DRT Registrar Cannot Suo Motu Refer Applications To Presiding Officer: Kerala High Court

The Kerala High Court has held that the Registrar of a Debts Recovery Tribunal (DRT) cannot suo motu place an unnumbered securitisation application (SA) before the Presiding Officer to decide questions of maintainability or locus standi.

The Registrar's role is limited to scrutinising applications for defects, giving applicants an opportunity to cure them and, where defects remain, declining registration through a reasoned order.

“The Rule does not give any power to the Registrar to place the application filed by the applicant before the Presiding Officer / DRT for any reasons, much less to decide the questions of locus standi / maintainability,” Justice P. V. Balakrishnan ruled.

The court was dealing with a petition filed by Fathima M.P against an order of the DRT-I, Ernakulam, which had rejected her SA as not maintainable.

She had approached the tribunal against coercive steps taken by IDBI Bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) concerning an alleged secured asset.

The SA was defectively and tentatively numbered. Fathima also filed an application seeking a stay of the proceedings.

The registry placed the SA before the tribunal to consider its maintainability. The tribunal then examined the merits of the application, found that Fathima had no locus standi, and rejected it as not maintainable. It did so without giving her a proper opportunity of hearing.

Fathima challenged the order before the high court. She argued that the tribunal could not decide the merits while considering whether the SA was maintainable.

She also relied on Rule 5 of the Debts Recovery Tribunal (Procedure) Rules, 1993. The provision sets out how applications are presented and scrutinized.

Under Rule 5, the Registrar first checks whether an application is in order. If it is, the application has to be registered and assigned a serial number.

Where a defect is found, the procedure depends on the nature of the defect. A formal defect can be rectified in the Registrar's presence, while time can be granted to cure a defect that is not formal in nature.

If the applicant fails to cure the defect within the time allowed, the Registrar can decline to register the application by passing a written order giving reasons.

The high court noted that Rule 5 does not permit the Registrar to independently raise questions about the merits, maintainability or locus standi. The Registrar also cannot suo motu refer the application to the tribunal for deciding those questions.

“The Registrar is only a Chief Ministerial Officer, and is not having judicial powers. If the Registrar is permitted to raise doubts / pose questions regarding the merits of the matter and place the matter before the Tribunal / Presiding Officer; it would undoubtedly amount to him exercising a judicial mind, which is totally impermissible as per law,” the court observed.

The court relied on its earlier ruling in Vincent v. Housing and Urban Development Corporation. It had held there that the Registrar's powers under Rule 5 are limited to examining defects.

The Registrar cannot reject or dismiss an application. Where defects remain uncured, the Registrar can only decline registration through a reasoned order.

The Registrar can, however, place an unnumbered application before the tribunal if the applicant maintains that there is no defect and insists that the application be considered by the tribunal. In that situation, the question is to be decided judicially by the tribunal.

The court also considered whether the DRT itself could reject a Section 17 SA at the preliminary stage. Section 17 of the SARFAESI Act provides a remedy before the DRT to a person aggrieved by measures taken by a secured creditor under the Act.

The court relied on the Andhra Pradesh High Court's ruling in Kanigiri Jaya Sri v. Debts Recovery Tribunal. The Andhra Pradesh High Court had held that there was no provision permitting the Presiding Officer to reject such an application at the preliminary stage.

The court also referred to its decision in Ameena Salim v. Presiding Officer, Debts Recovery Tribunal-1, Ernakulam. It held that issues concerning a person's status, locus standi, maintainability or limitation cannot be treated as mere formal defects where they involve questions of fact or law.

Such questions require adjudication by the tribunal on the judicial side, after hearing the parties. They cannot be decided by the Presiding Officer in chambers by following the procedure meant for curing formal defects.

The high court therefore set aside the DRT-I, Ernakulam's July 7 order. It remitted the matter to the Registrar of DRT for consideration.

If there are no defects, or if the defects are cured within the time granted, the application must be numbered and placed before the tribunal for consideration in accordance with law. If the defects remain uncured, the Registrar can decline registration through a speaking order.

For Petitioner: Advocates K.M Firoz, M Shajna, S Kannan, A Al Fayad, Jameel Ahammed M.S and Dipu James

For Respondents: Advocate K.P Sujesh Kumar