Buyers Of Borrower’s Property Lose Challenge To Bank Mortgage As Karnataka HC Applies 12-Year Article 136 Limit To RDDB Act Recovery

M/s Sri Renukamba Associates and its managing partner challenged a possession notice issued by the Bank under the SARFAESI Act, alleging that the proceedings were time-barred and that the mortgaged property had not been validly charged.

The underlying borrower had obtained a loan of ₹20,00,000 in 1987; the account was classified as an NPA in 1989.

The Bank filed a recovery suit in 1992, which was decreed in its favour in 2001.

The petitioners claimed rights in the property under later-registered documents and challenged the Bank’s possession notice dated 12 May 2009.

The DRT dismissed their application, and the DRAT affirmed that decision.

Section 13(4) of the SARFAESI Act permits a secured creditor to take the specified enforcement measures only where its claim is within the applicable limitation period; Section 36 likewise requires the claim to be within the limitation prescribed by law.

The Court applied Article 136 of the Limitation Act, 1963, which provides a twelve-year limitation period for execution of a decree or order, and relied on Kotak Mahindra Bank Ltd. v. State of Maharashtra for the proposition that a recovery certificate enables recovery within twelve years.

It also relied on Geevarghese P. John v. Federal Bank Ltd., which held that Article 136 governs recovery of dues under Section 19 of the RDDB Act and that Rule 68B of the Second Schedule to the Income Tax Act does not apply to such recovery proceedings.

The Court found no basis to disturb the DRT and DRAT’s concurrent conclusion that the Bank had continued recovery efforts and had pursued a civil recovery suit, which resulted in a decree.

Applying the twelve-year limitation principle in Kotak Mahindra Bank and the reasoning in Geevarghese P. John, it held that the limitation objection did not establish that the Bank’s claim was out of time; the petitioners’ reliance on contrary authority was distinguishable on the facts.

On the mortgage issue, the Court accepted the tribunals’ finding that the later BDA sale deed in favour of the borrower’s wife identified her as the borrower’s legal representative, rather than establishing an independent right that displaced the Bank’s security interest.

The petitioners’ challenge to the mortgage therefore failed.

The orders under challenge were left undisturbed.