The Orissa High Court’s ruling clarified the jurisdictional boundaries between Consumer Commissions and the SARFAESI Act. It stated that Consumer Commissions cannot adjudicate matters related to the enforcement of security interests under the SARFAESI Act.
Background:
- Rajesh Kumar Agrawal, along with others, was a guarantor and mortgagor for loans availed by M/s-Tulshyan Storeware Pvt. Ltd. from Corporation Bank (now Union Bank of India).
- The company defaulted on loans, leading the bank to initiate proceedings under the SARFAESI Act to auction the secured assets.
District Consumer Redressal Commission’s Order:
- The Commission ordered the bank to halt the auction process under the SARFAESI Act.
Bank’s Petition:
- The bank argued that the Consumer Commission lacked jurisdiction over matters governed by the SARFAESI Act, which has its own mechanism for redressal.
Legal Standpoints:
- The SARFAESI Act allows banks to enforce security interests without court intervention, whereas the Consumer Protection Act deals with consumer grievances.
- The core issue was whether the Consumer Commission could intervene in SARFAESI Act proceedings.
Judgement:
- The High Court of Orissa ruled that the District Consumer Redressal Commission does not have jurisdiction to intervene in matters specifically governed by the SARFAESI Act.
- The Consumer Protection Act cannot override the specific provisions of the SARFAESI Act designed for recovery and enforcement of security interests.
Conclusion:
The judgment emphasized that the SARFAESI Act provides a specific legal framework for resolving disputes concerning the enforcement of security interests by banks and financial institutions. Therefore, such matters should be handled exclusively by the mechanisms provided within the SARFAESI Act, not by consumer protection bodies.
Case Title: The Chief Manager-cum-Authorized Officer, Union Bank of India, Jharsuguda v. Rajesh Kumar Agrawal & Anr.