In a notable legal development, the Delhi High Court has issued a ruling with far-reaching consequences for the jurisdiction of Debt Recovery Tribunals (DRT) under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act. The court's decision, delivered by a Division Bench led by Justice Vibhu Bakhru and Justice Amit Mahajan, provides clarity on the jurisdictional boundaries and the interaction between the SARFAESI Act and the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act).

The case in question pertained to IDFC First Bank, which contested the dismissal of their Section 13(10) SARFAESI Act application by the Debts Recovery Tribunal. The reason for this rejection was the perceived absence of sufficient pecuniary jurisdiction. The disputed outstanding amount was approximately Rs. 6,92,551.63, inclusive of interest. The DRT argued that the pecuniary jurisdiction limits of the RDB Act did not come into play when the debt owed to the bank amounted to less than Rs. 20 lakhs.

IDFC put forth the argument that Section 13(10) of the SARFAESI Act constituted a separate and unique remedy, distinct from the regulations outlined in the RDB Act. They contended that the pecuniary limit specified in Section 1(4) of the RDB Act should not be applicable to Section 13(10) SARFAESI Act applications. Their rationale was based on the fact that there was no equivalent provision in the SARFAESI Act akin to Section 1(4) of the RDB Act.

Nonetheless, the court did not align with IDFC's arguments, and it provided several significant reasons for its decision:

To begin with, the court highlighted that the SARFAESI Act did not explicitly designate a specific Debt Recovery Tribunal responsible for handling Section 13(10) applications. Justices Bakhru and Mahajan pointed out, "The SARFAESI Act does not contain any express provisions that stipulate which Debt 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."

Secondly, the court stressed the importance of referring to the provisions of the RDB Act in order to ascertain jurisdiction. The court concluded that there was no compelling rationale for disregarding the pecuniary jurisdiction limits of the Debt Recovery Tribunal (DRT) as stipulated under the RDB Act, given the interrelationship between the two acts.

Thirdly, the court emphasized that particular critical provisions of the RDB Act, which were crucial for the resolution of claims and debt recovery, should not be disregarded. These provisions encompassed the ability to file an appeal against the determination of the amount owed, a feature absent in the SARFAESI Act. Moreover, the borrower's right to file a counterclaim, as provided by the RDB Act, was another significant aspect that needed to be taken into consideration.

Furthermore, the court recognized the amendments made to the Recovery of Debts and Bankruptcy Act (RDB Act) through Section 294 of the Insolvency and Bankruptcy Code (IBC). These amendments incorporated the phrase "save as otherwise provided" into Section 1(4), creating an exception to the clause concerning the pecuniary jurisdiction of the Debts Recovery Tribunal.

In their judgment, the judges expressed, "The significance of the said words was to create an exception to the provision concerning the pecuniary jurisdiction of the Debts Recovery Tribunal. When the DRT is expressly conferred with jurisdiction, it should exercise it irrespective of the monetary limit stipulated under Section 1(4) of the RDB Act."

Ultimately, the court reached the conclusion that an application filed under Section 13(10) of the SARFAESI Act, in practical terms, constituted an Original Application under Section 19(1) of the RDB Act, which had a prescribed limit of Rs. 20 lakhs. Consequently, the remedy provided by the SARFAESI Act could not be regarded as separate from the RDB Act, and, as a result, the court dismissed IDFC's petition.

Case: IDFC FIRST BANK LIMITED Vs UNION OF INDIA AND ORS, W.P.(C) 2550/2020 and CM APPL. 8896/2020.