The failure to exercise proper jurisdiction by the Debt Recovery Tribunal undermines the standards for granting interim relief, necessitating judicial intervention, as established under Section 17 of the SARFAESI Act.

Headnote:(A) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 17 - Judicial review of interim orders - The petitioners challenged the interim orders of the Debts Recovery Tribunal, asserting non-application of mind and failure to properly exercise jurisdiction in considering merits for interim relief. The court observed that the orders issued lacked reflection of judicial consideration and failed to apply principles governing interim relief. (Paras 1-13)

(B) Interim Relief - Standards for granting - A Tribunal must consider the existence of a strong prima facie case, balance of convenience, and irreparable injury when granting interim relief, and must articulate reasons indicating an application of mind. (Paras 10-12)

JUDGMENT

These cases have been filed, challenging the interim orders of the Debts Recovery Tribunal (hereinafter referred to as ‘the Tribunal’) in separate Securitisation Applications filed under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the Act’ or as the ‘SARFAESI Act’). The petitioners contend that the Tribunal mechanically issued orders on the interlocutory applications filed in the respective Securitisation Applications without paying any heed to the contentions raised, and completely disregarding the well-settled principles governing the consideration of an application for ad-interim relief. It is contended in the main that there is a gross failure to exercise a jurisdiction vested in the Tribunal properly, warranting this Court's interference.

2. I have heard Sri. K.K Chandran Pillai, Learned Senior Advocate, and Advocates Sri. P.Binod, Sri. C.S Ullas and Sri. S.S Aravind for the Petitioners in these cases and Sri. P.C Sasidharan, Sri.S.Easwaran and Sri Sunil Shankar for the contesting respondents (Banks/the Financial Institutions).

3. It is not necessary to examine the merits of the contentions raised before the Tribunal, in any great detail, for the consideration of the issue arising in these cases. However those contentions are to be noticed, in brief, only to consider whether there was non-application of mind and a failure by the Tribunal to exercise the jurisdiction vested in it in a proper and judicious manner. The contentions (in brief) raised before the Tribunal in each of these cases are set out below:-

(i) O.P (DRT) No.360/2022 (S.A. No. 315/2022 before the Tribunal)

The petitioner in O.P (DRT) No.360 of 2022 availed a cash credit facility from the Indian Bank. On default being committed in the repayment of amounts due to the bank, proceedings were initiated against the petitioner under the provisions of the Act. When steps were initiated to take physical possession of the secured asset (residential property of the petitioner), the petitioner approached the Debts Recovery Tribunal by filing a Securitisation Application under Section 17 of the Act. The petitioner also applied for a stay of further proceedings. The petitioner had raised four contentions before the Tribunal;

(a) That the account of the petitioner was not a non-performing asset at the time when the demand notice was issued, and therefore, the condition precedent for issuing a demand notice under Section 13 (2) of the SARFAESI Act had not been satisfied;

(b) Non- compliance with the procedure contemplated by sub-section 3A of Section 13 of the Act;

(c) That the proceedings under the SARFAESI Act could not be initiated or continued against the petitioner for failure to register the security interest as provided under Section 26D of the SARFAESI Act; and

(d) That the affidavit supporting the application filed before the Chief Judicial Magistrate Court, Thalassery under Section 14 of the Act was not legal or proper.

(ii) W.P (C)No. 31891/2022 (S.A No.224/2021 before the Tribunal)

The petitioners availed a cash credit facility as also a working capital term loan from the Indian Overseas Bank. On default being committed, proceedings were initiated against the petitioners prompting the petitioners to file S.A.No.224/2021 before the Tribunal. The petitioners inter alia contend before the Tribunal that the claim of the Bank is barred by limitation; that the proceedings under the Act are bad for the reason that there is no registration with the Central Registry as provided in Section 26D of the Act and that there is a violation of the procedure contemplated by the Act and the Rules framed thereunder in the proceedings initiated against the petitioners.

(iii) O.P(DRT) No. 438/2022 (S.A No. 79/2022 before the Tribunal)

The petitioner availed of two loans for agricultural purposes. The petitioner inter alia contends before the Tribunal that the procee

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2023 Supreme(Online)(Ker) 57525

The failure to exercise proper jurisdiction by the Debt Recovery Tribunal undermines the standards for granting interim relief, necessitating judicial intervention, as established under Section 17 of the SARFAESI Act.

Cases Referred (6)