Delhi High Court Dismisses State Bank of India’s Plea to Expunge Adverse Remarks in SARFAESI Case, Cites Procedural Lapses and Observations on Loan Recovery Delays
Kiran Raj
The Delhi High Court has dismissed petitions filed by the State Bank of India (SBI) seeking the expungement of adverse remarks made by the Chief Metropolitan Magistrate (CMM), Rohini Courts, in a case concerning loan recovery proceedings under the SARFAESI Act. Justice Dharmesh Sharma, presiding over the matter, observed that "it is not the law that the learned CMM should be sitting like a silent spectator in Court and allow any party under the SARFAESI Act to abuse the process of law."
The case pertained to the bank's efforts to recover outstanding dues from P.P. Jewellers Private Limited, whose loan account had been classified as a Non-Performing Asset (NPA). The court noted that the bank had sought multiple adjournments before the CMM, leading to the dismissal of its application for non-prosecution. Addressing SBI’s contention that the remarks had caused reputational harm, the court recorded that "the petitioner Bank was not diligently pursuing its remedies."
The dispute originated when P.P. Jewellers Private Limited, a company engaged in the jewellery business, availed multiple loan facilities from SBI and its erstwhile subsidiaries. The financial arrangements were secured through charge creation on assets, personal and corporate guarantees, and mortgage of immovable properties in Delhi.
On March 31, 2016, the respondent’s loan account was classified as an NPA, prompting SBI to issue a demand notice under Section 13(2) of the SARFAESI Act on September 8, 2016. The notice required the borrower and its guarantors to repay the outstanding dues. Following this, a One-Time Settlement (OTS) proposal was accepted by SBI on January 15, 2018, allowing settlement at ₹145 crores. However, due to non-compliance by the borrower, SBI cancelled the OTS on March 19, 2019, after receiving partial payments amounting to ₹29.60 crores.
In August 2019, SBI issued another demand notice under Section 13(2) of the SARFAESI Act and subsequently filed an application under Section 14 before the CMM, seeking possession of a secured asset located in Delhi. On June 4, 2022, the CMM dismissed SBI’s application for non-prosecution, noting the absence of the bank’s representatives and recording adverse remarks regarding the bank’s conduct.
The High Court extensively examined the nature of the proceedings under Section 14 of the SARFAESI Act, referring to the Supreme Court's decision in R.D. Jain & Co. v. Capital First Ltd. (2023) 1 SCC 675. It noted that the role of the Magistrate under Section 14 is purely ministerial, requiring verification of documents before passing necessary directions.
However, the court held that the Magistrate was within its rights to express concerns over delays in the bank's actions.
The court recorded: "It appears that there was shown no alacrity on the part of the bank in satisfying the learned CMM about the correctness of the information furnished and the measures that were being taken to pursue the recovery of loan amount in right earnest."
It further stated: "The Magistrate is only required to verify the correctness of the information furnished in the application and proceed in terms of the procedure prescribed. However, given the fact that there is a huge pendency of cases in the Court, it is not unreasonable for the Magistrate to take cognizance of delays in recovery efforts."
Also Read: Supreme Court: Lottery Distributors Have No Service Tax Obligation to Centre
Regarding SBI's contention that the adverse remarks harmed its reputation, the court observed: "This is a luxury litigation which is being pursued by the petitioner Bank challenging an innocuous order of the learned CMM, which in no way causes it any irreparable loss of reputation or loss of face."
The High Court dismissed the petitions, holding that they suffered from inordinate delay and laches, as they were filed nearly two years after the cause of action arose.
The court concluded: "In summary, the present litigation is ill-conceived and palpably suffering from inordinate delay and barred by laches for having been filed after almost two years of arising of the cause of action."
Advocates Representing the Parties
For the Petitioner (State Bank of India): Ankur Mittal, Abhay Gupta, Muskan Jain, Advocates
For the Respondent (P.P. Jewellers Private Limited): Sanjeev Bhandari, Ravi Data, Rajesh Sharma, Advocates
For the Itervenors: Jyoti Taneja, Shantanu Sharma, Moksh Tyagi, Reny Chauhan, Advpcates
Case Title: State Bank of India v. M/s P.P. Jewellers Private Limited
Neutral Citation: 2025: DHC:1595
Case Number: W.P.(C) 6991/2024 & W.P.(C) 7017/2024
Bench: Justice Dharmesh Sharma
[Read/Download order]
