The Author, Nishit Paul is lawyer having 4 years of practice in civil litigation related to land and property disputes and debt recovery disputes in the Debt Recovery Tribunal.
The law of debt recovery in India is derived from two laws which are the Recovery of Debt and Bankruptcy Act, 1992 and the Securitization and Reconstruction of Financial Assets and Security Interest Act, 2002 (SARFAESI Act).
The RDB Act established a Debt Recovery Tribunal (DRT) and a Debt Recovery Appellate Tribunal (DRAT) which the intent of speedy proceeding for recovery of the debts. The Debt Recovery Tribunal is managed by the Ministry of Finance, Government of India.
The two laws set the judicial procedure for recovery of debts by the Bank through the sale of secured asset mortgaged or hypothecated by the Borrower. The SARFAESI Act provides stringent powers to the Banks and Financial Institutions whereby, the secured asset of the borrower is auctioned without the intervention of the DRT. Whereas, the RDB Act provides the whole judicial proceeding before the Debt Recovery Tribunal and the Debt Recovery Appellate Tribunal.
This article features unique legal dispute which arose between a borrower and the lender.
A Delay can be condoned by the DRT by filing an application under Section 5 of the Limitaton Act.
In the Bensan Exim Coporation vs The Presiding Officer case before the Madras High Court the Division Bench opined that delay in filing an appeal by the Borrower before the Debt Recovery Tribunal can be condoned by the filing an application as per Section 5 of the Limitation Act, 1969.
The law under Section 17 of the SARFAESI Act gives a period of 45 days from the date of the receipt of the possession notice under Section 13(2) of the Acct the Borrower can file an appeal before the Debt Recovery Tribunal.
However the Court based its opinion on two judgements which are Standard Chartered Bank vs MSTC [Manu /SC/0073/2020] and Baleshwar Dayal Jaiswal vs Bank of India & others both these case referred to the decision of the Apex court in International Asset Reconstruction Company of India Limited vs Official Liquidator of Aldrich Pharmaceuticals Limited and others [(2017) 16 SCC 137].
The Apex court’s judgement accepted in providing condonation of delay because as per Section 18(2) of the SARFAESI Act which enables the power in disposing the petition under by the operation of Section 20(3) Recovery of Debt & Bankruptcy Act, 1993 (RDB, Act).
Also further referring to the same judgement, in which it was held that Section 5 read with Section 29(2) of the Limitation Act, 1963 an appeal to the order of Recovery Officer under RDB Act is not available by the operation of Section 30 of the RDB Act. Therefore, no condonation of delay is allowed.
The Hon’ble Court inferred from this position of the Apex Court which adjudicated on the issue of condonation of delay in case of appeal from the order of Recovery Officer in the RDB Act. The Hon’ble Bench misjudged because the application of condonation of delay was asked with reference to the SARFAESI Act.
The law is settled in case of SARFAESI Act, that condonation of delay is not applicable on an appeal before the DRT as per Section 17 of the Act. This is because Section 17 is of the nature of an appeal, not suit or a regular application as defined in the Limitation Act. This has been held in the case of Akshat Commercials Limited vs Kalpana Chakrobarty.
The Lordships in the case and their judgements are should be set aside by the Hon’ble Supreme Court.
How Condonation of Delay is Not Applicable in Proceedings Before DRT under Section 17 of the SARFAESI Act?
The Learned Bench in the Akshat Commercials Limited vs Kalpana Chakrobarty has held on the following preposition:
- What is the nature of the Section 17(1) of SARFAESI Act
The Hon’ble bench in the case came to the conclusion that, the proceeding before DRT under Section 17(1) of the SARFAESI Act, 2002 are of the nature of suit, not an application or an appeal. For this the Court referred to the judgements of Mardia Chemecils Limited and the M/s Transcore Ltd. Vs Union of India wherein, it was described that, the said provision is of the nature of suit because of the Section 17 is method of raising grievances against any action taken by the secured creditor under Section 13(4) of the Act.
On the other side, the scope of Limitation Act is not fully extended to the SARFAESI Act because of the provision under Section 24 of the RDB Act, 1993 wherein, it limits the applicability of the Limitation Act. Therefore, the limitation created under Section 24 of the RDB Act is then subject to interpretation of the courts.
The Court further refereed to the case of Gopal Sardar vs Karuna Sardar [] wherein, it was held that, suits are first class proceedings which is instituted in the first instance and the application are ancillary to the proceedings with the suit. The proceedings under Section 17 of the Act and Section 24 gives limitation for filing an application within 45 days from the date of any action taken by the secured creditor. Also, the law itself give the adjudication of the proceeding within 60 days till 4 months from the filing of the suit, if not file an application before the Appellate Tribunal (DRAT).
Since, the law is determined to file it within 45 days and the disposal of within a fixed period of its proceedings, it was never the intention of the legislators to extend the relief under Section 5 of the Limitation Act, for condonation of the delay.
Conclusion
The Judgement as per the Akshat Commercial should be upheld whereby the applicability for granting a condonation of delay to the borrower should not be allowed. This will defeat the actual intent of the law because this will give time to the borrower to cause delay and the Bank will suffer because of rising bad debts. The law is a special law which was enacted to made sure the statutory special protection is to be provided to the institute. The Bensen Exim Corporation will broke the substance of the special law. if further maintained.
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