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IN THE HIGH COURT OF JUDICATURE AT MADRAS
R. Mahadevan, Mohammed Shaffiq, JJ.
Mrs. K. Letchoumy Kanagarajan Proprietrix - Petitioner
Versus
The Registrar, The Debts Recovery Appellate Tribunal and ors. – Respondents
W.P. No.11126 of 2023 and W.M.P. No.10979 of 2023
Decided On : 19-09-2023
Writ Petition - Challenging Guidelines - Recovery of Debts and Bankruptcy Act, 1993 - Section 22(1) - [Section 22(1) of the Recovery of Debts and Bankruptcy Act, 1993] - The court examined the challenge to the impugned guidelines issued by the 1st respondent dated 07.02.2023, which mandated service of notice on the respondents even for the appeal/application to be placed before the Tribunal. The court found the impugned guidelines to be invalid and set them aside, directing the first respondent to take up the interim application(s) filed by the petitioner and dispose of the same on merits and in accordance with the law.
Fact of the Case:
The petitioner approached the 2nd respondent Bank for financial assistance and was sanctioned an overdraft facility. Due to business setbacks, the petitioner fell into default of repaying the loan. The respondent Bank issued a possession notice and conducted an e-auction sale of the secured asset. The petitioner approached the Debt Recovery Tribunal to set aside the auction and cancel the sale certificate. The DRT-III dismissed the securitization application, and the petitioner appealed to the Debt Recovery Appellate Tribunal, challenging the guidelines issued by the 1st respondent, which mandated service of notice on the respondents even for the appeal/application to be placed before the Tribunal.
Finding of the Court:
The impugned guidelines were found to be invalid and set aside. The first respondent was directed to take up the interim application(s) filed by the petitioner and dispose of the same on merits and in accordance with the law.
Issues: The main issue was the validity of the guidelines issued by the 1st respondent, which mandated service of notice on the respondents even for the appeal/application to be placed before the Tribunal.
Ratio Decidendi: The court held that the impugned guidelines were contrary to binding judgments of the Hon’ble Supreme Court, in excess of power under Section 22(2) (h) of the RDB Act, and imposed procedural restrictions that rendered the Appellate Tribunal inaccessible to obtain ex-parte interim orders, thereby falling foul of Articles 14 and 21 of the Constitution of India.
Final Decision: The impugned guidelines were set aside, and the first respondent was directed to take up the interim application(s) filed by the petitioner and dispose of the same on merits and in accordance with the law.
ORDER :
MOHAMMED SHAFFIQ, J.
Prayer: Writ Petition is filed under Article 226 of the Constitution of India, praying to issue a writ of Declaration, declaring that the guidelines issued by the 1st respondent in F.No.E3/01/2022/DRAT dated 07.02.2023 as being contrary to law and principles of justice and and to consequently direct the 1st respondent to entertain the petitioner's urgent petitions for hearing interim petitions ex parte without insisting for pre-notice on the respondent.
The present writ petition is filed challenging the guidelines dated 07.02.2023 issued by the 1st respondent herein in F.No.E-3/01/2022/DRAT insofar as it disables the petitioner from moving the Debt Recovery Appellate Tribunal, Chennai for ex parte interim orders.
2. Before we proceed to examine the challenge to the impugned guidelines, it may be relevant to set out very briefly the facts, which read as follows:
b. The petitioner offered her property at Karaikal as security. The valuation of the said property was carried out by the 2nd respondent initially in 2013 and again in 2015. A valuation certificate was issued in respect of the said property certifying that the market value was Rs.2,17,00,000/-. The second Valuation Report was made on 15.08.2015, wherein the market value was fixed at Rs.2,60,42,000/- and the realizable value was at Rs.2,40,00,000/-, while the distress sale value was fixed at Rs.2,20,00,000/-
c. It is stated that though the petitioner initially made repayments regularly, however, due to set back in the business, she fell in default of repaying the loan.
d. The respondent Bank issued a notice on 29.08.2019 demanding payment of a sum of Rs.81,75,071/-. The petitioner requested to re-schedule the loan and to furnish details / list of the documents pledged so as to enable her to take steps for mobilizing the funds to settle the loan.
e. The 2nd respondent Bank issued possession notice on 06.11.2019. The petitioner requested three months time for settling the loan account. However, the 2nd respondent issued a sale notice dated 31.12.2019 for conducting e-auction sale of the secured asset for recovery of the alleged dues of Rs.84,47,094/-. The upset price was fixed at Rs.1,15,80,000/-.
f. The auction sale was scheduled to be conducted on 30.01.2020. On 29.01.2020, the petitioner approached the Bank and paid a sum of Rs.4,99,000/-, while requesting the 2nd respondent Bank to postpone the e-auction by a week assuring that she would settle the entire dues by then.
g. Despite the above request, the e-auction was conducted on 30.01.2020. Pursuant to a request made by the petitioner on 31.01.2020 to furnish the details of e-auction sale, she was provided with the details on 06.02.2020, indicating that the 3rd respondent was the highest bidder at Rs.1,16,05,000/-. It was also informed that the said sum had been remitted by the 3rd respondent and the sale certificate was also issued to him. Immediately, the petitioner approached the 2nd respondent Bank on 12.02.2020 with ready payment of Rs.82,00,000/- and requested to cancel the sale certificate. The said request was not acceded to by the 2nd respondent Bank. Subsequently, the petitioner sent a letter dated 13.02.2020 enclosing a copy of the cheque for Rs.82,00,000/-. However, there was no response from the 2nd respondent Bank.
h. Thereafter, the petitioner approached the Debt Recovery Tribunal – III (hereinafter referred to as “DRT-III”) by filing S.A.No.32 of 2020 with a prayer to set aside the auction conducted on 30.01.2020 and to cancel the sale certificate, if any, issued by
The court established that the power of the Tribunal to grant ex-parte interim orders inheres in it, and any guidelines imposing restrictions on this power are invalid.
It is settled law that Tribunal has power to do everything which is incidental or ancillary for proper exercise of jurisdiction vested in it.
The main legal point established in the judgment is that the period of limitation for filing an application to set aside an ex-parte order before the Tribunal shall be 30 days, and there would be no ....
Powers of High Court under Article 226 cannot be invoked in matter of recovery of dues under Act, unless there is any statutory violation resulting in prejudice to party or where such proceedings or ....
When alternative statutory remedies are available, a writ petition under Article 226 is not maintainable, particularly in financial recovery matters under the SARFAESI Act, unless exceptional circums....
The main legal point established in the judgment is that while the Tribunal has the power to impose reasonable costs, it cannot impose conditions that negate the purpose of adjudication. The judgment....
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