DRAT Orders Expeditious Disposal of SARFAESI Case considering Delay in communication of Stay order to UBI [Read Order]

The Debt Recovery Appellate Tribunal (DRAT), Mumbai has directed the Debt Recovery Tribunal (DRT) to expedite the disposal of a Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) case, pointing out the complications arising from a borrower's failure to communicate a stay order to the Union Bank of India , the appellant bank.

The application was filed by the appellant bank seeking an urgent hearing for S.A. No. 53/2021, a case where borrowers had challenged the bank's actions under the SARFAESI Act, 2002. The tribunal observed that the core of the dispute stemmed from the borrowers' failure to inform the bank about a stay order passed on April 6, 2021. Unaware of this stay, the bank proceeded with the auction and sale of the mortgaged property. This non-communication led to further complications, including litigation by the auction purchaser who has been unable to take possession for over two years.

They raised the issue of classification of account as Non-Performing Asset (NPA) for the reason that two different dates are given with regard to classification of account as NPA. They moved for stay of further proceedings. Learned Presiding Officer passed an order of staying further proceeding on 06.042021. This order was never communicated to the Appellant Bank by the Borrowers. Thereafter, Sale Notice was given, sale was held, Sale Certificate was issued.

Even during these sale measures, the stay order dated 06.04.2021 was not communicated to the Appellant Bank. Only when the Bank tried to take physical possession of the property, the stay order dated 06.04.2021 was informed to the Bank. Meanwhile the Auction Purchasers filed I.A. No. 337/2024 seeking direction for delivery of possession of the property. That application was ultimately rejected by the Presiding Officer after direction given by the High Court of Bombay in Writ Petition No. 12814/2024.

The Auction Purchaser appearing in video conference submitted that after purchasing the property, he is waiting for more than two years for taking possession of the property. The Bank is empowered to proceed under SARFAESI Act but it is not proceeding further. He further submitted that the borrowers are engaged in forum shopping.

This decision underscores the critical duty of litigants to promptly communicate court orders that affect other parties. The tribunal highlighted that such a failure can create a cascade of legal issues, stall recovery proceedings, and prejudice the rights of third parties like auction purchasers, thereby necessitating judicial intervention to ensure an expeditious resolution. While acknowledging the heavy pendency of cases before the DRTs, the tribunal found the unique circumstances of this case warranted special attention.

Consequently, while refraining from setting a strict timeline, the DRAT directed the Presiding Officer of DRT-II, Mumbai, to prioritize and dispose of S.A. No. 53/2021 as expeditiously as possible, preferably within six months from the date of the order. The application for early hearing was subsequently disposed of, with each party directed to bear its own costs.

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