Section 19 sets out the application(s), on the consideration of which an order for compensation and costs could be made. It provides that ‘an application made under Section 17 or 17A or the Appellate Tribunal or the High Court on an appeal preferred under Section 18 or 18A’ and here again there is no reference to the filing of an application under Section 19.
It also provides that certain jurisdictional perquisites for an order of compensation is to be passed. The phrase and expression ‘shall be entitled’ requires to be noticed.
In other words, it enables the borrower or such other person to seek for payment and costs and compensation in the event of jurisdictional prerequisite being satisfied. The only inquiry or determination that Tribunal or the Court will have to undertake is for determining the quantum of costs and compensation.
In the event of Tribunal arriving at a conclusion that such borrower or aggrieved person is entitled to payment of costs and compensation (under section 19) then he would not be required to make separate application claiming for such compensation.
The Tribunal or the Court may order for compensation in favour of the borrower or other aggrieved person and it is a discretionary power vested with the Tribunal or the High Court and necessarily after conducting such inquiry as it deems fit for deciding the quantum of compensation.
Excerpts of the order;
# 1. Short point that arises for our consideration in this appeal is:
whether an application under Section 19 for payment of compensation can be filed independently or separately without seeking such prayer in an application filed under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002?
OR
whether for payment of compensation specified in Section 19 the prayer has to be sought for in the application filed under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 or separate application is to be filed?
OR
whether Section 19 is a standalone provision, giving right to an applicant to file an application for compensation after adjudication of the application filed under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002?
# 2. Since answers to the above points are interconnected, all the questions are taken up together and answered hereinbelow.
# 3. The facts in brief which has given rise to filing of this appeal are as under:
3.1 M/s. Mithilanchal Industries Private Limited and M/s. Telstar Industries Private Limited had availed certain financial assistance from respondent No.1 – secured creditor and writ applicants had stood as guarantors / mortgagers against which the security interest was created by them on the moveable and immovable properties belonging to them and in the name of the said company.
3.2 On account of the loan accounts of the companies were classified as a Non Performing Assets (NPA) on 27.12.2014, a notice under Section 13(2) of the of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘SARFAESI Act’) came to be issued on 19.3.2015 for taking possession of the secured assets viz. immovable property. The said action was challenged by the company including writ applicants before the Debts Recovery Tribunal-II, Ahmedabad (hereinafter referred to as ‘DRT’) by filing an application in Securitisation Application No.47 of 2015 and Securitisation Application No.48 of 2015 respectively, by invoking Section 17 of the SARFAESI Act. On 22.7.2015, the symbolic possession of the property was taken and on 13.1.2017, physical possession of the property was taken. The DRT allowed the applications on 22.6.2017 being Securitisation Application No.47 of 2015 and Securitisation Application No.48 of 2015 and directed the secured creditor – bank to restore physical possession of the property to the petitioners. The bank filed an appeal being Appeal No.130 of 2017 and Appeal No.131 of 2017 before the Debts Recovery Appellate Tribunal, Mumbai (hereinafter referred to as ‘DRAT’) under Section 18 of the SARFAESI Act along with an application for stay of the order under challenge.
3.3 In the meanwhile, the writ applicants filed Miscellaneous Application No.44 of 2017 and Miscellaneous Application No.45 of 2017 before the DRT for execution of the order dated 22.6.2017 whereunder the DRT directed the authorised officer to remain present for not complying with the order of the Tribunal. Challenging the said action, Special Civil Application No.14741 of 2017 and Special Civil Application No.14910 of 2017 were filed by the secured creditor challenging the order passed in Misc. Application No.44 of 2017 and Misc. Application No.45 of 2017, which stayed the proceedings before the DRT. The said Special Civil Application came to be disposed of on 24.6.2019 by directing the DRAT to decide Appeal No.130 of 2017 on or before 31.10.2019. The DRAT, by order dated 23.8.2019, dismissed the appeals filed by the bank. Being aggrieved by the same, the secured creditor filed Special Civil Application No.19920 of 2019 and Special Civil Application No.19921 of 2019 before this Court which came to be dismissed on 14.11.2019. Being aggrieved by the same, Letters Patent Appeal No.159 of 2020 and Letters Patent Appeal No.160 of 2020 were filed before the Coordinate Bench of this Court which came to be dismissed on 17.8.2020 with costs of Rs.5,00,000/- in each appeal.
3.4 During the pendency of aforesaid appeals, the borrowers viz. writ applicants in both these matters filed an application on 14.12.2019 under Section 19 of the SARFAESI Act seeking for a direction to the secured creditor to pay to the applicants (debtors) a sum of Rs.32,66,28,840.60 and Rs.38,98,10,649.19 respectively towards compensation and costs with interest @ 12% per annum from the date of the application upto date of payment. After dismissal of Letters Patent Appeal No.159 of 2020 and Letters Patent Appeal No.160 of 2020 on 14.9.2020, the secured creditor handed over possession of the property to writ applicants in both petitions in compliance of the order passed by DRT dated 17.8.2020.
3.5 On account of the application filed under Section 19 of the SARFAESI Act registered as Misc. Application No.61 of 2019 and Misc. Application No.62 of 2019 by DRAT was not proceeding, writ applicants had approached the learned Single Judge by filing Special Civil Application No.9223 of 2021 and Special Civil Application No.9224 of 2021 which came to be dismissed on 2.7.2021. The DRAT by order dated 21.8.2021 dismissed Misc. Application No.61 of 2019 and Misc. Application No.62 of 2019 (in Securitisation Application No.47 of 2015 and Securitisation Application no.48 of 2015) and being aggrieved by the same, Special Civil Application No.16203 of 2021 and Special Civil Application No.16204 of 2021 were filed by petitioners – writ applicants which also came to be dismissed on 27.7.2022. Hence, this intra-court appeal.
# 4. We have heard the arguments of Mr. Navin Pahwa, learned Senior Advocate appearing for the appellants, Mr. Mihir Thakore, learned Senior Advocate appearing for respondent No.1 and Mr. Arjun Sheth, learned advocate appearing for respondent No.3. Respondent No.2 being a formal party, no notice is issued. Perused the records.
# 5. It is the contention of Mr. Navin Pahwa, learned Senior Advocate appearing for the appellants that learned Single Judge erred in holding that Section 19 is an enabling provision and not independent to other provisions of the SARFAESI Act. He would also contend that learned Single Judge erred in holding that order under Section 19 of the SARFAESI Act can only be made in a proceeding under Section 17 or Section 17A by the Tribunal or the Appellate Tribunal or the High Court under Section 18 or Section 18A by completely ignoring the fact that borrower can exercise option to avail remedy available under Section 19 of the SARFAESI Act. He would also contend that learned Single Judge erred in holding that Section 19 of the SARFAESI Ac is discretionary in nature and it does not grant any enabling power to the Tribunal to grant compensation and costs, though Section 19 is the only remedy available to a borrower when the Tribunal arrives at a conclusion that the measures taken by the secured creditor under Section 13(2) of the SARFAESI Act not being in accordance with law. He would submit that Section 17(3) of the SARFAESI Act defines the power of DRT and the order it can make on such an application and clauses (a) to (c) do not provide for award of compensation, for which only Section 19 can be invoked.
# 6. He would also contend that learned Single Judge erred in holding that writ applicants had filed the application under Section 19 of the SARFAESI Act at a very belated stage by ignoring that the order dated 22.6.2017 passed by DRT in Securitisation Application No.47 of 2015 and Securitisation Application No.48 of 2015 was never complied by the respondent bank and same had been challenged and both proceedings were pending before various forums. It was only when Division Bench dismissed Letters Patent Appeal No.159 of 2020 and Letters Patent Appeal No.160 of 2020 on 17.8.2020 and actually complied with the order of DRT by delivering back possession of the secured assets seized, the cause of action had arisen for filing an application under Section 19 and as such no delay can be attributed to the writ applicants for preferring the applications under Section 19 of the SARFAESI Act. He would also elaborate his submissions by contending that learned Single Judge erred in holding that as no compensation and costs was awarded to the appellants by DRT vide order dated 22.6.2017 viz. while setting aside the action of the bank taken under Section 13 of the SARFAESI Act as a ground for not awarding compensation which is wholly misconceived. He would also contend that learned Single Judge also erred in not awarding compensation as claimed before DRT in the application filed under Section 19 on the ground that Division Bench in Letters Patent Appeal No.159 of 2020 and Letters Patent Appeal No.160 of 2020 had awarded costs of Rs.5,00,000/- in favour of the applicants in each appeal and treating the said costs awarded as compensation and it is a misnomer. He would also contend that learned Single Judge erred in holding that writ applicants who are required to file application under Section 19 of the SARFAESI Act when the first order of DRT came to be passed on 22.6.2017 had failed to do so though subject property was undisputedly delivered by the secured creditor in favour of the writ applicants only on 14.9.2020. Hence, he would contend that there was no occasion for the writ applicants to file an application under Section 19 prior to 14.9.2020.
# 7. He would submit that on the one hand, the learned Single Judge holds that application under Section 19 itself is not maintainable but on the other hand holds such applications should have been filed at an earlier point of time. He would submit that the learned Single Judge has failed to appreciate that DRT while rejecting the application filed under Section 19 of the SARFAESI Act has not rejected the same on merits but on the ground of maintainability. He would contend that learned Single Judge erred in holding that the writ applicants ought to have filed application under Section 19 before the High Court, whereas Section 19 stipulates such application ought to be filed before the Tribunal. He would rely upon the observations made by the Coordinate Bench in Letters Patent Appeal No.159 of 2020 disposed of on 17.8.2020 whereunder the costs of Rs.5,00,000/- imposed on the bank was on account of the delay tactics adopted by the bank and had nothing to do with the compensation determinable under Section 19 of the SARFAESI Act. To sum up, he would contend that entire process initiated by the bank was not in accordance with the provisions of the Act and as such the writ applicants were entitled to approach the jurisdictional DRT for award of compensation under Section 19 of SARFAESI Act. He would contend that this Court, while disposing of Special Civil Application No.16203 of 2021 and Special Civil Application No.16204 of 2021, has clearly observed what was the damage that had been caused to applicants by the bank. Hence, he prays for allowing the appeal by setting aside the orders of the Tribunal and the learned Single Judge. He would also hasten to add that learned Single Judge has failed to appreciate the fact that respondent No.1 – secured creditor had taken physical possession of the property on 13.1.2017 at which of point of time units were in a running condition along with raw material, unfinished goods, finished goods, plant and machinery and only on 14.9.2020, possession was delivered that is after gap of more than three years. In these circumstances, the application filed under Section 19 ought to have been allowed and hence, he prays for setting aside the impugned orders. He would contend that after about three years, the physical possession of the property was handed over by which time the value of the units had come down to zero and facts also establish the illegal and arbitrary action on the part of the respondent had resulted in appellants suffering huge loss which was required to be compensated by allowing the appeal. He would submit that learned Single Judge has ventured to have tested the order of the Tribunal by recording reasons in paragraph 10 which was never raised or argued by respondent bank. Hence, he prays that application filed under Section 19 either being allowed and compensation as prayed for being granted or in the alternative by setting aside the orders under challenge, the matter be remitted back to the Tribunal for adjudication afresh.
# 8. Per contra, Mr. Mihir Thakore, learned Senior Advocate appearing for respondent No.3 would support the orders passed by the DRT and the learned Single Judge and would contend that Section 19 is an enabling provision and not a standalone provision. He would contend that Section 19 empowers the DRT to award compensation. He would also contend that the expression ‘shall be entitled’ found in Section 19 itself is sufficient for this Court to arrive at a conclusion that it is an enabling provision and as such the impugned orders are sustainable. He would submit that against an order passed under Section 19, no appeal as provided unlike an order passed under Section 17 being appealable as indicated in Section 18 and thereby it has to be necessarily held that only against an order passed under Section 17, appeal would lie and it takes within its sweep the enabling viz. Section 19, which enables the DRT to award compensation in the event of the answer being in the affirmative under sub-section (3) of Section 17. He would also contend that there is no prayer made in the application filed under Section 17 for award of compensation and a separate application filed under Section 19 that too after long lapse of time is not maintainable and as such the order of rejection of the said application is just and proper and it would not call for interference. In support of his submission, he has relied upon the observations made in paragraph 13 of the judgment of the High Court of Punjab and Haryana in the case of Atma Jain Hosiery Emporium and others vs. Union of India and others [MANU/PH/0577/2004]. Hence, he seeks for dismissal of the appeal.
# 9. Mr. Arjun Sheth, learned advocate appearing for respondent No.3 would also support the impugned order and would contend that Section 19 does not enable an applicant to file a separate application and the remedy to seek compensation is available only under Section 17. The words and expression ‘may make an application’ as found in sub-section (1) of Section 17 is not present in Section 19 and as such nothing can be read into a provision and therefore, the reasoning adopted by the Tribunal and as affirmed by the learned Single Judge would not call for interference and as such he prays for dismissal of the appeal and seeks for order of learned Single Judge being affirmed.
RE: DISCUSSION ON THE POINT FORMULATED HEREINABOVE:
# 10. A secured creditor is empowered under Section 13 of the SARFAESI Act to enforce the security without intervention of the Court or the Tribunal in accordance with the provisions provided thereunder. The secured creditor is empowered under sub-section (4) of Section 13 to take recourse to one or more of the measures indicated in clauses (a) to (d) of sub-section (4) of Section 13 to recover its secured debt when the borrower fails to discharge its liability in full within the period specified in sub-section (2) of Section 13 of the SARFAESI Act. On account of initiation of such proceedings, any person including borrower if being aggrieved by any of the measures referred to in sub-section (4) of Section 13 of the SARFAESI Act taken by the secured creditor or his authorised officer, may make an application with prescribed fee to the jurisdictional Debts Recovery Tribunal within 45 days from the date on which such measures had been taken by filing an application under sub-section (1) of Section 17. In such an event, the Tribunal would consider such application under sub-section (2) of Section 17 and determine whether any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor for enforcement of the security or in accordance with the provisions of the Act and the Rules made thereunder. If the Tribunal comes to a conclusion that any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor is not in accordance with the provisions of the Act and the Rules made thereunder, after examining the facts and circumstances of the case and evidence tendered by the parties and required restoration of the management or restoration of possession to the borrower or such aggrieved person, it may (a) declare the recourse taken by the secured creditor to anyone or more measures referred to in sub-section (4) of Section 13 as invalid; and (b) restore the possession of the secured assets or management of secured assets to the borrower or such other aggrieved person who has made the application under sub-section (1) as the case may be, and such other other direction as may be considered and appropriate in relation to any of the course taken by the secured creditor under sub-section (4) of Section 13 of the SARFAESI Act. Section 19 indicates that the Tribunal is empowered to order payment of such compensation and costs as may be determined by it in the event of an application having been filed under Section 17 or 17A or an appeal preferred under Section 18 or 18A. In order to appreciate the rival contentions raised with regard to the interpretation of Section 19, we are of the considered view that it would be apt and necessary to extract both Section 17 and Section 19 of the SARFAESI Act. It reads:
“17. Application against measures to recover secured debts.–
(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter,1 [may make an application along with such fee, as may be prescribed,]to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken:
Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.
Explanation.— For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under sub-section (1) of section 17..
(1A) An application under sub-section (1) shall be filed before the Debts Recovery Tribunal within the local limits of whose jurisdiction—
(a) the cause of action, wholly or in part, arises;
(b) where the secured asset is located; or (c) the branch or any other office of a bank or financial institution is maintaining an account in which debt claimed is outstanding for the time being
(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.
(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management or restoration of possession, of the secured assets to the borrower or other aggrieved person, it may, by order,—
(a) declare the recourse to any one or more measures referred to in sub-section (4) of section 13 taken by the secured creditor as invalid; and
(b) restore the possession of secured assets or management of secured assets to the borrower or such other aggrieved person, who has made an application under sub-section (1), as the case may be; and
(c) pass such other direction as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of section 13. (4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section (4) of section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub-section (4) of section 13 to recover his secured debt.
(4A) Where—
(i) any person, in an application under sub-section (1), claims any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy,—
(a) has expired or stood determined; or
(b) is contrary to section 65A of the Transfer of Property Act, 1882 (4 of 1882); or
(c) is contrary to terms of mortgage; or
(d) is created after the issuance of notice of default and demand by the Bank under subsection (2) of section 13 of the Act; and
(ii) the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) of clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act.
(5) Any application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application:
Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1).
(6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub-section (5), any part to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal.
(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder.
17A. Making of application to Court of District Judge in certain cases.—
In the case of a borrower residing in the State of Jammu and Kashmir, the application under section 17 shall be made to the Court of District Judge in that State having jurisdiction over the borrower which shall pass an order on such application.
Explanation.— For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons shall not entitle the person (including borrower) to make an application to the Court of District Judge under this section.
19. Right of borrower to receive compensation and costs in certain cases. –
If the Debts Recovery Tribunal or the Court of District Judge, on an application made under section 17 or section 17A or the Appellate Tribunal or the High Court on an appeal preferred under section 18 or section 18A, holds that the possession of secured assets by the secured creditor is not in accordance with the provisions of this Act and rules made thereunder and directs the secured creditors to return such secured assets to the 2 [concerned borrowers or any other aggrieved person, who has filed the application under section 17 or section 17A or appeal under section 18 or section 18A, as the case may be, the borrower or such other person] shall be entitled to the payment of such compensation and costs as may be determined by such Tribunal or Court of District Judge or Appellate Tribunal or the High Court referred to in section 18B.”
# 11. A plain reading of sub-section (1) would indicate that any person including borrower, being aggrieved by any one of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor or its authorised officer can make an application along with such prescribed fee to the jurisdictional Debts Recovery Tribunal within 45 days from the date on which such measures had been taken by challenging said action. Sub-section (2) of Section 17 enables the DRT to consider whether any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor for enforcement of security is/was in accordance with the provisions of the Act and the Rules made thereunder. Sub-section (3) of Section 17 enables the DRT to arrive at a conclusion after examining the facts and circumstances of the case and the evidence produced by the parties to hold that measures referred to in sub-section (4) of Section 13 taken out by the secured creditor are not in accordance with the provisions of the Act and the Rules and it further enables the Tribunal to direct the secured creditor to restore either the management or possession of the secured assets to the borrower or any other aggrieved person by declaring that such measures taken by the secured creditor as invalid and restore possession of the secured assets or management of secured assets to the borrower or such aggrieved person who has made the application under sub-section (1) of Section 17; and also pass such other direction as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of Section 13 of the SARFAESI Act.
# 12. If the Tribunal declares the recourse taken by the secured creditor, sub-section (4) of Section 13 is in accordance with the provisions of the Act and Rules made thereunder, then it enables the secured creditor to take recourse to one or more of the measures specified in sub-section (4) of Section 13 to recover his secured debt. Sub-section (5) mandates that any application made under sub-section (1) should be dealt by the Tribunal expeditiously and disposed of within 60 days from the date of such application. The proviso thereto enables the Tribunal to extend the period beyond 60 days for reasons to be recorded in writing and said period cannot extend beyond 4 months from the date of filing of such application. Sub-section (6) enables an aggrieved party to make an application in the form prescribed to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application filed under Section 17(1).
# 13. A plain reading of Section 19 would indicate where the Debts Recovery Tribunal or the Court of District Judge on an application made under Section 17 or 17A or the Appellate Tribunal under Section 18 or 18A, holds that possession of the secured asset by the secured creditor is not in accordance with the provisions of the Act and the Rules made thereunder and directs the creditor to return such secured assets to the concerned borrower or any other aggrieved person who has filed an application under Section 17 or 17A or appeal under Section 18 or 18A as the case may be shall also order for payment of such compensation and costs as may be determined by the Tribunal or District Judge or Appellate Tribunal or the High Court. The words and expression ‘shall be entitled to the payment of such compensation and costs’ specified therein would clearly indicate that they are enabling words and it would indicate that they would only confer, power or authority and imply discretion having vested with the Tribunal to award compensation and costs to such borrower any other aggrieved person who has filed an application under Section 17 of the SARFAESI Act. The expression ‘shall be entitled to the payment of such compensation and costs’ found in Section 19 would indicate that they are used in the statute to indicate something that may be done by the Tribunal while adjudicating an application under Section 17. The use of the words ‘shall be entitled to the payment of compensation and costs’ are not the words of compulsion and they are only enabling words. Generally a power conferred on an authority by use of the word ‘may’ on a particular matter does not mandate compulsion on such Tribunal to award compensation and costs. When a capacity or power is given to an authority, there may be circumstances which couple with the power and duty to exercise it or the manner in which it may only be exercised. In other words, the legal and factual context in which the power is to be exercised may combine the power with an obligation to exercise it even though it is conferred by use of word ‘may’.
# 14. A power conferred by a statute having regard to its object cannot be treated as power simpliciter, but it is a power coupled with a duty or so it is the duty of the Tribunal to make sure that where it arrives at a conclusion that the measures taken by the secured creditors is invalid or contrary to the provisions of the SARFAESI Act, then necessarily the Tribunal has to make an order for payment of such compensation and costs as may be determined. When a statute confers an authority to do a judicial act in such case, it is imperative on those so authorised to exercise authority; it is in this background that Section 19 will have to be examined.
# 15. Thus, it will have to be seen whether the borrower or any person aggrieved by the action of the secured creditor who files an application under Section 17 before the Tribunal would have right to receive compensation as a consequential relief or it will have to be determined on a separate application filed under Section 19 as a consequence of adjudication done under Section 17(3).
# 16. On 2.2.2017, the Security Interest Enforcement Rules, 2002 was amended. Rule 12 was introduced which provided that an application under Section 17(1) of the Act ‘shall be, as nearly as possible, in the form given in Appendix VII to the rules’. Rule 13 provided for fees to be paid on the application filed under Section 17 or an appeal filed under Section 18 of the Act for the purpose of convenience and immediate reference. Rule 12 and 13 is extracted hereinbelow:
“12. Application to the Tribunal / Appellate Tribunal. –
(1) Any application to the Debt Recovery Tribunal under sub-section (1) of section 17 shall be, as nearly as possible, in the form given in Appendix VII to the rules.
(2) Any application to the Appellate Tribunal under sub-section (6) of section 17 of the Act shall be, as nearly as possible, in the form given in Appendix VIII to the said rules. Any appeal to the Appellate Tribunal under section 18 of the Act shall be, as nearly as possible, in the form given in Appendix IX to the said rules.
13. Fees for applications and appeals under section 17 and 18 of the Act. –
(1) Every application under sub-section (1) of section 17 or an appeal to the Appellate Tribunal under sub-section (1) of section 18 shall be accompanied by a fee provided in the sub-rule (2) and such fee may be remitted through a crossed demand draft drawn on a bank or Indian Postal Order in favour of the Registrar of the Tribunal or the Court as the case may be, payable at the place where the Tribunal or the Court is situated.”
# 17. Thus, it becomes clear that the rules provide for specific and detailed forms in which applications are to be made and the fee payable on such application has also been provided for. It is worth notable that conspicuously absent in the rules is a form for an application to be filed under Section 19 of the SARFAESI Act. No fees, obviously, has also been provided for such an application. Thus, it can be reasonably inferred that the legislature did not contemplate that an application had to be separately filed under Section 19 of the SARFAESI Act.
# 18. A wholesome reading of Sections 17 and 19 along with the Rules would indicate that no procedure has been set out in the Act and the Rules as regards the borrower’s right to receive compensation and costs as it has been done in case of an application filed under Section 17 [Rule 12(2) of the Rules can be looked up]. If the legislature intended to provide for a separate adjudication as to compensation and costs, definitely it would have provided some foundation in terms of procedure, forms, appeals, etc. also. The very fact that there is no separate appeal mechanism provided further goes to show that legislature did not intend to enable a party to file a separate application or an independent application seeking compensation and costs.
# 19. It was rightly contended by Mr. Mihir Thakore, learned Senior Advocate appearing for respondent No.3 that DRT is a Tribunal of limited jurisdiction, and as such, it enjoys no inherent powers. For it any of the jurisdiction being exercised, it must be specifically conferred upon it. In that sense, Section 19 of the SARFAESI Act enables the Tribunal to order for compensation and costs in the event wherein the prerequisites provided within that section or satisfied. In the absence of such an enabling power, any order for compensation or costs could have been challenged as having been without jurisdiction. Section 19 itself provides several clues which would aid us to arrive at a conclusion that it does not contemplate filing of any separate application but said section only provides a source of power to the Tribunal to provide for grant of additional relief under Section 17 in the event of the borrower or any other aggrieved person satisfies the jurisdictional Tribunal for such power being exercised by the Tribunal. At the very outset, Section 19 sets out the application(s), on the consideration of which an order for compensation and costs could be made. It provides that ‘an application made under Section 17 or 17A or the Appellate Tribunal or the High Court on an appeal preferred under Section 18 or 18A’ and here again there is no reference to the filing of an application under Section 19. It also provides that certain jurisdictional perquisites for an order of compensation is to be passed.
# 20. While adjudicating the application filed under Section 17 by the borrower or any other aggrieved person, if the Tribunal were to hold that (a) the possession of the secured assets by the secured creditor is not in accordance with the provisions of the Act and the Rules made thereunder; and (b) pass a direction to the secured creditor to return such secured assets to the borrower and in such situation where both the ingredients viz. (a) and (b) are satisfied, the borrower / any other aggrieved person shall be entitled to the payment of such compensation and costs as may be determined by such Tribunal or Court of District Judge or Appellate Tribunal or the High Court referred to in Section 18B as the case may be. The phrase and expression ‘shall be entitled’ requires to be noticed. In other words, it enables the borrower or such other person to seek for payment and costs and compensation in the event of jurisdictional prerequisite being satisfied. The only inquiry or determination that Tribunal or the Court will have to undertake is for determining the quantum of costs and compensation. In the event of Tribunal arriving at a conclusion that such borrower or aggrieved person is entitled to payment of costs and compensation then he would not be required to make separate application claiming for such compensation. The Tribunal or the Court may order for compensation in favour of the borrower or other aggrieved person and it is a discretionary power vested with the Tribunal or the High Court and necessarily after conducting such inquiry as it deems fit for deciding the quantum of compensation.
# 21. At the cost of repetition, the facts on hands can be recapitulated by noticing that secured credit had issued a notice to the writ applicants under Section 13(2) of the SARFAESI Act on 29.12.2014 and this was followed by a notice dated 19.3.2014 for taking possession of the secured assets. Being aggrieved by the said action of bank, an application under Section 17 was filed in SA No.47 of 2015 and SA No.48 of 2015 which came to be allowed vide order dated 22.6.2017 (Annexure-B) and directed the bank to restore the possession of the property in question. Being aggrieved by the said order, bank had filed an appeal before DRAT, Mumbai in Appeal no.130 of 2017 and for execution of the order of the Tribunal, the writ applicants filed MA No.44 of 2017 before DRT-II, Ahmedabad. Tribunal directed the authorised officer of the bank to remain present for not complying with the order of the Tribunal and this triggered the bank to file Special Civil Application No.14741 of 2017 before the learned Single Judge and by order dated 21.8.2017, further proceedings before the DRT-II, Ahmedabad which was adjudicating MA No.44 of 2017 came to be stayed. The said Special Civil Application came to be disposed of on 24.6.2019 by the learned Single Judge by directing DRAT to decide Appeal No.130 of 2017 which had been filed by the bank on or before 31.10.2019. Hence, DRAT, Mumbai heard the matter and dismissed the appeal by order dated 23.8.2019. Being aggrieved by order of DRAT, Mumbai passed in Appeal No.130 of 2017, the secured creditor – bank filed Special Civil Application No.19920 of 2019 and Special Civil Application No.19918 of 2019. These two Special Civil Applications came to be dismissed vide order dated 14.11.2019. Being aggrieved by the same, the secured creditor – bank filed Letters Patent Appeal No.159 of 2020 and Letters Patent Appeal No.160 of 2020 which came to be dismissed by order dated 17.8.2020 whereunder the co-ordinate Bench, while dismissing the appeal filed by the bank, imposed costs of Rs.5,00,000/- in each appeal payable by the secured creditor – bank in favour of the writ applicants. The application filed for recalling the said order dated 17.8.2020 also came to be dismissed on 7.10.2020.
# 22. In the meanwhile, the writ applicants filed an application under Section 19 of the SARFAESI Act before DRT-II, Ahmedabad for payment of compensation of Rs.32,66,28,840/-. The said application came to be dismissed on 21.8.2021 on the ground that borrower or any other person would be entitled to payment of costs and compensation in an appeal filed under Section 17 or 17A or appeal under Section 18 or 18A as may be determined by the concerned authority in such proceedings. It also came to be held by the Tribunal that it had already dismissed SA No.47 of 2015 and SA No.48 of 2015 filed under Section 17 and had not thought fit to award any costs or compensation but had only directed the respondent bank to restore possession of the property in question to the writ applicants. It was also observed by Tribunal that Division Bench of this Court vide order dated 17.8.2020 while dismissing Letters Patent Appeal No.159 of 2020 and Letters Patent Appeal No.160 of 2020 had awarded costs of Rs.5,00,000/- to each of the writ applicant and had directed the respondent-bank to pay said amount and as such another application under Section 19 could not have been filed by the applicants for compensation. In conclusion, it came to be held by the Tribunal that after logical conclusion of the proceedings initiated under Section 17, the applicants could not have filed an application under Section 19. This order having been affirmed by the learned Single Judge and for the reasons aforestated, this Court having arrived at a conclusion that a separate application under Section 19 of the SARFAESI Act not being maintainable, the present appeal has to fail as being devoid of merits.
# 23. Hence, we proceed to pass following
J U D G M E N T
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