2021 (3) TMI 566 - HC - Indian Laws

Interpretation of statute - details of the amount payable by the borrower and the secured assets intended to be enforced mentioned in sub-section (3) of section 13 of the SARFAESI Act - power of Debts Recovery Tribunal under section 17 of the SARFAESI Act to test the validity of notice under section 13(2) of the SARFAESI Act? - HELD THAT - From a perusal of the material on record and as also discussed not only by the Tribunal but also the learned single judge there was an issue raised earlier and pending between the parties regarding the rate of interest at which the secured creditor was calculating. According to the borrower, the rate of interest was higher as was being applied by the secured creditor than what actually it could claim under the agreement. The learned single judge had referred to such facts in paragraphs 5.1 to 6.1 of the judgment. The learned single judge had also placed reliance upon the view taken by the Patna High Court as also the High Court of Calcutta while interpreting the provisions of sub-sections (2) and (3) of section 13 of the SARFAESI Act - Application dismissed. Scope of section 17 of the SARFAESI Act - HELD THAT - In the present case, the borrower took an objection of non-compliance of sub-section (3), in his objection/representation given sub-section (3A), but despite the same the bank-secured creditor in the present case rejected the objection instead of ensuring the compliance of sub-section (3). A perusal of the notice under sub-section (2) which is already reproduced above does not spell out the details of the amount payable by the borrower, but only mentions a lump sum aggregate amount. The dispute with regard to rate of interest being charged by the bank was pre-existing the stage of section 13, and therefore, when the borrower called upon the secured creditor to provide the details, as a fair and reasonable secured creditor-the appellant-bank ought to have come out with such details, justification of such details would be a different aspect, but the bank could not withhold the details - Even the details of the secured assets had not been correctly provided as recorded by the Tribunal, which finding has not been altered or upset at any subsequent stage. If the bank withholds the details, as in the present case, then such action cannot be sustained. The present case, is a classic example how the judicial system is getting clogged with frivolous litigation. The facts and the circumstances that have led to the filing of the present appeal, leave us with no choice but to impose exemplary costs on the appellant secured creditor. This matter requires costs to be imposed upon the appellant-bank which we quantify at ₹ 5 lakhs per appeal. The amount of costs to be deposited within one month from today with the Registrar General of this court whereupon the same shall be transmitted to the Gujarat State Legal Service Authority. This amount is to be recovered from the officers found responsible for carrying on this frivolous litigation.

Summary

Issues Involved:
1. Pendency of cases due to frivolous litigation.
2. Validity of the notice under Section 13(2) of the SARFAESI Act.
3. Compliance with Section 13(3) of the SARFAESI Act.
4. Scope of Section 17 of the SARFAESI Act.

Detailed Analysis:

Pendency of Cases Due to Frivolous Litigation:
The judgment begins by highlighting the significant issue of case pendency in the judiciary, exacerbated by frivolous and vexatious litigation. The court criticizes the appellant-bank, a nationalized bank, for its gross indifference towards litigative diligence, which has unnecessarily burdened the judicial system for three years. The court expresses exasperation at the appellant-bank's impractical litigation policy, which contrasts sharply with the expectation of higher sensibility from governmental agencies compared to individual litigants.

Validity of the Notice Under Section 13(2) of the SARFAESI Act:
The appellant-bank issued a demand notice dated December 29, 2014, under Section 13(2) of the SARFAESI Act, which the borrowers contested as defective and invalid. The Debts Recovery Tribunal (DRT) set aside the notice and all consequential proceedings, directing the bank to restore possession to the borrowers. The DRT found the notice non-compliant with Section 13(3) as it lacked details of the amount due and the correct details of the secured assets. The Debts Recovery Appellate Tribunal (DRAT) and the learned single judge upheld this decision, emphasizing the necessity of providing detailed amounts payable and secured assets in the notice under Section 13(2).

Compliance with Section 13(3) of the SARFAESI Act:
The court scrutinized whether the notice issued under Section 13(2) complied with Section 13(3), which mandates detailing the amount payable by the borrower and the secured assets intended to be enforced. The court found that the notice only mentioned an aggregate amount without providing a detailed breakup of the outstanding amount, including principal, interest, penal interest, and other charges. This lack of detail rendered the notice invalid, as it deprived the borrower of the ability to make a meaningful representation or objection under Section 13(3A). The court reiterated that the statutory requirement of detailing the amount payable is to ensure transparency and fairness, allowing the borrower to contest any inaccuracies.

Scope of Section 17 of the SARFAESI Act:
The court examined whether the DRT under Section 17 could test the validity of the notice under Section 13(2). The court concluded that the DRT has wide powers to restore possession to the borrower if the measures taken under Section 13(4) are found invalid. The court emphasized that compliance with Section 13(2) and (3) is a prerequisite for any action under Section 13(4). If the notice under Section 13(2) is invalid due to non-compliance with Section 13(3), any subsequent actions under Section 13(4) would also be invalid. The court affirmed that the DRT is empowered to examine the validity of the notice under Section 13(2) and the procedural compliance under Section 13(3A).

Imposition of Costs:
The court imposed exemplary costs of ?5 lakhs per appeal on the appellant-bank, to be deposited with the Gujarat State Legal Service Authority. The court stressed the need for costs to act as a deterrent against frivolous litigation, highlighting the misuse of judicial resources and the unnecessary burden on the justice system caused by such cases. The court cited the Supreme Court's observations on the importance of imposing real and compensatory costs to prevent abuse of the judicial process and ensure that access to justice is preserved for legitimate causes.

Conclusion:
The court dismissed the appeals, upholding the decisions of the DRT, DRAT, and the learned single judge. The judgment underscores the importance of compliance with statutory provisions in notices under the SARFAESI Act and the role of the DRT in ensuring such compliance. The imposition of costs serves as a strong message against frivolous litigation, aiming to protect the integrity and efficiency of the judicial system.