Supreme Court Mandates Speedy Resolution of Securitisation Matters by DRTs under SARFAESI Act

Case Name:  Indian Overseas Bank Versus M/S Radhey Infra Solutions (PVT.) LTD. & ORS.

Introduction: 

The Apex Court of Country, in a present case, decisively condemned the Debt Recovery Tribunal (DRT), Dehradun, because of its Non-compliance to adhere to the statutory timeframe required under the SARFAESI Act i.e. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The Bench led by Justice Sanjay Kumar and Justice Alok Aradhe stressed the significance of speedy adjudication of securitisation appeals, emphasizing that Lapses Undermine the very object of the SARFAESI Regime. The Court clarified the DRT to ensure timely disposal of the remaining securitisation application precisely as per which directs that such matters be determined within 60 days, extendable up to a maximum of four months.

Supreme Court directs DRTs to ensure speedy disposal of cases under the SARFAESI Act.

Case Background:

Indian Overseas Bank filed a suit stating that the DRT i.e. Debts Recovery Tribunal in Dehradun, is not expeditiously deciding on a securitisation application filed by Radhey Infra Solutions Pvt. Ltd.  The bank filed application in the High Court to Fast-track the process, however, the High Court denied issuing any orders, observing that the legal framework regulating such types of matters. Alternatively, the court suggested the bank present suitable legal clauses before the DRT to Request advancement on the application.

Legal Provisions:

Section 17(5) of the SARFAESI Act, 2002 mandates that a Debt Recovery Tribunal (DRT) must deal with applications filed under Section 17 as expeditiously as possible, disposing of them within 60 days from the application date. This period can be extended, but the total pendency cannot exceed four months, after which a party can appeal to the Appellate Tribunal for an order to expedite the disposal of the application.

Supreme Court insights in Securitisation Matters:

The Apex Court presently condemned the Debt Recovery Tribunal (DRT) in Dehradun for not deciding on a securitisation application filed by a bank within the timeframe set by the SARFAESI Act, 2002.

The Court highlighted that the DRT unsuccessfully adhered to the strict timeframe in the law, which required the tribunal to settle such applications within 60 days, Adjustable up to four months. Justices Sanjay Kumar and Alok ordered the DRT to determine the case “without further delay” and to abide by the rules under Section 17(5) of the SARFAESI Act. They also said if the tribunal cannot decide within the deadline, it must record valid, but the DRT had not done this either.

Court said, 

“Once the statute itself mandates that the DRT should dispose of the matter within the stipulated time. It is incumbent upon the DRT, Dehradun, to abide thereby. Further, in the event it fails to do so, the proviso to Section 17(5) ordains that reasons need to be recorded. We find from the orders passed by the DRT, Dehradun, that this statutory direction has also not been respected.” 

dispose of the appeal directing the DRT, Dehradun, to take note of the statutory mandate under Section 17(5) of the SARFAESI Act and act accordingly without further delay.” 

Conclusion: 

The Apex Court has underlined how important it is to adhere to the deadlines specified in the SARFAESI Act when resolving securitization appeals. By criticizing the Debt Recovery Tribunal, Dehradun, for not adhering to these deadlines, the Court has reaffirmed that any delay not only undermines the effectiveness of the debt recovery procedure but also negates the SARFAESI regime's primary goal. The judgment protects the interests of financial institutions and upholds the integrity of the recovery framework by clearly directing all Debt Recovery Tribunals to ensure prompt adjudication. It requires that such cases be resolved within the allotted 60 days, with a maximum extension of four months.

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