Liability of Deceased guarantor to repay Debt shall fall upon legal heirs who were party to DRT proceedings: Delhi HC Dismisses Petition against DRAT Order [Read Order]

Suman Srivastava, the Petitioner has invoked the Writ jurisdiction against the observations and directions passed by the Debt Recovery Appellate Tribunal (“DRAT”) vide judgment dated 28.02.2025 in Misc. Appeal No. 39 of 2025 and 40 of 2025; as well as against the observations and directions passed by the Debt Recovery Tribunal ( “DRT”) vide common judgment dated 14.02.2025 in Appeal No. 01 of 2025 and TMA 23 of 2024.

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The DRAT vide the impugned Judgment has refused to entertain the appeal without pre-deposit as mandated under Section 21 of the Recovery of Debts And Bankruptcy Act, 1993 ( 'the RDB Act').

Mr. Prakash Srivastava, the husband of the Petitioner, along with other persons stood as mortgagor qua the loan granted by the Union Bank of India (Respondent No. 1) in favour of M/s Green World International Private Limited (Respondent No. 3) on 19.02.2013. The husband of the Petitioner hypothecated his residential property bearing address – A-3, South City – 1, Gurgaon, Haryana ( “Property in Question”) in lieu of the above-mentioned mortgage.

The husband of the Petitioner died on 11.06.2013.

After the death of the husband of the Petitioner, the Property in Question was divested in the name of the Petitioner, and her two sons, namely Mr. Anurag Srivastava (Respondent No. 9), and Mr. Anuj Srivastava (Respondent No. 13).

Respondent No.1 renewed the terms of the loan as was sanctioned to the Respondent No. 3/company on 13.03.2015.

The loan account of Respondent No. 3 was declared as a NonPerforming Asset on 30.01.2016. Further, a notice u/s 13(2) of the SARFAESI Act, 2002, was issued by Respondent No. 1 to the directors of Respondent No. 3 on 29.02.2016 demanding remission of dues owed by Respondent No. 3 to Respondent No. 1.

The Respondent No. 1 filed an Original Application No. 30 of 2017 on 16.12.2016 against the Respondent No. 3 and its directors for recovery of the said loan to the tune of Rs. 10,42,51,321.10 along-with pendente lite and future interest at 15% per annum till realization. Notices were issued to the Defendants in the Original Application, but on failure to appear, they were proceeded ex-parte on 25.08.2017.

DRT-3, Delhi, vide its final order directed all the Defendants in the Original Application to pay to the Applicant Bank, jointly or severally, a sum of Rs. 10,42,51,321.10/- together with cost and future interest @15% per annum, from the date of filing of the O.A. till the date of realization; failing which the said amount would be recovered from the sale of mortgaged properties.

Subsequently, recovery proceedings were initiated before the Learned Recovery Officer of the DRT-1, in TRC No. 155 of 2022, wherein the Tribunal vide its Order dated 03.07.2024 ordered impleadment of LRs of the deceased CD – Mr. Prakash Srivastava. T

he LRs, namely Mrs. Suman Srivastava (Petitioner), Mr. Anurag Srivastava, and Mr. Anuj Srivastava, were given notice under Rule 85 of Second Schedule of the Income Tax Act, 1961, that steps will be taken under the provisions of RDDBFI Act 1993 and as per the provisions of the Second Schedule of the Income Tax Act 1961 read with Income Tax (Certificate Proceedings) Rules 1962 to recover the dues from the LRs of the deceased. Directions were also passed to issue sale proclamation notice qua the mortgaged property, i.e., the Property in Question.

The DRAT vide its Order declined to entertain the appeals in absence of the pre-deposit as envisaged in Section 21 of the RDB Act. The DRAT provided four weeks to deposit the said pre-deposit, on failure of which, the appeals shall automatically stand dismissed.

The petitioner stated that the Respondent No. 1 issued a notice dated 29.02.2016 under Section 13(2) of the SARFAESI Act, 2002 to directors of Respondent No. 3 but the said notice was neither issued to Late Mr. Prakash Srivastava, nor to his legal heirs. The Respondent No. 1 approached the DRT, Delhi – 3 by way of filing O.A. No. 30 of 2017 against a dead person.

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The Petitioner was neither the borrower of the credit facilities from Respondent No. 1 nor any debt was due to be realized from the Petitioner. Therefore, she is not liable to make any pre-deposit either before the DRT under Section 30-A of the RDB Act while preferring Appeal No. 1 of 2025 or before the DRAT under Section 21 of the RDB Act in Misc. Appeal No. 39 and 40 of 2025.

It was argued that in absence of service under Rule 3 of the Security Interest (Enforcement) Rules, 2002, any subsequent actions are a nullity. He submits Sheeba Philominal Merlin and Ors. vs. The Repatriates Co-op Finance and Development Bank Ltd. (Govt. of India Enterprise) and Ors., 2010 SCC OnLine Mad 4286.

Per contra, the Counsel for the Respondent No. 2 stated that the Petitioner was aware about the proceedings much before 31.07.2024, that is when the sale proclamation notice was served upon her. The Counsel further states that the Petitioner being the legal heir of the guarantor, it was her duty to inform the Respondent Bank about the death of that guarantor. Being aware of the legal proceedings and yet choosing to not inform the Bank about the death of her husband, the Petitioner cannot be allowed to take advantage of the situation which she herself orchestrated to delay the recovery of dues by the Bank.

The Counsel further stated that the Petitioner has concealed material documents which indicates that the notice under section 13(2) of the SARFAESI Act, 2002 was served to the Petitioner. The possession notice was also served on 03.10.2017. Further, the demand notice dated 01.06.2022 was also served at the address of the Petitioner. Even the sons of the deceased, upon whom the said notice was served, failed to notify the Bank about the death of their father.

The Petitioner had full knowledge of the date of hearing in the proceedings before DRT. Nevertheless, the Petitioner, as well as the other legal representatives of the deceased, i.e. Respondent Nos. 9 and 13, failed to apprise the Respondent Bank regarding the death of their father. Moreover, the said parties even failed to appear in the proceedings before DRT, consequentially failing to inform the tribunal about the death of Mr. Prakash Srivastava in order to allow the tribunal to implead all the legal representatives in accordance with law.

Material on record shows that the two sons of the Petitioner were arrayed as parties before the DRT and they did not inform the DRT about the debt of the Petitioner. The Petitioner and her sons had been also individually approaching various forums being fully aware of the proceedings before the DRT. The Petitioner has, therefore, come with a dishonest plea that she was not aware of the proceedings before the DRAT. Be that as it may, that issue is not very germane to the matter.

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It was found that the argument of the Petitioner that she is neither a borrower or a guarantor and, therefore, is not liable to submit the pre-deposit does not hold merit. It is an admitted position of the Petitioner that she is a legal representative of the deceased guarantor and has inherited the Property in Question. Therefore, the liability of the deceased guarantor to repay the debt shall fall upon the Petitioner, and her two sons, i.e., Respondent No. 9 and 13, who were party to the DRT proceedings.

The Respondent Bank has issued a fresh notice dated 18.05.2025 under section 13(2) of the SARFAESI Act, 2002, at the address of the Petitioner, after gaining knowledge of the fact that the husband of the Petitioner has passed away. The Petitioner has 60 days from the date of issuance of the said notice to fulfil its liabilities.

A division bench of Justice Subramonium Prasad and Justice Harish Vaidyanathan Shankar observed that the Petitioner has not filed the present Writ Petition with clean hands as there is clear evidence against the pleas taken by her. In light of such concealment of facts, the Court dismissed the petition and refused to interfere with the proceedings before DRT.

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