Karnataka High Court Rules on Condonation of Delay under SARFAESI Act

In a significant judgment, the Karnataka High Court addressed the issue of whether courts possess the authority to extend prescribed limitation periods on equitable grounds. The case involved a petitioner, Kailasam P., who challenged the Debt Recovery Appellate Tribunal's (DRAT) refusal to condone a delay in filing an appeal against the sale of his property by a bank. The DRAT had dismissed his application for condonation of delay, asserting it lacked the power to extend the limitation period.

The petitioner contended that the 45-day limitation period stipulated under Section 17(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), was merely directory. He argued that the Debt Recovery Tribunal (DRT) should have the discretion to condone delays beyond this period. Conversely, the respondent banks maintained that the 45-day period was mandatory and that the DRT, not being a conventional court, lacked inherent powers to condone delays, especially since Section 5 of the Limitation Act, 1963, was inapplicable.

The division bench, comprising Justice Krishna S. Dixit and Justice G. Basavaraja, upheld the DRAT's decision. The court emphasized that the law of limitation, though potentially harsh, must be applied rigorously as prescribed by statute. It stated that courts do not possess the authority to extend prescribed limitation periods based on grounds of equity and justice.

Referring to Section 17(1) of the SARFAESI Act, the bench noted the absence of any provision allowing for the condonation of delays in approaching the DRT. The court asserted that unless the power to condone delay is explicitly or implicitly granted by legislation, tribunals like the DRT cannot assume such authority. It further clarified that tribunals, unlike conventional courts, do not possess inherent powers, and the Limitation Act of 1963 does not apply to them unless expressly stated.

The judgment underscores the legislative intent that individuals seeking redress under the SARFAESI Act must approach the DRT within the specified 45-day period. Beyond this timeframe, the opportunity for redress is foreclosed. The court highlighted that the law does not favor those who are "sleepy & tardy," reinforcing the necessity for prompt action in legal proceedings.

This ruling has significant implications for borrowers and financial institutions, emphasizing the importance of adhering to statutory timelines. It clarifies that, in the absence of explicit legislative provisions, courts and tribunals lack the discretion to condone delays, thereby promoting certainty and efficiency in legal processes under the SARFAESI Act.