Bombay High Court Issues Show Cause Notice For Contempt Against Borrower For Using “Extra- Judicial Pressure”

Observing that defaulting borrowers are increasingly taking law into their own hands, the Bombay High Court has directed certain borrowers to explain why contempt notices shouldn't be issued against them.

A division bench of Justices BP Colabawalla and Somasekhar Sundaresan prima facie observed that even after handing over physical possession of the secured asset to the non-banking financial institution, the borrowers had re-entered the premises and by breaking open the locks.

“From what has transpired in the above matter, we find that that after giving a solemn undertaking to this Court, the borrowers have sought to put extra-judicial pressure on the authorised officer of the Petitioner-NBFC. This cannot be tolerated even for a minute. We are increasingly finding that borrowers are taking the law into their own hands.”

Accordingly, the court directed borrowers Prashant Tanaji Shinde, Yamuna Tanaji Shinde & Tanvi Chavan to remain present in court on March 28 along with their advocates and explain why contempt proceedings shouldn't be initiated against them.

The petitioner - Cholamandalam Investment & Finance Company Ltd said the borrowers were sanctioned credit facilities of Rs. 1. 70 crore by mortgaging a shop in Borivali in 2019. Following persistent defaults, the finance company raised a demand notice under Section 13(2) of the SARFAESI Act for Rs. 1.86 crore.

Subsequently, the property was auctioned and an Advocate was appointed as Commissioner to take physical possession of the property in 2023. The borrowers then trespassed and took physical possession of the property forcing the creditor to approach HC.

In its March 13 order, the HC recorded the borrower's statement that possession would be handed over on March 20.

However, auction purchaser expressed an apprehension about not getting the property as the advocate commissioner was made to sign a paper by the borrowers that even though possession was being handed over, it wouldn't be given to a third person.

The financial creditor's authorized officer stated that when taking possession of an asset, they were forced by the presence of a Member of Parliament, a Member of Legislative Assembly, and around 30-40 people to accept a letter from the borrowers containing certain conditions.

Noting this behaviour, the court directed the financial creditor to hand over the secured asset to the auction purchaser and sought an explanation from the borrowers.

Case Title - Cholamandalam Investment & Finance Company Ltd. Vs 1. The State of Maharahstra, through Government Pleader & 5 Ors.

Appearances – Advocates Charles D'souza a/w. Alok Mishra for Financial Creditor, AGP Dhriti Kapadia, Advocates Ziyad Madon a/w. Nilesh Gala etc for Auction Purchaser.

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