A person aggrieved from measures taken by secured creditor u/s 13(4) should approach DRT and not Civil Court: HC

Case Details: Electrosteel Castings Ltd. v. UV Asset Reconstruction Company Ltd. - [2021] 132 taxmann.com 187 (Madras)

Judiciary and Counsel Details

• • Sanjib Banerjee, CJ. and Senthilkumar Ramamoorthy, J.
  • Soumendranath Mookherjee, Sr. Adv. and Surya Teja Nalla for the Appellant. 
  • P.S. Ganesh and V. Kuberan for the Respondent.

Facts of the Case

In the instant case, the Appellant stood as a guarantor in respect of a loan taken by a borrower from the R2-finance company and mortgaged its property. The Borrower defaulted in repayment. The R2 assigned debts of the borrower in favour of R1-reconstruction company through an assignment deed; hence R1 had taken recourse of section 13(4) to take possession of the mortgaged property. The Appellant filed a civil suit seeking direction for return of property and title deeds pertaining to mortgaged property on the ground that debt due from the borrower to R2 stood discharged. The Civil Court by impugned order rejected said suit on the ground that R1 had invoked provisions of SARFAESI Act, and thus, the appellant should have approached jurisdictional DRT and not Civil Court for return of title deed. On contrary, the appellant claimed that no DRT/DRAT had the authority to direct the return of title deeds.

High Court Held

The High Court noted that when a secured creditor adopts a measure under section 13(4), any person aggrieved by the same should approach jurisdictional DRT and it was incumbent on DRT to deal with the matter.

Further, the limited authority of DRT or DRAT might not be effective to remedy wrong, in such a case, Civil Court’s doors remain open to receive an action, not only to completely undo mischief but also to consider a claim in damages.

In view of aforesaid, issue as to whether Civil Court had territorial jurisdiction to entertain suit would not be conclusively answered and left open to the unlikely stage that appellant might have to approach Civil Court again and as to whether relief claimed then for return of title-deeds was accompanied by relief for possession of the immovable property, whereupon situs of immovable property would be deciding factor. Since the suit that the appellant brought before Civil Court could no longer be entertained, the impugned order did not call for any interference.

List of Cases Referred to

• • Mardia Chemicals Ltd. v. Union of India [2004] 51 SCL 513/136 Taxman 360 (SC) (para 19)
  • A Batcha Saheb v. Nariman K. Irani AIR 1955 Mad. 491 (para 20)
  • D. Ram Reddy v. Asset Reconstruction Company (India) (P.) Ltd. [Writ Petition No. 9412 of 2016, dated 11-7-2016] (para 21)
  • Bank of Baroda v. Gopal Shriram Panda [Civil Revision Application No. 29 of 2011, dated 25-3-2021] (para 21)
  • Delta International Ltd v. Smt. Nupur Mitra [APO No. 390 of 2017, dated 28-8-2017] (para 22).