2022 (8) TMI 594 - SC - Indian Laws

Validity of Sale Certificate issued in favour of the Auction Purchaser under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - time limitation - application dismissed on the ground that it was filed beyond the statutory period of limitation of 45 days - HELD THAT - According to Section 17(1), the period of 45 days is mandated to commence from the date on which a measure under Section 13(4) has been adopted, which in the facts of the present case is the date when the secured asset is sold in favour of Respondent No.7. This is a case where the Company, with its own independent identity, is contesting the proceedings. It is apparent that the Directors were also contesting the matter by filing the Section 17 application. Even the legal representatives of one of the deceased Directors were party to the application under Section 17. Further, DRAT came to the conclusion that the original order passed by the DRT has been arrived at after a detailed consideration and that there is no justifiable ground for invoking the review jurisdiction. For granting or refusing to grant an interim order, the above referred facts were more than sufficient. The reason for providing a time limit of 45 days for filing an application under Section 17 can easily be inferred from the purpose and object of the enactment. In TRANSCORE VERSUS UNION OF INDIA 2006 (11) TMI 349 - SUPREME COURT this Court held that the SARFAESI Act is enacted for quick enforcement of the security. It is unfortunate that proceedings where a property that has been brought to sale and third-party rights created under the provisions of the Act, have remained inconclusive even after a decade. The High Court was not justified in staying the operation of the order of the DRAT which came to the conclusion that there was no error apparent on the face of record for the DRT to invoke the review jurisdiction and recall its order dismissing the application under Section 17 of the Act - Appeal allowed.

Summary

Issues:
- Challenge to an Interlocutory Order of stay passed by the High Court of Judicature at Allahabad, Lucknow Bench pending disposal of a Writ Petition.
- Dismissal of a challenge to the Sale Certificate under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
- Review of the order dismissing the Section 17 application.
- Granting of an interim order by the High Court.
- Justification of the High Court's interim order.
- Examination of the time limit for filing an application under Section 17.
- Effect of the interim order passed by the Supreme Court.
- Setting aside of the impugned interim order by the Supreme Court.

Analysis:

The Supreme Court addressed the appeal by Bank of Baroda against an Interlocutory Order of stay issued by the High Court of Judicature at Allahabad, Lucknow Bench, pending the disposal of a Writ Petition filed by a Respondent Company challenging the Sale Certificate issued under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The appeal stemmed from the dismissal of the challenge to the Sale Certificate on the grounds of limitation, leading to the Supreme Court granting leave to appeal.

The case involved the Company's default in loan repayment, leading to the Bank issuing notices under Section 13(2) and 13(4) of the Act. Subsequently, the Bank obtained physical possession of the secured asset. Despite a Writ Petition being disposed of with directions for repayment, the Company failed to comply, prompting the Bank to proceed with a sale proclamation resulting in the issuance of a sale certificate to a successful bidder.

The Respondent Company and its Directors challenged the sale certificate under Section 17 of the Act, with the Debt Recovery Tribunal (DRT) dismissing the application as time-barred. A review was allowed by the DRT on the grounds of the death of one Director before the auction, a decision upheld by the Debt Recovery Appellate Tribunal (DRAT). The High Court admitted a Writ Petition and issued an interim stay order, which was the subject of contention before the Supreme Court.

The Supreme Court analyzed the justification of the High Court's interim order, emphasizing the importance of the time limit for filing Section 17 applications under the Act for swift enforcement of security interests. The Court highlighted the consequences of the interim order issued by the Supreme Court, which effectively maintained the DRT's decision. Ultimately, the Supreme Court set aside the impugned interim order of the High Court, directing expeditious disposal of the Writ Petition without expressing any opinion on the case's merits.

In conclusion, the Supreme Court allowed the appeal, emphasizing the need for timely resolution of legal proceedings and setting a deadline for the High Court to dispose of the Writ Petition within three months from the date of the Supreme Court's order, without imposing any costs.