Case Note & Summary
The case arises from a dispute between M/s Kut Energy Pvt. Ltd. and others (appellants/borrowers) and Punjab National Bank and others (respondents) concerning a loan availed for a hydroelectric project. The appellants' account was declared NPA, and the Bank initiated proceedings under the SARFAESI Act, 2002. The appellants made OTS proposals, and the Bank issued a sale notice for e-auction. The appellants filed a writ petition before the High Court challenging the Bank's actions. The High Court passed an interim order directing the appellants to deposit Rs.140 crores to show bona fides, of which Rs.40 crores was deposited. The Supreme Court later set aside the High Court's order, holding that the writ petition was not maintainable due to the availability of an alternate remedy. Subsequently, the Bank sought appropriation of the Rs.40 crores, while the appellants sought its refund. The High Court directed the amount to be deposited with the DRT pending the suit. The Supreme Court allowed the appeals, holding that the deposit was made only to establish bona fides and not as payment of dues. Since the writ petition was dismissed and the OTS rejected, the amount must be refunded to the appellants. The Court distinguished the case from Axis Bank v. SBS Organics (P) Ltd., noting that the deposit was not a voluntary payment but made under court order. The Supreme Court directed the Bank to refund the Rs.40 crores with accrued interest to the appellants within four weeks.
Headnote
A) Banking Law - SARFAESI Act - Deposit to Show Bona Fides - Refund - The appellants deposited Rs.40 crores pursuant to an interim order of the High Court to demonstrate bona fides in support of their One Time Settlement offer. The Supreme Court later set aside the High Court's order, holding the writ petition not maintainable. The Bank rejected the OTS. The Supreme Court held that the deposit was not a payment towards dues but a security for bona fides, and since the writ petition was dismissed and the OTS rejected, the amount must be refunded to the appellants. (Paras 10-12) B) Banking Law - SARFAESI Act - Appropriation of Deposit - No Lien - The Bank had no lien over the deposit as it was made with the Registry of the High Court and was not a voluntary payment towards the debt. The High Court's direction to deposit the amount with DRT pending suit was set aside. The Supreme Court directed refund of the amount to the appellants. (Paras 10-12) C) Civil Procedure - Interim Orders - Effect of Setting Aside - When an interim order is set aside, the parties must be restored to the position as if the order never existed. The deposit made under the interim order cannot be retained by the Bank. (Para 10)
Issue of Consideration
Whether the amount of Rs.40 crores deposited by the appellants pursuant to the High Court's interim order, which was later set aside by the Supreme Court, should be refunded to the appellants or appropriated by the Bank towards the loan dues.
Final Decision
The Supreme Court allowed the appeals, set aside the impugned order of the High Court, and directed the Bank to refund the amount of Rs.40 crores along with accrued interest to the appellants within four weeks.
Law Points
- Deposit made to establish bona fides
- not as payment of dues
- refund upon rejection of OTS and dismissal of writ petition
- no lien on such deposit
- SARFAESI Act
- 2002 Sections 13(2)
- 13(4)
- writ jurisdiction not maintainable when alternate remedy available
