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TMI Blog2019 (11) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... e DRT Act, in conjunction with Section 17(1A) of the SARFAESI Act, indicates that the primary consideration for ascertaining the jurisdiction of the tribunal is not restricted to the situs of the secured asset but is primarily based on the debt itself, be it with regard to the place where the cause of action, wholly or in part, arises or the branch or any other office of a bank or financial institution where it is maintaining an account in which the debt claimed is outstanding for the time being or (in the DRT Act) the defendant resides or works. In the present situation, if the argument of the opposite parties is to be accepted, the borrowers/petitioners have to file several different applications under Section 17(1) of the SARFAESI Act before the different tribunals respectively having territorial jurisdiction over the secured assets, for the same debt, each time paying the amount of fees specified for such debt, since there is no provision for segregation or apportionment of the fees payable within the scope of Rule 13(2) of the said Rules. The said proposition, ipso facto, is absurd, since for the same grievance, the applicant cannot be expected to deposit fees several tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the SARFAESI Act ), thereby clubbing challenges to three different notices, to save court fee. Upon upholding such objection, the tribunal disposed of the said application of the petitioners with a direction to file fresh SARFAESI application. 3. The question which falls for consideration in the instant revisional application is, whether separate notices under Section 13(4) of the SARFAESI Act, pertaining to different secured assets for a single debt, can be challenged in a single application under Section 17 of the said Act. 4. Learned counsel for the petitioners argues that, since Section 17 of the SARFAESI Act contemplates an application against measures to recover secured debts and gives the right to any person, including the borrower, aggrieved by any of the measures referred to in sub‐section (4) of Section 13, to approach the tribunal, a single application was maintainable in view of the secured debt being a single one. 5. Placing reliance on Section 13 of the SARFAESI Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accordance with the provisions of this Act. ( 2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non‐performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub‐section (4). Provided that ( i) the requirement of classification of secured debt as non‐performing asset under this sub‐section shall not apply to a borrower who has raised funds through issue of debt securities; and ( ii) in the event of default, the debenture trustee shall be entitled to enforce security interest in the same manner as provide under this section with such modifications as may be necessary and in accordance with the terms and conditions of securi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the secured assets the possession of which has been taken over by the secured creditor; ( d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt. ( 5) Any payment made by any person referred to in clause (d) of sub‐ section (4) to the secured creditor shall give such person a valid discharge as if he has made payment to the borrower. ( 5A) Where the sale of an immovable property, for which a reserve price has been specified, has been postponed for want of a bid of an amount not less than such reserve price, it shall be lawful for any officer of the secured creditor, if so authorised by the secured creditor in this behalf, to bid for the immovable property on behalf of the secured creditor at any subsequent sale. ( 5B) Where the secured creditor, referred to in sub‐section (5A), is declared to be the purchaser of the immovable property at a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secured creditor for transfer by way of lease or assignment or sale of such secured assets. ( 9) Subject to the provisions of the Insolvency and Bankruptcy Code, 2016, in the case of financing of a financial asset by more than one secured creditors or joint financing of a financial asset by secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to sub‐section (4) unless exercise of such right is agreed upon by the secured creditors representing not less than sixty per cent in value of the amount outstanding as on a record date and such action shall be binding on all the secured creditors: Provided that in the case of a company in liquidation, the amount realised from the sale of secured assets shall be distributed in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956 ): Provided further that in the case of a company being wound up on or after the commencement of this Act, the secured creditor of such company, who opts to realise his security instead of relinquishing his security and proving his debt un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the guarantors or sell the pledged assets without first taking any of the measured specifies in clause (a) to (d) of sub‐section (4) in relation to the secured assets under this Act. ( 12) The rights of a secured creditor under this Act may be exercised by one or more of his officers authorised in this behalf in such manner as may be prescribed. ( 13) No borrower shall, after receipt of notice referred to in sub‐ section (2), transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice, without prior written consent of the secured creditor. 14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset. ‐ ( 1) Where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, entitled to take possession of the secured assets under the provisions of sub‐section (4) of section 13 read with section 14 of the principal Act; ( ix) that the provisions of this Act and the rules made thereunder had been complied with: Provided further that on receipt of the affidavit from the Authorised Officer, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, shall after satisfying the contents of the affidavit pass suitable orders for the purpose of taking possession of the secured assets within a period of thirty days from the date of application: Provided also that if no order is passed by the Chief Metropolitan Magistrate or District Magistrate within the said period of thirty days for reasons beyond his control, he may, after recording reasons in writing for the same, pass the order within such further period but not exceeding in aggregate sixty days. Provided also that the requirement of filing affidavit stated in the first proviso shall not apply to proceeding pending before any District Magistrate or the Chief Metropolitan Magistrate, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 maintain an account in which debt claimed is outstanding for the time being. ( 2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub‐section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder. ( 3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub‐section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management or restoration of possession, of the secured assets to the borrower or other aggrieved person, it may, by order, ‐ ( a) declare the recourse to any one or more measures re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . ( 5) Any application made under sub‐section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application: Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub‐section (1). ( 6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub‐section (5), any party to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal. ( 7) Save as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the recovery of the debt. 17. The expression security interest , used in the caption of Section 13 of the SARFAESI Act, has been defined in Section 2(1)(zf) of the said Act as right, title or interest of any kind, other than those specified in Section 31, upon property created in favour of any secured creditor and includes several interests, like mortgage, charge, other right title or interest in any intangible asset, etc., as provide therein. 18. Section 2(1)(ze) defines secured debt to be a debt which is secured by any security interest. Thus, the definitions of secured debt and security interest are circular between themselves and lead us nowhere in so far as the present purpose is concerned. 19. For such purpose, we have to look into the definition of debt as provided in Section 2(1)(ha) which commences with the expression that debt shall have the meaning assigned to it in clause (g) of Section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the DRT Act ) and also includes unpaid portion of purchased price of any tangible a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the other hand, provides as follows: 19. Application to the Tribunal. ( 1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction, ‐ ( a) the branch or any other office of the bank or financial institution is maintaining an account in which debt claimed is outstanding, for the time being; or ( aa) the defendant, or each of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or ( b) any of the defendants, where there are more than one, at the time of making the application,, actually and voluntarily resides, or carries on business, or personally works for gain; or ( c) the cause of action, wholly or in part, arises: Provided that the bank or financial institution may, with the permission of the Debts Recovery Tribunal, on an application made by it, withdra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nant of the initial jurisdiction of the tribunal to entertain an application under Section 17 of the SARFAESI Act, which is attracted immediately after any measure under Section 13(4) is taken. 31. Even the measures under Section 13(4) relate to the debt and the security interest arising therefrom and cannot be determined on the basis of the assets, possession of which would come into play only in the event the borrower fails to pay the debt. Even enforcement under Section 14 has to await the adjudication under Section 17 of the SARFAESI Act, if an application is filed under the said provision. Hence, the territorial location of the assets is irrelevant for the purpose of deciding the jurisdiction of the tribunal. Jurisdiction of the tribunal, however, is a primary determinant for deciding as to whether the applicant under Section 17 has to approach different tribunals pursuant to different notices under Section 13(2) or Section 13(4) issued by the secured creditor in respect of such several assets, with several applications, or to file a single application under Section 17 in consonance with the debt‐in‐question, since the situs of action is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is to be accepted, the borrowers/petitioners have to file several different applications under Section 17(1) of the SARFAESI Act before the different tribunals respectively having territorial jurisdiction over the secured assets, for the same debt, each time paying the amount of fees specified for such debt, since there is no provision for segregation or apportionment of the fees payable within the scope of Rule 13(2) of the said Rules. The said proposition, ipso facto, is absurd, since for the same grievance, the applicant cannot be expected to deposit fees several times over. 39. Hence, the argument as to the petitioners avoiding fees returns as a boomerang against the opposite parties themselves inasmuch as the relevant provisions, as discussed above, indicate that the fees have to be put in on the basis of the debt alone. 40. Thus, it is obvious that, for a single debt, the borrowers have to file a single application under Section 17(1) in a tribunal having jurisdiction of the borrowers choice, as provided in Section 17(1A) of the SARFAESI Act, putting in a single fee pertaining to the debt‐in‐question, in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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