DRT Jurisdiction or Civil Jurisdiction? Bombay HC

Overview

• A division bench of the Bombay HC (Nagpur Bench) delivered a judgment regarding the jurisdiction of the civil courts vis-a-vis the Debts Recovery Tribunals (DRT) with respect to the security interest under the SARFAESI Act.

Question of the hour

• The question of law here was, “Whether the jurisdiction of a Civil Court to decide all the matters of civil nature, excluding those to be tried by the Debts Recovery Tribunal under Section 17 of the Securitisation Act, in relation to enforcement of security interest of a secured editor, is barred by Section 34 of the Securitisation Act?”

Why this question arose?

• This question was formed basically because of the apparent discord between the judgment of the Division Bench of this court in the case of, State Bank of India V. Jigishaben B. Sanghvi and others, 2011 (2) Mh.L.J.342: 2010 SCC Online Bom 1868 and State Bank of India V. Shri Sagar son of Pramod Deshmukh and others, 2011 (3) Mh.L.J. 71

Judgment of Bombay High Court

The Bench comprised of Justice SB Shurke and Justice Avinash G Gharote.

While answering the said question, the Bombay high court held that:

• That all the matters relating to section 13 and 17 of the SARFAESI Act, will be decided under the jurisdiction of Debts Recovery Tribunal exclusively.
• In all the cases, where the title to the property, in respect of which a ‘security interest’, has been created in favor of the bank or financial institution, stands in the name of the borrower and/or guarantor, and the borrower has availed the financial assistance, it would be only the Debts Recovery Tribunals which would have exclusive jurisdiction to try such matters, to the total exclusion of the civil court. Any pleas as raised by the borrowers or guarantors, vis-à-vis the security interest, will have to be determined by DRT.
• The jurisdiction of the Civil Court to decide all the matters of civil nature, excluding those to be tried by the Debts Recovery Tribunal under Sections 13 and 17 of the SARFAESI Act, in relation to enforcement of security interest of a secured creditor, is not barred by Section 34 of the SARFAESI Act.
• Where civil rights of persons other than the borrower(s) or guarantor (s) are concerned, the Civil Court would have the jurisdiction, that too, when it is prima facie apparent that the relief sort, is incapable of being decided by the Debts Recovery Tribunal, under Section 17 of the DRT Act, 1993 read with Sections 13 and 17 of the SARFAESI Act.
• Even in cases where the enforcement of a security interest involves issues as indicated in Mardia Chemicals of fraud as established within the parameters laid down in. Ayyasamy ; a claim of discharge by a guarantor under Sections 133 and 135 of the Contract Act [Mardia Chemicals ]; a claim of discharge by a guarantor under Sections 139, 142 and 143 of the Contract Act; Marshaling under Section 56 of the Transfer of property Act [J.P. Builders ]; the Civil Court shall have jurisdiction.
• The law therefore is well settled that where any person is aggrieved by any notice or action pursuant, thereto under the provisions of SARFAESI Act, the only remedy available to such person is, to approach the Debts Recovery Tribunal by filing an application under the provisions of the Act.

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