DRT has jurisdiction to entertain appeal us 17 of SRFAESI Act even if the amount involved is less than Rs. 10 lakh-SC

DRT has jurisdiction to entertain appeal us 17 of SRFAESI Act even if the amount involved is less than Rs. 10 lakh.

ABCAUS Case Law Citation:
1049 (2016) (11) SC

Important Case Laws Cited:
Mardia Chemicals Ltd. and others v. Union of India and others 2004(4) SCC 311

Brief Facts of the Case:
The appellant was a Nationalized Bank which had lent to the respondent a term loan and as security, the respondent debtor had mortgaged his immovable property. The respondent committed default in re-payment of the said loan, the appellant initiated proceedings under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SRFAESI Act). When notice under Section 13(2) of the Act had been issued, the proceedings had been challenged by the respondent by filing a Civil Suit in the Court of Civil Judge.

In the said civil suit, the appellant filed an application under Order VII Rule 11 of the CPC contending that the Civil Court had no jurisdiction to entertain the suit in view of the provisions of Section 34 read with Section 13(2) of the Act, which prohibits a Civil Court from dealing with the matters arising under the provisions of the Act. However, the Trial Court held that the suit was maintainable in view of the fact that the subject matter of the suit i.e. the amount which was sought to be recovered by the appellant from respondent was less than Rs. 10,00,000/- (Rupees Ten lakh) and according to the provisions of Section 1(4) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 ( ‘the DRT Act’), the provisions of the DRT Act would not apply, where the amount of debt due to any bank or financial institution is less than Rs. 10 lakh and therefore, it was not open to the Debt Recovery Tribunal (“DRT Tribunal”) to entertain the matter as the amount claimed in the suit was less than Rs.10 lakh. Thus the trial Court was of the view that as the DRT Act had no jurisdiction to entertain an appeal against the order passed under the provisions of the Act, a civil suit was maintainable and therefore, the application made under Order VII Rule 11 of the CPC had been rejected by the trial Court.

The High Court confirmed the said view of the trial Court.

Being aggrieved by the said judgment of the Delhi High Court, the present appeal had been filed by the appellant Bank.

Contentions of the Appellant:
It was submitted that the section 34 of the SRFAESI Act expressly bars the jurisdiction of the Civil Court from dealing with any matter which arises under the said Act. Also, it was contended that the SRFAESI Act was enacted in 2002, whereas the DRT Act was enacted in 1993. As the Act was enacted later in point of time, provisions of Section 34 of the SRFAESI Act would prevail.

Observations made by the Apex Court:
The Supreme Court noted that in normal circumstances, there cannot be any action of any authority which cannot be challenged before a Civil Court unless there is a statutory bar with regard to challenging such an action.

The Court observed that a perusal of Section 34 of SRFAESI Act, it was clear that no Civil Court could have jurisdiction to entertain any suit or proceeding in respect of any matter which a DRT or Appellate Tribunal was empowered under the SRFAESI Act. Further, the Civil Court has no right to issue any injunction in pursuance of any action taken under SRFAESI Act or under the provisions of the DRT Act.

The Court further observed that in view of a specific bar, no Civil Court can entertain any suit wherein the proceedings initiated under Section 13 of the SRFAESI Act are challenged. The SRFAESI Act had been enacted in 2002, whereas the DRT Act had been enacted in 1993. The legislature is presumed to be aware of the fact that the DRT Tribunal would not have any jurisdiction wherein the subject matter of the suit is less than Rs.10 lakh. Therefore one will have to make an effort to harmonize both the statutory provisions as under section 17 of the SRFAESI Act, any person aggrieved by the actions taken under Section 13 can approach the DRT Tribunal.

The Supreme Court observed that Section 1(4) of the DRT Act, might give impression that the provisions of the DRT Act would not apply where the amount of debt is less than Rs.10 lakh. However it must be read in a manner which would not adversely affect a debtor, who wants to have some remedy against an action initiated under the provisions of Section 13 of the SRFAESI Act.

The Court opined that the section 1(4) of the DRT Act, which limits the jurisdiction of the Tribunal to Rs. 10 lakh, prima facie, the intention of the legislature was to limit the original jurisdiction of the Tribunal. If any claim is to be made before the Tribunal, the amount must be more than Rs.10 lakh and if the amount is less than Rs.10 lakh, the creditor bank will have to file a suit in a Civil Court. So, one can safely interpret the provisions of Section 1(4) of the DRT Act to the effect that it deals with original jurisdiction of the Tribunal under the provisions of the DRT Act.

According to the Supreme Court, the Tribunal would be exercising its appellate jurisdiction when the action initiated under the provisions of Section 13 of the Act is challenged before the Tribunal. There is a difference between the Tribunal’s original jurisdiction under the provisions of the DRT Act and the appellate jurisdiction under the Act.

Held:
DRT has jurisdiction to entertain appeal u/s 17 of SRFAESI Act even if the amount involved is less than Rs. 10 lakh. The said appellate jurisdiction need not be misunderstood with the original jurisdiction of the Tribunal.