TaxTMI 
TaxTMI 
2023 (11) TMI 1371
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....n Rs. 10,00,000 and was therefore, not within the pecuniary jurisdiction of the learned Debts Recovery Tribunal - III. 2. The principal question to be addressed is whether the Debts Recovery Tribunal has the jurisdiction to entertain a claim for less than Rs. 10,00,000/- under Section 13(10) of the SARFAESI Act. Facts in Brief 3. The petitioner entered into a Loan Agreement on 30.12.2015 bearing Loan Account No. 4938084 for an amount of Rs. 23,00,000 with respondent no.1 and 2. Thereafter, respondent no.1 and 2 created security interest in respect of the built up property captioned 1/16953, First Floor, Khasra No. 270, Village Skidarpur, Abadu Babarpur Road, Shivaji Park, ILAQA, Shahadra, Delhi (hereafter 'the Property') to secure the Loan and accordingly, deposited original title deeds for the same to the petitioner. 4. It is the case of the petitioner that respondent no.1 and 2 were unable to comply with their repayment obligations and therefore, the loan amount was classified as Non-Performing Asset (NPA). 5. Admittedly, on 27.06.2017, the petitioner issued a demand notice to respondent no.1 and 2 calling upon them to discharge their liability of Rs. 24,71,141.85 ....
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....diction of civil courts from entertaining any suit or proceedings in respect of any matter that the learned Debts Recovery Tribunal is empowered to adjudicate under the SARFAESI Act, thereby, empowering only the learned Debts Recovery Tribunal to entertain its application. 13. The learned counsel for the petitioner relied on the decision in the case of State Bank of Patiala v. Mukesh Jain & Anr.: (2017) 1 SCC 53 and on the strength of the said decision stated that the Debts Recovery Tribunal constituted under the RDB Act has jurisdiction to entertain an appeal as per Section 17 of the SARFAESI Act even if the amount being claimed is less than Rs. 10,00,000. 14. Next, the learned counsel for the petitioner submitted that an application under Section 19 of the RDB Act can only be filed by financial institutions covered by Section 2(h) of the RDB Act, which in turn renders financial institutions covered under Section 2(1)(m) of the SARFAESI Act remediless thereby, defeating the object of the SARFAESI Act. 15. The learned counsel for respondent no.2 submitted that the present petition ought to be rejected as the petitioner has an equally efficacious alternate remedy. He referr....
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....00/- or such other amount as the Central Government may specify. The said threshold of Rs. 10,00,000/- has since been increased to Rs. 20,00,000/- by virtue of the Notification [S.O. 4312 (E)] dated 06.09.2018 issued by the Ministry of Finance (Department of Financial Services). 21. It is relevant to note that Sub-section (4) of Section 1 of the RDB Act as originally enacted, did not include the opening words, "save as otherwise provided". These words were added by virtue of Section 249 read with the Fifth Schedule of the Insolvency and Bankruptcy Code, 2016 (hereafter 'IBC'). 22. Undisputedly, an Original Application under Section 19 of the RDB Act by a bank or a financial institution or a consortium of banks or financial institutions, cannot be instituted in respect of debts due, which are less than Rs. 20,00,000/-. 23. It is the petitioner's case that its application for the recovery of a sum of Rs. 6,92,551.63/- was not under the RDB Act, but under the provisions of Section 13(10) of the SARFAESI Act. Therefore, the provisions of the RDB Act, including Section 1 of the RDB Act, are inapplicable. Section 13(10) of the SARFAESI Act expressly enables a secured creditor to....
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....es.- The provisions of this Act shall not apply to - xxx xxx xxx (h) any security interest for securing repayment of any financial asset not exceeding one lakh rupees;" 27. Thus, the principal question to be addressed is whether the Debts Recovery Tribunal constituted under the RDB Act, exercises any original jurisdiction for the recovery of debts under the SARFAESI Act. 28. Section 3 of the RDB Act provides for establishment of Debts Recovery Tribunal for exercising jurisdiction, powers and authority conferred under the RDB Act. Section 3 of the RDB Act as originally enacted is set out below: "3. Establishment of Tribunal.-(1) The Central Government shall, by notification, establish one or more Tribunals, to be known as the Debts Recovery Tribunal, to exercise the jurisdiction, powers and authority conferred on such Tribunal by or under this Act. (2) The Central Government shall also specify, in the notification referred to in sub-section (1), the areas within which the Tribunal may exercise jurisdiction for entertaining and deciding the applications filed before it." 29. Section 17 of the RDB Act sets out the jurisdiction of the Debts ....
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....ll also specify, in the notification referred to in sub-section (1), the areas within which the Tribunal may exercise jurisdiction for entertaining and deciding the applications filed before it." *** *** *** "17. Jurisdiction, powers and authority of Tribunals.- (1) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions. (1A) Without prejudice to sub-section (1),- (a) the Tribunal shall exercise, on and from the date to be appointed by the Central Government, the jurisdiction, powers and authority to entertain and decide applications under Part III of Insolvency and Bankruptcy Code, 2016 (31 of 2016). (b) the Tribunal shall have circuit sittings in all district headquarters. (2) An Appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act. (2A) Without prejudice to sub-section (2), the Appellat....
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....e stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section. (1A) An application under sub-section (1) shall be filed before the Debts Recovery Tribunal within the local limits of whose jurisdiction- (a) the cause of action, wholly or in part, arises; (b) where the secured asset is located; or (c) the branch or any other office of a bank or financial institution is maintaining an account in which debt claimed is outstanding for the time being. xxx xxx xxx (7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder." 33. Section 18 of the SARFAESI Act provides for a remedy of an appeal to any person aggrieved by an order made by the Debts Recovery Tribunal under Section 17 of the SARFAESI Act. In terms of Sub- section (2) of Section 18 of the SARFAESI Act, the Appellate Tribunal is required to dispose of....
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....ovisions, that stipulates which Debts Recovery Tribunal has the jurisdiction to decide any original claim as to the outstanding amount that remains after the secured creditor has enforced the security interest. This is in contradistinction to the provisions of Section 249 of the IBC by virtue of which certain provisions of the RDB Act were amended to expressly confer jurisdiction on the Debts Recovery Tribunals to exercise jurisdiction, powers and authority of an Adjudicating Authority conferred under the provisions of the IBC. 36. Sub-section (10) of Section 13 of the SARFAESI Act merely enables the secured creditor to file an application to the Debts Recovery Tribunal having jurisdiction or to a competent court, as the case may be, for recovery of the balance due to a borrower if the outstanding debt is not satisfied by the sale proceeds of the secured assets. The plain language of Sub-section (10) of Section 13 of the SARFAESI Act indicates that such an application is required to be made in the form and manner as prescribed. Rule 11 of the SIE Rules stipulates that the said application is required to be made in the form annexed in Appendix VI to the SIE Rules to the Registrar....
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....for the purposes of ascertaining the jurisdiction, it would be necessary to refer to other provisions of the RDB Act. 41. Clearly, if it is necessary to refer to the RDB Act for the purposes of ascertaining the Debts Recovery Tribunal that would exercise jurisdiction in respect of an application made under Section 13(10) of the SARFAESI Act, there is no ground to disregard the limits of the pecuniary jurisdiction of the Debts Recovery Tribunal under the RDB Act. 42. Second, that the language of Section 13(10) of the SARFAESI Act also clearly indicates that it is an enabling provision, which enables the creditor to institute an action for the recovery of the balance amount if the debts due to a secured creditor are not fully satisfied from the proceeds of the secured assets. The secured creditor may make an application to the Debts Recovery Tribunal exercising jurisdiction or to a court of competent jurisdiction. It is implicit that a remedy of making an application to a Debts Recovery Tribunal is available subject to the jurisdiction of the Debts Recovery Tribunal to decide the same, failing which the creditor is required to approach the court of competent jurisdiction. 43....
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....itution, which is also an unsecured creditor. 47. The second material aspect is the borrower's right to file a counter claim. Whereas, under Section 19(5)(1) of the RDB Act, a borrower against whom a claim is instituted under Section 19 of the RDB Act, is entitled to claim a set off in terms of Sub-section (6) of Section 19 of the RDB Act. The borrower is also entitled to file a counter claim under Sub-section (8) of Section 19 of the RDB Act. None of the said provisions would be applicable in case an application under Section 13(10) of the SARFAESI Act is considered. 48. It is also material to note that the RDB Act (then known as Recovery of Debts Due to Banks and Financial Institutions Act, 1993) was held to be unconstitutional by this Court in Delhi High Court Bar Association & Anr. v. Union of India, Secty. Department of Economic Affairs: 1995 SCC OnLine Del 215 on various grounds including that the enactment did not enable a defendant to claim any set off or make any counter claim against a bank or a financial institution. 49. While the appeal against the said decision was pending before the Supreme Court, the RDB Act was amended to remove the lacunae by expressly ena....
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....der the SARFAESI Act. In the aforesaid context, the Supreme Court considered the jurisdiction of the Debts Recovery Tribunal to entertain an application under Section 17(1) of the SARFAESI Act. The Supreme Court held that the Debts Recovery Tribunal exercises its appellate jurisdiction, where an action initiated under the provisions of Section 13 of the SARFAESI Act is challenged. The Supreme Court further observed that the threshold limit of Rs. 10,00,000/- under Section 1(4) of the RDB Act would be applicable to limit the original jurisdiction to the Debts Recovery Tribunal. The Supreme Court had also referred to the decision in Mardia Chemicals Ltd. & Ors. v. Union of India and Ors.: 2004 (4) SCC 311 and had observed that an aggrieved debtor could not be left without a remedy. The relevant extract of the said decision reads as under: "20. In the aforestated circumstances, the only remedy available to respondent no.1 debtor can be to approach the Tribunal under the provisions of the DRT Act read with the provisions of the Act. But, one would feel that as per Section 1(4) of the DRT Act, provisions of the DRT Act would not apply where the amount of debt is less than Rs. 1....