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K. Virupaksha & Anr. v. The State of Karnataka & Anr.

Criminal Appeal · 2020 INSC 261Decided 3 Mar 2020
Criminal Appeal No. 377 of 2020
Justice R. Banumathi · Justice S. Abdul Nazeer · Justice A.S. Bopanna

Background

A borrower defaulted on a loan from Canara Bank, and the bank, acting under the SARFAESI Act, took over and auctioned the mortgaged property after an initial auction attracted no bidders. The borrower unsuccessfully challenged the auction through a writ petition, a writ appeal, and then applications before the Debts Recovery Tribunal and Appellate Tribunal, alleging the property was undervalued. After losing all these remedies, the borrower filed a criminal complaint accusing two bank officers (the appellants, both Deputy General Managers) of cheating and conspiracy over the same undervaluation allegations, leading a magistrate to order a police investigation and register an FIR. The High Court declined to quash this FIR, and the officers appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that the SARFAESI Act is a complete code that already provides borrowers a specific remedy, appeal to the Debts Recovery Tribunal and Appellate Tribunal, for exactly this kind of grievance about valuation or conduct of the auction. Since the borrower had already pursued and lost those remedies on the identical factual grievance, using a fresh criminal complaint to reopen the same issue against the bank's officers was, in the Court's words, an "intimidatory tactic" and an abuse of the legal process. It therefore quashed the complaint, the magistrate's order, and the FIR as against the appellants, while leaving the borrower free to pursue any further remedies available in law regarding the DRT/DRAT orders.

Lesson Learnt

If you have a grievance about how a bank conducted a loan recovery or auction under the SARFAESI Act, the law expects you to pursue it through that Act's own dedicated forums (the DRT and DRAT): you cannot, after losing there, convert the same grievance into a criminal complaint against bank officials.

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

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