Case Note & Summary
The writ petition under Article 226 of the Constitution of India challenged an order of the Debt Recovery Appellate Tribunal (DRAT) dated 8 October 2013, which upheld the Debt Recovery Tribunal–III, Mumbai (DRT-III) order dated 14 August 2012. The DRT-III had held that it lacked territorial jurisdiction to entertain the Securitization Application filed by the petitioner company because the secured property was located in Gujarat. The petitioner, a company incorporated under the Companies Act, 1956, had its factory in Gujarat and had borrowed from banks and financial institutions, which later assigned their security interests to Respondent No.1, an asset reconstruction company under the SARFAESI Act. After the petitioner defaulted, Respondent No.1 issued a notice under Section 13(2) on 16 March 2009, took possession on 4 November 2009, and later published a sale notice on 19 April 2011 for auction of the secured property. The petitioner filed Securitization Application No.136 of 2011 before DRT-III, Mumbai, challenging the sale notice. During pendency, the auction was held, sale confirmed to Respondent No.3 (nominee of Respondent No.2), and a sale certificate issued on 2 July 2011. Respondent No.3 then filed an application questioning the DRT’s jurisdiction. The DRT, relying on the Full Bench decision of the Delhi High Court in Amish Jain v. ICICI Bank, held that jurisdiction lies where the secured property is situated and returned the application. The DRAT affirmed. In the writ petition, the petitioner argued that the entire cause of action—issuance of sale notice, submission of bids, payment of deposit—occurred in Mumbai, and that Section 16 CPC does not apply to SARFAESI proceedings. Instead, Section 17(7) of the SARFAESI Act mandates disposal in accordance with the RDDB Act, whose Section 19(1) defines jurisdiction based on cause of action, residence, or business. The issue before the High Court was whether the DRT Mumbai had jurisdiction when the cause of action arose within its limits even though the immovable property was outside. The court heard submissions and reserved judgment.
Headnote
A) Jurisdiction - Territorial Jurisdiction of DRT under SARFAESI Act - Determination of which DRT has jurisdiction to entertain an application under Section 17 - SARFAESI Act, 2002, Sections 17, 17(7); Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Section 19(1); Code of Civil Procedure, 1908, Section 16 - The DRT and DRAT, following Amish Jain v. ICICI Bank, held that DRT Mumbai lacked jurisdiction because the secured property was in Gujarat, and returned the application. The petitioner argued that the cause of action for the sale notice and auction arose wholly in Mumbai, and that Section 17(7) SARFAESI Act read with Section 19(1) RDDB Act gives jurisdiction based on cause of action, residence, or business, not location of property. (Paras 2, 8-9, 10-12) B) Statutory Interpretation - Applicability of CPC to SARFAESI Proceedings - Whether a Securitization Application under Section 17 SARFAESI Act is a 'suit' subject to Section 16 CPC - SARFAESI Act, 2002, Section 17; Code of Civil Procedure, 1908, Section 16 - The petitioner contended that Section 16 CPC does not apply because the application is not a suit, and that Section 17(7) of the SARFAESI Act explicitly requires disposal as per the RDDB Act, thereby excluding CPC. The DRT had applied Section 16 CPC by analogy, which was challenged. (Paras 11-12)
Issue of Consideration
Whether DRT-III, Mumbai had territorial jurisdiction to entertain the Securitization Application when the secured property was situated in Gujarat; whether Section 16 CPC applies to Securitization Applications under the SARFAESI Act, or jurisdiction is governed by Section 19(1) of the RDDB Act read with Section 17(7) of the SARFAESI Act.
Law Points
- Interpretation of territorial jurisdiction of DRT under SARFAESI Act
- applicability of CPC Section 16 to SARFAESI proceedings
- interplay between SARFAESI Act Section 17(7) and RDDB Act Section 19(1)
- scope of cause of action as basis for DRT jurisdiction
