Bank Of Baroda Through Its Branch Manager V. Gopal Shriram Panda And Anr.(25th March, 2021) Jurisdiction Of Civil Courts In Relation To The Debts Recovery Tribunal (DRT) With Respect To Security Interest Under The Sarfaesi Act


Court :
Bombay High Court

Brief :
The court held that an aggrieved party can only approach the Debts Recovery Tribunal to avail relief with respect to security interest under the provisions of the SARFAESI Act.

Citation :
REFERENCE: CRA 29 of 2011

CRUX: Bank of Baroda through its branch manager v. Gopal Shriram Panda and anr.(25th March, 2021)- The present case deals with the issue of jurisdiction of civil courts in relation to the Debts Recovery Tribunal (DRT) with respect to security interest under the SARFAESI Act.

JUDGES: S.B. Shurke, Avinash G. Gharote.

PARTIES

  • Bank of Baroda through its branch manager (Appellant)
  • Gopal Shriram Panda and anr. (Respondent).

SUMMARY: The following case deals with the issue of issue of jurisdiction of civil courts in relation to the Debts Recovery Tribunal (DRT) with respect to security interest under the SARFAESI Act.

OVERVIEW

  1. The present case was heard by the Nagpur bench of the Bombay High Court by way of clubbing similar petitions filed regarding the issue that the case deals with.
  2. The issue that the case deals with is the issue of whether or not civil courts have the jurisdiction to take up cases with regards to security interest under the provisions of the SARFAESI Act.
  3. The court also sought to address the question of whether or not the jurisdiction of civil courts to try matters of civil nature, excluding those to be tried by the DRT under Sec. 17 of the SARFAESI Act, in relation to enforcement of security interest, is barred by the provisions of Sec. 34 of the Act.
  4. The court held that the bar under the provisions of Sec. 34 is not absolute and is confined to the provisions of Sec. 13 and 17 of the Act.
  5. The court also sought to explore situations wherein civil courts have jurisdiction over security interest as mentioned in the provisions of Sec. 17.
  6. After reviewing all possible scenarios and arguments made by the appellant and the respondent, the court held that it had no jurisdiction over matters concerning the provisions of SARFAESI Act, and that the DRT has jurisdiction over the same.

ISSUES

The following issues were analyzed by the court:

  • Whether or not civil courts have the jurisdiction to take up cases with regards to security interest under the provisions of the SARFAESI Act.
  • Whether or not the jurisdiction of civil courts to try matters of civil nature, excluding those to be tried by the DRT under Sec. 17 of the SARFAESI Act, in relation to enforcement of security interest, is barred by the provisions of Sec. 34 of the Act.

IMPORTANT PROVISIONS

ANALYSIS OF THE JUDGMENT

  1. The counsel for the appellant contended that jurisdiction of the civil court is not fully barred. The counsel placed reliance on the decision given in the case of Dhulabhai etc. v. State of Madhya Pradesh and another (AIR 1969 SC 78) to construe exclusion of jurisdiction.
  2. The counsel for the appellant contended that the bar under Section 34 is absolute, in so far as matters under the SARFAESI Act are concerned, for which the DRT is empowered to have jurisdiction. He placed reliance upon the language of Section 34 of the SARFAESI Act, which is express and specific.
  3. The counsel for the appellant placed strict reliance on the language of Sec. 34 of the SARFAESI Act, which states that there is a clear and express bar on the civil courts to not entertain cases regarding the provisions of SARFAESI Act.
  4. Relying on the judgment given in the case of Mardia Chemicals v. Union of India (2004 (2) Mh.L.J. 1090), the counsel submitted before the court that the purpose of the enactment would be defeated if the civil court is held to have jurisdiction.
  5. The counsel further contended before the court that powers under Section 17 of the SARFAESI Act are powers of width and amplitude and therefore would encompass a power to determine even the validity of the mortgage executed in favor of the secured creditor, even though raised by a person who was non-signatory to such mortgage.
  6. The counsel for the appellant further submitted that the DRT has the power and jurisdiction, in case so found, to declare the mortgage as illegal on ground of incompetency.
  7. The counsel for the respondent, when addressing the bar set by the provisions of Sec. 34 of the Act, contended that the bar under Sec. 34 of the SARFAESI Act was not an omnipotent bar but was restricted to matters to be decided by the DRT under the jurisdiction as conferred upon it.
  8. The counsel for the respondent contended that all adjudication in respect of civil rights, even if they arise in respect of a security interest, would be amenable to the jurisdiction of the civil court as it is the civil court alone, which would have the jurisdiction to decide such rights.
  9. The court, on hearing arguments from both the appellant and the respondent, held that the bar under Sec. 34 of the Act was not absolute, but was restricted to examination by the DRT of the actions of the secured creditor under Section 13 of the SARFAESI Act and the rights available under Section 17 of the SARFAESI Act, to be in accordance with the provisions of the SARFAESI Act and the Rules made thereunder, as indicated.
  10. The court, therefore, held that an aggrieved party can only approach the DRT to avail relief with respect to security interest under the provisions of the SARFAESI Act.


CONCLUSION

The issue that the present case deals with is whether or not civil courts have the jurisdiction to take up cases with regards to security interest under the provisions of the SARFAESI Act. The court, in the present case, held in the negative and held that civil courts do not have jurisdiction to deal with cases regarding security interest under SARFAESI Act.

The court held that jurisdiction of the DRT to decide matters regarding enforcement of security interest under the provisions of Sec. 13 of the SARFAESI Act were exclusive and limited to the tribunal. The jurisdiction of the civil court to decide all the matters of civil nature, excluding those to be tried by the Debts Recovery Tribunal under Sections 13 and 17 of the SARFAESI Act, in relation to enforcement of security interest of a secured creditor, was not barred by Section 34 of the SARFAESI Act, the court held. Therefore, it can be interpreted that with regards to security interest and its enforcement, the DRT has exclusive jurisdiction to decide matters on the same.


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Gnaneshwar Rajan
on 22 April 2021
Published in Others
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