Kerala High Court stays notification changing DRT jurisdiction in matters above ₹100 crores

The Kerala High Court on Friday stayed an October 4 notification issued by the Central government transferring all matters involving debt amounts of ₹100 crores and above to the Debts Recovery Tribunals (DRT) benches at Mumbai, Chennai and Delhi. [M/s. Ansu Enterprises Private Ltd. v The Registrar DRT -I Ernakulam & Ors.].Justice Bechu Kurian Thomas opined that the challenge to the constitutionality of the notification is not without merit and that if the notification is not stayed until deciding the matter, litigants would be prejudiced. "On a consideration of the legal issues that arise in the instant case, I am of the prima facie view that challenge against Ext.P1 notification as being unconstitutional and arbitrary has substantial merit. Balance of convenience leans in favour of staying the operation of the said notification as otherwise if ultimately the notification is set aside, great prejudice would be caused to all the litigants," the Court said.Therefore, the Court stayed the notification to the extent it transfers jurisdiction over all applications involving a debt amount of ₹100 crores and above from DRTs I and II, Ernakulam to the DRT-I, Chennai..Until the notification under the Recovery of Debts and Bankruptcy Act, 1993 was issued, the jurisdiction of both DRTs in Ernakulam covered applications irrespective of any pecuniary limit. The petitioner in the present case was constrained to approach the High Court after a securitisation application challenging the sale of the petitioner's property was returned from DRT-I Ernakulam with a direction to present it before the Chennai DRT-I since the sale notice was for the recovery of a sum of ₹976.57 Crores. The petitioner argued that the notification having been issued under the RDB Act, cannot cover applications filed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).It was also contended that the right of access of the petitioner and other similarly situated persons to a court of law has been prejudicially affected by taking it out of the State of Kerala and conferring it upon a Tribunal in another State which renders the fundamental right practically otiose. Therefore, it was argued that the notification itself is ex-facie arbitrary and violative of Article 14 of the Constitution of India..The Court prima facie found merit in the submissions of the petitioner.It noted that the Supreme Court has already held that the right of access to a court of law is a fundamental right and that an effective adjudicatory mechanism which is reasonably accessible in terms of distance, is an essential facet of the said right."The borrowers from banks and other financial institutions who are already in dire straits due to the persistent defaults are now forced, by virtue of notification, to approach a Tribunal in a different State, while the Tribunal in Kerala continues to be in existence," the Court noted.The Court also relied on the decision of a division bench in which it had held that the jurisdiction of DRT cannot be taken out of the State. Even though the situation in that case was different, the Court opined that the principle squarely applies to the instant case, at least prima facie. It further noted that the Bombay High Court has also recently stayed the notification.Accordingly it stayed the notification until the matter is disposed of. It also issued notice to the respondent bank and the Central Government. .Senior Advocate NN Sugunapalan, instructed by advocate AB Mohanakumar appeared for the petitioner. Senior Advocate AV Thomas, instructed by advocates Kevin Thomas, Nidhi Sam John and Lijo Joseph, appeared for the respondent bank.Deputy Solicitor General of India S Manu appeared for the Central government..[Read Order]