STATE BANK OF INDIA vs MINESTONE on 30 October 2026

ORDER

In

INTERLOCUTORY APPLICATION NO.1536 OF 2022

In

TRANSFER APPLICATION NO.1881 OF 2016

(Delivered on 30.10.2026)

State Bank Of India

...Applicant

Versus

Minestone

...Respondent

Advocate Bidan Chandran a/w Adv. Mittal Parekh a/w Adv. Nasima Siddiqui i/b M.V. Kini & Co. for the Applicant.

Advocate Sujata Gowalkar for the Respondent No. 17.

Advocate Siddharth Samantray a/w Adv. Sunil Kadam for the Respondent No. 18.

ORDER

1. . The application is filed by Defendant No. 18 who is a pari-passu charge holder to direct Applicant No. 1/lead bank of consortium to provide statement of account specifying the realisation of common pari-passu mortgaged securities to furnish the details of appropriation among the pari-passu charge holders, and to release the share of Royal Bank

of Scotland (RBS) to D18, who had been assigned with the debt due to RBs along with underlying securities.

2. The applicant contends that, the two consortiums headed by Applicant No. 1/State Bank of India had sanctioned various credit facilities to D1 in the O.A amounting to Rs.144 Crores and Rs.30.02 Crores respectively. Royal Bank of Scotland (RBS), who is a member in both consortiums, had assigned its debt with underlying securities, to ASREC (India) Limited a registered Asset Reconstruction Company, as per registered deed dated 11.12.2013, who in turn had assigned the same to applicant/D18 herein on 07.02.2015, also by registered assignment deed. So D18 is having 13.09% share in Consortium No. I and 29.5% share in Consortium No. II. The said fact was intimated to Applicant No. 1/bank by letter dated 20.02.2015. The mortgaged securities were sold by Applicant No. 1/lead bank fetching sale proceeds, to the tune of Rs.23.41 Cores, in which, applicant/D18 is having pari-passu charge. Though Applicant No. 1/lead bank had admitted to release the share of applicant/D18, and directed that D18 to furnish the details of assignment and bank accounts, no positive action is resorted to by Applicant No. 1/lead bank till date, despite the ever so many requests made by D18 for the same.

3. So by way of this present petition, applicant/D18 is seeking for an order directing Applicant No. 1/lead bank/State Bank of India to furnish the details and to release the amount due to D18 as is prayed for above.

4. The Applicant No. 1/lead bank as SBI bank contends that, D18 is not entitled to move this petition in this O.A which is preferred by Applicant No. 1/lead bank. The sale of the securities was effected during the period between 2014 and 2016 by SARFAESI measures. Now the present application by D18 is beyond the period of limitation as seven years are completed from the said sale. D18 is neither a bank nor a securitisation company. D18 is not a registered company u/s 3 of SARFAESI Act. On that ground itself, applicant/D18 cannot seek recovery against the bank in this proceedings. Applicant/D18 can only move Ld. Recovery Officer on obtaining a recovery certificate in its favour. Now D18 is moving in a manner, to assist the other defendants in the O.A, causing hurdles in the enforcement and recovery by Applicant No. 1/SBI. The reply filed by Applicant No. 1/SBI on 07.08.2023 mentions 07 items of property out of which 06 items are of Consortium I and 01 items was of Consortium II. The amount received from the 7th item was distributed amongst members of Consortium No. II. All the consortium members should be asked to file their share of sale proceeds so that, further claims should not be raised by them at a later stage. Though the details of calculation of the claims by D18 should also be specified, till date, the same has not been done by D18. So the present petition now filed by D18 cannot be entertained and is to be dismissed.

5. Heard both sides.

6. The thrust of the contention of Applicant No. 1/SBI seems to be that, D18 who is a private company, though an assignee from the assignee of RBS is not a substituted applicant, but is a defendant in the O.A.

D18 is not a registered securitisation company u/s 3 of SARFAESI Act. As against this D18 contends that, no such objections were made at the time of its impleadment in the O.A, and D18 had come into the party array without any objections from any of the parties in the O.A, who include the Applicant No. 1/lead bank/SBI.

7. The contentions of lead bank cannot be accepted merely on the ground that, D18 is a defendant rather than a substituted applicant in O.A or that it is not registered, u/s 3 of SARFAESI Act. The decisive questions are the legal validity of the assignment, the right of D18 under the pari-passu charge, and the jurisdiction of the DRT to determine entitlement to the sale proceeds. Here, applicant/D18 is seen to have been assigned with the debt and the underlying security interest by a consortium member, by a registered assignment deed. There is no dispute by Applicant No. 1/State Bank of India to the validity of the registration effected in favour of applicant/D18.

8. So by the assignment deed in favour of D18 the contractual and security rights are acquired by D18. The fact that the D18/assignee was impleaded as a defendant and was not substituted, as the O.A applicant, does not by itself extinguish those rights. However the status of the assignee-D18 as a secured creditor, for the purpose of the SARFAESI Act, must be distinguished, from its entitlement to enforce the assigned debt or receive its proportionate share of sale proceeds.

9. It is seen that, the applicant/D18 was permitted to come on record as per order dated 11.02.2022 passed by this Tribunal in I.A No. 204 of 2021. The Tribunal had passed an order therein holding that, the Applicant 1 and 3 who are the consortium members in Consortium II, have no objection to get the applicant/D18 substituted in place of the applicant No. 2 i.e., RBS. As applicant/D18 was neither a bank nor financial institution, it was impleaded as D18.

10. None of the applicants in the O.A who include Applicant No. 1/State Bank of India had raised any objection to the assignment to D18 or getting it impleaded in the party array. The order of the Tribunal passed dated 11.02.2022, specifically states that, no objection is raised by any side to such impleadment. No grounds were raised at that time by the applicant/bank regarding the lack of competency for D18 to step into the shoes of the consortium member as RBS.

11. The contention of the Applicant No. 1/bank that, D18 is not registered u/s 3 of SARFAESI Act and that it cannot make a request in this O.A cannot be entertained. After conceding to the impleadment without any objection the lead bank cannot take a reverse stand now.

12. Section 3(4) of SARFAESI Act deals with registration of securitisation companies and asset reconstruction companies. Section 5 provides the statutory mechanism by which a registered securitisation or reconstruction company may acquire financial assets from a bank or financial institutions. Claiming a share of proceeds because the assignee

acquired a valid pari-passu security interest by way of assignment of debt from a consortium member, and claiming payment, merely because the assignee was impleaded as a defendant on the basis of a SARFAESI enforcement right, which the assignee is not legally qualified to exercise, are distinct points.

13. Here the lead bank expressly accepted the assignment, acknowledged the interest of assignee-D18 in the pari-passu security and agreed to release the share on receipt of particulars. Since SBI consented to impleadment of D18 in O.A, it cannot be argued that D18 has no locus in the proceedings. In consortium agreement members typically share a common pari-passu charge over the mortgaged assets. Under SARFAESI Act, realisation of secured assets by a majority of lenders requires acting in conformity with rights of other secured creditors having a pari-passu charge.

14. Section 3 of SARFAESI Act is strictly mandatory only if an entity wishes to enforce security interest, as an Asset Reconstruction Company under section 13, extra judicially i.e., without intervention of court. The present dispute is within an O.A filed before DRT under RDB Act. There is no bar in a private company in legally acquiring the debt, through a valid assignment deed, and stepping into the shoes of the assignor bank to receive money through DRT. A pari-passu charge gives all participating lenders equal pro-rata rights over the mortgaged property. Here, when the consortium member as RBS, assigned its debt to ASREC/ARC who had assigned it to the private company as D18, all the underlying rights, including the pari-passu security interest, stand transferred to that assignee.

15. The acquiescence by Applicant No. 1/State Bank of India in permitting applicant/D18 to come on record in place of the consortium member as RBS, is relevant to hold that, the present objection by Applicant/bank cannot be entertained. This is more so, in view of the admission by Applicant No. 1/bank in the reply filed by it, to the present application filed by D18.

16. Page 7 of the said reply by the lead bank/SBI/Applicant No. 1 states as follows:

"The amount of sale proceeds could not be distributed due to non-submission of relevant data by the Stakeholders for the relevant period. However, the amount has been parked in an interest bearing account in the Bank and interest is being accrued on the sale proceeds as per the applicable rate of interest and necessary TDS is being deducted as per the provision of the Income Tax Act and rules therewith. The Defendant should submit the detailed documents as desired during 2017 to enable the Applicant Bank to share with the sale proceeds, after deducting necessary expenses. The defendant also needs to provide a detailed calculation of their claim."

17. This statement by the lead bank in the reply is a clear admission of the right of D18-assignee. Further the e-mails sent by the lead bank in response to the mails sent by D18 also are to the effect of conceding to the claim of D18, provided the records and bank account details are furnished by D18. It cannot be taken that bank account details would be sought for by the applicant/lead bank, simply for the sake of

communication if it was not for releasing the due amount to D18.

18. This admission by lead bank in the reply filed by it to the present petition and emails sent by it are relevant to show that, it had accepted the assignment of the debt by RBS and the assignee's entitlement to the share of sale proceeds, subject only to verification of particulars. So the lead bank should explain why it subsequently changed its position, and why the admission made by it in the reply filed, is now sought to be altered by oral submission.

19. It is to be noted that, the assignee-D18 is seeking for the details of appropriation of the sale proceeds of secured assets. It is admitted by lead bank that, the sale is effected, the sale proceeds had been appropriated among the consortium members and the share of RBS the prior assignee of D18 is retained in a separate interest bearing account. So the request of D18-assignee, for disclosure of relevant financial information, cannot be stated to be improper. The disclosure statement by the lead bank would be able to bring out the amount realised by the sale, the deduction, if any, made for the expenses, how much was retained and how the balance was distributed among consortium members.

20. This disclosure is necessary to examine whether, the predecessors in interest of D18-assignee, and consequently D18 has an outstanding claim, to any portion of the proceeds. When measures under Section 13(4) of SARFAESI Act are intended outside tribunal mechanism, once sale proceedings are realised and brought into the fold, or when O.A is

pending, where accounts of consortium are being adjudicated, DRT has statutory power to look into the proper apportionment and distribution amongst consortium members, particularly to prevent unjust-enrichment or exclusion of pari-passu charge holder.

21. It is contended by the lead bank that, DRT does not have jurisdiction to entertain the petition of D18. The facts that assignment was made by registered deed, that no consortium member objected to it, and that the assignee was impleaded pending O.A with consent of all the parties in the O.A including the lead bank, show that, the lead bank cannot now raise objection, that too after practically admitting the case of D18 in para 04 of its reply. The lead bank cannot contend that, DRT has no jurisdiction, merely because, the asset was sold through SARFAESI measures. Section 13(7) of SARFAESI Act addresses, the application of money received by secured creditors through enforcement measures. The objection formed solely as a jurisdictional bar, that the sale had arisen from the SARFAESI sale measure is not sustainable.

22. While the private company i.e., D18-assignee cannot independently initiate its own enforcement measures, it not being a bank, financial institution or registered Asset Reconstruction Company, it still legally holds the pari-passu economic rights to the security proceeds. The assignment transfers the right to receive the underlying cash flow and sale proceeds of the mortgaged asset. When a debt is assigned pending O.A, the assignee has every right to file an application for impleadment or substitution to claim its share of the recovery. A debt assignment involves

the substitution of a creditor. Here in this case the said substitution is effected with consent of all sides as is seen from the order of the Tribunal on 11.02.2022.

23. It is contended by lead/bank that the applicant herein can file separate securitisation application instead of filing the present petition in this O.A. SA under section 17 is a remedy to be used by an aggrieved person to challenge any wrongful enforcement measures taken by a bank in enforcing recovery. The D18-assignee herein is not challenging the lead banks's recovery action: rather it is supporting the recovery, and asking for its contractually assigned share which is due to it. The fact that the assignee company is a private entity, not registered u/s 3 of SARFAESI Act, does not invalidate the assignment of the underlying debt, nor does it extinguish its contractual rights, to a proportionate share of sale proceeds under pari-passu charge arrangement. The lead bank had originally conceded to the arrangement, in the reply filed and by the e-mails sent to D18. So now its subsequent reversal must be stated to be barred under the principle of promissory estoppel and the established framework governing the RDB Act.

24. When banks form a consortium, one member cannot arbitrarily appropriate or deny legitimate pari-passu shares, to another consortium member or its valid assignee and DRT overseeing the recovery proceeding can examine disbursement disputes relating to common security. The lead bank cannot automatically deny the assignee its share merely because the sale was conducted under SARFAESI Act. The decisive

questions are whether the registered assignment deed validly transferred the assignor bank's debt and pari-passu security interest and whether the assignor has legal entitlement to claim corresponding sale proceeds before DRT.

25. The private assignor company is fully competent to file an interim application on getting its substitution petition allowed in the ongoing O.A, to claim its share of sale proceeds. Pari-passu charge remains attached to the debt. Lead bank cannot rely on a statutory requirement meant for regulating Asset Reconstruction Company, to deny a legitimate contractual co-sharer their monetary recovery. As the assignment deed from ASREC to D18 was duly stamped and registered at the Sub-Registrar Office (SRO), lead bank cannot now raise any objection.

26. As stated earlier, D18 is not seeking enforcement of any claim or security. Its prayer is limited to distribution of the sale proceeds of common pari-passu securities already admitted by the lead bank to have been realized under the SARFAESI Act. Once securities are realized with the consent of the predecessor in interest of D18, the lead bank, which had accepted the same in the reply and by its e-mails, is bound to disclose particulars of realization and appropriation in the OA.

27. It is also admitted by the lead bank that the share of D18 from the realization of pari-passu securities has been parked in an interest-bearing account by the Applicants. The only requirement raised by the lead bank was submission of documents- viz. Assignment agreements,

Bank Account details, NOC of ASREC - all of which are seen furnished to the lead bank, by D18.

28. It is next contended by the lead bank that, the present application is barred by limitation. It is admitted by lead bank that it holds the mortgaged sale proceeds for all pari-passu charge holders. It is also stated by the lead bank that, the said share is held in an interest bearing account. So the said amount must be stated to be held by lead bank in trust for other consortium members. Such an amount which is held in trust by the lead bank cannot be stated to be unavailable for release being barred by time to the due shares under section 10 of Limitation Act. Section 10 of Limitation Act specifically directs that suits to receiver proceeds from an express trust are not barred by any length of time.

29. As stated earlier when banks form a consortium, arbitrary dealing of the pari-passu shares cannot be entertained. The lead bank cannot unilaterally decide to withdraw a member's proportionate share of the debt charged. Here since the lead bank originally conceded to release the sale proceeds to D18-assignee, it is legally bound by that agreement. A bank cannot take a contradictory stand midway through a judicial proceedings before DRT, especially after the assignee acted upon that concession by furnishing the details and bank account to lead bank and then by filing the present petition for release of the amount due to it. As the assignment itself conforms to the RBI guidelines, and the consortium inter-creditor agreement, the lead bank has no standing to object to the distribution of proceeds.

30. So on consideration of the entire matter, the contention of the applicant/D18 herein has to be accepted. The lead bank/State Bank of India/Applicant No. 1 in the O.A shall furnish the following details:-

1. 1) Total consideration received for the mortgaged premises, stated to be sold.

2. 2) The details of sale expenses and other deductions, if any.

3. 3) Lead bank to specify the amount due to the share of Royal Bank of Scotland (RBS) which now stands assigned to D18.

4. 4) Lead bank is directed to release the said amount entitled to RBS, to D18 within one month from the date of this order with interest at the rate of 8% from 07.02.2015 till realisation.

31. Petition as I.A No. 1536 of 2022 is allowed as above. Parties to suffer costs.

(Dictated to my Stenographer, transcribed by her corrected and signed by me and pronounced in open forum on 30.10.2026)

Date: 30.10.2026

Presiding Officer Debts Recovery Tribunal, Mumbai-I (Sreekala Suresh)