Allowed

Nawal Kumar Agarwal v. State Bank of India

DRAT5 Sept 2023REGULAR APPEAL/41/2020

Case brief

AI extract

What is this about?

The Debts Recovery Appellate Tribunal allowed an appeal by an auction purchaser challenging an order that had condoned a delay of over 1300 days in filing an application under Section 17 of the SARFAESI Act. The Tribunal held the condonation was erroneous as the borrower failed to substantiate grounds for delay and set aside the DRT order, dismissing the borrower's application.

What did the court decide?

Impugned order dated 10.01.2019 passed by the learned DRT is set aside. M.A. No. 1162 of 2017 filed by the respondent stands dismissed.

Nawal Kumar Agarwal versus State Bank of India — Contract and Commercial Disputes | DRAT (2023)

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA Appeal No. 41 of 2020

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(Arising out of MA 1162 of 2017 in dy. No. 745 of 2017 DRT- Cuttack)

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

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05.09.2023

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Nawal Kumar Agarwal, s/o Late Badri Prasad Agarwal, residing at 126A, Sri Orissa Saree Centre, Pithapur, Buxi Bazaar, Cuttack – 753001.

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-Vs-

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State Bank of India, having office at OSCARD Bank Building, A/34, Jawaharlal Nehru Marg, Bhubaneswar – 751001.

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Sri Manoj Kumar Dash, Managing Director, M/s. Kamyab Exports P. Ltd. at 301, Royal Heights Apartments, Jaydev Vihar, Bhubaneswar, Dist. Khurda, Odisha.

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Sri Sanjib Kumar Rout, Managing Tristee of Rout Education Trust, 58, Surya Nagar, Unit – VII, Bhubaneswar, Dist. Khurda.

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Smt. Jayashree Sahu, residing at Flat No. 002, Amrita Residency, Jaydev Vihar, Bhubaneswar, Dist. Khurda.

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Sri Dusmanta Nayak residing at plot No. 69/1532,Acharya Vihar, Bhunaneswar, Disrt. Khurda.

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Sri Jyotirmaya Dash, residing at near Baruneswari Temple, Goura Dash Colony, Samantapur, Bhubaneswar, Dist. Khurda.

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For the appellants : Mr. Nemani Srivas, Learned Counsel for Appellant.

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For the respondents:Mr. Debasish Chakraborty, ld. Counsel - Resp.no.1. Ms. Sharmistha Pal,, ld. Counsel – Resp.no.1 Mr. Nimish Mishra, ld. Counsel – Resp.no. 2 Mr. Gourav Singh, ld. Counsel – Resp. no.2 Mr. Subrata Kr. Sinha, ld. Counsel – Resp.no.3.

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THE APPELLATE TRIBUNAL :

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Instant appeal has arisen against the order dated 10.01.2019 passed by learned DRT, Cuttack in M.A. No. 1162 of 2017 arising out of Dy. No. 745 of 2017 whereby M.A. 1162 of 2017 was allowed and the delay in filing the SARFAESI application was condoned. Further, Registry was directed to register the S.A. and list the matter on 17.01.2019 which was registered as SA No.03 of 2019. Feeling aggrieved the appellant who is the successful auction purchaser, respondent no.3 in the S.A., preferred the appeal.

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As per pleadings of the party the appellant herein namely, Nawal Kumar Agarwal, is a successful auction purchaser in respect of the land and factory put to sell by the respondent no.1 namely, State Bank of India, u/s 13(4) of the SARFAESI Act, 2002 (hereinafter referred to as ‘the Act’) on 20.05.2014. He was declared highest bidder who deposited the bid amount of Rs.1,34,50,000/- and sale certificate was issued in favour of him on 01.08.2014. Possession was also delivered on 18.08.2014. Respondent no.2 herein, Sri Manoj Kumar Dash, Managing Director of M/s. Kamyab Exports Pvt. Ltd. had filed the application u/s 17 of the Act before the learned DRT, Cuttack with the prayer to cancel the sale deeds and sale certificates and redeem the property in his favour. SARFAESI application was moved inter alia with an application for condonation of delay on

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the ground that he had no knowledge of the notices issued u/s 13(2) and 13(4) of the Act and thereafter he could not arrange fund for moving the application. He was taken into judicial custody on 14.09.2014 and released on 23.11.2016. After releasing from the judicial custody, he preferred the S.A. along with the M.A. for condonation of delay.

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The application was opposed by the bank as well as by the appellant herein on the ground that application u/s 17 of the Act has to be filed within 45 days as prescribed under the Act and there is no provision for calculating the period of limitation of 45 days from the date of knowledge. Further, it was contended that notices issued under the Act were duly served and were also published in two leading newspapers. Auction was also conducted in accordance with law. Sale proceeds was duly credited to the borrower’s loan account. Physical possession was delivered to the auction purchaser. Borrower challenged the action of the bank by preferring different writ petitions which were dismissed by the Hon’ble High Court. S.A. was barred by limitation.

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Learned DRT Cuttack recorded the finding that the DRT has power to condone the delay in preferring an application u/s 17 of the Act. It was held that the object of providing legal remedy is to repair the damage caused by reason of legal injury. Learned DRT consequently allowed the M.A. 1162 of 2017 with the above

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finding and condone the delay in filing application u/s 17 of the

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Act.

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Feeling aggrieved by the impugned order appellant auction purchaser preferred the appeal.

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I have heard the learned counsel for the parties and perused the records.

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Learned counsel for the bank as well as learned counsel for respondent no.3 have adopted the submission of the learned counsel for the appellant.

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Learned counsel for the appellant challenged the impugned order on the ground that there was a delay of 1327 days in preferring the application u/s 17 of the Act. It is further submitted that no ground is made out in the application for condonation of delay in preferring the S.A. Application is moved on the ground that due to non-arrangement of fund for preparing demand draft even after the date of knowledge, filing of S.A. has been delayed, hence, delay may be condoned. Learned counsel submits that date of knowledge of the proceeding under the Act is not disclosed in the application for condonation of delay. It is further submitted that sale notice was issued on 12.04.2014 and auction sale was held on 20.05.2014. Sale certificate was issued on 01.08.2014. Physical possession was delivered to the auction purchaser who is appellant herein on 18.08.2014. Sale certificate was registered on 21.08.2014. Respondent no.2 herein i.e.

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SARFAESI applicant, had moved another application on 14.10.2017 before the learned DRT Cuttack stating that he was taken into judicial custody on 14.09.2014 and was released on 23.11.2016. The period of detention into judicial custody caused the delay in filing the S.A. It is further submitted even in this application date of knowledge of the proceeding is not disclosed. It is also submitted that in the application itself SARFAESI applicant has admitted that he had knowledge of the SARFAESI proceeding conducted by the bank.

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Learned counsel for the appellant further submits that impugned order was passed on 10.01.2019 while appeal was filed on 19.03.2019. It is further submitted hearing was concluded by learned DRT on 30.11.2018 and order was reserved. Thereafter no notice of delivery of the impugned order was given, even no copy of the order as required under Rule 16 of the DRT (Procedure) Rules, 1993 was sent. When the appellant came to know about the impugned order, he applied for certified copy on 18.02.2019 which was prepared on 04.03.2019 and was handed over on 07.03.2019, thereafter appeal was filed on 19.03.2019. Learned counsel submits that appeal has been preferred within the period of limitation as it is calculated from the date of knowledge of the impugned order.

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Per contra, learned counsel for the respondent no.2 herein submits that the instant appeal is not legally maintainable. It is submitted that limitation is sought to be calculated from the date

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of knowledge, but when the appellant came to know about the impugned order and the source of knowledge is not disclosed. Appeal has to be preferred within 30 days as prescribed u/s 18(1) of the Act. It is further submitted that if the appellant is calculating the period of limitation from the date of knowledge, then he should have moved an application u/s 5 of the Limitation Act, but no such application was filed. Learned counsel further submits that hearing was concluded on 30.11.2018 wherein the appellant herein had actively participated, then he should have been vigilant enough to know about the impugned order, but he did not take any steps to know the outcome of proceedings. There is a presumption of knowledge of the impugned order by “constructive knowledge”.

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Learned counsel further submits that respondent no.2 herein came to know about SARFAESI proceeding, when he filed an application under RTI Act to the bank. Thereafter he was in judicial custody. He moved the S.A. u/s 17 of the Act after his release from the judicial custody. Hence, learned DRT has rightly held that for doing substantial justice to the party delay should be condoned.

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As far as instant appeal is concerned there are two limbs of arguments advanced by the learned counsel for the parties. Firstly, it is argued that the appeal is not legally maintainable being time barred. Secondly, it is argued that application for condonation of delay filed by the SARFAESI applicant was devoid

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of merit and learned DRT has erred in condoning the delay and directing Registry to register the application filed u/s 17 of the Act.

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As far as first contention regarding maintainability of the appeal is concerned, admittedly impugned order was passed on 10.01.2019. Hearing was concluded by the learned DRT on 30.11.2018 and order was reserved. I have summoned the original record from the DRT Cuttack and perused the records. After reserving the order on 30.11.2018 no notice was given to the parties for delivery of the order dated 10.01.2019. Even copy of the order was not sent to the parties as required under Rule 16 of the DRT (Procedure) Rules, 1993. Rule 16 of the DRT (Procedure) Rules, 1993 reads as under.

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“16. Communication or orders to parties Every final order passed and recovery certificate issued shall be communicated to the applicant and to the defendant either in person or by registered post free of cost and may also be uploaded in the website of the Tribunal.”

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Perusal of the Rule makes it clear that every final order passed by the DRT shall be communicated to the applicant and the defendants in person or by registered post free of cost. Order allowing the M.A. brought the proceeding to an end whereby delay was condoned and S.A. was ordered to be registered by the learned DRT. The order was then final in nature and it should be communicated to the parties under Rule 16 of the DRT (Procedure) Rules, but it appears from the record that no notice of the impugned order fixing the date of delivery of order was

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given to the party. Hence it could not be presumed that the appellant herein was having knowledge of the impugned order when it was passed by the DRT.

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Learned counsel for contesting respondent has drawn my attention towards impugned order wherein it is mentioned that learned counsel for the auction purchaser had made submission. On the strength of the recording, learned counsel submits that on 10.01.2019 it was well within the knowledge of the appellant and he was present before the learned DRT. I am unable to accept the submission made by the learned counsel. Hearing of M.A. was concluded on 30.11.2018 and order was reserved and final order was passed on 10.01.2019. When hearing was concluded at that time submissions were made by learned counsel for the parties which was recorded by the learned DRT in the impugned order. Hence, it cannot be accepted that on the date of delivery of the order on 10.01.2019 appellant’s counsel argued the matter or appellant or his counsel was present.

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Learned DRT has directed to register the S.A. and fixed date of hearing on 17.01.2019 for further order. The order sheets of learned DRT Cuttack are as under :

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“17.01.2019	: Both the counsel are present and requested Time for hearing. Request is considered. Call On 30.01.2019 for hearing.
30.01.2019 :	Both the counsel are present and counsel of Respondent bank requested time for filing Objections. Requested is considered. Call on 05.02.2019.
30.01.2019	Counsel for applicant is present. Counsel for Respondent bank along with DGM Anil Dhawan is present and objections filed on

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Behalf of respondent no.1 and 4. Heard both Sides. Call on 04.02.2019 for orders. 05.02.2019 : Counsel for the applicant is present. Counsel For respondent bank is present. Counsel for Applicant requested time for arguments. Request is considered. Both the counsel are At liberty to file their written notes. Call on 11.02.2019.”

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After disposal of the M.A. no notice was issued to the auction purchaser, who could have appeared and contested the matter. As would appear from the order-sheet learned counsel for the appellant herein (respondent no.3 to the S.A.) was present for the first time on 25.02.2019. When the S.A. was directed to be registered on 10.01.2019 by the impugned order, it was incumbent upon the learned DRT to issue fresh notice to the respondent in the S.A. so that they could have liberty to file opposition to the S.A. Thereafter, as would appear from record, appellant herein came to know about the impugned order on 18.02.2019 and moved an application for obtaining certified copy and on receipt of the copy of order, filed the appeal.

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Learned counsel for the respondent submits that the term “Constructive Knowledge” would apply in this case. He has placed reliance on the Law Lexicon at page 394 wherein “Constructive Knowledge” defines as “if one by exercise of reasonable care would have known a fact, he is deemed to have had constructive knowledge of such fact.” For example, matters of public records.

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Learned counsel further placed reliance upon the judgement of Hon’ble Supreme Court in the case of Ram Bali Vs. State of

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UP reported in (2004) 10 SCC 598 and State of Maharashtra Vs. Ramdas Shrinivas Nayak & Anr. Reported in (1982)2 SCC 463. Both the cases relied upon are not applicable to the facts of the present case. In the case of State of Maharashtra (supra) it was held that “Judges record is conclusive. Neither lawyer nor litigant may claim to contradict it, except before the Judge himself, but nowhere else.” In the present case recording made by the learned Presiding Officer, DRT are not being challenged rather appellant has challenged the impugned order on the ground that communication of the impugned order was not made in accordance with law.

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In the case of Ram Bali (supra) it was held that “if a party thinks that the happenings in court have been erroneously recorded in a judgement, it is incumbent upon the party, while the matter is still fresh in the minds of the judges who have made the record, to make necessary rectification. That is the only way to have the record corrected. It is not open to the appellant to contend before this court to the contrary.”

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As far as issue of “constructive knowledge” is concerned no doubt, the definition as relied upon by the learned counsel emphasized that one should exercise reasonable care and by exercise of reasonable care such event should have known to him. He has deemed to have constructive knowledge of such fact in a judicial proceeding, when in the presence of the parties litigating before the court orders have passed, then it is accepted

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that the order was passed in open court. Notice of the impugned order was not delivered to the parties. Further, if the order was reserved by the court without fixing date of delivery, how a litigant can come to know about passing of the order in a reserved matter, if no notice was given either to him or to his counsel? When the matter is heard on different dates and fixed for delivery of the order or matter was reserved for order, when the case is published in the cause list of the court, the litigant or his counsel had sufficient knowledge about the date fixed in the matter. If the orders are passed on a particular date without adopting such process, it cannot be presumed that litigant has constructive knowledge of the fact. Accordingly, it cannot be accepted that the appellant herein was having any direct or constructive knowledge of the impugned order delivered by learned DRT on 10.01.2019.

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Now another issue arises as to whether the appellant is required to file a separate application for condonation of delay or limitation, as claimed by him in the memo of appeal is enough compliance of the Rules? 22. Appeal is filed u/s 18 of the Act. Format is prescribed in Appendix IX of the Security Interest (Enforcement) Rules, 2002 wherein in Colum IV period of ‘Limitation’ has to be mentioned. The period of limitation is reckoned in the appeal from the date of knowledge i.e. 18.02.2019 when the appellant allegedly came to know about the impugned order.

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As far as decision is concerned, learned counsel for the appellant has placed reliance on the judgement of Hon’ble Supreme Court in the case of Raja Harish Chandra Raj Singh Vs. the Deputy Land Acquisition Officer & Anr. [1962(1) SCR 676] and State of Punjab Vs. Mst. Qaisar Jehan Begum & Anr. [1SCR SCC 971] and Assistant Transport Commissioner (Administration), Uttar Pradesh & Ors. Vs. Sri Nand Singh

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[1980 SCR (1) 131] wherein it was held that date of knowledge is the relevant date for reckoning the period of limitation for filing appeal. An order would be effective against the person affected by it only when it comes to his knowledge either directly or constructively, otherwise not. It was held in the case of Assistant Transport Commissioner (supra) that the order must be made known either directly or constructively to the party affected by the order to enable him to prefer an appeal, if he so likes. In the present case as has been held by the Hon’ble Apex Court referred to above date of knowledge of the impugned order is the relevant date to calculate the period of limitation.

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In the case of Bhagmal & Ors. Vs. Kunwar Lal & Ors . reported in (2010) 8 SCR 1104 there was an issue regarding filing of application under Order IX Rule 13 of CPC stating that it is time barred, but in that case the delay in filing the application under Order IX Rule 13 was condoned, which is held to be justified by the Hon’ble Supreme Court. It was further held that the question of filing Order IX Rule 13 application was fully justified from

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seeking limitation from the date, when the applicant therein came to know about the exparte proceeding against them. Accordingly, as far as appellant herein is concerned, he came to know about the impugned order on 18.02.2019 thereafter he applied for copy on 18.02.2019, copy was prepared on 04.03.2019 and he received copy on 07.03.2018. Appeal was filed on 19.03.2019. The appeal was filed well within time from the date of knowledge of the impugned order. No separate application u/s 5 of the Limitation Act was required for condonation of delay.

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S.A. was disposed of pending appeal. It was held in Paragraph 05 of the case of G. Ramegowda, Major Vs. The Special Land Acquisition Officer, Bangalore [AIR 1988 SC 897] by the Hon’ble Supreme Court as under :

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“5. We might, perhaps, deal with the latter submission of Shri Veerappa first. The fact that the main appeals are themselves, in the meanwhile, disposed of finally on the merits by the High Court would not by itself detract from and bar the consideration of the correctness of the order condoning the delays. This is an instance of what are called 'dependant-orders' and if the order excusing the delays is itself set aside in these appeals, the further exercise, made in the meanwhile, by the High Court finally disposing of the appeals, would be rendered nugatory. The submission of Shri Veerappa is, therefore, insubstantial.”

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Accordingly, decision of the S.A. pending appeal would not adversely affect merit of this case.

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Coming to the merit of the matter I find that SARFAESI applicant has filed the S.A. challenging the auction sale and sale certificate along with application for condonation of delay. Initially stating, the statutory period for filing application u/s 17 of the Act is 45 days, but due to non-arrangement of fund for

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preparation of demand draft even after the date of knowledge, filing of the application u/s 17 of the Act was delayed. Thereafter another application on the same date is on record wherein it is stated that applicant was taken in judicial custody on 14.09.2014 and was released on 23.11.2016. According to applicant as he was under judicial custody entire delay in filing the application was caused. S.A. was filed on 12.12.2017. It would be pertinent to note that when the SARFAESI applicant came to know about SARFAESI proceeding is nowhere stated in the application. SARFAESI applicant submits that from the date of knowledge he took time to arrange fund for preparation of demand draft, further he was under judicial custody from 14.09.2014 to 23.11.2016. In the objection filed by the opposite party it is stated that SRAFAESI proceedings were drawn against the SARFAESI applicant in accordance with law. All the notices were served upon him. Publication was made in the leading newspapers. SARFAESI proceeding was concluded. Sale certificate was registered in favour of the auction purchaser. As per the SARFAESI applicant he was in judicial custody from 14.09.2014 to 23.11.2016. There is nothing stated in the application for condonation of delay that no notice was ever served upon him and he has no knowledge even after publication of notice made under the Act. Hence, it cannot be accepted that SARFAESI applicant was not having knowledge of the SARFAESI proceeding drawn by the bank.

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Hence, the ground taken by the SARFAESI applicant in the application for condonation of delay has no merit. Learned DRT has recorded erroneous finding that in order to do substantial justice delay is condoned. Learned DRT was under an obligation to find out as to whether the grounds taken by the SARFAESI applicant are supported by the material available on record, but without entering into the merit for condonation of delay and without assigning any reason for condonation of delay, M.A. was allowed, which is erroneous exercise of power by the learned DRT. On the basis of discussion made above, I am of the considered view that the SARFAESI applicant has measurably failed to make out any ground for condonation of delay in filing the application u/s 17 of the Act. Accordingly, I am of the view that impugned order was erroneously passed by learned DRT which is liable to be set aside.

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O R D E R

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Appeal is allowed. Impugned order dated 10.01.2019 passed by learned DRT is set aside. M.A. No. 1162 of 2017 filed by the respondent no.2 herein before the learned DRT stands dismissed. No order as to costs.

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File be consigned to record room.

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Copy of the order be supplied to the appellant and the respondent and a copy be also forwarded to the concerned DRT.

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Copy of the judgement/Final Order be uploaded in the

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Tribunal’s website.

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Order dictated, signed and pronounced by me in the open Court on this the 5^th day of September, 2023.

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