Courts should be cautious in granting ex-parte interim orders in financial matters

Supreme Court: Dealing with a matter under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), the bench of RF Nariman and Navin Sinha, JJ said:

“In financial matters grant of ex-parte interim orders can have a deleterious effect and it is not sufficient to say that the aggrieved has the remedy to move for vacating the interim order.”

The Court said that it is the solemn duty of the Court to apply the correct law without waiting for an objection to be raised by a party, especially when the law stands well settled. Any departure, if permissible, has to be for reasons discussed, of the case falling under a defined exception, duly discussed after noticing the relevant law.

Explaining the concept of loans by financial institutions, the Court said that these loans are granted from public money generated at the tax payers expense. It was observed:

“Such loan does not become the property of the person taking the loan but retains its character of public money given in a fiduciary capacity as entrustment by the public. Timely repayment also ensures liquidity to facilitate loan to another in need, by circulation of the money and cannot be permitted to be blocked by frivolous litigation by those who can afford the luxury of the same.”

It was said that the writ petition ought not to have been entertained and the interim order granted for the mere asking without assigning special reasons, and that too without even granting opportunity to the Appellant to contest the maintainability of the writ petition and failure to notice the subsequent developments in the interregnum. The opinion of the Division Bench that the counter affidavit having subsequently been filed, stay/modification could be sought of the interim order cannot be considered sufficient justification to have declined interference.

The Court was hearing appeal arising out of interim orders in the the writ petition under Article 226 of the Constitution, staying further proceedings at the stage of Section 13(4) of SARFAESI Act on deposit of Rs.3,50,000/-within two weeks. An appeal against the same was also dismissed by the Division Bench observing that counter affidavit having been filed, it would be open for the Appellant Bank to seek clarification/modification/variation of the interim order. [Authorized Officer, State Bank of Travancore v. Mathew KC, 2018 SCC OnLine SC 55, decided on 30.01.2018]

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