1. Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, provides for enforcement of the security interest by the secured creditor without the intervention of the court or the Debts Recovery Tribunal, overriding the provisions contained in sections 69 and 69A of the Transfer of Property Act, 1882, while section 35 overrides other laws or instructions in the case of inconsistency.
    

2. Section 38C of the Bombay Sales Tax Act, 1959 overrides anything contained in any contract which is contrary to section 38C and provides that any amount of tax, penalty, interest or any other sum payable by a dealer or any other person under this Act shall be a first charge on the property of the dealer or that person but subject to any provision regarding first charge in any Central Act for the time being in force.
    

3. Section 13 of the Securitisation Act is a procedural provision for expeditious realization of its security interest by a secured creditor in substitution of the normal process of recovery of debts through the court or the Tribunal. It does not create the charge by itself much less a first charge; rather it provides for a process for enforcement of the charge that has been created under the contract in favour of the secured creditor.
    

4. The intention of the Legislature in enacting the Securitisation Act is not to give precedence to dues of banks and financial institutions over statutory dues. Sections 35 of the Securitisation Act does not override section 38C of the Bombay Sales Tax Act and, therefore, based on section 35 of the Securitisation Act, the bank does not get precedence or for that matter priority over the Statutory first charge under section 38C of the Bombay Sales Tax Act.

Thane Janata Sahakari Bank Ltd. vs. CIT (2006) 132 Comp. Cas 823 (Bom)

The third respondent (director) was in occupation of the company’s premises in the capacity of a director on gratuitous license basis. He was not charged for using the premises for residential purposes. On an application by the landlord to the first respondent, to hand over vacant possession and to pay compensation for being the user of the premises from the date of institution of the winding-up petition till the date of vacating the premises.

The Hon’ble Bombay High Court held, that on a conjoint reading of sections 491 and 495 of the Companies Act, 1956, the third respondent would continue as director, and cease to be so, only upon the passing of the order of winding up in respect of the company in liquidation. As there was no final order of winding up passed on the petition which mean that he continued to be the director of the company. Merely with the appointment of a provisional liquidator or institution of the company petition or
any order passed therein, the third respondent (director) would not cease to be director.

As he continued to be director of the company, the arrangement for occupation of the premises ought to prevail, until expressly terminated between the parties. Therefore that the third respondent was liable to pay compensation for user of the premises during the relevant period.

Majid Ahmedbhai Oomerbhoy & Ors vs. Rashid Sattar Oomerbhoy & Ors. (2006) 132 Comp Cas 382 (Bom)

The writing off of NPAs is an exercise undertaken to clean the balance sheet and is an internal accounting procedure. It does not require the permission of the Reserve Bank of India but banks usually make such a request as a matter of practice and permissions are granted by the Reserve Bank after considering all relevant aspects of the matter.

The write off is only an internal accounting procedure to clean up the balance sheet, and it does not affect the right of the creditor to proceed against the borrower to realize his dues. Moreover, it does give some benefit to the bank under the Income Tax Laws because after write off, tax is payable only on the amount recovered as and when recovery is made.

It is no doubt true that amounts advanced by banks must be recovered. Such debts should not be permitted to become NPAs. However, one cannot lose sight of the realities of the situation. Having regard to the nature of banking business, it is possible that the bank may commit an error of judgment in advancing funds to a particular party or industry. It may be that on account of other factors beyond its control or even beyond the control of the borrowers, it may become difficult, or even impossible to recover the loan advanced in accordance with the schedule of repayment, or to recover the loan at all. These are risks inherent in the banking business, though a wise banker with foresight and anticipation may reduce such risks to the minimum level. One cannot, however, jump to the conclusion that only because some of the debts have become bad, there is lack of proper management of the bank, or that the conduct of the bank is dishonest or mala fide. In a given case, there may be evidence of such mismanagement or dishonest conduct, but in the absence of any such accusation, one cannot draw an adverse inference against the bank.

Salim Akbarali Nanji vs. UOI (2006) 68 SCL 417 (SC)

In respect of loan sanctioned in favour of the first respondent, the other respondent had executed agreements of guarantee and created equitable mortgage by deposit of title deeds of their property. Clause 9 of the agreement of guarantee provided that the acknowledgement made by the borrowers would renew the liability of the guarantors also. The borrower renewed the liability and the bank had obtained confirmation letter in respect of loan from the borrower but not from the guarantors.

The bank filed application for recovery of the sum before the Debts Recovery Tribunal against the other respondent (i.e., guarantors)

Held

The primary requite for a valid acknowledgement of liability is that (i) it must be in writing, (ii) it must be signed by the party or by any person against whom a property or right is claimed and (iii) the acknowledgement must be before the expiration of the period prescribed for a suit or application. This alone would save the limitation and a fresh period of limitation shall be computed from the date of acknowledgement.

The clause 9 of the agreement of guarantee was introduced only to meet the administrative convenience of the bank and could not be a law. The Contract Act 1872 and the Limitation Act, 1963, did not approve any such acknowledgement. The clause was introduced knowing fully well that the bank may not be able to obtain acknowledgement of liability from the guarantor and in anticipation to this the clause was introduced to take shelter and it would amount to defeating the provisions of law. Such an act was impermissible in law. The renewal made by the borrower would not renew the liability of the guarantor. No debt can be recovered if it is barred by time. Section 23 of the Contract Act, 1872, does not require that the contract should be tainted with illegality but it would be sufficient if it was so unfair or unreasonable as to shock the conscience of the Court. Waiver is different from estoppel. There could be no estoppel against the statute. To overcome the law of limitation, the bank had introduced clause 9 in the agreement, which was against the provisions of law and it would cause injury to the person concerned and, therefore, it was against the principles enunciated in section 23 of the Contract Act also.

Indian Bank vs. Mrs. Humera Mumtaz & Ors. (2006) 132 Comp Cas 285 (DRAT)

The nature and scope of investigation to be conducted under sections 235 to 242 of the Companies Act was different from the nature and scope of the investigation to be conducted by the police. An investigation under sections 235 to 242 was not an investigation of a criminal case. The purpose of investigation under the provisions of the Companies Act was only to streamline the working of the company. Such investigation may reveal violation of rules and regulations by the office bearers or even commission of technical offences which are punishable under the Companies Act for which investigation under the Code of Criminal Procedure may be uncalled for. But if such investigations revealed the commission of offences under the Indian Penal Code, section 242 of the Act enacts an enabling provision under which the Govt. can also launch prosecution. The investigation by the police officer was launched on receipt of an information of the commission of a cognizable offence. Under section 157 of the Code of Criminal Procedure it was obligatory on the part of the police officer to launch investigation if he suspected commission of a cognizable offence or if the commission of such an offence was brought to his notice. Even if there was no specific report and the police officer had only a suspicion, may be on the basis of an anonymous complaint, he was duty bound to investigate. The provisions of section 235 to 242 did not create any bar against an investigation by a police officer if cognizable offences punishable under the Indian Penal Code were suspected to have been committed with the affairs of the company.

S.P. Gupta & Ors vs. State of Delhi & Anr. (2006) 132 Comp. Cas 402 (Del.)

The drawer of the cheque makes himself liable for prosecution under section 138 of the Act if he fails to make the payment within fifteen days of the receipt of the notice given by the drawee. His failure to make the payment within the stipulated period gives rise to a cause of action to the complainant to prosecute the drawer under section 138 of the Act. It is not the "giving" of the notice but it is the failure to pay after "receipt" of the notice by the drawer which gives the cause of action to the complainant to file the complaint within the statutory period.

If in each such case the law is understood to mean that there has been no service of notice, it would completely defeat the very purpose of the Act. Also, if the complainant does not file a complaint within one month of the date on which the cause of action arises under clause (c) of the proviso to section 138 of the Act, his complaint gets barred by time. Thus, a person who can doge the postman for about a month or two, or a person who can get a fake endorsement made regarding his non availability can successfully avoid his prosecution because the payee is bound to issue notice to him within a period of 30 days from the date of receipt of information from the bank regarding the return of the cheque as unpaid. He is, therefore, bound to issue the legal notice which may be returned with an endorsement that the addressee is not available on the given address. It may be that the address is correct and even the addressee is available but a wrong endorsement is manipulated by the addressee. In such a case, if the facts are proved, it may amount to refusal of the notice. If the complainant is able to prove that the drawer of the cheque knew about the notice and deliberately evaded service and got a false endorsement made only to defeat the process of law, the court shall presume service of notice.
This, however, is a matter of evidence and proof.

D. Vinod Shivappa vs. Nanda Belliappa 2006 (6) SCC 456