Allahabad High Court held that the defaulter cannot resort to criminal proceedings against creditors or auction purchasers against an auction held under the SARFAESI Act; Exclusively DRT's domain.
The Division Bench of Allahabad High Court comprising Justice Ashwani Kumar Mishra and Justice Ashutosh Srivastava was hearing criminal petitions filed by the auction purchaser and a finance company. The Bench observed that the disputes arising from banking transactions, specifically those governed by the SARFAESI Act, fall within the exclusive jurisdiction of specialized tribunals like the Debts Recovery Tribunal (DRT). Criminal proceedings initiated to challenge actions taken under the SARFAESI Act constitute an abuse of process and are impermissible. Therefore, the court quashed the FIR, affirming that civil issues related to banking transactions should be adjudicated exclusively by tribunals like the DRT, not through criminal proceedings.
In a legal dispute before the High Court, the petitioners contested an FIR lodged against them, alleging it was an abuse of the law's process. The FIR, filed under various sections of the IPC and the Registration Act, stemmed from a civil dispute over the ownership of property. The petitioners argued that the FIR was maliciously instituted by the borrower company, which faced loan default proceedings under the SARFAESI Act.Â
The High Court noted that despite multiple opportunities, no counter-affidavit was filed by the respondents, leading it to treat the petitioners' averments as unchallenged. The FIR, initiated by the borrower company, accused the petitioners of fraudulent transfer of property to an auction purchaser and encroachment on additional land.
The petitioners, including the auction purchaser and a finance company, had lawfully acquired the property through auction proceedings conducted under the SARFAESI Act due to loan defaults by the borrower company. Legal actions, such as arbitration and appeals, were taken by both parties, culminating in the auction of the disputed property to the petitioner, the auction purchaser.
Citing legal precedent, the High Court emphasized the exclusive jurisdiction of the Debt Recovery Tribunal in matters related to banking transactions and loans. It highlighted that criminal proceedings initiated by the borrower company were an attempt to challenge the lawful proceedings under the SARFAESI Act.
Ultimately, the High Court quashed the FIR, affirming that civil issues related to banking transactions should be adjudicated by specialized tribunals, not through criminal proceedings. Consequently, the FIR against the petitioners was nullified, providing clarity on the jurisdictional boundaries between civil and criminal matters in such cases.
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