DRT Has No Inherent Power To Refund Court Fee In Section 17 SARFAESI Proceedings: Karnataka High Court

The Karnataka High Court has recently held that the Debts Recovery Tribunal (DRT) has no inherent power to refund court fees paid in proceedings under Section 17 of the SARFAESI Act in the absence of an express statutory provision, even if the proceedings become infructuous due to settlement between the parties, ruling that courts cannot order the refund of a statutory levy unless authorized by law.

Emphasising that court fees are governed strictly by statute, the Division Bench of Chief Justice Vibhu Bakhru and Justice C.M. Poonacha held:

“The fee is a statutory prescription. In the absence of any statute authorising the refund of the fee, the Court would have no inherent power to order its refund.”

The court further clarified that once the fee is paid in accordance with law, it is no longer under the control of the court, observing:

“Fee paid in accordance with the provisions of the statute ceases to be under the control of the court and belongs to the State. There is no inherent power to direct the State to make any payments which have been collected in accordance with law.”

The bench allowed an appeal filed by the Registrar, Debts Recovery Tribunal (DRT), Bengaluru, and set aside a Single Judge's order which had directed refund of court fees on equitable grounds.

The case arose after borrowers approached the DRT under Section 17 of the SARFAESI Act challenging measures taken by Union Bank of India after their loan account was classified as a Non-Performing Asset. During the pendency of the proceedings, the parties settled the dispute, and the loan account was regularised, rendering the securitisation application infructuous.

The borrowers thereafter sought refund of Rs 79,225 paid as court fee. The DRT rejected the request on the ground that there was no provision under the SARFAESI Act permitting refund of court fees.

In writ proceedings, the Single Judge set aside the DRT's order and directed refund, relying on Rule 4 of the Debts Recovery Tribunals (Refund of Court Fee) Rules, 2013, and holding that refund could be granted on equitable grounds even in the absence of an express statutory provision since the proceedings had become infructuous after settlement.

Aggrieved, the Registrar, DRT, filed an intra-court appeal.

Before the Division Bench, the Registrar contended that in the absence of any statutory provision, the DRT had no power to refund court fees. The borrowers, on the other hand, argued that the appeal was not maintainable as the Single Judge had exercised jurisdiction under Article 227 of the Constitution.

On maintainability, the Court held that the writ petition had been filed under Article 226 and the Single Judge had exercised original jurisdiction, making the intra-court appeal maintainable.

On the question of refund, the Bench noted that the SARFAESI Act and the Security Interest (Enforcement) Rules, 2002 prescribe payment of fees for applications under Section 17 but contain no provision permitting refund, and observed:

“Concededly, there is no provision for a refund of the fee.”

The Court reiterated that inherent powers cannot be used to override statutory provisions, holding:

“It is well settled that courts cannot use inherent powers to: (a) override express or implied statutory provisions; (b) create new substantive rights; (c) grant substantive relief not contemplated under any law; (d) serve as a substitute for appeal, revision, or review where such remedies are available; (e) re-open or unsettle concluded adjudications; or (f) revive expired or time-barred statutory remedies.”

Relying on the Supreme Court's order in Jage Ram v. Ved Kaur, the Bench held that refund of court fees cannot be granted merely because parties settle the dispute.

Rejecting reliance on the Debts Recovery Tribunals (Refund of Court Fee) Rules, 2013, the Court held that those rules apply to proceedings under the Recovery of Debts and Bankruptcy Act and cannot be extended to proceedings under the SARFAESI Act.

The Court also declined to accept the argument based on quid pro quo, observing:

“It is not necessary that the service be rendered directly to the person remitting the fee.”

Highlighting legislative intent, the Bench held:

“The fact that the SARFAESI Act or the Rules made therein do not specifically provide for refund of fees paid in respect of an application under Section 17 of the SARFAESI Act or an appeal under Section 18 of the Act, is indicative of the legislative intent not to permit refund of such fees. The refund of a statutory levy is a matter of statutory prescription; the courts do not have any inherent power to supplant the statutory scheme for providing such a refund.”

Accordingly, the appeal was allowed, and the single judge's order directing refund of court fee was set aside.

For Appellant: Advocate Nayana Tara B.G

For Respondents: Advocates Sameer Sharma and Divya Purandar