Coming down heavily on the State Bank of India (SBI) for challenging an innocuous order passed by a chief metropolitan magistrate (CMM) in a loan recovery case, the Delhi High Court (HC) called the matter a 'luxury litigation' by SBI, which in no way causes any irreparable loss of reputation or loss of face to the lender.
In an order on Tuesday, the bench of justice Dharmesh Sharma said, "A careful perusal of the order would show that the CMM was concerned that a huge amount of public money was involved and unnecessary adjournments were being sought and it was in the said context that castigating the concerned official of the Bank, the matter was referred to the chairman of SBI to take action against the erring bank officials. It appears that there was shown no alacrity on the part of the Bank in satisfying the CMM about the correctness of the information furnished and the measures that were being taken to pursue the recovery of the loan amount in right earnest."
"It is not the law that the CMM should be sitting like a silent spectator in Court and allow any party under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act to abuse the process of law, given the fact that there is a huge pendency of cases in the Court. It is evident that the Bank was not diligently pursuing its remedies...the present litigation is ill-conceived and palpably suffering from inordinate delay and barred by laches for having been filed after almost two years of arising of the cause of action," the bench says.
The case pertains to a loan recovery dispute between SBI and New Delhi-based PP Jewellers Pvt Ltd, where the bank initiated proceedings under the SARFAESI Act to recover a substantial outstanding amount.
On 31 March 2016, SBI classified the loan account of PP Jewellers as a non-performing asset (NPA) and, in September 2016, issued a demand notice under the SARFAESI Act. Subsequently, PP Jewellers proposed a one-time settlement (OTS), which SBI duly accepted on 15 January 2018 for an amount of Rs145 crore against the loan facilities availed by the PP Jewellers group through its three accounts, PP Jewellers, PP Jewellers (Delhi) and PP Jewellers (Exports).
However, due to non-compliance on the part of PP Jewellers and its guarantors, the OTS was cancelled on 19 March 2019, after SBI received partial payments worth Rs29.60 crore.
SBI issued another notice to PP Jewellers and its guarantors and subsequently filed an application under section 14 of the SARFAESI Act before the CMM at North-West District Rohini courts.
In the order, the CMM noted that SBI officials appeared reluctant to pursue the recovery with due diligence and questioned the accuracy of the information provided by the lender. "The conduct of the Bank is not appreciable in the present case as they are not serious about attaching or taking the possession of the secured asset against which they have disbursed such a huge loan involving public money, and it is clear that the Bank is hand in glove with PP Jewellers, hence, they are lingering on the matter and providing an opportunity to PP Jewellers to sell the secured asset and flee away and thereafter the public money would not be recovered due to the conduct of SBI," the CMM says.
Following this, the magistrate suggested action against the responsible SBI officials and emphasised the need for a more proactive approach to safeguard public funds.
SBI, in its petition before the High Court, argued that the CMM's observations were unjustified and adversely impacted the bank's reputation.
However, the High Court dismissed these claims, stating that the magistrate's concerns were valid and in the public interest. The bench reiterated that public sector banks are responsible for ensuring effective and efficient recovery processes rather than indulging in protracted and unnecessary litigation.
