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TMI Blog2015 (1) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... read with rule 6 of the Debts Recovery Tribunal (Procedure) Rules, 1993 ('DRT Rules'), this Full Bench was constituted. This petition was filed impugning the order dated 7th June, 2012 of DRT-III, Delhi holding that it has no jurisdiction to entertain the appeal preferred by the petitioners under section 17 of the SARFAESI Act for the reason of, (i) the petitioners being residents of Meerut; (ii) the loan in their favour having been sanctioned by the branch at Meerut of the respondent ICICI Bank Ltd. and being re-payable at Meerut; and (iii) the mortgaged property being also situated at Meerut. It was further held that merely because the notice under section 13(2) of the SARFAESI Act had been issued by the Jhandewalan, New Delhi Branch of the respondent-bank, would not vest the DRT Delhi with a jurisdiction to entertain the appeal at Delhi. Yet another reason given is, that even if action under section 13(4) or section 14 of the SARFAESI Act is to be taken by the bank, the bank will have to approach the concerned District Magistrate at Meerut for appointment of receiver, for taking possession of the property. 2. It is the contention of the petitioners in the writ petition, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a secured creditor or its "authorised officer" and, thus, can be filed wherever the "authorised officer" of the secured creditor, i.e., the bank or financial institution is situated. Attention is also invited to section 17(7) of the SARFAESI Act providing for disposal of such appeal in accordance with the provisions of the DRT Act and the Rules made thereunder. On the basis thereof, it is argued that the jurisdiction of the DRT before which appeal under section 17(1) of the SARFAESI Act can be filed shall be determined as per the DRT Act and the Rules made thereunder. Reference thereafter is made to section 19(1) of the DRT Act to contend that the jurisdiction thereunder is of the DRT where the defendants or any of them resides or carries on business or where the cause of action wholly or in part arises. It is contended that since the event which triggers the appeal under section 17(1), is the action of the authorised officer of the bank/financial institution, the DRT within whose jurisdiction the said authorised officer is situated would have jurisdiction. It is, thus, argued that since in the present case, the authorised officer of the respondent-bank has issued notice to the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amendment) the bank could file recovery proceedings only in the DRT within whose jurisdiction the branch of the bank/financial institution which had disbursed the loan was functioning and in no other-DRT, similarly the appeal under section 17(1) of the SARFAESI Act could also be filed in that DRT only and in no other. The said contention was negated by the Division Bench observing that even the bank under rule 6 (as it stood after the amendment and without noticing that the argument of the bank was predicated on the un-amended rule) could file recovery proceedings in the DRT in which its branch, which had disbursed the loan, was situated or in the DRT where any of the defendants was residing or carrying on business or in the DRT in which the cause of action has arisen and, hence, even the appeal under section 17(1) of the SARFAESI Act can be filed in any of the said DRT. It would, thus, be seen that before the Division Bench, it was not the contention of either of the parties that the jurisdiction should be confined only to the place where the property was situated, though notice is taken by the Division Bench that under section 16 of the Code of Civil Procedure, 1908 ('CPC& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The measures under section 13(4) of the Act are, inter alia, of taking possession of the secured assets of the borrowers and transferring the same by way of lease, assignment or sale, for realising the said secured assets or taking over management of the business or of appointment of any person to manage the secured assets, etc. The manner of so taking over possession is provided in section 14 of the SARFAESI Act which requires the secured creditor to approach the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured assets may be situated. Thus the secured creditor, i.e., the bank has no choice but to approach the Chief Metropolitan Magistrate or District Magistrate having jurisdiction over the area where the secured asset is situated. Once the grievance is against the action of so taking over the assets with the assistance of the Chief Metropolitan Magistrate or the District Magistrate, it prima facie appears that the jurisdiction to entertain an appeal against such action also will be of the DRT having jurisdiction over the area where the secured asset is situated and over the area whose Chief Metropolitan Magistrate or District Mag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pportunity of choosing jurisdiction to the borrower, as available to the bank. 10. We are, however, of the opinion that the Division Bench fell in error in assuming the debt/money recovery proceedings to be initiated by the bank under the DRT Act as equivalent to legal proceedings subject whereof is a mortgaged property, within the meaning of section 16 of the CPC. The proceedings referred to in section 19(1) of the DRT Act are merely proceedings for recovery of debt and not for enforcement of mortgage. Even prior to coming into force of the DRT Act, the bank, even if a mortgagee, was not mandatorily required to enforce the mortgage and which under section 16 of the CPC could be done only within the territorial jurisdiction of the court where the mortgaged property was situated and the bank was free to institute a suit, only for recovery of money and territorial jurisdiction whereof was governed by section 20 of CPC, containing the same principles as in section 19(1) of the DRT Act. We are, therefore, unable to accept that any departure qua territorial jurisdiction has been made in the DRT Act, as has been observed by the Division Bench Smt. Indira Devi (supra). 11. The proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We find the DRAT also in Bank of Baroda v. Teg's Musrado Ltd. [2006] 129 Comp. Cas. 275 (DRAT - Delhi) to have held that the relief sought under section 19(1) of the Act is for a money decree and even if consequent reliefs are also sought, that cannot be a ground to construe the proceeding as for enforcement of mortgage. We further find Samneel Engineering Co. (supra) to have been followed in State Bank of India v. Gujarmal Modi Hospital & Research Centre for Medical Sciences [1996] 6 DLT 614 as well as in Hindustan Laminators (P.) Ltd. v. Central Bank of India AIR 1998 Cal. 300. 13. For enforcement of the mortgage, the SARFAESI Act was enacted. While the Preamble of the DRT Act describes the same as to provide for establishment of Tribunals for expeditious adjudication and recovery of debts due to the banks and financial institutions, the Preamble to the SARFAESI Act describes the same as an act, inter alia, for enforcement of security interest. The Supreme Court in Transcore (supra), on analysis of provisions of DRT Act in juxtaposition to SARFAESI Act, held the DRT Act to be providing for adjudication of disputes, as far as debt due is concerned, whether it be a secured or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iting to discharge in full his liabilities within sixty days and giving details of the amount payable and the secured asset intended to be enforced in the event of nonpayment ; (d) consideration of representation if any made by the borrower there against and communication to the borrower of the reasons for non-acceptance of such representation. Though, it could well be argued that the DRT within whose jurisdiction bank/financial institution to whom the borrower is indebted is situated, would also have jurisdiction to adjudicate whether the action under section 13(4) of taking over possession/management is in accordance with the aforesaid procedure but the explanation to section 17(1) of the SARFAESI Act clarifies that the communication of the reasons to the borrower for not accepting the representation or the likely action of the bank/financial institution shall not entitle the borrower to make an application under section 17(1) of the SARFAESI Act. Thus, the cause of action for the appeal under section 17(1) of the SARFAESI Act is the taking over of the possession/management of the secured asset and which cause of action can be said to have accrued only within the jurisdiction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it were to be held that more than one DRT will have jurisdiction, it may also lead to remedy under section 17(1) against same action under section 13(4) being invoked by different persons before different DRTs. There is no provision in the DRT Act for transfer of proceedings from one DRT to another. The Supreme Court, in Authorised Officer, Indian Overseas Bank v. Ashok Saw Mill (2009) 8 SCC 366 has held the scope of a proceeding under section 17(1) to be extending to scrutinising even the steps taken by the bank/financial institution subsequent to measures under section 13(4). Such scrutiny by the DRT may entail adjudication of disputes as to preservation and protection of the secured asset [see rule 4 of the Security Interest (Enforcement) Rules, 2002], valuation of the secured asset (rule 5), sale thereof (rules 6 to 8) and in the case of the borrower being a company in liquidation, distribution of sale proceeds thereof or between more than one secured creditor of the secured asset [see section 13(9) of the SARFAESI Act]. Such scrutiny by DRT of post-section 13(4) measures may yet further enlarge the number of persons interested in invoking the remedy under section 17(1). Also, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have already been enacted earlier and can be adopted for the purpose in hand. The expression "so far as may be" was held to be meaning "to the extent necessary and practical". 20. What we, however, find is that the DRT Act is not containing any provision for territorial jurisdiction of an appeal as under section 17(1) of the SARFAESI Act, even if it were to be construed not as an appeal and as an original application. The jurisdictional provision under section 19(1) of the DRT Act is only for applications by the bank/financial institution for recovery of debt from any person. An application by a bank/financial institution for recovery of debt can by no stretch of imagination be equated with an appeal under section 17(1) of the SARFAESI Act. We are, therefore, of the view that there is no provision in the DRT Act providing for territorial jurisdiction of an appeal under section 17(1) of the SARFAESI Act and the question of application thereof under section 17(7) does not arise. Under section 17(7) of the SARFAESI Act only that much of the DRT Act can be said to be incorporated therein as is contained in the DRT Act and not more. Whether a particular provision of DRT Act would appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an application by the bank/financial institution for assistance in taking over possession of the secured asset, in the Chief Metropolitan Magistrate ('CMM') or the District Magistrate ('DM') within whose jurisdiction the secured asset is situated. Similarly, section 17A of the SARFAESI Act, while making a provision for appeal under section 17(1) of the SARFAESI Act for borrowers residing in the State of Jammu and Kashmir (to which the DRT Act does not apply and where there are no DRTs), provides for filing of such appeals in the Court of District Judge in that State having jurisdiction over the borrower. If an appeal under section 17(1) of the SARFAESI Act was maintainable in any of the DRTs as mentioned in the DRT Act and the DRT Rules or as found by the Division Bench in Indira Devi (supra) i.e., either in the DRT having jurisdiction where the Branch of the bank/financial institution which has disbursed the loan is situated or in the DRT where the bank carries on business or in the DRT where cause of action wholly or in part arises, there was no need for insertion of section 17A of the SARFAESI Act with effect from 11th November, 2004 to provide for an appeal und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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