Territorial Jurisdiction Error Leads Delhi High Court to Suspend Order: 'Balance the Equities' in Bank's Secured Asset Case

In a significant ruling, the Delhi High Court today suspended an order passed by the Chief Metropolitan Magistrate (CMM), North-West, Rohini, citing a territorial jurisdiction error. The judgment, delivered by Hon'ble Ms. Justice Mini Pushkarna, addresses a complex case involving the enforcement of security interests under the SARFAESI Act.

The crux of the judgment revolves around the territorial jurisdiction of the CMM in a case filed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The petitioner, M/s Subhash Chand Kathuria, challenged the CMM's order on the grounds of jurisdictional overreach.

The petitioner had taken a credit limit from Punjab National Bank, offering property as collateral. Upon classification of the account as a Non-Performing Asset (NPA), the bank initiated proceedings under the SARFAESI Act. The CMM, North-West, Rohini, passed an order allowing the bank to take possession of the property. The petitioner contested this, arguing that the property fell under the jurisdiction of the CMM, North District, not North-West.

Justice Pushkarna observed, "It is clear that the order...is clearly without any territorial jurisdiction." The court relied on a letter from the Office of the Principal District & Sessions Judge, which confirmed the jurisdictional lapse. Furthermore, the court highlighted the role of the Debt Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act in such matters.

The judgment elucidated the provisions of the SARFAESI Act, particularly Sections 13(4) and 17, dealing with the secured creditor's rights and the aggrieved party's recourse to the DRT. The judgment also clarified the authority of CMMs under Section 14 of the Act, underscoring their jurisdictional limits in assisting secured creditors.

The High Court suspended the CMM's order for one week, allowing the petitioner to approach the DRT under Section 17 of the SARFAESI Act. The court emphasized the need to "balance the equities" in such cases, highlighting the importance of proper jurisdictional authority in legal proceedings.

Date of Decision: February 9, 2024.

M/s Subhash Chand Kathuria vs. Punjab National Bank