Kosha Doshi | Symbiosis Law School, Pune | 15th March 2020
K.Virupaksha & Anr. Vs. the State of Karnataka & Anr. 2020 SCC OnLine SC 272
Facts-
The complainant herein the debtor had availed a loan from the Canara Bank situated in Hubbali, Karnataka. The loan amount granted by the bank to the debtor was ₹ 2.68 crores. Wherein the collateral for the same was a land measuring 3 acres and 2 guntas located in Anchategeri village, Hubbali. As per Canara Bank, the debtor defaulted in his repayment of loan eventually causing his account to be declared as a non performing asset (NPA). Under section 13 (2) of the SARFAESI (Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest) Act 2002, the bank sent a notice in regard to possession of the secured asset under Section 14 of the Act. The secured asset was put for auction to the people at large with an initial bid of ₹ 2.28 crores. Failure of attracting any purchasers the bid amount was reduced to ₹ 1.10 crore.
The complainant filed a writ petition in the Karnataka High Court wherein the auction notice provided by the bank was challenged. The case being dismissed he sought remedy under Section 17 (1) of the SARFAESI Act wherein the debtor filed an application in IR along with Section 5 of the Limitations Act. But this application was also dismissed by the Debt Recovery Tribunal. Filing under Section 200 of the Code of Criminal Procedure to the Judicial Magistrate First Class, Hubbali which alleged that Canara Bank had conspired with the auction purchasers causing wrongful loss to the debtor. Investigation under 156 (3) CrPC took place wherein the investigation directed registration of a FIR under Section 511, 109, 34, 120 B, 406, 409, 420, 405, 417 and 426 of Indian Penal Code.
The appellants filed a case in the Karnataka High Court, Dharwad Branch under Section 182 of CrPC for quashing or invalidation of the FIR filed. The High Court gave an order stating it was not directed to exercise inherent jurisdiction to invalid the FIR. This judgment was challenged before the Supreme Court.
Issue-
Whether it is permissible to enforce contractual obligations by resorting to filing criminal complaints?
Judgment-
Justice AS Bopanna who spoke for the bench stated that SARFAESI Act was a complete code in itself which contained the procedure to be followed by the secured creditor as well as remedy for the aggrieved along with the borrower. In case of any discrepancies in manner to classify an account NPA, determining the value of the secured asset or auctioning, the power was vested with the DRT to set aside the auction at the stage after the secured creditor invokes power under Section 13 of the SARFAESI Act. The intent of the legislature was to clear the stringent power vested in the bank and financial institutions along with the safeguards to rectify error or wrongful use of the same vested with the DRT.
The order dated 26/05/2016 passed, with the FIR 0152/2016 stood quashed as per the Supreme Court’s order. The grievances of the complainant were addressed wherein it stated that he was at a liberty to avail his remedy according to the law if her chose to do so. If the complain was allowed to be stood there would be a grave miscarriage of justice as it would grant permission to the police officials to redo the entire procedure. In case the procedure is redone, it would amount to reviewing of orders passed by the competent authorities. Under the SAFARESI Act, this action would not be permitted and would entice the law. Finally, the court stated that the bank’s action should not be considered sacrosanct and the same is subject to being questioned and critiqued under the SARFAESI Act, 2002.
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