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The Reason For Providing A 45-Day Limitation Period Can Be Inferred Through The Object And Purpose Of The Sarfaesi Act: Supreme Court

Shvena Neendoor ,
  13 August 2022       Share Bookmark

Court :
Supreme Court of India
Brief :

Citation :
CA 5240 of 2022

Case title: 
Bank Of Baroda & Anr Vs M/S Parasaadilal Tursiram Sheetgrah Pvt Ltd & Ors

Date of Order: 
11th August 2022

Bench: 
Justice B.R. Gavai and Justice Pamidighantam Sri Narasimha

Parties: 
Appellant- BANK OF BARODA & ANR
Respondent- M/S PARASAADILAL TURSIRAM SHEETGRAH PVT. LTD

SUBJECT

The Supreme Court has held that the reason for imposing a 45-day time frame for submitting an application under Section 17 can be deduced from the intent and object of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), which is swift enforcement of the security. 

The Bank of Baroda filed an appeal against an Interlocutory order of stay issued by the High Court of Judicature in Allahabad pending the disposition of a writ wetition. The respondent company filed the writ petition in response to the Debt Recovery Appellate Tribunal's ruling in appeal. The challenge to the Sale Certificate issued in favour of the Auction Purchaser under under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was rejected on the basis of limitation by this ruling.

IMPORTANT PROVISIONS

Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002- The section allows for the right of any individual (including the borrower) to appeal to the Debts Recovery Tribunal against any of the measures taken by the secured creditor or his authorized official within 45 days of the date such measures were taken.

OVERVIEW

  • The first respondent company obtained credit facilities for which the company's directors provided personal guarantees as well as an equitable mortgage on immovable property. Because the Company failed to repay the loan, the Bank issued a notice under the Act seeking a sum of Rs. 2,34,15,456/- from the Company and its Directors.
  • A notice under Section 13(4) of the Act seeking real physical possession was also served for non-payment. The Bank that its authorized personnel gained actual physical possession of the secured asset.
  • The Company and one of its Directors filed a Writ disputing the issuing of the notifications under Sections 13(2) and 13(4) of the Act, seeking a mandamus barring the Bank from pursuing any coercive action to collect the sum.
  • The Writ Petition was dismissed with the only condition that the whole debt be repaid in four equal instalments and that if the Company fails to make up the debt within the period specified, the Bank shall be free to continue in line with the law. 
  • Because the Company and its Directors failed to meet the High Court's deadline, the Bank went ahead and issued a sale proclamation, which resulted in Respondent No. 7 being proclaimed the victorious bidder. In addition, a sale certificate was obtained in his favour. 
  • The current procedures begin with the Respondent Company and the Directors filing an application under Section 17 of the Act to contest the aforementioned sale certificate.
  • The DRT denied the Section 17 application because it was filed after the statutory period of limitation of 45 days had passed. 
  • The review order was contested before the DRAT, which found no problem in granting the appeal on the grounds that there was never an error on the face of the record for exercising the review authority. 
  • This DRAT ruling was challenged in the Writ Petition before the High Court. The High Court granted the interim order, which said that the operation and implementation of the appellate order given in the Appeal would be stayed, and that the Debts Recovery Tribunal would proceed with the Securitization Application.

ISSUES RAISED

Whether the High Court was justified in staying the operation and implementation of the appellate order?

JUDGEMENT ANALYSIS

  • The bench stated that the justification for imposing a 45-day deadline for filing an application under Section 17 is simply deduced from the enactment's objective and intent. 
  • The Court concluded in Transcore v. Union of India and Anr. [(2008) 1 SCC 125] that the SARFAESI Act was meant to expedite security enforcement. 
  • the court opined that it is unfortunate that actions involving a property that has been put up for sale and third-party rights created under the Act have remained unresolved even after a decade. 
  • Despite the fact that the Special Leave Petition has been pending before this Court for the previous five years, this High Court issued a stay of the impugned decision at the stage of admission, resulting in the High Court's interim judgement not taking effect.
  • As a result of the reasons mentioned above, the court held that the High Court was not justified, in their judgement, in delaying the operation of the DRAT's ruling, which concluded that there was no mistake evident on the face of the evidence for the DRT to exercise review authority and recall its order rejecting the application under Section 17 of the Act.

CONCLUSION

The Supreme Court granted the appeal and set aside the impugned interim decision issued by the High Court until the resolution of the Writ Petition, and urged the High Court to resolve the Writ Petition as soon as possible, preferably within three months of receipt of the order.

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