Durga Agencies vs State bank Of Patiala

Ranjit Singh, J

The S.A. filed by the appellant has been dismissed by DRT-I, Chandigarh on the ground that the same was barred by limitation, Aggrieved against this order, the appellant has filed the present appeal.

The case of the appellant as would reveal from the pleadings, is that he had availed credit facilities from the respondent bank, but due to certain unavoidable circumstances, he could not remain regular in discharging his liability. The bank took action under the SARFAESI Act and issued notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for Short the SARFAESI Act). On 18.5.2006 demanding a sum of Rs. 23,23,693/-. The appellant claims to have visited the bank thereafter and shared his constraints and difficulties with the bank. As per the appellant, he paid a sum of Rs. 44,000/- between August 2006 to January 2007 in Term Loan (Housing) and another sum of Rs. 6,70,427/- from May 2006 to October 2006 in Cash Credit (Hypothecation). In this manner, the appellant states to have deposited a sum of Rs. 7,14,427/- after the issuance of the demand notice under section 13(2) of the SARFAESI Act. Despite this, the bank took symbolic possession of the property in question on 19.7.2006 by affixing the possession notice. As per the appellant, the possession notice was neither served on him nor published in the newspaper in terms of rule 8 of the Security Interest (Enforcement) Rules (for short the Rules) and he came to know about it only on 23.8.2006 when a notice under rule 8(6) of the Rules was published.

Possession notice had been published on 24.8.2006. The property ultimately was sold all 26.2.2007 for which auction notice was published in the newspaper on 16.1.2007.

The bank had appeared in response to the notice issued in the S.A. filed by the appellant and raised preliminary objection that the said application was barred by limitation. The Tribunal below, after considering the rival contentions, has held that the appellant did not challenge the sale notice dated 16.1.2007 and instead has challenged the sale conducted on 26.2.2007. The Tribunal has thus held that cause of action arose to the appellant on 16.1.2007 when the sale notice was published and the appellant came to know about the measure taken by the respondent bank. The Tribunal held that the appellant ought to have challenged the sale notice dated 16.1.2007 but they waited till the auction was held on 26.2.2007. On this basis, it is viewed that the S.A was not filed within 45 days of publication of sale notice and thus was barred by limitation.

I have heard the counsel for the parties. The learned counsel for the appellant would submit that the cause of action being a continuous one till the sale took place, the view taken by the Tribunal below that the appellant ought to have challenged the sale notice to oust him from the challenge raised in S.A. is unfair and is otherwise can not be legally sustained.

On the other hand, the counsel for the respondent bank and the auction purchaser has referred to the provisions of section 13(4) of the SARFAESI Act to urge that the sale notice gives a cause of action to a borrower to raise any challenge and in this regard have referred to the provisions of section 13(4)(a) of the SARFAESI Act. The counsel appearing for the auction purchaser would urge that notice issued is a cause for a person to challenge the same and not the sale as such and so limitation has to start from the date of notice.

The counsel for the appellant in response has also relied upon the judgment rendered by the Hon'ble Supreme Court in Authorised Officer, Indian Overseas Bank & Anr. vs. Ashok Saw Mill, (2009) 8 Supreme Court Cases 366, and another judgment in Indian Overseas Bank rep. by its Authorised Officer/Chief Manager, ARM Branch vs. G.S. Rajshekaran, (2008) 4 MLJ 1012. Submission is that the notice under section 13(4) of the Act would only be a part of cause of action and that so may be open to challenge. The notice ultimately leads to the sale which, of course, would give appellant yet another cause of action to challenge the same. Counsel contends that it is continuing cause which ultimately leads to the sale which was challenged, including the sale notice as such. On this basis, the counsel submits that the limitation ought to be counted from the date of sale and not from the date of sale notice.

To support his submission, the counsel would rely upon the observations made by the Hon'ble Supreme Court in Authorised Officer, Indian Overseas Bank & Anr. vs. Ashok Saw Mill (supra). While commenting on the jurisdiction DRT under section 17, it is held that it is not confined only to stage contemplated under section 13(4) of the Act but also extends to post section 13(4) situations or events. Accordingly, it is held that DRT can adjudicate upon or interfere with the action taken by the secured creditor after the stage contemplated under Section 13(4). The court has further observed.

In order to prevent misuse of the wide powers conferred on creditors under the 2002 Act and to prevent prejudice being caused to a borrower on account of an error on the part of the banks or financial institutions, certain checks and balance have been introduced in Section 127 of the 2002 Act which allow any person, including the borrower, aggrieved by any of the measures referred to in section 13(4) taken by the secured creditor, to make an application to the DRT having jurisdiction in the matter within 45 days from the date of such measures having taken for the reliefs indicated in section 17(3) of the said Act

As is observed that the consequences of the authority vested in the DRT under Sub Section (3) of Section 17 necessarily implies that the DRT is 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 Legislature by including Section 17(3) has gone to the extent of vesting DRT with authority to even set aside a transaction including sale and to restore possession to the borrower even though possession may have been made over to the transferee. The consequences, as noticed by the Hon'ble Supreme Court, of the authority vested in the DRT under section 17(3) of the Act necessarily implies that the DRT is entitled to question the action taken by the secured creditor and the transactions entered into by virtue of section 13(4) of the Act and past Section 13(4) as well.

On this basis, the counsel would contend that the subsequent action of sale would definitely be a part of that cause of action which was set in motion by notice issued under Section 13(4) of the Act. Thus the sale if effected or even possession if given to the transferee would form integral part of cause of action ignited by notice issued under Section 13(4) of the Act. For this view, I can draw support from the following observation made by Madras High Court in Indian Overseas Bank rep. by its Authorised Officer/Chief Manager, ARM Branch Vs G.S. Rajshekaran, (2008) 4 MLJ 1012.

In the present case, the first cause of action started when the possession was taken, vide notice dated 13.11.2007, followed by the subsequent cause of action taken place on 26.12.2007 when the auction-sale notice under Section 13(4) (a) of the SARFAESI Act was published by the secured creditor appellant-Bank. There being a continuous cause of action having lastly taken on 26.12.2008, and as the Writ Petition was filed on 8.1.2008, we are of the view that the Writ Petition was filed before this Court well within the period of limitation of 45 days.

Even otherwise, it will be highly unfair to curtail the right to challenge the subsequent bundle in the cause by saying that your challenge to one part of the cause in the bundle is barred by time. For good reasons, one may not challenge the notice and wait for some precipitate action before raising challenge one go. One of the grounds of challenge to the sale would be validity of notices under section 13(2) and Section 13(4) of the Act.

I am thus clear in my mind that the sale of the property would be part of bundle of cause which has commenced with notice and, continues to give cause to person aggrieved to challenge the notice as well as subsequent action of sale. If the sale is to be challenged, it is to be on the ground the procedure which was required to be followed before resorting to sale was or was not followed. If it is viewed that the sale notice is required to be separately challenged, it will lead to multiple litigation. In that event every notice issued under section 13(4) of the Act would be made subject matter of the challenge. The cause being continuous one, the bar of limitation would have to counted by taking into consideration the whole cause and not just one part of the bundle.

In fact it is come to notice of this Tribunal that the same Tribunal in another case has practically taken a different view on this aspect while deciding issue of limitation in S.A. No. 131/2010 decided on 15.5.2013 the Tribunal has observed that the Tribunal found that the S.A. application was well-within time as the dispute of violation of one-time settlement was going on between the parties till 29.9.2010 and thus limitation would commence w.e.f. this date. The part of the order where the Tribunal has held that this S.A. was barred by limitation on the ground that the sale notice was not challenged cannot be sustained and is set aside and it is held that the S.A. filed by the appellant was within the time from the date of sale.

The appeal is accordingly allowed in the above terms. In view of this position, the case will go back to the Tribunal for deciding the S.A. on merit.

At this stage the counsel for the appellant points out that a sum of Rs. 11 lacs was deposited by him in compliance of the requirement of pre-deposit before this Tribunal and he does not wish to withdraw the same Counsel has also pleaded that notice amount was Rs. 24 lacs out of which he has already paid about Rs. 18 lacs. This fact and any other plea raised has to be considered by the Tribunal below in accordance with law.

The counsel for the auction purchaser states that some direction may be issued to the Tribunal below to accord priority to this case since this S.A. is pending since 2007. The Tribunal may consider expediting the hearing and disposing of the S.A. as early as permissible.