Ashok Menon, Chairperson
1. The State Bank of India (formerly, State Bank of Hyderabad) assails the judgment and order dated 03/04/2024 dismissing Original Application (O.A.) No. 779 of 2019 by the Debts Recovery Tribunal, Aurangabad (D.R.T.) filed under Sec. 19 of the Recovery of Debts & Bankruptcy Act, 1993 (“RDB Act” in short) holding that the Tribunal has no power to entertain an application for recovery of a mortgage debt beyond the period of three years.
2. The facts in brief are thus:
Defendant No. 1 as the principal borrower availed various credit facilities from the applicant bank and executed registered simple mortgage deed No. 107/2008 on 14.01.2008 concerning the property owned by defendant No.1. The second defendant is a guarantor. Defendants defaulted on the repayment, as a consequence of which, a demand notice was issued on 24.12.2008. There was no response to the demand; hence, the O.A. was filed on 26.03.2019 for recovery of ₹31,31,542/- with interest.
3. The defendants remained ex-parte.
4. The D.R.T. observed that the Ld. Counsel for the applicant bank conceded that being a mortgage suit, it was not maintainable before the Tribunal and that the application had to be filed within three years. He had also submitted that appropriate orders could be passed. The Ld. Presiding Officer observed that it is settled law that the Tribunal has no power to entertain a mortgage suit. The D.R.T. has referred to Secs. 2(b) and 2(l) of the Limitation Act, and held that an application includes a petition and that a suit does not include an appeal or an application. The D.R.T. relies upon the decision of the Hon’ble Supreme Court in Inderjeet Arya and another Vs. ICICI Bank Ltd (2014)2 SCC 299 to hold that the term “suit” would apply only to the proceedings in civil court and not actions or recovery proceedings filed by banks and financial institutions before a Tribunal such as D.R.T., and concluded that no suit could be filed before the D.R.T. and that it was requested to return the O.A. to be presented in proper court. The appellant is aggrieved and hence in appeal.
5. The respondents remained ex-parte in this appeal as they were before the D.R.T. Heard the Ld. Counsel for the appellant. Records perused.
6. The Ld. Counsel for the appellant submitted that Sec. 24 of the RDB Act enunciates that the Limitation Act, 1963 (36 of 1963), shall, as far as may be, apply to an application made to a Tribunal. The period of limitation under Article 62 of the Limitation Act, to enforce payment of money secured by a mortgage or otherwise charged upon immovable property is 12 years from the date when the money sued becomes due. The Ld. P.O. agrees that the application was for the realisation of money due on a mortgage, yet holds that the application has to be filed within three years. From where this period is three years period of limitation is found is not explained. It is not a simple suit for money based on a promissory note or other document requiring it to be filed within three years.
7. The Ld. Counsel for the appellant relied upon the decision of the Hon’ble Delhi High Court in State Bank of India Vs. Samneel Engineering and Co. 1995 SCC Online Del 824 where it is held that suits for recovery of mortgage debts would fall within the competence and jurisdiction of the Tribunal and that the plea of mortgage suits not being liable to be transferred is no longer open as “debt” defined under Sec. 2(g) of the RDB Act includes a mortgage debt and that debt is an essential ingredient of a mortgage. There may be debt without a mortgage but there can be no mortgage without a debt, and an effort at carving out a mortgage away and out of the definition of debt is futile.
8. The Hon’ble Madhya Pradesh High Court has in Life Insurance Corporation of India vs. Ramji Kewat & Ors. 2001 SCC OnLine MP 176, has held that if an equitable mortgage was created in favour of the Corporation, Article 62 of the Limitation Act would be attracted and that the finding of the Tribunal that the mortgage created by way of collateral security would not attract the applicability of Article 62 is fallacious. The reliance placed by the D.R.T on Inderjeet Arya (supra) appears to be a misunderstanding of the ratio in that decision. The decision concerns the application of the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and does not apply to the proceedings before the D.R.T. The question that arose before the Supreme Court was as to whether the appellants therein were entitled to get the protection of section 22(1) of the SICA. It was held that only if the action filed by the bank comes within the ambit of the term “Suit” can the appellants who are guarantors, obtain the protection under the aforesaid section. The court was considering the ambit of proceedings under the provisions of SICA. it is in that connection that the Hon’ble Supreme Court observed that the matter pending before the DRT is a proceeding initiated by the bank for recovery and not a suit to attract the protection under section 22(1) of the SICA. The aforesaid decision has no application to the facts and circumstances of the case in hand.
9. A reading of Sec. 2 (g) of the RDB Act would be worthwhile:
“(g) “debt” means any liability (inclusive of interest) which is claimed as due from any person or pooled investment vehicle as defined in clause (da) of section 2 of the Securities Contracts (Regulation) Act, 1956, by a bank or financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, are assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and illegally recoverable on, the date of the application and includes any liability towards debt securities, which remains unpaid in full or part after notice of ninety days served upon the borrower by the debenture trustee or any other authority in whose favour, security interest is created for the benefit of holders of debt security.” (emphasis supplied)
10. The definition of debt indicates that it would include a debt under a mortgage which is illegally recoverable on the date of the application. Sec. 1 (4) specifies that the provisions of the RDB Act apply to a debt due to any bank or financial institution and is not less than ₹20 lakhs. It is therefore fallacious to hold that a debt due on a mortgage is not recoverable by applying to the D.R.T. A reading of Sec. 19 (3A) would make it further clear that an application for recovery of the amount due on a mortgage can be entertained by the D.R.T. the relevant section reads thus:
“3A Every applicant in the application filed under sub-section (1) of sub-section 2 for recovery of debt, shall--
(a) state particulars of the debt secured by security interest over properties or assets belonging to any of the defendants and the estimated value of such securities;
(b) if the estimated value of securities is not sufficient to satisfy the debt claimed, state, particulars of any other properties or assets owned by any of the defendants, if any; and
(c) if the estimated value of such other assets is not sufficient to recover the debt, seek an order directing the defendant to disclose to the Tribunal particulars of other properties or assets owned by the defendants.”
11. The above provisions would indicate that for recovery of a debt by a bank based on a mortgage, the proper forum is the D.R.T. Hence, the dismissal of the O.A. on the finding that a suit for a mortgage is not maintainable before the D.R.T. is erroneous.
12. The next question that would arise for consideration in this appeal is whether the concession of the Ld. Counsel for the applicant that the application is for recovery of an amount based on a mortgage is not maintainable before the D.R.T. would have any bearing on the maintainability of the application. The Hon’ble Supreme Court has in the decision Director of Elementary Education, Odisha & Ors. vs. Pramod Kumar Sahoo (2019) 10 SCC 674, held that the client is not bound by statement or admission which he or his lawyer was not authorised to make and that the lawyer has no implied or apparent authority to make an admission or statement which would directly surrender or conclude the substantial legal rights of his client unless such admission or statement is a proper step in accomplishing the purpose for which the lawyer was engaged. Neither the client nor the court is bound by the lawyer’s statements or admissions as to matters of law or legal conclusions. It was observed that the concession made before the Tribunal was a concession in law and contrary to the statutory rules. Such concessions are not binding as there cannot be any estoppel against the law.
13. The upshot of the above discussion is that the impugned judgment is erroneous and unsustainable. The D.R.T. should have gone into the provisions of the law and the statute before conceding to the concessions made by the lawyer on legal aspects. In the ordinary course, when the O.A. is dismissed solely on the grounds of limitation, the matter should be remanded to the Tribunal below for a finding on merits. However, the appellant bank has proved the existence of the debt and the mortgage. The defendants did not appear to controvert the application or the evidence adduced. Hence no purpose would be served by a remand of the matter. The application should therefore have been allowed.
In the result, the appeal is allowed and the impugned judgment and order are set aside. Original Application No. 779 of 2019 on the files of the D.R.T. is allowed as follows:
Respondents(defendants) Nos. 1 and 2 are jointly and severally directed to pay a sum of ₹30,31,542/- together with interest at the rate of 11.50% per annum with effect from 08.12.2018 till realisation and costs, from out of the mortgaged properties comprised in Gut No. 64 admeasuring 2 Hectares and 23 Ares, Gut No. 243 admeasuring 91 Ares, Gut No. 223 admeasuring 54 Ares and the land in Gut No. 66 admeasuring 1 Hectare 82 Ares, all situated in Brahhmangao, Jintur Taluk, Parbhani District, and more particularly described in the schedule to the mortgage deed executed and registered on 14/01/2008 as also from the hypothecated articles and other identified properties of the defendants and them personally. A Recovery Certificate be issued to this effect.
