Back
2009 Supreme(Cal) 514
High Court of Judicature at Calcutta
JYOTIRMAY BHATTACHARYA
Elements Coke Pvt. Ltd
Versus
UCO Bank
C.O. No. 3372 of 2008 with C.A.N. No. 2980 of 2009
Decided On : 16-07-2009
For the Appearing Parties:Ajoy Krishna Chatterjee, Aniruddha Roy, Somnath Saha, Sudeshna Bagchi, Sabyasachi Chowdhury, Soumen Das, Advocates.
The integral part of the cause of action for filing an application under Section 17 of the SARFAESI Act, in the context of realization of secured debt by the secured creditor under Section 13(4) of the Act, is the failure of the borrower to discharge its liability as per the demand notice under Section 13(2) of the Act, which is to be ascertained by the secured creditor at its branch where the borrower is required to pay its debt.
Headnote:
SARFAESI ACT - JURISDICTION - SECTION 17 - Whether DRT, Kolkata has jurisdiction to entertain an application under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) over the subject matter of the dispute arising out of an action taken by the concerned bank against the borrower as per Section 13 (4) of the said Act for realisation of its dues by sale of the mortgaged property of the petitioner at Gujarat?
Fact of the Case:
The petitioner (borrower) invoked the jurisdiction of the Debt Recovery Tribunal (DRT) at Calcutta for redressal of its grievances arising out of the action taken by the bank (secured creditor) under Section 13(4) of the SARFAESI Act, as part of the cause of action arose within the territorial jurisdiction of the said Tribunal. The bank challenged the territorial jurisdiction of the DRT, Kolkata, contending that no part of the integral part of the cause of action had arisen within the territorial jurisdiction of the said Tribunal.
Finding of the Court:
The Court held that the DRT, Kolkata, did not have jurisdiction to entertain the petitioner's application under Section 17 of the SARFAESI Act. The Court found that the integral part of the cause of action for the second phase of the realization process, which provided the remedy for realization of secured debt by the secured creditor under Section 13(4) of the Act, was the failure of the borrower to discharge its liability as per the demand notice under Section 13(2) of the Act. The Court held that such failure was to be ascertained by the secured creditor at its branch where the borrower was required to pay its debt, and that the measures under Section 13(4) of the Act were in the nature of execution of the secured creditor's decision taken under Section 13(3A) of the Act coupled with the fact of non-payment of the dues so determined. Since the secured assets were situated in Ahmedabad, beyond the territorial jurisdiction of the DRT Kolkata, the Court held that the Tribunal within whose territorial jurisdiction the secured assets were situated was the only competent Tribunal whose jurisdiction could be invoked for filing an application under Section 17 of the Act.
Issues: 1. Whether the DRT, Kolkata, has jurisdiction to entertain an application under Section 17 of the SARFAESI Act over the subject matter of the dispute arising out of an action taken by the bank against the borrower as per Section 13 (4) of the said Act for realisation of its dues by sale of the mortgaged property of the petitioner at Gujarat? 2. What constitutes the integral part of the cause of action for filing an application under Section 17 of the SARFAESI Act?
Ratio Decidendi: 1. The integral part of the cause of action for the second phase of the realization process under the SARFAESI Act, which provides the remedy for realization of secured debt by the secured creditor under Section 13(4) of the Act, is the failure of the borrower to discharge its liability as per the demand notice under Section 13(2) of the Act. 2. Such failure is to be ascertained by the secured creditor at its branch where the borrower is required to pay its debt. 3. The measures under Section 13(4) of the Act are in the nature of execution of the secured creditor's decision taken under Section 13(3A) of the Act coupled with the fact of non-payment of the dues so determined. 4. The Tribunal within whose territorial jurisdiction the secured assets are situated is the only competent Tribunal whose jurisdiction can be invoked for filing an application under Section 17 of the Act.
Final Decision: The Court dismissed the petitioner's revisional application, holding that the DRT, Kolkata, did not have jurisdiction to entertain the petitioner's application under Section 17 of the SARFAESI Act.
(1) The following issue has been raised in this revisional application before this Court for its consideration : Whether the Debt Recovery Tribunal (DRT) at Calcutta has jurisdiction to entertain an application under S. 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter referred to as the SARFAESI Act) over the subject-matter of the dispute arising out of an action taken by the concerned bank against the borrower as per S. 13 (4) of the said Act for realisation of its dues by sale of the mortgaged property of the petitioner at Gujarat?
(2) In fact, the petitioner (borrower) invoked the jurisdiction of the Debt Recovery Tribunal at Calcutta for redressal of its grievances arising out of the action taken by the bank (secured creditor) under S. 13(4) of the said Act, as according to the petitioner, part of the cause of action has arisen within the territorial jurisdiction of the said Tribunal. The part of the cause of action which according to the petitioner arose within the jurisdiction of the said Tribunal, are as follows : -
1. Pursuant to the request made by the petitioner, UCO Bank, Ashram Road Branch, Ahamedabad sent its proposal dated 23rd August, 2003 to the UCO Bank Head Office, Credit Department at 10 BTM Sarani, Kolkata-700001 (hereafter referred to as the Head Office of the Bank) inter alia for sanction of the said credit proposal favouring the petitioner.
2. Pursuant to the said request made by the Ahmedabad Branch of the said Bank, the head office of the bank by its letter dated 13th November, 2003 advised the Ahmedabad Branch that competent authority had sanctioned the credit proposal on 7th November, 2003 subject to the terms and conditions enclosed in Annexure "2" with its memorandum dated 29th October, 2003. The said letter dated 13th November, 2003 was issued from the head office of the bank which is situated within the jurisdiction of the Tribunal at Kolkata.
3. Ashram Road Branch of the said bank issued a notice on 3rd March, 2006 under Section 13(2) of the said Act alleging that the petitioner committed default in payment of its dues as per the terms and conditions of sanction of its credit proposal. The said notice which was addressed to the petitioner was served upon the petitioner at its registered office at 7/1, Lord Sinha Road, Kolkata within the jurisdiction of the said Tribunal. Pursuant to the said notice the petitioner submitted its representation on 28th April, 2006. Such representation was sent from the registered office of the petitioner at Kolkata to the branch of the said bank at Ahamedabad. The said representation was received by the branch of the said bank at Ahamedabad.
4. Since the said representation was not considered by the said bank, a writ petition being W.P.No.13158 (W) of 2006 was moved by the petitioner before this Honble Court and the said writ petition was ultimately disposed of on 25th May, 2006 after a contested hearing by granting liberty to the bank to take appropriate steps in accordance with law to protect its interest and directing the bank to consider the said representation of the petitioner and inform the decision to the petitioner before taking steps.
5. Pursuant to the said direction passed by this Honble Court in the aforesaid writ petition, the Ashram Road Branch of the said bank disposed of the petitioners said representation and ultimately communicated its decision from the said branch of the bank to the petitioners Advocate at 6, Old Post Office Street, Kolkata-1 within the jurisdiction of the said Tribunal.
6. On 25th May, 2006 the concerned bank issued a notice for taking possession of the factory, plant and assets of the petitioner situated at Ahamedabad and the copy of the said possession notice was also served upon the petitioner at its registered office at Lord Sinha Road within the jurisdiction of the Tribunal.
7. Challenging the said action of the bank, the petitioner on or ab
