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2015 (1) TMI 320 - HC - Companies LawJurisdiction of DRT - Territorial jurisdiction - Section 17 - petitioners being residents of Meerut - Held that - The reason which prevailed with the Division Bench in Smt. Indira Devi (2010 (8) TMI 886 - DELHI HIGH COURT) to hold that an appeal under section 17(1) of the SARFAESI Act can be filed in any of the DRTs where the bank under section 19(1) of the DRT Act could initiate proceedings, was predicated on the DRT Act making a departure from section 16 of the CPC in enabling the bank to initiate proceedings not necessarily within the jurisdiction of the DRT where the mortgaged property is situated but in any of the DRTs. The Division Bench was also guided by the consideration of giving the same opportunity of choosing jurisdiction to the borrower, as available to the bank. 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). The proceedings in the DRT for recovery of debt, culminate in a Certificate of Recovery which is equivalent to a money decree of a civil court. Just like a money decree of a civil court, can be transferred for execution to another court where the assets of the judgment debtor from which recovery is to be effected are situated, under section 19(23) of the DRT Act also, where the property from which recoveries are to be effected, is situated outside the local limits of the jurisdiction of the DRT which has issued the Certificate, the DRT is required to send a copy of the certificate for execution to the DRT within whose jurisdiction the property is situated. Section 25 provides for modes of recovery of the debts specified in the certificate, including by attachment and sale of property. The recovery proceedings under the DRT Act are, thus, equivalent to a suit for recovery of money before a civil court and cannot be said to be for enforcement of mortgage. Thus, it cannot be said that the DRT Act has made any departure from section 16 of the CPC. 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 an unsecured debt - Once it is held that an appeal under section 17(1) of the SARFAESI Act cannot be equated with an application by the bank/financial institution for recovery of debt under section 19 of the DRT Act, the limits of territorial jurisdiction described under section 19(1) of the DRT Act cannot be made applicable to section 17(1) of the SARFAESI Act. Provision for territorial jurisdiction under section 19(1) of the DRT Act is only qua the applications to be made by the bank or financial institution for recovery of its debt. However, a proceeding under section 17(1) of the SARFAESI Act is initiated not by the bank or the financial institution but by a person including the borrower aggrieved from the measures taken by the bank or financial institution under section 13(4) of the SARFAESI Act. We are, thus, of the view that notwithstanding section 17(7) of the SARFAESI Act providing for the disposal of the proceedings under section 17(1) of the SARFAESI Act in accordance with the provisions of the DRT Act and the Rules made thereunder, the same cannot make the provisions of section 19(1) of the DRT Act applicable to proceedings under section 17(1) of the SARFAESI Act. As aforesaid, section 19(1) of the DRT Act is n6t an omnibus provision qua territorial jurisdiction. It is concerned only with providing for territorial jurisdiction for applications for recovery of debts by the banks/financial institutions. The same can have no application to the appeals under section 17(1) of the SARFAESI Act which are to be preferred, not by the banks/financial institutions, but against the banks/ financial institutions. Principles of section 16 of the CPC are reflected in sections 14 and 17A of the SARFAESI Act. Assistance to the secured creditor has not been provided of any court but only of the court within whose jurisdiction secured asset is situated. This is not without reason. It is only the CMM/DM within whose jurisdiction such secured asset is situated who can render such assistance. Court does not concur with the second reasoning given by the Division Bench in Smt. Indira Devi (supra) of any need to provide parity to the borrower with the bank, in the matter of territorial jurisdiction. Principles of parity do not apply to territorial jurisdiction. Merely because the defendant if were to sue, can sue at the place of the residence of the plaintiff, does not entitle the plaintiff to sue at the place of his residence if that place would otherwise not have territorial jurisdiction. We re-emphasise that the scope of the proceedings under section 19(1) of the DRT Act is entirely different from a proceeding under section 17(1) of the SARFAESI Act and no need for parity exists. Division Bench judgment in Smt. Indira Devi (supra) is set aside and an appeal/application under section 17(1) of the SARFAESI Act can be filed only before the DRT within whose jurisdiction the property/secured asset against which action is taken is situated and in no other DRT. - No error in the order of the DRT, Delhi impugned in this petition holding it to have no jurisdiction to entertain the appeal/application under section 17(1) of the SARFAESI Act, the mortgaged property against which action is to be taken being situated at Meerut. - Decided against Petitioners.
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.
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