Kerala High Court Emphasizes Caution for DRTs in SARFAESI Act, Urges Mindful Interim Orders
In a recent ruling, the Kerala High Court has highlighted the importance of Debt Recovery Tribunals (DRTs) applying careful consideration when granting interim orders under Section 17 of the SARFAESI Act. The court's decision in the case of Jimmy Thomas v Indian Bank reaffirmed the Supreme Court's stance that the powers conferred under the SARFAESI Act can have disastrous consequences for borrowers and should not be taken lightly.
The court emphasized that during the initial stages of proceedings under the SARFAESI Act, there is no adjudication involved. Therefore, DRTs must be fully aware that the powers bestowed upon them are drastic and can potentially lead to severe outcomes for borrowers. Consequently, the court stressed the need for DRTs to thoroughly assess the contentions presented before them, even at the interim stage, before granting or rejecting any requests for interim relief.
Referring to the Supreme Court's ruling in Mardia Chemicals Ltd. v. Union of India, the Kerala High Court reiterated that DRTs possess the authority to issue conditional interim orders. While detailed orders addressing every contention may not be necessary, the court emphasized that the tribunal's order must demonstrate an awareness of the arguments raised in the securitization application.
The court also noted that DRTs must be presided over by individuals who have experience as District Judges. It stressed that the orders issued by the tribunal should reflect the reasonableness of their decisions, highlighting the need for experience and expertise.
The court's ruling came in response to a batch of pleas alleging that the DRTs had mechanically issued orders on interlocutory applications without proper consideration of the contentions raised. The court examined the orders and concurred with the petitioners, finding that they lacked any application of mind and failed to exercise the jurisdiction vested in the DRTs.
Expressing concern, the court emphasized that identical interim orders issued in three cases by the DRTs were unacceptable, stating that such a practice goes against the principles of justice. The DRT, which was a respondent in the case, argued that the petitions were not maintainable before the High Court. However, the court held that when the DRT fails to exercise its jurisdiction properly, resulting in a failure of justice, the High Court has the authority to entertain the petition under Article 227 of the Constitution of India.
The court clarified that if the DRT had considered the matter appropriately and demonstrated an application of mind in the interim orders, the High Court would not entertain a petition under Article 227 merely because a different view could have been taken.
The petitioners were represented by advocates CS Ullas, SS Aravind, AS Dileep, KK Chandran Pillai, P Binod, Suseela Dileep, KY Sudheendran, and Sudeep Aravind Panicker. The respondents were represented by advocates Sunil Shankar, Vidya Gangadharan, Sandra S, N Raghuraj, PC Sasidharan, and S Easwaran.
TAGS: Kerala High Court Debt Recovery Tribunals (DRT) SARFAESI Act interim orders cautious approach disastrous consequences borrower's rights Jimmy Thomas v Indian Bank Supreme Court Mardia Chemicals Ltd. v. Union of India adjudication contentions Securitisation Application reasonableness expertise jurisdiction failure of justice Article 227 petitioners respondents advocates.
