Indo Pacific Housing Finance Ltd. vs Gopala Shetty

PETITIONERS /opposite parties being aggrieved by order dated 4.7.2011, passed by Karnataka State Consumer Disputes Redressal Commission, Bangalore (for short, ''State Commission'') have filed the present revision petition under Section 21(b) of the Consumer Protection Act, 1986 (for short ''Act''). Brief facts are that Respondent/Complainant had availed a loan to the tune of Rs. 2 lacs from the petitioners for construction of his house. As per terms of the agreement, the loan was to be repaid in 180 monthly instalments. It is alleged by the respondent that while availing the loan, petitioners had assured that agreed rate of interest as on the date of execution of documents, will prevail till the completion of the instalments. Respondent was further assured that number of instalments will not be enhanced. However, petitioners have enhanced the rate of interest and also enhanced the number of instalments from 180 to 277. Thus, alleging deficiency in service on the part of the petitioners, respondent filed a consumer complaint before District Consumer Disputes Redressal Forum, Chikmagalur (for short, ''District Forum'')

IN the written statements, petitioners had taken preliminary objections to the effect that respondent being a borrower, had committed repeated defaults in repayment of the loan despite repeated requests and notices. Initially, a Loan Recall Notice dated 16.5.2009, was sent to the respondent through Registered Post demanding a total outstanding dues of Rs. 1,67,151 payable as on that date. Despite service of the notice, respondent failed to pay the outstanding dues. Therefore, petitioners were constrained to exercise its legitimate rights under the provisions of the "Securitization and Reconstructions of Financial Assets and Enforcement of Security Interest Act; 2002" (for short, ''SARFAESI Act'') being a secured creditor under the terms of the said Act. Accordingly, a notice dated 15.7.2009 under Section 13(2) of the SARFAESI Act, was issued and served upon the respondent. However, respondent did not respond to the notice. Thereafter, proceedings under SARFAESI Act were initiated against him. Under these circumstances, the complaint filed by the respondent before the District Forum is barred under the provisions of Section 17 read with Section 34 of the SARFAESI Act. District Forum, vide order dated 28.4.2011, partly allowed the complaint and passed the following directions: 2. The opponent is directed to cancel the reschedule of the loan and provide the complainant outstanding due within 180 instalments at the prevailing rate of 13.25% interest p.a. housing loan of the opponents -company.

The opponents are also directed to pay Rs. 5,000 compensation to the complainant along with litigation expenses of Rs. 2,000 within one month from the date of receipt of this order.

AGGRIEVED by the order of the District Forum, petitioners filed appeal before the State Commission. Their appeal was dismissed at the admission stage itself.

HENCE , this revision. Notice of the revision was issued to the respondent, who being duly served by Registered AD Post, has chosen not to appear. As such, respondent was proceeded ex parte, vide order dated 21.8.2012.

WE have heard the learned Counsel for the petitioners and gone through the record as well as the written synopsis.

WE find substance in the submission made by the learned Counsel for the petitioners. Under the SARFAESI Act, a Special Tribunal has been created to exercise, on and from the appointed day, the jurisdiction, power and authority to entertain and decide applications from the Banks and Financial Institutions for recovery of debts due to such Banks and Financial Institutions. Under Section 18, on and from the appointed day, the jurisdiction of the Civil Court or any other authority in relation to the matters specified in Section 17 has been barred except that of the Supreme Court and a High Court exercising jurisdiction under Articles 226 and 227 of the Constitution. Section 17 and Section 18 are produced below: 17. Jurisdiction, Powers and Authority of Tribunal - -(I) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions.

Bar of Jurisdiction: On and from the appointed day, no Court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court and a High Court exercising jurisdiction under Articles 226 and 227 of the Constitution) in relation to the matters specified in Section 17.

Both the Fora below, without noticing the defence taken by the petitioners that proceedings under SARFAESI Act have already been initiated against the respondent, allowed the complaint. In view of the SARFAESI Act, both the Fora below should have refrained themselves from proceeding with the complaint filed by the respondent. In view of the Section 18 of the SARFAESI Act, the Fora under the Consumer Protection Act, 1986 did not have the jurisdiction to try the suit relating to recovery of Debts Due to Banks and Financial Institutions. Section 18 of the SARFAESI Act, clearly bars the jurisdiction of any Civil Court or Authority to entertain complaint/suit relating to recovery of loan amount by the Bank or Financial Institutions. In view of the bar created by the Section 18 of the SARFAESI Act, the complaint filed by the respondent under the Consumer Protection Act, 1986 was not maintainable. Thus, the State Commission exercised the jurisdiction which did not vest in it.

AS noted above, the petitioners had taken specific plea in the written statement regarding the power and jurisdiction of the District Forum to entertain the complaint filed by the respondent. Both the Fora below did not deal with this point at all. They should have noticed the defence of the petitioners while deciding the dispute.

FOR the reasons stated above, the present revision petition is allowed and the order passed by both the Fora below stand set aside and consequently, the complaint filed by the respondent before the District Forum stand dismissed. No order as to cost.