Court Holds Disputes Over Mortgage Validity, Property Title And Jurisdiction Can Be Examined By Debt Recovery Tribunal Under Section 17
Bilaspur, June 16: The Chhattisgarh High Court has dismissed a writ petition challenging an order passed under Section 14 of the SARFAESI Act, reiterating that where an effective statutory remedy is available before the Debt Recovery Tribunal (DRT), High Courts should ordinarily refrain from exercising jurisdiction under Articles 226 or 227 of the Constitution.
Justice Sachin Singh Rajput passed the order in a petition filed by Ravindra Saraf challenging an order of the Additional Chief Judicial Magistrate (ACJM), Raipur, which had allowed Union Bank of India's application seeking assistance in taking possession of a secured asset under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
Background Of The Dispute
The petitioner claimed an ownership interest in agricultural land situated in Balodabazar district, which had allegedly been mortgaged by the borrowers in favour of Union Bank of India as security for financial assistance extended by the bank.
According to the petitioner, a civil dispute concerning ownership and title over the property was already pending before a competent civil court. He contended that the borrowers did not possess an undisputed title over the property and therefore could not have validly created a security interest in favour of the bank.
The petitioner further argued that the alleged mortgage was created merely by deposit of title deeds and that such an equitable mortgage was not legally recognized in Chhattisgarh without execution of a registered mortgage deed. On this basis, it was contended that no valid security interest existed under the SARFAESI Act and consequently the proceedings initiated by the bank were without jurisdiction.
Challenge To Magistrate's Jurisdiction
An additional challenge was raised regarding territorial jurisdiction.
The petitioner argued that since the secured property was situated in Balodabazar district, the ACJM, Raipur lacked authority to entertain the bank's application under Section 14 of the SARFAESI Act.
It was submitted that the possession order therefore suffered from a jurisdictional defect warranting interference by the High Court.
Bank Raises Preliminary Objection
Union Bank of India opposed the petition at the threshold, contending that the SARFAESI Act provides a complete statutory mechanism for redressal of grievances through proceedings before the Debt Recovery Tribunal.
The bank pointed out that Section 17 of the Act enables "any person" aggrieved by measures taken under the Act to approach the DRT. It was also brought to the Court's notice that the borrowers themselves had already challenged the possession proceedings before the DRT.
Relying upon several Supreme Court decisions, including United Bank of India v. Satyawati Tandon, PHR Invent Educational Society v. UCO Bank and Authorized Officer, State Bank of Travancore v. Mathew K.C., the bank argued that High Courts should not bypass the statutory remedy provided under the SARFAESI framework.
High Court Reaffirms Principle Of Alternative Remedy
The High Court accepted the preliminary objection and held that the petitioner had an efficacious alternative remedy before the DRT.
Justice Rajput observed that the petitioner's principal objections related to validity of the mortgage, existence of security interest, ownership disputes and jurisdictional issues. All these questions, according to the Court, could appropriately be examined by the DRT in proceedings under Section 17 of the SARFAESI Act.
The Court noted that the Supreme Court has repeatedly cautioned High Courts against entertaining writ petitions in matters arising under specialised recovery statutes where comprehensive appellate mechanisms are available.
Referring to the landmark decision in Satyawati Tandon, the Court reiterated that unwarranted interference in recovery proceedings can adversely affect the ability of banks and financial institutions to recover public funds.
"Any Person" Can Approach DRT
While the bank had argued that the petitioner was a stranger to the loan transaction, the High Court clarified that the expression "any person" occurring in Section 17 of the SARFAESI Act is broad enough to include persons claiming independent rights in the secured asset.
Relying upon the Supreme Court's decision in Jagdish Singh v. Heeralal, the Court held that the petitioner was not without a remedy and could raise his grievances before the DRT.
Territorial Jurisdiction Challenge Rejected
The Court also declined to accept the challenge regarding territorial jurisdiction of the ACJM.
It observed that Section 14 permits the Magistrate to exercise jurisdiction where either the secured asset or the documents relating to such asset are situated or found. Since the loan transaction had been processed from Raipur and relevant documents were executed there, the contention regarding lack of jurisdiction did not persuade the Court.
Decision
Dismissing the writ petition, the High Court held that the petitioner must avail the statutory remedy under Section 17 of the SARFAESI Act.
The Court granted liberty to the petitioner to approach the Debt Recovery Tribunal and directed that if such proceedings are instituted, the Tribunal shall decide the matter independently and in accordance with law, without being influenced by any observations contained in the High Court's order.
Key Takeaway
The judgment reinforces a consistent judicial approach that challenges to SARFAESI measures—including disputes relating to mortgage validity, title claims, possession proceedings and jurisdictional objections—should ordinarily be adjudicated by the Debt Recovery Tribunal. High Courts will generally decline to exercise writ jurisdiction where an effective statutory remedy under Section 17 of the SARFAESI Act is available.