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2012 (11) TMI 779 - HC - Companies LawRecovery proceedings - order of Debt Recovery Appellate Tribunal - condonation of delay - principal debtor - Liability of the surety / guarantors Period of limitation - petitioner contended that it is not the principal debtor and that another entity, being State Trading Corporation of India Ltd. is the principal debtor, given the nature of the transaction Held that - . Rule 5A gives a leeway to the DRT to entertain an application for review, only if, it is filed latest, by the sixtieth day from the date of the order of which review is sought. There is in sub rule (2) of Rule 5A, an express bar imposed on the DRT in entertaining review applications after the expiry of sixty (60) days. - There is, therefore, possibly no scope even for entertaining an application for condonation of delay by invoking Section 5 of the Limitation Act, 1963 (in short Limitation Act). Provisions of Section 24 of the RDDB Act, which provides, that the provisions of the Limitation Act shall as far as may be applied to an application made to a Tribunal. Undoubtedly, the application adverted to in the said provision refers to the OA filed by a bank/financial institution to seek recovery of its debt and not interlocutory applications, such as, one for review. - It is, therefore, perhaps the legislature s intention to apply the provisions of the Limitation Act to a limited extent and as far as may be to the original action for recovery of debt. This would not translate, perhaps, in the provisions of Section 5 of the Limitation Act being made applicable to an application for review of an order passed in an OA. It is interesting to note that there is no provision for review in the RDDB Act. Petitioners have not taken the trouble of filing an application for condonation of delay under section 5 of the Limitation Act - Issue no.1 is decided in favour of the respondent and against the petitioners. Scope of the term Suit - held that - the word suit cannot be understood in its broad and generic sense to include any action before a legal forum involving an adjudicatory process. - If that were so, the legislature which is deemed to have knowledge of existing statute would have made the necessary provision, like it did, in inserting in the first limb of section 22 of SICA, where the expression proceedings for winding up of an industrial company or execution, distress, etc. is followed by the expression or the like against the properties of the industrial company. - There is no such broad suffix placed alongside the term suit . The term suit would thus have to be confined, in the context of sub section (1) of section 22 of SICA, to those actions which are dealt with under the Code and not in the comprehensive or overarching sense so as to apply to any original proceedings before any legal forum as was sought to be contended before us. - The term, suit in our opinion would apply only to proceedings in a civil court and not actions for recovery proceedings filed by banks and financial institutions before a Tribunal, such as, the DRT . Liability of the surety is co-extensive with that of the principal debtor if the latter liability is scaled down the liability of the surety will accordingly stand reduced or even extinguished. The principle in so far as this aspect is concerned is pivoted on the fact that the liability of a guarantor i.e., the surety being co-extensive is both joint and several. Therefore, a creditor need not sue a principal debtor in order to bring an action against a guarantor - decided against the petitioners
Issues Involved:
1. Limitation for filing a review application. 2. Applicability of Section 22(1) of SICA to guarantors in recovery proceedings under the RDDB Act. Detailed Analysis: Issue 1: Limitation for Filing a Review Application Background: The petitioners filed a writ petition against the judgments of the Debt Recovery Appellate Tribunal (DRAT) and the Debt Recovery Tribunal (DRT). The DRT's order dated 03.05.2010 adjourned proceedings sine die only for the principal debtor (RPL) and not for the guarantors (petitioners). The petitioners' application for clarification/modification/review of this order was dismissed on 30.05.2011 as time-barred. Court's Analysis: - The petitioners were directed to file their written statement within 30 days from 22.12.2009. - The DRT's order dated 03.05.2010 was passed in the presence of the petitioners' counsel. - The review application was filed nearly five months after the order, beyond the 60-day limitation period prescribed under Rule 5A of the Debts Recovery Tribunal (Procedure) Rules, 1993. - The DRT dismissed the review application as time-barred and noted that the petitioners failed to provide a valid explanation for the delay. - The DRAT upheld the DRT's decision, noting no jurisdictional error or material irregularity. Conclusion: The court found no error in the judgments of the DRT and DRAT regarding the limitation for filing the review application. The petitioners' application was rightly dismissed as time-barred. Issue 2: Applicability of Section 22(1) of SICA to Guarantors in Recovery Proceedings under the RDDB Act Background: The petitioners contended that they, as guarantors, should be afforded the same protection under Section 22(1) of SICA as the principal debtor (RPL). They relied on the Supreme Court judgments in Patheja Bros. Forgings & Stamping and Paramjeet Singh Patheja to support their claim. Court's Analysis: - Section 22(1) of SICA: Provides for suspension of legal proceedings, including suits for recovery of money or enforcement of any security against the industrial company or any guarantee in respect of any loans or advances granted to the industrial company. - Patheja Bros. Forgings & Stamping (2000): The Supreme Court held that the term "guarantee" in Section 22(1) of SICA includes guarantors of loans to a sick industrial company. - Paramjeet Singh Patheja (2006): Reiterated that arbitration proceedings are included under "suit" in Section 22(1) of SICA. - Kailash Nath Agarwal (2003): The Supreme Court held that the term "suit" in Section 22(1) of SICA does not include proceedings under the U.P. Public Money (Recovery of Dues) Act, 1972 against guarantors. - Zenith Steel Tubes & Industries Ltd. (2008): The Supreme Court referred the issue to a larger bench to reconcile conflicting views on whether Section 22(1) of SICA applies to guarantors in recovery proceedings under the RDDB Act. - Nahar Industrial Enterprises vs. HSBC (2009): The Supreme Court held that a tribunal under the RDDB Act is not a civil court, and thus, the term "suit" does not extend to proceedings before the DRT. Conclusion: The court concluded that the term "suit" in Section 22(1) of SICA applies only to proceedings in a civil court and not to recovery proceedings under the RDDB Act before the DRT. Therefore, the protection under Section 22(1) of SICA does not extend to guarantors in such proceedings. Final Judgment: The court dismissed the petition, upholding the judgments of the DRT and DRAT. The petitioners' review application was time-barred, and the protection under Section 22(1) of SICA does not extend to guarantors in recovery proceedings under the RDDB Act.
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