Civil Court cannot usurp jurisdiction of DRT u/S 13 of the SARFAESI Act until civil rights are affected: Bombay High Court

Preliminary jurisdiction to try cases involving debt shall always be aligned with the Debts Recovery was opined by the bench constituting of N.J. Jamadar J. of the Bombay High Court bench. In the matter of Maharashtra Gramin Bank v Anwar [CRA NO. 43 OF 2020] it was held that only when civil rights are involved in the issue of credit then the matter hall be presented before the civil court otherwise the preliminary jurisdiction lies with the Debts Recovery Tribunal.

The respondent/plaintiff deals in the business of rice. In the year 2013, the plaintiff had availed cash credit facility of Rs.25 lakhs from the defendant. The limit came to be enhanced by Rs.20 lakhs in the year 2014. The plaintiff committed default in payment of the installments and the interest accrued on the amount advanced by the bank. The defendant/bank issued a notice of sale of the suit plot, in which security interest has been created, by issuing a The plaintiff instituted a suit being RCS No.476 of 2018 with the assertions that the defendant/bank proceeded to invoke the provisions under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [Act, 2002] in a highhanded manner and utter disregard to the offer made by the plaintiff to clear the due amount under one-time settlement plan. The plaintiff averred that the defendant had not issued notice under section 13(2) of the Act, 2002, which is a peremptory requirement before initiating measures under section 13(4) of the Act, 2002.

The crucial question before the bench which warranted consideration was whether an assertion in the plaint that the mandatory notice under section 13(2) of the Act, 2002 if not given by the secured creditor would, in itself, be sufficient to remove the embargo created by section 34 of the Act, 2002. For the answer, it was to be seen as to what the special forum i.e. Debt Recovery Tribunal is to examine in an application under section 17 of the Act and what reliefs it is empowered to grant.

The Court relied upon the case of Bank of Baroda and Others Vs. Gopal Shriram Panda and Ors., CRA No.29,30/2011 wherein it was concluded that where civil rights of persons other than the borrower(s) or guarantor (s) are involved, the Civil Court would have jurisdiction, that too, when it is prima facie apparent from the face of the record that the relief claimed, is incapable of being decided by the DRT, under Section 17 of the DRT Act, 1993 read with Sections 13 and 17 of the SARFAESI Act stands in the name of the borrower and/or guarantor, and the borrower has availed the financial assistance, it would be only the DRT 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-a-vis the security interest, will have to be determined by the DRT.

The court held that “The upshot of the aforesaid consideration is that the learned Civil Judge was not justified in holding that the Civil Court has jurisdiction to entertain the suit and the bar under section 34 of the Act, 2002 did not come into play. As the action initiated by the defendant/applicant emanated from the provisions of the Act, 2002 and the Debt Recovery Tribunal has exclusive jurisdiction under section 17 of the Act, 2002, the plaint is liable to be rejected.

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