State Bank Of Patiala vs Jasbir Kaur

P.K. Bhasin, J

The appellant Bank is aggrieved by the manner in which the Debts Recovery Tribunal-I, Delhi (DRT in short) has without following proper procedure disposed of Securitisation Application No. 111/2015 (S.A.) filed by respondent herein under Section 17(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act' in short) challenging the actions taken by the appellant Bank under Section 13(4) of SARFAESI Act to recover its money which it had advanced as a housing loan to the respondent. The S.A. was filed by the respondent in the year 2014 before DRT-III and when the same was taken up by the learned Presiding Officer after notice to the Bank on 21.2.2014 the following order was passed by DRT:

"Present: Ms. Alka Ahir along with Mr. J.S. Lamba, learned Counsel appears for applicant.

Mr. Z.A. Hashmi, learned Counsel appears for respondent Bank.

The learned Counsel for applicant submits that she has removed the objection of the Registry and this petition may be registered as S.A. Registry is hereby directed to register this S.A. after verifying this fact.

Today this matter is listed for interim order. Notice was issued and Mr. Z.A. Hashmi, learned Counsel appeared for respondent Bank submits that the property in question i.e. property No. WZ-36, Second Floor, measuring 100 sq. yds. situated at New Sahibpura, Tilak Nagar, New Delhi (hereinafter the property in question) has been put (sic) auction on 28.2.2014 as the outstanding amount is approximately Rs. 8.00 lacs.

On the other hand, the learned Counsel for applicant submits that the market value of the property is approximately Rs. 30.00 lacs and the dues of the Bank are Rs. 6.50 lacs.

The learned Counsel for the applicant submits that applicant is ready and willing to pay the dues of the Bank and to show his bona fide he has handed over a draft of Rs. 50,000/- to the respondent Bank and he will pay the entire dues within 6 months.

After hearing the learned Counsel for both the sides and perusing the record, I am of this view that let Bank may go ahead with the proposed sale/auction in respect of the property in question in accordance with law without taking the physical possession over the property in question but the sale shall be subject to the outcome of this S.A.

Matter be listed before learned Registrar on 18.6.2014 for completion of pleadings.

Sd/-

(Ashish Kalia)

Presiding Officer,

DRT-III, Delhi"

It appear that subsequently the S.A. came to be transferred to DRT-I and then on 23.11.2015 the following order came to be passed in the S.A.:

Present: Mr. Prashant Kumar, Counsel for applicant along with applicant in person.

Mr. Z.A. Hashmi, Counsel for respondent Bank.

Learned Counsel for the applicant submits that he is ready to settle the matter through the Lok Adalat. He further submits that applicant has brought a DD of Rs. 1.80 lacs. She is directed to handover the DD to Counsel for respondent Bank. List the case before the Lok Adalat on 12.12.2015. In the meantime, applicant is directed to give a viable proposal to the respondent Bank. In case the settlement is not arrived at before the Lok Adalat, last opportunity is granted to both the parties to file their respective evidence by affidavits and documents, if any, and case be listed before Registrar on 19.1.2016 and thereafter before this Tribunal for final hearing on 11.3.2016.

Sd/-

(Dr. Rekha G. Dhakar)

Presiding Officer, DRT-I, Delhi"

During the pendency of the S.A. the respondent filed one application (being IA No. 329/2016) and while deciding that miscellaneous application on 17.3.2016 the S.A. itself also came to be finally decided by the DRT and the order passed on that date, which is now under challenge in the present appeal, is re-produced below:

"IA No. 329/206

This IA has been filed by the applicant with the prayer to restrain the respondent Bank from taking possession of the secured asset as the applicant is ready to deposit the entire dues of the respondent Bank on or before 30.3.2016 with simple interest at the rate of 9% simple on reducing balance basis from the date of NPA.

Learned Counsel for the applicant submits that applicant has recently deposited a sum of Rs. 4.00 lacs in the month of March, 2016 itself. He further submits that the applicant has availed the housing loan of Rs. 7.50 lacs in the year 2005 which was to be repaid in 180 EMIs of Rs. 7,696. He further submits that the entire amount has to be repaid till 2019 and as such the total amount to be paid by the applicant in instalments comes to around Rs. 13.00 lacs. He further submits that during the pendency of present proceedings the applicant has already deposited Rs. 5.82 lacs with the Bank. Therefore, learned Counsel for the applicant submits that the applicant has already deposited Rs. 5.82 lacs with the Bank. Therefore, learned Counsel for the applicant submits that the applicant has already deposited the principal amount and only the interest component as well as certain charges levied by the Bank are left to be paid. He submits that the applicant is ready to deposit the balance amount on or before 31.3.2016 and prayed that this Tribunal may consider the grant of interest at the rate of 3% from the date of NPA. In support of his contentions learned Counsel for the applicant relied upon the judgment of Hon'ble Apex Court in the matter of State Bank of India v. Sarathi Textiles, II (2009) BC 696 (SC) : LAWS (SC) 2002-8-164 and the judgment of Hon'ble DRAT, Delhi in the matters of PSB v. Delhi Automobiles in Appeal No. 18/2013 dated 2.4.2014 and Virender Kumar Sharma & Anr. v. PSB in Appeal No. 22/2015 dated 18.9.2015.

Learned Counsel for the respondent Bank submits that the Bank has charged the rate of interest as agreed between the parties. He further submits that applicant has not raised any illegality in the measures taken by the Bank. He further submits that the measures initiated by the Bank are in accordance with law. He further submits that as per the respondent Bank, the total dues against the applicant are Rs. 4,92,2871.04 which includes advocate fee, receiver charges etc.

Heard the learned Counsel for the parties and perused the record. Admittedly, the applicant has deposited the principal amount during the pendency of present proceedings and now the only amount left to be paid is towards interest and other charges. I have also considered the judgments filed and relied upon by the applicant. Taking stock of all the facts and circumstances of the case, I am of the view that interest of justice would be met in case the applicant is directed to deposit the balance amount within 15 days from today with interest @10% p.a. simple on reducing balance basis from the date of NPA. The applicant is also directed to deposit a lump sum amount of Rs. 50,000/- towards other charges. The respondent Bank is directed to recalculate the amount and provide the fresh statement of account to the applicant within three days from the date of this order. In case the applicant fails to deposit the amount within 15 days from today, the respondent Bank is held entitled to recover the entire balance amount along with contractual rate of interest. In view of the above, now nothing survives in the present matter and same stands disposed off accordingly. File be consigned to records. Order Dasti.

Sd/-

(Rekha G. Dhakar)

Presiding Officer, DRT-I, Delhi"

Learned Counsel for the appellant Bank had submitted that perhaps the Bank would not have filed any appeal considering the small amount involved but the Bank is aggrieved since the manner in which S.A. has been disposed of merely on the basis of the statements made by the respondent on different dates showing her willingness to clear the Bank's dues without really doing that and without reaching a finding that there was some illegality/irregularity in any of the actions taken by the Bank under SAFRAESI Act the DRT has disposed of the S.A. and if this way of disposal of SAs is recognized by this Tribunal, it will set a wrong precedent and DRTs will continue to follow short cut routes to show disposal of SAs without discharging the responsibility of deciding as to whether Banks' actions under SARFAESI Act were suffering from the vice of illegality or irregularity. Counsel further submitted that in the present case the learned Presiding Officer did not come to the conclusion that either the Bank's actions under SARFAESI Act were illegal or irregular or were without any informality and had proceeded to decide the S.A. simply by observing that the principal amount stood paid, which fact the Bank had never admitted and accepting the submission made on behalf of the respondent that she was ready to discharge her liability towards the Bank and in that way the Bank stood restrained from taking the possession of the mortgaged property which right the Bank has got under the SARFAESI Act without the intervention of the DRT.

On the other hand, learned Counsel for the respondent/borrower simply submitted that since the respondent had herself offered to clear the Bank's dues the DRT was within its jurisdiction to grant the reliefs which have been given which have the effect of protecting the property of the respondent from being taken over by the Bank.

After reading the above quoted orders which were passed by DRT in the S.A. and considering the submissions of the Counsel for the parties and the relevant provisions of the SARFAESI Act I have come to the conclusion that the impugned order of DRT is liable to be set aside and the matter needs to be remanded back to the DRT for a fresh disposal in accordance with the law and observations to be made hereinafter by this Tribunal.

The appellant Bank had admittedly granted housing loan of Rs. 7,81,314/- to the respondent in 2004 and the same was payable in 180 instalments. The respondent allegedly paid some instalments but then defaulted in making regular payments of EMIs which resulted in classification of her account as a Non- Performing Asset in May 2011 since she had failed to regularise the account despite being called upon by the Bank to so. That was followed by issuance of a notice under Section 13(2) of the SARFAESI Act by the Bank in July, 2011 but despite that the respondent did not clear the outstanding dues within sixty days time granted to her. Thereafter the Bank sought to take possession of the property which the respondent had mortgaged with the Bank to secure repayment of the loan amount under Section 13(4) and to sell it through e-auction in January, 2004. At that stage the respondent filed an appeal under Section 17(1) of SARFAESI Act on 11.2.2014 in which, as noticed already, her dispossession from mortgaged property was stayed by DRT though the Bank was permitted to go ahead with the proposed sale of the mortgaged property.

The respondent had in her S.A. shown her willingness to clear the Bank's dues which she allegedly could not do earlier because of some family problems and financial crunch but in her rejoinder to the reply to the S.A. filed by the Bank she took a different stand and claimed that the Bank had cheated her and also that she had not even mortgaged her property.

Though the order dated 23.11.2015 passed by DRT, reproduced already, shows that parties were directed to adduce evidence by way of affidavits and the matter was to be taken up for final hearing but it is evident from the subsequent orders passed by the DRT that the respondent instead of adducing evidence moved one application before DRT could hear final arguments showing her willingness to discharge her liability and that application was being heard when the learned Presiding Officer suddenly abandoned the ongoing exercise of examining whether there was any infirmity in any of the actions taken by the Bank in exercise of its power under SARFAESI Act which had been impugned by the Security Applicant (respondent herein), and straightaway proceeded to pass the impugned order accepting her request of closing the matter without returning any finding in respect of any of her grounds of challenge against the Bank's actions under Section 13(4) of SARFAESI Act. The respondent also did not seek any opportunity to substantiate her defence that she had been defrauded by the Bank or that she had not created mortgage of her property which was being sought to be auctioned. Despite that the DRT showed indulgence in her favour by allowing her to retain the possession of the mortgaged property.

It was no doubt observed in the impugned order by the DRT that the principal amount had been paid by the respondent herein but without specifying as to how the principal amount stood paid by respondent when the Bank was disputing that claim.

Section 17 of SARFAESI Act, as it stood before its amendment in the year 2016, which was invoked by the respondent/borrower to save her property from being auctioned by the appellant Bank to recover its dues from her reads as under:

"17. Right to appeal

(1) 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, may make an application alongwith 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 :

Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.

Explanation: For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to made an application to the Debts Recovery Tribunal under this sub-section.

(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in Sub-section (4) of Section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and rules made thereunder.

(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in Sub-section (4) of Section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management of the business to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to in Sub-section (4) of Section 13 taken by the secured creditors as invalid and restore the possession of the secured assets to the borrower or restore the management of the business to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under Sub-section (4) of Section 13.

(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under Sub-section (4) of Section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under Sub-section (4) of Section 13 to recover his secured debt.

(5) Any application made under Sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application.

Provided that the Debts Recovery Tribunal may, from time-to-time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under Sub-section (1).

(6) If the applications is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in Sub-section (5), any part to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make on order for expeditious disposal of the pending application by the Debts Recovery Tribunal.

(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Tribunal Institutions Act, 1993 and the rules made thereunder."

According to this provision of law the DRT is required to return a finding after considering the pleadings and evidence adduced by the applicant and the secured creditor whether the action of the Bank in resorting to its remedies under Section 13(4) of SAEFAESI Act was in accordance with the law and Rules made under SARFAESI Act or not and depending upon the finding to be arrived at the DRT can grant appropriate reliefs to the security applicant or the security creditor or any other aggrieved person. However, in the present case the DRT did not complete the exercise of finding out any illegality in the Bank's actions and allowed the S.A. in favour or respondent/borrower/mortgagor without her establishing her case that she had not mortgaged her property or that she had been cheated by the Bank. The DRT did not also see whether the respondent had represented to the Bank on receipt of notice under Section 13(2) of SARFAESI Act that her account had been wrongly declared as NPA and if she had not lodged any protest at that stage whether she could resist the action of the Bank under Section 13(4) by filing appeal under Section 17(1).

I am also of the view that even if the DRT could go into the aspect whether the respondent had cleared the principal loan amount, as observed in the impugned order, without examining the evidence on record and some relief could be given to her in the matter of rate of interest, though Counsel for the Bank had submitted that the DRT could not any such relief in an appeal under Section 17(1), merely on the asking of the security applicant and because of her showing her willingness to clear Bank's dues, which willingness was in any event not unconditional as she had asked for reduction in rate interest from the contractual rate to 9% p.a. simple, that could not be done without examining the pleadings of the parties and evidence adduced by the parties which has also not been done by the DRT.

Remedy under Section 17(1) of SARFAESI Act is available to aggrieved persons, including borrowers, who allege violation of any provision of law/rules by the Banks or Financial Institutions and seek quashing of the actions taken under Section 13(4) and this section cannot be invoked only for getting the benefit of instalments and reduction in rate of interest. If simply on the basis of willingness shown by a defaulter borrower the Banks are to be restrained by DRTs from availing of their remedies under Sections 13(4) and 14 of SARFAESI Act the DRTs will be flooded with petitions only for reduction in contractual rate of interest and fixation of fresh instalments after declaration of the borrowers' account as NPAs which was not the object of the Parliament behind enactment of SARFAESI Act and the real object of providing to the Banks/Financial Institutions the remedy of speedier recovery of its dues from its defaulting borrowers by straightaway taking possession of its secured assets from the defaulting borrowers/guarantors without the intervention of DRTs will be defeated at the instance of DRTs. Of course if the DRTs find any illegality in the actions initiated by Banks under SARFAESI Act the DRTs can certainly come to the rescue of the aggrieved persons but not otherwise.

This appeal is accordingly allowed. The order dated 17.3.2016 passed by DRT-I is set aside and the matter is remanded back to DRT-I, Delhi for fresh disposal of the S.A. according to the observations made hereinabove. DRT will consider all the pleas which the parties may urge before it after remand and decide the S.A. in accordance with the law. Parties shall now appear before the DRT-I on 6.1.2017 at 2 p.m. to receive further directions from the learned Presiding Officer.

Since, the respondent has been enjoying the interim relief given by DRT when the S.A. was pending that relief will continue till DRT takes a fresh decision. However, if the appellant Bank makes a prayer for vacation/modification of the interim relief that prayer will also be considered and decided in accordance with law.