Debt recovery jurisdiction covers bank loan suits seeking sale of mortgaged property when the claim remains debt-based.
A bank's suit for recovery of a loan secured by mortgage, with a prayer for sale of the mortgaged property, remains a suit for recovery of debt and is capable of transfer to the Debt Recovery Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The mortgage is treated as collateral security, so the claim does not fall outside the Tribunal's recovery jurisdiction merely because secured assets are also sought to be sold. The Act's recovery machinery, including recovery certificates and sale of immovable property, is sufficient, and the Transfer of Property Act does not bar transfer where the cause of action arises from the loan transaction itself.
Issues: (i) Whether a suit by a bank for recovery of a loan secured by mortgage and seeking sale of the mortgaged property is a suit for recovery of debt capable of transfer to the Debt Recovery Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. (ii) Whether the absence of an express execution mechanism for sale of mortgaged property in the Act, or the provisions of the Transfer of Property Act, prevents such transfer.
Issue (i): Whether a suit by a bank for recovery of a loan secured by mortgage and seeking sale of the mortgaged property is a suit for recovery of debt capable of transfer to the Debt Recovery Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
Analysis: The claim arose from a bank loan advanced to the defendants, and the mortgage was only a mode of security for repayment. A suit framed for recovery of money by sale of mortgaged property does not cease to be a suit for recovery of debt merely because the plaintiff also seeks enforcement against the secured asset. The Act confers exclusive jurisdiction on the Tribunal in relation to recovery of debts of the prescribed value, and pending suits stand transferred under the statutory transfer provision. The fact that the debt is secured by mortgage does not take it outside the statutory definition or the Tribunal's jurisdiction.
Conclusion: The suit was transferable to the Debt Recovery Tribunal and the objection to transfer was rejected.
Issue (ii): Whether the absence of an express execution mechanism for sale of mortgaged property in the Act, or the provisions of the Transfer of Property Act, prevents such transfer.
Analysis: The Act empowers the Presiding Officer to issue a recovery certificate and authorises the Recovery Officer to recover the certified debt by the statutory modes, including attachment and sale of immovable property. That machinery is sufficient to cover recovery against mortgaged assets. The argument based on Section 68 of the Transfer of Property Act did not apply because the suit was founded on the loan transaction itself and not solely on the mortgage. The mortgage was collateral security and the creditor's cause of action was independent of the mortgage.
Conclusion: The statutory recovery machinery under the Act was sufficient, and the Transfer of Property Act did not bar transfer of the suit.
Final Conclusion: A bank's suit for recovery of a loan secured by mortgage, including a prayer for sale of the mortgaged property, falls within the Tribunal's recovery jurisdiction and can be transferred to that forum.
Ratio Decidendi: A claim for recovery of a debt does not cease to be such merely because the debt is secured by mortgage, and where the statute authorises recovery by attachment and sale of immovable property, a suit for recovery by sale of mortgaged property is transferable to the specialised debt recovery forum.
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AI Drafter ✕
TaxTMI 
