SARFAESI | DRT Cannot Restore Possession Of Secured Asset To A Person Who Isn't The Borrower Or Possessor : Supreme Court

The Supreme Court noted that the Debt Recovery Tribunal (DRT) is not authorized under the SARFAESI Act to "hand over" possession of the secured asset to an individual who was neither the borrower nor the possessor of the asset. It further stated that the DRT lacks the authority to "restore" possession of secured assets to an individual who is neither the borrower nor in possession of the assets. The Court clarified that a plea for the handover or restoration of a secured asset by an individual, who is neither a borrower nor in possession of the asset, is maintainable before the civil court.A bench of Justices JB Pardiwala and R Mahadevan was deciding an issue of whether an individual, who neither possessed nor borrowed the secured asset, would be entitled to claim restoration of the secured assets under Section 17(3) of the SARFAESI Act, 2002.Answering in negative, the Court said that because Section 17(3) of the SARFAESI Act uses the word 'restore' and not 'handover', therefore the DRT has the power to return possession to the person who was in possession when the bank took over possession. “Under Section 17(3), the DRT has the power to “restore” possession which would mean that it has the power to return possession to the person who was in possession when the bank took over possession. DRT only has power to “restore” possession; it has no power to “hand over” possession to a person who was never in possession when the bank took over possession.”, the court observed. It was the case where Respondent No.1, who didn't possess the secured assets, sought relief of handover of the possession of the same from the Civil Court. The Civil Court refused to grant relief stating that only DRT can grant such relief under Section 17(3) of the SARFAESI Act. The High Court overturned the Civil Court's noting that Respondent No.1 rightly approached the Civil Court for a grant of such relief because DRT lacks jurisdiction to hand over the possession of the secured asset to her and can only restore the same when an individual was already in possession of the secured asset. Being aggrieved by the High Court's decision to restore the file to the Civil Court, the Bank appealed to the Supreme Court. Affirming the High Court's decision, the Court observed that Respondent No.1 had rightly approached the Civil Court for the handover of the possession of the secured asset because DRT lacked jurisdiction to hand over possession to the possession."While it is true that Section 17(1) uses the words “any person (including the borrower) aggrieved”, Section 17(3) does not explicitly empower the DRT to restore the possession to anyone other than the borrower. Yes, in a given case, if the borrower has put someone else in possession, then perhaps, it could be contended that under Section 17(3), the DRT's power to restore possession to the “borrower” would include the power to restore possession to the person who was holding it on behalf of the borrower or claiming through the borrower. However, it cannot be contended that under Section 17(3), the DRT can hand over possession to someone whose claim is adverse to that of the borrower."Dismissing the appeal, the Court held :“Hence, Plaintiff (Respondent No.1) could not have sought from DRT, the relief of being handed over the possession. DRT would have no jurisdiction to grant such relief to her. Hence, the Plaintiff's third relief in her suit (filed before Civil Court) is also not barred by Section 34 of the SARFAESI ACT.”In the judgment, the Court also clarified that a civil suit for claiming relief about title and possession of the property is not barred under Section 34 of the SARFAESI Act.Accordingly, the appeal was dismissed. Also From Judgment: Banks Giving Loans Without Proper Title Search Reports : Supreme Court Flags Issue To RBI; Says Officials Who Approved Loan Be Made LiableOrder VII Rule 11 CPC | Plaint With Multiple Reliefs Cannot Be Rejected Just Because Some Reliefs Are Barred : Supreme CourtCase Title: CENTRAL BANK OF INDIA & ANR. VERSUS SMT. PRABHA JAIN & ORS.Citation : 2025 LiveLaw (SC) 96Click here to read/download the order

SARFAESI | DRT Cannot Restore Possession Of Secured Asset To A Person Who Isn't The Borrower Or Possessor : Supreme Court

Yash Mittal

The Court ruled that the suit of a third party for possession of the secured asset was maintainable before the Civil Court.

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