Jurisdiction in SARFASI and DRT

Jurisdiction of DRT under the SARFASI Act, 2002:-

The respondents borrowed Rs. 2.95 crores from petitioner bank in lieu of which certain property was mortgaged with the bank. Upon default in repayment of the loan the bank issued notice under section 13(2) of the SARFASI Act, 2002. As the borrowers avoided the notice the bank took possession of the property as contemplated under Section 13(4) of the SARFASI Act, 2002. The respondent filed suit for declaring the notice issued by the bank under section 13(2) of the SARFASI Act, 2002 void, illegal and ultra virus and also for permanent injunction. The bank filed application under Order VII, Rule 11 of the Code of Civil Procedure, 1908 to reject the plaint on the ground that under section 34 of the SARFASI Act, 2002, the Civil Court had no jurisdiction to entertain the suits, which were dismissed by the Trial Court. On revision petitions, the Madras High Court, allowing the petitions, held that bank had issued notice under section 13(2) of the SARFASI Act, 2002 as the respondent had committed default in payment of the loan and resorted to the remedy provided under Section 13(4) of the SARFASI Act, 2002 by taking possession of the secured assets of the borrower, including the right to transfer them by way of lease, assignment or sale for realising the secured asset. To escape from the action contemplated under Section 13(4) of the SARFASI Act, 2002, the respondent had filed the suit which was not maintainable under Section 34 of the Securitization Act or the SARFASI Act, 2002 because the civil court had no jurisdiction to entertain the suit. The only forum which was entitled to entertain the said suit s under the Securitization Act or the SARFASI Act, 2002 was the Debt Recovery Tribunal (DRT). The order passed by the trial court was set aside[1].

Where the bank took action against borrowers under Section 13(4) of the SARFASI Act, 2002, the borrowers did not avail the remedy of filing appeal under Section 17 of the SARFASI Act, 2002. The court fee was not paid by the borrowers. The appeal was held to be not maintainable[2].

By introducing amended provisions of Section 17(1) of the SARFASI Act, 2002 and by prescribing fees in respect of applications to the Debts Recovery Tribunal (DRT), the Central Government has impliedly specified that the provisions of the DRT Act, 1993 shall also apply to debts less than Rs. 10 lakhs. The borrowers can therefore avail alternative remedy of filing appeal under Section 17 of the SARFASI Act, 2002. Writ petition was not maintainable[3].