Gauhati High Court Case Summary: Debts Recovery Tribunal's Authority to Condon Delay in SARFAESI Act Proceedings

Citation: 2023 Gauhati High Court

Background and Factual Matrix:

The petitioners in this case were a proprietorship firm and its proprietor who had borrowed money from the respondent bank. Their loan account was classified as a Non-Performing Asset (NPA) on 28 February 2023. In response, the respondent bank initiated recovery proceedings under the SARFAESI Act, 2002. The bank first issued a notice under Section 13(2) of the SARFAESI Act, followed by further notices under Rule 8(1) of the Security Interest (Enforcement) Rules, 2002, informing the petitioners of the steps the bank intended to take for the recovery of the debt.

In turn, the petitioners challenged these notices and filed an application before the Debts Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act, which allows a borrower to challenge the measures taken by the secured creditor under the Act. The petitioners filed their application after the expiry of the statutory 45-day limitation period specified under Section 17(1) of the SARFAESI Act. The DRT, on 20 November 2023, dismissed the petitioners’ application, holding that it was time-barred by 19 days, as it was filed beyond the prescribed limitation period.

The DRT refused to condone the delay in accordance with certain legal precedents, which emphasized the mandatory nature of the time limit in Section 17(1) of the SARFAESI Act. The petitioners, aggrieved by the dismissal, approached the Gauhati High Court, asserting that the DRT had the discretion to condone the delay by applying the provisions of the Limitation Act, 1963. The petitioners contended that the DRT could exercise this discretion based on Section 24 of the RDB Act, which governs the functioning of DRTs and provides for the application of the Limitation Act in tribunal proceedings.

Issues:

1) Can the provisions of the Limitation Act, 1963, be applied to proceedings initiated under Section 17 of the SARFAESI Act, 2002?

2) Does the DRT have the discretion to condone delays in filing applications under Section 17 of the SARFAESI Act?

Petitioner’s Arguments:

1) Applicability of the Limitation Act: The petitioners argued that Section 17(7) of the SARFAESI Act mandates that the DRT dispose of applications filed under Section 17 in accordance with the procedural provisions of the RDB Act, 1993. Section 24 of the RDB Act specifically allows the application of the Limitation Act to proceedings before the DRT. Therefore, the petitioners contended that the DRT had the power to condone delays by applying the Limitation Act.

2) Judicial Precedents: The petitioners referred to the Supreme Court ruling in Baleswar Dayal Jaiswal v. Bank of India, where it was held that tribunals under the SARFAESI Act have the authority to condone delays by invoking the Limitation Act. In that case, the Supreme Court noted that the tribunal’s power to condone delay is consistent with the principles of natural justice and fairness.

3) Access to Justice: The petitioners further argued that denying the application of the Limitation Act would deprive them of their statutory remedy under Section 17 of the SARFAESI Act. This, they contended, would force them to approach the High Court under Article 226 of the Constitution, which would burden the High Court unnecessarily and defeat the purpose of having specialized tribunals for quick and efficient dispute resolution.

Respondent’s Arguments:

1) Mandatory Time Limits: The respondent bank asserted that the SARFAESI Act is designed to facilitate the expeditious enforcement of security interests, and thus, the 45-day time limit under Section 17(1) is mandatory. Allowing a delay would undermine the primary objective of the SARFAESI Act, which is to provide a quick resolution for banks and financial institutions recovering their dues.

2)Supreme Court Precedents: The respondents relied on precedents from the Supreme Court, particularly Mardia Chemicals Ltd. v. Union of India and M/s Transcore v. Union of India. These cases held that proceedings under Section 17 of the SARFAESI Act are original proceedings akin to filing a civil suit. As such, the provisions of the Limitation Act for condonation of delay do not apply automatically in such cases.

3)Legislative Intent: The respondents argued that the absence of an express provision for condonation of delay in Section 17(1) of the SARFAESI Act indicates the legislature’s intent to preclude the application of the Limitation Act to such proceedings. They emphasized that the SARFAESI Act was intended to be a quick mechanism for securing the rights of creditors, and thus the time limit should be strictly adhered to.

Court’s Analysis and Decision:

1) Section 17(7) and the RDB Act: The court examined Section 17(7) of the SARFAESI Act, which explicitly states that the procedures for adjudicating applications under Section 17 must follow the provisions of the RDB Act. Section 24 of the RDB Act provides that the Limitation Act applies to proceedings before the DRT. The court concluded that this incorporation of the RDB Act’s procedural framework into the SARFAESI Act implicitly allows the application of the Limitation Act to proceedings under Section 17 of the SARFAESI Act.

2) Judicial Precedents Supporting Condonation of Delay: The court referred to various decisions from different High Courts, including Andhra Pradesh, Madras, and Madhya Pradesh, which held that the Limitation Act could be applied to proceedings under the SARFAESI Act. The court found that these judgments were consistent with the principle that procedural timelines, including those in the Limitation Act, are generally directory and can be relaxed when a satisfactory cause for delay is shown.

3) Contrary Views Distinguished: The court also considered judgments from the Calcutta and Orissa High Courts, which had held that the Limitation Act does not apply to proceedings under Section 17. However, the court distinguished these cases, noting that they did not adequately consider the incorporation of the RDB Act’s provisions into the SARFAESI Act and the legislative intent behind it.

4)Equity and Access to Justice: The court emphasized that the SARFAESI Act should not be interpreted in a way that would deny a party access to justice simply because of a minor delay, especially when no express provision excludes the application of the Limitation Act. The court noted that allowing the condonation of delay aligns with the principles of natural justice, which ensure that litigants are not deprived of their rights due to procedural lapses.

5)Public Interest and Efficiency of Tribunals: The court also acknowledged the efficiency of specialized tribunals like the DRT, which were established to expedite the resolution of financial disputes. It noted that denying the petitioners the ability to seek condonation of delay would defeat the purpose of having such specialized forums for speedy resolution.

Conclusion:

The Gauhati High Court set aside the DRT’s order dismissing the petitioners’ application as time-barred. The court remitted the matter back to the DRT, directing the tribunal to consider whether the petitioners could satisfactorily explain the delay in filing the application. If the delay was adequately explained, the DRT was directed to adjudicate the case on its merits.