Tag Archives: debt

SARFAESI Act – Appeal under Section 17 of the Act

The “appeal” under Section 17 is available to the borrower against any measure taken under Section 13(4). Taking possession of the secured asset is only one of the measures that can be taken by the secured creditors. Depending upon the nature of the secured asset and the terms and conditions of the security agreement, measures other than taking the possession of the secured asset are possible under Section 13(4). Alienating the asset either by lease or sale, etc., and appointing a person to manage the secured asset are some of those possible measures. On the other hand, Section 14 authorises the Magistrate only to take possession of the property and forward the asset alongwith the connected documents to the borrower. Therefore, the borrower is always entitled to prefer an “appeal” under Section 17 after the possession of the secured asset is handed over to the secured creditor. Section 13(4)(a) declares that the secured creditor may take possession of the secured assets. It does not specify whether such a possession is to be obtained directly by the secured creditor or by resorting to the procedure under Section 14. By whatever manner the secured creditor obtains possession either through the process contemplated under Section 14 or without resorting to such a process, obtaining of the possession of a secured asset is always a measure against which a remedy under Section 17 is available. Dheerendra Kumar v. Authorised Officer, 2018 (129) ALR 32.

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Filed under Appeal Under Section 17 of SARFAESI Act, Debt Recovery Law

Term “Debt” – Meaning of

The term ”liability” has been defined as obligation, debt, etc. In First National Bank v. Sant Lal, AIR 1959 Punj 328, it is said that the term ‘liability’ is of large and comprehensive significance and when construed in its usual and ordinary sense, it expresses a state of being under obligation in law or in justice.

In Hindustan Laminators (P) Ltd. v. Central Bank of India, AIR 1998 Cal 300, Calcutta High Court has observed that word ‘liability’ obviously means obligation. Then it should be a liability which is alleged as due.

The term ‘due’ has different meanings. In State of Kerala v. V.S. Kalliyanikutty, JT 1999 (2) SC 540 the Supreme Court observed that ‘due’ means anything owning; that which one contracts to pay to another. It was in the context of Kerala Revenue Recovery Act, 1968.

In the context of the Companies Act, 1956, in Raymond Synthetics Ltd. v. Union of India, JT 1992 (1) SC 463, the court said that a debt is often said to be ‘due’ from a person where he is the party owing it; or primarily bound to pay, whether the time for payment has or has not arrived.

In the context of Income Tax Act, 1961, in CIT v. Southern Roadways Ltd., 2004 (266) ITR 135, the Madras High Court said that the word ‘due’ is used to refer to the debt or obligation which has become immediately payable. In CIT v. United Provinces Electric Supply Company, 2000 (244) ITR 764, the Apex Court while affirming above view of the Madras High Court observed that the initial determination is a pre-requisite for regarding that amount as having become ‘due’.

In Harshad Shantilal Mehta v. Custodian, 1998 (231) ITR 871 the Apex Court observed that ‘due’ means payable, justly owed.

In  Munsif Jahan v. Rajendra Prasad, AIR 1946 Oudh 226, the terms ‘due’ and ‘payable’ came to be considered. The court said that they are not convertible terms. A ;debt’ is said to be ‘due’ as soon as it has existence as a debt, though it may be payable on a future date. M/s B.K. Jewellers v. State Bank of India, 2016 (116) ALR 791.

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Filed under debt, Debt Recovery Law, Uncategorized

Offence Under Section 138 Negotiable Instrument Act – Jurisdiction

(1)An offence under Section 138 of the Negotiable Instrument Act is committed no sooner a cheque drawn by the accused on an account being maintained by him in a bank for discharge of debt/liability is returned unpaid for insufficiency of funds or for the reason that the amount exceeds the arrangement made with the bank.
(2)Cognizance of any such offence is however forbidden under section 142 of the Negotiable Instrument Act except upon a complaint in writing made by the payee or holder of the cheque in due course within a period of one month from the date the cause of action accrues to such payee or holder under clause (c) of proviso to Section 138.
(3)The cause of action to file a complaint accrues to a complainant/payee/holder of a cheque in due course if —
(a)the dishonoured cheque is presented to the drawee bank within a period of six months from the date of its issue.
(b)If the complainant has demanded payment of cheque amount within thirty days of receipt of information by him from the bank regarding the dishonor of the cheque, and
(c)If the drawer has failed to pay the cheque amount within fifteen days of receipt of such notice.
(4)The facts constituting cause of action do not constitute the ingredients of the offence under Section 138 of the Act.
(5)The proviso to Section 138 simply postpones/defers institution of criminal proceedings and taking of cognizance by the Court till such time cause of action in terms of clause (c) of proviso accrues to the complainant.
(6)Once the cause of action accrues to the complainant, the jurisdiction of the Court to try the case will be determined by reference to the place where the cheque is dishonoured.
(7)The general rule stipulated under Section 177 CrPC applies to cases under Section 138 of the Negotiable Instruments Act. Prosecution in such cases can, therefore, be launched against the drawer of the cheque only before the court within whose jurisdiction the dishonor takes place except in situations where the offence of dichonour of the cheque punishable under Section 138 is committed alongwith other offences in a single transaction within the meaning of Section 220(1) read with Section 184 of the Code of Criminal Procedure or is covered by the provisions of Section 182(1) read with Sections 184 and 220 thereof. Dashrath Rupsingh Rathod v. State of Maharashtra, 2014 (86) ACC 882.

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Equitable Set-off and Legal Set-off

“Set-off is defined in Black’s Law Dictionary (7th Edition, 1999) inter alia as a debtor’s right to reduce the amount of a debt by any sum the creditor owes the debtor; the counterbalancing sum owed by the creditor. The dictionary quotes Thomas W. Waterman from a Treatise on the Law of Set-off, Recoupment and Counter-claim as stating:
“Set-off signifies the subtraction or taking away of one demand from another opposite or cross-demand, so as to distinguish the smaller demand and reduce the greater by the amount of the less; or, if the opposite demands are equal, to extinguish both. It was also, formerly, sometimes called stoppage, because the amount to be set-off was stopped or deducted from the cross-demand.”
Equitable set-off is different than the legal set-off; that it is independent of the provisions of the Code of Civil Procedure; that the mutual debts and credits or cross-demands must have arisen out of the same transaction or to be connected in the nature and circumstances; that such a plea is raise not as a matter of right; and that it is the discretion of the court to entertain and allow such a plea or not. The concept of equitable set-off is founded on the fundamental principles of equity, justice and good conscience. The discretion rests with the court to adjudicate upon it and the said discretion has to be exercised in an equitable manner. An equitable set-off is not to be allowed where protracted enquiry is needed for determination of the sum due, as has been stated in Dobson and Barlow v. Bengal Spinning and Weaving Company, (1897) 21 Bom 126 and Girdharilal Chaturbhuj v. Surajmal Chauthmal Agarwal, AIR 1940 Nag 177. Jitendra Kumar Khan v. Peerless General Finance and Investment Company Ltd., 2013 (6) AWC 6359.

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