SBI cannot recover loan dues through Bihar’s public-demand process without a written agreement, Patna High Court rules

The petitioner had obtained two agricultural gold loans of ₹3 lakh each from the State Bank of India (SBI), secured by pledged gold ornaments.

After default, SBI auctioned the ornaments on 28 January 2016 and subsequently initiated certificate proceedings to recover the alleged shortfall.

The petitioner challenged the auction and recovery proceedings, alleging inadequate notice and undervaluation; he also disputed service of the demand notice and asserted that he remained willing to repay the lawful dues.

The Court noted that, despite repeated opportunities, the Bank had not produced a document showing the petitioner’s written agreement to recovery of the dues as a public demand.

Whether SBI’s certificate proceeding to recover the alleged outstanding loan amount was maintainable as a public demand under Schedule I, Rule 15(i) of the Bihar and Orissa Public Demands Recovery Act, 1914, in the absence of a written instrument agreeing to such recovery

Schedule I, Rule 15(i) of the Bihar and Orissa Public Demands Recovery Act, 1914, permits money payable to SBI to be recovered as a public demand only where the person liable has agreed, by a written instrument, that the amount shall be so recoverable.

The written instrument is therefore a foundational requirement for maintaining certificate proceedings under that provision.

The Court examined whether the statutory prerequisite for treating the alleged loan dues as a public demand had been established.

Despite repeated opportunities, SBI produced no written instrument containing the required agreement, and its counter-affidavit did not identify one.

The Court therefore held that the foundational requirement under Rule 15(i) had not been shown to be satisfied, making the certificate proceeding unsustainable.

The Court’s reasoning and disposition concerned the maintainability of the certificate proceeding; it did not determine the petitioner’s separate challenges to the auction’s notice, valuation, or conduct.

It quashed Certificate Case No. 335 of 2015–16 before the District Certificate Officer, Gopalganj, and the consequential proceedings, and allowed the writ petition.