Courts have power to mould relief to lender and borrower under the SARFAESI Act

By Merles' Law Firm on July 4th, 2022

The question as to whether courts and judicial authorities have the power to mould relief to the lender or the borrower under the SARFAESI Act was considered by the Supreme Court in ARCE POLYMERS PRIVATE LIMITED VERSUS M/S. ALPHINE PHARMACEUTICALS PRIVATE LIMITED.

The Court held that the general approach that the claimant who succeeds in establishing the unlawfulness of administrative action is entitled to grant of remedial order does not undermine the discretion which the courts or judicial authorities have in assessing “what is fair and just to do in the particular case – to withhold the remedy altogether or to mould the remedy by grant of a declaration rather than a more coercive quashing, prohibiting or mandatory order or injunction which may have been sought.

It was noted that relief may be granted in respect of one aspect and not others. The general approach, therefore, is that a complainant who succeeds in establishing unlawfulness of an action is entitled to a remedial order, but the court has discretion in the sense of determining what is fair and just to do in a particular case. This discretionary aspect of grant of relief even with reference to post litigation events has been highlighted in Beg Raj Singh v. State of U.P. and Others, (2003) 1 SCC 726 wherein it was held as under:

7. Having heard the learned counsel for the petitioner, as also the learned counsel for the State and the private De Smith’s Judicial Review, Eigth Edition (2018), at page 1006, we are satisfied that the petition deserves to be allowed. The ordinary rule of litigation is that the rights of the parties stand crystallized on the date of commencement of litigation and the right to relief should be decided by reference to the date on which the petitioner entered the portals of the court. A petitioner, though entitled to relief in law, may yet be denied relief in equity because of subsequent or intervening events i.e. the events between the commencement of litigation and the date of decision. The relief to which the petitioner is held entitled may have been rendered redundant by lapse of time or may have been rendered incapable of being granted by change in law. There may be other circumstances which render it inequitable to grant the petitioner any relief over the respondents because of the balance tilting against the petitioner on weighing inequities pitted against equities on the date of judgment. Third-party interests may have been created or allowing relief to the claimant may result in unjust enrichment on account of events happening in-between. Else the relief may not be denied solely on account of time lost in prosecuting proceedings in judicial or quasi- judicial forum and for no fault of the petitioner. A plaintiff or petitioner having been found entitled to a right to relief, the court would as an ordinary rule try to place the successful party in the same position in which he would have been if the wrong complained against would not have been done to him…

A similar view was taken earlier by the Supreme Court in Rameshwar and Others v. Jot Ram and Another 14 (1976) 1 SCC 194.

In the case of ARCE POLYMERS PRIVATE LIMITED VERSUS M/S. ALPHINE PHARMACEUTICALS PRIVATE LIMITED, the Court held that it was clear that the Bank actively considered the Borrower’s request for extension of the moratorium period. However, the Borrower did not submit the viability report and failed to bring in Rs. 45,00,000. Post this default also there were negotiations with assurances and promises by the Borrower. Displaying forbearance, the Bank granted indulgence as action under the SARFAESI Act was deferred for nearly one year. The Court held that the Borrower had indulged in a dilatory and tricky approach and had failed to submit details of the additional collateral security offered along with the legal opinion and the engineer’s valuation report. Even visit to the proposed collateral security property was not arranged. The Borrower again tried its luck and submitted a restructuring proposal but this did not fructify into an acceptable settlement. The Bank having lost faith could not rely on the Borrower. Only thereafter, the Bank proceeded with the auctions under the SARFAESI Act. The Borrower then kept silent.

The Court held that taking into consideration the entire facts of the case, which perspicuously reflect disingenuous conduct on part of the Borrower to gain indulgence, unfulfilled assurances and promises, their unwillingness to pay, and in light of the law laid down by the Court, the Borrower has waived and is estopped from challenging violation of Section 13(3A) of the SARFAESI Act.

The pdf of the judgement can be downloaded below.


Pdf file of attachment: Click here to Download


This article is a mere general guide to the subject matter. It is not professional advice. Please consult a professional for advice on the specific circumstances of your case.


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