2013 (9) TMI 1289 - SC - Indian Laws

Summary

Issues Involved:
1. Delay in disposal by Debts Recovery Tribunal (DRT) and Debts Recovery Appellate Tribunal (DRAT)
2. Legitimacy of auction sale and subsequent actions
3. Jurisdiction of DRAT to grant liberty to auction purchaser to initiate action against the bank
4. High Court's refusal to exercise extraordinary writ jurisdiction

Summary:

1. Delay in Disposal by DRT and DRAT:
The Supreme Court expressed concern over the delay in disposal of the application by the DRT and the appeal by the DRAT, highlighting that such procrastination adversely affects the economic spine of the country. The appeal was filed before the DRAT on 7.11.2005 and admitted on 14.11.2005, but disposed of only on 20.5.2010, almost after four and a half years. The Court emphasized that the DRAT had forgotten its obligation under the RDB Act and the SARFAESI Act, which aim for speedy recovery of dues and better availability of capital liquidity.

2. Legitimacy of Auction Sale and Subsequent Actions:
The appellant-bank sanctioned a home loan to respondent No. 1, who defaulted on payments, leading the bank to declare the loan account as a "non-performing asset." The bank issued a notice u/s 13(2) of the SARFAESI Act and subsequently took possession of the mortgaged property. The property was put up for auction, and respondent No. 3 submitted a bid. The auction sale was challenged by the borrower, leading to a series of legal proceedings. The DRT directed the borrower to pay the due amount within 15 days, failing which the sale would be confirmed in favor of the auction purchaser. The borrower appealed to the DRAT, which modified the DRT's order and directed the auction purchaser to accept Rs. 5 lacs as costs from the appellant, among other directions.

3. Jurisdiction of DRAT to Grant Liberty to Auction Purchaser to Initiate Action Against the Bank:
The Supreme Court scrutinized whether the DRAT had jurisdiction to grant liberty to the auction purchaser to initiate any action against the bank for any omission. The Court noted that the DRAT's jurisdiction is confined to what is conferred by the SARFAESI Act and the RDB Act. The tribunal does not have inherent powers and must function within statutory parameters. The Court held that the DRAT's observation granting liberty to the auction purchaser was beyond its jurisdiction and unwarranted, especially since the bank was not a party to the compromise between the borrower and the auction purchaser. Consequently, the Supreme Court deleted the observation granting liberty to the auction purchaser.

4. High Court's Refusal to Exercise Extraordinary Writ Jurisdiction:
The High Court had declined to interfere with the DRAT's order, stating that there was no need to exercise extraordinary writ jurisdiction under Article 226 of the Constitution. The Supreme Court, however, held that the High Court failed in its constitutional duty to scrutinize whether such liberty could have been granted by the tribunal. The Supreme Court set aside the High Court's judgment to the extent it declined to interfere with the DRAT's grant of liberty to the auction purchaser.

Conclusion:
The Supreme Court allowed the appeal to the extent of deleting the DRAT's observation granting liberty to the auction purchaser to initiate action against the bank. The Court emphasized the need for tribunals to act promptly and within their jurisdiction, and highlighted the importance of speedy disposal of cases under the SARFAESI Act and the RDB Act to prevent long-term economic harm.