Powers Of The DRT To Condone Delays In Filing Applications Under Section 17; A Question Put To Bed?

Contours Of The Act

The SARFAESI Act was enacted by the Parliament inter alia to regulate securitisation and reconstruction of financial assets and enforcement of security interest. The Act provides for a detailed mechanism under 'Chapter III - Enforcement of Security Interest' which provides banks and financial institutions with a statutory mechanism to recover secured loans. As per this mechanism, in cases of default of repaying secured loans and once the borrower's account is declared a Non-Performing Asset ['NPA'] the creditors i.e., banks and financial institutions, are legally permitted to proceed against his mortgaged property. In other words Chapter III of the SARFAESI Act provides the Banks with an efficacious mechanism to recover the outstanding loans without any interference from Courts or Tribunals making the process of seamless.

In order to balance the procedural ease for the Banks against the interest of the borrowers, safeguards, such as the remedy under Section 17, have been incorporated in the Act which the borrower can resort to in case any prejudice has been caused to him by the action of the creditor invoking the process under Section 13 of the SARFAESI Act. Therefore, Section 17 of the Act allows the borrower to challenge the steps taken by the financial creditor/bank under Section 13 in order to safeguard his property and rectify any error or wrongful use of power exercised by the bank.

However, this remedy available to the borrower under Section 17 of the Act is not unqualified. Section 17 of the Act requires the borrower is required to file the SA 'within 45 days from the date on which a measure had been taken' by the creditor as contemplated under Section 13(4). Interestingly though, the measures referred to under Section 13(4) do not discuss a particular end point as the action taken on part of the banks is often treated as a continuous cause of action^[1]. Therefore, litigants are often left puzzled when faced with the question of limitation. This conundrum is made worse by the fact that Section 17 does not contain any explicit provision for condonation of delay by the DRT which causes litigants to file an application akin to a Section 5 of the Limitation Act, 1963 seeking condonation of delay where the SA is filed beyond the 45-day period. Therefore, on the one hand Section 17 subjects the exercise of the relief therein to a limitation period to 45 days from the date the measure had been taken by the creditor under Section 13(4), with neither any liberty to the borrower nor any express discretion bestowed upon the DRT to condone delay, on the other hand, Section 13(4) is a case where, practically, the cause of action is continuous.

There are various sets of judgments which deal with the issue. While some have held an SA to be in the nature of 'original proceedings' i.e., similar to an original suit under the Code of Civil Procedure, 1908 ['CPC'] implying that Section 5 of the Limitation Act has no application, others have held it to be in the nature of a remedial measure against an action-initiated u/s 13(4), therefore clarifying that Tribunals do in fact have the power to condone the delay. The present piece seeks to delve into the quandary that is prevalent with regards to the sanctity and stringency of the period of limitation applicable to a SA moved under Section 17 of the SARFAESI Act.

To Condone Or Not To Condone: The Existing Conundrum

To begin with, the Supreme Court, in the decision of Bank of Baroda v. Parasaadilal Tursiram Sheetgrah (P) Ltd.^[2], held that the provisions of SARFAESI Act had been enacted for quick enforcement of security interests and that proceedings ought to be decided as expeditiously as possible. The much-required remark came from the Apex Court in light of the fact that the issue therein remained inconclusive for more than a decade. In this peculiar context, the Supreme Court observed that a specific time limit of 45-days had been provided for filing an application under Section 17 of the Act in order to put the issue at rest. In other words, in this case, the Supreme Court merely used the statutory time limit prescribed in Section 17 of the Act for emphasising its observation that the proceedings under the Act ought to be conducted and decided expeditiously. Nowhere did the Supreme Court state, or not state, that this time period is sacrosanct and not condonable.

The observations of the Supreme Court in Bank of Baroda (supra) have, however, been followed in a way to propagate something that was not considered by the Court - the time limit of 45 days for filing an SA is sacrosanct and no application filed beyond the prescribed period can be entertained by the DRT. The said interpretation has been followed in various judgments^[3] to hold that the period of limitation of 45 days for filing such an SA is mandatory, and therefore DRT under no circumstance can condone such delay. The interpretation of the aforesaid judgments is also premised on an understanding that the proceedings initiated under Section 17 are 'original proceedings' which is tantamount to filing a civil suit, and therefore Section 5 of the Limitation Act, 1963 has no application^[4]. In case an SA is in the nature of an original suit then Section 5 of the Limitation Act shall have no applicability, as the provision only pertains to appeals or applications. Section 5 reads as under: -

“5. Extension of prescribed period in certain cases.- Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908 (5 of 1908), may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.

Explanation.- The fact that the appellant or the applicant was misled by any order, practice or judgment of the High Court in ascertaining or computing the prescribed period may be sufficient cause within the meaning of this section.”

As can be seen, Section 5 of the said Act permits extension of period prescribed only in cases of an appeal or application, even if filed beyond the period of limitation. In case a Section 17 application does not fall under the category of appeal or application and rather is the nature of an original proceeding i.e., similar to a suit, then Section 5 of the Limitation Act would have no application at all. Therefore, to answer the aforementioned quandary it would be relevant to appreciate the nature of an application filed under Section 17.

Application Filed Under Section 17, Sarfaesi Act Equivalent To An Original Suit?

Undoubtedly, an application filed under Section 17 of the Act before the concerned DRT is the first time the borrower approaches the tribunal to seek a redressal of his grievance. Section 17 reads as under: -

“17. Application against measures to recover secured debts].—(1) Any person (including borrower) aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor or his authorised officer under this chapter, may make an application along with such fee, as may be prescribed, to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken:

Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.

[Explanation.—For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section.]”

If there were any doubts about the nature of the aforesaid remedy, the language of the provision, especially by usage of the expression 'aggrieved by any of the measures', has unequivocally clarified that an SA is in nature of a remedial measure against action taken by the bank u/s 13(4). Implying that the right to approach the DRT under Section 17 accrues in favour of the borrower only once the secured creditor initiates action against his property under Section 13(4). Thereby, any action initiated under Section 17 to establish one's right is akin to a remedy against the initiation of action by the creditor under the Act. Furthermore, the provisions clearly provide for filing an 'application' which refutes the hypothesis that an SA is equivalent to an original suit. The Courts, as discussed further, have held that the approach adopted by the borrower is seen as an objection against the action taken by the secured creditor rather than an original proceeding instituted by the borrower. Under Section 13(1) of the Act he legislature consciously created a provision which reads as: -

“Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act.”

A perusal of the above would reflect that the provisions of the Act provide for the creditor to not only act as a beneficiary, but also as an adjudicator to enforce his rights. The rationale for the same can be traced to the scheme and object of the Act which seeks to provide procedural autonomy to the secured creditor to recover its dues without getting into the technicality of things.

Also, Section 2 (b) of the Limitation Act defines an "application" to include a petition. Section 2 (1) defines a "suit" not to include an appeal or an application. Therefore, the definition of the word "suit" under Section 2 (1) of the Limitation Act makes it evident that in so far as the provisions of the Limitation Act are concerned, an application or an appeal is certainly different from a suit. Thus, the words "appeal" and "application" appearing in Section 5 of the Limitation Act have to be understood vis-à-vis the context of the definition of the word "suit".^[5] As seen above, the remedy adopted by the borrower u/s 17 is subsequent to the action adopted to by the secured creditor and therefore cannot stricto sensu be termed as an original proceeding constituting a Civil Suit or an original suit. The said issue has been discussed by various judgments of the Courts, which are as under: -

Interpretation By The Courts

The Division Bench of the Madhya Pradesh High Court in Aniruddh Singh v. ICICI Bank Ltd.^[6], while exercising its supervisory jurisdiction, dealt with the piquant issue whether Section 5 of the Limitation Act would be attracted in cases of an SA filed under Section 17 of the SARFAESI Act. The Court, while interpreting provisions such as Section 29(2) and Section 5 of the Limitation Act, termed the action taken under Section 17 of the SARFAESI Act as an application. While allowing the petition and remanding the matter to the DRT for consideration of the condonation of delay application, it was observed that by virtue of Section 29(2) of the Limitation Act, the SARFAESI Act does not expressly exclude the application of provisions from Sections 4 to 24 of the Limitation Act (including Section 5). Reliance was also placed on the findings of the Supreme Court in Baleshwar Dayal Jaiswal v. Bank of India^[7] which dealt with the aspect of condonation of delay in filing an appeal to the Debt Recovery Appellate Tribunal ['DRAT'] to bolster the conclusion that benefit of the provisions from Section 4 to Section 24 (both inclusive) of Limitation Act shall be available to the causes raised u/S 17(1) before DRT.

A Single Bench of the Madras High Court in Ponnusamy v. Debts Recovery Tribunal^[8] came to the conclusion that the SARFAESI Act does not exclude the application of the provisions of the Limitation Act and held that the remedy under Section 17(1) is virtually in respect of a right of redemption, and to conclude that Section 5 of the Limitation Act will not apply to an SA would virtually defeat the valuable right of redemption. Taking cue from other legislations, such as the Consumer Protection Act, 1986 and the Administrative Tribunal Act, 1985, wherein it was observed that delay in filing original proceedings may be condoned by the respective Tribunals, the Court concluded that condonation of delay is not an anathema to all types of original proceedings, as in the case of Civil Suits.

The Supreme Court in 2009 by way of another judgment in Indian Overseas Bank v. Ashok Saw Mills^[9] discussing the issue of limitation for filing an SA held that action taken by the bank under Section 13(4) is a continuous cause of action in context of Section 13(8), and therefore, the DRT would have jurisdiction to consider and adjudicate with regard to post Section 13(4) events. The Court considered the scope of Section 17(3) of the SARFAESI Act to conclude that the DRT has been vested with jurisdiction to declare any such action as invalid and also to restore possession in cases where possession may have been transferred to the transferee. The Apex Court held that the consequences of the authority vested in the DRT under a sub-section (3) of Section 17 necessarily implies that they are entitled to question the action taken by the secured creditor and the transactions entered into by virtue of Section 13(4) of the Act.

The Division Bench of the Punjab & Haryana High Court in Surinder Mahajan v. Debts Recovery Appellate Tribunal^[10] also observed that in absence of any provision under the Act excluding the applicability of the Limitation Act to the proceedings before the Debt Recovery Tribunal under Section 17 would not be proper. In all of these cases the Courts came to a finding that an application filed under Section 17 can in no manner be considered to be an original proceeding.

SARFAESI Act vis-à-vis the RDB Act

Another way to appreciate the issue at hand is to compare the provisions of the SARFAESI Act with Recovery of Debts and Bankruptcy Act, 1993 ['RDB Act']. The RDB Act was enacted and enforced prior to the SARFEASI Act. The RDB Act primarily deals with establishment of Tribunals which dealt with recovery of monies for all types of creditors, whether secured or not, whereas SARFAESI only deals with secured creditors. Sections 17(7) and 37 of the SARFAESI Act state that an application filed under the Act shall be disposed of in accordance with the provisions of the RDB Act, whereas Section 24 of the RDB Act provides that the provisions of the Limitation Act, 1963 shall as far as may apply to an application made to the Tribunal under the Act. Juxtaposing both the statutes, it is manifest that an application filed under Section 17 (1) of the SARFAESI Act, though unlike an application filed under the RDB Act, shall be influenced by the provisions of the latter. Therefore, due to the incorporation of Section 17(7) and 37 in the SARFAESI Act and reading the same in conjunction with Section 24 of the RDB Act, it was clearly established that the Limitation Act was in fact applicable to an application presented to the Tribunal under Section 17 of the SARFAESI Act.

In this regard, it is pertinent to mention that in Baleshwar Dayal Jaiswal v. Bank of India^[11] the Supreme Court held that any delay beyond the period prescribed under the Act may be condoned by the DRAT in exercise of its Appellate powers under Section 18. The Apex Court arrived at this conclusion by placing reliance upon the provisions of the RDB Act, which permitted the delay to be condoned where an appeal was filed beyond the prescribed limitation period of 30 days from receipt of the order of the DRT. Considering the conspicuous and conscious usage of the provisions of the RDB Act to the SARFAESI Act, the Supreme Court held that the DRAT shall have the power and jurisdiction to condone the delay in filing of appeals beyond the period of 30 days by taking recourse to the provisions of the RDB Act.

It is worthwhile mentioning that akin to Section 18, Section 17 also remains silent on the jurisdiction of the DRT to condone the delay in filing an SA. A comparative table highlighting the similarities of the wordings of the two provisions is as under: -

Section 17 SARFAESI Act	Section 18 SARFAESI Act
(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, may make an application along with such fee, as may be prescribed, to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken….	(1) Any person aggrieved, by any order made by the Debts Recovery Tribunal under section 17, may prefer an appeal along with such fee, as may be prescribed to the Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal.
(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder.	(2) Save as otherwise provided in this Act, the Appellate Tribunal shall, as far as may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder.

As can be seen from above, apart from the provision being Tribunal centric, no apparent difference is prevalent in the phraseology used by the legislature in both the Sections. It would be imprudent to draw a conclusion that the Appellate Tribunal i.e, DRAT, possesses the power and jurisdiction to condone the delay, although there is no explicit provision dealing with the same, while negating the same for a Tribunal i.e., DRT, that too for identically worded provisions.

Applying the aforesaid ratio to applications filed under Section 17 of the SARFAESI Act the Division Bench of the Hyderabad High Court in Porus Laboratory Private Limited v. Indian Bank^[12], while relying upon the judgment of the Apex Court in Baleshwar Dayal Jaiswal^[13] and International Asset Reconstruction Company of India Ltd. v. The Official Liquidator of Aldrich Pharmaceuticals Ltd.^[14], held that the DRT may exercise similar powers as exercised by the DRAT and may entertain application filed beyond the prescribed period. The Court in para 20 came to a specific finding which is as under: -

“20……Be it noted, by virtue of the proviso to Section 20(3) of the RDDB Act, the Appellate Tribunal has been held to have the power to condone the delay in the presentation of an appeal under Section 18 of the SARFAESI Act beyond the 30 day period stipulated therein. There is no logic or rationale in not extending the same power to the Tribunal while entertaining a belated application under Section 17 of the SARFAESI Act, by taking recourse to Sections 17(7) and 37 of the SARFAESI Act read with Section 24 of the RDDB Act.”

The Karnataka High Court in Bhuwalka Steel Industries Ltd. v. Indian Overseas Bank^[15] also held similarly while comparing the provisions of the SARFAESI Act to the RDB Act and remanded the matter for fresh consideration by the DRT when the Tribunal refused to recognise that it had powers to condone the delay in filing an SA.

All the aforesaid judgments highlight the underlying logic of not treating an SA as an original proceeding for apparent reasons. Firstly, an SA can in no manner, apart from procedural requirements, be treated in the nature of an original proceeding as Section 17 is in the nature of a remedial measure. Secondly, although the provisions of the SARFAESI Act do not explicitly provide the DRTs/DRATs with power to consider the aspect of delay, the Supreme Court has come to conclusions that the applicability of the RDB Act to the former establishes that the delay can actually be condoned using assistance of the provisions of the RDB Act.

Rationale Of Mardia Chemicals

If the law as discussed herein is amply clear and evident, one would rightly presume what possibly leads to the confusion with regards the exercise of jurisdiction by a DRT. As discussed above, there have been various judgments^[16] which have held an that the DRT cannot condone the delay beyond 45- days and that Section 5 of the Limitation Act has no application as an SA is termed as an original proceeding. Delving into the reasoning adopted by several judgments, it is often seen that such judgments have in fact relied upon the findings of the Supreme Court in Mardia Chemicals Ltd. v. Union of India^[17] to arrive at a conclusion that the benefit of Section 5 of the Limitation Act cannot be extended to such an SA. A holistic and purposive reading of the judgment would perhaps reflect otherwise. In Mardia Chemicals (supra), the Supreme Court was concerned with the validity of the SARFAESI Act primarily on the question of the precondition of deposit of a certain amount for invoking the remedy under Section 17. Finding the aforesaid condition to be harsh for borrowers, the Supreme Court, in this specific regard, observed that it would be a misnomer to call such proceedings as 'appellate proceedings'. It is pertinent to note that in the facts of Mardia Chemicals (supra) the Supreme Court proceeded to permit the litigants therein to file applications under Section 17 of the Act from a period which was to be considered from the date of the said decision. If the interpretation sought to be placed on this judgment is to further the supposition that the time period of 45-days is sacrosanct, the decision of the Supreme Court, even under Article 141, could have in no manner enlarged the time period in favour of the borrowers therein beyond the 45-day period. The said position is furthered by the findings of the High Court of Madras in Ponnusamy (supra) in para 24, which is laid as under: -

“24. In Mardia Chemicals case, the Supreme Court was concerned with the validity of the SARFAESI Act. One of the grounds of challenge related to the precondition prescribed under Section 17 of the Act for the deposit of 75% of the demanded amount, for invoking the remedy under Section 17. In support of the condition so prescribed (before amendment) it was argued that such a prescription was not unknown to law. It is only while dealing with such a contention that the Supreme Court observed in paragraph-59 that the proceedings under Section 17 are not appellate proceedings and that it would be a misnomer to call them so. After referring to its earlier decision in Ganga Bai's case, where the distinction between original and appellate proceedings was drawn, the Supreme Court observed in paragraph-60 that the requirement of pre-deposit is not to be found in any other statute, at the first stage of the proceedings, though it was permissible to have such a prescription at the appellate stage. But after having said so, the Supreme Court, in the operative portion of its order at paragraph-83 (penultimate paragraph) permitted the borrowers to file appeals under Section 17 within the limitation prescribed therein, to be counted only with effect from the date of its decision. If the earlier observations of the Apex Court are to be strictly construed, so as to exclude Section 5 of the Limitation Act, it would not have been possible for the Apex Court to have granted this reprieve to the borrowers, as it virtually had the effect of enlarging the time. Therefore, I am of the considered view that though the proceedings under Section 17 (1) of the SARFAESI Act, are original in nature, for the purpose of the procedure to be followed by the Tribunal and the reliefs that could be sought from the Tribunal, it does not follow as a corollary that as a consequence, Section 5 of the Limitation Act would have no application. To hold so, would defeat the right of redemption provided under Section 13 (8) and the principle of continuous cause of action inbuilt in Section 13 (4) and Section 17 (1) of the Act.”

The Court in Ponnusamy (supra) held that negating the applicability of the Section 5 of the Limitation Act would defeat the right of redemption provided under Section 13(8) of the SARFAESI Act and the principle of continuous cause of action inbuilt in Section 13(4) and 17(1) of the Act.

It is common knowledge that a judgment is an authority for what it actually decides and nothing more^[18]. Using this principle and a reading of the conspectus of the provisions and judgments, it is safe to say that the reliance placed upon Mardia Chemicals (supra) was perhaps used to proliferate something that was not considered by the judgment.

If an aggrieved person, including a borrower, is prevented from availing the statutory remedy provided under Section 17(1) of the SARFAESI Act merely because the application thereunder was not presented within the stipulated 45 days, the hierarchy of remedies provided under the SARFAESI Act would be denied to him and rendered nugatory on that short ground. Such an aggrieved person would then be left with no remedy but to invoke the extraordinary jurisdiction of the High Court under Article 226 of the Constitution. This defeats the very purpose of creating statutory Tribunals to provide efficacious alternative means of resolution of disputes and to decrease the burden that would otherwise be visited upon the High Courts under Article 226. Therefore, interpreting the statutory remedy provided under Section 17(1) needs to be appreciated holistically and cannot be interpreted in a narrow and pedantic compass.

With a whole spectrum of views adopted by the High Courts, predominantly with respect to the interpretation of Mardia Chemicals (supra), the Supreme Court in a Special Leave Petition ['SLP'] filed against a final judgment and order dated 02.11.2020 passed by the Kerala High Court in Petition(s) for Special Leave to Appeal (C) No(s). 4754/2021 issued notice on the question whether the DRT has the power to condone the delay in filing an application under Section 17 of the Act. Interestingly, the petitioners therein also placed reliance on the decision Baleshwar Dayal (supra) to draw an analogy that Sections 17 and 18 are similarly worded and hence the dictum of the said judgment must apply to Section 17 proceedings as well. In conclusion, perhaps the jury is still out on this issue which otherwise requires clarity for individual litigants i.e., borrowers, pitted against large multinational banks and corporations. Though the issue seems to be covered, only time can reveal whether the Supreme Court shall dilate on this issue, which is perhaps the need of the hour for many scrupulous litigants.

The author is an Advocate practising in the Delhi High Court. Views are personal.