DRT May Entertain Plea Against Measures To Recover Secured Debts Beyond Limitation If Satisfied With The Reasons: Gauhati High Court

The Gauhati High Court has recently held that the Debt Recovery Tribunal has to dispose of an application under SARFAESI Act made against measures to recover secured debts by any person in accordance with Section 24 of the Recovery of Debts and Bankruptcy Act which applies the provisions of the Limitation Act to tribunal proceedings.

For context, Section 24 of the RDB Act states that the provisions of the Limitation Act shall, as far as may be, apply to an application made to a Tribunal. In doing so the court, applied the "principle of legislation by incorporation" by observing that as the provisions of RDB Act are incorporated into the SARFAESI Act, therefore DRT can entertain a plea to recover secured debts beyond the limitation period, if it is satisfied that sufficient reasons were provided for not filing the plea within time. 

The petitioner–a proprietorship firm had moved a writ petition challenging a May 19, 2023 issued by the respondent State Bank of India (SBI) under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) and the subsequent bank notices issued in July and August 2023 under Rule 8(1) of the Security Interest (Enforcement) Rules, 2002. The petitioner's loan account was declared as a Non-Performing Asset (NPA) on February 28, 2023.

Noting the provisions of the SARFAESI Act and the RDB Act a division bench of Chief Justice Vijay Bishnoi and Justice N Unni Krishnan Nair said, "In Section 2(1)(i) of the SARFAESI Act, “Debts Recovery Tribunal” is defined, which means the Tribunal established under sub-section (1) of Section 3 of the RDB Act. Section 17(1) of the SARFAESI Act provides that any person, including the borrower, can file an application under Section 17 against the measures taken by the secured creditor under subsection (4) of Section 13 of the SARFAESI Act before the DRT established under the RDB Act. Sub-section (7) of Section 17 provides that the DRT is required to dispose of the application in accordance with the provisions of the RDB Act".

"Section 24 of the RDB Act provides that the provisions of the Limitation Act, as far as may be applied, to an application made to a Tribunal. A conjoint reading of the above provisions make it clear that the DRT is required to dispose of an application filed under Section 17 of the SARFAESI Act as per the provisions of the RDB Act, wherein by virtue of Section 24 of the RDB Act, the provisions of Limitation Act are applicable," it added.

Initially the petitioners had challenged the action of the Bank by filing an application under Section 17(1) of the SARFAESI Act before the Debts Recovery Tribunal (DRT) which was dismissed on the ground that the same was barred by limitation as per Section 17 SARFAESI Act. DRT turned down the petitioner's request to condone delay of 19 days–though DRT had calculated it as 23 days–holding that the statutory time period of 45 days provided under Section 17(1) of the SARFAESI Act is mandatory and no discretion has been conferred upon the DRT to extend such period. 

Under Section 17(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 may make an application to the Debts Recovery Tribunal having jurisdiction in the matter within forty five days from the date on which such measure had been taken. The Section 13(4) measures are taken when a borrower fails to discharge his liability in full. 

Although this order was not under challenge, the high court was considering the question whether the DRT can condone the delay in filing an application under Section 17(1) of the SARFAESI Act preferred on behalf of a borrower by giving the benefit of the provisions of the Limitation Act, 1963. 

The petitioners argued that the DRT can condone such delay in filing a Section 17(1) application stating that as per sub-section (7) of Section 17, the DRT is obliged to dispose of the application preferred under Section 17 of the SARFAESI Act in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (now Recovery of Debts and Bankruptcy Act (RDB), 1993). 

The petitioner relied on the decision of the Supreme Court in Baleswar Dayal Jaiswal -Vs- Bank of India & Ors. (2016) while taking into consideration the provisions of the SARFAESI Act as well as the RDB Act has, in unequivocal terms, which held that the DRT as well as the Debts Recovery Appellate Tribunal have the power to condone the delay by applying the provisions of the Limitation Act while adjudicating the application moved under Section 17 of the SARFAESI Act, or an appeal under Section 18 of the SARFAESI Act.

Meanwhile the respondents referred to Supreme Court decisions which they said had categorically held that proceedings under Section 17 of the SARFAESI Act is a state of initial proceedings, such as filing of suit in the Civil Court and, therefore, there is no application of the Limitation Act in the proceedings under Section 17 of the SARFAESI Act.

After referring to various high court decisions the court held, "The principle of legislation by incorporation is well recognized in India. As the provisions of the RDB Act are incorporated in the SARFAESI Act for disposal of an application filed under Section 17 and in such circumstances, in our view, there is no reason to hold that the DRT cannot entertain an application filed under Section 17 of the SARFAESI Act beyond the period of limitation even on being satisfied that there is sufficient cause for not filing such application within the time limit prescribed". 

Disposing of the writ petition the high court set aside the DRT's order and remitted the matter back to the tribunal for it to consider the petitioners' plea for condonation of delay in filing the Section 17 application under SARFAESI Act. The high court said that if the delay is satisfactorily explained, the tribunal may condone it and the Section 17 application may be decided on merits. 

Case title: M/s Baruah C.C. Block Industry and Anr. v/s State Bank of India and others

Counsel for the petitioners: Advocate S Mitra

Counsel for the respondents: Advocate K.K. Nandi

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