Recovery Case Jurisdiction Upheld Where Account Maintained by Bank Office

Sri Cotton Concern Vs HDFC Bank Limited (DRAT Kolkata)

The appeal before the Debts Recovery Appellate Tribunal Kolkata arose from an order dated 7 February 2024 passed by DRT-II, Hyderabad, dismissing an interlocutory application challenging territorial jurisdiction. The original application (O.A. No. 843 of 2019) was filed by the respondent bank for recovery of ₹14,87,82,008.31 along with interest. The bank stated that the cause of action arose when the borrower made the last payment on 29 December 2018, the loan account was classified as NPA on 31 March 2019, and a demand notice under Section 13(2) of the SARFAESI Act, 2002 was issued on 28 June 2019.

During the pendency of the recovery proceedings, the appellant filed an interlocutory application contending that DRT Hyderabad lacked territorial jurisdiction. It was argued that the cause of action arose at Guntur in Andhra Pradesh, where the borrower resided and the secured property was located, and that jurisdiction lay with DRT Visakhapatnam. The appellant also contended that transfer of the loan account to the bank’s Special Operations Department was not intimated, and reliance was placed on a memo filed in SARFAESI proceedings stating that SARFAESI action had been withdrawn.

The respondent bank opposed the application, stating that once the account became irregular it was transferred to the Special Operations (Recovery) Department at Hyderabad, from where recovery actions and notices were issued. According to the bank, the appellant was duly served with notices but failed to regularise the account, and the application challenging jurisdiction was intended only to delay the proceedings. It was also clarified that only the notice under Section 13(4) of the SARFAESI Act had been withdrawn, not the entire SARFAESI action.