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Borrower's Knowledge About Secured Creditor's Recovery Measures Relevant To Reckon Statutory Period U/S 17(1) SARFAESI Act: Calcutta HC

26 Nov 2022 12:30 PM GMT
The Karnataka High Court Has Held Section 14 (1) Of The Securitization And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002 Is Not Ultra Vires To The Constitution.

The Calcutta High Court on Thursday, in hearing a writ petition seeking quashing of a certificate of sale issued under the SARFAESI Act ("Act"), has ruled that the statutory time period of forty-five days as prescribed under S.17(1) of the Act must be given purposive construction.

The instant matter arose out of recovery proceedings instituted u/s 13 of the Act against the writ petitioner no. 1 by the respondent no. 1 bank. Counsels for the respondent no. 1 bank made two-fold objections to the maintainability of the writ petition: firstly, in terms of Section 13(8) of the Act, the borrower can take action against sale of a secured asset only till the date of publication of notice for the auction or tender inviting quotations from the public; and secondly, S.17(1) of the Act requires an application to be made before the Debt Recovery Tribunal (DRT) within forty-five days from date of institution of proceedings under S. 13(4) of the Act.

Counsels for the petitioners contended that a copy of the impugned certificate of sale was received by the petitioners as late as on August 1, 2022. The writ petition was filed on 5th August.

Ruling that the time period prescribed u/s 17(1) of the Act ought to be purposively constructed, the Single Judge Bench of Justice Moushumi Bhattacharya observed:

"The time period mentioned in section 17(1) of the SARFAESI Act, must be given a purposive construction. Although, the starting point is the date of the impugned measure taken by the secured creditor, the provision would be rendered arbitrary and ineffective if the date of knowledge of the 'person' [under section 17(1)] is not taken into account. If the date of knowledge is discounted, then most applications under section 17(1) would be rendered infructuous particularly where the 'person' receives the communication of the impugned action beyond the 45-day time limit. It is completely believable that the petitioners did not approach the DRT on the apprehension that the petitioners' application would be kept out and not even be given a file number on the ground of being belated."

As regards the contention of the respondent no. 1 bank that S. 5 of the Limitation Act has no manner of application in respect of the statutory time period of forty-five days prescribed u/s 17(1) of the Act, the Court distinguished the decision of the Calcutta High Court in Akshat Commercial Pvt. Ltd. v. Kalpana Chakraborty reported in AIR 2010 Calcutta 138, within the factual matrix of the instant case, to hold:

"Although, a Division Bench of this Court in Akshat Commercial was of the view that section 5 of the Limitation Act will not apply to original proceedings in the nature of the jurisdiction of the DRT under section 17 of the SARFAESI Act, the facts in the present case, as stated on record, show that the petitioners became aware of the certificate of sale only on 1st August, 2022. The writ petition was filed on 5th August, 2022. By the order dated 9th November, 2022, the Bank was given an opportunity to rebut the statement made in the writ petition by way of documents in the form of an affidavit. The Bank has not brought anything on record to dislodge the factual contentions of the petitioners with regard to knowledge. Hence, the statement made in paragraph 18 of the writ petition with regard to the petitioners' knowledge on and from 1st August, 2022 remains uncontroverted."

Having failed to dispute as to the date of knowledge of receiving the impugned sale certificate as stated in the writ petition, the contentions of the respondent no. 1 were rejected. The writ petition was accordingly disposed off with the liberty of the petitioners to approach the DRT not later than seven days from November 28, 2022.

Case: M/s. Deecon India Pvt. Ltd. & Ors. V. Canara Bank & Ors., WPA 18157 of 2022

Date: 24.11.2022

Citation: 2022 LiveLaw (Cal) 345

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