The Kerala High Court has stayed the notification issued by the Central Government transferring all matters involving debt of INR 100 crores.
On 4.10.2022, the Ministry of Finance issued a notification as No.S.O.4717(E) purportedly in exercise of the powers under section 3 of the Recovery of Debts and Bankruptcy Act, 1993 notifying the jurisdiction of various Debts Recovery Tribunals.
As per serial No.1 of the notification, the jurisdiction in respect of applications involving debt amount of Rs.100 Crores and above falling within the jurisdiction of Debts Recovery Tribunals specified therein (which includes Debts Recovery Tribunal-I and Debts Recovery Tribunal-II, Ernakulam), have been varied and conferred upon Debts Recovery Tribunal-I, Chennai. Change is also specified in respect of other Debts Recovery Tribunals with which the petitioner is not concerned with.
N.N.Sugunapalan, Senior Counsel contended that when a securitisation application challenging the sale of petitioner’s property was filed before the Debts Recovery Tribunal, Ernakulam, the Registry of the DRT Ernakulam returned the application relying upon the impugned notification and directed it to be presented before the appropriate forum since the sale notice was for the recovery of a sum of Rs.976.57 Crores.
He contended that the notification issued under the RDB Act specifying jurisdiction for applications under the said Act cannot apply to the applications filed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
The provisions of sections 3, 17 and 19 when read with section 2B of the RDB Act will clearly indicate that notification, if valid, can apply only to applications filed by the financial institutions or banks under the RDB Act and cannot apply to applications under the SARFAESI Act filed by individual borrowers or oust the jurisdiction of the existing DRT’s.
It was further submitted that a notification issued under one statute has to be confined to that statute alone and cannot apply to the provisions of other statutes.
In any event, it was also submitted that by virtue notification, the right of access of the petitioner and other similarly situated persons to a court of law has been prejudicially affected by taking it out of the State of Kerala and conferring it upon a Tribunal in another State which renders the fundamental right practically otiose.
In such circumstances, the counsel contended that the notification itself is ex-facie arbitrary and violative of Article 14 of the Constitution of India.
The single judge bench of Justice Bechu Kurian Thomas held that the jurisdiction of both Debts Recovery Tribunals in Ernakulam covered applications irrespective of any pecuniary limit. The right of access to a court of law has already been declared to be a fundamental right
“I am of the prima facie view that the challenge against notification as being unconstitutional and arbitrary has substantial merit. Balance of convenience leans in favour of staying the operation of the said notification as otherwise if ultimately the notification is set aside, great prejudice would be caused to all the litigants,” the court said.
Case title: M/S. Ansu Enterprises Private Ltd. v/s The Registrar DRT-1 Ernakulam and Ors.
Citation: WP(C) NO. 38962 OF 2022