# STANDARD CHARTERED BANK v. DHARMINDER BHOHI AND OTHERS

- **Citation:** [2013] 9 S.C.R. 410
- **Court:** Supreme Court of India
- **Decided:** 2013-09-13
- **Case number:** Civil Appeal No. 8486 of 2013
- **Bench:** Anil R. Dave, Dipak Misra
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/standard-chartered-bank-v-dharminder-bhohi-and-others-29289
- **Pages:** 27

## Headnote

SEGUR/TISA TION AND RECONSTRUCTION OF
FINANCIAL
ASSETS
AND
ENFORCEMENT
OF
C SECURITY INTEREST ACT, 2002:
Delay in disposal of cases and granting of adjournments
by ORT and DRAT - Object of the Act - Explained -- Held:
Delay in disposal of application by DRT and appeal by DRAT
0 has the potentiality or creating a corrosion in the economic
spine of the country - Grant of an adjournment should be an
exception and not a routine and mechanical matter -
Tribunals are expected to act in quite promptitude, so that an
. ingenious litigant does not take recourse to dilatory toctics -
In the case at hand, there was no reason for DRAT to keep
E on adjourning the matter and finally dispose it by passing an
extremely laconic order -- A curative step is warranted and
Chairman and Members of DRAT shall endeavour to remain
alive to the obligations as expected of them by such special
legislations, namely, SARFAES/ Act and ROB Act -
F Adjournments.
RECOVERY OF DEBTS DUE TO BANKS AND
FINANCIAL INSTITUTIONS ACT, 1993:
G
ss. 19 and 22 - Object of the Act and the procedure
before Tribunal - Held: DRT and ORA T shall not be bound
by the procedure laid down by the Code of Civil Procedure,
but shall be guided by the principles of natural justice and
subject to the rules framed -- They have been conferred
H
410
STANDARD CHARTERED BANK v. DHARMINDER
411
BHOHI
powers to regulate their own procedure, as the very purpose
A
of their establishment is to expedite disposal of applications
and appeals preferred before them -- They have the character
of specialized institutions with expertise and have been
confeffed jurisdiction to decide the /is in speedy manner so
that the larger public interest, that is, the economy of the
B
country does not suffer.
s.19(25) - Powers of Tribunal - Held: s.19(25) confers
limited powers -- Tribunal has been given power under the
statute to pass such other orders and give such directions as
C
to give effect to its orders or to prevent abuse of its process
or to secure the ends of justice -- Tribunal is required to
function within the statutory parameters - It does not have any
inherent powers - Tribunal cannot assume the role of a court
of different nature which can grant "liberty to initiate any action
against the bank" -- Taking note of a submission made at the
D
behest of auction purchaser and then proceed to say that he
is at liberty to file any action against bank for any omission
committed by it, has no sanction of law -- Therefore, the
observation, namely, "liberty is also given to the auction
purchaser to file action against the bank for any omission
E
committed by it", is deleted -- Judgment of High Court whereby
it has declined to interfere with the grant of liberty by ORA T
is also set aside.
Respondent no. 1 obtained a home loan from· the
F
appellant-Bank on 17.5.1999, and on his failure to repay
the same, the Bank proceeded to sell the mortgaged
property, which he had purchased from respondent no.
2- developer. Respondent no. 1 filed an application u/s
17(1) read with s.19 of the Securitisation and
G
Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002(5ARFAESI Act). The matter
was taken to DRAT and then to High Court. Meanwhile
the property was sold and respondent no. 3, the auction
purchaser, deposited the required amount. However, the
H
412
SUPREME COURT REPORTS
[2013] 9 S.C.R.
A ORT, by its order dated 25.10.2005 granted time to the
borrower to deposit the entire amount with the bank and
the developer, and Rs. 1 lakh to auction purchaserrespondent no. 3, as compensation. Respondent no. 1
filed an appeal before the DRAT, which, by an interim
B order directed him to deposit Rs.7.55 lakhs with the Bank,
and while disposing of the appeal, inter alia, directed the
Bank to return Rs.25,60,000/- to auction-purchaserrespondent no. 3 and granted liberty to respondent no.
3 to file action against appellant-Bank "for any omission
c committed by it". The writ petition filed by the B.mk was
dismi

## Text

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A
B
[2013] 9 S.C.R. 410
STANDARD CHARTERED BANK
v.
DHARMINDER BHOHI AND OTHERS
(Civil Appeal No. 8486 of 2013)
SEPTEMBER 13, 2013
[ANIL R. DAVE AND DIPAK MISRA, JJ.]
SEGUR/TISA TION AND RECONSTRUCTION OF
FINANCIAL
ASSETS
AND
ENFORCEMENT
OF
C SECURITY INTEREST ACT, 2002:
Delay in disposal of cases and granting of adjournments
by ORT and DRAT - Object of the Act - Explained -- Held:
Delay in disposal of application by DRT and appeal by DRAT
0 has the potentiality or creating a corrosion in the economic
spine of the country - Grant of an adjournment should be an
exception and not a routine and mechanical matter -
Tribunals are expected to act in quite promptitude, so that an
. ingenious litigant does not take recourse to dilatory toctics -
In the case at hand, there was no reason for DRAT to keep
E on adjourning the matter and finally dispose it by passing an
extremely laconic order -- A curative step is warranted and
Chairman and Members of DRAT shall endeavour to remain
alive to the obligations as expected of them by such special
legislations, namely, SARFAES/ Act and ROB Act -
F Adjournments.
RECOVERY OF DEBTS DUE TO BANKS AND
FINANCIAL INSTITUTIONS ACT, 1993:
G
ss. 19 and 22 - Object of the Act and the procedure
before Tribunal - Held: DRT and ORA T shall not be bound
by the procedure laid down by the Code of Civil Procedure,
but shall be guided by the principles of natural justice and
subject to the rules framed -- They have been conferred
H
410
STANDARD CHARTERED BANK v. DHARMINDER
411
BHOHI
powers to regulate their own procedure, as the very purpose
A
of their establishment is to expedite disposal of applications
and appeals preferred before them -- They have the character
of specialized institutions with expertise and have been
confeffed jurisdiction to decide the /is in speedy manner so
that the larger public interest, that is, the economy of the
B
country does not suffer.
s.19(25) - Powers of Tribunal - Held: s.19(25) confers
limited powers -- Tribunal has been given power under the
statute to pass such other orders and give such directions as
C
to give effect to its orders or to prevent abuse of its process
or to secure the ends of justice -- Tribunal is required to
function within the statutory parameters - It does not have any
inherent powers - Tribunal cannot assume the role of a court
of different nature which can grant "liberty to initiate any action
against the bank" -- Taking note of a submission made at the
D
behest of auction purchaser and then proceed to say that he
is at liberty to file any action against bank for any omission
committed by it, has no sanction of law -- Therefore, the
observation, namely, "liberty is also given to the auction
purchaser to file action against the bank for any omission
E
committed by it", is deleted -- Judgment of High Court whereby
it has declined to interfere with the grant of liberty by ORA T
is also set aside.
Respondent no. 1 obtained a home loan from· the
F
appellant-Bank on 17.5.1999, and on his failure to repay
the same, the Bank proceeded to sell the mortgaged
property, which he had purchased from respondent no.
2- developer. Respondent no. 1 filed an application u/s
17(1) read with s.19 of the Securitisation and
G
Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002(5ARFAESI Act). The matter
was taken to DRAT and then to High Court. Meanwhile
the property was sold and respondent no. 3, the auction
purchaser, deposited the required amount. However, the
H
412
SUPREME COURT REPORTS
[2013] 9 S.C.R.
A ORT, by its order dated 25.10.2005 granted time to the
borrower to deposit the entire amount with the bank and
the developer, and Rs. 1 lakh to auction purchaserrespondent no. 3, as compensation. Respondent no. 1
filed an appeal before the DRAT, which, by an interim
B order directed him to deposit Rs.7.55 lakhs with the Bank,
and while disposing of the appeal, inter alia, directed the
Bank to return Rs.25,60,000/- to auction-purchaserrespondent no. 3 and granted liberty to respondent no.
3 to file action against appellant-Bank "for any omission
c committed by it". The writ petition filed by the B.mk was
dismissed.
Partly allowing the appeal, the Court
HELD: 1.1. Delay in disposal of the application by the
D ORT and the appeal by DRAT has the potentiality of
creating a corrosion in the economic spine of the country.
It is significant to note that though the appeal was
admitted by the DRAT on 14.11.2005, yet the same was
disposed of on 20.5.2010 almost after four and half years.
E The DRAT has totally forgotten the obligation cast on it
under the ROB Act and also has remained quite oblivious
of the salient features and the seminal purpose of
SARFAESI Act. [para 2 and 12] [416-H; 417-A; 423-C-D]
F
1.2. The intendment of SARFAESI Act is for speedy
recovery of dues to the bank. In this backdrop, the
tribunals are expected to act in quite promptitude regard
being had to the nature of the tis and see to it that an
ingenious litigant does not take recourse to dilatory
tactics. Neither the ORT nor the appellate tribunal can
G afford to sit over matters as that would fundamentally
frustrate the purpose of the legislation. A tribunal dealing
·With an appeal should not allow adjournments for the
asking. It should be kept uppermost in mind by the
Presiding Officer of the tribunal that grant of an
H
STANDARD CHARTERED BANK v. DHARMINDER
413
BHOHI
adjournment should be an exception and not a routine
A
and mechanical matter. [para 20] [429-B-E]
Mardia Chemicals Ltd. And others v. Union of India and
Others 2004 (3) SCR 982 = 2004 (4) SCC 311; Authorised
Officer, Indian Overseas Bank and another v. Ashok Saw Mill
8
2009 (11) SCR 599 = 2009 (8) SCC 366; United Bank of
India v. Satyawati Tondon and others 2010 (9) SCR 1 = 2010
(8) sec 110; Transcore v. Union of India and another 2006
(9) Suppl. SCR 785 = 2008 (1) SCC 125' Official Liquidator,
Uttar Pradesh and Uttarakhand v. Allahabad Bank and others C
(2013) 4 sec 381 - referred to.
1.3. In the case at hand, there was no reason for the
DRAT to keep on adjourning the matter and finally
dispose it by passing an extremely laconic order. Such
a delineation by the DRAT only indicates its apathy and
D
indifference to the role ascribed to it under the enactment
and the trust bestowed on it by the legislature. A curative
step is warranted and the Chairman and the members of
the DRAT shall endeavour to remain alive to the
obligations as expected of them by such special
E
legislations, namely, the SARFAESI Act and the ROB Act.
Besides, the Tribunal as well as the DRAT has to rise to
the occasion, for delay in adjudication of these types of
litigations brings a long term disaster. [para 20-21] [429E-G; 430•C-D]
F
1.4. Be it noted, the principal purpose is to see that
recovery of dues which is essential function of any
banking institution does not get halted because of
procrastinated delineation by the tribunal. The legislature
by s. 22 of the ROB Act has provided that the ORT and
G
the appellate tribunal shall not be bound by the procedure
laid down by the Code of Civil Procedure, but shall be
guided by the principles of natural justice and subject to
the rules framed. They have been conferred powers to
regulate their own procedure as given to them, as the very
H
414
SUPREME COURT REPORTS
[2013] 9 S.C.R.
A purpose of their establishment is to expedite disposal of
the applications and the appeals preferred before them.
They have the character of specialized institutions with
expertise and conferred jurisdiction to decide the lis in
speedy manner so that the larger public interest, that is,
B the economy of the country does not suffer. But in the
case at hand the DRAT did not dispose of the appeal for
four and a half years. [para 21) [429-G-H; 430-A-C]
1.5. The procedure of tribunals has been elaborately
stated in s.19 of the ROB Act. Sub-s.(25) of s.19 makes it
C quite clear that the tribunal has been given power under
the statute to pass such other orders and give such
directions to give effect to its orders or to prevent abuse
of its process or to secure the ends of justice. Thus, the
tribunal is required to function within the statutory
D parameters. The tribunal does not have any inherent
powers and it is limpid that s.19(25) confers limit.ed
powers. [para 27] [432-G-H; 433-A]
Upper Doab Sugar Mills Ltd. v. Shahdara (Delhi)
E Saharanpur Light Rly. Co. Ltd. 1963 SCR 333 = Union of
India v. Orient Paper and Industries Limited 2009 (16)
SCC 286; Union of India v. R. Gandhi, President, Madras Bar
Association 2010 (6) SCR 857 = 2010 (11) SCC 1; Harinagar
Sugar Mills Ltd.
v.
Shyam Sunder Jhunjhunwala
F 1962 SCR 339 = 1961AIR1669; Jaswant Sugar Mills Ltd. v.
Lakshmi Chand 1963 Suppl. SCR 242 = 1963 AIR 677,
Associated Cement Companies Ltd. v. P.N. Sharma 1965
SCR 366 = 1965 AIR 1595; and Kihoto Hollohan v. Zachil/hu
1992 (1) SCR 686 = 1992(2) Suppl. sec 651 - relied on.
G
1.6. The sacrosanct purpose with which the tribunals
have been established is to put the controversy to rest
between the banks and the borrowers and any third party
who has acquired any interest. They have been conferred
jurisdiction by special legislations to exercise a particular
H power in a particular manner as provided under the Act.
STANDARD CHARTERED BANK v. DHARMINDER
415
BHOHI
It cannot assume the role of a court of different nature
A
which really can grant "liberty to initiate any action
against the bank". It is only required to decide the lis that
comes within its own domain. If it does not fall within its
sphere of jurisdiction it is required to say so. Taking note
of a submission made at the behest of the auction
purchaser and then proceed to say that he is at liberty
8
to file any action against the bank for any omission
committed by it, has no sanction of law. The said
observation is wholly bereft of jurisdiction, and
indubitably is totally unwarranted in the obtaining factual c
matrix. Therefore, the observation, namely, "liberty is also
given to the auction purchaser to file action against the
bank for any omission committed by it", is deleted. Such
grant of liberty was not within the domain of the tribunal
reg~rd being had to its limited jurisdiction under such
D
special legislation and further, especially, when the bank
was not a party to the compromise. The judgment of the
High Court whereby it has declined to interfere with the
grant of liberty by the DRAT is also set aside. [para 3031) [435-B-G]
E
1. 7. DRAT is required to adjudicate the lis in an
apposite manner. It is hearing an appeal from an order
passed by the ORT. It cannot afford to pass a laconic
order. However, this Court refrains from remitting the
matter to the DRAT for the reasons, namely, (i) the auction
F
purchaser has not challenged the order passed by the
DRAT before the High Court nor has he come to this
Court and further, the grievance of the bank was only with
regard to grant of liberty; and (ii) with the efflux of time
the bank has realized its money and the property has
G
changed hands. In the circumstances, it is unnecessary
to direct the DRAT to proceed with the appeal de novo.
[para 32] [436-A, B-D]
H
A
B
c
D
E
F
G
416
SUPREME COURT REPORTS
[2013] 9 S.C.R.
Case Law Reference:
2004 {3) SCR 982
referred to
para 14
2009 (11) SCR 599
referred to
para 15
2010 (9) SCR 1
referred to
para 16
2006 (9) Suppl. SCR 785 referred to
para 17
(2013) 4 sec 381
referred to
para 19
1963 SCR 333
relied on
para 27
2009 (16) sec 286
relied on
para 27
2010 (6) SCR 857
relied on
para 28
1962 SCR 339
relied on
para 28
1963 Suppl. SCR 242
relied on
para 28
1965 SCR 366
relied on
para 28
1992 (1) SCR 686
relied on
para 28
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
8486 of 2013.
From the Judgment & Order dated 16.07.2010 of the High
Court of Delhi at New Delhi in Writ Petition (C) No. 4694 of
2010.
Sanjay Jain, Sanjeev Sagan, Chandra Bhushan Prasad,
A. Ansari for the Appellant.
Jatin, Krishan Kumar, Mohit D. Ram for the Respondents.
The Judgment of the Court was delivered by
DIPAK MISRA, J. 1. Leave granted.
2. The present appeal depicts a factual score where this
H Court is constrained to say that delay in disposal of the
STANDARD CHARTERED BANK v. DHARMINDER 417
BHOHI [DIPAK MISRA, J.]
application by the Debts Recovery Tribunal and the appeal by
A
Debt Recovery Appellate Tribunal have the effect potentiality
of creating a corrosion in the economic spine of the country. It
exposits a factual expose' which is not only perplexing but usher
in a sense of puzzlement which in the ultimate eventuate
compels one to ask: "How long can the financial institutions
B
would suffer such procrastination? How far the public interest
be put to hazard because of small, and sometimes contrived
individual interest? To what extent the defaulters be given
protection in the name of balancing the stringent powers vested
on the banks and the statutory safegurards prescribed in favour c
of loanees? Even assuming there are legal lapses and abuses,
how long the statutory tribunals take to put the controversy to
rest being oblivious of the fact that the concept of flexibility is
insegragably associated with valuation of any asset? One is
bound to give a wake up call and we so do by saying "Tasmat
D
Uttistha Kaunteya"; "Awake, Arise, 'O' Partha".
3. The present appeal, by special leave, is directed
against the judgment and order dated 16. 7 .2010 passed by the
High Court of Delhi in Writ Petition (C) No. 4694 of 2010.
E
4. The facts which are essential to be stated are that the
appellant-bank sanctioned home loan of Rs.12.00 lacs to the
respondent No. 1 on 17.5.1999 payable in equal monthly
instalments and in lieu of that the borrower mortgaged the
property which was purchased from the developer, the
F
respondent No. 2 herein. Since the respondent No. 1 failed to
pay the instalments, the loan account was declared as "non
performing asset" in terms of the NPA guidelines issued by the
Reserve Bank of India. On 28.12.20012 the appellant-bank
issued a notice under Section 13(2) of the Securitisation and
G
·Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (for short "the SARFAESI Act) to the
respondent No. 1 directing him to pay the amount due as on
27.12.2002. Since the respondent No. 1 did not make any
payment till 27 .11.2004, the Tehsildar, Gurgaon took
H
418
SUPREME COURT REPORTS
[2013] 9 S.C.R.
A possession of the mortgaged property as per the order of the
District Magistrate and handed over the same to the appellantbank. On 10.3.2005 the appellant-bank in order to sell the said
property published possession-cum-sale notice in the leading
newspapers stating the terms and conditions of the public
B auction .. In response to the said notice the respondent No. 3
submitted its bid form dated 10.3.2005 for purchasing the said
property by way of auction. The said action was challenged by
filing an application under Section 17(1) read with Section 19
of the SARFAESI Act before the Debt Recovery Tribunal (ORT).
c The application was presented on 15.3.2005 before the ORT
II, Delhi and the concerned Presiding Officer declined to pass
any order and sought appropriate directions from the Debt
Recovery Appellate Tribunal (DRAT) for transfer of the said
application to some other ORT. As no order was passed by
0 the DRAT, the matter was again placed before the ORT II on
25.10.2005 and on that day the ORT was informed that the
bank had already taken over possession of the property. in
question and put the same into auction for sale. The borrower
preferred a writ petition before the High Court on 17.5.2005
E and the High Court directed the borrower to deposit certain
amount with the bank and further directed status quo, as
regards the property, to be maintained. Eventually, the High
Court vide order dated 25.7.2005 only directed the ORT to
dispose of the appeal within two months. While finally disposing
of the writ petition the High Court opined that though no order
F was passed by the ORT as the Presiding Officer was awaiting
orders from the appellate forum, the bank ought not have
decided to sell the property to render the appeal of the borrower
to become infructuous and tried to non-suit him.
G
5. Be it noted, the DRAT vide its order dated 3.6.2005
transferred the case to another Debt Recovery Tribunal. As the
property was sold in auction, the auction purchaser, the third
respondent herein, filed an application for impleadment which
was allowed. Before the ORT her stand was that she had
H deposited the entire amount of Rs.25.60 lacs with the bank and
STANDARD CHARTERED BANK v. DHARMINDER
419
BHOHI [DIPAK MISRA, J.]
if the borrower was still interested to retain his property, he had
A
to purchase it from her. The ORT by its order dated 25.10.2005
adverted to the facts, assertions made in the application filed
by the borrower, reply filed by the bank and appreciating the
evidence on record came to hold that there was no infirmity in
the Statement of Accounts of the bank and thereafter taking into
B
consideration the facts and circumstances granted 15 days
time to the borrower to pay the entire amount to the bank and
the developer, Mis. Unitech, and Rs.1.00 lac as compensation
to the auction purchaser. Thereafter, the ORT directed as
follows: -
c
"In case the applicant/appellant fails to deposit this amount
within 15 days, the appeal/application be treated as
dismissed and respondent No. 1 is free to confirm the sale
in favour of the auction purchaser. The amount deposited
by the applicant herein during the pendency of present
D
proceedings as per the order of Hon'ble High Court of
Delhi be given due adjustment."
6. The borrower instead of complying with the said order,
preferred appeal No. 267 of 2005 before the ORA T which, on
14.11.2005, admitted the appeal and passed the following
interim order: -
"Pending passing further orders, the appellant shall deposit
a sum of Rs.7.55 lakhs directly to the 1st respondent-bank.
However, there shall be stay of implementation of the order
in favour of the 2nd and 3rd respondent."
E
F
7. It is apt to state here that the appeal was directed to be
posted on 7.12.2005. The bank filed a reply before the DRAT
highlighting the consistent default by the borrower. The auction
G
purchaser, the third respondent herein, did not file an appeal
before the DRAT but on 25.1.2006 filed an application under
Section 151 of the Code of Civil Procedure. The DRAT took
up the application on 7.9.2007 and observed that as the
p~rchaser had already been impleaded as a party to the
H
420
SUPREME COURT REPORTS
[2013] 9 S.C.R.
A
appeal, she would have the right to address the Court and,
accordingly disposed of the application. As the factual narration
would reveal the appeal was adjourned from time to time and,
eventually on 20.5.2010, the DRAT passed the following order:
B
c
D
E
F
G
H
"Counsel for the parties present. I have heard them
at length. Counsel for the appellant is ready to pay the
entire amount up to date minus the penal interest for which
no provision was made in that context. The column of
penalty portion was left blank and no amount was
mentioned therein therefore I am of the considered view
that the appellant has not to pay the penal interest. The
residue amount be paid to the bank within 45 days from
today as agreed.
The builder has already recovered the amount of
Rs.7, 11,745/- from the bank. That amounfwill be paid by
the appellant to the bank directly within 45 days as agreed.
The appellant will also pay Simple Interest @ 9% from the
date of payment to the builder till its realization within 45
days.
As agreed by the Auction Purchaser he is ready to
accept Rs.5 lacs as costs from the appellant and would
not insist for auction sale and would surrender his rights
in favour of the appellant.
The said amount be deposited with the Registrar of
this court within the period of 45 days failing which the
appeal shall stand dismissed on this deposit as well as
other deposits stated above. The auction purchaser can
withdraw this.
Liberty is also given to the Auction Purchaser to file
action against the bank for any omission committed by it.
Liberty is given to the appellant as well as to the builder
to get the Registry executed in favour of the appellant within
STANDARD CHARTERED BANK v. DHARMINDER 421
BHOHI [DIPAK MISRA, i'J.]
two months thereafter i.e. after. tpe elapse of 45 days
A
mentioned above. Stamp duty etp. will be paid by the
appellant.
The bank is further directed to furnish the statement
of account minus the penal clause within ten days.
8
The bank is further directed to return the amount
deposited by the Auction Purchaser in the sum of
Rs.25,60,000/- along with the normal interest @ 9% per
annum simple without prejudice to his right against the
bank.
C
The matter stand disposed off. Auction Purchaser
and the appellant are directed to sign this order."
8. Aggrieved by the aforesaid order the bank preferred writ
petition and raised two contentions, namdly (i) the ORA T had
D
modified a reasonable and detailed order passed by ORT by
a cryptic order, and (ii) that the DRAT erred in granting liberty
to t.he third respondent to initiate any action against the bank
for any omission. The High Court, by the impugned order, in
the first paragraph dealt with the element of the claim of penal
E
interest and opined that the grievance of the bank was
baseless. Thereafter, adverting to the grant of 9% interest
towards deposit made by the auction purchaser with the bank,
observed that there was no error in the same as the money was
lying with the bank. Thereafter, the writ court proceeded to
F
observe as follows:-
"Learned counsel for the auction purchaser points out that,
in fact, this interest of 9 per cent is really not full
compensation but only part compensation as liberty has
G
been granted to the auction purchaser to pursue the
remedy against the bank as according to the auction
purchaser this property was auctioned by the petitioner
bank without even disclosing the factum of the lis pending
between the owner and the bank in the ORT. We see no
H
422
SUPREME COURT REPORTS
[2013] 9 S.C.R.
A
reason to exercise our extraordinary writ jurisdiction under
Article 226 of the Constitution of India."
9. Mr. Sanjay Jain, learned senior counsel appearing for
the appellant, submitted that though two issues were raised
B before the High Court, yet he would confine his relief to the
second one, namely, grant of liberty to the third respondent to
initiate any action against the bank for any omission. It is urged
by him that the High Court has fallen into error by opining that
there was no justification to exercise jurisdiction under Article
c· 226 of the Constitution of India whereas the factual matrix
warranted deletion of such an observation by the DRAT as a
tribunal has no jurisdiction to grant such liberty and, especially,
when a settlement between the borrower and auction purchaser
had been arrived at. Learned counsel would submit that the
DRAT had really not addressed to any issue and, after
D recording a settlement in a most laconic manner, recorded the
observations which really deserved to be quashed by the High
Court. It is further canvassed by Mr. Jain that the High Court
should have taken note of the fact that the order passed by the
DRAT had already been complied with and it was absolutely
E unnecessary to drag the bank to a further litigation which is
contrary to the spirit of SARFAESI Act and the purpose of
Recovery of Debts due to Banks and Financial Institutions Act,
1993 (for short "the ROB Act") It is also contended that the
ORA T failed to take note of the prayer made by the appellant
F therein and for no manifest reason the matter was kept pending
for more than four and half years.
10. Mr. Mohit Dham, learned counsel appearing for the
respondent No. 1, contended that he had paid the dues of the
G bank within the time fixed by the DRAT and thereafter he had
also transferred the property in favour of a third party due to
financial difficulties. In essence, submission of learned counsel
is that putting the clock back is likely to cause serious jeopardy
to him.
H
11. Mr. Jatin, learned counsel appearing for the auction
STANDARD CHARTERED BANK v. DHARMINDER
423
BHOHI [DIPAK MISRA, J.]
purchaser, submitted that on the basis of the liberty he had
A
already filed a suit in the Delhi High Court and is entitled to
pursue the remedy because of action was taken in hot haste
in by the bank in putting the property into auction without
indicating that litigation was going on between the borrower and
the bank. It is urged by him had the said fact was made known
B
the third respondent would not have participated in the auction.
It is argued by him that his claim for damages cannot be nullified
and hence, the decision of the High Court is absolutely
defensible and does not require to be interfered with.
12. Before we dwell upon the jurisdiction of the DRAT to
C
give such a liberty to the auction purchaser, we think that it is
absolutely imperative, in the case at hand, to take note of the
fact that though the appeal was filed before the DRAT on
7 .11.2005 and admitted on 14.11.2005, yet the same was
disposed of on 20.5.2010 almost after four and half years. We
D
are at pains to say that the DRAT has totally forgotten the
obligation cast on it under the RDB Act and also has remained
quite oblivious of the salient features and the seminal purpose
of SARFAESI Act.
13. In this context, we may fruitfully refer to the Objects and
Reasons of the SARFAESI Act. The relevant part of it reads
as follows: -
E
"The financial sector has been one of the key drivers in
India's efforts to achieve success in rapidly developing its
F
economy. While the banking industry in India is
progressively complying with international prudential norms
and accounting practices there are certain areas in which
the banking and financial sector do not have a level playing
field as compared to other participants in the financial
G
markets in the world. There is no legal provision for
facilitating securitisation of financial assets of banks and
. financial institutions. Further, unlike international banks, the
banks and financial institutions in India do not have power ·
to take possession of securities and sell them. Our
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[2013] 9 S.C.R.
A
existing legal framework relating to commercial
transactions has not kept pace with the changing
commercial practices and financial sector reforms. This
has resulted in slow place of recovery of defaulting loans
and mounting levels of non-performing assets of banks
s
and financial institutions. Narasimham Committee I and II
and Andhyarujina Committee constituted by the Central
Government for the purpose of examining banking sector
reforms have considered the need for changes in the legal
system in respects of these areas."
c
14. In Mardia Chemicals Ltd. And Others v. Union of India
and Others1, after referring to the Statement of Objects and
Reasons this Court dealt with the submission that existing rights
of private parties under a contract cannot be interfered with,
more particularly, putting one party in an advantageous position
D over the other. In that context, the three-Judge Bench observed
thus:-
E
F
G
"As discussed earlier as well, it may be observed that
though the transaction may have the character of a private
contract yet the question of great importance behind such
transaction as a whole having far-reaching effect on the
economy of the country cannot be ignored, purely
restricting it to individual transactions, more particularly
when financing is through banks and financial institutions
utilizing the money for the people in general, namely, the
depositors in the banks and public money at the disposal
of the financial institutions. Therefore, wherever public
interest to such a large extent is involved and it may
become necessary to achieve an object which serves the
public purposes, individual rights may have to give way.
Public interest has always been considered to be above
the private interest. Interest of an individual may, to some
extent, be affected but it cannot have the potential of taking
over the public interest having an impact on the spcioH 1.
(2004) 4 sec 311.
STANDARD CHARTERED BANK v. DHARMINDER 425
BHOHI [DIPAK MISRA, J.]
economic drive of the country. The two aspects are
A
intertwined which are difficult to be separated."
In the said case, it was further rules thus: -
"81. In view of the discussion held in the judgment and the
findings and directions contained in the preceding
B
paragraphs, we hold that the borrowers would get a
reasonably fair deal and opportunity to get the matter
adjudicated upon before the Debts Recovery Tribunal. The
.effect of some of the provisions may be a bit harsh for
some of the borrowers but on that ground the impugned
C
provisions of the Act cannot be said to be unconstitutional
in view of the fact that the object of the Act is to achieve
speedier recovery of the dues declared as NPAs and
better availability of capital liquidity and resources to help
in growth of the economy of the country and welfare of the
D
people in general which would subserve the public
interest."
15. In Authorised Officer, Indian Overseas Bank and
Another v. Ashok Saw Mi/12, though in a different context, the
E
Court has expressed thus: -
"33. It is clear that while enacting the SARFAESI Act the
legislature was concerned with measures to regulate
securitization and reconstruction of financial assets and
enforcement of security interest. The Act enables the banks
F
and financial institutions to realize long-term assets,
manage problems of liquidity, asset liability mismatches
and improve recovery by exercising powers to take
possession of securities, sell them and reduce nonperforming assets by adopting measures for recovery 9f G
reconstruction."
Thereafter, the Bench proceeded to state thus: ·
2.
c2oos) a sec 366.
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(2013) 9 S.C.R.
A
"36. The intention of the legislature is, therefore, clear that
while the banks and financial institutions have been vested
with stringent powers for recovery of their dues, safeguards
have also been provided for rectifying any error or wrongful
use of such powers by vesting the DRT with authority after
B
conducting an adjudication into the matter to declare any
such action invalid and also to restore possession even
though possession may have been made over to the
transferee."
· 16. In United Bank of India v. Satyawati Tandon and
C Others3 , this Court restated the purpose of bringing the
SARFAESI Act and in that context observed the role of the
tribunal as under: -
D
E
F
G
"23. Sub-section (2) of Section 17 casts a duty on the
Tribunal to consider whether the measures taken by the
secured creditor for enforcement of security interest are
in accordance with the provisions of the Act and the Rules
made thereunder. If the Tribunal, after examining the facts
and circumstances of the case and. evidence produced by
the parties, comes to the conclusion that the measures
taken by the secured creditor are not in consonance with
sub-section (4) of Section 13, then it can direct the secured
creditor tq restore management of the business or
possession of the secured assets to the borrower. On the
other hand, if the Tribunal finds that the recourse taken by
the secured creditor under sub-section (4) of Section 13
is in accordance with the provisions of the Act and the
Rules made thereunder, then, notwithstanding anything
contained in any other law for the time being in force, the
secured creditor can take recourse to one or more of the
measures specified in Section 13(4) for recovery of its
secured debt.
24. Sub-section (5) of Section 17 prescribes the time-limit
H 3.
c2010) s sec 110.
STANDARD CHARTERED BANK v. DHARMINDER
427
BHOHI [DIPAK MISRA, J.]
of sixty days within which an application made under
A
Section 17 is required to be disposed of. The proviso to
this sub-section envisages extension of time, but the outer
limit for adjudication of an application is four months. If the
Tribunal fails to decide the application within a maximum
period of four months, then either party can move the s
Appellate Tribunal for issue of a direction to the Tribunal
to dispose of the application expeditiously."
17. In Transcore v. Union of India and Another+, the Court,
while discussing about the various provisions of the SARFAESI
C
Act, expressed thus: -
"60. Value of an asset in an inflationary economy is
discounted by "time" factor. A right created in favour of the
bank/Fl involves corresponding obligation on the part of the
borrower to see that the value of the security does not
D
depreciate with the passage of time which occurs due to
his failure to repay the loan in time."
We have referred to the aforesaid authorities to show that
speedy disposal of the application and the appeal are
E
fundament objects of the enactment and "time factor" has
inextricable nexus with the sustenance of economy.
18. Having discussed about the purpose and legislative
intendment of the SARFAESI Act we think it appropriate to refer
to the legislative purpose of the RDB Act. We are absolutely
F
conscious that this was an earlier legislation and because it
could not become that effective, the SARFAESI Act was
enacted. While dealing with the purpose of the said legislation
and how it works, this Court in Satyawati Tondon (supra) has
observed that an analysis of the provisions of the DRT Act
G
shows that primary object of that Act was to facilitate creation
of special machinery for speedy recovery of the dues of banks
and financial institutions. This is the reason why the DRT Act
4. ; c2ooa) 1 sec 12s.
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428
SUPREME COURT REPORTS
[2013] 9 S.C.R.
A not only provides for establishment of the Tribunals and the
Appellate Tribunals with the jurisdiction, powers and authority
to make summary adjudication of applications made by banks
or financial institutions and specifies the modes of recovery of
the amount determined by the Tribunal or the Appellate Tribunal
B but also bars the jurisdiction of all courts except the Supreme
Court and the High Courts in relation to the matters specified
in Section 17. Thereafter the Division Bench proceeded to state
thus:-
c
D
E
"7. For few years, the new dispensation worked well and
the officers appointed to man the Tribunals worked with
great zeal for ensuring that cases involving recovery of the
dues of banks and financial institutions are decided
expeditiously. However, with the passage of time, the
proceedings before the Tribunals became synonymous
with those of the regular courts and the lawyers
representing the borrowers and defaulters used every
possible mechanism and dilatory tactics to impede the
expeditious adjudication of such cases. The flawed
appointment procedure adopted by the Government
greatly contributed to the malaise of delay in disposal of
the cases instituted before the Tribunals."
19. In Official Liquidator, Uttar Pradesh and Uttarakhand
v. Allahabad Bank and Others5, though in a different context,
F this Court observed that the RDB Act has been enacted in the
backdrop that the banks and financial institutions had been
experiencing considerable difficulties in recovering loans and
enforcement of securities charged with them and the procedure
for recovery of debts due to the banks and financial institutions
G which were being followed had resulted in a significant portion
of the funds being blocked. Emphasis has been laid on
blocking of funds in unproductive assets, the value Qf which
deteriorates with the passage of time. That apart, the purpose
of the RDB Act, as is evincible, is to provide for establishment
. H
s.
(2013) 4 sec 3a1.
STANDARD CHARTERED BANK v. DHARMINDER 429
BHOHI [DIPAK MISRA, J.]
of Tribunals and Appellate Tribunals for expeditious
A
adjudication and recovery of debts due to banks and financial
institutions and for matters connected therewith or incidental
thereto. Section 17 of the ROB Act deals with jurisdiction,
powers and authority of the Tribunals. It confers jurisdiction on
the Tribunal to entertain and decide applications from the banks
B
and financial institutions for recovery of debts due to such banks
and financial institutions.
20. Thus, the intendment of this legislation is for speedy
recovery of dues to the bank. In this backdrop, the tribunals are
C
expected to act in quite promptitude regard being had to the
nature of the lis and see to it that an ingenious litigant does not
take recourse to dilatory tactics. It may be aptly noted that an
action taken by the bank under SARFAESI Act is subject to
assail before the ORT and a further appeal to the DRAT.
Neither the ORT nor the appellate tribunal can afford to sit over
D
matters as that would fundamentally frustrate the purpose of the
legislation. In the case at hand, we really fail to fathom what
impelled the ORA T to keep on adjourning the matter and finally
dispose it by passing an extremely laconic order. It is really
perplexing. A tribunal dealing with an appeal should not allow
E
adjournments for the asking. It should be kept uppermost in
mind of the Presiding Officer of the tribunal that grant of an
adjournment should be an exception and not to be granted in
a routine and mechanical matter. In the case at hand, such a
delineation by the DRAT only indicates its apathy and
F
indifference to the role ascribed to it under the enactment and
the trust bestowed on it by the legislature. A curative step is
warranted and we expect the Chairman and the members of
the ORA T shall endeavour to remain alive to the obligations as
expected of them by such special legislations, namely, the
G
SARFAESI Act and the ROB Act.
21. Be it noted, the principal purpose is to see that recovery
of dues which is essential function of any banking institution
does not get halted because of procrastinated delineation by
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SUPREME COURT REPORTS
[2013] 9 S.C.R.
A the tribunal. It is worthy to note that the legislature by its wisdom
under Section 22 of the ROB Act has provided that the ORT
and the appellate tribunal shall not be bound by the pro,cedure
laid down by the Code of Civil Procedure, but shall be guided
by the principles of natural justice and subject to the rules
B framed. They have been conferred powers to regulate their
own procedure as given to them. It is so, for the very purpose
of their establishment is to expedite disposal of the applications
and the appeals preferred before them. They have the character
of specialized institutions with expertise and conferred
c jurisdiction to decide the lis in speedy manner so that the larger
public interest, that is, the economy of the country does not
suffer. But, a pregnant one, in the case at hand the DRAT did
not dispose of the appeal for four and a half years. We can only
say that apart from the curative step the tribunal as well as the
0
DRAT has to rise to the occasion, for delay in adjudication of
these type of litigations brings a long term disaster. A cute
slumber shall not do.
22. The grievance of the bank does not end here. On the
contrary this is the beginning of the end. Accentuating the
E grievance, it is submitted by Mr. Jain, learned senior counsel
for the appellant, that the ORA T travelled beyond the prayer
made by the borrower inasmuch as the borrower in essentiality
had prayed for grant of compensation and alternatively
extension of time for sixty days. Due to the pendency of the
F appeal before the tribunal, submits Mr. Jain, the extension of
time melted into total insignificance. Despite that, as the order
would indicate, a ·consensus was arrived at between the
auction purchaser and the borrower and the same is clear from
the order, as the DRAT had directed that the auction purchaser
G and the borrower would sign the order. The bank was not a
party to the said adjustment or consensus.