'Luxury Litigation': Delhi High Court Dismisses SBI's Plea To Expunge Magistrate's Remarks Suggesting Collusion In Loan Default Case

Justice Dharmesh Sharma commented, “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 facts of the case are that the respondent availed various loan facilities from the SBI. Subsequently, SBI classified the respondent's account as a Non-Performing Asset as its loan account became overdue and irregular. SBI issued a demand notice to the respondent under the SARFAESI Act. However, as the respondent defaulted in paying its dues, SBI filed an application under Section 14 of the SARFAESI Act before the Magistrate, seeking possession of the mortgaged immovable property.

As no appearance was entered by the SBI, the said application was dismissed by the Magistrate for non-prosecution on 04.06.2022. In its order, the Magistrate observed that SBI has sought three adjournments to produce the original documents. It recorded that around Rs. 31.41 crore of public money was involved and that SBI was not serious in taking possession of the secured asset against which they have disbursed a huge loan involving public money and the bank was hand in glove with the respondent.

The SBI then filed a fresh application under Section 14 of the SARFAESI Act, which was allowed by the Magistrate. The Magistrate directed a Court-Appointed Receiver to take possession of the secured asset.

SBI's grievance is that notwithstanding the favourable order, Magistrate's 'adverse remarks' in its order dated 04.06.2024 continue to cause irreparable harm to its reputation and interests. SBI thus filed the present petition seeking to expunge the remarks made by the Magistrate. SBI contended that the exercise of powers under Section 14 of the SARFAESI Act is a ministerial function rather than quasi-judicial or adjudicatory role and thus the Magistrate's remarks are without jurisdiction.

The High Court noted that the Magistrate reprimanded the officials of the bank as the Magistrate was concerned that a huge amount of public money was involved and unnecessary adjournments were being sought.

It noted that while the exercise of jurisdiction under Section 14 of the SARFAESI Act is ministerial in nature, it referred to R.D. Jain & Co. v. Capital First Ltd (2022 LiveLaw (SC) 634), where the Supreme Court observed that Magistrate is required to verify the correctness of the information furnished in the application and proceed in terms of the procedure prescribed.

Here, the Court stated that there was no willingness on the part of SBI to satisfy the Magistrate about the correctness of the information furnished and the measures being taken to pursue the recovery of the loan amount.

Observing that SBI was not diligent in pursuing its remedies, the Court remarked “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, given the fact that there is a huge pendency of cases in the Court. It is evident that petitioner Bank was not diligently pursing its remedies.”

Remarking that the petition was “ill-conceived” and suffered from inordinate delay as it was filed two years after the cause of action arose, the Court dismissed the petition.

Case title: State Bank of India vs. M/S. P. P. Jewellers Private Limited (M/S. P. P. JEWELLERS PRIVATE LIMITED)

Citation: 2025 LiveLaw (Del) 310