ACTION UNDER SARFAESI NOT SACROSANCT: IMPORTANT CASE LAW FOR VALUERS

For Professionals in Engineering, Valuation, and Land Administration

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IDFC FIRST BANK LTD V STATE OF HARYANA (13 DEC 2022)

Punjab and Haryana High Court
IDFC First Bank Limited vs. State of Haryana & Others
Decision Date: 13 December 2022

Background of the Case

• Petition filed under Section 482 Cr.P.C.: IDFC First Bank sought to restrain the respondents (Police Authorities, Gurugram) from repeatedly inquiring into matters already adjudicated by various judicial forums, including up to the Supreme Court.
• Grievance of the Bank: The Bank argued that repeated complaints and inquiries by the borrowers amounted to harassment, an abuse of process, and a transgression of jurisdiction.

Chronological Events

1. Default by Borrowers & NPA Declaration
   • Borrowers defaulted, and their account was declared Non-Performing Asset (NPA).
   • The Bank initiated recovery proceedings under the SARFAESI Act, 2002.
2. First Legal Challenge (2019)
   • Borrowers approached DRT-II, New Delhi in SA No. 11/2019.
   • Relief was granted, but the Bank was given liberty to reinitiate proceedings.
3. Fresh Proceedings (2019)
   • Bank took physical possession of the mortgaged property with aid of District Magistrate (12.09.2019).
   • Borrowers again filed SA No. 242/2019 before DRT-III, New Delhi, raising the issue of undervaluation.
   • Interim relief was denied (09.10.2019).
4. Writ Petitions
   • Borrowers approached Delhi High Court (W.P.(C) No.11752/2019). Petition dismissed on 06.11.2019.
   • Later, CWP No.1750/2020 filed before Punjab-Haryana High Court. However, during its pendency, physical possession was delivered to the Bank, rendering it infructuous (08.02.2021).
5. Repeated Applications (2021)
   • Borrowers filed IA Nos. 107 & 108/2021 in SA No. 242/2019 before DRT-III (Delhi) again raising undervaluation claims. Relief denied (21.01.2021).
   • Auction attempts were made, but property could not fetch buyers at reserve price.
   • Borrowers filed WP(C) No.11892/2021 before Delhi HC. Dismissed as withdrawn (22.10.2021). Liberty granted to approach Punjab-Haryana High Court.
   • Again filed CWP No.21624/2021 before Punjab-Haryana HC. Dismissed as withdrawn with liberty to avail alternate remedy (26.10.2021).
6. Approach to Police & Apex Court
   • Borrowers, with alleged intent to arm-twist the Bank, lodged complaints before Police Authorities (Gurugram). Notices issued (01.12.2021 onwards).
   • Bank officials joined inquiry, submitting documents & court orders.
   • Meanwhile, Borrowers approached the Supreme Court in SLP(C) No.19092/2021, which was dismissed as withdrawn (24.11.2021).
7. Subsequent Litigation
   • Borrowers again moved Delhi High Court in WP(C) No.478/2022, challenging issuance of sale certificate despite pending securitization application.
   • Delhi HC dismissed the writ, holding:
     • Sale certificate issuance was subject to DRT’s decision.
     • No stay order was operating.
     • Thus, Borrowers had no valid grievance.
8. DRT Jaipur Decision (13.01.2022)
   • After transfer of proceedings, DRT Jaipur dismissed Borrowers’ interim applications, holding:
     • Valuation objections had already been decided earlier (09.10.2019, 21.01.2021).
     • These orders attained finality, not set aside by higher courts.
     • Borrowers’ claim of property worth Rs. 60–70 crore lacked substance.
     • No illegality found in auction proceedings (25.11.2021) or Sale Certificate (10.12.2021).
     • Applications dismissed.
9. Police Inquiries (2022)
   • Notices from Police Authorities (13.01.2022, 16.04.2022, 06.05.2022).
   • Bank officials repeatedly joined inquiry & submitted responses.
   • Bank argued that Police were transgressing jurisdiction, since valuation and possession issues already adjudicated by courts.

Legal Issues Framed by Court

1. Whether Police Authorities can inquire into issues already adjudicated by DRT/High Courts/Supreme Court?
2. Whether repeated complaints by borrowers amount to abuse of process of law?

Court’s Observations

• Action under SARFAESI not sacrosanct, but can be challenged before DRT, DRAT, High Court, or Supreme Court.
• Borrowers had already availed remedies, all dismissed/withdrawn.
• Filing fresh police complaints after dismissal amounted to an intimidatory tactic and abuse of process.
• Allowing police to continue inquiry would amount to reviewing judicial orders indirectly, which is impermissible.
• Banking system cannot be held to ransom by such repeated tactics.

On Police Powers & Preliminary Inquiry

• Reference made to Section 154 Cr.P.C. (FIR registration on cognizable offence).
• Police may conduct preliminary inquiry in certain cases (e.g., valuation disputes, commercial issues).
• However:
  • Inquiry must be time-bound (max 7 days).
  • Police can call for documents, but cannot enforce personal attendance of Bank officials (Section 160 Cr.P.C.).

Final Decision

• The Court held that police authorities exceeded their jurisdiction by repeatedly summoning Bank officials in matters already settled judicially.
• Extraordinary powers under Section 482 Cr.P.C. invoked.
• Petition disposed of with direction that:
  • Police may only seek documents (not enforce attendance).
  • No further inquiry permissible into matters already adjudicated by competent forums.

Key Takeaways

• Borrowers’ undervaluation claims had been raised multiple times before DRT, DRAT, Delhi HC, Punjab-Haryana HC, and Supreme Court, and were consistently rejected.
• Filing police complaints after judicial rejection was deemed malicious litigation.
• Section 482 Cr.P.C. relief granted to prevent harassment of Bank officials.
• Reinforced principle: Police cannot re-investigate or re-adjudicate matters already settled by judicial forums.

✅ Judgment balances: Borrower’s right to challenge bank action vs. protection of banks from vexatious, repetitive litigation and harassment.

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