Safiya Malik

In a recent judgement, the Karnataka High Court has upheld the order of the Debt Recovery Appellate Tribunal (DRAT), refusing to condone the delay in filing an appeal under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The court observed that the prescribed limitation period of 45 days under the Act is mandatory and not subject to extension.

The case involved a writ petition challenging the DRAT's decision, which had dismissed an application for condonation of delay and, consequently, the appeal itself. The petitioner, acting as a guarantor for a substantial loan of Rs. 12,84,46,406.76, had sought to set aside the DRAT's order and obtain relief in his appeal against the Debt Recovery Tribunal’s (DRT) rejection of a delay condonation application.

The petitioner had availed of a housing loan facility of Rs. 2.90 crore from the Karnataka Bank Ltd. Additionally, White Horse Network Services Pvt. Ltd. had secured loans totaling Rs. 8 crore, for which the petitioner had mortgaged property as security. Following defaults in repayment, the bank initiated proceedings under the SARFAESI Act. A demand notice under Section 13(2) was issued on April 4, 2017, followed by a possession notice under Section 13(4) on August 8, 2017.

Subsequently, the petitioner, along with White Horse Network Services Pvt. Ltd., filed an application before the DRT, Bangalore, under Section 17(1) and (3) of the SARFAESI Act, challenging the possession notice. Due to a delay of 14 days in filing this application, a separate application for condonation of delay was submitted, citing non-receipt of the possession notice as the reason. During the pendency of the proceedings, the bank issued a sale notice on November 9, 2017, scheduling an auction for December 27, 2017.

The DRT granted an interim stay against the possession notice on December 12, 2017, subject to the petitioner depositing Rs. 2 crore. Although the petitioner deposited Rs. 10 lakh, he failed to meet the full requirement. Consequently, the auction process continued, and the bank issued a second sale notice on March 23, 2018, fixing the auction date for March 31, 2018. The petitioner challenged this notice in the Karnataka High Court, which granted an interim stay on March 28, 2018, subject to the deposit of Rs. 5 crore within six weeks. However, this condition was not fulfilled, leading to the dismissal of the writ petition on June 6, 2018.

Following subsequent legal proceedings, the auction was conducted on March 22, 2019, with the second respondent emerging as the highest bidder. The sale certificate was issued on May 16, 2019. The petitioner, on October 11, 2019, filed a fresh application before the DRT under Section 17(1) and (3) of the SARFAESI Act, challenging the entire recovery proceedings. Since the application was delayed by 158 days, the petitioner sought condonation of delay through a separate application, which was opposed by the bank.

The DRT, by an order dated March 27, 2023, dismissed the delay condonation application, ruling that it lacked jurisdiction to extend the statutory period. The petitioner then filed a writ petition before the Karnataka High Court, which was disposed of with liberty to approach the DRAT. The DRAT, in turn, dismissed the appeal on April 1, 2024, for being time-barred, prompting the petitioner to challenge the order before the High Court.

The Karnataka High Court, comprising Justice Krishna S. Dixit and Justice G. Basavaraja, examined the statutory framework under the SARFAESI Act. The court reproduced Section 17(1), which provides a limitation period of 45 days for filing applications before the DRT. The court stated:

“A perusal of the above provision leaves no manner of doubt that no provision is made by the Parliament for condonation of delay in approaching the DRT against orders of the kind, whatever be the cause therefor and howsoever justifiable it may sound.”

The court stated that tribunals, unlike conventional courts, do not possess inherent powers, and the absence of an explicit provision allowing for condonation of delay must be treated as a deliberate legislative decision. It observed that “one who wants to have redressal has to knock at the doors of DRT within 45 days and thereafter those doors should permanently stand closed.”

Relying on the Supreme Court decision in Bank of Baroda v. M/s. Parasadilal Tursiram Sheetgrah Pvt. Ltd., the High Court stated that the limitation period under Section 17 is mandatory and must be strictly adhered to. The Supreme Court, in that case, held:

“The reason for providing a time limit of 45 days for filing an application u/s.17 can easily be inferred from the purpose and object of the enactment. The SARFAESI Act is enacted for quick enforcement of the security.”

The court also rejected the petitioner’s reliance on decisions from the Delhi High Court and Telangana High Court, which had interpreted Section 17 as allowing condonation of delay. The Karnataka High Court instead aligned itself with the Calcutta High Court’s ruling in Akshat Commercial Pvt. Ltd. v. Kalpana Chakraborty, which held that the limitation period under Section 17 is strict and non-extendable.

Upon considering the submissions and precedents, the Karnataka High Court dismissed the writ petition, refusing to grant any relief to the petitioner. It stated that:

“If the Parliament intended that DRT should have power to condone delay, it would have enacted a provision like Section 5 of the Limitation Act in Section 17 of the SARFAESI Act. However, consciously it has chosen not to do so.”

The court concluded that condonation of delay cannot be granted in the absence of a statutory provision and thereby dismissed the petition.

Case Title: Kailasam P v. The Karnataka Bank Ltd. & Others
Case Number: Writ Petition No. 11273 of 2024
Bench: Justice Krishna S. Dixit, Justice G. Basavaraja

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