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2024 Supreme(Online)(KER) 19592
HIGH COURT OF KERALA
Dinesh Kumar Singh, J
QUBE CINEMA TECHNOLOGIES (P) LTD. – Appellant
Versus
UNION BANK OF INDIA – Respondent
WP(C) 12942/2024
Limitation under Section 17(1) of the SARFEASI Act is strictly from the auction date, not from the date of knowledge.
Headnote:
SARFEASI - Writ Petition - SARFEASI Act - Section 17(1) - Court examined the binding limitation period for challenging auction proceedings under Section 17(1) of the SARFEASI Act, concluding that the limitation is based on the auction date and not the date of knowledge of the auction.
Fact of the Case:
The petitioner challenges the dismissal of his appeal regarding auction proceedings conducted by a bank, arguing that the leased equipment was wrongfully auctioned as the 2nd respondent did not hold rights over it.
Finding of the Court:
The court found that the limitations for contesting auction proceedings are strictly governed by Section 17(1) of the SARFEASI Act, stating that the auction could only be contested within 45 days of the auction date, not from the date of knowledge.
Issues: Whether the petitioner could challenge the auction of secured assets under Section 17(1) due to timeline limitations and the ownership rights relating to leased equipment.
Ratio Decidendi: The interpretation of Section 17(1) dictates that the limitation period for challenging auction sales is from the date of the auction, not the date of knowledge of such proceedings.
Final Decision: The writ petition is dismissed.
Dated this the 8 th day of July, 2024 The present Writ Petition has been filed impugning Ext.P11 order dated 03.11.2023 in Appeal No.16/2023 passed by the Debt Recovery Tribunal-II, Ernakulam.
2. The petitioner claims that he has given the various equipments to the 2 nd respondent. The 2 nd respondent had availed business loan from the 1st respondent bank. The 2nd respondent defaulted in repayment of the business loan. Under the provisions of the SARFEASI Act and Rules made thereunder, the secured asset of the 2nd respondent were put to auction. In auction sale proceedings, the sale was confirmed in favour of the petitioner 4th respondent.
3. The learned counsel for the petitioner submits that equipments given on lease to the 2nd respondent were not his property and loan was secured for the commercial building of M/s.”Jaya Vinayaka” Theatre.
The 2nd respondent did not have any right, title or interest over the equipments given to them on lease, as per the terms and conditions of the agreement entered between the petitioner and the 2nd respondent. Only lease hold rights were created in favour of the 2nd respondent. The 2nd respondent had no right to mortgage the equipments of the petitioner given to him on lease for securing the loan.
4. It is further submitted that the secured assets were sold of for Rs.5,60,10,000/- against the bank's total outstanding amount of Rs.3,93,00,059/- and there is a balance of Rs. 3,07,90,945.07 which has been credited to the account of M/s.”Jaya Vinayaka”
Theatre.
5. It is therefore, submitted that the cost of petitioner's equipments, around Rs.28,00,000/- should be directed to be reimbursed to him by the respondent bank.
6. The petitioner challenged the auction proceedings before the DRT by filing SA (Diary No.112/2023). The Registrar decline to register the SA vide order dated 12.09.2023, on the ground that the SA was presented beyond the limitation prescribed.
The DRT in impugned order Ext.P11 had dismissed the appeal against the said order of the Registrar, the respondent 2, on the ground that the petitioner had presented the SA on 24.08.2023 challenging the sale of the secured asset. The auction proceedings were conducted by the respondent bank on 25.05.2023 pursuant to the sale notice dated 13.04.2023. Under Sub Section 1 of Section 17, the proceedings to challenge the action/steps taken under Sub Section 4 of Section 13 can be undertaken within 45 days from the date of sale ie, 25.05.2023 as held in judgment of the Supreme Court in the case of International Asset Reconstruction Company of India Limited vs. Official Liquidator of Aldrich Pharmaceuticals Limited and Others [ (2017) 16 SCC 137 ] and judgment of this Court in the case of Authorized Officer, Indian Bank vs. K.J George & Others [ 2020(6) KLT 289 ]. It was also held that the DRT does not have the power to condone the delay while exercising the power under Section 17 of the SARFEASI Act , 2002. Delay in filing the application under Section 17(1) cannot be condoned by the Tribunal in view of the specific and unambiguous provisions contained in Section 17(1) of the SARFEASI Act .
7. Sri.A.Kumar, learned senior counsel assisted by Sri.P.J Anil Kumar, submits that the petitioner was not the party to the loan agreement, and therefore, no notice was issued to the petitioner. The petitioner could come to know of the sale of the secured asset only on 10.07.2023 and filed the S.A. on 24.08.2023 well within the period of 45 days from the date of knowledge of the auction proceedings. He therefore, submitted that the Tribunal has wrongly calculated 45 days from the date of the auction proceedings ie, on 25.05.2023 for the purposes of computing the limitation of 45 days, 10.07.2023 is the relevant date on which the petitioner could come to know the auction proceedings. He has therefore submitted that if the date of knowledge of the auction proceedings to the petitioner ie, on 10.07.2023 is taken as the date to begin the limitation, the SA fil
