The Bombay High Court has clarified a critical procedural right under the SARFAESI Act, affirming that Debts Recovery Tribunals possess territorial jurisdiction to entertain securitisation applications filed by borrowers under Section 17(1-A). This ruling resolves conflicting interpretations among DRTs and reinforces the statutory framework meant to balance creditor enforcement with borrower remedies.
Background & Facts
The Dispute
The petitioners, M/s. Prabhav Manas Project and others, are borrowers who had defaulted on loan agreements with Hinduja Leyland Finance Ltd. The respondent initiated enforcement proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). In response, the petitioners filed a securitisation application before Debts Recovery Tribunal-I, Mumbai, seeking to challenge the legality of the enforcement action and assert their right to repayment restructuring.
Procedural History
- January 2026: Petitioners filed securitisation application before DRT-I, Mumbai.
- 4 February 2026: DRT dismissed the application, holding it lacked territorial jurisdiction under Section 17(1-A) of the SARFAESI Act.
- 6 February 2026: The same DRT, in a separate but factually identical case involving the same parties, held that it did have jurisdiction under Section 17(1-A), relying on the same statutory provision.
Relief Sought
The petitioners sought quashing of the DRT’s order dated 4 February 2026 and a direction to the Tribunal to entertain their securitisation application on merits, asserting their statutory right under Section 17(1-A).
The Legal Issue
The central question was whether Section 17(1-A) of the SARFAESI Act confers territorial jurisdiction on a Debts Recovery Tribunal to entertain a securitisation application filed by a borrower when the secured asset is located within its territorial limits, even if the loan agreement was executed elsewhere.
Arguments Presented
For the Petitioner
Counsel for the petitioners relied on the plain language of Section 17(1-A), which permits a borrower to approach the DRT "where the secured asset is situated" or "where the borrower resides or carries on business". They argued that since the secured immovable property was located in Mumbai, the DRT-I had clear territorial jurisdiction. They cited M/s. Surya Roshni Ltd. v. Union of India to underscore that statutory remedies under SARFAESI must be interpreted liberally to protect borrower rights.
For the Respondent
The respondent contended that jurisdiction under Section 17(1-A) is restricted to enforcement applications initiated by secured creditors, and that securitisation applications filed by borrowers fall outside the scope of territorial jurisdiction provisions. They relied on a narrow reading of Section 17(1) and argued that the DRT’s prior dismissal was consistent with administrative convenience.
The Court's Analysis
The Court conducted a purposive interpretation of Section 17(1-A), emphasizing that the provision was inserted in 2016 to empower borrowers with a statutory remedy against arbitrary enforcement. The Court noted that the phrase "where the secured asset is situated" is unambiguous and applies equally to applications filed by borrowers under Section 17(1-A). The DRT’s refusal to entertain the application was found to be contrary to the legislative intent of balancing creditor rights with borrower access to justice.
"The jurisdictional trigger under Section 17(1-A) is not contingent on the nature of the application - whether enforcement or securitisation - but on the location of the secured asset or the residence of the borrower. To hold otherwise would render the provision otiose."
The Court further observed that the DRT’s own subsequent order on 6 February 2026 - recognizing its jurisdiction in an identical matter - undermined its earlier reasoning and demonstrated internal inconsistency. The Court held that such contradictory positions cannot be sustained and that the doctrine of stare decisis within the same tribunal demands uniformity.
The Verdict
The petitioners succeeded. The Court held that Section 17(1-A) grants territorial jurisdiction to the DRT where the secured asset is located, regardless of whether the application is for enforcement or securitisation. The DRT’s order dated 4 February 2026 was set aside, and the matter was directed to be heard on merits.
What This Means For Similar Cases
Securitisation Applications Are Jurisdictionally Valid
- Practitioners may now file securitisation applications before any DRT where the secured asset is situated, even if the loan was disbursed elsewhere.
- Borrowers no longer need to travel to the creditor’s registered office to seek relief under Section 17(1-A).
DRTs Must Maintain Consistent Jurisdictional Stance
- A DRT cannot deny jurisdiction in one case while granting it in another involving the same statutory provision and similar facts.
- Internal contradictions within a tribunal will be viewed as arbitrariness and subject to writ review.
Statutory Remedies Must Be Interpreted Liberally
- Courts will favor interpretations that give effect to borrower protections under SARFAESI, especially where the statute explicitly provides a remedy.
- Any attempt to restrict access to Section 17(1-A) on procedural grounds will be struck down as contrary to legislative intent.
