The Supreme Court has ruled that a Securitisation Recovery Application (SRA) can proceed on outstanding dues, rejecting 'clean slate' argument where it would cause grave inequity to the creditor.
SC Permits SRA Despite 'Clean Slate' Claim
The Supreme Court has allowed a Securitisation Recovery Application (SRA) to proceed on the defaulted dues of a corporate debtor, holding that the 'clean slate' principle cannot be invoked to deprive a secured creditor of remedies under the SARFAESI Act. The Court found that barring a creditor from raising a defence based on the original contract would result in grave inequity.
The bench observed that
"the clean slate principle under IBC does not extinguish pre-existing claims where the creditor has not fully recovered its dues". The judgment clarified that resolution plans do not wipe out residual liabilities unless explicitly stated. The right to recover under SARFAESI remains enforceable for unpaid balances.
This decision is critical for secured creditors navigating post-IBC recovery. It preserves enforcement rights where resolution proceeds are insufficient, ensuring that creditors are not unjustly deprived of remedies under parallel statutes.
Citations
- SARFAESI Act, 2002
- Insolvency and Bankruptcy Code, 2016
