LPA No.942 of 2011

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IN THE HIGH COURT OF DELHI AT NEW DELHI

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LPA No.942 of 2011

Reserved on: March 05, 2012

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Pronounced on: April 20, 2012

SOMNATH MANOCHA

. . . APPELLANT

Through:

Mr.

A.S.

Chandhiok,

Sr.

Advocate (Amicus Curie) Mr.

Ritesh Kumar, Mr. Sidharth

Tyagi, Mr. Sumit Goyal, Ms.

Shweta

Gupta,

Mr.

Vikas

Mehta and Mr. Piyush Sanghi,

Advocates.

VERSUS

PUNJAB AND SINDH BANK & ANR.

. . .RESPONDENTS

Through:

Mr. Rajinder Walia, Advocate

for respondent No.1.

Mr. Jagat Arora, Advocate for

respondent No.4.

CORAM :-

HON’BLE THE ACTING CHIEF JUSTICE

HON’BLE MR. JUSTICE RAJIV SAHAI ENDLAW

A.K. SIKRI (ACTING CHIEF JUSTICE)

1.

This appeal poses a very interesting, and at the same time, an

important question of law pertaining to the interpretation which

is to be accorded to Section 36 of the Securitization and

Reconstruction of Financial Assets and Enforcement of Security

Act, 2002 (hereinafter referred to as „SARFAESI Act‟). This

provision makes the following reading:

“36. Limitation

No secured creditor shall be entitled to take all or any of

the measures under sub-section (4) of section 13, unless

his claim in respect of financial asset is made within the

period of limitation prescribed under the Limitation Act,

1963 (36 of 1963).”

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LPA No.942 of 2011

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2.

The issue as to whether action of the respondent bank invoking

the provisions of SARFAESI Act by serving notice of Section 32

of the said Act is barred by limitation or not, which has arisen

in the following background.

3.

The respondent bank herein had given certain loans to one

M/s. General Tyre House, a partnership firm in the year 1981.

For securing this loan, the appellant was one of the guarantors.

He also gave the security in the form of equitable mortgage in

respect of house property bearing Municipal No.32/24, Pratap

Nagar, Jagdigh Colony, Rohtak (Haryana). The loan could not

be paid by M/s. General Tyre House, which forced the bank to

file CS (OS) No.935 of 1984 for recovery of `7,75,283.60

against that firm as well as the appellant and other guarantors.

The aforesaid proceedings are still pending adjudication and

the Suit has not been decided so far.

4.

The Parliament enacted SARFAESI Act which came into effect

from 18.12.2002. This Act provides additional remedy to the

financial institutions to recover their debts by enforcing the

security. Mechanism for that is provided under this Act. The

respondent bank chose to avail this additional remedy and

thus, in February, 2003 served notice to the appellant under

Section 13(2) of the SARFAESI Act for enforcing the aforesaid

security in the form of said property mortgage to the bank.

This provision reads as under:

“13. Enforcement of security interest

(1)

xxx

xxx

xxx

(2) Where any borrower, who is under a liability to a

secured creditor under a security agreement, makes any

default in repayment of secured debt or any installment

thereof, and his account in respect of such debt is

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LPA No.942 of 2011

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classified by the secured creditor as non-performing

asset, then, the secured creditor may require the

borrower by notice in writing to discharge in full his

liabilities to the secured creditor within sixty days from

the date of notice failing which the secured creditor shall

be entitled to exercise all or any of the rights under

subsection (4).”

5.

Though no immediate action was taken on the basis of this

notice, fresh notice dated 20.11.2004 under Section 13(2) was

served on similar lines calling upon the appellant to pay the

entire

outstanding

liability

amounting

to

`3,84,59,807/-

together with interest with effect from 21.11.2004. The

appellant replied on 07.1.2005 questioning the validity of this

notice on the ground that the action was time barred in view of

the