Banking Law & Incidental matters part 6

 Summary of Question-  Condonation of Delay in Application / Appeal before  DRT / DRAT

 

Question –  Whether  (i) Section 5 of the Limitation Act is applicable to condone delay in Filing OA under section 19 of the DRT Act (ii) whether section 5 of the Limitation Act is applicable to condone delay in filing Application under section 17(1) of SARFAESI Act and Appeal under section 18(1) of the SARFAESI Act.  

Answer-  No to (i) and Yes to (ii).

1. Section 5 of the Limitation Act for condonation of delay in filing OA u/s 19 of Recovery of Debts Due to Bank and Financial Institution Act , 1993 (Now Recovery of Debts and Bankruptcy Insolvency resolution and bankruptcy of Individuals and partnership firms Act, 1993) [for Short DRT Act] does not apply to enable a Bank or Financial Institution to file OA of a time barred debt because section 24 of the DRT Act provides that the provisions of the Limitation Act 1963 shall, as far as may be, apply to an application made to DRT. An application under Section 19 being in the nature of a suit for recovery of debt (though it may not be a civil suit for all other purposes), the limitation period prescribed in the limitation Act for filing a suit for recovery of the same debt would apply. As there is no provision in the Limitation Act, 1963 for condonation of delay in filing a suit under section 5 of the Limitation Act, delay in filing OA for recovery of a time barred debt cannot be condoned under section 5 of the Limitation Act. 

 2. Although section 5 of the Limitation Act does not apply to condone delay in filing OA under section 19 of the DRT Act to recover a time barred debt, section 5 is applicable to condone delay in filing an application under section 17(1) of the SARFAESI Act before DRT as also an appeal before DRAT under section 18(1) of the SARFAESI Act. Earlier there were decisions that section 5 does not apply in the matter of an application under section 17(1) and appeal under section 18(1) of the SARFAESI Act , but the legal position has changed after decision of the Hon’ble supreme Court in the case reported in (2016) 1 SCC 444. 

 

 

Rationale-

1.In the writ petition, reported in IV (2016) BC 267 (Kar) before the Hon’ble Karntaka High Court,  an issue before the DRT was whether Section 5 of the Limitation Act can be invoked by the petitioner/applicant who opts to file petition/application under Section 17 of the SARFAESI Act, seeking to condone the delay in filing the petition/application under Section 17 of the SARFAESI Act and whether DRT can invoke Section 5 of the Limitation Act to condone the delay in filing the petition/application under Section 17 of the SARFAESI Act, 2002.


1.1.  The learned DRT while rejecting the applications seeking condonation of delay,   relied upon a decision of the Hon’ble Madras High Court in Zubida Begaum v. Indian Bank & others, 2013 (1) DRTC 226, which was a Division Bench judgment holding that Section 5 of the Limitation Act, 1963 could not be invoked in proceedings before the DRT and that any appeal filed after the prescribed period, could not be entertained.
 

1.2. The Hon’ble High Court, however, allowed the writ petition and remanded the matter back to the DRT for fresh consideration relying  upon the Hon’ble  Supreme Court decision in the case reported in (2016) 1 SCC 444, in which the  question was whether the Appellate Authority under the SARFAESI Act has the power to condone the delay in filing an appeal under Section 18(1) of the SARFAESI Act, and the Supreme Court answered the question in the affirmative.


2. In another case a Division Bench of the Hon’ble P&H High Court in CWP No. 21519 of 2018 (Oswal Spinning And Weaving  vs Uco Bank) decided on the  29th.  October, 2018 held that DRT has jurisdiction to entertain the application for condonation of delay under section 5 of the Limitation Act in case it is accompanied along with section 17 (1) SARFAESI Application. Some of the observation of the P&H High Court are:
“There is a specific provision under Section 17(7) of the 2002 Act stating that the Debts Recovery Tribunal, as far as may be, dispose of the application in accordance with the provisions of the 1993 Act and the rules made thereunder. Further, Section 24 of the 1993 Act states that the provisions of the Limitation Act, 1963 would apply to an application made to the Tribunal. Hence the intention of the legislature clearly shows that the provisions of the Limitation Act, 1963 are specifically applicable to the 2002 Act. The legislature has not specifically excluded the provisions of the Limitation Act, 1963.”
“From the discussion and reading of the judicial pronouncements as quoted above, the inevitable conclusion is that Section 17(1) of the 2002 Act is virtually a remedy in respect of a right of redemption. Hence the application of Section 5 of the Limitation Act, 1963 to proceedings under Section 17(1) of the 2002 Act would neither defeat the rights nor cause irreparable hardship to the secured creditor. The provisions of the Limitation Act, 1963 are applicable to the proceedings under Section 17 of 2002 Act before the DRT in view of Section 24 of the 1993 Act and therefore, the provisions of section 5 of the Limitation Act, 1963 are applicable to the provisions of the said Act. Further, 2002 Act does not expressly exclude the application of the provisions of the Limitation Act, 1963.”


3.  A Division  Bench of the Hon’ble A.P High Court in the case  reported in  I (2019) BC 356 (AP) observed and held:


“ It is therefore manifest that an application filed under Section 17(1) of the SARFAESI Act, though unlike an application under Section 19 of the RDDB Act, has to be dealt with in accordance with the provisions of the RDDB Act, as per Sections 17(7) and 37 of the SARFAESI Act. Therefore, Section 24 of the RDDB Act which makes the Act of 1963 applicable to an application would come into play as it cannot be denied that what is presented to the Tribunal under Section 17 of the SARFAESI Act is also an application. It is therefore amply clear that the provisions of Section 5 of the Act of 1963 would be applicable to a belated application made under Section 17 of the SARFAESI Act.”


“Be it noted that in AKSHAT COMMERCIAL PVT. LTD.  AIR 2010 Calcutta 138, the Calcutta High Court observed that although in a proceeding under Section 17(1) of the SARFAESI Act, the provisions of the Act of 1963 apply in general, as far as may be, yet Section 5 of the Act of 1963, in particular, has no application in view of the fact that the proceeding is original in nature like a suit and Section 5 of the Act of 1963 has no application to a suit. It was therefore concluded that Section 5 of the Act of 1963, at least, would not apply to an application under Section 17(1) of the SARFAESI Act which should be treated as a suit, although other relevant provisions of the Act of 1963 may apply. It is this view that weighed with the Appellate Tribunal to hold that Section 5 of the Act of 1963 would not apply to an application filed under Section 17(1) of the SARFAESI Act.”


“ However, the Calcutta High Court failed to note the distinction between an application under Section 19 of the RDDB Act and an application under Section 17(1) of the SARFAESI Act. As already stated supra, an application under Section 19 of the RDDB Act is practically equivalent to a recovery suit governed by the ordinary law of limitation as per the Act of 1963 but the same is not the case with an application under Section 17(1) of the SARFAESI Act. Failure to recognize this difference led to the misguided extension of the norm that Section 5 of the Act of 1963 would not apply to a time-barred suit to a belated application under Section 17(1) of the SARFAESI Act. What is presented to the Tribunal under Section 17(1) of the SARFAESI Act is, all said and done, an application and the Act of 1963, including Section 5 thereof, is made applicable to such an application by virtue of Section 24 of the RDDB Act.”
“On the above analysis, this Court finds that the law laid down by the Calcutta High Court in AKSHAT COMMERCIAL PVT. LTD.  AIR 2010 Calcutta 138 does not constitute good law for the reasons stated above and in the light of the principles spelt out by the Supreme Court in BALESHWAR DAYAL JAISWAL  (2016) 1 SCC 444 and INTERNATIONAL ASSET RECONSTRUCTION COMPANY OF INDIA LTD.  AIR 2017 SC 5013. The provisions of Section 5 of the Act of 1963 would therefore be very much applicable to an application filed beyond time under Section 17(1) of the SARFAESI Act.”

 

 

Summary of Question-   138 N.I. Act  prosecution  against authorized signatory of company / Partnership Firm.

Question –  Whether authorized signatory of a company / Partnership Firm  would  be liable for prosecution under Section 138 of the N. I. Act without the company / Firm  being arraigned as an accused and without Notice to the Company / Firm.

Answer- No.

Rationale-


1. In  the case reported in  (2019) 3 SCC 797, the Hon’ble Supreme Court referred to its earlier decisions , and observed and held :

“In the absence of the company being arraigned as an Accused, a complaint against the Appellant was therefore not maintainable. The Appellant had signed the cheque as a Director of the company and for and on its behalf. Moreover, in the absence of a notice of demand being served on the company and without compliance with the proviso to Section 138, the High Court was in error in holding that the company could now be arraigned as an Accused.”

 

2. In view of the Honble Madras high Court decision CRL.O.P  No.13147  of  2015 and Cri.M.P  Nos.1  and  2  of  2015 ( Rangabashyam    Vs. Ramesh), decided on the 27th July 2019, prosecution under section 138 N. I Act can’t continue if bounced cheque is on behalf of a Partnership Firm but Notice of demand has not been sent to the Partnership Firm and the Partnership Firm has not been made accused, even though the Firm is un-registered under Partnership Act.