Vijaya Bank vs B. L. Gupta ...Counter Claim

Sections dealt with :Sec13(4) and 17­ of SARFAESI Act

Debts Recovery Appellate Tribunal, Delhi

Before:

HON'BLE J.M. MALIK, CHAIRPERSON:      

Vijaya Bank...................................................................................... Appellantt

                                                        Versus

;,

B.L. Gupta & Ors........................................................................ Respondents                                                            

Misc. Appeal No. 148 of 2011, decided on 16.3.2011 

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Sections 13(4) and 17­ 

JUDGMENT

J. M. Malik, Chairperson.-The controversy in this appeal revolves around the question whether the respondents can file counter-claim in the proceedings under Section 17 of the SRFAESI Act. The learned Counsel for the appellant opined that the respondents cannot file counter-claim.

He explained that there is specific provision in the Recovery of Debts to Banks and Financial Institutions Act, 1993. The attention of the Court was invited towards Section 19, sub-sections (8) and (9) of the above said Act. It was argued that. no such provision is provided in the SRFAESI Act. He also argued that Section 17 of the SRFAESI Act deals with the measures referred to in sub-section (4) of the Section 13 of the SRFAESI Act. 

2. I see no merit in these arguments. The application under Section 17 of SRFAESI Act is to be treated as civil suit. This view finds support from the Apex Court authority reported in Mardia Chemicals Ltd. v. Union of India, 2004; (4) SCC 311 and latest authority by the Madras High Court in Misons Leather Ltd. represented by its Managing Director v. Canara Bank, represented by its Chief Manager, I (2008) BC 440 wherein it was held:

"8.     Learned Counsel appearing for, the petitioners strenuously contended that in Mardia Chemicals's case, the Supreme Court has clearly held that the proceedings under Section 17 of the Act are in lieu of Civil Suit, which remedy is already available but barred under Section 34 of the Act. Our attention was drawn to the observations in paragraphs 59, 62 and 71 of the judgment, which read as follows:

59.    We may like to observe that proceedings under Section 17 of the Act, in fact, are not appellate proceedings. It seems to be a misnomer. In fact it is the initial action which is brought before a Forum as prescribed under the Act, raising grievance against the action or measures taken by one of the parties to the contract. It is the stage of initial proceeding like filing a suit in Civil Court. As a matter of fact proceedings under Section 17 of the Act are in lieu of a civil suit which remedy is ordinarily available but for the bar under Section 34 of the Act in the present case. We may refer to a decision of this Court in Ganga Bai v. Vijay Kumar where in respect of original and appellate proceedings a distinction has been drawn as follows: (SCC p. 397, para 15)

There is a basic distinction between} the right of suit and the right of appeal. There is an inherent right in every person to bring a suit of civil nature and unless the suit is barred by statute one may at one's peril, bring a suit of one's choice. It is no answer to a suit, howsoever frivolous to claim, that the law confers no such right to sue. A suit for its maintainability requires no authority of law and it is enough that no statute bars the suit. But, the position in regard to appeal is quite the opposite. The right of appeal inheres in no one and therefore an appeal for its maintainability must have the clear authority of law. That explains why the right of appeal is described as a creature of statute.

62.     As indicated earlier, the position of the appeal under Section 17 of the Act is like that of a suit in the Court of the first instance under the Code of Civil Procedure. No doubt, in suits also it is permissible, in given facts and circumstances and under the provisions of the law to attach the property before a decree is passed or to appoint a receiver and to make a provision by way of interim measure in respect of the property in suit. But, for obtaining such orders a case for the same is to be made out in accordance with the relevant provisions under the law. There is no such provision under the Act.

71.    Arguments have been advanced as to how far principles of lender's liability are applicable. Whatever be the position, however, it cannot be denied that the financial institutions, namely, the lenders owe a. duty to act fairly and in good faith. There has to be a fair dealing between the parties and financing companies/institutions are not free to ignore performance of their part of tlte obligation as a party to the contract. They cannot be free from it. Irrespective of the fact as to whatever may have been held in decisions of some American Courts, in view of the facts and circumstances and the terms of the contract and other details relating to those matters, that may or may not strictly apply, nonetheless, even in absence of any such decisions or legislation, it is incumbent upon such financial institutions to act fairly and in good faith complying with their part of obligations under the contract. This is also the basic principle of the concept of lender's liability. It cannot be a one-sided affair shutting out all possible and reasonable remedies to the other party, namely, borrowers and assumes all drastic powers for speedier recovery of NP As. Possessing more drastic powers calls for exercise of higher degree of good faith and fair play. The borrowers cannot be left remediless in case they have been wronged against or subjected to unfair treatment violating the terms and conditions of the contract. They can always plead in defence deficiencies on the part of the Banks and financial institutions.'

10     We are afraid that the contention is totally misconceived. The provisions of Section 17 (1) of the Act provides remedy for the borrower / guarantor / mortgagor to challenge the action of the Bank under Section 13 (4) of the Act before the Debts Recovery Tribunal. The Debts Recovery Tribunal is required to decide whether the action of the Bank/ Financial Institutions, under Section 13 (4) is in accordance with the provisions of the Act and the rules framed thereunder, It is open to the borrower/guarantor /mortgagor to demonstrate before the Debts Recovery Tribunal that resort to Section 13 of the Act is not permissible by law. In a given case, the claim of the Bank/Financial Institutions may be barred by limitation or there may be cases, where the adjustment of the amount paid is not reflected in the notice or the calculation of interest may not be in accordance with the contract between the parties. 

           Needless to say that all such grounds, which render the action of the Bank/Financial Institutions illegal can be raised in the proceedings under Section 17 of the Act before the Debts Recovery Tribunal.

11     Learned Additional Solicitor General and the learned Counsel appearing for Banks and financial institutions fairly stated that all the objections which can be legally raised in the reply to the notice under Section 13 (2) of the Act can also be raised in the proceedings under Section 17 (1) of the Act. It would be for the Debts Recovery Tribunal to decide in each case whether the action of the Bank is in accordance with the 'provisions of the Act and is legally sustainable."

3. In the light of the above discussion the petitioners/respondents can file the counter-claim I see no illegality or infirmity in the order passed by the learned Trial Court. The appeal is, therefore, dismissed in limine.

4. Copies of this order be furnished to the parties as per law and one copy be sent to the learned DRT forthwith.