Dismissing an appeal in State Bank of Patiala v Mukesh Jain & Anr, the Supreme Court ruled that a debt recovery tribunal (DRT) constituted under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (DRT Act), can entertain appeals arising from the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), even if the amount involved is less than ₹1 million.
The court held that there is a difference between a DRT’s original jurisdiction under the provisions of the DRT Act, which is ₹1 million and above, and its appellate jurisdiction under the SARFAESI Act.
State Bank of Patiala lent ₹800,000 to Jain and initiated proceedings against him under the SARFAESI Act when he defaulted on the loan. On receipt of notice under section 13(2) of the act, Jain had challenged it before a civil court. The bank had unsuccessfully argued, before both the civil court and Delhi High Court, that civil courts have no jurisdiction to entertain suits dealing with matters arising under the provisions of the SARFAESI Act, as section 34 read with section 13(2) of the act prohibits civil courts from dealing with such matters. The civil court had ruled that the suit was maintainable as the loan amount was less than the ₹1 million threshold below which DRTs cannot entertain matters under the DRT Act.
Stating that there was a need to harmonize the provisions of both acts and considering that the SARFAESI Act was passed after the DRT Act, the Supreme Court clarified that the ₹1 million threshold for filing recovery claims before a DRT is intended to limit its original jurisdiction. Appeals filed before DRTs face no such limitation.
The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at [email protected] or [email protected] Readers should not act on the basis of this information without seeking professional legal advice.