Dehradun: Uttarakhand State Consumer Disputes Redressal Commission has held that consumer forums have no jurisdiction to intervene in disputes over non-performing assets (NPAs) once a bank initiates recovery proceedings under the SARFAESI Act, 2002.The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act empowers banks and financial institutions to recover loans classified as NPAs — accounts where borrowers have defaulted on repayments — by taking possession of and selling secured assets without requiring a court order. The law provides a faster recovery mechanism than conventional civil litigation and establishes the Debt Recovery Tribunal (DRT) as the designated forum to hear challenges arising from such proceedings.Setting aside the district consumer commission’s order, the state commission found the lower forum’s decision “legally unsustainable”. It held that once proceedings under the SARFAESI Act are initiated, with the bank issuing a statutory notice to recover its dues, the matter falls outside the jurisdiction of consumer forums, which are neither authorised nor equipped to adjudicate securitisation proceedings. Accordingly, the appeal was allowed and Canara Bank’s recovery actions in the long-standing NPA dispute involving M/s Nisar Tyre Service in Haridwar were upheld as “valid and legally justified”.The case stemmed from a Rs 25 lakh loan granted to M/s Nisar Tyre Service, owned by Nisar Ahmed. The dispute became more complex after a property owned by Ahmed’s wife, Meena, was mortgaged to the bank as security. Following a default in repayment, the loan account was classified as an NPA, and the bank initiated recovery proceedings under the SARFAESI Act by issuing statutory notices in Feb 2018.In July 2022, the district consumer commission had ruled in favour of the complainant, directing Canara Bank to release the mortgaged property and awarding token compensation. The bank challenged the order, contending that the consumer forum lacked jurisdiction because disputes arising from SARFAESI proceedings are exclusively triable by the Debt Recovery Tribunal.Allowing the appeal in its July 6 order, the state commission held that the district commission’s ruling was “legally unsustainable”. “Under the prevailing legal framework and judicial precedents, consumer forums cannot adjudicate matters relating to securitisation proceedings under the SARFAESI Act. Consequently, the appeal is allowed and the actions taken by Canara Bank are held to be valid and legally justified,” the commission observed.
