Orissa High Court: Consumer Commissions Do Not Possess Jurisdiction To Deal With Cases Under SARFAESI Act

Orissa High Court: Consumer Commissions Do Not Possess Jurisdiction To Deal With Cases Under SARFAESI Act

It hoped that they would refrain from 'judicial adventurism' while dealing with special legislation

The Orissa High Court has held that consumer courts do not have the power to deal with a case, which is to be adjudicated by the Debt Recovery Tribunal (DRT) or appellate tribunal under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.

Clarifying the jurisdictional issue, the division bench of Justice Debabrata Dash and Justice V. Narasingh stated, “Section 34 prescribes the jurisdictional bar for entertaining any suit or proceeding, which can be entertained by the DRT or the appellate tribunal. It has been mentioned that no injunction shall be granted by any court or other authority on any action in present day or in future to be taken under the SARFAESI Act.”

The Case:

One of the opposite parties was among the mortgagors and guarantors for credit facilities availed by a company. As the borrower company failed to repay the loan, the bank (petitioner) recalled the loan and issued a demand notice.

Since steps were not taken to repay the loan, another notice was issued under Section 13(4) of the SARFAESI Act read with Rule 8 of the Security Interest (Enforcement) Rules, 2002 for possession of the property.

Thereafter, the opposite party filed an appeal under Section 17(1), after which the petitioner published an e-auction sale notice.

The opposite party then approached the District Consumer Disputes Redressal Commission, Jharsuguda, Odisha, under Section 35 of the Consumer Protection Act, 1986.

The Consumer Commission passed an ex-parte order granting a stay on the auction.

Aggrieved by the order, the petitioner approached the high court.

The bench referred to the SARFAESI Act provisions under Sections 34 (bar of jurisdiction of Civil Court), 35 (provisions of SARFAESI to override over other laws) and 37 (application of other laws not barred).

Justice Dash and Justice Narasingh noted that Section 34 barred to deal with a suit or proceeding that could be entertained by the DRT or an appellate tribunal. Also, no injunction would be granted by any court or 'other authority' for action in the present or in the future.

The bench added, “Even if the reference to ‘civil court’ in the heading of Section 37 and in the narration of the Sections is interpreted and understood in the context of Section 9 of the CPC, the expression ‘other authority’ must come into force. Otherwise, the legislative intent of Section 37 would be set at naught. There is no doubt that ‘other authority’ will encompass the ‘Consumer Commissions.’”

The court held that if Section 35, read with Section 37, juxtaposed with Section 100 of the Consumer Protection Act, it was clear that any action taken or contemplated under the SARFAESI Act or the Recovery of Debts and Bankruptcy (RDB) Act, 1993, must be governed by these Acts. All other laws except those mentioned in Section 37 must yield to it.

The judges stated that an onerous duty was cast on the President and Members of the Consumer Commissions while considering the reliefs sought under the Special Acts and to function within the purview.

It was expected of them to, “Test the propositions claiming the reliefs on the touchstone of law governing the field which would enable them not to embark upon a journey which will lead to avoidable litigation and denude the faith of the common man in the fairness and effectiveness of the redressal mechanism, and which will also not render otiose, the intent of the legislature in enacting Special Statutes.”

Thus, the bench hoped that the Consumer Commissions would refrain from 'judicial adventurism' while dealing with special legislation.

It held that the Consumer Commission could not have granted the ex-parte stay on the e-auction notice and quashed the impugned order.

The court took cognizance that the opposite party had concealed the pending DRT proceedings while seeking relief from the District Commission.

The bench thus imposed a penalty of Rs.1 lakh on it, directing to deposit the amount with the welfare fund of Jharsuguda District Bar Association.