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2024 Supreme(Guj) 1196
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SUNITA AGARWAL, C.J., ANIRUDDHA P. MAYEE, JJ.
Aditya Birla Finance Ltd. – Appellant
Versus
Manglesh Champaklal Gandhi & Ors. – Respondent
R/LETTERS PATENT APPEAL NO. 224 of 2020 In R/SPECIAL CIVIL APPLICATION NO. 15765 of 2019 With CIVIL APPLICATION (FOR STAY) NO. 1 of 2019 In R/LETTERS PATENT APPEAL NO. 224 of 2020 With CIVIL APPLICATION (DIRECTION) NO. 1 of 2020 In R/LETTERS PATENT APPEAL NO. 224 of 2020
Decided on : 28-06-2024
Advocate Appeared
For the Appellant :MR SHALIN MEHTA, SR. ADVOCATE with MR BOMI H SETHNA
For the Respondent: MR.ADITYA J PANDYA, SANDIPKUMAR N SOLANKI
The court affirmed that the DRT can condone delays in applications under Section 17 of the SARFAESI Act, as per Section 5 of the Limitation Act, allowing borrower's challenges to creditor measures within reasonable timeframes.
Headnote:(A) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 17 - Limitation Act, 1963 - The court examines the grounds of restoring a borrower’s right to challenge actions taken by the secured creditor. The learned Single Judge ruled that a borrower can challenge measures related to recovery only within 45 days from when they are adopted, but also concluded that the DRT has jurisdiction to condone delays under Section 5 of the Limitation Act, as there is no express exclusion in SARFAESI Act provisions. The court further noted rights of borrowers under Section 17 as akin to a right to redemption and concluded that objections could be entertained until a further stage—specifically, the auction sale. (Paras 1-80)
Facts of the case:
The Letters Patent Appeal questions the ruling of the learned Single Judge, who found in favor of a borrower claiming non-compliance with procedural requirements under the SARFAESI Act, and restored their right to contest recovery actions.
Findings of Court:
The court upheld the learned Single Judge's decision, affirming that the DRT had jurisdiction to decide applications beyond the usual limitation period when reasonable cause is shown per provisions under the Limitation Act.
Issues: The court addressed whether the DRT has the power to condone delays in actions filed under Section 17 of the SARFAESI Act and whether the principles governing the Limitation Act apply to these applications.
Ratio Decidendi: The ratio emphasizes the DRT's authority to assess compliance with and validity of secured creditor actions, not limited to initial notices but extending through associated measures up until the auction sale; it applies precedents reaffirming limits to secure creditor power while balancing borrower redemption rights.
Result: The Letters Patent Appeal is dismissed, returning the matter to the DRT for decision on its merits.
| Table of Content |
|---|
| 1. letter patent appeal against single judge's order. (Para 1) |
| 2. appellate tribunal's role in review process. (Para 2 , 3) |
| 3. jurisdiction of drt to condone delay. (Para 4 , 5 , 6) |
| 4. clarifies the role of the drt concerning procedural compliance. (Para 7) |
| 5. compliance with the sarfaesi act procedures. (Para 10 , 11) |
| 6. provisions under the rdb act regarding procedures. (Para 12 , 13) |
| 7. mandatory compliance with the procedure for recovery. (Para 14 , 15 , 16) |
| 8. delay in challenging measures taken by secured creditors. (Para 24 , 25) |
| 9. limitations on challenging earlier creditor measures. (Para 26 , 27 , 28 , 29 , 30) |
| 10. rights of borrowers to challenge creditor actions. (Para 32 , 33 , 34 , 35 , 36 , 37) |
| 11. right to redeem property before sale mandatory. (Para 46 , 47) |
| 12. affirms limitation law application to debt recovery actions. (Para 60 , 61 , 62) |
| 13. the appeal dismissed with no merits. (Para 78 , 80) |
JUDGMENT :
(PER : HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA AGARWAL)
1. This Letters Patent Appeal is directed against the judgment and order dated 07.10.2019 passed by the learned Single Judge in allowing the writ petition remanding the matter to the Debts Recovery Appellate Tribunal (DRAT) to decide the Appeal No. 28 of 2019 on merits, which in turn was directed against the order dated 08.01.2019 passed by the Debts Recovery Tribunal (DRT) in Securitisation Application No. 27 of 2019, whereby the entire proceeding of recovery initiated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'SARFAESI Act, 2002') by the appellant herein has been quashed with the liberty to the appellant financial institution/ secured creditor to proceed afresh in accordance with law to recover its dues. The appellant financial institution/secured creditor has further been restrained from proceeding with the auction sale, which was subject matter of challenge before the DRT.
2. At the outset, it may be noted that the order passed by the DRT in quashing the entire proceeding of the recovery has been set aside by the DRAT only on one ground, i.e. the challenge to the proceedings under the SARFAESI Act, 2002 by way of the application under Section 17* * was beyond the period of 45 days, as prescribed under Section 17* * (1) of the SARFAESI Act, 2002. It may further be noted that none of the grounds of challenge to the order passed by the DRT had been addressed by the Appellate Tribunal, viz. DRAT while allowing the appeal vide order dated 14.08.2019, which was subjected to challenge before the learned Single Judge.
3. The learned Single Judge, while allowing the writ petition, setting aside the order passed by the DRAT, has remanded the matter back with the observation that the cause of action to the borrower accrued from the time the notice under Rules 8(1) and 8(2) was issued and the borrower having right to approach the Tribunal (DRT) before the date of auction sale, could not be non-suited by the Appellate Tribunal. The arguments made by the learned advocate appearing for the financial institution/secured creditor that each measure under Section 13 (4) gives rise to a separate cause of action and once the first measure was not challenged, the borrower could not subsequently challenge the same, was turned down. It was held that the borrower can challenge the action of the secured creditor within 45 days from the last step of the process, i.e. sale notice, which was issued before the date of auction sale.
4. It was held that on a reading of the provisions of Section 17* * 3(4) of the SARFAESI Act, 2002 with Rule 8 of the Security Interest (Enforcement) Rules, 2002 (for short 2002 Rules'), and a conjoint reading of the judgment of the Apex Court in Mardia Chemicals Limited and another Vs. Union of India and others [(2004) 4 SCC 311] and M/s Transcore Vs. Union of India and another [AIR 2007 SC 712], it is clear that under the scheme of Section 17* * 3(4) read wi
