Case BriefsHigh Courts

Telangana High Court: The Division Bench of A. Rajasheker Reddy and T. Vinod Kumar, JJ., dismissed a petition challenging the sale notice issued by the respondent Bank pursuant to proceedings under the SARFAESI Act.

In the present matter, respondent 2 — Company had borrowed a term loan from respondent 1 – Bank.

Petitioners are the guarantors. Respondent defaulted in payment of loan instalments and hence the loan account was declared as NPA due to which the recovery proceedings initiated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. (SARFAESI Act).

Demand notice was issued to the petitioners and 2nd respondent under Section 13(2) of the SARFAESI Act and thereafter since the amount still remained unpaid, possession notice was issued under Section 13(4) of the SARFAESI Act.

Petitioners submitted that the bank did not follow the procedure prescribed under sub-rules 1 and 2 of Rule 8 of the Security Interest (Enforcement) Rules, 2002.

Further, during the course of recovery proceedings, respondent 1 – Bank issued a sale notice dated under Rule 8(6) of the Rules of 2002. The said notice has been challenged by the petitioners by the present petition.

Petitioner’s main grievance was that they were not served with sale notice under Rule 8(6) of the Rules of 2002, and the period of 30 days under the said provision was not given to them to exercise the right of redemption under Section 13(8) of the SARFAESI Act, and there was also no separate gap of 30 days between the sale notice, and the publication of sale notice, as envisaged under Rule 9(1) of the Rules of 2002, hence the sale notice was illegal and arbitrary to the law laid down in the Supreme Court decision of Mathew Varghese v. M. Amritha, (2014) 5 SCC 610.

Analysis, Law and Decision

Bench on perusal of Rule 8(6) of Security Interest (Enforcement) Rules, 2002 noted that:

the authorized officer of the Bank shall serve on the borrower a notice of 30 days for sale of immovable property and that if the sale of such secured assets is by way of public auction, the Bank / secured creditor, shall cause publication of such notice in two leading newspapers, one in vernacular, language having sufficient circulation in the locality by setting the out the terms of sale, mentioned in the said provision; and under sub-rule (1) of Rule 9, such sale of immovable of property under these Rules shall not take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6), or notice of sale has been served to the borrower.

Under Section 13(8) of SARFAESI Act, If the amounts due by secured creditor is paid by the borrower before the date of publication of notice for public auction, the secured asset shall be sold or transferred by the modes mentioned in the said provision.

Hence, petitioners are entitled to a 30 day notice period enabling them to clear the loan and redeem the property as envisaged under Section 13(8) of the SARFAESI Act and if they fail to repay the amount within a stipulated period, the secured creditor is entitled to issue publication of sale notice under Rule 9(1), and that on publication of such notice, the right of the borrower to redeem the property stands extinguished.

Adding to the above, Court also observed that since the respondent – Bank sent notices to the correct addresses of the petitioners as mentioned in the loan agreement, it has to be presumed to have been served, unless the petitioners prove that they were not really served and that they were not responsible for such non-service.

In view of the facts and circumstances, and the law laid down by the Supreme Court in T.N. Parameswaran Unni v. G. Kannan, (2017) 5 SCC 737, Court held that there was clear compliance with Rule 8(6) of the Rules of 2002.

Petitioners camouflaged the grievance by merely stating that they were not served with sale notice under Rule 8(6) of the Rules of 2002 and that they were not provided with 30 days time fixed under the said provision to clear the loan and to redeem the property, to give an impression to this Court, the action of the respondent –bank being in violation of principles of natural justice.

Thus there was clear suppression of material facts with regard to filing of securitization applications.

In Court’s opinion, Bank did follow the procedure as envisaged under provisions of SARFAESI Act and the Rules of 2002 and further, the petitioners suppressed the material facts with regard to filing of securitization applications before the Debts Recovery Tribunal and the facts and circumstances manifestly disclosed that they were resorting to dilatory and subterfuge tactics, to see that the recovery proceedings initiated by the Bank, were defeated in view of the Supreme Court decision in KD. Sharma v. SAIL, (2008) 12 SCC 481.

Hence, in view of the above discussion, the petition was dismissed.[K V V Prasad Rao Gupta v. SBI, 2021 SCC OnLine TS 328, decided on 12-02-2021]

Case BriefsHigh Courts

Kerala High Court: A. Muhamed Mustaque, J. disposed of the original petition, allowing the application for setting aside ex parte order and condonation or delay application.

The petitioner is under the liability pursuant to an Award that came out of the O.P. (MV) No. 1093 of 2017 on the file of the Motor Accidents Claims Tribunal. There was a delay of 9 years and the recovery proceedings were initiated. Hence, the petitioner filed applications to set aside the ex parte order and an application to condone the delay.

The petitioner mentioned another Award that came out from the proceedings of the same accident carried in appeal before Division Bench of this Court in M.A.C.A. No. 1413 of 2012. The Division Bench, in the mentioned case, fastened the liability on the insurer. Hence, the petitioner contended that while following the principle of parity, his ex parte order should also be set aside. Though the respondent contended that the Judgment mentioned by the petitioner was an outcome of a separate claim petition and not out of common Award.

After hearing the counsel for the petitioner, Jacob Sebastian, and the counsel for the respondent, S. Gopinathan (Government Pleader), the Court held that the Tribunal will consider both the applications within two months. The Court also directed to postpone the recovery proceedings against the petitioner until then. [Madhusoodhanan v. National Insurance Co. Ltd., 2020 SCC OnLine Ker 60, decided on 09-01-2020]

Case BriefsHigh Courts

Kerala High Court: Shaji P. Chaly, J. dismissed a petition challenging initiation of recovery proceedings against the share of the defaulter in a co-owned property.

Petitioner and her husband were in joint possession of a property in Unnikkulam village. Petitioner’s husband had a payment of around Rs 44 lakhs due to the 4th respondent – Bharat Sanchar Nigam Ltd. (BSNL). The telecom company initiated revenue recovery proceedings against him. Case of the petitioner was that BSNL was proceeding against their co-owned property; but since there was no liability upon the petitioner, therefore, attachment of the property held by the petitioner in co-ownership with her husband could not be made by BSNL.

BSNL filed a counter affidavit stating that it was proceeding against the share of the property of the petitioner’s husband and that it had no intention to proceed against the share of property held by petitioner.

The Court opined that as per Section 47 of the Transfer of Property Act, 1882 proceedings can be initiated against the share of the property of defaulter since the respective sharers are entitled to transfer their shares without specifying that the transfer is to take effect on any particular share of the transferer. Therefore the contention advanced by the petitioner that a co-ownership property cannot be sold without effecting partition could not be sustained under law.

In view of the above, the petition was disposed of directing the respondents not to proceed against the share of property held by the petitioner in co-ownership with her husband if she has no liability against the proceedings initiated by 4th respondent. The property in co-ownership held by the husband was allowed to be proceeded with by the respondents.[Shakeela C.K. v. Tahsildar, Thamarassery Taluk Office, 2019 SCC OnLine Ker 1145, decided on 25-03-2019]

Case BriefsHigh Courts

Delhi High Court: A Single Judge Bench comprising of Vinod Goel, J. dismissed a petition against the order of District and Sessions Judge, Rohin Courts whereby he has dismissed petitioner’s application under Order 7 Rule 11 CPC.

The petitioner was the defendant in a suit for recovery filed by the respondent. The respondent had transferred Rs 5,00,000 in the account of petitioner on 16-3-2015. The petitioner filed an application under Order 7 Rule 11 for rejection of plaint on the ground that the suit being filed on 16-03-2018 was beyond the period limitation of 3 years prescribed under Article 19 of the Schedule to Limitation Act, 1963 and thus barred in law.

The High Court held the petition to be without merit. It referred to Section 12(1) of the Act which makes amply clear that in computing period of limitation for any suit/appeal/application, the date from which such period is to reckoned shall be excluded. In the present case, the amount was transferred on 16-03-2015 which day was to be excluded while computing the period of limitation. After so excluding, the suit was within 3 years and hence was well within time. Therefore, the petition was dismissed. [Brijesh Yadav v. Bijender Kumar Kaushik, 2018 SCC OnLine Del 13225, Order dated 19-12-2018]

Case BriefsHigh Courts

Kerala High Court: A Single Judge Bench comprising of Dama Seshadri Naidu, J. while hearing an original petition in a debt recovery matter ruled that where a Tribunal exercises its jurisdiction over more than one State, then the High Court in the State where the first court is located has supervisory jurisdiction over the said Tribunal.

In a recovery proceeding filed by the respondent bank, petitioner purchased a secured asset brought for sale by the bank. Defaulting borrowers filed an application before Debts Recovery Tribunal (DRT), Ernakulam which set aside the sale in favour of petitioner. Aggrieved thereby, bank filed an appeal before Debts Recovery Appellate Tribunal (DRAT), Chennai wherein the petitioner pleaded that he had parted with his money and purchased the property on bank officials’ assurance. But since the property was now entangled in legal proceedings, he did not wish to contest the proceedings and wanted his money back with interest and damages. In this backdrop, the present petition was filed seeking a direction to DRAT, Chennai for early disposal of the appeal.

The respondent bank raised an objection as to maintainability of the petition in view of territorial jurisdiction. Thus, the question for Court’s consideration was as to whether it could assume supervisory jurisdiction over DRAT, Chennai.

Relying on the dictum of Apex Court in Ambica Industries v. CCE, (2007) 6 SCC 769 it was held that when the High Court exercises its jurisdiction over a Tribunal extending its jurisdiction over more than one State, then the High Court in the State where the first court is located would be the proper forum. In the instant case, the primary forum was DRT, Ernakulam and as such the High Court could eminently exercise its supervisory jurisdiction over DRAT, Chennai.

The petition was allowed directing DRAT to dispose of the appeal within three months.[Thomas Chacko v. Bank of India,2018 SCC OnLine Ker 4915, decided on 01-11-2018]