Federal Bank Ltd vs Naveen Kumar And Ors

P.K. Bhasin, J

The appellant Bank's application under Section 13(10) of SARFAESI Act filed for recovery of Rs. 9,79,850/- against the respondents herein after selling mortgaged properties by invoking SARFAESI Act has been thrown out in limine by the learned DRT vide order dated 23.9.2016. The appellant had initiated proceedings under Section 13(2) of SARFAESI Act by given a demand notice to the respondents/defaulting borrowers calling upon them to clear the outstanding Bank's dues. The respondents having failed to make payment the appellant Bank invoked its remedy under Section 13(4) of SARFAESI Act and sold the property of the respondents which they mortgaged in its favour to secure the repayment of housing loan which it had sanctioned and disbursed to them. The appellant could recover Rs. 13.21 lacs by sale of its secured asset out of the total recoverable amount. For the recovery of the shortfall the Bank approached the DRT-I, Delhi with a petition for recovery of the balance dues of Rs. 9,79,850/-. The DRT however rejected the Bank's petition at the threshold without even issuing notice to the respondents upon the Registrar of DRT raising an objection that the petition was not maintainable before DRT. The impugned order is re-produced below:

"Today the case is listed for orders on the maintainability of the present OA.

This OA has been filed on behalf of applicant Bank under Section 13(10) of the SARFAESI Act for recovery of Rs. 979,850/- along with pendente lite and future interest. On scrutiny, learned Registrar vide order dated 9.6.2016, has mainly raised the following three objections:

(i) That since the matter has been filed under Section 13(10) of the SARFAESI Act and the secured assets were situated at the Loni, Ghaziabad. Therefore this Tribunal has no jurisdiction.

(ii) That the loan was disbursed by the Nirman Vihar branch of the application Bank which falls within the jurisdiction of DRT II Delhi.

(iii) That the Court fee has to be paid as per Rule 7 of the DRT (Procedure) Rules, 1993.

Heard the learned Counsel for applicant Bank and perused the record.

As per the Counsel for applicant Bank, the Bank has already sold the secured asset on 27.3.2012 for an amount of Rs. 13,21,000/- and now the present OA is filed for recovery of the balance amount. He further submits that after declaring the account as NPA. The borrower has been transferred to East Patel Nagar branch of the applicant Bank, therefore, this Tribunal has the jurisdiction to by and entertain the present O.A. relying upon Section 13(10) of the SARFAESI Act. Learned Counsel for the Bank submits that the present OA is maintainable on payment of the Court fees as mandated under the SARFAESI Act. He further submits that there is no provision under Rule 7 of the DRT (Procedure) Rules, 1993 for payment of Court fee if the amount is less than Rs. 10.00 lacs. He further relied upon the judgment of Hon'ble Madras High Court in Writ Petition No. 21486 and 22218 of 2009 titled as EID Parry (India) Ltd. and the Authorized Officer, Indian Bank. He also relied upon a judgment of learned DRT at Ernakulam wherein the amount due was less than Rs. 10.00 lacs. He also submitted that unlike RDDBFI Act, there is no pecuniary limit for filling the OA under Section 13(10) of the SARFAESI Act as the Tribunal is also entertaining the SAs wherein the amount due is less than Rs. 10 lacs.

I have carefully examined the relevant provisions of the Act and perused the record. Section 13(10) of the SARFAESI Act reads as under:

"Where the dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a Competent Court, as the case may be for recovery of the balance amount from the borrower."

Section 13(10) of the SARFAESI Act provides that where the dues of the secured creditor ore not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction of a Competent Court. As the case may be Section 1(4) of the RDDBFI Act provide as under:

"(4) The provisions of this Act shall not apply where the amount of debt due to any Bank of financial institution or to a consortium of Banks and financial institution is less than ten lakh rupees or such other amount. Being not less than one lakh rupees. As the Central Government may. By notification. Specify."

Thus under the RDDBFI Act 1993, the pecuniary jurisdiction of the Tribunal is Rs. 10.00 lacs or more than that. A combined reading of Section 13(10) of SARFAESI Act, 2002 and Section 1(4) of the RDDBFI Act, 1993 demonstrate that on application for the remaining debt dues may he filed before DRT or a Competent Court and as per Section 1(4) of the RDDBFI Act application for recovery of debt dues may be filed in case amount recoverable is Rs. 10 lac or more admittedly. In the present case, Bank dues are less than Rs. 10 lacs. Thus considering the words contained in Section 13(10) of the SARFAESI Act i.e. "the Debts Recovery Tribunal having jurisdiction or a Competent Court". In my considered view, since the pecuniary jurisdiction of the Tribunal starts from Rs. 10 lacs and hence any suit for recovery of debt less than that cannot be entertained before the DRT whether it is under the DRT Act of under the SARFAESI Act". The word "Competent Court" in Section 13(10) of the SARFAESI Act fortify the position. The Legislature in their wisdom have not ousted the jurisdiction of the Civil Court completely. Even at present also. The cases in which the amount due is less than Rs. 10 lacs are being filed before the Civil Courts only in my view for the DRT purposes Section 13(10) attracts only in cases where the amount due is more than Rs. 10 lacs. The learned Counsel for the applicant Bank relied upon a judgment passed by learned Presiding Officer DRT Ernakulam. I am not in agreement with the same.

Learned Counsel for the applicant Bank also submitted that this Tribunal is entertaining the SAs which are less than the amount of Rs. 10.00 lacs. Therefore the OA filed by him is also maintainable. I am not in agreement with this view of the applicant Bank also. The SAs are being filed under Section 17(1) of the SARFAESI Act which clearly stipulates that "any person (including borrower), aggrieved by any of the measure referred to in Sub-section (4) of the Section 13 taken by the secured creditor or his Authorized Officer" may make an application before the Tribunal in the case in hand. The applicant Bank is neither a borrower nor an aggrieved person. Hence the case of applicant Bank did not fall under this category.

In view of the above discussion, I find merit in the objection raised by the learned Registrar that the present OA is not maintainable before this Tribunal. Accordingly, Registry is directed to return the case file to the applicant Bank for filling the same before appropriate Court as mandated under Section 13(10) of the SARFAESI Act. Order accordingly."

This order shows that the learned Presiding Officer has rejected the petition of the Bank on the ground that DRT lacked pecuniary jurisdiction to try a petition for recovery of an amount less than ten lacs of rupees. In my view, the learned DRT should have at least issued notice of the petition to the respondents/borrowers and waited for their response as to the pecuniary jurisdiction because this objection regarding pecuniary jurisdiction can always be waived. In any case even if it is raised then the matter can be decided after hearing both sides and then that decision will bind both parties. Now, even if the Bank were to file a suit before Civil Court the respondents can still contend before the Civil Court that application under Section 13(10) if SARFAESI Act will lie only before DRT and the Civil Court also may agree with that proposition. In that eventuality the Bank will be in a dilemma as to which Forum to approach in view of two conflicting views. DRT having already concluded by an ex parte decision that it has no pecuniary jurisdiction (see the highlighted lines in the impugned order) the Bank will not be in a position to approach DRT again. The Bank had the remedy of challenging the ex parte decision of the DRT which it has done and, therefore, this Tribunal has formed the view that the DRT should have taken any decision regarding its pecuniary jurisdiction after notice of the Bank's petition to the respondents/borrowers.

This appeal is accordingly allowed and the impugned order is set aside. The matter is remanded back to the DRT which shall now issue notice of the Bank's petition to the respondents/borrowers and thereafter only, depending upon the defence which they may take, to arrive at a fresh decision regarding its pecuniary jurisdiction and other pleas to be raised in the matter. It is, however, clarified that this order shall not be construed as an opinion of this Tribunal that DRT has the jurisdiction to entertain the Bank's petition under Section 13(10) of SARFAESI Act or the Civil Court. The matter shall now be taken by the DRT on 13th August, 2018 at 2 p.m. for passing of necessary order for issuance of notice to the respondents/borrowers.

A copy of this order be sent to DRT along with its records.