MANU/DD/0035/2012

Equivalent Citation: II(2013)BC 125

BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL

DELHI
Appeal Nos. 386 to 391 of 2012
Decided On: 30.11.2012
Appellants: State Bank of Patiala
Vs.
Respondent: Laxmi Narain Sharma and Ors.
Hon'ble Judges/Coram:
S.N.H. Zaidi, J. (Chairperson)
Counsels:
For Appellant/Petitioner/Plaintiff: Mr. Narinder Pal, Advocate
For Respondents/Defendant: Mr. Ashok Kumar Singh, Advocate for the Respondent
No. 1
JUDGMENT
S.N.H. Zaidi, J. (Chairperson)
1. All these appeals have been directed against a common judgment and order dated
17th November, 2011 passed by the Presiding Officer of DRT-I, Chandigarh whereby
the aforesaid S. As. have been disposed of with the direction to the appellant Bank to
pay Rs. 12,000/- towards Court fee and Rs. 11,000/- towards Counsel fee as cost to
the applicant of each of the S.As. Since the facts and circumstances of these appeal
and the issue involved are common, therefore, these appeals are being disposed of
by a common order.
2 . Briefly stated, the facts of the case are that the appellant Bank had sanctioned
certain credit facilities to High Volt Magnet Wires Pvt. Ltd. on execution of loan
documents and mortgage of property bearing Plot No. 36 (Municipal No. 487/4)
Khasra No. 441/267, measuring 358 sq. yds. Dilshad Garden, Shahdara, Delhi. Since
the borrowers failed to maintain financial discipline and defaulted in the repayment of
the loan, the appellant-Bank took measures under the SARF AESI Act and after
issuing public notice for auction sale, took physical possession of Plot Nos. 36/2 and
36/3 of the aforesaid property. The actions of the appellant-Bank qua the sale of
property bearing Nos. 36/1 and 36/4 were challenged before DRT-I, Chandigarh in
the applications (S.A. Nos. 26/2005, 27/2005, 64/2005, 65/2005, 66/2005 and
67/2005) filed under Section 17(1) of the SARFAESI Act, whereas, the Oriental Bank
of Commerce filed S.A. (No. 72/2005 -- Oriental Bank of Commerce v. State Bank of
Patiala) before DRT-III, Delhi qua the sale of the property Nos. 36/2 and 36/3,
wherein though the auction process was allowed to continue but the confirmation of
the sale was put on hold.
3 . During the hearing of the S.A. No. 72/2005, the respondent/borrowers amicably
settled the dispute with both the Banks and agreed to pay Rs. 2,30,00,000/- to the
Oriental Bank of Commerce and Rs. 1,52,25,000/- to the appellant Bank and

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accordingly the DRT concerned asked them to pay a total sum of Rs. 4.05 crores,
including Rs. 22 lacs towards further interest and expenses incurred by the Banks,
which was to be shared equally by the Banks and the auction sale was set aside, vide
order dated 8th February, 2008.
4 . Feeling aggrieved with that order of the DRT-III Delhi, the auction purchaser
preferred an Appeal (No. 222/2008) before this Tribunal, but it was dismissed on
18th January, 2010 on the ground that the mortgagor had a right to redeem the
mortgage before the confirmation of sale.
5 . The appellant-Bank, after receipt of the compromise amount from the borrowers
handed over the physical possession of the auctioned properties (Nos. 36/2 and
36/3) to the legal representatives of the deceased mortgagor.
6 . The Tribunal below while observing in the order impugned that during the
pendency of these applications (the S.As.) the borrowers had settled the matter with
the respondent-Bank and had paid the entire amount as per the settlement, therefore,
the applicants were not pursuing these matters regarding the action taken by the
respondent Bank under Section 13(4) of the SARFAESI Act, proceeded to consider the
claim of S.A. applicant for payment of Rs. 2 lacs as compensation as well as cost of
the proceedings and observed that under Section 19 of the SARFAESI Act only the
borrower is entitled for compensation and the applicants being third-party purchasers
are not entitled for any compensation. The Tribunal below, however, awarded Rs.
12,000/- towards Court fee and Rs. 11,000/- towards Counsel's fee as cost to each of
the S.A. applicants. Feeling aggrieved with the said order of payment of cost, the
Bank has preferred these appeals.
7 . I have heard Mr. Narinder Pal, learned Counsel for the appellant-Bank and Mr.
Ashok Kumar Singh, learned Counsel for the respondent No. 1 of Appeal No.
389/2012. The respondent No. 1 of the rest appeals, have not filed any written reply
to the appeals and have stated that they would abide by whatever order is made in
Appeal No. 389/2012.
8 . Mr. Narinder Pal has contended that the learned Tribunal below has rightly
observed that only the borrower is entitled to get the compensation under Section 19
of the SARFAESI Act, and since the S. A. applicants (respondent No. 1 in these
appeals) are not the borrowers, therefore, they have rightly been declined the
compensation amount claimed by them. He further submitted that the learned
Tribunal below has, however, lost sight of the fact that under the said Section 19, the
cost can also be awarded to the borrower only and not to any other person and thus
the S.A. applicants are also not entitled to get any cost of proceedings and the
learned Tribunal below has erred in awarding the cost by the impugned order. He
also submitted that even under Section 19 of the SARFAESI Act the compensation and
cost can be awarded to the borrower only if the DRT comes to the conclusion that the
possession of the secured assets has not been taken by the secured creditor in
accordance with the provisions of the said Act or the rules made thereunder, whereas
in none of these matters the DRT has so concluded and the S.As. have been disposed
of by stating that the S.A. applicants are not interested in pursuing their S.As. in view
of the settlement arrived at between the borrowers and the Banks and the payment
made by the borrowers in pursuance thereof.
9. Section 19 of the SARFAESI Act reads as under:
19. Right of borrower to receive compensation and costs in certain cases-- If

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 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, hold 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 concerned borrowers,
such borrower 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.
A bare perusal of the aforesaid provision clearly shows that the borrower would be
entitled to get compensation and cost only when the DRT under Section 17 or the
District Judge under Section 17A or this Tribunal under Section 18 or the High Court
under Section 18B holds that the possession of the secured assets taken by the
secured creditor was not in accordance with the provisions of the Act or the rules
made thereunder and directs that the said secured asset be delivered back to the
concerned borrower. Admittedly, no such observation has been made by the learned
PO in the order impugned. None of the applicants of these S.As. has challenged the
order impugned, which has attained the finality qua them. Thus, I am of the
considered view that the order for payment of cost, as awarded by the Tribunal
below, cannot be held to be in accordance with the provisions of Section 19 of the
SARFAESI Act.
10. Mr. Singh has, however, submitted that the Tribunal below has awarded the cost
with the observation that since the applicants were neither the borrowers nor the
guarantors or mortgagors and they had to pursue the litigation, therefore, in the
interest of justice, they were entitled to get the cost. According to him, it showed that
the Tribunal had awarded the cost in exercise of inherent powers, which is vested
with every justice dispensing body as per Section 151 of the C.P.C. This contention is
also not tenable as the SARFAESI Act, being a special Act, has overriding effect on
any other law as per Section 35 of the said act. The DRT, under Section 17(7) of the
SARFAESI Act is to act in accordance with the provisions of the said Act, the RDDBFI
Act and the rules made thereunder for the disposal of the S.A. None of the provisions
of the said Acts or the rules made thereunder vests the DRT or this Tribunal with any
inherent power. Section 22 of the RDDBFI Act provides that the DRT or this Tribunal
shall not be bound by the procedure laid down by the C.P.C. and shall be guided only
by the principles of natural justice. In view of this legal position, I am inclined to
accept the contention of Mr. Pal that the Tribunal below was not empowered to award
cost in exercise of any inherent powers. Moreover, when the SA was not pressed on
merit and the applicant did not pursue it after the dispute relating to the payment of
the outstanding amount was settled between the borrowers and the Bank and the DRT
also did not hold that the possession taken by the Bank was against the provisions of
the SARFAESI Act or rules made thereunder, the award of the cost to the respondents
cannot be sustained.
11. In view of above discussion, I am of the view that the order impugned qua award
of cost to the S.A. applicants (respondent No. 1 herein) by the Bank is not
sustainable and these appeals filed against the said order are entitled to be allowed.
These appeals are, accordingly, allowed and the order impugned to the extent of its
direction for payment of cost of Rs. 12,000/- towards Court fee and Rs. 11,000/-
towards Counsel's fee is set aside. The parties shall bear their own cost of these
appeals. Copy of this order be furnished to the parties as per law and be also sent to
the Tribunal below.

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