2012 (4) TMI 786 - HC - Indian Laws

Summary

Issues Involved:
1. Interpretation of Section 36 of the SARFAESI Act.
2. Whether the action of the respondent bank invoking the provisions of SARFAESI Act is barred by limitation.

Summary:

Issue 1: Interpretation of Section 36 of the SARFAESI Act

The appeal raises an important question of law regarding the interpretation of Section 36 of the SARFAESI Act, which states: "No secured creditor shall be entitled to take all or any of the measures under sub-section (4) of section 13, unless his claim in respect of financial asset is made within the period of limitation prescribed under the Limitation Act, 1963." The court examined whether the respondent bank's action of invoking SARFAESI Act by serving notice u/s 13(2) is barred by limitation.

Issue 2: Whether the action of the respondent bank invoking the provisions of SARFAESI Act is barred by limitation

The respondent bank had given loans to a partnership firm in 1981, with the appellant as one of the guarantors who provided security in the form of an equitable mortgage. The bank filed a suit for recovery in 1984, which is still pending. The SARFAESI Act, enacted in 2002, provides an additional remedy for financial institutions to recover debts. The bank served notice u/s 13(2) in 2003 and again in 2004, which the appellant contested as time-barred under Section 36 of the SARFAESI Act read with Article 62 of the Limitation Act.

The learned Single Judge dismissed the appellant's writ petition, stating that SARFAESI Act provides an additional remedy independent of other legal remedies. The Judge held that Section 36 requires a claim to be made within the limitation period but does not mandate that the notice u/s 13(2) must be issued within that period. The Judge relied on the Gujarat High Court's judgment in Ivee Injectaa Ltd. v. Junagadh Vibhagyiya Nagrik Sahakari Bank Ltd., which supported the view that SARFAESI Act remedies are independent and additional.

The appellant argued that the bank's failure to file a suit under Order XXXIV of CPC within the 12-year limitation period for enforcing payment of money secured by mortgage (Article 62) rendered the SARFAESI action time-barred. The appellant contended that the claim must be made under SARFAESI Act itself and not through other legal proceedings.

The court agreed with the appellant, stating that the SARFAESI Act provides a new means of enforcing a preexisting right. Since the right to file a suit or proceedings had extinguished, the SARFAESI Act could not revive this extinguished claim. The court distinguished the present case from Ivee Injectaa Ltd., where a mortgage suit was pending, thus keeping the claim alive.

The court concluded that the claim was barred u/s 36 of SARFAESI Act and quashed the impugned notices u/s 13(2) and 13(4) issued by the bank. The appeal was allowed with no order as to costs.