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TMI Blog2015 (1) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir favour having been sanctioned by the branch at Meerut of the respondent ICICI Bank Ltd. and being re-payable at Meerut; and (iii) the mortgaged property being also situated at Meerut. It was further held that merely because the notice under section 13(2) of the SARFAESI Act had been issued by the Jhandewalan, New Delhi Branch of the respondent-bank, would not vest the DRT Delhi with a jurisdiction to entertain the appeal at Delhi. Yet another reason given is, that even if action under section 13(4) or section 14 of the SARFAESI Act is to be taken by the bank, the bank will have to approach the concerned District Magistrate at Meerut for appointment of receiver, for taking possession of the property. 2. It is the contention of the petitioners in the writ petition, that DRT, Delhi has jurisdiction by virtue of the provisions of section 19(1)(c) of the DRT Act read with rule 6(d) of the DRT Rules, to entertain and decide such an appeal. Reliance is placed on State of Rajasthan v. Swaika Properties AIR 1985 SC 1289 and Smt. Indira Devi (supra). It is further pleaded, that the bank cannot sell the mortgaged property of the petitioners by violating the procedure laid down in SARF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction of the DRT before which appeal under section 17(1) of the SARFAESI Act can be filed shall be determined as per the DRT Act and the Rules made thereunder. Reference thereafter is made to section 19(1) of the DRT Act to contend that the jurisdiction thereunder is of the DRT where the defendants or any of them resides or carries on business or where the cause of action wholly or in part arises. It is contended that since the event which triggers the appeal under section 17(1), is the action of the authorised officer of the bank/financial institution, the DRT within whose jurisdiction the said authorised officer is situated would have jurisdiction. It is, thus, argued that since in the present case, the authorised officer of the respondent-bank has issued notice to the petitioners from within the jurisdiction of Delhi, the DRT having jurisdiction over Delhi would definitely have jurisdiction to entertain the appeal. Attention is next invited to rule 6 supra and it is highlighted that prior to amendment thereof on 21st January, 2003, the same provided for the jurisdiction only of the DRT where the applicant was functioning as a bank or financial institution but after amendment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er rule 6 (as it stood after the amendment and without noticing that the argument of the bank was predicated on the un-amended rule) could file recovery proceedings in the DRT in which its branch, which had disbursed the loan, was situated or in the DRT where any of the defendants was residing or carrying on business or in the DRT in which the cause of action has arisen and, hence, even the appeal under section 17(1) of the SARFAESI Act can be filed in any of the said DRT. It would, thus, be seen that before the Division Bench, it was not the contention of either of the parties that the jurisdiction should be confined only to the place where the property was situated, though notice is taken by the Division Bench that under section 16 of the Code of Civil Procedure, 1908 ('CPC'), legal proceedings, subject-matter whereof was a mortgaged property, could be filed only in the court within whose territorial jurisdiction the mortgaged property was situated. It was, however, held that the DRT Act made a specific departure from the provision of section 16 of CPC inasmuch as the bank was not required to file recovery proceedings only with the DRT which had territorial jurisdiction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SARFAESI Act which requires the secured creditor to approach the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured assets may be situated. Thus the secured creditor, i.e., the bank has no choice but to approach the Chief Metropolitan Magistrate or District Magistrate having jurisdiction over the area where the secured asset is situated. Once the grievance is against the action of so taking over the assets with the assistance of the Chief Metropolitan Magistrate or the District Magistrate, it prima facie appears that the jurisdiction to entertain an appeal against such action also will be of the DRT having jurisdiction over the area where the secured asset is situated and over the area whose Chief Metropolitan Magistrate or District Magistrate has been approached for so taking over the secured assets. It may be noticed that the DRT, in such appeal under section 17(3) of the SARFAESI Act, if finds that the measures taken under section 13(4) are not in accordance with SARFAESI Act and the Rules made thereunder, is authorised to declare such measures to be invalid and to restore the possession of the secured assets to the borrowers. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 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). 11. 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in State Bank of India v. Gujarmal Modi Hospital Research Centre for Medical Sciences [1996] 6 DLT 614 as well as in Hindustan Laminators (P.) Ltd. v. Central Bank of India AIR 1998 Cal. 300. 13. 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. 14. We may mention, that while in the DRT Act, there is no mention of mortgage and even an application under section 19(1) is required to only specify the properties required to be attached and which may not necessarily be mortgaged property, section 2(l) of the SARFAESI Act while defining financial asset expressly includes 'mortgage' and sections 2(zc), 2(ze) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RT within whose jurisdiction bank/financial institution to whom the borrower is indebted is situated, would also have jurisdiction to adjudicate whether the action under section 13(4) of taking over possession/management is in accordance with the aforesaid procedure but the explanation to section 17(1) of the SARFAESI Act clarifies that the communication of the reasons to the borrower for not accepting the representation or the likely action of the bank/financial institution shall not entitle the borrower to make an application under section 17(1) of the SARFAESI Act. Thus, the cause of action for the appeal under section 17(1) of the SARFAESI Act is the taking over of the possession/management of the secured asset and which cause of action can be said to have accrued only within the jurisdiction of the DRT where the secured asset is so situated and the possession thereof is taken over. We are, thus, of the view that it is the said DRT only which can be said to be having jurisdiction in the matter within the meaning of section 17(1) of the Act. 17. Further, the relief to be granted by the DRT in an appeal under section 17(1) of the SARFAESI Act, if successful, is under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9) 8 SCC 366 has held the scope of a proceeding under section 17(1) to be extending to scrutinising even the steps taken by the bank/financial institution subsequent to measures under section 13(4). Such scrutiny by the DRT may entail adjudication of disputes as to preservation and protection of the secured asset [see rule 4 of the Security Interest (Enforcement) Rules, 2002], valuation of the secured asset (rule 5), sale thereof (rules 6 to 8) and in the case of the borrower being a company in liquidation, distribution of sale proceeds thereof or between more than one secured creditor of the secured asset [see section 13(9) of the SARFAESI Act]. Such scrutiny by DRT of post-section 13(4) measures may yet further enlarge the number of persons interested in invoking the remedy under section 17(1). Also, all these disputes bear closest proximity to the place where the secured asset is situated and the DRT having jurisdiction over that place would be the most suitable DRT to entertain such disputes. 18. As far as section 17(7) of the SARFAESI Act requiring disposal of appeals under section 17(1) of the SARFAESI Act, as far as may be in accordance with the provisions of the DRT Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an appeal and as an original application. The jurisdictional provision under section 19(1) of the DRT Act is only for applications by the bank/financial institution for recovery of debt from any person. An application by a bank/financial institution for recovery of debt can by no stretch of imagination be equated with an appeal under section 17(1) of the SARFAESI Act. We are, therefore, of the view that there is no provision in the DRT Act providing for territorial jurisdiction of an appeal under section 17(1) of the SARFAESI Act and the question of application thereof under section 17(7) does not arise. Under section 17(7) of the SARFAESI Act only that much of the DRT Act can be said to be incorporated therein as is contained in the DRT Act and not more. Whether a particular provision of DRT Act would apply or not, would depend upon the nature and scope of proceeding under the SARFAESI Act. 21. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ARFAESI Act for borrowers residing in the State of Jammu and Kashmir (to which the DRT Act does not apply and where there are no DRTs), provides for filing of such appeals in the Court of District Judge in that State having jurisdiction over the borrower. If an appeal under section 17(1) of the SARFAESI Act was maintainable in any of the DRTs as mentioned in the DRT Act and the DRT Rules or as found by the Division Bench in Indira Devi (supra) i.e., either in the DRT having jurisdiction where the Branch of the bank/financial institution which has disbursed the loan is situated or in the DRT where the bank carries on business or in the DRT where cause of action wholly or in part arises, there was no need for insertion of section 17A of the SARFAESI Act with effect from 11th November, 2004 to provide for an appeal under section 17 of the SARFAESI Act by borrowers residing in the State of Jammu and Kashmir. Further, the jurisdiction under section 17A of the SARFAESI Act being limited to only one DRT, i.e., the DRT having jurisdiction over the borrower, is also indicative of the DRT having jurisdiction in the matter under section 17(1) of the SARFAESI Act being only one and the multipl ..... 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