Indiabulls Housing Finance Ltd vs Forging Pvt. Ltd. And Ors

P.K. Bhasin, J

By this order I shall be disposing of I.A. No. 765/2017 moved by the appellant for condonation of delay of 62 days in filing of this appeal against the order of the Tribunal below whereby the Securitisation Application (S.A.) filed by the respondents herein to protect the mortgaged land in question from being sold in auction by the appellant in exercise of its powers under the SARFAESI Act was allowed and the measures initiated by the appellant for sale of its secured asset were set at naught holding that the Appellant was not a secured creditor. The appellant a Financial Institution, had sometime during the period of 2008 onwards extended financial facilities of crores of rupees to respondent No. 1 M/s. Forging Pvt. Ltd. (hereinafter to be referred as 'the borrower Company') and its Group Companies. The re-payments of loans so granted were secured by way of equitable mortgage of immovable property in question. Other respondents had given personal guarantees also for re-payment. The borrowers however defaulters in re-payment of the outstanding dues of the appellant in different accounts which consequently came to be declared as Non-Performing Assets (NPAs). Thereafter a notice under Section 13(2) of SARFAESI Act came to be issued to the respondents in March, 2013. No payments were made by them to the appellant as demanded from them in that demand notice and instead they started legal battle to save the mortgaged property in question from being sold after its physical possession was taken over by the appellant. Simultaneously the respondents also made efforts to settle with the appellant and some settlement appeared to have been arrived at in principle and the appellant must have been satisfied about the good intentions of the respondents in persuading it to arrive at some settlement. During that phase the borrowers persuaded the appellant to grant them fresh loan of a huge amount of over 25 crores of rupees and the appellant sanctioned fresh loan of Rs. 25,80,99,593.00 in March, 2015. Again the respondents failed to repay the loan amount as per the terms of sanction and a fresh notice under Section 13(2) of SARFAESI Act was served upon the borrowers/guarantors/mortgagors. Still the respondents did not clear the outstanding dues of Rs. 28,37,58,344.00 along with interest at the contractual rate. That led to the initiation of measures for the sale of the mortgaged land at the instance of the appellant Company. The respondents approached DRT with a S.A. under Section 17(1) of SARFAESI Act challenging the said measure of the appellant. The appellant contested that S.A. but finally failed and the DRT came to the conclusion that there was no equitable mortgage of the land in question which was sought to be sold in exercise of the powers under Section 13(4) of SARFAESI Act by the appellant and since the mortgage being relied upon by the appellant required registration and having not got it registered recourse to SARFAESI Act was bad.

The only ground pleaded in the delay condonation application was that the appellant's previous Counsel had advised filing of review application before the DRT itself seeking review of its order dated 28.6.2017 instead of filing appeal. Accordingly review application was filed before the DRT as a bona fide decision upon legal advice and therefore the period spent in pursuing the remedy of review deserves to be excluded from the period of limitation prescribed for appeals to DRAT.

As far as the challenge to the order on review application is concerned the same is undisputedly within the period of limitation.

The delay condonation application has been opposed orally by the learned Counsel for the respondents. The principal ground of opposition being that this Tribunal has no power to entertain delay condonation application in view of the judgment dated 24.10.2017 of the Hon'ble Supreme Court in the case of International Asset Reconstruction Company of India Ltd. v. The Official Liquidator of Aldrich Pharmaceuticals & Ors., Civil Appeal No. 16962 of 2017, VII (2017) SLT 651 : IV (2017) BC 571 (SC).

The judgment of the Hon'ble Supreme Court cited by Ms. Pratiti Rungta, learned Counsel for the respondents, however, was given when a dispute arose as to whether the DRT can condone the delay in filing of an appeal under Section 30(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ('RDDBFI Act, 1993' in short) by an aggrieved person against some order passed by the Recovery Officer in the proceedings pending before him for the execution of a Recovery Certificate issued by the DRT in an Original Application (OA) filed by a secured creditor under Section 19 of RDDBFI Act, 1993. It was held by the Apex Court in that context that the DRT has no power to condone such a delay. That however is not the situation here. This appeal is under Section 18 of SARFAESI Act filed by the Financial Institution against the order passed by the DRT allowing the S.A. of the respondents filed under Section 17(1) of SARFAESI Act and quashing the move of the appellant to sell the property in question which according to its case had been mortgaged in its favour by way of deposit of title deeds. The DRT had come to the conclusion that this is not a case of equitable mortgage but of usufructuary mortgage which required compulsory registration and in the absence of registration the appellant could not claim itself to be a secured creditor in order to avail of the stringent remedies available to secured creditors for recovery of their monies from their defaulting borrowers under the SARFAESI Act. The grievance urged before the DRT by the appellant herein in its review application was that the Security Applicants themselves had not even raised a plea that the appellant was not a secured creditor since this is a case of usufructuary mortgage and not of equitable mortgage by way of deposit of title deeds and therefore the DRT on its own ought not to have entered into that aspect.

This appeal has been filed under Section 18(1) of SARFAESI Act whereunder it has been provided that an appeal against any order passed by the DRT can be filed within thirty days and while examining the question whether any delay in filing of an appeal under Section 18(1) of SARFAESI Act can be condoned by the Appellate Tribunal (DRAT) or not the Hon'ble Supreme Court in a recent judgment in the case of Baleshwar Dayal Jaiswal v. Bank of India and Ors., IV (2015) BC 182 (SC) : VI (2015) SLT 385 : (2016) 1 SCC 444 has held that the Appellate Tribunal can condone the delay in the filing of an appeal under Section 18(1) of SARFAESI Act. Thus, this judgment of the Apex Court answers the objection of Ms. Rungta that the DRAT has no power to condone the delay in the filing of the present appeal. Of course, it goes without saying that the delay will be condoned only upon sufficient cause being shown for the delay by the appellant approaching the DRAT.

Justification given by the appellant in this case for the delay in the filing of the appeal against the original order dated 28th June, 2017 passed by the learned DRT is that on the advice of the appellant's Advocate review petition was filed first before the DRT and that was a bona fide decision based on legal opinion and, therefore, the delay occurred in the filing of the appeal against the original order of the DRT. On this aspect half hearted submission was made by the learned Counsel for the respondents that this explanation is not worth acceptance. However, while submitting so the learned Counsel did not attribute any mala fides to the appellant's decision to avail of the remedy of review at first instance. If no mala fides are being attributed against the appellant by the respondents themselves and I also do not find any circumstances from which mala fides on the part of the appellant or any of its officers could be inferred in the delayed in filing of appeal in order to cause any financial benefit to the borrowers which in this type of cases is likely to be the result, the appellant does become entitled to get its appeal heard and disposed of on merits. That will also be in the larger public interest since this legal battle is primarily centering around crores of public money which according to the appellant is recoverable from the respondents. Accordingly, I.A. No. 765/2017 filed by the appellant for the condonation of delay in filing of this appeal is allowed and the delay in the filing if this appeal stands condoned.