FEDERAL BANK vs Manoj on 26 March 2024

1. 1. The Appellant has filed the present Chamber Appeal with a prayer to quash and set aside the order dated 03/08/2023 passed by Ld. Registrar of this Tribunal.

2. 2. It is the case of the Appellant that the Appellant has filed an Original Application (Diary no.634 of 2023) under Section 13(10) read with Appendix VI of Rule 11(1) of the of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (hereafter will be referred as the "SARFAESI Act") before this Tribunal. It is stated by the Appellant that at the request of the Defendants, the Appellant had sanctioned various credit facilities to the Defendants. But, the Defendants have not remitted the dues of the bank and due to the faulty act of the Defendants, their accounts were classified as NPA as per norms of RBI. The Appellant initiated legal recovery against the Defendants under the Securitization Act. The Appellant had issued the 13(2) notice to the Defendants under the SARFAESI Act. Despite service of the said notice, no reply or representation had been made by the Defendants. On expiry of the statutory period, the Appellant had taken possession of all the 5 mortgaged properties. On 07/03/2019, 16/07/2019 and 12/02/2021, the Appellant had sold 4 mortgaged properties through public auction as per the rules and regulations of the Securitization Act

for Rs.1.11 crores and sale certificates were also issued to the successful purchasers. However, even after selling the mortgaged properties a huge amount of more than Rs.4.00 crores is still outstanding – to be paid by the Defendants to the Appellant. Therefore, the Appellant has filed an Original Application before this Tribunal under the SARFAESI Act.

1. 3. It appears from the impugned order passed by Ld. Registrar that the Appellant has not provided details of security interest of the bank over the property, the estimated value of security and in case the estimated value of security is not sufficient, then particulars of any other properties owned by Defendants along with their estimated value to satisfy the dates claimed by the Bank. According to Ld. Registrar such details are necessary to be disclosed in view of section 19(3A) of the RDB Act. Ld. Registrar has further observed that the Appellant Bank issued Demand Notice to the borrowers on 11/09/2017, but OA was received in this Tribunal on 08/4/2023. Therefore the Appellant waited for six years to file OA after issuance of demand notice. As such, the OA is *prima facie* barred by limitation.

2. 4. Ld. Counsel for the Appellant submitted that Ld. Registrar has only administrative powers and Ld. Registrar cannot decide legal issues. The Presiding Officer of DRT only possesses authority to decide legal issues involved in the

matter. He further submitted that the Original Application is well within limitation. Relying on the contents of Para 4 of the Original Application, Ld. Counsel for the Appellant submitted that the Defendants executed several documents in favour of the Appellant Bank in the year 2016 and 2017. The Defendants had mortgaged the properties in favour of the Appellant only on 04/11/2016 and 08/03/2017. Therefore the period of limitation of 12 years from the date of mortgage has not expired yet. He further submitted that the Bank has sold the mortgaged properties on 07/03/2019 and 12/02/2021 through public auction under SARFEASI Act. Therefore the present OA is within the limitation period. He further submitted that the Appellant has disclosed in the OA that one of the mortgaged properties could not be sold despite several efforts of the bank. The bank has filed the present OA under section 13(10) of the SARFEASI Act for recovery of its legitimate dues against the Defendants. He also submitted that RDB Act and SARFEASI Act are complimentary to each other. He further submitted that the Appellant Bank having filed the present OA under section 13(10) of the SARFEASI Act, section 19(3A) of RDB Act would not be applicable in the present case. The Appellant is not expected to provide information about the mortgaged property under Rule 19(3A) of RDB Act as the Appellant has filed the present OA as per Rule 11 (1)

read with Appendix VI of the SARFEASI Act. Therefore, Ld. Counsel for the Appellant urged to quash and set aside the impugned order passed by Ld. Registrar and to register the present OA.

1. 5. Considering submissions made by Ld. Counsel for the Appellant and documentary evidence placed before this Tribunal, it appears that the Appellant has sold four mortgaged properties through public auction on 07/03/2019, 16/07/2019 and 12/02/2021 under SARFEASI Act for Rs.1.11 crores and sale certificate were also issued to the successful purchasers. According to the Appellant, the property being Residential Duplex No.8, Avadh city RS No.92 in VUDA Draft TP scheme no.1 FP No. 30 Sayajipura Vadodara owned by Mrs.Manjulaben Manojbhai Upadhyay mentioned in the schedule of OA has not been sold. Therefore the Appellant has filed the present OA under section 13(10) read with Rule 11(1) and Appendix VI of the SARFEASI Act.

2. 6. In this context, a reference deserves to be made to the judgment of the Hon'ble High Court of Patna in the case of **The State Bank of India V/s Pumea Cold Storage & Ors., MANU/BH/0752/2013**, relied on by Ld. Counsel for the Appellant. It has been held therein as under :

*"14. There is nothing wrong about the Bank in approaching the Tribunal within the period of*

*limitation. No ulterior motive can be imputed against the Bank for approaching the Tribunal within the period of limitation as suggested by Mr. Arbind Kumar Jha. On the contrary, we believe that it is the endeavour of the petitioner to thwart every action of the Bank in realizing its outstanding dues. The petitioner has challenged every stage of action before this Court or before the Tribunal. The intention to delay the proceeding is writ large in the conduct of the petitioner.*

*15. We can view this matter the other way also. Sub- section (10) of Section 13 of the Act of 2002 does enable a secured creditor to realise remainder of its dues before the Debts Recovery Tribunal in case the sale proceeds of the secured assets are not sufficient to satisfy the debt. In the present case, the secured asset could not be sold at all. Hence, the entire debt remained outstanding even after having taken recourse to the Act of 2002. The Bank, therefore, had the remedy of recovery before the Tribunal as envisaged by Section 13(10) of the Act of 2002.*

1. 7. In the present case, the Appellant Bank has specifically come forward with a case that of the mortgaged properties has remained unsold and there is a huge amount of more than Rs.4.00 crores recoverable from the Defendants. It is true that in light of the aforesaid observations of the Hon'ble Patna High Court, Section 13(10) of SARFEASI Act enables a secured creditor to realize remainder of his dues by filing OA before this

Tribunal even after having taken recourse to the SARFEASI Act. But in para 14 of the aforesaid judgment, it is laid down that the Bank could have very well approached this Tribunal within the period of limitation. The Appellant Bank issued Demand Notice u/s 13(2) on 11/09/2017 and has thereafter not filed Original Application under RDB Act within the prescribed period of limitation for recovery of its outstanding dues. Now the Appellant has approached this Tribunal by way of Original Application u/s 13(10) of the SARFAESI Act in the year 2023 i.e. after about six years from the date of Demand Notice. Since the Appellant was pursuing its remedy under SARFEASI Act and has successfully sold some of the mortgaged properties after issuance of demand notice, this Tribunal is of the view that the Appellant can be said to have waived its right of recovery of outstanding dues under RDB Act. It failed to initiate action under RDB Act within the period of limitation. This Tribunal is therefore of the opinion that the present Original Application sought to be filed by the Appellant Bank u/s 13(10) of the SARFAESI Act is barred by limitation.

8. It is further required to be noted that the Registrar examines applications submitted to the DRT. These applications could be from banks, financial institutions, or other parties seeking debt recovery. Upon scrutiny, if the

application adheres to the prescribed rules and requirements, it is duly registered and assigned a serial number. In the present case, Ld. Counsel for the Applicant Bank failed to rectify the defects pointed out by Registry. As such, Ld. Registrar appears to have rightly exercised his powers under Rule 5(4) of the Debts Recovery Tribunal (Procedure) Rules, 1993 in declining registration of the Application.

1. 9. In view of the aforesaid discussion, the objection raised by Ld. Registrar of this Tribunal is sustained and impugned order passed by him on 03/08/2023 is held to be legal and valid. Consequently, the present Chamber Appeal is hereby dismissed with no order as to cost.

Pronounced in open Court on 26^th day of March, 2024.

(Laxman Madnani) Presiding Officer DRT-II, Ahmedabad