The remedy to a borrower who received possession notice u/s 13(4) SARFAESI Act is to file an appeal to Debts Recovery Tribunal within 45 days

DELHI HIGH COURT

SINGLE BENCH

( Before : Dr. S. Muralidhar, J )

SOMNATH MANOCHA — Appellant

Vs.

PUNJAB AND SIND BANK AND OTHERS — Respondent

Writ Petition (C) 7228 of 2005

Decided on : 17-10-2011

Constitution of IndiaIndia Bharat Varsha (Jambu Dvipa) is the name of this land mass. The people of this land are Sanatan Dharmin and they always defeated invaders. Indra (10000 yrs) was the oldest deified King of this land. Manu's jurisprudence enlitened this land. Vedas have been the civilizational literature of this land. Guiding principles of this land are : सत्यं वद । धर्मं चर । स्वाध्यायान्मा प्रमदः । Read more, 1950 – Article 62

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI)

Cases Referred

Ivee Injectaa Ltd. and Another Vs. Junagadh Vibhagiya Nagrik Sahakari Bank Ltd., (2006) 129 CompCas 528 : (2005) 2 GLR 962 : (2007) 74 SCL 147
Counsel for Appearing Parties

R.K. Saini with Mr. Sitab Ali Chaudhary, for the Appellant; Khalid Abdullah, for the Respondent

JUDGMENTJudgment The statement given by the Judge on the grounds of a decree or order - CPC 2(9). It contains a concise statement of the case, points for determination, the decision thereon, and the reasons for such decision - Order 20 Rule 4(2).  Section 354 of CrPC requires that every judgment shall contain points for determination, the decision thereon and the reasons for the decision. Indian Supreme Court Decisions > Law declared by Supreme Court to be binding on all courts (Art 141 Indian Constitution) Civil and judicial authorities to act in aid of the Supreme Court (Art 144) Supreme Court Network On Judiciary – Portal > Denning: “Judges do not speak, as do actors, to please. They do not speak, as do advocates, to persuade. They do not speak, as do historians, to recount the past. They speak to give Judgment. And in their judgments, you will find passages, which are worthy to rank with the greatest literature….” Law Points on Judgment Writing > The judge must write to provide an easy-to-understand analysis of the issues of law and fact which arise for decision. Judgments are primarily meant for those whose cases are decided by judges (State Bank of India and Another Vs Ajay Kumar Sood SC 2022)

Justice S. Muralidhar

1. Aggrieved by a notice dated 20th November 2004 issued by Respondent No. 1 Punjab & Sind Bank (‘Bank’) u/s 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’) and consequent possession notice u/s 13(4) SARFAESI Act dated 13th April 2005 taking over possession of the immovable property bearing old No. 4A, New Municipal No. 32/24, Pratap Nagar, Jagdish Colony, Rohtak (Haryana) [‘the property in question’], the Petitioner, who is the owner of the property in question, has filed this present petition.

2. The Petitioner stated that he had purchased the property in question by a registered sale deed dated 16th April 1980. In 1981, the Bank extended loan and credit facilities to one M/s. General Tyre House, a partnership firm in which the relatives of the Petitioner were partners. The Petitioner was one of the three guarantors in respect of the said loan and credit facilities, which was secured by an equitable mortgage upon the property in question in favour of the Bank.

3. On 10th December 1984 the Bank filed in this Court a suit for recovery of a sum of Rs. 7,75,283.60 against M/s. General Tyre House, its partners and the three guarantors including the Petitioner. The said Suit No. 935 of 1984 instituted under Order XXXVII CPC is stated to be still pending. It is stated by the Petitioner that the principal borrower has, in the said suit, filed a counter claimA Claim A claim is “factually unsustainable” where it could be said with confidence before trial that the factual basis for the claim is entirely without substance, which can be the case if it were clear beyond question that the facts pleaded are contradicted by all the documents or other material on which it is based. against the Bank.

4. On 18th December 2002 the SARFAESI Act came into force. The mortgage in the present case falls within the definition of ‘financial asset’ u/s 2(l)(iii) SARFAESI Act and the Bank falls within the definition of ‘secured creditor’ u/s 2(zd) thereof. u/s 13(4) thereof, the secured creditor is entitled to exercise its rights in respect of the mortgaged property by taking over possession thereof, if the borrower fails to discharge the full liability within 60 days of a notice being issued to him u/s 13(2) SARFAESI Act. Section 36 SARFAESI Act prohibits the secured creditor from taking any of the measures u/s 13(4) thereof unless a claimA Claim A claim is “factually unsustainable” where it could be said with confidence before trial that the factual basis for the claim is entirely without substance, which can be the case if it were clear beyond question that the facts pleaded are contradicted by all the documents or other material on which it is based. in respect of the financial assets is made within the period of limitation prescribed under the Limitation Act, 1963 (‘LA’).

5. On 20th November 2004 the Bank issued a notice to the principal borrower, its partners and three guarantors including the Petitioner u/s 13(2) SARFAESI Act calling upon them to pay the entire outstanding liability amounting to Rs. 3,84,59,807/- together with interest with effect from 21st November 2004 as well as costsCosts Subject to any written law, costs are at the discretion of the Court, and the Court has the power to determine all issues relating to the costs of or incidental to all proceedings, including by whom and to what extent the costs are to be paid, at any stage of the proceedings or after the conclusion of the proceedings. Generally “Costs” includes charges, disbursements, expenses, fees, and remuneration. Costs in any matter are payable from the date of the order of the Court unless the parties otherwise agree. The costs of a third-party funding contract are not recoverable as part of the costs of, or costs. in the sum of Rs. 35,615/-. The Petitioner replied to the said notice on 7th January 2005 referring to Section 36 SARFAESI Act and pointing out that the notice itself was barred by limitation. It was stated that the limitation period in the event of recovery of money secured by mortgage was 12 years from the date when the amount became due under Article 62 of the Schedule to the LA. The amount became due on 11th and 12th October 1982. The claim for money became timeTime Where any expression of it occurs in any Rules, or any judgment, order or direction, and whenever the doing or not doing of anything at a certain time of the day or night or during a certain part of the day or night has an effect in law, that time is, unless it is otherwise specifically stated, held to be standard time as used in a particular country or state. (In Physics, time and Space never exist actually-“quantum entanglement”) barred in the year October 1985, and the claim based on mortgage, in the year 1994. The Bank, by a reply dated 26th February 2005, reiterated its stand. On 13th April 2005 the Bank issued the possession notice u/s 13(4) SARFAESI Act read with Rule 9 of the Security Interest (Enforcement) Rules, 2002. Thereafter, the present writ petition was filed.

6. On 26th April 2005 this Court directed notice to issue in this petition after noting the contention of learned counsel for the Petitioner that the action initiated by the Bank under the SARFAESI Act was time barred. Further, it was directed that in the interim the parties shall maintain status quo in respect of the property in question. Thereafter, the interim order was made absolute on 15th December 2005 and Rule was issued on 22nd May 2008.

7. Mr. R.K. Saini, learned counsel appearing for the Petitioner submitted that the proceedings under the SARFAESI Act were instituted more than 18 years after the filing of the suit and therefore, were time barred u/s 36 SARFAESI Act. Since the Bank has already filed a suit, it would be unreasonable to permit it to also invoke the provisions of the SARFAESI Act in regard to the outstanding liability of the principal borrower.

8. Mr. Khalid Abdullah, learned counsel appearing for the Bank referred to the counter affidavitAffidavit An ex parte statement in writing made under oath before a notary public or other officer authorized to administer oaths, about facts which the affiant either knows of his own personal knowledge or is aware of to the best of his knowledge. filed on its behalf. He submitted that the filing of the suit by the Bank for recovery of money was within the prescribed period of limitation. Consequently, the Bank was, for the purposes of Section 36 SARFAESI Act, entitled to take measures u/s 13(4) thereof since it had made a claim in respect of the financial asset, i.e., the mortgage of the property in question, by filing the suit within the prescribed time of limitation.

9. The above submissions have been considered. The SARFAESI Act was intended to provide an additional remedy to a financial institution to recover its debts. The Statement of Objects and Reasons of the SARFAESI Act acknowledged that the existing legal framework relating to commercial transactions has not kept pace with the changing commercial practice which has resulted in slow pace of recovery of defaulting loans and mounting levels of non-performing assets of banks and financial institutions. Section 35 SARFAESI Act provides that “the provisions of the said Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law”. It is therefore, apparent that the remedy provided under the SARFAESI Act to a secured creditor for recovery of a debt owing to it, is independent of any other remedy available in law. Section 36 SARFAESI Act requires that a claim should have been made by the lender in respect of the financial assets within the period of limitation prescribed under the LA. Section 36 does not mandate that the notice u/s 13(2) SARFAESI Act must be issued within such period of limitation. A ‘claim’ in respect of the financial asset, could be by way of any proceedings in accordance with law. Since the SARFAESI Act itself came into force only on 18th December 2002, the legislative intent was that even the sum owned to a secured creditor prior to that date can be sought to be recovered as long as the claim was made within the prescribed period of limitation. A similar view has been expressed by the Gujarat High Court in Ivee Injectaa Ltd. and Another Vs. Junagadh Vibhagiya Nagrik Sahakari Bank Ltd., .

10. In the present case, the Bank had made a claim in respect of the secured financial asset by filing a suit in the year 1984. Admittedly, the suit was filed within the limitation period. Therefore, the essential requirement of Section 36 SARFAESI Act was fulfilled. The Bank validly proceeded to the next step by issuing a notice u/s 13(4) SARFAESI Act. Consequently, this Court finds no merit in the contention of learned counsel for the Petitioner that the notice u/s 13(2) and the possession notice u/s 13(4) SARFAESI Act issued by the Bank were without jurisdictionJurisdiction Authority by which courts receive and decide cases. Limited Jurisdiction: the authority over only particular types of cases, or cases under a prescribed amount in controversy, or seeking only certain types of relief, the District Court is a court of limited jurisdiction. Original Jurisdiction: Jurisdiction of the first court to hear a case.. The remedy to the borrower who received a possession notice u/s 13(4) SARFAESI Act is to file an appeal to the Debts Recovery Tribunal (‘DRT) within 45 days thereof u/s 17 of the SARFAESI Act. In the present case the Petitioner has a remedy of an appeal to the DRT u/s 17 SARFAESI Act. Without expressing any opinionOpinion A judge's written explanation of a decision of the court. In an appeal, multiple opinions may be written. The court’s ruling comes from a majority of judges and forms the majority opinion. A dissenting opinion disagrees with the majority because of the reasoning and/or the principles of law on which the decision is based. A concurring opinion agrees with the end result of the court but offers further comment possibly because they disagree with how the court reached its conclusion. on meritsMerits Strict legal rights of the parties; a decision “on the merits” is one that reaches the right(s) of a party as distinguished from a disposition of the case on a ground not reaching the rights raised in the action; for example, in a criminal case double jeopardy does not apply if charges are nolle prossed before trial commences, and in a civil action res judicata does not apply if a previous action was dismissed on a preliminary motion raising a technicality such as improper service of process. of the contentions of the parties in regard to the impugned action of the Bank u/s 13(2) and (4) SARFAESI Act, this Court declines to entertain this writ petition. It is clarified that it will be open to the Petitioner to invoke the remedy available to him u/s 17 SARFAESI Act.

11. Considering that there was an interim order made by this Court on 26th April 2005, it is directed that the said interim order will continue for a further period of four weeks to enable the Petitioner to seek appropriate remedy u/s 17 SARFAESI Act before the DRT. It is made clear that the interim order would come to an end on 16th November 2011 or till such time the DRT takes up the Petitioner’s appeal u/s 17 SARFAESI Act, whichever is earlier.

12. The petition is disposed of in the above terms.

(2011) 9 AD(Delhi) 476