SARFAESI Act; Punjab National Bank Vs. Consumer Disputes Redressal Forum [Kerala High Court, 29-07-2011]

Consumer Protection Act, 1986 – Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Consumer Disputes Redressal Forum has no jurisdiction to entertain any complaint in respect of any measures taken by a Bank or a Financial Institution under the SARFAESI Act, 2002 and the CDRF has no jurisdiction to give any relief whatsoever against the same.

2011 (3) KLT 616 : 2011 (3) KLJ 542 : ILR 2011 (3) Ker. 693 : 2011 (3) KHC 511


The Hon’ble MR. Justice S.SIRI JAGAN

Dated this the 29th day of July, 2011

W.P. (C) No. 5957 of 2011 (T)

For Petitioner: P.K. Suresh Kumar, M. Sindhu Thankam; For Respondent: M.D. Sasikumaran, K.S. Hariharaputhran, George Mathew, Dipu James, K.V. Ramya


The petitioner Bank challenges an interim order of the Consumer Disputes Redressal Forum, Alappuzha, passed under the

Consumer Protection Act, 1986

in Ext.P4 complaint filed by respondents 1 and 2, restraining and prohibiting the petitioner from taking auction proceedings of sale and other proceedings against the respondents 2 and 3, pursuant to a notice issued by the petitioner under the

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)

for recovery of loan amounts due under a loan given to the respondents 2 and 3, on the ground that the respondents 2 and 3 have made out a prima facie case against the petitioner and there is a consumer dispute. According to the petitioner, the Consumer Disputes Redressal Forum (CDRF) has no jurisdiction to entertain a challenge against the proceedings under the SARFAESI Act. The petitioner therefore seeks the following reliefs:

“a) quash Ext.P3 order by the issue of a writ of certiorari or other appropriate writ, order or direction.

b) issue a writ of prohibition or other appropriate writ, order or direction restraining the 1st respondent from proceeding further with Ext.P4 petition.

c) declare that the 1st respondent has no authority or jurisdiction to entertain Ext.P4 petition.”

2. The respondents 2 & 3 oppose the prayers of the petitioner on the ground that since there is a consumer dispute involving deficiency in service of the petitioner and banking comes within the purview of ‘service’ as defined in Section 2 (o) of the Consumer Protection Act, the CDRF has jurisdiction to entertain a complaint regarding deficiency in service of the petitioner Bank, notwithstanding the SARFAESI Act, in view of Section 3 of the Consumer Protection Act.

3. I have considered the rival contentions in detail. At first blush the argument of the respondents on the basis of the definition of ‘service’ in Section 2 (o) of the Consumer Protection Act, read with Section 3 thereof, stipulating that the provisions of the Consumer Protection Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force, sounds attractive. But the jurisdiction of the Consumer Disputes Redressal Forum to interfere with proceedings under the SARFAESI Act has to appreciated in the light of the provisions of the SARFAESI Act, the object and purpose of that Act and the decisions of the Supreme Court upholding the primacy of the Act, even in relation to the powers of the High Court under Article 226 of the Constitution of India.

4. At the outset certain obvious facts are to be noted, which are as follows:

(a) The Consumer Protection Act is a general enactment and the SARFAESI Act is a special enactment.

(b) The Consumer Protection Act was enacted in 1986, whereas the SARFAESI Act was enacted in 2002.

(c) Under Section 34 of the SARFAESI Act, jurisdiction of the civil courts for entertaining any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by the said Act to determine is barred and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the said Act.

(d) Under Section 35 of the SARFAESI Act, the provisions of the said Act is to have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.

(e) The SARFAESI Act is a comprehensive law providing for all aspects relating to the subject dealt with by that legislation and the Act provides to persons aggrieved by measures taken under the Act a remedy by way of challenging the action taken under the Act before a quasi judicial authority, namely, the Debts Recovery Tribunal, with a right to file a further appeal before the Debt Recovery Appellate Tribunal, making the legislation a self contained one.

5. Certainly, as stated in its Preamble, the Consumer Protection Act, 1986 is an Act to provide for better protection of the interests of consumers and for that purpose to make provision for the establishment of consumer councils and other authorities for the settlement of consumers disputes and for matters connected therewith. Section 2 (o) of the said Act defines ‘service’ thus: “service” means service or any description which is made available to potential users and includes, but not limited to, the provision of facilities in connection with banking, financing insurance, transport, processing, supply of electrical or other energy, board or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service;” Under Section 12 of the Act, the CDRF has jurisdiction to entertain a complaint in relation to any service provided or agreed to be provided. Section 3 of the said Act reads thus:

3. Act not in derogation of any other law

The provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force.”

Borrower of money from a Bank is a consumer as defined under Section 2 (d). Reading all these provisions together, certainly deficiency in service provided by a Bank can be the subject matter of a dispute before a CDRF. But in the event of a CDRF finding in favour of a complainant, the CDRF has power to grant only the reliefs provided for in Section 14 (1) of the Consumer Protection Act, which reads thus:

(1) If, after the proceeding conducted under section 13, the District Forum is satisfied that the goods complained against suffer from any of the defects specified in the complaint or that any of the allegations contained in the complaint about the services are proved, it shall issue an order to the opposite party directing him to do one or more of the following things, namely:–

(a) to remove the defect pointed out by the appropriate laboratory from the goods in question;

(b) to replace the goods with new goods of similar description which shall be free from any defect;

(c) to return to the complainant the price, or, as the case may be, the charges paid by the complainant;

(d) to pay such amount as may be awarded by it as compensation to the consumer for any loss or injury suffered by the consumer due to the negligence of the opposite party:

Provided that the District Forum shall have the power to grant punitive damages in such circumstances as it deems fit;

(e) to remove the defects in goods or deficiencies in the services in question;

(f) to discontinue the unfair trade practice or the restrictive trade practice or not to repeat them;

(g) not to offer the hazardous goods for sale;

(h) to withdraw the hazardous goods from being offered for sale;

(ha) to cease manufacture of hazardous goods and to desist from offering services which are hazardous in nature;

(hb) to pay such sum as may be determined by it, if it is of the opinion that loss or injury has been suffered by a large number of consumers who are not identifiable conveniently:

Provided that the minimum amount of sum so payable shall not be less than five per cent, of the value of such defective goods sold or services provided, as the case may be, to such consumers:

Provided further that the amount so obtained shall be credited in favour of such person and utilized in such manner as may be prescribed;

(hc) to issue corrective advertisement to neutralize the effect of misleading advertisement at the cost of the opposite party responsible for issuing such misleading advertisement;

(i) to provide for adequate costs to parties. Going by the said Section, the CDRF has no power to injunct or restrain a Bank from enforcing their rights under a loan agreement executed by a borrower with them, which would include sale of the mortgaged properties for recovery of the loan amounts advanced by the Bank to the borrower, for which specific purpose the SARFAESI Act was enacted.

6. Further Section 34 of the SARFAESI Act provides thus: