2016 (5) TMI 822 - HC - Indian Laws

Appellant's Appeal Dismissed, Directed to Seek Remedy at DRT

The appellant's challenge to the District Magistrate's order under Section 14 of the SARFAESI Act was dismissed by the court, directing the appellant to ... SARFAESI Act - alternative statutory remedy - maintainability of petition - Held that:- An action under Section 14 of the Act constitutes an action taken after the stage of Section 13(4), and therefore, the same would fall within the ambit of Section 17(1) of the Act. Thus, the Act itself contemplates an efficacious remedy for the borrower or any person 1 affected by an action under Section 13(4) of the Act, by providing for an appeal before the DRT. Thus, any aggrieved person can file appeal before the Debts Recovery Tribunal and therefore when alternative statutory remedy of filing an appeal under Section 17 of the SARFAESI Act is available to the petitioner, learned Single Judge has rightly not entertained the petition. We are also in complete agreement with the reasoning given by the learned Single Judge while rejecting the petition. In view of the aforesaid discussion, this appeal is required to be dismissed and accordingly dismissed. However, it is clarified that if the appeal is filed under Section 17 of the SARFAESI Act, the DRT shall decide the same in accordance with law on its own merits without being influenced by the observations made by us in this order. Issues Involved:1. Whether the appellant, as a third party in possession of the property, can challenge the District Magistrate's order under Section 14 of the SARFAESI Act.2. Whether the appellant had knowledge of the mortgage created in favor of the respondent-bank.3. Whether the learned Single Judge erred in dismissing the petition and directing the appellant to the alternative remedy before the Debts Recovery Tribunal (DRT).4. Whether the mortgage was required to be registered under Section 17 of the Registration Act.5. Applicability of precedents cited by both parties.Detailed Analysis:1. Challenge to the District Magistrate's Order:The appellant contended that she was not the borrower and had no knowledge of the mortgage created by the principal borrowers. She argued that she was not given an opportunity to be heard before the District Magistrate passed the impugned order under Section 14 of the SARFAESI Act. The learned Single Judge dismissed the petition, directing the appellant to seek remedy before the DRT under Section 17 of the SARFAESI Act. The court emphasized that Section 17 provides an efficacious remedy for any person aggrieved by measures taken under Section 13(4) of the Act, including actions under Section 14.2. Knowledge of Mortgage:The respondent-bank argued that the appellant was aware of the mortgage, as it was explicitly mentioned in the Agreement to Sale and the Power of Attorney executed by the borrowers. The court found that the appellant had knowledge of the mortgage when she entered into the Agreement to Sale. The appellant's claim of ignorance was not credible, given the specific references to the loan in the documents.3. Alternative Remedy Before DRT:The court upheld the learned Single Judge's decision, emphasizing that the SARFAESI Act provides a comprehensive remedy through the DRT for grievances related to measures taken under Section 13(4). The court referred to precedents, including the Supreme Court's decisions in *Kanaiyalal Lalchand Sachdev* and *Satyavati Tondon*, which established that the DRT has jurisdiction to adjudicate disputes arising from actions under Section 13(4) and Section 14.4. Registration of Mortgage:The appellant argued that the mortgage was not registered under Section 17 of the Registration Act, which should invalidate the mortgage. The court did not find this argument persuasive, noting that the appellant's knowledge of the mortgage was evident from the documents and that the lack of registration did not absolve her of this knowledge.5. Precedents:The appellant relied on the Supreme Court's decision in *Harshad Govardhan Sondagar*, arguing that the High Court can entertain petitions against orders passed under Section 14 of the SARFAESI Act. However, the court distinguished the facts of that case, noting that it dealt with leases created before the mortgage. The court found that this precedent did not apply to the appellant's situation, where the mortgage was known and subsequent to the Agreement to Sale.Conclusion:The court concluded that the appellant had an alternative statutory remedy under Section 17 of the SARFAESI Act and should have pursued it before approaching the High Court. The appeal was dismissed, and the appellant was directed to seek remedy before the DRT. The court clarified that the DRT should decide the appeal on its merits without being influenced by the High Court's observations.