Delhi High Court
Smt. Indira Devi & Anr. vs Debt Recovery Appellate Tribunal & ... on 9 August, 2010
Author: Valmiki J. Mehta
Bench: Sanjay Kishan Kaul, Valmiki J.Mehta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) No. 8221/2009
Reserved on : 4th August, 2010
Pronounced on: 9th August, 2010
SMT. INDIRA DEVI & ANR. ...... Petitioners
Through: Mr. R.P.Vats, Adv. with Mr.
Prasanta Verma, Adv.
VERSUS
DEBT RECOVERY APPELLATE TRIBUNAL & OTHERS
....Respondents
Through: Mr. Pranav Kishore Jha for
Mr.Lajwinder Singh, Advocate
for Respondent No.2.
Mr. P.K.Dhamija, Advocate for
Respondent No.3 to 16.
CORAM:
HON'BLE MR. JUSTICE SANJAY KISHAN KAUL
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
1. Whether the Reporters of local papers may be
allowed to see the judgment? Yes
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported in the Digest? Yes
% JUDGMENT
VALMIKI J. MEHTA, J
1. The issue which arises for determination in the present
petition is whether an appeal can or cannot be filed under Section 17
of the Securitisation and Reconstruction of Financial Assets and
WP(C) 8221-09 Page 1 of 15
Enforcement of Security Interest Act, 2002 (hereafter referred to as
the „Securitisation Act‟) by a borrower/mortgagor where the
mortgaged property is situated. Putting it differently, the issue is
whether an appeal under Section 17 of Securitisation Act can only be
filed where the branch of the bank is situated which has given the
loan or it can be filed both in the Debt Recovery Tribunal (DRT) which
has jurisdiction where the branch of the Bank is situated which has
given the loan or that the appeal under Section 17 can also be filed
within the jurisdiction of the DRT where the mortgaged property is
situated.
Under the provisions of the Code of Civil Procedure, 1908
(CPC), any legal proceeding where the subject matter of the suit is a
mortgage property, is filed within the court within whose territorial
jurisdiction the mortgaged property is situated. In fact, Section 16 of
the CPC mandates in view of the Non-obstante Clause thereof that
the territorial jurisdiction will only lie with the court where the
mortgaged property is situated and the court where the defendant
resides or carries on business or any other part of cause of action
arises will not have territorial jurisdiction to try the legal proceedings.
2. When the Recoveries of Debts Due to Banks and Financial
Institutions Act, 1993 (hereinafter referred to as „DRT Act‟) was
passed, the Legislature made a specific departure from the provision
WP(C) 8221-09 Page 2 of 15
of Section 16 of the CPC. In terms of Section 19(1) of the DRT Act, it
was not required that the bank should file the proceedings for
recovery only within the DRT which had territorial jurisdiction over
the mortgaged property and the bank could file the proceedings for
recovery either where the defendant resides or carries on business or
where whole or part of cause of action arise including where the
branch is located. Meaning thereby, the bank can institute recovery
proceedings where its branch is situated which advanced the credit
facilities to the borrower although the mortgaged property was
situated elsewhere, since the place where the loan is advanced is the
place where it can be said that the part of the cause of action
undoubtedly arises. The relevant provision of DRT Act being Section
19(1) and the Rule 6 of the Debt Recovery Tribunal (Procedure) Rules,
1993 (hereinafter referred to as the „DRT Rules‟) being relevant, the
some are reproduced as under:-
"Section 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,
WP(C) 8221-09 Page 3 of 15
actually and voluntarily resides or carries on
business or personally works for gain; or
(c) the cause of action, wholly or in part, arises;
xxxxxxxx
Rule 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."
A reading of the aforesaid provisions shows that this provision is
similar to Section 20 of the CPC. Thus the banks in view of Section
19(1) of the DRT Act have been filing cases for recovery of money
where the branch of the bank which advanced the loan is situated
although it has an option also to file the recovery proceedings in the
DRT within whose jurisdiction the mortgaged property is situated.
3. As per Section 17 of the Securitization Act, an appeal has
to be filed in the Debt Recovery Tribunal having jurisdiction. This
provision of Section 17(1) of the Securitization Act reads as under:-
WP(C) 8221-09 Page 4 of 15
"Section 17 Right to appeal (1) Any person (including
borrower), aggrieved by any of the measures referred to in
sub-section (4) of section 13 taken by the secured
creditor or his authorised officer under this Chapter,
(may make an application along with such fee, as may be
prescribed) to the Debts Recovery Tribunal having
jurisdiction in the matter within forty-five days from the
date on which such measures had been taken."
4. The issue is that which is this Debt Recovery Tribunal
which has jurisdiction where an appeal under Section 17 has to be
filed under the Securitization Act. It is obvious that this DRT which
has jurisdiction is the Debt Recovery Tribunal which has jurisdiction
to hear the proceedings which are initiated by the bank for recovery
of its dues. The DRT which has jurisdiction can be one of the
different DRTs in terms of Section 19(1) of the DRT Act i.e. it can be
in the DRT where the defendant resides or where the defendant
carries on business or where whole or part of cause of action arises
in terms of the said Section 19(1). Rule 6 of the DRT Rules, is also a
near identical reproduction of Section 19(1). It is, therefore, clear
that any aggrieved person who files an appeal under Section 17 of the
Securitization Act can file it in any one of the DRTs where the bank
could have filed its original recovery proceedings under Section 19(1)
of the DRT Act. Since the bank could have filed its recovery
proceedings even at the place where the mortgage property is
situated, clearly, an aggrieved person under Section 17(1) of the
Securitization Act can also file an appeal where the mortgage
WP(C) 8221-09 Page 5 of 15
property is situated. There is no reason to depart from a literal
interpretation of the applicable provisions otherwise the same will
create a position that whereas the bank has an option in terms of
Section 19(1) of the DRT Act to file its recovery proceedings in
different DRTs where either the defendant resides or carries on
business or where the mortgage property is situated or where the
whole or part of cause of action arises including the DRT where
branch where the loan is disbursed is located, an aggrieved person
under Section 17 is obliged to file his appeal only where the branch is
situated which has disbursed the loan. This obviously cannot be.
5. Another reason for holding that the DRT which has
territorial jurisdiction over the place where the immovable mortgage
property is situated would have jurisdiction to decide the appeal filed
under Section 17(1) of the Securitization Act becomes clear from a
reading of the Section 14 (1) of the Securitization Act which reads as
under:-
"Section 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
secured asset, request, in writing, the Chief
Metropolitan Magistrate or the District Magistrate within
whose jurisdiction any such secured asset or other
WP(C) 8221-09 Page 6 of 15
documents relating thereto may be situated or found, to
take possession thereof, and the Chief Metropolitan
Magistrate or, as the case may be, the District
Magistrate shall, on such request being made to him-
(a) take possession of such asset and documents relating
thereto; and
(b) forward such assets and documents to the secured
creditor."
This provision will have to be read along with Section 13(4) (a) of
the Securitization Act and which reads as under:
"Section 13(4) (a) In case the borrower fails to
discharge his liability in full within the period specified
in sub-section (2), the secured creditor may take
recourse to one or more of the following measures to
recover his secured debt, namely:-
(a) take possession of the secured assets of the
borrower including the right to transfer by way of lease,
assignment or sale for realising the secured asset."
A conjoint reading of Section 13(4) (a) and 14(1) show that
action is taken by the Chief Metropolitan Magistrate for and on behalf
of the financial institution where the secured asset is situated. The
secured asset is the mortgage property. Under Section 14(1) of the
Securitization Act, the concerned Chief Metropolitan Magistrate will
be the Chief Metropolitan Magistrate either where the documents are
located of which possession is sought by the financial institution
through Chief Metropolitan Magistrate or the immovable property is
situated of which possession is sought through an application filed
under Section 14 before the Chief Metropolitan Magistrate. If the
bank can take action through a Chief Metropolitan Magistrate within
WP(C) 8221-09 Page 7 of 15
whose jurisdiction the immovable property is situated, it does not
stand to reason why a borrower who challenges such action under
Section 13(4) (a) cannot file an appeal under Section 17 of the DRT
Act where the immovable property is situated.
6. Our conclusions therefore are as under:-
(i) Under Section 17(1) of the Securitization Act, an appeal is
filed in the DRT which has jurisdiction.
(ii) The DRT which has jurisdiction as referred to under
Section 17(1) is the DRT where proceedings can be initiated by the
financial institution under Section 19(1) of the DRT Act read with
Rule 6 of the DRT Rules.
(iii) There are different DRTs where the financial institution can
initiate its recovery proceedings under Section 19(1) of the DRT Act
read with Rule 6 of the DRT Rules. The said DRTs, inter alia, are
where the defendant resides or carries on business or where the
cause of action arises wholly or in part.
(iv) Therefore, the financial institution can file its recovery
proceedings either from the place where the loan is disbursed or
where whole or part of cause of action otherwise arises or where the
mortgaged property is situated.
WP(C) 8221-09 Page 8 of 15
(v) Since the financial institution has an option to file its
recovery proceedings at any of the DRTs which has jurisdiction under
Section 19(1) of the DRT Act read with Rule 6 of the DRT Rules,
similar option is also available to a borrower/mortgagor who files an
appeal under Section 17(1) of the Securitization Act.
(vi) It is not possible to restrict the right of a
borrower/mortgagor to file an appeal only within the jurisdiction of
the DRT where the branch of the financial institution is situated
which has given the loan because there is no such restriction upon
the financial institution when it seeks to file recovery proceedings
under Section 19(1) of the DRT Act and which proceedings filed by
the financial institution can be instituted in more than one DRTs
including the DRT where the loan is disbursed or the mortgaged
property is situated.
7. Learned senior counsel for the petitioners has sought to
place reliance upon the decision of a learned Single Judge of the
Calcutta High Court in the case of Elements Coke Pvt. Ltd. Vs. UCO
Bank 2010 (1) CLR 361. It has been held by the learned Single Judge
of the Calcutta High Court in the aforesaid judgment that only that
DRT has jurisdiction to decide the appeal under Section 17(1) of the
Securitization Act where the mortgaged property is situated. The
learned Single Judge has held that there are two parts of Section 13.
WP(C) 8221-09 Page 9 of 15
The first part ends when an order is passed by the financial institution
under Section 13(3A) and the second part starts thereafter when the
proceedings under Section 13(4) are initiated. Learned Single Judge,
then, has likened the proceedings under Section 13(4) of the
Securitization Act to execution proceedings and which have to be filed
where the immovable property is situated.
Though we agree with the conclusion of the learned Single Judge
that the DRT which has territorial jurisdiction where the immovable
property is situated is the DRT which has jurisdiction where an appeal
under Section 17(1) can be filed, however, we feel that that it is not the
exclusive DRT where an application under Section 17(1) can be filed.
As already stated in our conclusions hereinabove, the appeal under
Section 17(1) can be filed in any one of the DRTs in terms of Section
19(1) of the DRT Act read with Rule 6 of the DRT Rules. We also feel
that the conclusion of the learned Single Judge that there are two
separate parts of Section 13 of the Securitization Act and that the
proceedings on and after Section 13(4) of the Securitization Act are
execution proceedings may not be correct because in execution
proceedings there is no power to alter the decree whereas the
proceedings under Section 17(1) are, in fact, original proceedings
where the aggrieved person has a right to challenge the amount which
is claimed by the financial institutions. This aspect is no longer res
integra and we need only refer to the decision of the Supreme Court in
WP(C) 8221-09 Page 10 of 15
the case of Madia Chemicals Ltd. & Ors. Vs Union of India & Ors.
2004 (4) SCC 311. Paras 18 and 54 of this judgment are relevant
and the same read as under:
"18. It is submitted that the mechanism provided for
recovery of the debt under Section 13 indicated above
does not provide for any adjudicatory forum to resolve
any dispute which may arise in relation to the liability of
the borrower to be treated as a defaulter or to see as to
whether there has been any violation or lapse on the part
of the creditor or in regard to the correctness of the
amount sought to be recovered and the interest levied
thereupon. On the other hand, Section 34 bars the
jurisdiction of the civil court to entertain any suit in
respect of any matter which a Debts Recovery Tribunal or
the Appellate Tribunal is empowered to determine. It also
provides that no injunction shall be granted by any court
or other authority in respect of any action taken or to be
taken in pursuance of any power conferred by or under
the Act or under the Recovery of Debts due to Banks and
Financial Institutions Act, 1993. Section 35 gives an
overriding effect to the provisions of the Act over the
provisions contained under any other law. The
submission, therefore, is that before any action is taken
under Section 13, there is no forum or adjudicatory
mechanism to resolve any dispute which may arise in
respect of the alleged dues or NPA.
54. Insofar as the argument advanced on behalf of
the petitioners that by virtue of the provisions contained
under sub-section (4) of Section 13 the borrowers lose
their right of redemption of the mortgage, in reply it is
submitted that rather such a right is preserved under
sub-section (8) of Section 13 of the Act. Where a
borrower tenders to the creditor the amount due with
costs and expenses incurred, no further steps for sale of
the property are to take place. In this connection, a
reference has also been made by the learned Attorney
General to the decision in Narandas Karsondas V. S.A.
Kamtam which provides that a mortgagor can exercise his
right of redemption any time until the final sale of the
property by execution of a conveyance. Shri Sibal,
however, submits that it is the amount due according to
WP(C) 8221-09 Page 11 of 15
the secured creditor which shall have to be deposited to
redeem the property. Maybe so, some difference
regarding the amount due may be there but it cannot be
said that right of redemption of property is completely
lost. In cases where no such dispute is there, the right
can be exercised and in other cases the question of
difference in amount may be kept open and got decided
before sale of property."
A reading of the aforesaid paragraphs clearly shows that the
amount which is claimed by the financial institution on passing of an
order under Section 13(3A) of the Securitization Act whereby the
amount is claimed against the borrower/mortgagor/guarantor etc, the
said crystallisation is not final and it can always be challenged in an
appeal under Section 17(1) of the Securitization Act which proceedings
are in fact, though titled as „appeal proceedings‟, original jurisdiction
proceedings.
8. We, therefore, agree with the final conclusion of the learned
Single Judge of the Calcutta High Court in the case of Elements Coke
(supra) but we feel that the entire conclusions and the ratio of that
judgment may not be correct and it is not only the DRT where the
immovable property is situated would have exclusive jurisdiction to try
the appeal under Section 17(1) of the Securitization Act but all other
DRTs in terms of Section 19(1) of the DRT Act read with Rule 6 of the
DRT Rules.
9. The counsel who appeared on behalf of the financial
institution/bank have sought to urge that by virtue of Rule 6 of the
WP(C) 8221-09 Page 12 of 15
DRT Rules, the bank can only file its recovery proceedings where the
branch of the bank is situated and at no other place, and therefore
proceedings under Section 17(1) can also be filed where the branch of
the financial institution is situated which has disbursed the loan. We
have already reproduced Rule 6 of the DRT Rules above. The said
Rule is identical to Section 19(1) of the DRT Act and therefore it is not
possible to agree with the contention of the counsel for the bank
inasmuch as the argument of the counsel is predicated as if Rule 6
only contains sub-Rule (a) of the said Rule 6 and as if it does not
contain the other sub rules (b) to (d).
It was also sought to be contended by the counsel for the bank
that Section 13(3A) of the Securitization Act supports the proposition
that it is only the DRT where the branch of the financial institution
which has disbursed the loan would have territorial jurisdiction for an
appeal under Section 17(1). Section 13(3A) of the Securitization Act
reads as under:
"Section 13. Enforcement of security interest.--
xxxxxxxx
(3A) If, on receipt of the notice under sub-section (2), the
borrower makes any representation or raises any objection,
the secured creditor shall consider such representation or
objection and if the secured creditor comes to the conclusion
that such representation or objection is not acceptable or
tenable, he shall communicate within one week of receipt of
such representation or objection the reasons for non-
acceptance of the representation or objection to the
borrower."
WP(C) 8221-09 Page 13 of 15
We do not find anything in Section 13 (3A) of the Securitization
Act to support the contention of the counsel for the bank that the
proceedings under Section 17(1) can only be filed where the branch of
the financial institution is located which has disbursed the loan. In
fact, as already held by us above, there are no two separate parts of
Section 13 as held by the learned Single Judge in the case of
Elements Coke (supra) because Section 17(1) proceedings are
original proceedings where even the amount which has being claimed
by the financial institution by passing an order under Section 13(3A)
of the Securitization Act is subject to challenge and the amount which
is claimed/demanded in the notice issued under Section 13 (3A) read
with Section 13(2) is not final.
10. The last argument of the counsel for the bank in support of
the proposition that only that DRT has jurisdiction where the branch
of the financial institution is located which has given the loan is on the
basis of a decision of the learned Single Judge of this Court in the case
reported as State Bank of India Vs. M/s. Samneel Engineering
Company & Ors. 1 (1997) BC 655. We have read the said judgment
and we do not understand how at all it applies to the question at
hand. The said judgment is, in fact, of the year 1997 i.e., before the
Securitization Act came into force in the year 2002.
WP(C) 8221-09 Page 14 of 15
11. Accordingly, we answer the proposition and the issue as
raised and hold that an appeal under Section 17(1) need not be filed
only in DRT having jurisdiction where the branch of the financial
institution is located which has disbursed the loan and the territorial
jurisdiction for appeals to be filed under Section 17(1) of the
Securitization Act is of all DRTs which would have jurisdiction in
terms of Section 19(1) of the DRT Act read with Rule 6 of the DRT
Rules. An aggrieved person, therefore, can file an appeal under
Section 17(1) of the Securitization Act even where the mortgaged
property is situated and he is not bound only to file the appeal under
Section 17(1) in the DRT which has jurisdiction over the branch where
the credit facilities are disbursed.
12. In view of the above, we allow the writ petition and set
aside the order dated 17.10.08 passed by the Debt Recovery Appellate
Tribunal and uphold the order dated 23.11.07 of DRT-III, New Delhi
and hold that the DRT-III has the territorial jurisdiction to entertain
the S.A. 122/07 filed by the petitioner.
VALMIKI J. MEHTA, J.
AUGUST 9, 2010 SANJAY KISHAN KAUL, J. ib/Ne WP(C) 8221-09 Page 15 of 15