Gauhati High Court: DRT Erred in Dismissing SARFAESI Application Filed 19 Days Beyond the 45-Day Limit; Procedural Timelines Under Section 17(1) Are Relaxable with Sufficient Cause

Court’s Decision:

The Gauhati High Court ruled that the Debts Recovery Tribunal (DRT) has the authority to condone delays in filing applications under Section 17 of the SARFAESI Act, 2002, by applying Sections 4 to 24 of the Limitation Act, 1963. The court emphasized that the DRT is bound to follow the provisions of the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act), which allows for condonation of delay. The case was remitted back to the DRT to assess whether the petitioners’ delay was satisfactorily explained and, if so, to decide the application on its merits.

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Facts:

1. The petitioners include a proprietorship firm and its proprietor, who had borrowed money from the respondent bank. Their loan account was classified as a Non-Performing Asset (NPA) on 28 February 2023.
2. The respondent bank issued a notice under Section 13(2) of the SARFAESI Act, followed by notices under Rule 8(1) of the Security Interest (Enforcement) Rules, 2002.
3. The petitioners challenged these notices by filing an application under Section 17 of the SARFAESI Act before the DRT.
4. The DRT dismissed the application on 20 November 2023 as time-barred, noting a delay of 19 days beyond the statutory 45-day limitation period. The tribunal refused to condone the delay based on legal precedents that emphasized the mandatory nature of the time limit under Section 17(1).
5. The petitioners approached the High Court, asserting that the DRT had the authority to condone the delay by applying the provisions of the Limitation Act.

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Issues:

1. Can the provisions of the Limitation Act, 1963, be applied to proceedings initiated under Section 17 of the SARFAESI Act, 2002?
2. Does the DRT have the discretion to condone delays in filing applications under Section 17 of the SARFAESI Act?

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Petitioner’s Arguments:

1. Applicability of the Limitation Act:
   The petitioners argued that Section 17(7) of the SARFAESI Act mandates that the DRT must dispose of applications under Section 17 in accordance with the provisions of the RDB Act, 1993. Section 24 of the RDB Act specifically provides for the application of the Limitation Act to tribunal proceedings.
2. Judicial Precedents:
   Reliance was placed on several judgments, including Baleswar Dayal Jaiswal v. Bank of India, where the Supreme Court held that DRTs and appellate tribunals can condone delays in applications and appeals under the SARFAESI Act by applying the Limitation Act.
3. Statutory Rights and Access to Justice:
   It was contended that denying condonation of delay would deprive borrowers of their statutory remedy under Section 17, leaving them with no alternative but to approach the High Court under Article 226 of the Constitution. This would undermine the purpose of creating specialized tribunals for quick and efficient resolution of disputes.

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Respondent’s Arguments:

1. Mandatory Time Limits:
   The respondents argued that the SARFAESI Act’s primary objective is the quick enforcement of security interests. Allowing condonation of delay would defeat this purpose. They emphasized that the statutory 45-day period under Section 17(1) is mandatory.
2. Supreme Court Precedents:
   They cited Supreme Court rulings such as Mardia Chemicals Ltd. v. Union of India and M/s Transcore v. Union of India, which clarified that proceedings under Section 17 are original in nature, akin to filing a suit, to which the Limitation Act’s provisions for condonation of delay do not apply.
3. Legislative Intent:
   The respondents asserted that the absence of an express provision for condonation of delay in Section 17 indicates the legislature’s intent to preclude such relief.

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Analysis of the Law:

1. Section 17(7) of the SARFAESI Act and RDB Act Provisions:
   The court noted that Section 17(7) of the SARFAESI Act explicitly incorporates the procedural framework of the RDB Act for adjudication of applications. Section 24 of the RDB Act provides that the provisions of the Limitation Act apply to applications before the DRT.
2. Principle of Legislative Incorporation:
   The court emphasized that when the procedural framework of one statute is incorporated into another, the provisions of the former, including the application of the Limitation Act, must be applied unless explicitly excluded.
3. Judicial Precedents Supporting Condonation of Delay:
   The court referred to decisions of several High Courts, including Andhra Pradesh, Madras, and Madhya Pradesh, which upheld the applicability of the Limitation Act to proceedings under Section 17 of the SARFAESI Act.
4. Contradictory Views Distinguished:
   The court analyzed contrary judgments from the Calcutta and Orissa High Courts but found them unpersuasive, as they failed to consider the incorporation of the RDB Act’s provisions into the SARFAESI Act.

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Precedent Analysis:

1. Supporting Judgments:
   • Baleswar Dayal Jaiswal v. Bank of India: Supreme Court held that tribunals under the SARFAESI Act have the power to condone delays by applying the Limitation Act.
   • Decisions from Andhra Pradesh, Madras, and Madhya Pradesh High Courts recognized that procedural safeguards under the Limitation Act ensure access to justice.
2. Contrary Judgments:
   • Akshat Commercial Pvt. Ltd. v. Kalpana Chakraborty: Calcutta High Court ruled that the Limitation Act does not apply to original proceedings under Section 17.
   • The Orissa High Court took a similar stance, emphasizing the SARFAESI Act’s objective of expeditious recovery.

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Court’s Reasoning:

1. Procedural Nature of Limitation:
   The court reaffirmed that laws related to limitation and procedural timelines are generally directory and can be relaxed when sufficient cause is shown, especially when no explicit exclusion exists.
2. Access to Remedies:
   Denying condonation would render the statutory remedy under Section 17 ineffective, forcing litigants to rely solely on constitutional remedies, which would burden High Courts unnecessarily.
3. Equity and Justice:
   The court emphasized that the SARFAESI Act does not exclude the application of beneficial provisions of the Limitation Act, and condonation of delay aligns with the principles of natural justice.

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Conclusion:

The court set aside the DRT’s order dismissing the application as time-barred and remitted the matter back to the DRT. The tribunal was directed to consider the petitioners’ application for condonation of delay on merits and, if the delay is satisfactorily explained, to adjudicate the case substantively.

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Implications:

This judgment reinforces the procedural safeguards available to borrowers under the SARFAESI Act and affirms the applicability of the Limitation Act to DRT proceedings. It ensures that aggrieved parties are not unfairly deprived of their statutory remedies due to procedural delays, thereby balancing the interests of creditors and borrowers.

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