DR Tribunal-2 examined a claim that securitisation proceedings abated due to the guarantor's death and lack of Section 14 notice. The court found the proceedings were not bad in law and dismissed the application.
The Securitisation Application was dismissed with costs.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
DEBTS RECOVERY TRIBUNAL-2, CHANDIGARH, PRESIDED OVER BY M.M. DHONCHAK
DATED THE 19th DAY OF JANUARY, 2023 SECURITISATION APPLICATION NO.225/2022
Nirmal Gupta W/o Late Sh. Jai Kishan Gupta R/o House No. 1280, Sector-8, Faridabad, Haryana (Legal heir of Guarantor)
…..Applicant
Versus
Bank of Baroda, MSME Ballabhgarh Branch, Pujari Complex, First Floor, Mohna Road, Ballabhgarh-121004, Haryana, through its Authorised Officer
…..Respondent
Argued by: Sh. Harsh Mehla counsel for the SA applicant Sh. Rahul Garg counsel for the respondent bank
FINAL ORDER
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SA/225/2022 NIRMAL GUPTA Vs BANK OF BARODA
It was further argued by the learned counsel for the applicant that notice under Section 14 of the Act was not served upon the applicant by the learned Chief Judicial Magistrate, Faridabad.
It was argued by the learned counsel for the respondent bank that notice under Section 13(2) of the Act was served upon the guarantor who had died subsequently. It was further argued that notice under Section 13 (4) of the Act was also served upon the guarantor during his lifetime.
Learned counsel for the respondent bank argued that there was no question of abatement of the proceedings and those could continue. He placed reliance upon the judgment of the Division Bench of the Hon’ble High Court of Punjab and Haryana in the case of “Kotak Mahindra Bank Ltd. Vs. The District Magistrate and Another,” (Civil Writ Petition No. 435/2022), decided on 03.08.2022, wherein it was held that a secured creditor is not required to issue fresh notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, to the legal heirs of a deceased guarantor or borrower if the guarantor or borrower dies after initiation of proceedings.
Facts and circumstances of the case of “N. Jayaram Reddy and Another vs. Revenue Divisional Officer,” (Civil Appeal No. 2314 of 1969), decided on 23.03.1979, relied upon by the learned counsel for the applicant being not identical to the present case, the same is not applicable.
Facts and circumstances of the case of “The Authorised Officer, Tamilnad Mercantile Bank Limited and Another Vs. Devi Prasad,” (W.A. No. 1754 of 2017), decided on 07.08.2019, relied upon by the learned counsel for the applicant, being not identical to the present case, the same is not applicable.
SA/225/2022 NIRMAL GUPTA Vs BANK OF BARODA
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Going by the pleadings of the parties, it can be safely inferred that notice with regard to the proceedings under Section 14 of the Act was not served upon the applicant but at the same time, it has not been shown at Bar or mentioned in the pleadings as to how such a notice was/is sine qua non. The scope of Section 17 of the Act is with regard to the measures referred to in sub-Section 4 of Section 13 of the Act by the secured creditor and now for the purposes of Section 13(4) of the Act, Section 14 of the Act cannot be allowed to come in play.
In the case of “NKGSB Cooperative Bank Limited Vs. Subir Chakravarty & Ors.,” (Civil Appeal No. 1637/2022) decided on 25.02.2022, the Hon’bl e Apex Court hel d that an order under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is a ministerial act. It cannot brook delay. Time is of the essence and this is the spirit of the special enactment.
In the case of “M/s R.D. Jain and Co. Vs. Capital First Ltd. & Ors,” (Civil Appeal No. 175/2022) decided on 27.07.2022, the Hon’ble Supreme Court of India held that as per Section 14(1) [1A] of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the secured creditor is required to comply certain conditions and to disclose that by way of an application accompanied by affidavit duly affirmed by its authorised officer in that regard. It was further held that the CMM/DM has to act within the stipulated time limit and pass a suitable order for the purpose of taking possession of the secured assets within a period of 30 days from the date of application which can be eXtended for such further period but not eXceeding in the aggregate, siXty days. Thus, the powers eXercised by the CMM/DM is a ministerial act. It was further held that Section 14 does not oblige the CMM/DM to go personally and take possession of the secured assets and documents relating thereto. It was further held that while disposing of the application under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, no element of quasi−judicial function or application of mind would be required. It was further held that the power vested in the learned Chief Metropolitan Magistrate/learned District Magistrate is not by way of persona designata .
SA/225/2022 NIRMAL GUPTA Vs BANK OF BARODA
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“the proceedings under the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, cannot be held to be bad in law merely on raising an trivial objection which has no legs to stand unless the person is able to show any substantial prejudice being caused on account of procedural lapse as prescribed under the Act or the rules framed thereunder still with a caveat that it always depends upon the facts of each case to decipher the nature of the procedural lapse being complained of and the resultant prejudice, if any, being caused and there cannot be a straitjacket formula which can be uniformly followed in all the transactions.”
In view of the above discussion, there is no infirmity in the securitisation proceedings. Consequently, the SA is dismissed with costs.
Announced in the open Tribunal (M.M. Dhonchak) Presiding Officer DRT-2, Chandigarh
SA/225/2022 NIRMAL GUPTA Vs BANK OF BARODA
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SECURITISATION APPLICATION NO.225/2022 DATE OF INSTITUTION: 09.11.2022 DATE OF DECISION: 19th DAY OF JANUARY, 2023
3 issues framed by the court
Whether the sale/securitisation proceedings under the SRF Act abate upon the death of the guarantor or need to be initiated afresh.
Whether the non-service of notice under Section 14 of the Act vitiated the Section 13(4) possession proceedings.
Whether the procedural lapses alleged caused any substantial prejudice justifying the quashing of the proceedings.
Colour shows how this judgement treated each authority
Kotak Mahindra Bank Ltd. Vs. The District Magistrate and AnotherDistinguished¶19
Kotak Mahindra Bank Ltd. Vs. The District Magistrate and Another, (Civil Writ Petition No. 435/2022)
N. Jayaram Reddy and Another vs. Revenue Divisional OfficerDistinguished¶20
N. Jayaram Reddy and Another vs. Revenue Divisional Officer, (Civil Appeal No. 2314 of 1969)
The Authorised Officer, Tamilnad Mercantile Bank Limited and Another Vs. Devi PrasadDistinguished¶21
The Authorised Officer, Tamilnad Mercantile Bank Limited and Another Vs. Devi Prasad, (W.A. No. 1754 of 2017)
NKGSB Cooperative Bank Limited Vs. Subir Chakravarty & Ors.Explained¶25
NKGSB Cooperative Bank Limited Vs. Subir Chakravarty & Ors., (Civil Appeal No. 1637/2022)
M/s R.D. Jain and Co. Vs. Capital First Ltd. & OrsExplained¶26
M/s R.D. Jain and Co. Vs. Capital First Ltd. & Ors, (Civil Appeal No. 175/2022)
M/s L&T Housing Finance Limited Vs. M/S Trishul Developers and AnotherExplained¶30
M/s L&T Housing Finance Limited Vs. M/S Trishul Developers and Another
4 provisions across 1 enactments
Nirmal Gupta
Bank of Baroda
M.M. Dhonchak
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
M.M. Dhonchak
Parties & counsel
