Madras High Court
M/S. Asian Health And Nutri Foods Ltd vs The Debts Recovery Tribunal on 24 June, 2014
Bench: V.Ramasubramanian, V.M.Velumani
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
Dated: 24.06.2014
CORAM
THE HON'BLE MR.JUSTICE V.RAMASUBRAMANIAN
AND
THE HON'BLE MS.JUSTICE V.M.VELUMANI
Civil Revision Petition (MD) No.694 of 2014(PD)
1. M/s. Asian Health and Nutri Foods Ltd.,
Omalur By-Pass Road,
Omalur, Salem ? 636 455.
Rep.by its Chairman/Managing Director.
2. K.Saravanan
3. R.Jayaseelan ... Petitioners/Applicants
-Vs-
1. The Debts Recovery Tribunal,
3rd & 4th Floor, Kalyani Towers,
4/162, Melur Road, Madurai. ... 1st Respondent
2. The Authorised Officer,
State Bank of Mysore,
Salem Branch,
No.19/35-B, Car Street,
Salem ? 636 001. ... 2nd Respondent/Respondent
Civil Revision filed under Article 227 of the Constitution of India
seeking to set aside the Return Endorsement order of the first Respondent
dated 19.03.2014 made in S.A.SR.No.2051 of 2014 and direct the first
Respondent to number the application filed under Section 17 of the SARFAESI
Act, 2002 and hear the same on merits in accordance with law.
!For Petitioners .. Jayesh B Dolia for
M/s. Ayar & Dolia
^For Respondents .. Mr.Ananth C.Rajesh for R2.
:ORDER
This Revision is filed under Article 227 of the Constitution, questioning the correctness of the view taken by the Registrar of the Debts Recovery Tribunal, Madurai, on the question of its jurisdiction to entertain an appeal under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
2. Heard Mr.Jayesh B Dolia, learned counsel for the Petitioner and Mr.Ananth C.Rajesh, learned counsel for the second Respondent.
3. The first Petitioner borrowed money from the State Bank of Mysore, Salem Branch and the account became a Non Performing Asset. The Bank initiated proceedings under the SARFAESI Act, 2002. A series of possession notices were issued on 31.01.2014, 01.02.2014, 03.02.2014, 04.02.2014, 05.02.2014 and 06.02.2014. These possession notices were in respect of several properties offered as security by the petitioner in favour of the Bank. All the properties are located within the jurisdiction of various Districts as well as various States in the country. One property is in Omalur, in Salem District. Another property is in Madurai. The third property is in Gummidipoondi. The fourth property is in Tenali in Guntur District, Andhra Pradesh. Yet another property is in Karnool, in Andhra Pradesh. One property is in Kaisaratgi, State of Karnataka.
4. But all possession notices were issued by only one Authorised Officer namely the second Respondent herein. There is no dispute about the fact that some of the properties are situate in Madurai, within the jurisdiction of the Debts Recovery Tribunal, Madurai. Therefore the petitioner herein filed an Appeal in S.A.SR.No.2051 of 2014, on the file of the Debts Recovery Tribunal, Madurai, under Section 17 of the Act, challenging all the possession notices. But, the Registrar of the Tribunal returned the papers on the ground that the petitioners should approach the respective Tribunals within whose jurisdiction each one of the properties is situate. Therefore, aggrieved by the return of the papers, the petitioners are before this Court.
5. We do not think that the stand taken by the Debts Recovery Tribunal can be approved. In Amish Jain vs. ICICI Bank Limited (IV (2012) BC 552 (FB), a Full Bench of the Delhi High Court was concerned with a reference made by a Division Bench, on the question as to whether an appeal under Section 17 of the SARFAESI Act would lie only in the Court within whose jurisdiction the mortgaged property is situate or as to whether it can be filed in the Tribunal having jurisdiction where the Branch of the Bank which disbursed the loan is situate. The Full Bench of the Delhi High Court held that an appeal under Section 17 of the SARFAESI Act can be filed only before the Debts Recovery Tribunal within whose jurisdiction the secured asset is situate. It is based upon this judgment that the Tribunal has held that the petitioners herein should go before every one of the Tribunals within whose jurisdiction every one of the properties is situate.
6. But we do not think that the said decision can be relied upon for the purpose of resolving the issue that has arisen in this case. The Full Bench of the Delhi High Court was not concerned with the question as to which of the Tribunals would have jurisdiction, when several secured assets are involved and when all of them are located within the jurisdiction of different Tribunals. In the case on hand we are confronted with the situation where there as several secured assets located within the jurisdiction of various Tribunals. Hence the decision of the Full Bench of the Delhi High Court cannot be invoked to resolve the problem on hand.
7. For resolving the problem on hand, we will have to take a look at some of the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Act 54 of 2002), read with the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (Act 51 of 1993).
8. The Debts Recovery Tribunal as well as Debts Recovery Appellate Tribunal are actually constituted in terms of Sections 3 and 8 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Section 3(1) of the 1993 Act empowers the Central Government to establish one or more Tribunals, to be known as the Debts Recovery Tribunal, to exercise the jurisdiction, powers and authority conferred upon such Tribunal by or under the Act. Under sub-section (2) of Section 3, 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.
9. Similarly, Section 8(1) of the 1993 Act empowers the Central Government to establish one or more Appellate Tribunals. Under sub-section (2) of Section 8, the Central Government shall also specify the Tribunals in relation to which the Appellate Tribunal may exercise jurisdiction.
10. Section 19(1) of the 1993 Act, defines to some extent, the territorial jurisdiction of the Debts Recovery Tribunal. Under Section 19(1) of the 1993 Act, an application for recovery of a debt can be made by a Bank or a Financial Institution, to the Tribunal within whose local limits of jurisdiction, (a) any of the defendants actually and voluntarily resides or carries on business or personally works for gain or (b) the cause of action wholly or in part arises.
11. It is interesting to see that the focus of Section 19(1) of 1993 Act is not on the property offered as security by the borrower in favour of the Bank. The focus of Section 19(1) is only on (a) the residential status or place of business of the borrower and (b) the situs of the cause of action.
12. The fact that an application can be filed by a Bank before a Tribunal within whose jurisdiction the mortgaged property is not situate, is made clear by sub-section (23) of Section 19 of the 1993 Act. Sub-sections (1) and (23) of Section 19 are reproduced for easy reference:
?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 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 party, arises.
(23) Where the Tribunal, which has issued a certificate of recovery, is satisfied that the property is situated within the local limits of the jurisdiction of two or more Tribunals, it may send the copies of the certificate of recovery for execution to such other Tribunals where the property is situated:
Provided that in a case where the Tribunal to which the certificate of recovery is sent for execution finds that it has no jurisdiction to comply with the certificate of recovery, it shall return the same to the Tribunal which has issued it.
13. The fact that the jurisdiction of the Tribunal under the 1993 Act is primarily based upon the cause of action or the residential status of the defendant, is further fortified by Section 31, which relates to transfer of cases from the Civil Courts to the Tribunal after the constitution of the Tribunal. Sub-section (1) of Section 31 reads as follows:-
?31. Transfer of pending cases.?(1) Every suit or other proceeding pending before any court immediately before the date of establishment of a Tribunal under this Act, being a suit or proceeding the cause of action whereon is based is such that it would have been, if it had arisen after such establishment, within the jurisdiction of such Tribunal, shall stand transferred on that date to such Tribunal:?
14. The Debts Recovery Tribunal (Procedure) Rules 1993 issued in exercise of the powers conferred by Section 36 of the 1993 Act, lay down the procedure for the filing of applications, presentation and scrutiny. Rule 6 of these Rules gives an indication of the place of filing of the application. It is interesting to note the provisions of Rule 6 of the Debts Recovery Tribunal (Procedure) Rules 1993 which reads as follows:-
? 6. Place of filing application ? The application shall be filed by the applicant with the Registrar within whose jurisdiction, -
(a) the applicant is functioning as a Bank or Financial Institution, as the case may be, for the time being; or
(b) the defendant, or each of the defendants where there are more than one, at the time of making application, actually or voluntarily resides, or carries on business, or personally works for gain; or
(c) 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
(d) the cause of action, wholly or in part, arises.?
15. A careful look at Rule 6 of the Debts Recovery Tribunal (Procedure) Rules 1993 would show that clause (a) therein goes contrary to Section 19(1) of the 1993 Act. Section 19(1) of the 1993 Act lays down only three contingencies. Those three contingencies are repeated verbatim in clauses (b), (c) and (d) of Rule 6 of the Debts Recovery Tribunal (Procedure) Rules 1993. But clause (a) of Rule 6 of the Debts Recovery Tribunal (Procedure) Rules 1993, goes beyond Section 19(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Any way, we are not now concerned with the same. All that is borne out by the provisions of the 1993 Act and the 1993 Rules, is the fact that the jurisdiction under 1993 Act is not determined either on the basis of the location of the mortgaged properties or on the basis of the principles enunciated in the Civil Procedure Code.
16. In so far as the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is concerned, it does not contain any provision for the establishment or constitution and composition of the Tribunal or Appellate Tribunal. This is in view of the fact that these matters were already taken care of by the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
17. However, Section 2(1)(i) of the SARFAESI Act 2002, defines the Debts Recovery Tribunal, to mean the Tribunal established under Section 3(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
18. Section 17(1) of the SARFAESI Act 2002, which provides for a right of appeal to any person including the borrower to challenge before the Debts Recovery Tribunal, any of the measures taken under Section 13(4) of the Act, merely stipulates that the application should be made to the Debts Recovery Tribunal having jurisdiction in the matter. Therefore, Section 17(1) of the SARFAESI Act 2002 has to be understood in the light of the definition in Section 2(1)(i) and Section 3(1) of the 1993 Act. Section 17(7) of the Securitisation Act 2002 makes it clear that the Tribunal shall dispose of the application filed under Section 17(1), as far as may be, in accordance with the provisions of the 1993 Act and the Rules made therein.
19. After the issue of the Securitisation Act 2002, the Debts Recovery Tribunal (Procedure) Rules 1993 were amended by the Central Government by GSR44(E) dated 21.01.2003. It was only after this amendment that Rule 6, prescribing the place of filing of application got enlarged. Rule 6 as it stood before the amendment dated 21.01.2003 and after the amendment, are presented in a tabular column for easy reference. Rule 6 prior to its amendment Rule 6 after amendment on 21.01.2003 "6. Place of filing applications.- The application shall be filed by the applicant with the Registrar within whose jurisdiction the applicant is functioning as a bank or financial institution, as the case may be, for time being."
"6. Place of filing application.- The application shall be filed by the applicant with the Registrar within whose jurisdiction,-
(a) the applicant is functioning as a Bank or Financial Institution, as the case may be, for the time being; or
(b) the defendant, or each of the defendants where there are more than one, at the time of making application, actually or voluntarily resides, or carries on business, or personally works for gain; or
(c) 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
(d) the cause of action, wholly or in part, arises.
20. It could be seen from Rule 6, as it stood both before and after the amendment, that up to the year 2003, the Rule enabled the Banks and Financial Institutions to file applications before the Debts Recovery Tribunal within whose jurisdiction the Bank or Financial Institution was functioning. But it was only after the 2003 amendment that Rule 6 was enlarged to include clauses (b), (c) and (d).
21. The Securitisation Act 2002 does not actually prescribe the procedure for the Tribunal to follow in the matter of disposal of an application under Section 17 of the Act. However, Section 17(7) of the Securitisation Act 2002 entitles the Debts Recovery Tribunal to dispose of the applications, to the extent possible, in accordance with the provisions of the 1993 Act. The procedure and powers of the Tribunal and the Appellate Tribunal are codified in Section 22 of the 1993 Act. Sub-section (1) of Section 22 of the 1993 Act states that the Tribunal and the Appellate Tribunal are not bound by the procedure laid down in the Code of Civil Procedure 1908, but should be guided by the principles of natural justice:
The Tribunal and the Appellate Tribunal are also conferred with the power to regulate their own procedure including the place at which they shall have their sittings.
22. However, sub-section (2) of Section 22 enlists certain matters in respect of which the Tribunal and the Appellate Tribunal shall have the same powers as are vested in a Civil Court under the Code of Civil Procedure. Therefore it is clear that the provisions of the Code of Civil Procedure will have no application. Nevertheless there is no bar for the Tribunal to adopt the very same principles that form the basis of the Code of Civil Procedure, as and when the Tribunal regulates its own procedure.
23. In so far as territorial jurisdiction is concerned, the Code of Civil Procedure lays down certain fundamental principles in Sections 16 to
20. These principles, found in Sections 16 to 20 can be summarized as follows:-
"(i) a suit for recovery or partition of immovable property, a suit for foreclosure, sale or redemption in the case of mortgage of an immovable property, a suit for determination of any right to or interest in immovable property, a suit for compensation for wrong to immovable property and a suit for recovery of immovable property should be instituted within the local limits of whose jurisdiction the property is situate. (as per Section 16 of CPC).
(ii) A suit to obtain relief respecting, or compensation for wrong to, immovable property situate within the jurisdiction of different Courts, is to be instituted in any Court within whose local limits of jurisdiction, any portion of the property is situate . (as per Section 17 of CPC).
(iii) In cases where there is uncertainty with regard to the jurisdiction of two or more Courts, one of them can entertain the suit after recording a statement. (As per Section 18 of CPC).
(iv) A suit for compensation for wrong either to a person or to his movable property, should be instituted either in the place where the wrong was committed or in the place where the defendant resides or carries on business or personally works for gain. (As per Section 19 of CPC.).
(v) A suit, the institution of which is not restricted by any of the limitations found in Sections 16 to 19, can be instituted in any of the three places namely: (a) where the defendant or each of the defendants actually and voluntarily resides or carries on business or personally works for gain; (b) where any of the defendants actually and voluntarily resides or carries on business or personally works for gain, provided the leave of the Court is taken or the defendant whose right may be prejudiced, acquiesces and (c) where cause of action wholly or in part arises (As per Section 20 of CPC). "
24. What is incorporated in Clauses (a), (b) and (c) of Section 19(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (Act 51 of 1993) are nothing but what are found in Clauses (a), (b) and (c) of Section 20 of Code of Civil Procedure, 1908. As a matter of fact Clauses
(a), (b) and (c) of Section 19(1) of the 1993 Act are in pari-materia with clauses (a), (b) and (c) of Section 20 of the Code, with only one exception. For the application of clause (b) of Section 20 of the Code, anyone of the two conditions stipulated therein is to be satisfied. The plaintiff should have either taken the leave of the Court or the defendant who does not reside within the territorial jurisdiction should have acquiesced in the institution of the suit. These two prescriptions found in Section 20(b) of the Code alone are not found in Section 19(1)(b) of the 1993 Act.
25. Keeping the above fundamental principles in mind, if we have a careful look at the decision of the Full Bench of the Delhi High Court in Amish Jain, it could be seen that the Full Bench of the Delhi High Court was of the view that the question of territorial jurisdiction for the remedy of appeal provided in Section 17(1) of the SARFAESI Act cannot be determined in the light of the DRT Act making a departure from the principles enshrined in Section 16 of the Code. In other words the Full Bench of the Delhi High Court made the principles underlying Section 16 of the Code, applicable to an appeal under Section 17 of the SARFAESI Act. The Full Bench was of the opinion that the DRT Act 1993 alone made a departure from Section 16 of the Code, in view of the fact that an application under the 1993 Act is only for the recovery of a debt and need not necessarily be for the enforcement of a right over an immovable property. The Full Bench of the Delhi High Court also held that an appeal under Section 17 of the SARFAESI Act cannot be equated to an application under Section 19 of the DRT Act 1993. In para 26 of its judgment, the Full Bench held as follows:-
"26. It would thus be seen that the principles of Section 16 of the CPC are reflected in the 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. "
26. As rightly observed by the Full Bench of the Delhi High Court, the SARFAESI Act 2002 does not speak about territorial jurisdiction. It only speaks about (i) the Tribunal having jurisdiction in the matter of Section 17(1) and (ii) disposal of the application in accordance with the provisions of the 1993 Act and the Rules issued therein. Therefore, only two alternatives are available to us for resolving this issue. The first is to simply go by the prescription regarding territorial jurisdiction in clauses
(a), (b) and (c) of Section 19(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (Act 51 of 1993) and the prescription contained in clauses (a), (b) and (c) of Rule 6 of the Debts Recovery Tribunal (Procedure) Rules, 1993. If this is not acceptable, (as per the opinion of the Full Bench of the Delhi High Court), then the only other alternative is to look for guidance from the principles that underline the concept of territorial jurisdiction under Section 16 of the Code of Civil Procedure.
27. In so far as the case on hand is concerned, we need not go as far as the Full Bench of the Delhi High Court has gone. If we can fall back upon clauses (a), (b) and (c) of Section 19(1) of the DRT Act 1993 and clauses
(a), (b) and (c) of Rule 6 of DRT (Procedure) Rules, 1993, then the petitioners herein are entitled to file an application under Section 17(1) of the SARFAESI Act, on the file of any one of the Debts Recovery Tribunals within whose jurisdiction a part of the cause of arose.
28. Even if Section 19(1) of the 1993 Act and Rule 6 of the DRT (Procedure) Rules, 1993 are presumed to be inapplicable, we have to go by the general principles that originated from the common law and culminated in Sections 16 to 20 of the Code of Civil Procedure. In such an event, Section 17 would go to the rescue of the petitioner. The object behind Section 17 of the Code of Civil Procedure is to ensure that the very same parties to a lis, are not driven to various Courts for the very same cause of action, merely because the reliefs sought are in respect of different properties situate in different jurisdictions. Therefore, what underlines Section 17 of the Code are general principles based on equity and fairness of procedure. There is no reason as to why the fundamental principles that underline Section 17 of the Code cannot be applied to a proceeding under Section 17 of the SARFAESI Act. The fundamental principles on the basis of which an edifice is built in Section 17 of the Code, do not become untouchables merely because they are incorporated in the Code of Civil Procedure and merely because the DRT Act 1993 states that the provisions of the Code of Civil Procedure are not applicable to the proceedings before the Debts Recovery Tribunal.
29. As a matter of fact, the Supreme Court has repeatedly held that even principles of procedure such as res judicata recognized by the Code of Civil Procedure for application to proceedings before the Civil Courts, can be imported in appropriate cases arising under Article 226 of the Constitution. Therefore by the same analogy, the Debts Recovery Tribunal ought to apply in the proceedings arising under Section 17 of the SARFAESI Act, the principles underlying Section 17 of the Code of Civil Procedure.
30. In view of the above, the Revision Petition is allowed, the endorsement made by the Debts Recovery Tribunal on the application filed by the petitioner is set aside. The petitioner is directed to represent the papers before the Debts Recovery Tribunal, within 10 days from the date of receipt of copy of this order. If all other requirements are satisfied, the Tribunal shall number the application and take it up for hearing. We make it clear that we have considered only one issue namely as to whether the Tribunal in question has territorial jurisdiction to entertain the appeal of the petitioner herein or not. We have not considered any other issues. There will be no order as to costs.
To
1. The Debts Recovery Tribunal, 3rd & 4th Floor, Kalyani Towers, 4/162, Melur Road, Madurai.
2. The Authorised Officer, State Bank of Mysore, Salem Branch, No.19/35-B, Car Street, Salem ? 636 001.