2015 (1) TMI 320 - HC - Companies Law

Appeal jurisdiction clarified under SARFAESI Act: File with DRT where asset is.

The court held that an appeal under Section 17(1) of the SARFAESI Act can only be filed before the DRT within whose jurisdiction the secured asset is ... Appeal under section 17(1) of the SARFAESI Act - territorial jurisdiction in actions concerning immovable/secured assets - distinction between recovery proceedings before DRT and enforcement of security under SARFAESI - cause of action linked to taking possession/management under section 13(4) - relief of restoration of possession under section 17(3) - application of DRT Act provisions 'as far as may be' to SARFAESI proceedings - rejection of parity principle between creditor and borrower for forum choiceAppeal under section 17(1) of the SARFAESI Act - cause of action linked to taking possession/management under section 13(4) - territorial jurisdiction in actions concerning immovable/secured assets - distinction between recovery proceedings before DRT and enforcement of security under SARFAESI - application of DRT Act provisions 'as far as may be' to SARFAESI proceedings - Territorial jurisdiction for an appeal under section 17(1) of the SARFAESI Act - HELD THAT: - The court held that the cause of action for an appeal under section 17(1) is the taking over of possession or management of the secured asset under section 13(4), and the relief under section 17(3) (including restoration of possession/management) is most appropriately granted by the DRT within whose territorial jurisdiction the secured asset is situated. The DRT Act's section 19(1) deals with applications by banks for recovery of debt and does not prescribe territorial jurisdiction for appeals under section 17(1) of the SARFAESI Act; recovery proceedings under the DRT Act are distinct from enforcement of security under SARFAESI. The phrase in section 17(7) that appeals be disposed 'as far as may be' in accordance with the DRT Act does not import the territorial jurisdiction rule of section 19(1) where it is inconsistent with the SARFAESI scheme. Sections 14 and 17A of the SARFAESI Act-vested with nexus to the place where the secured asset is situated-confirm that jurisdiction for proceedings under section 17(1) should be confined to the DRT having jurisdiction over the secured asset. The Division Bench's view allowing choice of any DRT available to a creditor under section 19(1) was rejected; parity of forum between creditor and borrower does not apply to territorial jurisdiction in matters concerning immovable/secured property. Consequently, permitting appeals under section 17(1) in DRTs other than the one having jurisdiction over the secured asset is likely to produce practical difficulties and multiplicity of proceedings and is therefore not permissible. [Paras 9, 10, 16, 17, 28]An appeal under section 17(1) of the SARFAESI Act can be filed only before the DRT within whose jurisdiction the secured asset is situated and in no other DRT.Final Conclusion: The Division Bench judgment in Smt. Indira Devi is set aside; the order of DRT Delhi that it had no jurisdiction was correct because the mortgaged/secured property is situated in Meerut and an appeal under section 17(1) SARFAESI Act lies only before the DRT having jurisdiction over that secured asset. No costs. Issues Involved:1. Jurisdiction of Debt Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act.2. Interpretation of Section 19(1) of the DRT Act and Rule 6 of the DRT Rules.3. Applicability of Section 16 of the Code of Civil Procedure (CPC) in the context of SARFAESI Act.4. Parity in choosing jurisdiction between borrowers and banks.Issue-Wise Detailed Analysis:1. Jurisdiction of Debt Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act:The petitioners contended that DRT Delhi has jurisdiction by virtue of Section 19(1)(c) of the DRT Act read with Rule 6(d) of the DRT Rules. They argued that the appeal can be filed wherever the cause of action has accrued, emphasizing that the notice under Section 13(2) of the SARFAESI Act issued by the Delhi branch of the respondent-bank vested jurisdiction in DRT Delhi. However, the court observed that the right of appeal under Section 17(1) of the SARFAESI Act is against measures under Section 13(4) of the Act, not against a notice under Section 13(2). The court concluded that the jurisdiction to entertain an appeal against such action would be of the DRT having jurisdiction over the area where the secured asset is situated.2. Interpretation of Section 19(1) of the DRT Act and Rule 6 of the DRT Rules:The petitioners relied on Section 19(1) of the DRT Act, which allows filing applications in the DRT where the defendants reside or where the cause of action arises. The court, however, clarified that Section 19(1) pertains to applications by banks/financial institutions for recovery of debts and cannot be equated with an appeal under Section 17(1) of the SARFAESI Act. The court emphasized that the DRT Act does not provide for territorial jurisdiction for appeals under Section 17(1) of the SARFAESI Act, and the principles of Section 19(1) of the DRT Act do not apply to such appeals.3. Applicability of Section 16 of the Code of Civil Procedure (CPC) in the context of SARFAESI Act:The court noted that Section 16 of the CPC mandates that legal proceedings concerning immovable property should be filed in the court within whose jurisdiction the property is situated. The court found that the SARFAESI Act, which deals with enforcement of security interests, aligns with this principle. The court highlighted that the DRT Act, which deals with recovery of debts, does not make a departure from Section 16 of the CPC. The court concluded that the jurisdiction for appeals under Section 17(1) of the SARFAESI Act should be determined based on the location of the secured asset.4. Parity in choosing jurisdiction between borrowers and banks:The Division Bench in Smt. Indira Devi had held that the borrower should have the same opportunity to choose jurisdiction as the bank under Section 19(1) of the DRT Act. However, the court in this judgment disagreed, stating that principles of parity do not apply to territorial jurisdiction. The court emphasized that the scope of proceedings under Section 19(1) of the DRT Act is different from those under Section 17(1) of the SARFAESI Act, and no need for parity exists. The court concluded that an appeal under Section 17(1) of the SARFAESI Act can only be filed in the DRT having jurisdiction over the area where the secured asset is situated.Conclusion:The court set aside the judgment of the Division Bench in Smt. Indira Devi and held that an appeal under Section 17(1) of the SARFAESI Act can only be filed before the DRT within whose jurisdiction the secured asset is situated. Consequently, the order of DRT Delhi, which held it had no jurisdiction to entertain the appeal concerning the mortgaged property situated in Meerut, was upheld. No costs were awarded.