Kerala High Court Upholds Bank's Auction Sale, Dismisses Borrowers' Appeal

Court rules that time limits under Income Tax Act do not apply to debt recovery proceedings under RDDB Act, affirms principles of res judicata.

In a significant judgment, the Kerala High Court dismissed the appeal filed by Binu Vincent and others, challenging the sale of their mortgaged property by the Federal Bank Ltd. The Division Bench, comprising Justices Anil K. Narendran and Muralee Krishna S., upheld the judgment of a single judge, which had confirmed the legality of the auction sale conducted by the bank under the Recovery of Debts Due To Banks And Financial Institutions Act, 1993 (RDDB Act).

The appellants, Binu Vincent and others, had availed a loan from the Federal Bank, which later fell into arrears. The bank initiated recovery proceedings through the Debt Recovery Tribunal (DRT), which culminated in the auction of the appellants' mortgaged properties. The appellants contested the auction, arguing that it was conducted beyond the time limit prescribed under Rule 68B of the Second Schedule to the Income Tax Act, 1961, which they claimed rendered the sale void.

However, the Court ruled that the time limit under Rule 68B is merely directory and not mandatory for recovery proceedings under the RDDB Act. The Court emphasized that the limitation for recovery proceedings is governed by Article 136 of the Limitation Act, 1963, which allows a period of twelve years for execution of a decree.

Furthermore, the Court applied the doctrine of res judicata, noting that the appellants had not raised the issue of the auction's validity in previous litigations, thereby barring them from doing so at this stage. The judgment also referenced the 'Henderson Principle', which prevents parties from raising issues in subsequent litigation that could have been raised in earlier proceedings.

The judgment reaffirmed that procedural irregularities or delays do not render a sale null unless there is a lack of jurisdiction apparent on the face of the decree. The Court found no such jurisdictional defect in the present case.

The decision underscores the Court's commitment to ensuring the expeditious recovery of debts, aligning with the objectives of the RDDB Act, and discouraging piecemeal litigation tactics.

Bottom Line:

Debt Recovery Tribunal - Sale of mortgaged property under Rule 68B of the Second Schedule to the Income Tax Act, 1961 - Time limit specified under Rule 68B for sale of attached immovable property not applicable to recovery proceedings under the RDDB Act - Principles of res judicata and constructive res judicata applicable in subsequent litigation.

Statutory provision(s): Recovery of Debts Due To Banks And Financial Institutions Act, 1993, Rule 68B of the Second Schedule to the Income Tax Act, 1961, Article 136 of the Limitation Act, 1963, Doctrine of Res Judicata.

Binu Vincent v. Federal Bank Ltd., (Kerala)(DB) : Law Finder Doc Id # 2815967