S.37 SARFAESI Act & Debts Recovery Tribunals Rules 2013 Are Applicable To Proceeding Vis-à-Vis Refund Of Court Fee: Karnataka HC

The Karnataka High Court clarified that, Section 37 of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and Debts Recovery Tribunals (Refund of Court Fee) Rules, 2013 are applicable to a proceeding before the Tribunal under the SARFAESI Act vis-à-vis refund of Court fee.

The Court was dealing with a Writ Petition seeking to quash and set aside the Order of the Debt Recovery Tribunal (DRT) by which it dismissed the Application seeking a refund of the Court fees as deposited.

A Single Bench of Justice Hemant Chandangoudar observed, “… in concurrence with the ratio enunciated in ‘Progressive Aquatech’ by the High Court of Telangana, I am of the view that by virtue of Section 37 of the SARFAESI Act, Debts Recovery Tribunals (Refund of Court Fee) Rules, 2013 are applicable to a proceeding before the Tribunal under the SARFAESI Act vis-a-vis refund of court fee.”

Advocate Sameer Sharma appeared for the Petitioners while AGA Naveen Chandrashekhar and Advocate Nayana Tara B.G. appeared for the Respondents.

Facts of the Case -

The Petitioner No. 1 sought an Order granting a refund of Rs. 79,225/- and in the alternative, sought to quash the Order and remand the case back to the file of the DRT for a time-bound reconsideration of the same. The Petitioner No. 1 was a Contractor (PWD) and had availed loan of an amount of Rs. 2,50,00,000/- vide sanction letter against the mortgage of several properties. The Petitioner No. 2 (wife of the Petitioner No.1) had guaranteed the same as a surety. Thereafter, vide letter and Amendment Agreement to Rephase Payment, the Respondent No. 2 (Union Bank of India) sanctioned another loan. The Petitioner contended that despite not having defaulted in the making of monthly payments for more than a continuous period of 90 days, the Bank had issued a demand notice classifying the accounts of the Petitioner as a Non-Performing Asset (NPA).

It was further contended that despite repeated assurances, the Bank issued a notice under Section 13(4) of SARFAESI Act to take possession of the secured assets. The Bank issued an E-Auction notice and the Petitioner No. 1 issued a representation offering to pay Rs. 50 lakhs. When the Bank did not respond to the same, the Petitioners approached the DRT. During the pendency of proceedings, the Petitioners preferred an Application seeking disposal of the same. The DRT disposed of the main Petition and dismissed the Interlocutory Application for return of Court fees. Hence, the case was before the High Court.

The High Court in view of the facts and circumstances of the case, enunciated, “… when there is no formal adjudication of a dispute and more so, when a suit or as in this case, securitisation application made under Section 17 of the SARFAESI Act, 2002 challenging the recovery proceedings initiated by the Bank, has been disposed of as infructuous in light of the settlement arrived at between the applicant-borrower and the Bank, it is an inherent right of the applicant to receive a refund of the court fees, so deposited at the time of the filing of such application.”

The Court added that, mere unavailability of an express provision for return/refund of Court fees cannot deprive a litigant of the inherently equitable right of a refund of Court fee where no order is made on the merits of the arguments canvassed and evidence adduced.

“The Division Bench of the High Court of Delhi opined that it was trite law that fiscal statutes such as Court Fees Act must be construed liberally in favour of lessening the burden on litigants, and that there having been no formal adjudication of the dispute in light of the jurisdictional infirmity being pointed out at the initial stage itself, refusal to return/refund of court fee is not sustainable in law”, it said.

The Court further noted that where the borrower did not pursue the Application and there was no proceeding of the Tribunal pending on the said Application, it would not be “just and proper” to withhold the entire amount of the Court fee so deposited by the Applicant.

Accordingly, the High Court allowed the Writ Petition, set aside the impugned Order, and remanded back the case to DRT.

Cause Title- Narayana Murthy HM & Anr. v. The Registrar Debt Recovery Tribunal & Ors. (Neutral Citation: 2024:KHC:46797)

Appearance:

Petitioners: Advocate Sameer Sharma

Respondents: AGA Naveen Chandrashekhar, Advocates Nayana Tara B.G., and Divya Purandar.

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