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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
Ujjal Bhuyan, A. Venkateshwara Reddy, JJ.
M/s. Maruthi Ginning and Pressing Factory and Others - Petitioners
Versus
The Recovery Officer, Debts Recovery Tribunal-II, Hyderabad and Others – Respondents
W.P.Nos.29918, 29928, 31871 and 32730 of 2021 And W.P.Nos.1980, 3396, 3415, 3451, 7516 and 8115 of 2022
Decided On : 01-07-2022
SARFAESI ACT - JURISDICTION - TERRITORIAL - WRIT PETITION - HIGH COURT - CAUSE OF ACTION - SECURED ASSET - SECURED CREDITOR - DEBTS RECOVERY TRIBUNAL: The High Court of Telangana held that it does not have territorial jurisdiction to entertain writ petitions relating to proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) where the cause of action, secured asset, and secured creditor are all located in the State of Andhra Pradesh, even if the Debts Recovery Tribunal (DRT) adjudicating the matter is located in Hyderabad, Telangana. The Court interpreted the relevant provisions of the SARFAESI Act and the Code of Civil Procedure, as well as various judicial precedents, to conclude that the territorial jurisdiction of a High Court to entertain a writ petition is determined by the location of the cause of action, not the location of the DRT or the residence of the parties. The Court emphasized that the mere filing of a securitization application before the DRT-II, Hyderabad, or the passing of an order by the Tribunal, does not create a new cause of action within the territorial jurisdiction of the Telangana High Court.
Fact of the Case:
Numerous writ petitions were filed before the Telangana High Court challenging orders passed by the Debts Recovery Tribunal-II, Hyderabad, in relation to disputes arising under the SARFAESI Act. The common issue in all the petitions was whether the Telangana High Court had territorial jurisdiction to entertain these petitions, given that the cause of action, borrowers, secured assets, and secured creditors were all located in the State of Andhra Pradesh.
Finding of the Court:
The Telangana High Court held that it did not have territorial jurisdiction to entertain the writ petitions. The Court analyzed the provisions of the SARFAESI Act, the Code of Civil Procedure, and relevant judicial precedents to conclude that the territorial jurisdiction of a High Court to entertain a writ petition is determined by the location of the cause of action, not the location of the DRT or the residence of the parties. The Court found that the cause of action in the present case arose in the State of Andhra Pradesh, where the borrowers, secured assets, and secured creditors were located, and that the mere filing of a securitization application before the DRT-II, Hyderabad, or the passing of an order by the Tribunal, did not create a new cause of action within the territorial jurisdiction of the Telangana High Court.
Issues: 1. Whether the Telangana High Court has territorial jurisdiction to entertain writ petitions relating to proceedings under the SARFAESI Act where the cause of action, secured asset, and secured creditor are all located in the State of Andhra Pradesh, even if the DRT adjudicating the matter is located in Hyderabad, Telangana? 2. How is the territorial jurisdiction of a High Court to entertain a writ petition determined?
Ratio Decidendi: The territorial jurisdiction of a High Court to entertain a writ petition is determined by the location of the cause of action, not the location of the DRT or the residence of the parties. The mere filing of a securitization application before the DRT-II, Hyderabad, or the passing of an order by the Tribunal, does not create a new cause of action within the territorial jurisdiction of the Telangana High Court.
Final Decision: All the writ petitions were dismissed as being not maintainable before the Telangana High Court. However, the petitioners were granted liberty to approach the appropriate forum for redressal of their grievances. Interim orders passed by the Court were to continue for a period of 30 days to enable the petitioners to approach the appropriate forum.
JUDGMENT :
(Ujjal Bhuyan, J.)
1. We have heard Mr. V.V. Ramana, Mr. T.Vijay Kumar, Mr. P.Nagendra Reddy, Mr. D.Raghavulu, Ms. P.Hamsa Durga, Ms. Mohana, Mr. Venkatesh and Mr. G.K. Desh pande, learned counsel for the petitioners. Also heard Mr. Ch. Srinivas, Mr. K. Viswanadham, Mr. A. Krishnam Raju and Mr. Maruti Jadav, learned counsel for the respondents.
2. On our request, Mr. B.S. Prasad, learned Advocate General for the State of Telangana had appeared and assisted us in the hearing.
3. The core issue which has arisen for consideration in this batch of writ petitions was summed up by this Court in the order dated 03.12.2021 passed in Writ Petition No.31871 of 2021. Therefore, relevant portion of the order dated 03.12.2021 is extracted hereunder:
We may mention that the loan transaction had taken place at Dharmavaram in the State of Andhra Pradesh. The borrowers and the bankers are also at Dharmavaram, so also the guarantors. For administrative exigency, disputes arising under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 from Rayalaseema region of the State of Andhra Pradesh are being taken up by the Debts Recovery Tribunal-II, Hyderabad.
Question for consideration is whether any order or proceeding of the Debts Recovery Tribunal-II, Hyderabad pertaining to issues arising from the State of Andhra Pradesh would confer jurisdiction on the High Court for the State of Telangana to adjudicate.
We would like to request the learned Advocate General for the State of Telangana to assist us in the matter.
Let a copy of this order be served in the office of learned Advocate General for the State of Telangana. Since we are examining this issue, we expect that no coercive steps shall be taken by the respondent/Bank till we decide this issue”.
4. Thus, the issue arising in all the writ petitions is that whether a subject matter taken up by the Debts Recovery Tribunal-II, Hyderabad or any order passed by the said Tribunal on a dispute arising out of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (briefly, ‘the SARFAESI Act’ hereinafter) when both the parties to the dispute as well as the cause of action had arisen in the State of Andhra Pradesh?
5. In view of the issue under consideration, it may not be necessary for us to narrate the facts of each individual case.
6. Before proceeding further, we may mention that there are two Debts Recovery Tribunals in Hyderabad i.e. Debts Recovery Tribunal – I, Hyderabad and Debts Recovery Tribunal – II, Hyderabad. Both the Tribunals have territorial jurisdiction over the State of Telangana. For a short while, both the Tribunals did not have presiding officers after superannuation of the incumbent presiding officers. As a result, a number of writ petitions came to be filed. Subsequently, new presiding officer has joined in the Debts Recovery Tribunal – I at Hyderabad, but Debts Recovery Tribunal – II, Hyderabad is still without any presiding officer.
7. Government of India in the Ministry of Finance issued Notification SO 254 (E) dated 25.01.2017. The notification states that vide earlier notification of Government of India in the Ministry of Finance dated 21.09.1999 Central Government had established one Debts Recovery Tribunal at Hyderabad for the then composite State of Andhra Pradesh. Thereafter, vide the notification dated 26.02.2002 Central Government established another Debts Recovery Tribunal at Visakhapatnam in the composite State of Andhra Pradesh. After bifurcation of the unified State of Andhra Pradesh into the States of Telangana and Andhra Pradesh, Central Government considered it necessary to establish one more Debts Recovery Tribunal a
Article 226 of the Constitution of India was amended by the Constitution (15th Amendment) Act, 1963 whereby Clause (1A) was inserted in Article 226 thereby introducing the concept of cause of action,....
The jurisdiction of a High Court under Article 227 pertains only to the Debts Recovery Tribunal located within its territorial limits, not an appellate tribunal for matters originating outside its ju....
The jurisdiction for challenging appellate tribunal orders lies in the High Court corresponding to the original tribunal's location, affirming the principle that appellate orders merge with original ....
The main legal point established in the judgment is the interpretation of 'cause of action' and the concept of territorial jurisdiction under Article 226 of the Constitution in relation to the notice....
A High Court's jurisdiction under Article 226(2) requires that part of the cause of action arises within its territorial limits.
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