KOTAK MAHINDRA BANK LIMITED Vs. TRUPTI SANJAY MEHTA

JUDGEMENT

(1.) The issue for consideration in these appeals is whether a bank, as defined by Sec. 2(1)(c) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest, Act, 2002 [ For short, 'the SARFAESI Act ' ], can take recourse to the provisions thereof for recovery of a debt assigned to or taken over by it from a financial entity that was not governed by the SARFAESI Act at the time of creation of such debt.

(2.) In Civil Appeal No. 8531 of 2015, Kotak Mahindra Bank Limited (KMBL) is the appellant. City Financial Consumer Finance Limited (CFCFL), a non-banking financial company (NBFC), respondent No. 3, was initially not a 'financial institution ' notified under Sec. 2(1)(m) of the SARFAESI Act. During that initial stage, Amit Bipin Shah, respondent No. 4, availed a home loan from it to acquire a residential flat from Trupti Sanjay Mehta and her husband, Sanjay Walchand Mehta (together, 'the Mehtas '), respondent Nos. 1 and 2. He executed a loan agreement for Rs.69,60,000.00 with CFCFL and pursuant thereto, a sum of Rs.66,72,360.00 was said to have been transferred by CFCFL to the Mehtas. However, Amit Bipin Shah failed to repay his debt to CFCFL leading to arbitration proceedings, whereupon he was directed to pay a sum of Rs.75,30,872.00 to CFCFL with interest thereon, vide Award dtd. 31/7/2010.

(3.) While so, KMBL took over this loan account from CFCFL on 13/7/2012. KMBL then initiated proceedings under the SARFAESI Act by issuing a demand notice under Sec. 13(2) thereof on 3/7/2013. As per the said notice, Amit Bipin Shah was liable to pay a sum of Rs.1,10,39,111.00 as on 2/7/2013 along with interest thereon. Thereafter, in exercise of power under Ss. 13(4) and 14 of the SARFAESI Act, KMBL secured order dtd. 11/7/2014 from the learned Chief Metropolitan Magistrate, Mumbai, enabling it to take physical possession of the secured asset, viz., the residential flat. KMBL claims that, at the time of taking possession, it found that the Mehtas were still in possession thereof despite having sold the property to Amit Bipin Shah.