In Brief
Kut Energy obtained a consortium loan to build a hydro-electric project. When the account became non-performing, the bank issued a Section 13(2) demand notice under the SARFAESI Act for over Rs.106 crores and proceeded with asset sale. The borrower offered One Time Settlement proposals and deposited Rs.40 crores with the High Court registry to establish good faith. After the High Court's writ petition was set aside by the Supreme Court and the settlement was rejected, the bank sought to appropriate the deposit towards loan dues. The Supreme Court held that deposits made to establish bona fides are neither secured assets nor secured debts under the SARFAESI Act, and cannot be appropriated. The bank has no general lien over court-registry deposits. The borrower was entitled to full refund of Rs.40 crores with accrued interest.",
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