In this post we will discuss about DRT Petition for return of deposited amount to auction Purchaser wherein the Supreme Court has settled the law that not only the Borrower but even the auction purhaser can approach DRT under Section 17 of SARFAESI Act if he is aggrieved by any of the measures taken by the secured creditor under Section 13(4) of the Act.
Introduction
The debt recovery tribunal a tribunal set up by the Central Government under Section 3 of The Recovery of Debts Due to Banks and Financial Institutions Act, 1993
(1)The Central Government shall, by notification, establish one or more Tribunals, to be known as the Debts Recovery Tribunal, to exercise the jurisdiction, powers and authority conferred on such Tribunal by or under this Act.
(2)The Central Government shall also specify, in the notification referred to in sub-section (1), the areas within which the Tribunal may exercise jurisdiction for entertaining and deciding the applications filed before it.[1]
The main aim of the debt recovery tribunal is to enforces provisions of the Recovery of Debts Due to Banks and Financial Institutions (RDDBFI) Act, 1993 and also Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act, 2002. However, a Debts Recovery Tribunal cannot hear claims of damages or deficiency of services or breach of contract or criminal negligence on the part of the lenders. In addition, a Debts Recovery Tribunal cannot express an opinion beyond its domain, or the list pending before it.
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Cases
In the case of Ram Sarup vs Dalpat Rai And Ors[2]. In all cases of public sale of property underthis Regulation, it shall be clearly explained to the bidders at the sale, that nothing is guaranteed to them in the land or other property sold, beyond the rights and interests therein of the individuals answerable for the amount of the decree, or other process, in execution of which the sale is made.
The oldest case on the subject which I have been able to discover is a Full Bench decision of the Calcutta Suddar Court, Dost Mahomed Khan v. Prosunnonath Roy[3] a purchaser at a sale in satisfaction of a decree, of a party’s rights and interests, is not entitled to the recovery of his purchase money, on the rights and interests sold turning out to be without title.
In a recent case of CrombestPrecest Buildings Ltd, a company engaged in construction of commercial, residential, hospital and institutional buildings using pre-cast concrete technology, had availed of a term loan from Federal Bank and Bank of India in 2008. The banks had disbursed ₹38.22 crore. Later, the banks had declared the account as NPA and took possession of the assets of the company, which was assigned to Maximus Asset Reconstruction Company (ARC) Limited.
The banks approached the Debt Recovery Tribunal and the court to invoke the corporate guarantee and personal guarantee, for consideration by the ARC and for calling the company to settle the amount of ₹25.26 crore to Federal Bank and ₹31.01 crore to Bank of India.
The Tribunal noted that in the current case it was mandatory for the authorised officer to serve the sales notice by affixing a copy of the sale notice on the outer door or some other conspicuous part of the house or building in which the applicant/borrower or his agent ordinarily resides or carries on business or personally works for gain. It is also required to publish the contents of the sale notice in two leading newspapers, one in a vernacular language, having sufficient circulation in that locality, it noted.
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According to Section Section 13(4) of SARFAESI Act-
In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely :—
(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;
(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset :
Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt;
Provided further that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt;]
(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;
(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.[4]
In the case of H.S.Goutham vs Rama Murthy And Anr. Etc[5]. it has been stated that it is open to the auction purchaser to make an application before the trial court for refund of the amount deposited by him and reimbursement of the amount spent by him for registration of the sale deed and other expenses incurred by him and trial court shall consider the said application and dispose of the same, in accordance with law.
In Dorab Ally Khan v. Abdool Azeez,[6], have reference to the position as it stood before the Code of 1882. After the Code of 1882 the right of an auction purchaser to refund of the purchase money whether by way of a suit or by way of an application in execution was recognized by the Code of 1882, and inasmuch as this right was recognized, it must be taken that the Code of Civil Procedure recognized that there was a warranty of some title in auction sales held in execution and consequently a suit will lie when there is a breach of the warranty.
The right of action to obtain a refund consequent on the want of saleable interest in the judgment-debtor is not a right inhering in a purchaser, but is the creature of a statute, and the right thus conferred can only be exercised within the limitations prescribed. Consequently, with-out getting the sale set aside through Court the purchaser has no right of action.
ALSO READ- WRIT PETITION AGAINST DRT ORDERS IN PUNJAB HARYANA HIGH COURT
Conclusion
In a case, the Supreme Court has settled the law that not only the Borrower but even the auction purhaser can approach DRT under Section 17 of SARFAESI Act if he is aggrieved by any of the measures taken by the secured creditor under Section 13(4) of the Act.
Considering the legal points of reference clarified hereinabove, it tends to be inferred that, an obligation is given occasion to feel qualms about the Secured Creditor to unveil all encumbrances identifying with the unloaded property in the public notification. On the off chance that a Secured Creditor neglects to reveal encumbrances identifying with the sold property, it can’t later guarantee assurance on the affection of “as is the place where is” and as is the thing that is’ reason for the way that the equivalent has lost its importance in the current business set-up and the guideline of proviso emptor can’t be made relevant to the properties bought in sell off led under SARFAESI Act.
This post is written by Tanya Gorshi
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[1]The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 , § 3 Act 51 of 1993 (India)
[2](1921) ILR 43 All 60
[3]1885) S.D.A. (L.P.) 549.
[4]Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act, 2002, § 13, Act 54 of 2002 (India).
[5]Civil appeal no. 1845 of 2010
[6]5 I. A. 116: (3 Cal. 806 P. C.)
