Delhi High Court: A petition was filed impugning an order dated 20-06-2019 passed by the Debts Recovery Tribunal III, Delhi whereby, the petitioner’s application under Section 13(10) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’) read with Rule 11 of the Security Interest (Enforcement) Rules, 2002 (‘SIE Rules’) for the recovery of balance amount of ₹ 6,92,551.63 along with interest, was rejected on the ground that the same was less than ₹ 10,00,000 and was therefore, not within the pecuniary jurisdiction of the Debts Recovery Tribunal – III. A division bench of Vibhu Bakhru and Amit Mahajan, JJ., dismissed the petition by refusing the contentions put forth by the petitioner and held that an application under Section 13(10) of the SARFAESI Act is required to be made in a manner as prescribed in the form annexed as Appendix VI to the SIE Rules.
The petitioner entered into a Loan Agreement on 30-12-2015 for an amount of ₹ 23,00,000 with respondents 1 and 2. Thereafter, respondent 1 and 2 created security interest in respect of the built-up property to secure the loan and accordingly, deposited original title deeds for the same to the petitioner. It is the case of the petitioner that respondents 1 and 2 were unable to comply with their repayment obligations and therefore, the loan amount was classified as a Non-Performing Asset (NPA). The petitioner issued a demand notice to respondents 1 and 2 calling upon them to discharge their liability of ₹ 24,71,141.85 along with interest and other charges within 60 days from the said date. The petitioner filed an application under Section 14 of the SARFAESI Act as a secured creditor and appointed a receiver to take possession of the property on behalf of the petitioner. Thereafter, the petitioner sold the property for an amount of ₹ 21,38,000 and issued a sale certificate and after adjusting the sale proceeds recovered from the loan amount, an amount of ₹ 6,92,551.63 remained outstanding. Therefore, the petitioner filed an application under Section 13(10) of the SARFAESI Act read with Rule 11 of the Rules before the Debts Recovery Tribunal which was thereby dismissed by the impugned order.
On the aspect of whether the Debts Recovery Tribunal constituted under the Recovery of Debts and Bankruptcy Act, 1993 (‘RDB’ Act) exercises any original jurisdiction for the recovery of debts under the SARFAESI Act, the Court noted that the SARFAESI Act provides the Debts Recovery Tribunal with the appellate jurisdiction to decide applications against any measures taken by the secured creditors under the SARFAESI Act for the enforcement of security interest. The nature of the application under Section 13(10) of the SARFAESI Act is that of an original action for the recovery of an amount payable by the borrower to the secured creditor. An application under Section 13(10) of the SARFAESI Act is not an action for enforcement of a security interest in respect of a financial asset. The nature of the said application is precisely that of the original action, which is covered under the RDB Act. However, the SARFAESI Act does not contain any express provisions, that stipulates which Debts Recovery Tribunal has the jurisdiction to decide any original claim as to the outstanding amount that remains after the secured creditor has enforced the security interest.
The Court further noted that Sub-section (10) of Section 13 of the SARFAESI Act merely enables the secured creditor to file an application to the Debts Recovery Tribunal having jurisdiction or to a competent court, as the case may be, for recovery of the balance due to a borrower if the outstanding debt is not satisfied by the sale proceeds of the secured assets. Section 13(10) of the SARFAESI Act indicates that such an application is required to be made in the form and manner as prescribed. Rule 11 of the Security Interest (Enforcement) Rules, 2002 stipulates that the said application is required to be made in the form annexed in Appendix VI to SIE Rules to the Registrar of the Bench within whose jurisdiction the case falls. In terms of the SIE Rules, the said application can also be sent by registered post addressed to the Registrar of Debts Recovery Tribunal. In terms of sub-rule (2) of Rule 11 of the SIE Rules, the provisions of the Debts Recovery Tribunal (Procedure) Rules, 1993 would apply mutatis mutandis to the said application. In terms of Sub rule (3), of Rule 11 of the SEI Rules, the application is also required to be accompanied by a fee as provided under Rule 7 of the Debts Recovery Tribunal (Procedure) Rules, 1993.
On the aspect of whether the pecuniary jurisdiction of a Debts Recovery Tribunal under the RDB Act would also apply for an application made under Section 13(10) of the SARFAESI Act, the petitioner contended that an application under Section 13(10) of the SARFAESI Act is not an application under the RDB Act and therefore, the pecuniary jurisdiction as notified under Section 1(4) of the RDB Act would be inapplicable in cases where an application is made under Section 13(10) of the SARFAESI Act. The Court observed that the Court is unable to accept that the legislative intent is to provide parallel regimes for the recovery of debts. The provisions of Section 13(10) of the SARFAESI Act, thus, cannot be interpreted in the manner as contended on behalf of the petitioner.
The Court concluded that the debts as determined are to be recovered under Chapter V of the RDB Act. The SARFAESI Act has neither any provisions for the Debts Recovery Tribunal to issue a recovery certificate, nor any substantive or machinery provisions for the recovery of debts. The remedy under Section 13(10) of the SARFAESI Act cannot be considered as a remedy independent of the RDB Act. An application under Section 13(10) of the SARFAESI Act is required to be made in a manner as prescribed — in the form annexed as Appendix VI to the SIE Rules — and is required to be accompanied by the requisite fee as prescribed under the Debts Recovery Tribunal (Procedure) Rules 1993. However, for all intents and purposes, this application is an Original Application under Section 19(1) of the RDB Act and is required to be adjudicated as such.
[IDFC First Bank Limited v Union of India, 2023 SCC OnLine Del 7001, decided on 0-11-2023]
Advocates who appeared in this case :
Mr Sanjeev Singh and Ms Ridhi Pahuja, Advocates for petitioner
Mr Vivek Goyal, SPG and Mr Mimansak Bhardwaj, GP, Mr Gokul Sharma, Mr Shivam Singh and Ms Aneeta Goyal, Advocates for R-1 & 2.
