Consumer Protection Act vs Securitisation/SARFAESI Act

Consumer Protection Act(hereinafter referred as CP Act) is an enactment made to protect the interest of the consumers from defective goods and services. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act(hereinafter referred as SARFAESI Act) is meant to recover the dues of the banks and financial institution by either taking possession and resorting to sale of the mortgaged or hypothecated assets, or to manage the business of the defaulter loanee. Here we are dealing with an issue where the CP Act and SARFAESI Act come face to face in an interesting legal battle.

The case we are discussing is that of Punjab National Bank versus Consumer Disputes Redressal Forum and others reported in All India Reporter 2012 Kerala page 8. The case started as follows:

The petitioner bank granted a loan to the party. When the party defaulted the amount, the account became irregular and sooner the account was classified as Non-Performing Asset by the Bank. Proceedings initiated under SARFAESI Act. The borrowers moved under CP Act on the basis that the action of the bank has to be stopped since there is a consumer dispute. They contended that banking is a 'service' and there had been a deficiency of service on the part of the Bank.

So the issue was whether the Consumer Forum has jurisdiction to entertain a matter which is under SARFAESI Act proceedings. There was also a question as to Section 34 of the SARFAESI Act where civil court's jurisdiction is barred and applicability of consumer court jurisdiction was under purview.

The High Court of Kerala clarified the position in this regard. The Court rested its finding on the following points:

• The CP Act is a general statute, where SARFAESI Act is a special enactment.
• A special enactment will prevail over the provisions of a general statute.
• 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 SARFAESI Act.
• SARFAESI Act provides a remedy for the actions of the bank or other financial institution under Section 17.
• SARFAESI Act is a later enactment compared to CP Act.
• The provision of SARFAESI Act which excludes the jurisdiction of authorities to grant injunction against the proceedings under the Act should apply with high importance to the Consumer Disputes Redressal Forum.

The High Court also taken note of the issue of economic stability when there is blockade of large sums of money by unnecessary causing hindrance to the recovery measures initiated by the Banks and other financial institutions. Thus in this legal battle, the SARFAESI Act wins. 

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