Allegations Levelled Against Secured Creditors Can Always Be Examined By DRT Headed By Judicial Officer Of Same Level As A District Judge: Punjab & Haryana High Court

Punjab and Haryana High Court recently held that allegations levelled against the secured creditors can be examined by the DRT and where there is an express bar to the jurisdiction of Civil Court, the same cannot be permitted by alleging fraud played by the secured creditors.

The allegations levelled against the secured creditors can always be examined by the DRT which is headed by the Judicial Officer of the same level as the level of a District Judge. In a case where there is an express bar to the jurisdiction of Civil Court, the same cannot be permitted to be avoided merely by alleging fraud played by the secured creditors.

The bench comprising Justice Anil Kshetarpal further added that after the judgment of Mardia Chemicals Ltd. etc. vs. Union of India and another, Section 17 of the Securitisation and Reconstruction of Financial Assets and enforcement of Security Interest Act, 2002 was amended and its scope has been enlarged. Accordingly, any person aggrieved by the measures taken by the secured creditors is entitled to invoke the jurisdiction of DRT.

………after the judgment of Mardia Chemicals's case (supra), Section 17 of the 2002 Act has undergone an amendment. The scope of Section 17 has been enlarged after the said judgment and now any person aggrieved by the measures taken by the secured creditors is entitled to invoke the jurisdiction of DRT.

The court was dealing with a case where the petitioner was the guarantor to the loan amount disbursed to M/s Saphire Digital Printers. On default, the proceeding under the Securitisation and Reconstruction of Financial Assets and enforcement of Security Interest Act, 2002 were initiated against the borrowers and guarantors. Plaintiff claims to have signed the agreement of guarantee and deposit the original title deeds with the bank in lieu of the loan amount.

The court further noted that the Supreme Court, considered the allegations of fraud played on by the secured creditors in the case of Electrosteel Castings Limited vs. UV Asset Reconstruction Com. Ltd. and others, 2022(2) SCC 573 wherein it held that held that the plaintiff can initiate appropriate proceedings before the DRT and is debarred to invoke the jurisdiction of the Civil Court under Section 34.

With all these observations, the court allowed the revision and set aside the order under challenge.

Case Title : Punjab National Bank v. Surender Singh Bedi and others

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