The DRT has the authority to reduce future/pendente lite interest under the SARFAESI Act, which was upheld by the court as necessary for facilitating loan repayment.

ORDER :

Moushumi Bhattacharya, J.

The petitioner has challenged an order dated 10.05.2024 passed by the Debts Recovery Appellate Tribunal, at Kolkata (‘DRAT’) in Miscellaneous Appeal No.35 of 2023 filed by the respondent Bank from an order dated 05.07.2023 passed by the Debts Recovery Tribunal – II, at Hyderabad (‘DRT’) in I.A.No.885 of 2023 in S.A.No.425 of 2019.

2. The DRT passed the order dated 05.07.2023 in I.A.No.885 of 2023 in S.A.No.425 of 2019 filed by the petitioner for making payment of the outstanding amount mentioned in the Demand Notice dated 04.10.2016 minus the payments made by the petitioner after receipt of the Demand Notice at the rate of 6% interest from the date of the Demand Notice till realization of the amount mentioned thereof. By the impugned order dated 10.05.2024, which forms the subject matter in the present writ petition, the DRAT set aside the order passed by the DRT and allowed the Appeal filed by the respondent Bank.

3. The petitioner, represented by learned Senior Counsel, argues that the DRAT erred in interfering with the order passed by the DRT since the latter has the power to reduce the rate of interest under the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’) as well as The Recovery Of Debts Due To Banks And Financial Institutions Act, 1993 (‘the 1993 Act’). Counsel submits that the interference is arbitrary and unjustified since the borrower/petitioner is eager to pay off the amount demanded by the respondent Bank in the Notice issued under section 13(2) of the SARFAESI Act and the discretion exercised by the DRT in reducing the rate of interest cannot be said to be perverse under the law.

4. Learned counsel appearing for the respondent Bank recounts the facts before the petitioner filed the S.A. in the DRT. Counsel submits that the petitioner obtained a mortgage loan of Rs.770 Lakhs from the respondent Bank in 2015 for purchase of commercial property which was to be repaid in 108 equated monthly installments commencing from 28.08.2015 and ending on 05.09.2024. Counsel submits that the petitioner was irregular in payment of EMIs and breached several terms of the sanction letter. The petitioner issued 27 cheques amounting to Rs.40,50,000/- towards repayment which were dishonoured leading to cases being filed under The Negotiable Instruments Act, 1881. The petitioner paid an amount of Rs.40,50,000/- during trial of the criminal proceedings. Counsel submits that other complaints are pending against the petitioner for subsequent dishonour of cheques.

5. Counsel further submits that the respondent Bank issued a Demand Notice on 04.10.2018 under section 13(2) of the SARFAESI Act and a Possession Notice on 26.12.2017 under section 13(4) of the SARFAESI Act despite which the petitioner leased the portions of the mortgaged property and has been collecting substantial rents as of January, 2025. The respondent Bank moved a petition under section 14 of the SARFAESI Act and obtained a warrant for delivery of possession of the secured property through an Advocate Commissioner and thereafter took physical possession of the secured property on 15.03.2018. Counsel submits that the petitioner’s S.A. before the DRT challenging the SARFAESI action was dismissed on 17.07.2019 and the Appeal before the DRAT as well as the writ petition filed by the petitioner were also dismissed on 23.09.2019. Counsel submits that the petitioner has failed to repay the loan amount despite collecting rents from the secured property and assails the order passed by the DRT on the ground that section 17 of the SARFAESI Act does not permit the DRT to reduce pendente lite interest.

6. We have heard the respective submissions made on behalf of the parties and considered the material placed before the Court.

7. The point for adjudication is whether the DRT was authorized to reduce the future/pendente lite interest under the provisions of the SARFAESI Act a