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Judgment
Ashok Menon, Chairperson
This is an appeal filed by the 1st Respondent in Securitisation Application (S.A.) No. 30 of 2020 impugning the order dated 19/07/2021 of the learned Presiding Officer, DRT-1 Mumbai.
The S.A. was filed by the Applicant (the 1st Respondent herein) under section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act for short).
The Applicant in the S.A. and his former husband, of the 2nd Respondent herein, and they had availed a home loan of ₹50 lakhs on 30/11/2006, and purchased a flat bearing number 1303, in RNA Royale Park, Building No.1, A wing, 13th floor Dahanukarwadi, Kandivali (West), Mumbai (hereinafter referred to as ‘the secured asset’). A mortgage was created with the Appellant with regard to the secured asset. The secured debtors defaulted payment and the debt was classified as a Non-Performing Asset (‘NPA’ for short) on 31/12/2008. A loan recall notice was issued on 31/01/2008 calling upon the debtors to pay a sum of ₹5,050,622/-within 7 days from the date of the notice. The debtors failed to pay the amount and resultantly, a demand notice was issued to them under section 13 (2) of the SARFAESI Act on 18/02/2009 calling upon them to pay the aforementioned amount together with future interest at the rate of 18% per annum with effect from 01/01/2009 within a period of 60 days. The demand notice was also published in two newspapers on 28/12/2009. The attempt made by the Bank to take possession of the secured asset was objected to by the builder who also sent a notice on 20/10/2020 denying that there was any mortgage pertaining to the property. Thereafter, the builder also issued another notice on 20/03/2011 to the Appellant informing them that the agreement allotting the flat to the creditors has been canceled. A reply was sent through counsel to the builder on 11/05/2011 asserting the Bank’s right over the secured asset as a secured creditor, and calling upon him to not create any obstruction to the proceedings taken under the provisions of the SARFAESI Act. The Appellant preferred a civil suit No. 150 of 2012 before the Hon’ble High Court of Bombay seeking a declaration with respect to the secured asset being a mortgaged property and that any document created by the builder with regard to the secured asset with any third party is not binding on the Bank. The Hon’ble High Court ordered a status quo to be maintained. The suit was subsequently transferred to the City Civil Court and resulted in dismissal on 17/03/2017. The Appellant preferred an appeal before the Hon’ble High Court. In the meanwhile, the Appellant approached the Chief Metropolitan Magistrate for an order under section 14 of the SARFAESI Act and the application was allowed on 28/08/2019. A commission was appointed to take possession of the secured asset. Physical possession of the secured asset was taken on 17/02/2020.
In SA No. 30 of 2020, the Appellant had raised a preliminary objection regarding the maintainability of the application. The Learned Presiding Officer granted relief to the 1st Respondent holding that he is entitled to get the interest charged at the rate of 18% per annum for the period 01/07/2010 to 17/02/2020 by the Bank deducted as there was an unreasonable delay in taking possession of the secured asset and putting it for sale on the part of the Bank, despite the borrower consenting to the sale and appropriation of the amount due from him. The Ld. P.O., purportedly exercising jurisdiction under section 17 (7) SARFAESI Act read with section 19 (25) of the RDB Act, granted the aforesaid relief. The Appellant is aggrieved and hence, this appeal.
It is contended that the Learned Presiding Officer has erred in entertaining the Securitisation Application without passing any order on the application for condonation of delay. The Learned Presiding Officer also failed to notice that the Appellant is a Housing Finance Company and not a ‘financial institution’ coming within the purview of the RDB Act. The Appellant is, therefore, precluded from filing an application under the provisions of the RDB Act for any relief before the DRT. That is the reason why the Appellant was constrained to approach the Hon’ble High Court for relief. It is also pertinent to note that the entire dues have not been paid by the 1st Respondent. The Ld. Presiding Officer also did not consider the objection with respect to the maintainability of the Securitisation Application. The Ld. Presiding Officer also did not consider the fact that the Applicant had not challenged any of the specific Sarfaesi measures taken by the Appellant under section 13(4) of the SARFAESI Act, which alone could have been challenged under the provisions of S.17 of the Act. The claim is also barred by limitation and therefore, for that reason also, this S.A. is not maintainable. The Applicant had not challenged the taking over of possession of the secured asset by the Appellant. Interest was levied on the loan in accordance with the agreement executed between the Appellant and the debtors. It is also contended that The Ld. Presiding Officer has also gone wrong in resorting to the provisions under section 19 (25) of the RDB Act since the same could not have been invoked while passing in order under section 17 of the SARFAESI Act. Hence it is prayed by the Appellant that the appeal may be allowed and SA No. 30 of 2020 be dismissed after setting aside the impugned order dated 19/07/2021.
The averments in Securitisation Application No. 30 of 2020, in brief, are thus:
The Applicant states that he is a defendant in SA No. 634 of 2018 filed by the 1st Respondent HDFC Ltd before the Chief Metropolitan Magistrate, Esplanade Mumbai seeking possession of the secured asset belonging to the Applicant under section 14 of the SARFAESI Act. The secured asset was purchased by the Applicant in the joint name of himself and his wife who is the 2nd Respondent in S.A.No. 30 of 2020 before the DRT. The Applicant in the S.A. and his wife were embroiled in matrimonial disputes and litigations. There were also civil suits pending between them concerning the secured asset. HDFC filed the suit before the High Court of Bombay as Suit No. 152/2015 for declaration and recovery of outstanding dues on the loan that was disbursed by HDFC for the purchase of the secured asset. The CMM passed an order on 28/10/2019 directing an Advocate Commissioner to take possession. The 2nd defendant obtained an order of stay from the DRT-1, Mumbai, in SA 135/2019 without making the Applicant a party, relying on the decision of the Bombay High Court that an Advocate Commissioner cannot be appointed for taking possession of the secured asset since he is not an officer subordinate to the CMM. Thereafter, vide order dated 02/01/2020, the CMM appointed the Sub Registrar of the CMM Court, Borivali, and the physical possession of the secured asset was taken on 17/02/2020. SA 1 30/05/2019 is still pending on the files of DRT 1 Mumbai. The Applicant in the S.A. states that he had sent an email to HDFC on 30/06/2010 informing them that the secured asset may be taken possession of and the amount realised from it. HDFC however did not take any steps for more than a decade letting the interest accrue and accumulate. The Applicant in the S.A states that he is not liable to pay any capital interest on the loan after it was classified as NPA. In view of the fact that the Applicant had expressed his desire to pay off, the entire debt vide the e-mail dated 30/06/2010, is not liable to pay any interest thereafter because the delay in proceeding against the secured asset was caused solely by the HDFC for which, the Applicant is not responsible. It is now understood by the Applicant that the outstanding debt has gone up to ₹1.71 crores. The prayers in the Securitisation Application filed by the Applicant are thus:
“a) This Hon’ble Court be pleased to call upon an order and direct the defendant No. 1 to furnish to the Hon’ble Court certified audited copy of the Ledger statement and statement of accounts and balance sheet in view of loan account No. 561975917 from the date of disposal to the date of NPA and thereafter.
b) This Hon’ble Court be pleased to direct the defendant No. 1 to furnish the details of account 1st to end the NPA and what is actual interest amount due and payable after the date of Applicant’s letter of 30/06/2010 which would not payable by the Applicant.
c) This Hon’ble Court be please to declare and direct the defendant No. 1 that they are not entitled to recover any interest from the date of letter at exhibit… Being letter dated June 2010.
d) The Hon’ble Court be please to order and direct the defendant to publish all auction to furnish all details of the loan account including loan application form, guarantee, security indemnities undertaking the interest statement that have been entered in view of this account as along with the statement of accounts duly certified by the chartered accountant of the bank on record as on date.
e) This Hon’ble Court be please to order and direct the defendant No. 1 further stay its heads regarding auction sale of the suit property being flat number A 1303, RNA Royale Park CHS Ltd, MG road, Kandiwali West Mumbai 400067 near Hindustan Naka, pursuant to the order of the SARFAESI save and except under the order and direction of this Honourable Court.
f) This Hon’ble Court be please to appoint the court receiver High Court of Bombay or any other office of desirable court including the office of the Commissioner of accounts High Court of Bombay to hold supervise and administer the auction proceedings in view of flat number A 1303, RNA Royale Park CHS Ltd., MG road, Kandiwali West, Mumbai 40067 near Hindustan Naka, in accordance with law.
g) This Hon’ble Court be please to allow and permit the Applicant and or his nominees to get bids or to bids in the auction proceedings to in order that the best price be allowed in the bed and get the best deal for the Applicant
h) Further and other orders cost etc., for which act of kindness the Applicant respectively prays.” (sic)
The Appellant had opposed the Securitisation Application on various grounds. It is stated that the application is barred by limitation. It is also contended that the Applicant has not challenged any Sarfaesi measures under section 13 (4) of the SARFAESI Act. The Applicant has suppressed several facts. None of the prayers in the Securitisation Application could be allowed by the DRT under the provisions of section 17 of the SARFAESI Act. HDFC had issued a notice dated 06/10/2010 informing the Applicant and his wife about the intended visit of the officers to take possession of the secured asset. When the Authorised Officer of the HDFC visited the mortgaged property on 15/10/2010 in order to take possession, it was obstructed by the builder, claiming that he has outstanding dues to be paid by the borrowers. It is under the circumstances that the Appellant had to approach the court against the builder to remove the obstruction. Thereafter application was made before the Chief Metropolitan Magistrate for taking physical possession of the secured asset. Taking physical possession was further delayed for the reason that the learned CMM had in the 1st instance appointed the advocate Commissioner to take possession, and the same was held to be not proper by the Hon’ble High Court of Bombay. Under the circumstances, the Appellant had to make another application for appointment of the registrar of the court to take possession and that was ordered on 02/01/2020. The Applicant has not challenged any of the Sarfaesi measures in the Securitisation Application filed by him. The auction sale of the secured asset was scheduled to be held on 30/09/2020 the SA was filed on 17/03/2020. The Applicant has not challenged the measures pertaining to the taking over of possession or the measures pertaining to the sale of the property. The Applicant is liable to pay interest in accordance with the terms and conditions contained in the loan agreement which he has signed. On 31/03/2020 there was an overdue of ₹11,34,922/-payable to the society where the secured asset is situated. No objection whatsoever was raised regarding the inadequacy of the reserve price. The Applicant has also not made any attempt to repay the entire loan under the provisions of section 13 (8) of the SARFAESI Act. The builder had created a third-party interest with regard to the secured asset which also needed to be challenged before a civil court. That apart, the 2nd Respondent had also filed a civil suit against the Applicant and others to cause hindrance to the proceedings initiated by the Appellant. The allegation that the Appellant was not vigilant and prompt in proceeding against the secured asset and that there was a deliberate delay on the part of the HDFC as alleged by the Applicant in the S A is also denied by the Appellant.
The learned Presiding Officer observed that the possession of the property was taken only on 17/01/2020 and the Securitisation Application was filed on 17/03/2020. Therefore, the preliminary objection has been overruled by the impugned order. The Learned Presiding Officer has found fault with the Appellant for having delayed the entire Sarfaesi measures despite having gotten the green signal from the applicant to proceed. It is observed that the NPA was declared on 31/12/2008 and the demand notice was issued only on 18/02/2009 and the publication in the newspapers was made only on 20/12/2009. The delay has not been explained properly it is also observed that even though the Applicant had, vide e-mail dated 30/06/2010 agreed to surrender the property for being proceeding against, the Appellant had delayed the measures without any proper explanation, and let the interest accumulate. The Appellant was found at fault for delaying the process for about 10 years. Ultimately, the Learned Presiding Officer allowed the Securitisation Application by holding thus:
“17) in view of the above discussion, in exercise of power conferred under section 17 (7) of the SARFAESI Act 2002 read with section 19 (25) of the DRT Act, 1993 and in the interest of justice, the Respondent No. 1 is hereby directed to deduct the interest (which is charged as 18% per annum) for the period 01/07/2010 to 17/02/2020 as the delay in taking possession was due to error of Respondent No. 1 to approach wrong forums thus, the Applicant would not saddled for the said delay. The Respondent No. 1 is hereby directed to deduct the interest as directed herein above from the total liability and then calculate their dues including the genuine expenses incurred by them and adjust the amount received from auction for their reduce, in case any amount remains thereafter, the same may be refunded to the mortgagor.” (sic)
The point that arises for consideration in this Appeal falls within a very narrow compass. Did the learned Presiding Officer exceed jurisdiction in granting the above relief in an application u/s 17 of the SARFAESI Act?
Heard the learned counsel appearing for the Appellant Shri. Rishabh Shah and Shri. Shreesh Oak and 1st Respondent who appeared in person. Although the 2nd Respondent also appeared in person, no reply is filed and she was also not present at the time of arguments. Records perused.
Jurisdiction of the Debts Recovery Tribunal to decide all matters relating to Section 13 u/s 17 of the SARFAESI Act, is exclusive. The purpose of the creation of a special statute like the SARFAESI Act was to facilitate the creation of special machinery for the speedy recovery of debts due to banks and financial institutions which had gained alarming proportions and which still are alarmingly high. The Hon’ble Supreme Court had in Nahar Industrial Enterprises Ltd. Vs. Hong Kong & Shanghai Banking Corporation, 2009 (8) SCC 646 delineated the distinction between the Civil Courts and the Tribunals and goes on to hold that the DRT cannot be treated as a Civil Court as it is constituted with a specific purpose and limited jurisdiction. The DRT, therefore, cannot pass a decree nor can any declaratory relief be sought from it. The DRT itself has jurisdiction under two statutes. The adjudicatory jurisdiction comes within the purview of the Recovery of Debts & Bankruptcy Act, 1993 (‘RDB Act’ for short). While the enforcement of security interest where there are secured assets comes within the purview of the SARFAESI Act, 2002. A financial institution can resort to remedies under the RDB Act provided it is a financial institution included within the definition of such an institution u/s 2 (h) of the RDB Act. In the instant case, the Appellant is not a financial institution coming under the definition of Section 2 (h) of the RDB Act and hence is not entitled to resort to the remedies available under the RDB Act. But since it is a financial institution coming between the purview of 2 (1) (m) of the SARFAESI Act, the HDFC is at liberty to resort to the Sarfaesi measures available under u/s 13 of the SARFAESI Act. Determination of the question of whether the 1st Respondent is entitled to get a waiver of interest for 10 years because of default on the part of the HDFC for having sat over the further Sarfaesi measures under sub-section 4 of section 13 intended to be taken, is something to be determined not under section 17 of SARFAESI Act but under the provisions of the RDB Act or any other forum where the adjudication of such a dispute is possible. The scope of section 17 of the SARFAESI Act is very limited. The relevant portion of section 17 (1) reads thus:
“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 under this Chapter, 2[may make an application along with such fee, as may be prescribed,] to the Debts Recovery Tribunal having jurisdiction in the matter within forty five days from the date on which such measure had been taken. .... ....”
A plain reading of the aforesaid section would indicate that the DRT has jurisdiction only to determine the validity or propriety of the measures referred to in sub-section 4 of Section 13 taken by the secured creditor. The question of whether the secured creditor had delayed the security measures available under sub-section (4) of section 13 and thereby let the interest due on the debt accumulate to the detriment of the debtor is not something that can be determined by the DRT exercising jurisdiction under the SARFAESI Act. There is no outer time limit fixed for proceeding with the Sarfaesi measures except where it is specified. Section 13 (2) provides for 60 days time for the debtor to pay the amount demanded. In case the debtors fail in paying the amount within the stipulated time, further measures under sub-section (4) to section 13 cannot be initiated until the period of 60 days expires. But there is no outer limit to it. Likewise, an auction sale can be conducted only after 30 days time is granted after serving of sale notice, but does not hold the notice invalid in case more time is granted. D.R.T. is a creation of s Statute and its functioning is determined by the provisions under the Statute.
In the instant case, as it appears from the materials produced, the delay in proceeding with the property by the HDFC was not deliberate or with the purpose of amassing interest on the amount due illegally. The builder had obstructed taking of the delivery of the secured asset stating that amounts were due to him. A civil suit had to be filed against the builder to inject him from doing so. The Sarfaesi measures were further thwarted by the 2nd Respondent who is a co-borrower, by approaching the High Court against the secured creditor to prevent them from proceeding further. All these objections and obstacles countenanced by the secured creditor needed to be removed. In the process, some delay was caused. This cannot be attributed to the secured creditor alone.
In view of the above discussion, I find no substance in the objections raised by the 1st Respondent. A relief that has not been sought has been granted by the Learned Presiding Officer in the impugned order, which definitely was not within the jurisdiction of the powers conferred under Section 17 of the SARFAESI Act. The learned Presiding Officer has resorted to provisions under sub-section (25) to Section 19 of the RDB Act to grant a relief that was not sought in the application. I have already pointed out that the Appellant is a financial institution that comes only within the purviews of the SARFAESI Act and not under the RDB Act. Sub-section (25) grants power to the Tribunal to make such orders and give such directions as may be necessary or expedient to give effect to its order or to prevent abuse of its process or to secure the ends of justice. The Tribunal can pass only such orders which could be legitimately passed under the provisions of Section 17. The impugned order is not something which could have been legitimately passed. Hence, to give effect to such an order which at its inception is defective, resorting to provisions under sub-section (25) of Section 19 of the RDB Act may not be proper.
The impugned order is, therefore, without jurisdiction and requires to be reversed.
The Appeal is allowed and S.A. No. 30 of 2020 on the files of D.R.T.-I, Mumbai, is dismissed. The parties are directed to bear their costs.
All Miscellaneous Applications, if any, are dismissed as infructuous.