IN THE HIGH COURT OF DELHI AT NEW DELHI
W.P. (C) 7228/2005
Reserved on: September 29, 2011
Decision on: October 17, 2011
SOMNATH MANOCHA ..... Petitioner
Through: Mr. R. K. Saini with
Mr. Sitab Ali Chaudhary, Advocates.
versus
PUNJAB & SIND BANK & ORS ..... Respondents
Through: Mr. Khalid Abdullah, Advocate.
CORAM: JUSTICE S. MURALIDHAR
1. Whether Reporters of local papers may be
allowed to see the judgment? No
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported in Digest? Yes
JUDGMENT
17.10.2011
1. Aggrieved by a notice dated 20th November 2004 issued by Respondent No. 1 Punjab
& Sind Bank („Bank‟) under Section 13 (2) of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002 („SARFAESI Act‟)
and consequent possession notice under Section 13 (4) SARFAESI Act dated 13th April
2005 taking over possession of the immovable property bearing old No. 4A, New
Municipal No. 32/24, Pratap Nagar, Jagdish Colony, Rohtak (Haryana) [„the property
in question‟], the Petitioner, who is the owner of the property in question, has filed this
present petition.
2. The Petitioner stated that he had purchased the property in question by a registered
sale deed dated 16th April 1980. In 1981, the Bank extended loan and credit facilities to
one M/s. General Tyre House, a partnership firm in which the relatives of the Petitioner
were partners. The Petitioner was one of the three guarantors in respect of the said loan
and credit facilities, which was secured by an equitable mortgage upon the property in
W.P. (C) No. 7228 of 2005 Page 1 of 5
question in favour of the Bank.
3. On 10th December 1984 the Bank filed in this Court a suit for recovery of a sum of
Rs. 7,75,283.60 against M/s. General Tyre House, its partners and the three guarantors
including the Petitioner. The said Suit No. 935 of 1984 instituted under Order XXXVII
CPC is stated to be still pending. It is stated by the Petitioner that the principal borrower
has, in the said suit, filed a counter claim against the Bank.
4. On 18th December 2002 the SARFAESI Act came into force. The mortgage in the
present case falls within the definition of „financial asset‟ under Section 2 (l) (iii)
SARFAESI Act and the Bank falls within the definition of „secured creditor‟ under
Section 2 (zd) thereof. Under Section 13 (4) thereof, the secured creditor is entitled to
exercise its rights in respect of the mortgaged property by taking over possession
thereof, if the borrower fails to discharge the full liability within 60 days of a notice
being issued to him under Section 13 (2) SARFAESI Act. Section 36 SARFAESI Act
prohibits the secured creditor from taking any of the measures under Section 13 (4)
thereof unless a claim in respect of the financial assets is made within the period of
limitation prescribed under the Limitation Act, 1963 („LA‟).
5. On 20th November 2004 the Bank issued a notice to the principal borrower, its
partners and three guarantors including the Petitioner under Section 13 (2) SARFAESI
Act calling upon them to pay the entire outstanding liability amounting to Rs.
3,84,59,807/- together with interest with effect from 21st November 2004 as well as
costs in the sum of Rs. 35,615/-. The Petitioner replied to the said notice on 7th January
2005 referring to Section 36 SARFAESI Act and pointing out that the notice itself was
barred by limitation. It was stated that the limitation period in the event of recovery of
money secured by mortgage was 12 years from the date when the amount became due
under Article 62 of the Schedule to the LA. The amount became due on 11th and 12th
October 1982. The claim for money became time barred in the year October 1985, and
the claim based on mortgage, in the year 1994. The Bank, by a reply dated 26th
February 2005, reiterated its stand. On 13th April 2005 the Bank issued the possession
notice under Section 13 (4) SARFAESI Act read with Rule 9 of the Security Interest
(Enforcement) Rules, 2002. Thereafter, the present writ petition was filed.
W.P. (C) No. 7228 of 2005 Page 2 of 5
6. On 26th April 2005 this Court directed notice to issue in this petition after noting the
contention of learned counsel for the Petitioner that the action initiated by the Bank
under the SARFAESI Act was time barred. Further, it was directed that in the interim
the parties shall maintain status quo in respect of the property in question. Thereafter,
the interim order was made absolute on 15th December 2005 and Rule was issued on
22nd May 2008.
7. Mr. R.K. Saini, learned counsel appearing for the Petitioner submitted that the
proceedings under the SARFAESI Act were instituted more than 18 years after the
filing of the suit and therefore, were time barred under Section 36 SARFAESI Act.
Since the Bank has already filed a suit, it would be unreasonable to permit it to also
invoke the provisions of the SARFAESI Act in regard to the outstanding liability of the
principal borrower.
8. Mr. Khalid Abdullah, learned counsel appearing for the Bank referred to the counter
affidavit filed on its behalf. He submitted that the filing of the suit by the Bank for
recovery of money was within the prescribed period of limitation. Consequently, the
Bank was, for the purposes of Section 36 SARFAESI Act, entitled to take measures
under Section 13 (4) thereof since it had made a claim in respect of the financial asset,
i.e., the mortgage of the property in question, by filing the suit within the prescribed
time of limitation.
9. The above submissions have been considered. The SARFAESI Act was intended to
provide an additional remedy to a financial institution to recover its debts. The
Statement of Objects and Reasons of the SARFAESI Act acknowledged that the
existing legal framework relating to commercial transactions has not kept pace with the
changing commercial practice which has resulted in slow pace of recovery of defaulting
loans and mounting levels of non-performing assets of banks and financial institutions.
Section 35 SARFAESI Act provides that “the provisions of the said Act shall have
effect, notwithstanding anything inconsistent therewith contained in any other law for
the time being in force or any instrument having effect by virtue of any such law”. It is
therefore, apparent that the remedy provided under the SARFAESI Act to a secured
creditor for recovery of a debt owing to it, is independent of any other remedy available
W.P. (C) No. 7228 of 2005 Page 3 of 5
in law. Section 36 SARFAESI Act requires that a claim should have been made by the
lender in respect of the financial assets within the period of limitation prescribed under
the LA. Section 36 does not mandate that the notice under Section 13 (2) SARFAESI
Act must be issued within such period of limitation. A „claim‟ in respect of the
financial asset, could be by way of any proceedings in accordance with law. Since the
SARFAESI Act itself came into force only on 18th December 2002, the legislative
intent was that even the sum owned to a secured creditor prior to that date can be
sought to be recovered as long as the claim was made within the prescribed period of
limitation. A similar view has been expressed by the Gujarat High Court in Ivee
Injectaa Ltd. v. Junagadh Vibhagyiya Nagrik Sahakari Bank Ltd. (2006) 129 Comp
Cas 528 (Guj).
10. In the present case, the Bank had made a claim in respect of the secured financial
asset by filing a suit in the year 1984. Admittedly, the suit was filed within the
limitation period. Therefore, the essential requirement of Section 36 SARFAESI Act
was fulfilled. The Bank validly proceeded to the next step by issuing a notice under
Section 13 (4) SARFAESI Act. Consequently, this Court finds no merit in the
contention of learned counsel for the Petitioner that the notice under Section 13 (2) and
the possession notice under Section 13 (4) SARFAESI Act issued by the Bank were
without jurisdiction. The remedy to the borrower who received a possession notice
under Section 13 (4) SARFAESI Act is to file an appeal to the Debts Recovery
Tribunal („DRT) within 45 days thereof under Section 17 of the SARFAESI Act. In the
present case the Petitioner has a remedy of an appeal to the DRT under Section 17
SARFAESI Act. Without expressing any opinion on merits of the contentions of the
parties in regard to the impugned action of the Bank under Section 13 (2) and (4)
SARFAESI Act, this Court declines to entertain this writ petition. It is clarified that it
will be open to the Petitioner to invoke the remedy available to him under Section 17
SARFAESI Act.
11. Considering that there was an interim order made by this Court on 26th April 2005,
it is directed that the said interim order will continue for a further period of four weeks
to enable the Petitioner to seek appropriate remedy under Section 17 SARFAESI Act
before the DRT. It is made clear that the interim order would come to an end on 16th
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November 2011 or till such time the DRT takes up the Petitioner‟s appeal under
Section 17 SARFAESI Act, whichever is earlier.
12. The petition is disposed of in the above terms.
S. MURALIDHAR, J
OCTOBER 17, 2011
rk
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