The Delhi High Court has dismissed the writ petitions filed by the State Bank of India (SBI) challenging adverse remarks made against it by the Chief Metropolitan Magistrate (CMM), Rohini Courts, in a case concerning recovery of public funds from M/s P.P. Jewellers Private Limited. The court held that SBI’s litigation was “ill-conceived” and “suffering from inordinate delay,” emphasizing that “a bank cannot obstruct or manipulate legal recovery proceedings under the guise of procedural lapses.”
Background of the Case
The case stems from financial facilities granted by SBI to M/s P.P. Jewellers Private Limited. The company had availed various loans secured by multiple guarantees and mortgage deeds executed in favour of the bank. However, the borrower defaulted, leading to its classification as a Non-Performing Asset (NPA) on March 31, 2016.
Following the default, SBI issued demand notices under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. In 2018, an initial One-Time Settlement (OTS) was agreed upon for Rs. 145 crore, but after partial payments of Rs. 29.6 crore, it was cancelled. A subsequent OTS of Rs. 96 crore was also not fully honoured by the borrower.
In May 2022, SBI filed an application before the CMM under Section 14 of SARFAESI Act to take possession of mortgaged properties. However, due to repeated adjournments and non-appearance by SBI’s representatives, the CMM dismissed the application for non-prosecution on June 4, 2022. The order contained severe remarks against the bank’s conduct, suggesting possible collusion with the borrower.
Key Legal Issues and Arguments
SBI’s Arguments:
SBI contended that the adverse remarks were beyond the jurisdiction of the CMM, as proceedings under Section 14 of SARFAESI Act are ministerial and non-adjudicatory.
The bank argued that the remarks had caused “irreparable reputational harm” and were being misused in unrelated proceedings, obstructing loan recovery.
Counsel for SBI cited R.D. Jain & Co. v. Capital First Ltd. [(2023) 1 SCC 675], where the Supreme Court held that a magistrate’s role under Section 14 is purely procedural.
Intervenors’ Arguments:
The intervenors, representing significant stakeholders in P.P. Jewellers, argued that SBI’s actions were collusive and strategically delayed to favour certain borrowers.
They pointed to an ongoing investigation, including an FIR (No. 106/2022), which alleged siphoning of assets in connivance with SBI officials.
The intervenors claimed that despite an NCLT order permitting revival of IBC proceedings against the borrower, SBI failed to act, further evidencing its “malafide intentions.”
Court’s Decision and Observations
Justice Dharmesh Sharma, dismissing SBI’s writ petition, held that the CMM’s remarks were justified in light of SBI’s conduct. The High Court stated:
“This is a luxury litigation pursued by the petitioner bank challenging an innocuous order which in no way causes irreparable loss to its reputation.”
The court emphasised that given the substantial public funds involved, SBI was obligated to act diligently. The High Court observed that the magistrate was right to question the bank’s repeated adjournments and lack of initiative in enforcing recovery measures.
“It is not the law that the learned CMM should be sitting like a silent spectator in Court and allow any party under SARFAESI Act to abuse the process of law, given the fact that there is a huge pendency of cases in the Court.”
The court further elaborated that the magistrate’s role in such cases is not merely to rubber-stamp applications filed by banks but to ensure that due process is followed in the interest of justice and public accountability. It pointed out that a bank’s responsibility does not end with initiating recovery proceedings but extends to their diligent pursuit.
Justice Sharma remarked that the repeated adjournments sought by SBI raised serious concerns about its intentions in the matter. He noted that delays in loan recovery not only weaken the enforcement of banking laws but also undermine the confidence of depositors and stakeholders in financial institutions.
The court also took note of the significant sum of Rs. 31.41 crore in public funds at stake, highlighting the broader implications of SBI’s inaction. It observed that had the bank pursued the matter with due urgency, the secured assets could have been attached and liquidated in a timely manner, thereby safeguarding public funds.
Referring to the procedural history, Justice Sharma criticised SBI’s argument that the CMM had exceeded jurisdiction in making the adverse observations. He held that courts are duty-bound to intervene when there is apparent laxity in the enforcement of financial laws, particularly when public money is involved.
In conclusion, the High Court made it clear that courts will not tolerate the misuse of procedural delays to the detriment of financial discipline. The ruling sends a strong message to public sector banks that their conduct in debt recovery matters will be subject to strict scrutiny and that negligence will not go unnoticed.
The writ petitions were accordingly dismissed.
