Court holds limitation period for filing application under Section 17 starts from last action by secured creditor; directs DRAT to decide appeal on merits, upholding constitutional protections under Article 300A
In a significant judgment delivered on September 8, 2026, the Rajasthan High Court (Jaipur Bench) presided over by Justice Anoop Kumar Dhand quashed the Debt Recovery Appellate Tribunal's (DRAT) order that had dismissed an appeal on the ground of delay in filing a securitisation application under the SARFAESI Act, 2002. The petition was filed by Mrs. Rishu Chaudhary challenging the DRAT's rejection of her appeal against the Debt Recovery Tribunal's (DRT) order which had held her Section 17 application as time-barred.
The facts reveal that the Indian Overseas Bank initiated SARFAESI proceedings against Mrs. Chaudhary by issuing a notice under Section 13(4) on April 17, 2017. Subsequently, a Section 14 order was passed by the District Collector & Magistrate on October 8, 2018 in the petitioner's absence. The petitioner claimed ignorance of this order until receiving an email communication from the bank dated October 25, 2018. Acting promptly thereafter, she filed a Section 17 securitisation application before the DRT on November 29, 2018. However, the DRT rejected her application as barred by limitation on January 3, 2019. Aggrieved, she appealed before the DRAT which dismissed her appeal citing delay.
On hearing the writ petition, the High Court extensively relied on precedents, including the Supreme Court's rulings in Kanaiyalal Lalchand Sachdev vs. State of Maharashtra (2011), Authorised Officer, Indian Overseas Bank vs. Ashok Saw Mill (2009), and others, which clarified that the limitation period under Section 17 of the SARFAESI Act must be reckoned from the date of the last action by the secured creditor that causes grievance to the borrower. The Court noted that Section 14 proceedings are a continuation of Section 13(4) and thus give rise to a fresh cause of action for filing a Section 17 application.
Justice Dhand emphasized the necessity of a liberal interpretation of Section 17's limitation to uphold the borrower's constitutional right to property under Article 300A of the Constitution of India. Denying the borrower the opportunity to approach the DRT before dispossession would amount to infringing this fundamental right. The Court observed that the DRAT erred in dismissing the appeal on technical grounds without considering its merits.
Consequently, the Court quashed the DRAT order dated June 4, 2026, restored the petitioner's appeal before the DRAT, and directed that it be decided expeditiously on merits within four weeks. It further directed both parties to appear before the DRAT on September 22, 2026. The Court clarified that the DRAT should decide the appeal independently without being influenced by observations made in the High Court's order.
This judgment reinforces the protective mechanism available to borrowers under the SARFAESI Act, ensuring that procedural technicalities do not bar them from judicial scrutiny of the secured creditor's actions. It also underscores the judiciary's commitment to balancing the interests of banks and borrowers while safeguarding constitutional rights.
Bottom Line:
SARFAESI Act - Securitisation application under Section 17 - Limitation period to be calculated from the date of the last action against which the borrower feels aggrieved - Liberal interpretation of Section 17 limitation period is necessary to uphold the borrower's rights under Article 300A of the Constitution of India.
Statutory provision(s):
SARFAESI Act, 2002 - Sections 13(4), 14, 17; Constitution of India - Article 300A
Mrs. Rishu Chaudhary v. Indian Overseas Bank, (Raj)(Jaipur Bench) : Law Finder Doc Id # 2980751
