Case Note & Summary
The petitioner, International Asset Reconstruction Co Pvt Ltd, an asset reconstruction company acting as trustee of IARC-BOB-01/07 Trust, filed a writ petition under Articles 226 and 227 of the Constitution of India challenging the order dated 8 September 2020 passed by the Debts Recovery Appellate Tribunal (DRAT), Mumbai. The DRAT had set aside the order dated 4 August 2020 of the Debts Recovery Tribunal-1 (DRT), Mumbai, which had condoned the delay in filing the claim affidavit by Respondent No. 1, Ambalal Sarabhai Enterprises Limited, a guarantor. The petitioner is the assignee of Bank of Baroda, which had assigned the debt due from Respondent No. 2 (a demerged division of Respondent No. 1) under the SARFAESI Act. Originally, Central Bank of India and Bank of Baroda had filed a joint suit in the Bombay High Court (Suit No. 2520 of 1989) for recovery of amounts due, which was later transferred to the DRT and renumbered as Transfer Original Application No. 2571 of 1999. Multiple proceedings ensued, culminating in the Supreme Court's order dated 20 November 2003 in Civil Appeal Nos. 6545 and 6546 of 1997, directing Respondent No. 1 to execute a guarantee. The core legal issue was whether the DRAT was justified in setting aside the DRT's order condoning the delay in filing the claim affidavit. The petitioner argued that the delay was inordinate and the DRT's order was erroneous, while the respondent contended that the delay was minimal and the DRT had correctly exercised its discretion. The High Court analyzed the facts and held that the delay was not inordinate and the DRAT ought not to have interfered with the DRT's discretionary order. The Court emphasized that the guarantor's right to participate in the proceedings should not be foreclosed on technical grounds and that adjudication on merits should be preferred. Consequently, the High Court set aside the DRAT's order and restored the DRT's order condoning the delay, allowing the writ petition.
Headnote
A) Limitation - Condonation of Delay - Section 5 of Limitation Act, 1963 - Claim Affidavit - The issue pertained to whether the DRAT correctly set aside the DRT's order condoning delay in filing claim affidavit by the guarantor. The Court held that the delay was not inordinate and the DRAT ought not to have interfered with the discretion exercised by the DRT, as the guarantor's right to participate in the proceedings should not be foreclosed on technical grounds. (Paras 1-15) B) SARFAESI Act - Right of Guarantor - Section 13 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Participation in Proceedings - The Court considered the guarantor's right to file a claim affidavit in proceedings initiated by the asset reconstruction company. It was held that the guarantor is entitled to be heard and the delay in filing the claim affidavit should be condoned to ensure adjudication on merits. (Paras 4-15) C) Constitutional Law - Writ Jurisdiction - Articles 226 and 227 of Constitution of India - Interference with Discretionary Orders - The Court examined whether the High Court should interfere with the DRAT's order. It was held that the DRAT's order was perverse and set aside, restoring the DRT's order condoning delay, as the DRT had exercised its discretion judiciously. (Paras 1-15)
Issue of Consideration
Whether the Debts Recovery Appellate Tribunal (DRAT) was justified in setting aside the order of the Debts Recovery Tribunal (DRT) condoning the delay in filing the claim affidavit by the guarantor (Respondent No. 1) in proceedings under the SARFAESI Act.
Final Decision
The High Court allowed the writ petition, set aside the DRAT order dated 8 September 2020, and restored the DRT order dated 4 August 2020 condoning the delay in filing the claim affidavit.
Law Points
- Condonation of delay
- Limitation Act
- 1963
- Section 5
- Debts Recovery Tribunal procedure
- SARFAESI Act
- 2002
- Claim affidavit
- Right to be heard
- Adjudication on merits
