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D. Nageswar Rao v. S.B.I. & Ors.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 786 of 2016)Decided 29 Jan 2016
Civil Appeal No. 786 of 2016
Justice Kurian Joseph · Justice Rohinton Fali Nariman

Background

The appellant defaulted on a bank loan from SBI, and the Bank obtained a recovery decree for about Rs. 92.94 lakh through the Debt Recovery Tribunal. When the appellant failed to pay, the Bank auctioned the mortgaged property for Rs. 48.80 lakh, with Respondent No. 3 as the auction purchaser; that deposit was held in an interest-bearing account pending the appeal. Despite an earlier partial payment of Rs. 60 lakh by the appellant, outstanding dues still stood at about Rs. 1.02 crore, and the appellant sought one more chance to pay off the balance in instalments rather than let the auction be confirmed.

Decision Breakdown

The Supreme Court, over the Bank's objection and noting the appellant's past conduct, decided to give the appellant one final opportunity given that confirming the auction would recover for the Bank barely a third of what it was owed. It directed the appellant to clear the outstanding Rs. 1,02,06,815 in monthly instalments of Rs. 15 lakh starting March 2016, with a strict condition that default on two consecutive instalments would forfeit the indulgence, automatically dismiss the appeal, and let the Bank proceed against the property. It further directed that if the appellant did clear the dues, both the appellant and the Bank would each pay Rs. 5 lakh in compensation to the auction purchaser, whose original deposit (with accrued interest) would then be returned to him.

Lesson Learnt

Courts can grant a defaulting borrower a conditional last chance to pay off bank dues in instalments instead of losing an auctioned property outright, but such relief typically comes with a strict, self-executing default clause: miss the agreed payments and the case is automatically over, with no further indulgence.

Official source (sci.gov.in)View Judgment (PDF)

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