Kerala HC Stays Centre's Notification Transferring DRT Applications Above Rs 100 Crores To DRT Chennai

The Kerala High Court on Friday stayed the operation of notification issued by the Ministry of Finance, dated October 4, 2022, to the extent it transfers/confers jurisdiction of all applications involving a debt amount of Rs.100 Crores and above falling within the jurisdiction of Debts Recovery Tribunal-I and Debts Recovery Tribunal-II, Ernakulam with the Debts Recovery Tribunal-I, Chennai. 

The Court clarified that the stay order shall operate until disposal of the petition. 

Justice Bechu Kurian Thomas, observed in this regard that, 

"the borrowers from banks and other financial institutions who are already in dire straits due to the persistent defaults are now forced, by virtue of Ext. P1 notification (the impugned notification) to approach a Tribunal in a different State, while the Tribunal in Kerala continues to be in existence". 

Recently, the Bombay High Court had also stayed the notification relating to the DRT jurisdiction.

Bombay High Court Stays Centre's Notification Limiting Jurisdiction Of Cases Above Rs 100 Crores To 3 DRTs

It was contended by Senior Advocate N.N. Sugunapalan, instructed by Advocate A.B. Mohanakumar, that when a securitisation application challenging the sale of petitioner's propertywas 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. The counsel contended that the notification under the Recovery of Debts and Bankruptcy Act, 1993 (hereinafter RDB Act), specifying jurisdiction for applications could not apply to the applications filed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter the SARFAESI Act). The counsel argued that Sections 3, 17 and 19 when read with section 2B of the RDB Act that the notification, if valid, would apply only to applications filed by the financial institutions or banks under the RDB Act and not to applications under the SARFAESI Act filed by individual borrowers or oust the jurisdiction of the existing DRT's. 

The counsel stressed that due to the impugned notification, the right of access of the petitioner and other similarly situated persons to a court of law was 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. The Senior Counsel therefore flailed the impugned notification as ex-facie arbitrary and violative of Article 14 of the Constitution of India.

The Court observed that till the date of the impugned notification, the jurisdiction of both Debts Recovery Tribunals in Ernakulam covered applications irrespective of any pecuniary limit. 

The Court reiterated that the right of access to a court of law and that an effective adjudicatory mechanism which is reasonably accessible in terms of distance, is an essential facet of the said right. (Anita Kushwaha v. Pushap Sudan [(2016) 8 SCC 509]; Rojer Mathew v. South Indian Bank Limited and Others [(2020) 6 SCC 1]). The Court also noted the decision in M/S Kerala Fashion Jewellery & Ors v. Union of India & Ors. (MANU/KE/1328/2021) that the jurisdiction of DRT cannot be taken out of the State.

On these grounds, the Court was of the prima facie view that the challenge against the impugned notification as being unconstitutional had 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 observed while passing the order staying the operation of the impugned notification until disposal of the writ.

The case has been posted for January 13, 2023 for further hearing. 

Senior Advocate A.V. Thomas, and Advocates A. Kevin Thomas, Nidhi Sam Johns, and Lijo Joseph appeared on behalf of the respondents. 

Case Title: M/S Ansu Enterprises Pvt. Ltd. v. The Registrar, DRT-I Ernakulam & Ors 

Click Here To Read/Download The Order