Skip to content

Limited Scope of DRT Review in SARFAESI Proceedings: Analysis of DRAT Chennai Ruling

Limited Scope of DRT Review in SARFAESI Proceedings: Analysis of DRAT Chennai Ruling

In a significant judgment that clarifies the scope of DRT review in SARFAESI Proceedings, the Debt Recovery Appellate Tribunal (DRAT) in Chennai has outlined the constraints within which Debt Recovery Tribunals (DRT) operate, particularly in relation to orders issued under Section 14 of the SARFAESI Act, 2002. The ruling in the case of V. M. Vijayan vs. City Union Bank Ltd. elucidates the limited judicial oversight that DRTs have concerning the decisions made by magistrates under this section.

Case Background 

The appellant, V. M. Vijayan, contested the procedural adherence of the City Union Bank concerning the enforcement of security interest under the SARFAESI Act. The dispute centered on whether the DRT could act as an appellate authority over the magistrate’s decision to allow the bank to take possession of the secured assets.

Core Legal Discussions 

Tribunal’s Scope under Section 14 DRT Review

The DRAT emphasized that the DRT does not serve as an appellate body over decisions rendered by magistrates under Section 14 of the SARFAESI Act. Its role is strictly to assess whether the actions taken under Section 14 align with the statutory provisions of the SARFAESI Act and its accompanying rules.

Key Observations from the Judgment

“The only power vested with Tribunal is to verify whether measures under Section 14 are in accordance with provisions of Act and Rules made thereunder.”

This point highlights the tribunal’s function as a verifier of compliance rather than a reviewer of judicial merit.

Compliance with Procedural Requirements

The DRAT supported the lower tribunal’s findings that the bank had complied with necessary procedural norms, including the proper issuance and service of possession notices. The appellant’s arguments regarding the non-application of the magistrate’s mind were dismissed, underscoring the tribunal’s inability to re-evaluate the magistrate’s subjective assessments.

Significant Judicial Commentary:

“Appellant cannot be allowed to contend that Learned Magistrate has not applied his mind because DRT is not sitting as Appellate Authority over the Order of Learned Magistrate.”

RBI Guidelines and NPA Classification

The tribunal also briefly touched upon the appellant’s objections related to the classification of accounts as Non-Performing Assets (NPA), referring to RBI guidelines to ascertain the correctness of the bank’s actions. The adherence to these guidelines further solidified the case against the appellant’s claims.

Implications of DRT Review in SARFAESI Proceedings

This decision clarifies the limitations of DRT’s jurisdiction in the context of SARFAESI proceedings, particularly in relation to the judicial review of magisterial decisions. It reaffirms the principle that DRTs are not appellate bodies for magisterial decisions under the SARFAESI Act but are instead limited to assessing procedural compliance. This ruling is crucial for financial institutions and borrowers alike, as it delineates clear boundaries for the challenges that can be raised against the enforcement of security interests under the SARFAESI Act.

Conclusion: Clarifying DRTs’ Jurisdiction in SARFAESI Proceedings

The DRAT Chennai’s decision in V. M. Vijayan vs. City Union Bank Ltd. is a landmark in clarifying the jurisdictional scope of DRTs review in SARFAESI Proceeding. By confirming that DRTs do not have the authority to act as appellate bodies over magisterial decisions, the tribunal has reinforced the procedural sanctity of actions taken under Section 14 of the Act, ensuring that these proceedings are conducted within the strict confines of the law.




Contact Us

Contact Form Demo (#5) (#6)

Recent Posts

Trending Topics

Visit Us

Bhatt & Joshi Associates
Office No. 311, Grace Business Park B/h. Kargil Petrol Pump, Epic Hospital Road, Sangeet Cross Road, behind Kargil Petrol Pump, Sola, Sagar, Ahmedabad, Gujarat 380060

Chat with us | Bhatt & Joshi Associates Call Us NOW! | Bhatt & Joshi Associates