DRT May Accept Petition Against Measures for Recovery of Non-Restrictive Secured Debts, If Reasons Are Sufficient: Gauhati High Court

The Gauhati High Court recently held that the Debt Recovery Tribunal must dispose of an application filed under the SARFAESI Act against measures for recovery of debts secured by any person under Section 24 implementing the provisions of the Debts Collection and Bankruptcy Act. Court proceedings Limitation Act.

For context, Section 24 of the RDB Act provides that the provisions of the Limitation Act shall apply, to the extent possible, to an application to a Court. In doing so, the court applied the “principle of legislation by aggregation”, observing that since the provisions of the RDB Act have been incorporated into the SARFAESI Act, the DRT, if satisfied, can file a plea to recover secured debts beyond the period of limitation. Sufficient reasons are presented for not making the defense within the required time.

The petitioner, a property owner, has challenged a writ petition issued on May 19, 2023 by the respondent State Bank of India (SBI) under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002. (SARFAESI) and subsequent bank statements issued in July and August 2023 under Rule 8(1) of Security Assurance (Enforcement) Rules, 2002. The petitioner’s loan account was declared a Non-Performing Asset (NPA) on 28 February 2023.

Noting the provisions of the SARFAESI Act and the RDB Act, Chief Justice Vijay Bishnoi and Justice N Unni Krishnan Nair said:Section 2(1)(i) of the SARFAESI Act defines “Debt Recovery Tribunal”, which means the Tribunal established under sub-section (1) of Section 3 of the RDB Act. Article 17(1) of the SARFAESI Act provides that any person, including the debtor, may file an application before the DRT established under Article 17 against the measures taken by the secured creditor under clause (4) of Article 13 of the SARFAESI Act. RDB Act. Sub-section (7) of Section 17 provides that the DRT must dispose of the application in accordance with the provisions of the RDB Act.“.

“Section 24 of the RDB Act provides for the application of the provisions of the Limitation Act to the extent applicable to an application to a Court. A combined reading of the above provisions makes it clear that the DRT must dispose of an application filed under Section 17 of the SARFAESI Act in accordance with the provisions of the RDB Act; herein under Section 24 of the RDB Act, the provisions of the Limitation Act apply,” he added.

Initially, the petitioners had challenged the Bank’s action by filing an application before the Debt Recovery Tribunal (DRT) under Section 17(1) of the SARFAESI Act, which was dismissed on the ground of estoppel under Section 17 of SARFAESI. To behave. The DRT rejected the petitioner’s request to condone the delay of 19 days – but the DRT had calculated it as 23 days – arguing that the statutory period of 45 days provided under Section 17(1) of the SARFAESI Act was mandatory and no discretion was given. I request DRT to extend this period.

Pursuant to Section 17(1) aAny person (including the debtor) aggrieved by any of the measures referred to in clause (4) of Article 13 by the secured creditor or his authorized officer may, within forty days, make an application to the Debt Collection Tribunal having jurisdiction over the matter. Five days from the date on which the measure in question was taken. Section 13(4) measures are taken when: Failure of the debtor to fully fulfill its responsibility.

Although this order was not challenged, the high court was considering the question whether the DRT could condone the delay in filing the preferred application on behalf of the debtor under Section 17(1) of the SARFAESI Act by taking advantage of its provisions. Limitation Act, 1963.

The petitioners submit that the DRT may condone such delay in filing of Section 17(1) application, under sub-section (7) of Section 17, the DRT is bound to dispose of the preferred application under Section 17 of the SARFAESI Act. It lasted. Under the provisions of the Recovery of Debts from Banks and Financial Institutions Act, 1993 (currently the Debts Recovery and Bankruptcy Code (RDB), 1993).

The applicant relied on the court decision Supreme Court Baleswar Dayal Jaiswal -Vs- Bank of India and Ors. (2016), while considering the provisions of the SARFAESI Act and the RDB Act, stated in clear terms that the DRT and the Debt Recovery Appellate Tribunal have the power to sanction the delay by applying the following provisions. Limitation Act while deciding the application moved under Section 17 of the SARFAESI Act or an appeal under Section 18 of the SARFAESI Act.

Meanwhile, the participants referred to the Supreme Court decisions. It has categorically held that the proceedings under Section 17 of the SARFAESI Act are a case of first trial like filing of suit in the Civil Court and, therefore, the Limitation Act does not apply to the proceedings under Section 17 of the SARFAESI Act.

After citing various high court decisions, the court said,The principle of legislation by establishment is well recognized in India. Since the provisions of the RDB Act are incorporated in the SARFAESI Act for disposal of an application made under Chapter 17 and in such cases, in our opinion, there is no reason to hold that the DRT cannot entertain an application made under Chapter 17 of the Agreement. SARFAESI Act exceeds the limitation period even when it is held that there are sufficient grounds for not filing such an application within the stipulated time“.

Dismissing the writ petition, the high court set aside the order of the DRT and remanded the matter back to the court for consideration of the petitioners’ claims for relief for delay in filing Chapter 17 application under the SARFAESI Act. The apex court said that if the delay is satisfactorily explained, the court can condone it and decide the Chapter 17 application on merits.

Case title: M/s Baruah CC Block Industry and Anr. v/s State Bank of India and others

Counsel for the petitioners: Advocate S Mitra

Counsel for the respondents: Advocate KK Nandi

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