Orissa High Court
Sree Metaliks Limited vs Zonal Manager on 13 March, 2026
Author: Sanjeeb K Panigrahi
Bench: Sanjeeb K Panigrahi
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 26-Mar-2026 10:57:46
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C) No.27912 of 2025
(In the matter of an application underArticles 226 & 227 of the
Constitution of India)
Sree Metaliks Limited, Keonjhar .... Petitioner(s)
-versus-
Zonal Manager, State Bank of India, .... Opposite Party (s)
Bhubaneswar & Ors.
Advocates appeared in the case throughHybrid Mode:
For Petitioner(s) : Mr. Sidharth Ray, Sr. Adv.
with associates
Mr. Kshirod Kumar Sahoo, Adv.
For Opposite Party(s) : Mr. Dillip Kumar Mohapatra, Adv.
for O.Ps.1 & 2
Mr. Shibani Shankar Pradhan, Adv.
for O.P.3
CORAM:
DR. JUSTICE SANJEEB K PANIGRAHI
DATE OF HEARING:-07.03.2026
DATE OF JUDGMENT:-13.03.2026
1. In filing this Writ Petition, the Managing Director representing the
Petitioner-Company which deals with in the manufacturing of iron billet,
sponge iron and TMT Bars in the district of Keonjhar, has challenged the
action of the Opposite Party Nos.1 & 2/ Bank in continuing the lien and /
or appropriation of the Fixed Deposit Account of the Petitioner-Company
bearing No.32920809610.
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Apart fromthe above, the Petitioner has also sought for a direction from
this Court to the Opposite Party Nos.1 & 2/ Bank for releasing the
proceeds of the Fixed Deposit, account number of which is noted
hereinabove, along with interestfor the period from its maturity till the
date of its actual release in its favour.
I. FACTUAL MATRIX OF THE CASE:
2. The essential facts, briefly stated, are that the Petitioner-Company, in
the course of its business operations, availed various credit facilities
from Opposite Party Nos.1 & 2/Bank as well as from the erstwhile
State Bank of Bikaner and Jaipur, after fulfilling the prescribed
eligibility criteria and executing the requisite loan documentation. As
security for the financial assistance so extended, the Fixed Deposit
Account in question was duly marked under lien in favour of the
lending Bank. Subsequently, in the year 2017, the State Bank of Bikaner
and Jaipur came to be amalgamated with Opposite Party Nos.1 &
2/Bank and, by operation of law, all its assets, liabilities, rights and
obligations stood vested in Opposite Party Nos.1 & 2/Bank.
3. Prior thereto, in the years 2014 and 2015, Opposite Party Nos.1 &
2/Bank along with its subsidiary banks had, by executing Assignment
Agreements dated 27.06.2014 and 27.02.2015, assigned their financial
assets, including the loan accounts of the Petitioner, in favour of M/s.
Edelweiss Asset Reconstruction Company Ltd., Mumbai.
Consequently, all rights, title and interest in respect of the said
financial assistance stood transferred to the said Asset Reconstruction
Company.
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4. It is further borne out from the record that the Petitioner-Company,
having become financially distressed with effect from 2011,
approached the Board for Industrial and Financial Reconstruction
(BIFR) seeking revival and rehabilitation. The reference was admitted
on 18.11.2014. Thereafter, with the coming into force of the Insolvency
and Bankruptcy Code, 2016, SREI Equipment and Finance Ltd.
initiated proceedings under Section 7 of the IBC before the National
Company Law Tribunal, Kolkata Bench, alleging default on the part of
the Petitioner-Company. The said application was admitted on
30.01.2017 and Corporate Insolvency Resolution Process (CIRP) was
commenced.Pursuant to public announcement, claims were invited by
the Interim Resolution Professional. A Resolution Plan submitted by
the successful Resolution Applicant was placed before the Committee
of Creditors and was approved by a voting share of 78.5%.
5. The learned NCLT, Kolkata Bench, by order dated 07.11.2017,
approved the Resolution Plan under Section 31 of the IBC. The
challenge to the said order before the National Company Law
Appellate Tribunal, New Delhi, was dismissed by judgment dated
13.12.2018, thereby affirming the approval of the Resolution Plan and
rendering it final and binding upon all stakeholders. It is pertinent to
mention here that despite issuance of notice inviting claim, no claim
was lodged by the SBI. The asset reconstruction company named
EARCL to whom the Opposite Party Nos.1 & 2/ Bank has assigned all
the loans / financial assistance of the Petitioner, has been paid all its
dues as per the approved resolution plan. Further, the Opposite Party
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Nos.1 & 2/ Bank owing to its assignment, has not raised any claim
against the Petitioner-Company in the CIRP. The asset reconstruction
Company EARCL has issued "No Dues Certificate" dated 22.04.2025
inter alia certifying that the Petitioner has paid all its dues in terms of
the resolution plan and there remains no outstanding dues payable by
the Petitioner. In the said certificate, the asset reconstruction company
has also confirmed to have released all the securities, charges and
guarantees created in its favour. In spite of payment of all the dues and
issuance of the "No Dues Certificate", the Opposite Party Nos.1 & 2-
Bank appropriated the fixed deposit of the Petitioner even after its
maturity in the month of July, 2021. Thereafter, despite several
approaches of the Petitioner and filing of a complaint as per the
provision of the R.B.I Integrated Ombudsman Scheme, 2021,since the
Opposite Party Nos.1 & 2/ Bank did not release the proceeds of the
fixed deposit in question in favour of the Petitioner, hence, the
Petitioner has preferred the present Writ Petition.
II. SUBMISSIONS ON BEHALF OF THE PETITIONER:
6. Learned counsel for the Petitioner earnestly made the following
submissions in support of his contentions, as borne out from the Written
Note of Submissions:
i) Learned Senior Advocate appearing on behalf of the Petitioner raised the
following questions to be adjudicated by this Court:
a. Whether, after assignment of the Petitioner's entire debt by
Opposite Party Nos.1 & 2/Bank (SBI) in favour of Opposite
Party No.3/Edelweiss Asset Reconstruction Company Ltd.,
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the assignor-Bank is legally justified in continuing to retain
the Petitioner's Fixed Deposit under lien?
b. Whether, after approval of the Resolution Plan under
Section 31 of the Insolvency and Bankruptcy Code, 2016, and
issuance of a "No Dues Certificate" by the assignee creditor,
the Opposite Party Nos.1 & 2/Bank retains any enforceable
legal right to exercise lien or set-off against the Petitioner's
Fixed Deposit?
c. Whether the continued retention and/or appropriation of the
Petitioner's Fixed Deposit, notwithstanding extinguishment of
the underlying debt, amounts to unlawful deprivation of
property in violation of Article 300-A of the Constitution of
India?
d. Whether a Bank which has not lodged its claim during the
Corporate Insolvency Resolution Process (CIRP) can, after
approval of the Resolution Plan, assert rights over securities or
invoke a contractual or statutory lien dehors the scheme and
binding effect of Section 31 of the IBC?
ii) Learned Senior Counsel for the Petitioner further submits that the
Opposite Party-Bank seeks to justify its action on the purported exercise
of a "banker's lien." It is contended that in law a lien is merely a passive
right of retention, enabling a creditor to retain possession of property
until satisfaction of a legally enforceable debt. It does not confer an
independent right of appropriation, nor can it exist in abstract detached
from a subsisting liability.Under Section 171 of the Indian Contract Act,
1872, a banker's lien is recognized as a qualified right permitting the bank
to retain securities or deposits of a customer only in respect of an existing
and legally recoverable debt. The said right is accessory and incidental to
the principal obligation; it does not create a substantive or autonomous
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claim. It is well-settled that once the underlying debt is discharged,
satisfied, assigned or otherwise extinguished, the ancillary right of lien
automatically ceases to operate. Therefore, in absence of a subsisting
enforceable liability, the continued retention of the Fixed Deposit under
the guise of banker's lien iswholly untenable in law. He also relies on a
decision of the Supreme Court in the case of Syndicate Bankvs. Vijay
Kumar1. He further contends that in the present case, the Opposite Party
Nos.1 & 2/ Bank has no subsisting enforceable debt against the
Petitioner.In the present context, the legal interest ofthe Opposite Party
Nos.1 & 2/ Bank relating to the loan/debt in question is ceased due to the
assignment of the loan to the Edelweiss ARC/ Opposite Party No.3. Upon
assignment, the S.B.I was divested from all its rights in the debt or
security. An assignor cannot retain any security once the debt is
transferred. Therefore, continue retention of lien over the Fixed Deposit in
questionby the S.B.I is arbitrary, which amounts to exercise of rights
without legal title.
iii) It is further contended that once the entire liability stood discharged in
terms of the approved Resolution Plan under Section 31 of the IBC and
the assignee creditor has issued a categorical "No Dues Certificate"
certifying full satisfaction of its claims and release of securities, no
enforceable debt survives in law. In such circumstances, Opposite Party
Nos.1 & 2/Bank cannot assert any independent right to continue lien over
the matured proceeds of the Petitioner's Fixed Deposit. The continued
retention of the amount, despite extinguishment of the underlying
1
(1992) 2 SCC 330
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liability, is asserted to be wholly without authority of law and amounts to
the Bank deriving a pecuniary benefit without any subsisting legal
entitlement. Such conduct squarely attracts the equitable doctrine of
unjust enrichment, which prohibits a party from retaining a benefit at the
expense of another in the absence of a lawful basis.
iv) In support of the aforesaid submission, learned Senior Counsel places
reliance upon the judgment of the Hon'ble Supreme Court in Indian
Council for Enviro-Legal Action v. Union of India2, wherein the doctrine
of unjust enrichment was elaborately discussed and it was held that no
person can retain a benefit without lawful authority, particularly when
such retention results in wrongful gain to one and corresponding loss to
another. It is further contended that the continued retention of the
Petitioner's Fixed Deposit, despite extinguishment of the underlying
liability, amounts to deprivation of property without authority of law and
thus violates Article 300-A of the Constitution of India. Article 300-A
embodies a constitutional mandate that no person shall be deprived of his
property save by authority of law. In the absence of a subsisting
enforceable debt, the Bank's action lacks statutory sanction and therefore
cannot be sustained.
v) Reliance is also placed on the decision of the Supreme Court in K.T.
Plantation Pvt. Ltd. v. State of Karnataka3, wherein it was held that any
deprivation of property must have a valid legal foundation and must
satisfy the test of legality. It is thus urged that, once the debt has been
2
(2011) 8 SCC 161
3
(2011) 9 SCC 1
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fully satisfied and acknowledged as such by the assignee creditor, the
continued withholding of the Fixed Deposit is arbitrary, unreasonable,
and violative of Articles 14 and 300-A of the Constitution. The R.B.I
Circular dated 13.09.2023 mandates that all securities must be released
immediately upon repayment. Further, S.B.I's frequent silence to the
repeated communications violates principles of transparency and fair
banking practice under the R.B.I's Integrated Ombudsman Scheme, 2021.
After approval of the Resolution Plan, all past dues, whether asserted or
unasserted, stands extinguished. Since S.B.I admittedly did not file any
claim in CIRP despite public notice, its lien and set-off rights stood
extinguished automatically. The law is settled that after approval of a
Resolution Plan under Section 31 of the IBC, all debts stand extinguished
and no fresh claim can survive.He also relies on adecision of the Supreme
Court in the case of Ghanashyam Mishra & Sons Pvt. Ltd. Vrs. Edelweiss
ARC4 and in the case of Essar Steel India Ltd. Vrs. Satish Kumar Gupta5.
Contractual lien cannot survive once the underlying debt is extinguished.
Lien under Section 171 of the Contract Act is accessory to debt. Once debt
stands extinguished, the lien ceases automatically
vi) While summing up his argument,Ld. Senior Counsel appearing for the
petitioner submits that the continued retention of the Fixed Deposit by
Opposite Party Nos.1 & 2/Bank, despite complete discharge and statutory
extinguishment of the underlying debt pursuant to an approved
Resolution Plan under Section 31 of the IBC, is bereft of legal authority.
4
(2021) 9 SCC 657
5
(2020) 8 SCC 531
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Once the principal obligation has stood satisfied and the creditor's claim
has been conclusively settled within the framework of a binding
insolvency resolution process, no residual or derivative right can survive
in favour of the erstwhile lender. It is further submitted that a banker's
lien, being purely accessory to a subsisting enforceable debt, cannot be
invoked in isolation or perpetuated after the extinction of the primary
liability. Any continued retention of the Petitioner's funds in such
circumstances amounts to usurping the petitioner's right to property
unsupported by statute or contract. Such action, it is submitted, is
manifestly arbitrary and falls foul of Article 14 of the Constitution, as it
lacks both rational nexus and lawful justification.Further, the Petitioner's
Fixed Deposit constitutes property within the meaning of Article 300-A of
the Constitution. Deprivation thereof, in the absence of a subsisting debt
or statutory sanction, is unconstitutional. The constitutional guarantee
under Article 300-A mandates that no person shall be deprived of his
property save by authority of law, executive action unsupported by a
valid legal foundation cannot withstand judicial scrutiny. In this
backdrop, it is contended that the Bank's action amounts to unlawful
deprivation and unjust enrichment, warranting interference under Article
226 of the Constitution. Learned Senior Counsel, therefore, prays that the
writ petition be allowed and appropriate directions be issued for release
of the Fixed Deposit along with accrued interest.
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III. SUBMISSIONS ON BEHALF OF THE OPPOSITE PARTIES:
7. On the contrary, learned Counsel for the Opposite Party Nos.1 & 2 made
the following submissions:
i. Per contra, learned counsel appearing for Opposite Party Nos.1 &
2/Bank raises a preliminary objection as to the maintainability of the
present Writ Petition. It is contended that the Petitioner has already
invoked the remedy available under the Reserve Bank of India's
Integrated Ombudsman Scheme by filing a complaint before the
Banking Ombudsman on 11.09.2025 in respect of the very same subject
matter which is presently pending for consideration. In view of the
availability and pendency of such alternative statutory remedy, it is
submitted that the Petitioner ought not to have invoked the
extraordinary jurisdiction of this Court under Article 226 of the
Constitution. It is further submitted that the Petitioner had availed
substantial loan facilities from Opposite Party Nos.1 & 2/Bank and, as
part of the security arrangement, it had voluntarily created a lien over
the Fixed Deposit in question in order to secure repayment of the
outstanding dues. The said lien was contractually created and forms
part of the security structure underlying the credit facilities extended
to the Petitioner. In such circumstances, the Counsel for bank contends
that the Petitioner cannot seek release of the matured proceeds of the
Fixed Deposit along with accrued interest as a matter of right, and the
writ petition is liable to be dismissed both on the ground of
maintainability and on merits. He further contends that a person is
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entitled to get loan / advances against his term deposit / fixed deposit
as per the guidelines of the Reserve Bank of India vide its Circular
No.RBI/2007-2008-41 DBOD No.DIR BC.7/13.03.00-2006/07 dated
02.07.2007.
ii. Learned counsel for Opposite Party Nos.1 & 2 further submits that the
Bank has issued a Master Circular dated 12.12.2022 governing loans
and advances against securities. As per the said circular, credit
facilities may be sanctioned against time deposits and fixed deposits
subject to compliance with the prescribed procedures and
documentation requirements. It is specifically provided therein that,
where advances are granted against such deposits, an appropriate lien
or hold must be duly recorded in the Bank's system against the
concerned securities, including fixed deposits. Placing reliance on
Clause 10 of the said Master Circular, it is contended that the marking
of lien over the Petitioner's Fixed Deposit was in consonance with
established banking practice and internal regulatory guidelines. The
Bank further asserts that such lien, having been created as part of the
security mechanism for the loan facilities availed by the Petitioner, was
validly recorded and could be enforced in accordance with the
contractual terms and applicable banking norms. It is further
submitted that the Petitioner-Company had availed extensive credit
facilities from Opposite Party Nos.1 & 2/Bank, involving substantial
financial exposure running into several crores of rupees. Despite the
contractual obligations governing repayment, the Petitioner allegedly
defaulted in servicing the loan accounts within the stipulated time
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frame. Owing to continued irregularity and non-liquidation of the
outstanding dues, the accounts were classified as Non-Performing
Assets (NPA) in accordance with the prudential norms and asset
classification guidelines issued by the Reserve Bank of India. Such
classification was a consequence of persistent default and was effected
strictly in conformity with the applicable regulatory framework. and
the Bank in 2014/15 filed Original Applications vide O.A No.155/2014
and the O.A. No.83/2014 respectively before the D.R.T, Cuttack.
iii. It is further contended that upon the Petitioner's persistent default in
discharging its repayment obligations, Opposite Party Nos.1 & 2/Bank,
in accordance with their statutory entitlement under the SARFAESI
Act and the contractual terms governing the loan facilities, executed
Assignment Agreements in favour of Opposite Party No.3/Edelweiss
Asset Reconstruction Company Ltd. thereby transferring the financial
assets relating to the Petitioner's loan accounts. By operation of the
said assignment agreement, the entirety of the Bank's right, title and
interest in the debt, together with all incidental and underlying
securities, stood vested in the assignee. In law, the assignee stepped
into the shoes of the assignor-bank and acquired all enforceable rights
in respect of the financial assistance extended to the Petitioner.
Consequently, Opposite Party No.3 assumed the position of creditor
and proceeded to pursue appropriate recovery proceedings before the
Debts Recovery Tribunal and other competent fora in substitution of
Opposite Party Nos.1 & 2/Bank. After acquiring the assets of the
borrower from the Bank the assignee / Opposite Party No.3
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participated in the insolvency proceeding initiated by one SREI and
the present representative of the Petitioner-Company being the
successful resolution applicant has acquired the present Petitioner-
Company by paying the dues of the Opposite Party No.3.
iv. It is further submitted that though Opposite Party No.3 has issued a
"No Dues Certificate" in favour of the Petitioner-Company/(i.e.
Annexure-8), the same does not ipso facto bind Opposite Party Nos.1 &
2/Bank, inasmuch as no such certificate has been issued by them.
According to the Bank, the Petitioner cannot predicate its claim for
release of the Fixed Deposit amount solely on the basis of a certificate
issued by the assignee creditor.
v. It is further contended that the Fixed Deposit in question did not form
part of the assets expressly transferred under the relevant Deed of
Assignment executed in favour of Opposite Party No.3. The
assignment, according to the Bank, pertained to the financial asset and
underlying interest in the loan account, but did not encompass the
term deposit itself. Reliance is placed on the scheme of the SARFAESI
Act, 2002 to contend that certain categories of security or lien,
particularly in respect of money or deposits governed by the Indian
Contract Act, may not automatically stand transferred unless
specifically included.
vi. Elaborating further, learned counsel for Opposite Party Nos.1 &
2/Bank contends that the Bank retained an independent and legally
enforceable interest in the Fixed Deposit, which had been consciously
and contractually placed under lien by the Petitioner as collateral
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security for the credit facilities availed. It is submitted that such lien
constitutes a distinct contractual right, traceable to Section 171 of the
Indian Contract Act, 1872, and is not automatically extinguished
unless expressly waived or legally displaced. According to the Bank,
the assignment of the financial asset in favour of the Asset
Reconstruction Company did not ipso facto result in transfer of the term
deposit itself, nor did it divest the Bank of its pre-existing security
interest therein.
vii. It is further contended that the right of set-off, being an incident of the
banker-customer relationship, entitles the Bank to adjust monies lying
in deposit against outstanding dues payable by the customer,
provided mutuality of obligation exists. The Bank does assert that the
appropriation of the Fixed Deposit was effected in exercise of this well-
recognized banking right and was not dependent upon any
subsequent certification by the assignee creditor. The "No Dues
Certificate" issued by Opposite Party No.3 cannot operate to
extinguish rights which, according to the Bank, were neither assigned
nor relinquished.
viii. The Bank further submits that at the time of assignment of the debt, it
had already sustained substantial financial diminution by accepting a
significant haircut. In such circumstances, it is contended that the
adjustment of the Fixed Deposit was not only contractually
permissible but also equitable, preventing unjust advantage to the
borrower who had admittedly defaulted. In so far as the reliance
placed by the Petitioner on the RBI Circular dated 13.09.2023, learned
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counsel submits that the same has no application in the present case, as
Opposite Party Nos.1 & 2/Bank have not issued any "No Dues
Certificate" in favour of the Petitioner. It is contended that the
regulatory instruction concerning release of securities presupposes full
satisfaction of dues vis-à-vis the concerned secured creditor. In the
present case, according to the Bank, its independent security interest
over the Fixed Deposit remained unaffected by the assignment of the
loan account.
ix. It is also contended that the Bank was under no statutory compulsion
to lodge a claim before the Resolution Professional during the CIRP in
respect of the Fixed Deposit, as the said deposit allegedly fell outside
the scope of the assigned financial asset. Placing reliance upon the
scheme of the SARFAESI Act, it is contended that the Bank's rights in
respect of money or deposits under lien are preserved and may be
exercised independently of insolvency proceedings, particularly where
such rights emanate from contractual stipulation.
x. On these premises, it is contended that the appropriation of the Fixed
Deposit was lawful, based in contractual and statutory rights, and
cannot be characterized as arbitrary or unconstitutional. Learned
counsel, therefore, submits that the writ petition is devoid of merit and
liable to be dismissed. In his opposition, learned counsel for the
Opposite Party No.3 also submits that since the Petitioner failed to
repay the financial assistance, the Opposite Party Nos.1 & 2/ Bank filed
Original Applications bearing O.A Nos.483 of 2014 before the learned
D.R.T, Cuttack for recovery of debts from the Petitioner. During
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pendency of the proceeding, pursuant to the provision under Section
5(1) of the SARFAESI Act, the financial asset pertaining to the account
of the Petitioner along with underlying interest/ security arising out of
the financial assistance granted by the State Bank of India, State Bank
of Bikaner and Jaipur, Andhra Bank and Allahabad Bank to the
Petitioner was acquired by the present Opposite Party No.3 by way of
separate Assignment Agreements. In the year 2026, one SREI
Equipments and Finance Ltd. filed an application under Section 7 of
the IBC before the NCLT, Kolkata Bench, which was admitted on
30.01.2017 and consequentially Corporation Insolvency Resolution
Process (CIRP) was initiated against the Petitioner. During course of
hearing of the CIRP, the Insolvency Professionals appointed therein
filed Resolution Plan before the learned NCLT for approval which was
approved by the Committee of Creditors of Sree Metaliks Ltd. with a
voting shares of 78.53%. Consequentially, the learned NCLT vide order
dated 07.11.2017 approved the Resolution Plan placed by the
Insolvency Professional. Pursuant to the Resolution Plan which was
approved by the learned NCLT, Kolkata Bench, Kolkata, the Petitioner
paid all its dues in terms of the Resolution Plan in respect of share of
the Opposite Party No.3, who stepped into the shoes of the State Bank
of India, State bank of Bikaner and Jaipur, Andhra Bank and
Allahabad Bank by virtue of Assignment agreements and accordingly,
the Opposite Party No.3 issued "No Dues Certificate" on 22.04.2025 by
releasing all securities, charges and guarantees created and subsisting
in favour of the Opposite Party No.3. Thereafter, the Opposite Party
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No.3 has also filed interim application for withdrawal of Original
Application i.e. O.A No.483 of 2014 confining to its claim before the
learned D.R.T, Cuttack which is still pending adjudication.
xi. Since the present Writ Petition is based on two assignment agreements,
Annexure-2 being the Assignment Agreement of the State Bank of
Bikaner and Jaipur and Annexure-2/A being the Assignment
Agreement of the State Bank of India.The Assignment Agreements are
distinct and different and by two different institutions. In the
Assignment Agreement of the State Bank of Bikaner and Jaipur some
fixed deposits have been assigned as security which is reflected at page
43 of the Writ Petition. However, in the Assignment Agreement of the
State Bank of India there was no mentioning of any Fixed Deposit as
Security which is reflected at page 74 of the Writ Petition.
xii. Since there is no mentioning of any Fixed Deposits as security in the
Assignment Agreement of the State Bank of India, the present
Opposite Party has never dealt with the said Fixed Deposits in any
manner. As on date, since the Opposite Party No.3 has already issued
"No Dues Certificate" in favour of the Petitioner, the Opposite Party
No.3 does not have any charge and/ or encumbrances on the said
Fixed Deposits and as such the Opposite Party No.3 has no objection
on the releasing of the said Fixed Deposit amount in favour of the
Petitioner. However, the Opposite Party No.3 is not aware of any fact
whether the Petitioner has availed any other loans from the State Bank
of India and whether the State Bank of India has any encumbrances in
respectof the said facilities on the Fixed Deposits.
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IV. THIS COURT'S REASONING AND ANALYSIS:
8. The present Writ Petition has been filed by the Managing Director
representing the Petitioner-Company, which is engaged in the business of
manufacturing iron billets, sponge iron and TMT bars in the district of
Keonjhar, assailing the action of Opposite Party Nos.1 & 2/Bank in
continuing lien and appropriating the proceeds of the Petitioner's Fixed
Deposit Account No. 32920809610 even after its maturity. The Petitioner
further seeks a direction for release of the matured amount along with
accrued interest.
9. The essential facts are not in serious dispute. The Petitioner had availed
various credit facilities from Opposite Party Nos.1 & 2/Bank. The fixed
deposit in question was marked under lien as security for such facilities.
In the years 2014 and 2015, by virtue of Assignment Agreements executed
under Section 5(1) of the SARFAESI Act, 2002, the Bank assigned its
financial assets, including the Petitioner's loan account, in favour of M/s.
Edelweiss Asset Reconstruction Company Ltd. (Opposite Party No.3). It
is admitted that thereafter Corporate Insolvency Resolution Process
(CIRP) was initiated against the Petitioner under Section 7 of the
Insolvency and Bankruptcy Code, 2016 (IBC), the Resolution Plan was
approved by the learned NCLT, Kolkata Bench on 07.11.2017, and the
same was affirmed by the learned NCLAT. Opposite Party No.3, as
assignee creditor, participated in the CIRP. Upon implementation of the
approved Resolution Plan, Opposite Party No.3 issued a "No Dues
Certificate" dated 22.04.2025 certifying full satisfaction of its claims and
release of securities.
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10. The controversy centers around the legality of the Bank's continued lien
and appropriation of the matured fixed deposit in July, 2021, despite
assignment of debt and subsequent approval of a Resolution Plan under
Section 31 of the IBC. The first issue is the nature and scope of a banker's
lien. Section 171 of the Indian Contract Act, 1872 recognizes a banker's
general lien. The jurisprudence is settled that a banker's lien is in the
nature of an implied pledge and is accessory to a subsisting and legally
enforceable debt. In Syndicate Bank v. Vijay Kumar6, the Supreme Court
has held that the banker's lien is not an absolute or independent right; it
is exercisable only in respect of a lawful and subsisting debt. Once the
underlying debt ceases to exist, the lien, being incidental, cannot survive.
11. In the present case, the Opposite Party Nos.1 & 2/Bank admittedly
executed Assignment Agreements in favour of Opposite Party No.3
transferring their financial assets pertaining to the Petitioner. An
assignment, in law, transfers to the assignee all rights, title and interest in
the debt and its incidental securities, unless expressly reserved. Upon
such assignment, the assignor ceases to be a creditor in respect of the
assigned debt. No material has been placed before this Court to
demonstrate any reservation of rights in respect of the fixed deposit in
question.
12. The legal effect of approval of a Resolution Plan under Section 31 of the
IBC is no longer res integra. In Ghanashyam Mishra & Sons Pvt. Ltd. v.
6 (1992)2SCC331
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Edelweiss Asset Reconstruction Co. Ltd7., the Supreme Court
authoritatively held that once a Resolution Plan is approved, all claims,
whether filed or not, stand extinguished and no person is entitled to
initiate or continue proceedings in respect of such claims.
13. The Resolution Plan binds all stakeholders and provides a clean slate to
the successful resolution applicant. This principle was reiterated in
Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta,
wherein it was held that undecided and unclaimed liabilities cannot be
enforced after approval of the Plan which is extracted herein below:
"Section 31(1) of the Code makes it clear that once a
resolution plan is approved by the Committee of Creditors it
shall be binding on all stakeholders, including guarantors.
This is for the reason that this provision ensures that the
successful resolution applicant starts running the business of
the corporate debtor on a fresh slate as it were. In State Bank
of India v. V. Ramakrishnan, 2018 (9) SCALE 597, this
Court relying upon Section 31 of the Code has held: "22.
Section 31 of the Act was also strongly relied upon by the
Respondents. This Section only states that once a Resolution
Plan, as approved by the Committee of Creditors, takes effect, it shall be binding on the corporate debtor as well as the guarantor. This is for the reason that otherwise, Under Section 133 of the Indian Contract Act, 1872, any change made to the debt owed by the corporate debtor, without the surety's consent, would relieve the guarantor from payment. Section 31(1), in fact, makes it clear that the guarantor cannot escape payment as the Resolution Plan, which has been approved, may well include provisions as to payments to be made by such guarantor. This is perhaps the reason that Annexure VI(e) to Form 6 contained in the Rules and Regulation 36(2) 111referred to above, require information as 7 Civil Appeal No. 8129 of 2019 @ para 95 Page 20 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 26-Mar-2026 10:57:46 to personal guarantees that have been given in relation to the debts of the corporate debtor. Far from supporting the stand of the Respondents, it is clear that in point of fact, Section 31 is one more factor in favour of a personal guarantor having to pay for debts due without any moratorium applying to save him."
In the case at hand, Opposite Party Nos.1 & 2/Bank did not lodge any claim in the CIRP. The assignee creditor, Opposite Party No.3, participated in the CIRP, received payment in terms of the approved Resolution Plan and issued a categorical "No Dues Certificate" releasing all securities in its favour. Consequently, the principal debt stood satisfied and extinguished in terms of a binding statutory process. Once the principal obligation stood discharged, the accessory right of lien under Section 171 of the Contract Act automatically ceased.
14. The contention of the Bank that the fixed deposit was outside the purview of assignment and therefore could be appropriated independently cannot be accepted. A lien or right of set-off cannot operate in the absence of a legally recoverable debt. After assignment of the financial asset and extinguishment of liability under an approved Resolution Plan, no enforceable mutual debt survived between the Petitioner and Opposite Party Nos.1 & 2/Bank. The doctrine of set-off presupposes mutual and subsisting obligations between the same parties. Such mutuality is conspicuously absent in the present case as has been borne out of record.
15. The submission based on Section 31 of the SARFAESI Act, 2002 is misconceived and unsustainable. A plain reading of the said provision would reveal that it merely enumerates certain classes of assets and Page 21 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 26-Mar-2026 10:57:46 transactions to which the provisions of the Act shall not apply. It is essentially exclusionary in character and does not, by any stretch of interpretation, confer an independent or substantive right upon a secured creditor to appropriate a borrower's deposit after having divested itself of the underlying financial asset, particularly when such debt has subsequently stood extinguished under a statutory insolvency framework.
16. Section 31 of the SARFAESI Act cannot be construed as a reservoir of enforcement power detached from the existence of a subsisting and legally recoverable debt. The scheme of the Act predicates enforcement of security interest upon the continued existence of a financial liability. Once the debt has been assigned and thereafter resolved and satisfied in accordance with an approved Resolution Plan under the Insolvency and Bankruptcy Code, 2016, the very foundation for invocation of ancillary or derivative rights ceases to exist.
17. It is equally apposite to note that the IBC, 2016, being a subsequent and comprehensive legislation governing insolvency resolution, contains a sweeping non obstante clause under Section 238, which accords it overriding effect over any inconsistent provision contained in any other law for the time being in force. The jurisprudence emanating from the Supreme Court consistently affirms that, upon approval of a Resolution Plan under Section 31 of the IBC, the claims and rights of all stakeholders stand conclusively determined and are binding in their entirety. The rights of creditors thereafter stand crystallized strictly in terms of the Page 22 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 26-Mar-2026 10:57:46 approved Plan, and no creditor is permitted to assert a claim dehors or contrary to its terms.
18. In such circumstances, any reliance upon Section 31 of the SARFAESI Act to justify retention or appropriation of the Petitioner's Fixed Deposit after the debt has stood extinguished under the IBC is legally untenable and runs counter to the overriding statutory mandate of the insolvency regime. The appropriation of the matured fixed deposit in July, 2021, therefore, lacked statutory backing. Article 300-A of the Constitution mandates that no person shall be deprived of property save by authority of law. A Constitution bench of the Supreme Court in K.T. Plantation Pvt. Ltd. v. State of Karnataka.8has held that deprivation of property must be supported by a valid law and must satisfy the test of legality. In absence of a subsisting debt or statutory authority, the continued retention of the Petitioner's deposit amounts to unlawful deprivation. Such action is also arbitrary and offends Article 14 of the Constitution. The said dictum may be extracted herein below:
" Right to life, liberty and property were once considered to be inalienable rights under the Indian Constitution, each one of these rights was considered to be inextricably bound to the other and none would exist without the other. Of late, right to property parted company with the other two rights under the Indian Constitution and took the position of a statutory right. Since ancient times, debates are going on as to whether the right to property is a "natural" right or merely a creation of `social convention' and `positive law' which reflects the centrality and uniqueness of this right. Property rights at 8 2011 (9) SCC 146 Page 23 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 26-Mar-2026 10:57:46 times compared to right to life which determine access to the basic means of sustenance and considered as prerequisite to the meaningful exercise of other rights guaranteed under Article Eminent thinkers like Hugo Grotius, Pufendorf, John Locke, Rousseau and William Blackstone had expressed their own views on the right to property. Lockean rhetoric of property as a natural and absolute right but conventional in civil society has, its roots in Aristotle and Aquinas, for Grotius and Pufendorf property was both natural and conventional. Pufendrof, like Grotius, never recognized that the rights of property on its owners are absolute but involve definite social responsibilities, and also held the view that the private property was not established merely for the purpose "allowing a man to avoid using it in the service of others, and to brood in solitude over his hoard or riches." Like Grotius, Pufendorf recognized that those in extreme need may have a right to the property of others. For Rousseau, property was a conventional civil right and not a natural right and private property right was subordinate to the public interest, but Rousseau insisted that it would never be in the public interest to violate them. With the emergence of modern written constitutions in the late eighteenth century and thereafter, the right to property was enshrined as a fundamental constitutional right in many of the Constitutions in the world and India was not an exception. Blackstone declared that so great is the regime of the law for private property that it will not authorize the land violation if it - no, not even for the general good of the whole community. Writings of the above-mentioned political philosophers had also its influence on Indian Constitution as well."
19. The submission regarding pendency of a complaint before the Banking Ombudsman does not bar exercise of writ jurisdiction in the facts of the present case. The issue raised is purely legal, based on admitted Page 24 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 26-Mar-2026 10:57:46 documents and statutory interpretation concerning the effect of assignment and an approved Resolution Plan under the IBC. The alternative remedy is neither efficacious nor a bar where fundamental legal infirmity is demonstrated.Where the impugned action of the Opposite party is ex facie without jurisdiction, in violation of principles of natural justice, or suffers from a patent error of law going to the root of the matter, the High Court would be justified in exercising its constitutional jurisdiction notwithstanding availability of another forum. The Supreme Court in Whirlpool Corporation v. Registrar of Trade Marks9 authoritatively held that writ jurisdiction can be invoked despite availability of an alternative remedy in three contingencies: (i) where the writ petition seeks enforcement of fundamental rights; (ii) where there has been violation of principles of natural justice; and (iii) where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. This principle has been consistently reaffirmed in many of its subsequent decisions.
20. In the present case, the grievance of the Petitioner is not merely factual but strikes at the legality of the Bank's action in retaining and appropriating the Fixed Deposit despite assignment of debt and extinguishment of liability under an approved Resolution Plan under Section 31 of the IBC. The issue is one of jurisdictional competence and statutory interpretation, purely based on admitted documents. The continuation of lien in absence of a subsisting enforceable debt is alleged 9 1998 (8) SCC 1 Page 25 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 26-Mar-2026 10:57:46 to be without authority of law and violative of Article 300-A of the Constitution.Where the action impugned is demonstrably without legal foundation and results in unlawful deprivation of property, relegating the Petitioner to an alternative forum would amount to perpetuating further illegality. In such circumstances, the alternative remedy cannot be regarded as efficacious so as to oust or restrict the constitutional jurisdiction of this Court under Article 226.
V. CONCLUSION:
21. For the reasons aforesaid, this Court holds that after assignment of the debt in favour of Opposite Party No.3 and after approval and implementation of the Resolution Plan under Section 31 of the IBC resulting in issuance of a "No Dues Certificate," Opposite Party Nos.1 &2/Bank has no legal authority to continue lien or appropriate the Petitioner's Fixed Deposit. The impugned action is unsustainable in law.
22. Accordingly, the Writ Petition stands allowed. Opposite Party Nos.1 and 2/Bank are directed to release the proceeds of Fixed Deposit Account No.32920809610 along with accrued interest from the date of its maturity till the date of actual payment within a period of eight weeks from the date of receipt of this judgment. No order as to costs.
23. Interim order, if any, passed earlier stands vacated.
(Dr. Sanjeeb K Panigrahi) Judge Orissa High Court, Cuttack, Dated the13th March, 2026 Page 26