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In absence of DRTs in J&K and Ladakh, borrowers facing action against SARFAESI Act can invoke jurisdiction of local court: HC

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Srinagar: The High Court on Friday held that since there is a limited and non-efficacious remedy available to the borrowers under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act in J&K, they can approach the local court here and invoke its jurisdiction.

According to SARFAESI, borrowers who have defaulted in repaying the loans, their secured properties are attached, sold, auctioned, rendering them financially crippled.

A division bench comprising Chief Justice N Kotiswar Singh and Justice W S Nargal while hearing petitions of 46 petitioners, mostly businessmen from J&K, said “these writ petitions are maintainable”.

However, the bench said “it will be required to decide on the merit of each case as to whether our intervention under Article 226 of the Constitution would be necessary for which we will take up these writ petitions individually and consider the pleas taken therein separately”.

Accordingly, it directed that all these petitions be listed again after a month during which time, the respondent banks, financial institutions and the government shall file their respective affidavits, if not already filed.

An issue of seminal importance arose in the batch of writ petitions where the actions of the banks, financial institutions and secured creditors initiated under Sections 13 and 14 of SARFAESI Act have been questioned by the borrowers and the guarantors.

The aggrieved persons pleaded that though there is a statutory remedy available, it is of a limited nature and not efficacious. They said that they have to approach the Debts Recovery Tribunal (DRT) Chandigarh for seeking justice as the statutory body is missing in J&K.

The High Court appreciating the  petitioners plea about the non-existence of a remedial forum against SARFAESI in J&K  said, “in such an event, the litigant who is already burdened financially and with other difficulties in appearing before the DRT at Chandigarh, will not get any respite, rather he will be doubly burdened, inasmuch as, his redressal forum will be in Punjab and Haryana High Court or Delhi High Court as the case may be, and not before this court, entailing more difficulties in knocking the doors of different unfamiliar High Courts rather than our High Court, which is a familiar forum”.

It said all these difficulties and constitutional issues, which will arise if the litigants from the UTs of Jammu & Kashmir and Ladakh are compelled to appear before the DRT, Chandigarh, can be resolved if DRT(s) are established or revived in the UT of Jammu & Kashmir and UT of Ladakh.

It observed that these cumbersome, inconvenient and expensive proceedings at DRT at Chandigarh can be avoided if DRTs are established or such Benches/Circuit Benches are established in the UT of Jammu & Kashmir and UT of Ladakh.

“Till such fora or benches are established, in our view, the litigants can invoke the writ jurisdiction of this court under Article 226 of Constitution of India”, the J&K High Court ordered.

In the face of any action initiated under Section 13 of the SARFAESI Act, the threat of dispossession is real and sometimes eminent and by this time, in most of the cases, the borrowers are financially crippled and sometimes they are reduced to penury, the court said.

It observed that it may also happen that sometimes the secured assets are residential buildings and the debtors can be thrown out of their home and hearth to the streets.

In such an event where the borrowers, who have already been put to serious financial disadvantages, will be additionally burdened with extra expenses which would be required to be incurred if they have to physically approach a forum which is located at a distant place.

It said this would act to the great prejudice of the borrowers and cause serious hardships. Thus, from the perspective of a litigant borrower, who has been already financially hard pressed and sometimes facing the possibility of being thrown out on the streets, connected matters compelling him to approach a Forum located at a distance which is expensive, certainly can amount to denial of easy access to the justice.

It said there may be occasions where the financial institutions/banks may not have proceeded strictly in accordance with provisions of SARFAESI Act which may lead to challenges by the borrowers/guarantors or the aggrieved persons.

Under the circumstances, because of the stringent provisions of the Act, it is incumbent upon the authorities to provide equally efficacious redressal forum which is readily, easily and regularly available, which will provide relief in a speedy and convenient manner, so that the borrowers and such aggrieved parties can promptly, without undue difficulties, challenge those acts which would have the effect of dispossessing them of their properties.

It concluded that if the redressal forum is not effective, efficacious and readily available, sometimes grave injustice can be caused to the borrowers and debtors, in which event, this High Court can step in to prevent injustice by invoking extraordinary jurisdiction under Article 226.

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