DRAT affirmed the validity of the SARFAESI proceedings and dismissed the securitization application on the grounds of procedural compliance.
The Debts Recovery Appellate Tribunal (DRAT), Delhi Bench headed by Justice Brijesh Sethi (Chairperson) addressed a set of two appeals and held that the SARFAESI proceedings, including demand and possession notices, and auction actions, were in compliance with the statutory provisions of the SARFAESI Act, 2002, and the rules, with no merit found in the appellant's claims of procedural irregularities, improper service, or errors in the loan agreement, leading to the dismissal of the Securitization Application.
The appeal in question, numbered 387/2023, was filed to challenge the order dated October 6, 2023, passed by the DRT-II, Delhi. In response to this challenge, on March 20, 2024, the DRAT, Mumbai, directed Indiabulls Housing Finance Ltd. (the respondent) to maintain the status quo, halting SARFAESI proceedings. This interim order was passed due to conflicting decisions from the DRT Lucknow, which had quashed SARFAESI measures, and the DRAT Allahabad, which had granted a stay. The High Court intervened in July 2024, directing the DRAT, Delhi, to prioritize the appeal and issue a speaking order, stressing the need to address concerns related to dues reconciliation and claims of the auction purchaser.
After a detailed hearing, the DRAT, Delhi, dismissed the appeal on July 29, 2024. It found the appellant's claims of procedural irregularities under the SARFAESI Act, including improper service of demand and possession notices, non-compliance with statutory rules, and errors in the valuation of the secured asset, to be without merit. The Tribunal ruled that the SARFAESI Act, 2002, superseded the RBI Circular of August 30, 2001, and did not mandate notice before declaring an account as a Non-Performing Asset (NPA). The DRAT also dismissed the appellant's assertion of non-receipt of notices, confirming that they were properly served, including by courier, and acknowledged by the appellant.
The DRAT further concluded that the notices and auction proceedings complied with the provisions of the SARFAESI Act and its rules. Claims of incorrectness in the statement of accounts, loan tenure extension, and variation in the interest rate were found to be matters that should have been addressed with the respondent earlier. The Tribunal emphasized that these did not invalidate the SARFAESI actions. Additionally, the appellant's objections regarding possession notices and the role of the Authorized Officer were rejected, as these followed the legal requirements set forth by the SARFAESI Act and the Supreme Court's Mardia Chemicals Limited v. Union of India & Others, REEDLAW 2004 SC 04201 : 2004(1) Bank CLR 641 (SC) judgment.
Despite the appellant's various arguments about procedural lapses, the DRAT upheld the respondent's actions, stressing the importance of strict compliance with statutory procedures under the SARFAESI Act. It found no merit in the Securitization Application (SA) and thus dismissed it, affirming the validity of the auction proceedings. The decision highlights the significance of following statutory provisions under the SARFAESI Act and serves as a reminder of the Tribunal's role in balancing legal compliance with equitable justice for all parties involved.
Ms. Suruchi Aggarwal, Sr. Advocate along with Mr. Gurmeet Singh, Advocate in Appeal No. 387/2023 and Harsh Chopra, Advocate in Appeal (Dy.) No.175/2024 represented the Appellant.
Mr. Sunil Dalal, Sr. Advocate along with Mr. Shashwat Roy and Ms. Sangeeta Sondhi, Advocate appeared for the Respondent.
Mr. Ashish Choudhary, Advocate appeared for the Auction Purchaser.
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