It would be clueless for the professionals at times in answering the queries of the borrowers facing proceedings under ‘The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002’.  If the Bank initiates proceedings under the provisions of SARFAESI Act, 2002, then, in view of section 34, no Civil Court shall have jurisdiction to entertain any suit or legal proceeding in respect of the same subject matter.  Though there can not be any such restriction in any act when it comes to High Court exercising jurisdiction under Article 226 of Constitution of India, the High Courts too may hesitate to look into the infirmities committed by the Bank under SARFAESI Act, 2002 and the Court may lay emphasis on the availability of ‘alternative remedy’ to the borrowers under section 17 of the SARFAESI Act, 2002.  Section 34 of the Act is as follows:

“34. Civil Court not to have jurisdiction.- No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993).”

Relief before DRT under section 17:

Initially, it is held by the Courts and followed by the Debt Recovery Tribunals that the Tribunal, under section 17, can only see as to whether there is any procedural irregularity in the action initiated by the Bank.  However, now, it is settled, atleast as a legal principle, that the Debt Recovery Tribunal can look into all allegations or issues while entertaining an Appeal under section 17 and it extends to the issue of looking at the correctness of the amount/outstanding amount demanded by the Bank in its notice under section 13 (2). Courts have further held that the DRT has the power to restore the possession of the ‘secured asset’ back to the borrowers in appropriate cases.  It all may appear good as a principle of law, but, the reality is different. If the borrower files any appeal under section 17, then, the DRT will look at the outstanding amount in the notice under section 13 (2) and insists for the deposit of 20 or 30% of the outstanding before granting any interim relief and this interim relief can only be for some time or till the disposal of the Appeal in some cases.  It is alleged that the DRT emphasis on the amount demanded by the Bank rather the grievance of the borrower or borrowers.

What if borrower succeeds?

Again, even if borrower succeeds in his Appeal under section 17 of the SARFAESI Act, 2002, the borrower may not be happy. It is interesting. Because, the borrower might have clearly alleged or established that the Bank was at fault in adhering to the terms and conditions of the sanction and might have wanted the DRT to force the Bank to act upon the agreed terms. But, it will not happen and the DRT may simply set-aside the possession notice issued by the Bank under section 13 (4) of the Act and the Bank impliedly have an opportunity to start the proceedings afresh. There may not be any difficulty for a Public Sector Bank or the officers of the Bank to initiate proceedings against the borrower again and again.  Like-wise, on some technical grounds, the borrower may succeed in his Appeal under section 17 of the SARFAESI Act, 2002, but, it would be interesting to understand as to what that means. That may be nothing at times unless the borrower is interested only in getting some time to repay the outstanding amount. It is felt that the Debt Recovery Tribunal can grant no relief to the borrowers under section 17 except asking the Bank to start the proceedings afresh.

High Court/Civil Court’s jurisdiction:

In view of the Bar under section 34 of SARFAESI Act, 2002 and in view of the composition of Tribunal, the Tribunal should have all powers to adjudicate the claim and to issue suitable directions to the Bank or suitable relief to the borrowers.  The High Court can be issuing various directions to the Bank in a SARFAESI proceeding if it chooses to entertain any Writ Petition under Article 226 of Constitution of India.  Why can’t it be done by the Tribunal also? In view of the settled practice, as many say, before the Debt Recovery Tribunals and in view of the fact that the borrower needs a forum to agitate his grievance, it is impossible according to me to say that ‘no civil court shall have jurisdiction’ or impossible to confine the jurisdiction of Civil Court in cases only when there exists ‘fraud’ etc. Civil Court shall have jurisdiction in deciding disputes between the Bank and the borrower unless there exists an ‘Arbitration Clause’. Just because, the Bank initiates the proceedings under the provisions of SARFAESI Act, 2002, it can not be a Bar on the Civil Court or the High Court under Article 226 and it all depends upon the facts and circumstances of the case.

Why there can’t be suitable compensation:

There exists a provision in the SARFAESI Act, 2002 that the borrower should be compensated if it is proved that the Bank is at fault in a proceeding under the provisions of SARFAESI Act, 2002. While section 19 of the Act deals with the issue of payment of costs and compensation to the borrowers; section 32 of the Act protects the action taken in good faith.  Section 19 and section 32 of the Act are as follows:

19. Right of borrower to receive compensation and costs in certain cases. – If the Debt Recovery Tribunal or the Court of District Judge, on an application made under section 17 of section 17A or the Appellate Tribunal or the High Court on an appeal preferred under section 18 or section 18A, holds that the possession of secured assets by the secured creditor is not in accordance with the provisions of this Act and rules made thereunder and directs the secured creditors to return such secured assets to the concerned borrowers, such borrower shall be entitled to the payment of such compensation and costs as may be determined by such Tribunal or Court of District Judge or Appellate Tribunal or the High Court referred to in section 18B.

32. Protection of Action taken in Good Faith- No suit, prosecution or other legal proceeding shall lie against any secured creditor or any of his officers or manager exercising any of the rights of the secured creditors or borrower for anything done or omitted to be done in good faith under this Act.

When there exists a fault on the part of the Bank, the borrower should suitably be compensated under section 19, but, in reality, it is not happening and it should happen.

Courts to the rescue of borrowers:

While resisting to entertain the Writ Petitions under Article 226 and 227 in respect of SARFAESI matters as many believe, the Courts have always tried to make the proceedings before the Debt Recovery Tribunal meaningful. The Courts made it clear that the Bank should apply its mind in disposing of the objections raised by the borrower under section 13 (3). The Courts have held that the DRT has all powers under section 17 and the DRT can entertain appeals challenging any proceeding of the Bank pursuant to the issuance of notice under section 13 (4) of the Act. Thus, Courts have done its best to make the Debt Recovery Tribunals really effective.

Unless there is a course correction as to how the Tribunals deal with the Appeals of the borrowers under section 17, it is very difficult to stick to the principle that the Civil Courts and the High Courts should avoid interfering in SARFAESI proceedings initiated by the Bank.

Note: the views expressed are my personal.


V.DURGA RAO, Advocate, Madras High Court.


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    Respected Sir

    I have read your article in Tax guru regarding Sarfesi act

    Sir I have taken a loan from UNITED bank amount 95 lac.

    Sarfesi notice 13(2)issued I have replied and but no responce received from bank .

    After 90 days Bank sent me 3 nos of e-mail asking me to deposit the amount 5 lac for upgrade the account .

    I have deposited the amount but account not upgraded

    UBI bank merged with Pnb and covid scheme introduced CGSSD.

    PNB asked me to submit the application for restructure which I did but since last 12 months no responce from bank except few letter to me account restructure in process. I have valid export orders the same Letter of credit arrived in PNB branch my several email and visit result in vain.

    I have filed suit in high court but high court direct me to approach to DRT. Suit pending in Drt since last 4 months .

    Pls Sir can u suggest me what other relief can I get and from which court it’s possible .

    Thanks in advance to u

    Ram Banerjee

  2. Ifteqar says:

    Dear sir,
    I. Have read ur article and it has given me a relax about Drt proceedings iam also facing some problem in my company. Give me ur appointment to meet u in person

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February 2024