Judgements of Supreme Court/ High Courts

Banking Regulation Act

Interest- Bank directed to keep specified amount in fixed deposits pursuant to High Court order-- Bank enjoyed benefits of amount, liable to pay interest for its utilization. Del 93 (DB)



Civil Procedure Code

Ouster of jurisdiction--- DRT has jurisdiction to hear and decide petition for setting aside ex- parte decree passed by Civil Court. Ori 43 (DB)

Recovery suit by bank---- Civil Court while considering objection ordered return of plaint for presenting it before Tribunal holding that it had no jurisdiction--- Bank had filed suit on advice of its legal advisors--- it cannot be therefore said that bank with any ulterior motive and to take some advantage, opted for longer procedure by filing civil suit. (NOC) 356 (Raj) (A)

Suit for recovery of its dues by financial institution-- it is not always necessary that plaintiff should be personally present before court-- Responsibility is of conducting counsel to take appropriate steps in such manner-- Default of lawyer-- Litigant should not be allowed to suffer. (NOC) 277 (Gau) (B)

Realization of secured assets--- Application by banks filed before DRT under DRT Act-- Taking recourse to NPA Act, 2002 by them-- Withdrawal of application pending before DRT in terms of S. 19 (1) of DRT Act-- Not a condition precedent SC 712 (A)

Attachment before judgment-- Life Insurance Policies of judgment Debtor-- Cannot be attached. (NOC) 997 (AP) (B)


Constituition of India

Art. 226-- P.I.L.--Petition targetting particular person-- Court should be cautious to see whether attack in guise of public interest is really intended to unleash a private vendetta, personal grouse or some other mala fide object. SC 758 (b)

Art.226-- P.I.L.-- Not to be entertained in service matters. SC 758 (C)

Art. 226-- Judicial Review-- Commercial transaction-- Enforcement of right emanating from contract-- Court cannot direct financial institution to enter into one time settlement with debtor/ sick company offering higher bid. Del 65 (DB) (b)

Recovery of secured assets-- Possession of secured assets/flat, by bank, taken not only in presence of independent witnesses, but also in presence of police personnel who accompanied authorised officer -- is not by applying force-- No fundamental rights u/ Art. 21 stands infringed. AIR 2007 CALCUTTA 105


RDDB Act

Suit for recovery-- Plea that excessive interest has been charged by banks-- RBI Rate with minimum of 12% with quarterly rests-- No proof to produce to show that interest charged was interests in defiance of said agreed rate-- Plea of excessive rate interest, not tenable-- suit decreed for balanced sum with interest at 12% p.a. (NOC) 298 (Chh)

Debt Recovery Proceedings-- against borrowers as well as guarantors-- Tribunal ordered recovery and sale of mortgaged property--certificate and mortgaged property of guarantor put to auction sale-- no benifit can be granted to borrower for one time settlement of NPA in terms of guidelines issued by RBI dt. 29.1.03-- the RBI guidelines for one time settlement are not applicable to the cases where already a decree/ order has been passed by the Court/ Tribunal as has been stated in clause (b) of the Circular dt. 11.11.03 of the RBI. MP 51 (DB) (A)

Recovery Proceedings--Auction sale of mortgaged property of defaulter/ guarantor-- Proclamation of sale drawn up after notice to guarantor u/R 2 of Sch. 2 of Income Tax Act-- Death of guarantor after recovery certificate is drawn up-- Proceedings continue against LR's of deceased defaulter-- No fresh notice is required to be served on his LR's to pay amount sought to be recovered-- Failure of Recovery Officer to pass an order in order sheet settling terms of proclamation-- No material irregularity in conducting sale of property-- Sale not liable to be set aside. MP 51 (DB) (B)

Powers of DRT-- Bank filing petition before DRT for withdrawal of proceedings on ground that dues were satisfied-- enquiry whether settlement, as entered into between bank and and its constituent was in accordance with law or not, would be beyond jurisdiction of DRT. AIR 2008 Patna 68

Conduct of auction-- Manner of-- merely because property to be auctioned belongs to the defaulter-- Recovery Officer has no right to sell property in manner suitable to him. (NOC) 1288 (MAD) (DB) (A)

Application to set aside sale-- ground non service of notice or irregularity conducting sale-- pre deposit of amount shown in proclamation of sale. not condition precedent. AIR 2008 (NOC) 1288 (MAD) (B)

Limitation Act

Recovery of loan-- Claim involving mortgaged property-- Loan advanced in the year 1991-- Petitioner gave his personal guarantee by mortgaging immovable property in 1991-- Cannot therefore contend that period of limitation for enforcing claim came to an end within 3 years-- Period of 12 years is to be considered for limitation period. Del 81 (DB) (B) / P&H 66 (DB)

N.I. Act

Dishonour of more than one cheques-- Dishonour of each cheque giving rise to seperate cause of action subject to condition that seperate notices are issued in respect of each cheque-- Transactions cannot be held to be single transaction attracting provisions of Sec. 219 of Cri. P.C.-- Separate trial permissible.
(NOC) 418 (Bom) (DB) (A)

Demand notice-- sent under certificate of posting returned with endorsement "not claimed"-- is deemed to be served. (NOC) 942 (Kar) (B)

Dishonour of cheque-- only drawer of cheque can be held liable for the offence-- joint account holder who was not drawer of cheque cannot be held liable with aid of S. 141 (NOC) 1301 (P&H)

Dishonour of cheque--- complaint alleging-- must be signed & verified by complainant-- complaint signed & verified by special power of attorney holder of complainant-- cannot be regarded as complaint-- said defect could not be cured due to death of complainant meanwhile-- special power of attorney holder not being payee of cheque or holder there of in due course complaint filed by him liable to be dismissed. (NOC) 1290 (Bom) (A)

Dishonour of cheque-- cognizance of complaint-- lack of territorial jurisdiction of Court to entertain complaint-- no ground to quash complaint.
(NOC) 1299 (Mad) (B)

Registration Act

Suit for recovery of money/ loan-- Unregistered mortgage deed executed by defendants in favour of plaintiff-- Admissible, only for limited purpose of proving loan amount. (NOC) 339 (MAD)

Sale of secured assets in public auction-- ended in issuance of sale certificate as per R. 9 (7) of Security Interest (Enforcement) Rules (2003), in favour of auction purchaser-- sales becomes absolute and title vests in auction purchaser-- such a sale certificate does not require registration.
Mad 108 (DB) (A)

SARFAESI Act

NPA Act is additional remedy to DRT Act-- Together they constitute one remedy-- Thus doctrine of election does not apply. SC 712 (B)

Demand notice u/s 13 issued by solicitor on instructions of secured creditor is valid-- Reason being, decision to give notice is already taken by client himself and lawyer merely conveys the decision. Cal 49 (DB)

Secured asset is an immovable property-- Appointment of enforcement agencies (agency of muscle man) to make recovery, permissible-- Enforcement agency with past criminal record cannot be employed. MP 68

Bar of civil suit in respect of debt recovery proceedings-- Borrower without filing objections to Sec. 13(2)-- Notice issued by secured creditor/ bank , filed civil suit seeking injunction restraining bank from trespassing/ transferring property-- Civil suit is not maintainable-- Fact that Sec.13(2) notice did not disclose details of amount is no ground to file civil suit. Ker 64

Possession of property taken, under-- Bank taking such possession is secured creditor-- Would have precedence over claim of Excise department (Crown's debt), in absence of specific provision of 'first charge' in Central Excise Act as well as customs Act. AIR 2007 (Madras) 118 (FB)

Eviction of tenants in occupation of Secured Assets-- Permissible-- Expression "encumbrances" used in R. 9 (9) of Securitisation Rules-- Would take in occupation of tenant. AIR (Ker) 114 (DB)

Classification of debt as NPA-- to be carried out in accordance with guidelines issued by RBI-- authority of the secured creditor to be classify such debt as NPA cannot be questioned. Cal 88 (B)

Enforcement of Security Interest-- property in dispute was in possession of GIIC u/s 29 of Financial Corporation Act-- entrustment of property by GIIC to secured creditors for disposal of property-- auction of property by secured creditor cannot be said to without authority. A.I.R 2008 Guj 79

Crown's preferential priority over secured assets-- Excise Dept. vias vis secured creditors/ Banks-- Central Excise Dept. cannot claim precedence over claim of secured creditors/ banks. A.I.R. 2008 Kar 70

Stamp Duty

Stamp duty is chargeable on basis of market valueof property conveyed by instrument-- Not on basis of amount mentioned in Civil Court's decree.
ALL 39 (SB) (A)

Evidence Act

Opinion of handwriting expert-- Expert opinion would merely be an aid to Court to arrive at a conclusion-- Such an opinion is not binding and it is optional for Court to accept or reject. (NOC) 897 (Cal) (A)

Documentary Evidence-- Proof-- Suit by bank for recovery of loan amount-- Extracts of account produced on record-- Not bearing certification under Banker's Book Evidence Act-- Cannot be read in evidence. AIR 2008 Bombay 81

Banking Regulation Act

One time settlement scheme-- guidelines relating to OTS scheme issued by RBI-- are not statutory in nature-- cannot be enforced by issuing writ of mandamus
(NOC) 1209 (AP)

Reserve Bank of India Act

Revised guidelines issued by Reserve Bank-- are purely executive instructions and having no statutory force-- not creating any right in favour of borrowers-- issuance of mandamus by High Court directing bank to declare respondents account as NPA and to apply said RBI guidelines-- Not Proper.
SC 1339 (B)

Power of Attorney

Power of Attorney is a document by which a person gives authority to another person to act on his behalf.The person to whom it is given is called 'the attorney.
If POA is for specific purpose to perform certain acts, it is called Special Power of Attorney. For example, only for looking your property/ only for giving the property on rent without the powers to sell/ only for sale of a specific property/ to appear in a legal proceedings or to attend a court hearing. In General Power of Attorney covers most of the acts which the executant including operating the bank A/C, conducting the business and all other acts can be included in General Power of Attorney. One can also give POA jointly to two or more persons who could act from your behalf jointly or severally as may be specified.
While purchasing property, one should ensure that the POA is properly executed and valid and the clause 'power to sell the property' should be specifically mentioned. Upon the death of the executant, the POA becomes void. One should inspect the original and seek confirmation from the person giving the fresh POA stating that the POA is valid.
While relying on the attorney, as an authorised representative of the actual owner, the POA SHOULD BE CLOSELY EXAMINED to ensure its validity and contents.
Your advocate would draft the POA as per your requirements and he will do all rhe requisite formalities like Stamp duty, Registration etc.
For safer side, the photo identities of executant and the attorney should be there on POA alongwith the witnesses full name & addresses.

Negotiable Instrument Act

If a cheque received by you got bounced, what will you do?
As per the N.I. Act, you have to send a notice within 15 days from the date of intimation. Notice should be send to the Registered office as well as in the name of the proprietor/partners/directors (as the case may be) by Regd. post.

In the notice, one has to mention the details of transaction under which cheque was given, the details of cheque (No., date, amount, name of the bank), when you had deposited the said cheque in your account and when did you receive the intimation about dishonor of the cheque. Don't forget to mention the reason for bouncing of cheque. It is mentioned in the intimation letter issued by your bank. In the concluding para, make the demand to pay the cheque amount within 15 days, filing which, action would be taken under the provisions of N.I. Act. You can download the notice format.

Don't panic and don't rush to the advocate for taking legal action. You've got 15 days time for that. First try to settle the matter amicably through common friends and intermediaries. Keep 7 days for this. If you receive a part of the amount, always obtain an undertaking that the remaining amount would be paid within a stipulated period. If the party is offering Post Dated Cheques, accept it. Try to avoid the litigations as far as possible.

Instead of advocate, you can also draft and send the notice of your own. It is absolutely not mandatory that only an advocate can give the notice. Preserve the acknowledgment receipts.

If you do not receive the amount within 15 days, then you have the option to initiate criminal proceedings under N.I.Act. (Sec. 138 & 142). If the reason for cheque bounce is "A/C Closed," then Sec. 420 of Indian Penal Code can also be included. If the amount is big, discuss your advocate for filing F.I.R. in the concerned police station.

If you forget to give the notice within 15 days, don't worry. The validity of the cheque is 6 months. Just intimate the party by Regd. post that you are re-depositing the cheque on a particular date, so kindly arrange the funds. after receiving the acknowledgment receipt, you can safely send the notice by virtue of fresh cause of action.

As per the Act, the court must dispose the case within 6 months. But practically it is not possible for varied reasons. A recent report says that more than 5 lacs cheque bouncing cases are pending in Maharashtra alone. It is a very time consuming process. Apart from advocate's fee, you have to attend each & every court hearing because it is a criminal proceeding. In civil matters, one can breathe easily as the advocate would take care of all the court proceedings.
Therefore think twice before filing the complaint. Persuade the party by using your channels & contacts. To pressurize, send the notice. But afterwards, make sustained efforts to materialize the issue amicably.

MIND IT, litigations/court proceedings is a vicious & unending game.

Reverse Mortgage

Three Cheers for Grand-pa's and senior citizens!
Why to depends on your insensitive children who don't want to keep you and insist to throw you with your wife in old age home. To hell with those emotionless youngsters. Now you can peacefully live in your own without any worry.
Reverse Mortgage is the solution.
The bank would make tax-free payments to the house-owner for life. If a person lives beyond that fixed & agreed tenure, the loan may be renewed.

Reverse Mortgage seeks to monetize the house as an asset and specifically the owner's equity in the house. The scheme involves the Senior Citizen borrower(s) mortgaging the house property to a lender, who then makes periodic payments to the borrower(s) during the latter's lifetime. The Senior Citizen borrower is not required to service the loan during his lifetime and therefore does not make monthly repayments of principal and interest to the lender. On the borrower's death or on the borrower leaving the house property permanently, the loan is repaid along with accumulated interest, through sale of the house property. The borrower(s)/heir(s) can also repay or prepay the loan with accumulated interest and have the mortgage released without resorting to sale of the property. Reverse mortgages are one product within the “Equity Release” category.

Eligible Borrowers:

• Should be Senior Citizen of India above 60 years of age.
• Married couples will be eligible as joint borrowers for financial assistance. In such a case, the age criteria for the couple would be at the discretion of the bank, subject to at least one of them being above 60 years of age.
• Should be the owner of a self- acquired, self occupied residential property (house or flat) located in India , with clear title indicating the prospective borrower's ownership of the property.
• The residential property should be free from any encumbrances.
• The residual life of the property should be at least 20 years.
• The prospective borrowers should use that residential property as permanent primary residence.
• Determination of Eligible Amount of Loan:

• The amount of loan will depend on market value of residential property, as assessed by the bank, age of borrower(s), and prevalent interest rate.
• The table given hereunder may serve as an indicative guide for determining loan eligibility :

Age	Loan as proportion of Assessed Value of Property
60 – 65	40%
66 – 70	50%
71 – 75	55%
Above 75	60%

Nature of Payment:

Any or a combination of the following:

• Periodic payments (monthly, quarterly, half-yearly, annual) to be decided mutually between the bank and the borrower upfront
• Lump-sum payments in one or more tranches
• Committed Line of Credit, with an availability period agreed upon mutually, to be drawn down by the borrower

Lump-sum payments may be made conditional and limited to special requirements such as medical exigencies, home improvement, maintenance, up-gradation, renovation, extension of residential property etc. The PLIs may be selective in considering lump-sum payments option and may frame their internal policy guidelines, particularly the eligibility and end-use criteria. However, these conditions shall be fully disclosed to potential borrowers upfront .

End use of funds

The loan amount can be used for the following purposes:

• Up gradation, renovation and extension of residential property.
• For uses associated with home improvement, maintenance/insurance of residential property
• Medical, emergency expenditure for maintenance of family
• For supplementing pension/other income
• Repayment of an existing loan taken for the residential property to be mortgaged
• Meeting any other genuine need

Use of RML for speculative, trading and business purposes shall not be permitted

Period of Loan: Maximum 15 years.

7. Interest Rate: The interest rate (including the periodic rest) to be charged on the RML to be extended to the borrower(s) may be fixed by the bank in the usual manner based on risk perception, the loan pricing policy etc. and specified to the prospective borrowers.

Security:

• The RML shall be secured by way of mortgage of residential property, in a suitable form, in favour of PLI.
• Commercial property will not be eligible for RML.

Provision for Right to Rescission:

After the documents have been executed and loan transaction finalized, Senior Citizen borrowers may be given up to three business days to cancel the transaction, the “right of rescission,”. If the loan amount has been disbursed, the entire loan amount will need to be repaid by the Senior Citizen borrower within this three day period. However, interest for the period may be waived at the discretion of the bank.

Loan Disbursement by Lender to Borrower:

• The bank will pay all loan proceeds directly to the borrower, except in cases pertaining to retirement of existing debt, payments to contractor(s) for the repairs of borrower's property, or payment of property taxes or hazard insurance premiums from the borrower's account set aside for the purpose.
• In case the residential property is already mortgaged to any other institution, the bank may, at its discretion, consider permitting use of part proceeds of RML to prepay/repay the existing housing loan. The loan amount will be paid directly to that institution to the extent of the loan outstanding with that institution with a view to release the mortgage.
• Periodicity: The loan will be extended as regular monthly, quarterly, half-yearly or annual periodic cash advances or as a line of credit to be drawn down in time of need or in lumpsum.
• The bank will have the discretion to decide the mode of payment of the loan including fixation of loan tenor, depending on the state and market value of the property, age of the borrower and other factors. The rationale behind the decision of mode of payment and fixation of the loan tenor shall be clearly disclosed to the borrowers.

Closing:

The bank will provide in writing, a fair and complete package of reverse mortgage loan material and specimen documents, covering inter-alia, the benefits and obligations of the product.

• The loan shall become due and payable only when the last surviving borrower dies or would like to sell the home, or permanently moves out of the home for aged care to an institution or to relatives. Typically, a "permanent move" may generally mean that neither the borrower nor any other co-borrower has lived in the house continuously for one year or do not intend to live continuously. Bank may obtain such documentary evidence as may be deemed appropriate for the purpose.
• Settlement of loan along with accumulated interest is to be met by the proceeds received out of Sale of Residential Property.
• The borrower(s) or his/her/their estate shall be provided with the first right to settle the loan along with accumulated interest, without sale of property.
• A reasonable amount of time, say up to 2 months may be provided when RML repayment is triggered, for house to be sold.
• The balance surplus (if any) remaining after settlement of the loan with accrued interest, shall be passed on to the estate of the borrower.

Prepayment of Loan by Borrower(s)

• The borrower(s) will have option to prepay the loan at any time during the loan tenor.
• There will not be any prepayment levy/penalty/charge for such prepayments.

This scheme is very good for old parents. They can't be driven out by their children.

Right To Information Act

The following Information cannot be provided under the provisions of the Act:
1. The information regarding details of payment of monthly salary of the employees cannot be provided in the absence of specific period. Not only the volume of information would be huge but it also amounts to diversion of resources u/s 7(9) of the Act.
2. The particulars of employees against whom action was initiated by CVC/CBI cannot be given as it amounts to invasion of privacy u/s 8(1) (j) of the Act.
3. Particulars of loanee, name of the Branch of the Bank, Branch Manager etc. being third party information, cannot be provided.
4. The information regarding details of companies to whom duty of valuation is given by different branches of bank, cannot be given as it is exempted u/s 8(1) (d) being commercial confidence.
5. Details of settlement proposals cannot be given because the volume of information is huge and it amounts to diversion of resources u/s 7(9) of the Act.
6. Details of outsourcing agencies cannot be provided as it is exempted u/s 8(1) (d) of the Act.
7. Names of the employees getting highest salary/lowest salary cannot be provided being personal information.
8. Name of the branch of the bank whose Traveling expenses is the highest may not be given, as it affects the competitive position of a bank.
9. Name of the employees getting highest TA/DA cannot be provided being personal information.

PS. Reconfirm, before disposal of the application.

RTI CANNOT BE USED FOR BANK DEALINGS

A person or a company and registered owner of a property cannot have access to information pertaining to bank's information under RTI when the said property has already been mortgaged by another person or company.

Recently, Central Information Commission (CIS) has held that an applicant cannot have access to information regarding a bank's transaction under RTI, as they have to maintain the secrecy of the transaction.
A company, under RTI Act, sought a certified copy of a title deeds of a property mortgaged in bank's favour by another company. The CPIO denied on the grounds that it is personal information having no relationship with any public activity and would cause unwarranted invasion of privacy. The bank maintained that the title deeds were deposited by the mortgagor to create equitable mortgage.And providing copies of mortgage related documents to a 3rd party could affect the interests of the mortgagor. As bank has to maintain secrecy of transactions of its customers, therefore the information could not be furnished.
The applicant company had claimed that they could not be termed as outsiders or third party because they are the registered owners of the property in question. The CPIO had told them that the said information could be obtained from Sub Registrar office. The bank had stated that by virtue of equitable mortgage, they alone are entitled to have this information.
The applicant company appeal was dismissed by the Information Commissioner.

Your dream house

If you intend to purchase an immovable property, the following precautions are required:
1. Take first hand information about the title, ownership and present status from neighborhood. Even that chai-walla or pan-wala of nearby locality can provide you valuable tips in this regard. Normally people satisfy themselves after getting a non-encumbrance certificate/ title clearing certificate.
2. Latest Non- encumbrance certificate/Title Clearance certificate have to be obtained from the advocate but it should be verified from other sources. Visit to the office of Municipal Corporation . Obtain the information whether the builder has taken the necessary permission and the construction is as per the norms and as per the sanctioned plan. Whether the builder has encroached any piece of land. Whether builder has paid all the requisite dues/amounts to the corporation. This point is very important. In some of the cases, particularly in new societies, builders simply hand over the society's charge to the occupants and after taking over the charge, in due course the occupants realizes that society has to pay various amounts pertaining to sewage, gutter or other charges to the corporation which the builder was supposed to pay.
3. One has ti be very careful while going for a plot of land for bunglow. It should be a non-agricultural land. Visit to the concerned Registrar office and obtain 7/12 extract of the property by paying a small fee. Also obtain 8-A extract. By these documents the status and ownership of the property would be established. In some of the States, these information can be obtained online.
4. Before any transaction, give a public notice in a newspaper inviting objections from the third parties, if any , pertaining to the said property. This will save you from future litigations.
5. Thoroughly grilled the builder about the water, electricity, generator, lift and everything specially a slot for your car. After all, you are going for a life time deal investing your hard earned money and the builder is not sitting for a charity. He is not a saint. He has to extract the maximum from every deal. So be careful.


Always insist for cheque payment to the builder towards initial payment or booking amount. However most of the times, builder refuse to accept cheques. Then insist for receipt, albeit on a plain paper. Now-a days there are many fraud cases where builder has sold a property to more than one person and has even issued share certificates to the purchasers of the same property. You have to be very particular and vigilant on this issue. After booking, execute an Agreement to Sale with the builder and get it notarized. The averments should be very specific that the builder has accepted the initial amount and has booked the property in your name. Further, after receiving the entire amount, builder would hand over the possession of the property on or before a particular date free from all encumbrances & with a clear title. Further, builder promises & assures that the rates would not be increased in any circumstances and prior to this, the said property neither booked nor any share certificate was issued to any person or persons. Give a public notice in a newspaper that you have booked the property from the builder ( name) and going to purchase it being the first sale of the said property and the builder would be issuing share certificate in your name. Invite the objections within the stipulated period pertaining to the property in question. This exercise would definitely shield you from unscrupulous persons/claimants (if any) in future.

So, if you are having original Share Certificate after taking the aforesaid precautions, you need not to worry about the registration of the property. (in case of finance/ home loan, original share certificate goes to the bank from where you have availed the loan. Don't forget to obtain from your builder True copy of the share certificate notarized) . It depends upon the individual's perception whether to go for registration or not. If you want to take extra precautions and you have apprehensions that in due coarse of time, any possible complications/ litigations may arise about the title/ ownership, then go for registration. It is a process by which your rights, title & interest on the property would be recorded in the Govt. records. It is admissible as evidence in a court of law. For registration, one has to pay the Stamp duty based on the market value of the property. The market value of a property can be obtained from "Jantri" issued by the Govt.
For registration, don't rush to a hi-fi advocate. Any young advocate, having 4-5 years experience can do it with a minimum time & money. However, negotiate the fees before entrusting the job.