No Acts & Articles mentioned in this case
2025 INSC 95 1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.1876 OF 2016
CENTRAL BANK OF INDIA & ANR. Appellant(s)
VERSUS
SMT. PRABHA JAIN & ORS. Respondent(s)
WITH
CIVIL APPEAL NO.1877 OF 2016
CIVIL APPEAL NO.1896 OF 2016
CIVIL APPEAL NO.1893 OF 2016
CIVIL APPEAL NO.1897 OF 2016
CIVIL APPEAL NO.1915 OF 2016
CIVIL APPEAL NO.1907 OF 2016
CIVIL APPEAL NO.1913 OF 2016
CIVIL APPEAL NO.1900 OF 2016
CIVIL APPEAL NO.1898 OF 2016
CIVIL APPEAL NO.1916 OF 2016
CIVIL APPEAL NO.1914 OF 2016
CIVIL APPEAL NO.1892 OF 2016
2
CIVIL APPEAL NO.1910 OF 2016
CIVIL APPEAL NO.1899 OF 2016
CIVIL APPEAL NO.1917 OF 2016
O R D E R
Since the issues raised in all the captioned appeals are the
same, those were taken up for hearing analogously and are being
disposed of by this common judgment and order.
2.The Civil Appeal No.1876 of 2016 is treated as the lead
matter. The disposal of this appeal shall govern the disposal of
all connected appeals.
3.This appeal arises from the judgment and order dated
30.10.2012 passed by the High Court of Madhya Pradesh at Jabalpur
in First Appeal No.408 of 2012 by which the High Court allowed the
appeal filed by the respondents herein-original plaintiffs and
thereby, set aside the order passed by the 5
th
Additional District
Judge, Bhopal in Civil Suit No.25A/2011 rejecting the plaint under
Order VII Rule 11 of the Code of Civil Procedure, 1908 (for short,
“the CPC”).
4.The facts giving rise to this appeal may be summarised as
under:-
3
Respondent no.1 namely, Smt. Prabha Jain instituted Civil Suit
No.25A/11 praying for the following reliefs:-
“a. It be declared that the disputed sale deed and
the mortgage deed described in para 6 above are a
nullity and it be declared that the defendant numbers
4 and 5 had no right to sell the disputed plot, to
the defendant number 3 and the possession taken by
the defendant number 2 is against the law and the
grant of loan by the defendant number 1 on the
security of the plot is against the law.
b. That the possession of the plot of land shown in
slanted red lines in the plan attached to the suit
may be given to the plaintiff after demolishing the
construction.
c. That the plaintiff may be awarded damages of
Rs. 7200/- for period from December 2009 to December
2010.
d. That the mesne profit from the date of institution
of the suit till possession may be granted to the
plaintiff at the rate of Rs. 600/- p.m.”
5.It is the case of the plaintiff that the suit land was
purchased by her late father-in-law vide sale deed dated 19.06.1967
and after his death on 15.08.2005, the same was inherited in equal
shares by her late husband Mahendra Kumar Jain, husband’s elder
brother Sumer Chand Jain (defendant no.4) and mother-in-law. After
the death of Mahendra Kumar, his 1/3
rd
share was inherited by the
plaintiff. However, Sumer Chand Jain without any partition amongst
the heirs divided the land into several plots and sold them off
illegally to different persons. One such plot was sold to defendant
no.3 (Parmeshwar Das Prajapati) vide registered sale deed dated
4
03.07.2008 who in turn, mortgaged the same with the Central Bank of
India (defendant no.1) for the purpose of obtaining loan.
6.It seems that the person who obtained loan defaulted and that
is how the Bank decided to proceed further in accordance with the
provisions of the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 (for short,
“the SARFAESI Act”).
7.It is a case of the plaintiff that the sale deed as well as
the mortgage could be said to be a nullity. She claimed possession
of the suit land in the suit.
8.It appears that the appellant-Bank herein preferred an
application under Order VII Rule 11 of the CPC and prayed that the
plaint be rejected as the civil court has no jurisdiction to try
the same in view of Section 17 of the SARFAESI Act. The trial court
rejected the plaint. The original plaintiff carried the matter in
appeal before the High Court. The High Court allowed the First
Appeal holding in paras (9) and (10) respectively, as under:-
“9. From the scheme of the SARFAESI Act narrated
above, it is apparent that the Debts Recovery
Tribunal has no jurisdiction to decide the question
whether persons other than the mortgager had title
in the mortgaged property. In that context the
validity of the sale deed of a property mortgaged
with the Central Bank of India cannot be decided by
the Debts Recovery Tribunal. If the sale deed is
held to be wholly or partially invalid it will
immediately affect the validity of the mortgage of
that property. The jurisdiction of civil court is
ousted in respect of matters which the Debts
Recovery Tribunal is empowered to decide. Absence of
a provision to enable the Debts Recovery Tribunal
for holding an enquiry on a particular question is
indicative that jurisdiction of civil courts on that
question is not excluded. The above question
relating to the validity of the sale deed and its
5
consequent effect on the mortgage are matters which
the Debts Recovery Tribunal is not empowered to
decide. The provision for appeal under section 17 of
the SARFAESI Act by "any person" does not oust the
jurisdiction of civil court on matters which cannot
be decided by the Debts Recovery Tribunal.
Therefore, the jurisdiction of the civil court to
decide these matters cannot be held to be ousted
under section 34 of the SARFAESI Act.
10. We also disagree, with the finding of the trial
court that proper Court fee has not been paid by the
plaintiff. The plaintiff is not a signatory or party
in the sale deed as well as in the mortgage deed.
She is, therefore, not required to claim the
consequential relief of the cancellation of these
documents. And for the relief claimed by her for the
declaration of sale deed and mortgage as illegal,
she has paid the proper Court fee. The consequential
relief which the plaintiff has claimed and which is
appropriate in the circumstances of the case is
possession of the suit land/plot. The suit land/plot
is assessed to the land revenue at Rs.l/-. She has
valued this relief at Rs.20/- and paid Rs.lOO/-
Court fee as required under section 7 (v)(a) of the
Court Fees Act, 1870. The plaintiff has thus paid
the proper Court fee.”
9.In such circumstances referred to above, the appellant-Bank is
here before this Court with the present appeal. We have heard
Mr. O. P. Gaggar, the learned counsel appearing for the appellant-
Bank and Mr. Umesh Babu Chaurasia, the learned counsel appearing
for respondent no.1 i.e. the original plaintiff. The only argument
canvassed before us on behalf of the Bank is that in view of
Section 34 of the SARFAESI Act, the civil court has no jurisdiction
to try the suit.
10.Having regard to the importance of the issue raised before us,
we proposed to consider it in detail.
6
PLAINTIFF’S CASE IN THE PLAINT AS BORNE OUT FROM THE IMPUGNED
JUDGEMENT
19.06.1967: Plaintiff’s father-in-law purchased the suit land by
way of a sale deed.
15.8.2005 Plaintiff’s father-in-law died. Thereupon, the suit
land was inherited by 3 persons in equal
proportions:
1. Plaintiff’s husband Mahendra Kumar Jain (1/3rd)
2. Plaintiff’s husband’s elder brother Sumer Chand
Jain (1/3rd)
3. Mother-in-law (1/3rd)
Upon the death of the Plaintiff’s husband, the
Plaintiff inherited her husband’s 1/3rd share.
Plaintiff’s brother-in-law Sumer Chand Jain without
any partition divided the suit land into plots and
illegally sold off the plots.
03.7.2008 By a sale deed, Sumer Chand Jain sold one of the
plots to Parmeshwar Das Prajapati.
Parmeshwar Das Prajapati executed a mortgage deed
mortgaging the said plot (“subject plot”) to the
Central Bank of India (“bank”) for obtaining a loan.
7
From para 2 of the impugned judgement of the High
Court, it appears that some construction was also
raised on the land at some stage.
The bank took over possession of the subject plot
under Section 13 of the SARFAESI Act and published
an advertisement for the purpose of putting it to
auction.
The Plaintiff filed a suit in a civil court praying
inter alia for the following reliefs:
1. For a declaration that the sale deed executed by
Sumer Chand Jain in favour of Parmeshwar Das
Prajapati is illegal (“first relief”)
2. For a declaration that the mortgage deed executed
by Parmeshwar Das Prajapati in favour of the Bank is
illegal (“second relief”)
3. For being handed over the possession (“third
relief”)
In the suit, the bank filed an application under
Order VII, Rule 11 of the CPC raising the following
contentions:
a) Suit is barred under Section 34 of the SARFAESI
Act.
b) Plaint is written on insufficiently stamped
paper.
8
10.2.2012 The Civil Court rejected the plaint on the following
grounds:
1. The suit is barred by Section 34 of the SARFAESI
Act.
2. The plaintiff has not paid the proper court fee.
09.04.2012 The Plaintiff filed First Appeal before the High
Court challenging the judgement dated 10.2.2012.
30.10.2012 The High Court set aside the judgement and restored
the suit on the following grounds:
1. The Civil Court’s jurisdiction to decide the suit
is not ousted by Section 34 of the SARFAESI Act.
2. The Plaintiff has paid the proper court fee.
RELEVANT PROVISIONS OF THE SARFAESI ACT
11.Section 34 of the SARFAESI Act reads thus:-
“34. Civil court not to have jurisdiction.— No
civil court shall have jurisdiction to entertain
any suit or proceeding in respect of any matter
which a Debts Recovery Tribunal or the Appellate
Tribunal is empowered by or under this Act to
determine 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 this Act or under the
Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 (51 of 1993).”
9
12.Section 34 of the SARFAESI Act provides that no civil court
shall have jurisdiction to entertain any suit or proceeding
“in respect of any matter which Debts Recovery Tribunal or the
Appellate Tribunal is empowered by or under this Act to
determine…” Hence, the Civil Court’s jurisdiction is only
ousted in respect of those matters which the Debts Recovery
Tribunal or the Appellate Tribunal is empowered by or under
the SARFAESI Act to determine. The SARFAESI Act confers
certain powers upon the Debts Recovery Tribunal by virtue of
the following sections: Sections 5(5), 13(10), 17 and 19.
Except for Section 17, as such none of the other sections
referred to above are relevant for the purposes of this
matter.
13.Section 17 of the SARFAESI Act is as follows:
Under Section 17(1) of the Act, “ Any person (including
borrower), aggrieved by any of the measures referred to
in subsection (4) of section 13 taken by the secured
creditor or his authorised officer under this Chapter, may
make an application… to the Debts Recovery Tribunal..”.
From Section 17(2), (3) and (4) of the SARFAESI Act, it is
clear that the Tribunal has the power to examine whether
“..any of the measures referred to in sub-section (4) of
section 13 taken by the secured creditor are in
accordance with the provisions of this Act and the rules
made thereunder. ” The Tribunal has the power to pass
consequential orders as provided in Section 17(3).
14.From Section 17, it is clear that it is only the Tribunal that
has the jurisdiction to determine whether “ any of the measures
referred to in sub-section (4) of Section 13 taken by the
secured creditor” are in accordance with the Act or Rules
thereunder.
10
15. The plaintiff in her suit has prayed for 3 reliefs:
a) The first relief is in relation to a sale deed executed by
Sumer Chand Jain in favour of Parmeshwar Das Prajapati.
b) The second relief is in relation to a mortgage deed
executed by Parmeshwar Das Prajapati in favour of the bank.
c) The third relief is for being handed over the possession of
the suit property.
16. So far as the first and second reliefs are concerned, they are
not in relation to any measures taken by the secured creditor
under Section 13(4) of the SARFAESI Act . Rather, they are
reliefs in relation to the actions taken prior to the secured
creditor stepping into the picture and well prior to the
secured creditor invoking the provisions of the SARFAESI Act.
17.Therefore, the Tribunal would have no jurisdiction under
Section 17 of the SARFAESI Act to grant the declarations sought
in the first and the second reliefs.
18.Further, the SARFAESI Act is enacted essentially to provide a
speedy mechanism for recovery of debts by banks and financial
institutions. The SARFAESI Act has not been enacted for
providing a mechanism for adjudicating upon the validity of
documents or to determine questions of title finally. The DRT
does not have the jurisdiction to grant a declaration with
respect to the mortgage deed or the sale deed as sought by the
Plaintiff. The jurisdiction to declare a sale deed or a
mortgage deed being illegal is vested with the civil court
under Section 9 of the Code of Civil Procedure. Therefore, the
11
civil Court has the jurisdiction to finally adjudicate upon the
first two reliefs.
19.In the aforesaid context, we may give few illustrations of the
kind of disputes that can crop up. These illustrations would
indicate that DRT can never have the jurisdiction to decide
such civil disputes of title between a third person and a
borrower. Two illustrations may be considered:
Illustration 1: A and B are sons of X. On X’s death, A
claims that X made a will bequeathing a particular parcel of
land (“Land 1”) exclusively to A. A mortgages Land 1 to a bank
and the bank initiates proceedings under the SARFAESI Act. The
other son i.e. B claims that father X had made a will
bequeathing Land 1 exclusively to B. Hence, there are two
conflicting wills propounded by each son. B files a suit
praying for a declaration that he is the exclusive owner of the
land on the basis of the will and other reliefs. The civil
court will have jurisdiction to decide which of the two wills
is valid. It is inconceivable that DRT would have the
jurisdiction to decide which will is valid.
Illustration 2: X was married to Y (wife). They did not
have any biological children. Hence, in 1985, the couple
adopted Q. In 1990, Y died and left her entire estate to X by
way of a will. X died in 1995 without making a will. The
adopted child Q (claiming to be sole owner by intestate
succession) mortgaged one of the lands in favour of the bank
which initiated SARFAESI proceedings. However, X’s only brother
12
Z made a claim that the “adoption” of Q was not as per law and
that there being no adoption in law, Q was not entitled to the
estate of X. X filed a suit inter alia praying for the
following declarations:
1. The adoption of Q was void and ineffective.
2. Z being the only heir as per intestate succession, Z
was exclusively entitled to the land.
3. The Mortgage by Q in favour of the bank was invalid as it
was a mortgage by Q who had no title.
20.The answer to the aforesaid would depend on whether Q’s
adoption was valid or not. If the adoption is valid, Q had title
and the mortgage in favour of the bank would be valid. If the
adoption was invalid, Z would be the owner & Q’s mortgage would be
invalid. The civil court will have jurisdiction to decide upon the
validity of the adoption, not the DRT.
21.By way of third relief, the plaintiff is seeking possession.
22. The suit is of 2011. Hence, the SARFAESI Act as applicable
prior to the 2016 Amendment will have to be examined. Section 17
(as it stood prior to the 2016 amendment) is reproduced below:
“17. Right to appeal.—(1) Any person (including
borrower) aggrieved by any of the measures referred
to in sub-section (4) of Section 13 taken by the
secured creditor or his authorised officer under
this Chapter, may make an application along with
such fee, as may be prescribed, to the Debts
13
Recovery Tribunal having jurisdiction in the matter
within forty-five days from the date on which such
measure had been taken:
Provided that different fees may be prescribed for
making the application by the borrower and the
person other than the borrower.
Explanation.—For the removal of doubts, it is hereby
declared that the communication of the reasons to
the borrower by the secured creditor for not having
accepted his representation or objection or the
likely action of the secured creditor at the stage
of communication of reasons to the borrower shall
not entitle the person (including borrower) to make
an application to the Debts Recovery Tribunal under
this sub-section.
(2) The Debts Recovery Tribunal shall consider
whether any of the measures referred to in sub-
section (4) of Section 13 taken by the secured
creditor for enforcement of security are in
accordance with the provisions of this Act and the
rules made thereunder.
(3) If, the Debts Recovery Tribunal, after examining
the facts and circumstances of the case and evidence
produced by the parties, comes to the conclusion
that any of the measures referred to in sub-section
(4) of Section 13, taken by the secured creditor are
not in accordance with the provisions of this Act
and the rules made thereunder, and require
restoration of the management of the business to the
borrower or restoration of possession of the secured
assets to the borrower, it may by order, declare the
recourse to any one or more measures referred to in
sub-section (4) of Section 13 taken by the secured
creditors as invalid and restore the possession of
the secured assets to the borrower or restore the
management of the business to the borrower, as the
case may be, and pass such order as it may consider
appropriate and necessary in relation to any of the
recourse taken by the secured creditor under sub-
section (4) of Section 13.
(4) If, the Debts Recovery Tribunal declares the
recourse taken by a secured creditor under sub-
section (4) of Section 13, is in accordance with the
provisions of this Act and the rules made
thereunder, then, notwithstanding anything contained
in any other law for the time being in force, the
secured creditor shall be entitled to take recourse
to one or more of the measures specified under sub-
14
section (4) of Section 13 to recover his secured
debt.
(5) Any application made under sub-section (1) shall
be dealt with by the Debts Recovery Tribunal as
expeditiously as possible and disposed of within
sixty days from the date of such application:
Provided that the Debts Recovery Tribunal may, from
time to time, extend the said period for reasons to
be recorded in writing, so, however, that the total
period of pendency of the application with the Debts
Recovery Tribunal, shall not exceed four months from
the date of making of such application made under
sub-section (1).
(6) If the application is not disposed of by the
Debts Recovery Tribunal within the period of four
months as specified in subsection (5), any part to
the application may make an application, in such
form as may be prescribed, to the Appellate Tribunal
for directing the Debts Recovery Tribunal for
expeditious disposal of the application pending
before the Debts Recovery Tribunal and the Appellate
Tribunal may, on such application, make an order for
expeditious disposal of the pending application by
the Debts Recovery Tribunal.
(7) Save as otherwise provided in this Act, the
Debts Recovery Tribunal shall, as far as may be,
dispose of the application in accordance with the
provisions of the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993 (51 of 1993) and
the rules made thereunder.”
(emphasis supplied)
23.Unamended Section 17(3) of the SARFAESI Act as applicable to
the present case:
I. Section 17(3) as it stood prior to the 2016 amendment,
provides that where the DRT finds that the measures taken
by the secured creditor under Section 13(4) of the
SARFAESI Act are not in accordance with the Act or Rules,
it has the power to “ restore the possession of the secured
assets back to the borrower”. In this context, there are
two significant points that deserve to be considered:
15
1. While it is true that Section 17(1) uses the words “any
person (including the borrower) aggrieved”, Section 17(3)
does not explicitly empower the DRT to restore the
possession to anyone other than the borrower . Yes, in a
given case, if the borrower has put someone else in
possession, then perhaps, it could be contended that under
Section 17(3), the DRT’s power to restore possession to
the “borrower” would include the power to restore
possession to the person who was holding it on behalf of
the borrower or claiming through the borrower.
However, it cannot be contended that under Section 17(3),
the DRT can hand over possession to someone whose claim is
adverse to that of the borrower.
2. What is even more important is that in the unamended
Section 17(3), the word used is “restore” and not “hand
over”. As per Cambridge English dictionary, word “restore”
means “to return something or someone to an earlier good
condition or position”. Under Section 17(3), the DRT has
the power to “restore” possession which would mean that it
has the power to return possession to the person who was
in possession when the bank took over possession. DRT only
has power to “restore” possession; it has no power to
“hand over” possession to a person who was never in
possession when the bank took over possession .
16
The word “restore” has been very rightly used by the
Parliament. It is one thing to empower the DRT to hold
that the actions of the secured creditor are not in
accordance with the Act and to empower the DRT to give
directions to the secured creditor to reverse its actions
and to direct it to restore the property back to where it
was. However, it would be quite illogical for the
Parliament to empower the DRT to direct the secured
creditor to hand over possession to some third party who
was never in possession in the first place .
II. Now, the question that arises is this: whether the
Plaintiff being not in possession could have sought for
from the DRT under the unamended Section 17(3)? In our
considered view for the following two reasons, the
plaintiff could not have sought from DRT the relief of
being given possession:
1. Plaintiff is neither a borrower nor a person
claiming under/through the borrower. Plaintiff has a
claim independent of and adverse to the borrower.
2. Plaintiff was not in possession. Hence, the
question of DRT “restoring” possession to Plaintiff
did not arise.
III. Hence, Plaintiff could not have sought from DRT, the
relief of being handed over the possession. DRT would have
no jurisdiction to grant such relief to her. Hence, the
17
Plaintiff’s third relief in her suit is also not barred by
Section 34 of the SARFAESI ACT.
IV. The bank may contend that even if the plaintiff cannot
seek the relief of being handed over possession under the
expression “restore the possession…. to the borrower”, she
can still seek that relief under the widely worded
expression appearing at the end of Section 13(3): “and
pass such order as it may consider appropriate and
necessary in relation to any of the recourse taken by the
secured creditor under sub-section (4) of Section 13”
appearing at the end of Section 13(3). We are of the view
that even under such expression, the Plaintiff cannot seek
the relief of being handed over possession for the
following reasons:
1. Under the last phrase of Section 13(3), the civil
court has the power to pass other orders as it may
consider appropriate and necessary “ in relation to any
of the measures taken by the secured creditor under
sub-section (4) of Section 13”.
2. The measures taken by the secured creditor are of
taking over possession from the borrower and not from
the plaintiff. Hence, the Plaintiff’s prayer to hand
over possession is not at all “ in relation to any of
the measures taken by…” The passing of an order to hand
over possession to Plaintiff is, therefore, not an
order “in relation to any of the measures taken by the
secured creditor”.
18
3. Hence, even under the last phrase of Section 13(3),
DRT has no power to pass an order directing the secured
creditor to hand over possession to Plaintiff. Hence,
Plaintiff could not have sought that relief from DRT.
V. Although Section 13(3) as amended by the the SARFAESI Act,
2016 does not arise for our consideration in this matter,
yet it is pertinent to note that even the amended Section
13(3) uses the expression “ restore the possession of
secured assets”. The expression “or such other aggrieved
person” have been inserted after the word “borrower” in
sub-clause (a). However, there is no power conferred to
hand over the property to someone who was never in
possession. The amended Section 13(3) is reproduced below:
“(3) If, the Debts Recovery Tribunal, after
examining the facts and circumstances of the case
and evidence produced by the parties, comes to the
conclusion that any of the measures referred to in
sub-section (4) of section 13, taken by the secured
creditor are not in accordance with the provisions
of this Act and the rules made thereunder, and
require restoration of the management or
restoration of possession, of the secured assets to
the borrower or other aggrieved person, it may, by
order,—
(a) declare the recourse to any one or more
measures referred to in sub-section (4) of section
13 taken by the secured creditor
as invalid; and
(b) restore the possession of secured assets or
management of secured assets to the borrower or
such other aggrieved person, who has made an
application under sub-section (1), as the case may
be; and
(c) pass such other direction as it may consider
appropriate and necessary in relation to any of the
recourse taken by the secured creditor under sub-
section (4) of section 13.”
19
24.Even if we would have been persuaded to take the view that the
third relief is barred by Section 17(3) of the SARFAESI Act, still
the plaint must survive because there cannot be a partial rejection
of the plaint under Order VII, Rule 11 of the CPC. Hence, even if
one relief survives, the plaint cannot be rejected under Order VII,
Rule 11 of the CPC. In the case on hand, the first and second
reliefs as prayed for are clearly not barred by Section 34 of the
SARFAESI ACT and are within the civil court’s jurisdiction. Hence,
the plaint cannot be rejected under Order VII Rule 11 of the CPC.
25.If the civil court is of the view that one relief (say relief
A) is not barred by law but is of the view that Relief B is barred
by law, the civil court must not make any observations to the
effect that relief B is barred by law and must leave that issue
undecided in an Order VII, Rule 11 application. This is because if
the civil court cannot reject a plaint partially, then by the same
logic, it ought not to make any adverse observations against relief
B.
PRECEDENTS OF THIS COURT ON SECTION 34
26. This Court, in Mardia Chemicals Ltd. & Ors. v. Union of India &
Ors. reported in (2004) 4 SCC 311, held that a meaningful reading
of Section 34 of the SARFAESI Act indicates that the jurisdiction
of the civil court is barred in respect of matters which a Debts
Recovery Tribunal or an Appellate Tribunal is empowered to
20
determine i.e., in respect of any action taken or to be taken in
pursuance of any power conferred under this Act. This Court also
carved out an exception in the case where allegations of fraud are
made. The relevant observations are as under:
“50. It has also been submitted that an appeal is
entertainable before the Debts Recovery Tribunal only
after such measures as provided in sub-section (4) of
Section 13 are taken and Section 34 bars to entertain
any proceeding in respect of a matter which the Debts
Recovery Tribunal or the Appellate Tribunal is
empowered to determine. Thus before any action or
measure is taken under sub-section (4) of Section 13,
it is submitted by Mr Salve, one of the counsel for
the respondents that there would be no bar to
approach the civil court. Therefore, it cannot be
said that no remedy is available to the borrowers.
We, however, find that this contention as advanced by
Shri Salve is not correct. A full reading of Section
34 shows that the jurisdiction of the civil court is
barred in respect of matters which a Debts Recovery
Tribunal or an Appellate Tribunal is empowered to
determine in respect of any action taken “or to be
taken in pursuance of any power conferred under this
Act”. That is to say, the prohibition covers even
matters which can be taken cognizance of by the Debts
Recovery Tribunal though no measure in that direction
has so far been taken under sub-section (4) of
Section 13. It is further to be noted that the bar of
jurisdiction is in respect of a proceeding which
matter may be taken to the Tribunal. Therefore, any
matter in respect of which an action may be taken
even later on, the civil court shall have no
jurisdiction to entertain any proceeding thereof. The
bar of civil court thus applies to all such matters
which may be taken cognizance of by the Debts
Recovery Tribunal, apart from those matters in which
measures have already been taken under sub-section
(4) of Section 13.
51. However, to a very limited extent jurisdiction of
the civil court can also be invoked, where for
example, the action of the secured creditor is
alleged to be fraudulent or his claim may be so
absurd and untenable which may not require any probe
whatsoever or to say precisely to the extent the
scope is permissible to bring an action in the civil
court in the cases of English mortgages . We find such
a scope having been recognized in the two decisions
of the Madras High Court which have been relied upon
21
heavily by the learned Attorney General as well
appearing for the Union of India, namely, V.
Narasimhachariar [AIR 1955 Mad 135] , AIR at pp. 141
and 144, a judgment of the learned Single Judge where
it is observed as follows in para 22: (AIR p. 143)
“22. The remedies of a mortgagor against the
mortgagee who is acting in violation of the
rights, duties and obligations are twofold in
character. The mortgagor can come to the court
before sale with an injunction for staying the
sale if there are materials to show that the power
of sale is being exercised in a fraudulent or
improper manner contrary to the terms of the
mortgage. But the pleadings in an action for
restraining a sale by mortgagee must clearly
disclose a fraud or irregularity on the basis of
which relief is sought: Adams v. Scott [(1859) 7
WR 213, 249]. I need not point out that this
restraint on the exercise of the power of sale
will be exercised by courts only under the limited
circumstances mentioned above because otherwise to
grant such an injunction would be to cancel one of
the clauses of the deed to which both the parties
had agreed and annul one of the chief securities
on which persons advancing moneys on mortgages
rely. (See Ghose, Rashbehary: Law of Mortgages,
Vol. II, 4th Edn., p. 784.)”
(emphasis supplied)
27.This Court, in Jagdish Singh v. Heeralal & Ors. reported in
(2014) 1 SCC 479, had held in the facts of the said case that the
Civil Suit was barred by Section 34 of the SARFAESI Act . In the
said case, the Civil Suit was filed after the original borrowers
purchased the properties mortgaged with the Bank. This led to an
auction and the subsequent dismissal of the applications before the
DRT. Furthermore, the plaintiffs, who sought title, partition, and
possession, did not raise any objections at any stage. In this
case, the auction was conducted in 2005, the original borrowers
lost before the DRT in 2006, and the Civil Suit was filed in 2007.
In these peculiar circumstances, the Civil Suit was held to be
22
barred under Section 34 of the SARFAESI Act. At the same time, this
Court reiterated that the jurisdiction of the civil court is barred
in respect of any matter that the DRT alone can decide. Thus, the
crucial question that is supposed to be asked and answered is as to
whether the DRT would be able to determine the prayers made in the
Civil Suit. The relevant paragraphs are as follows:
“10. Bank of India had advanced a loan of Rs 25
lakhs to M/s Guru Om Automobiles, Respondent 10
herein, through its proprietor, Respondent 6 on 17-
2-2000. The loan was secured by equitable mortgage
executed by Respondents 7 to 9 in respect of the
land measuring one acre in Khasra Nos. 104/3 and
105/2, Patwari Halka No. 5, Village Seagon, Anjad
Road, Barwani, M.P. Respondents 6 to 8 had also
created equitable mortgage on three houses, which
were in their respective names. Original title deeds
of all the abovementioned properties were duly
deposited with the Bank at the time of availing of
the loan.
11. Since they committed default in re-paying the
loan, the Bank issued notice under Section 13(2) of
the Securitisation Act and took steps under Section
13(4) of the Securitisation Act in respect of
properties on 1-3-2004. Auction notice was duly
published in the newspapers on 30-9-2005. No
objection was raised by the plaintiffs and the suit
land was auctioned on 8-11-2005, which was settled
in favour of the highest bidder, the appellant
herein. The entire auction price was paid by the
auction-purchaser and the sale in his favour was
duly confirmed. Respondents 7 to 9 challenged the
sale notice, as already indicated, by filing
Application No. 19 of 2005 before the DRT, Jabalpur,
which was dismissed on 21-7-2006. No appeal was
preferred against that order and that order has
attained finality.
12. We notice, at this juncture, Respondents 1 to 5
filed Civil Suit No. 16A/07 in the Court of the
District Judge, Barwani against the appellant, as
well as the Bank and Respondents 6 to 9, alleging
that the family members Respondents 1 to 9 herein
being sons/grandsons of deceased Premji, constituted
a HUF engaged in agriculture. It was stated that the
said properties were purchased in the names of
Respondents 7 to 9 out of the funds of HUF and House
23
Nos. 41/1, 42/3 and 42/2 were also purchased in the
names of Respondents 6 to 8 respectively, out of the
funds of HUF and, therefore, were the properties of
HUF. But, the facts would clearly indicate that the
properties referred to above were purchased by
Respondents 6 to 8 in their individual names, long
after the death of Premji and that too by registered
sale deeds and no claim was ever made at any stage
by any member of the HUF that the suit land was a
HUF property and not the individual property.
Respondents 7 to 9 had purchased those lands vide
sale deed dated 14-9-1999 and Respondent 6 had also
purchased in his individual name House No. 42/1 on
31-3-1998 vide registered sale deed. Similarly,
Respondent 7 had also purchased House No. 42/3 in
his individual name. No claim, whatsoever, was made
at any stage by any member of the family that those
properties and buildings were HUF properties and not
the individual properties of Respondents 6 to 8
herein.
13. We find that the Bank had advanced loans on the
strength of the abovementioned documents which stood
in the names of Respondents 6 to 9. Due to non-
repayment of the loan amount, the Bank can always
proceed against the secured assets.
XXX XXX XXX
18. Any person aggrieved by any order made by the
DRT under Section 17 may also prefer an appeal to
the Appellate Tribunal under Section 18 of the Act.
19. The expression “any person” used in Section 17
is of wide import and takes within its fold not only
the borrower but also the guarantor or any other
person who may be affected by action taken under
Section 13(4) of the Securitisation Act. Reference
may be made to the judgment of this Court
in Satyawati Tondon case [United Bank of
India v. Satyawati Tondon, (2010) 8 SCC 110 : (2010)
3 SCC (Civ) 260] .
20. Therefore, the expression “any person” referred
to in Section 17 would take in the plaintiffs in the
suit as well. Therefore, irrespective of the
question whether the civil suit is maintainable or
not, under the Securitisation Act itself, a remedy
is provided to such persons so that they can invoke
the provisions of Section 17 of the Securitisation
Act, in case the Bank (secured creditor) adopt any
measure including the sale of the secured assets, on
which the plaintiffs claim interest.
24
XXX XXX XXX
22. The scope of Section 34 came up for
consideration before this Court in Mardia Chemicals
Ltd. [Mardia Chemicals Ltd. v. Union of India,
(2004) 4 SCC 311] and this Court held as follows:
(SCC p. 349, para 50)
“50. It has also been submitted that an appeal is
entertainable before the Debts Recovery Tribunal
only after such measures as provided in sub-
section (4) of Section 13 are taken and Section 34
bars to entertain any proceeding in respect of a
matter which the Debts Recovery Tribunal or the
Appellate Tribunal is empowered to determine. Thus
before any action or measure is taken under sub-
section (4) of Section 13, it is submitted by Mr
Salve, one of the counsel for the respondents that
there would be no bar to approach the civil court.
Therefore, it cannot be said that no remedy is
available to the borrowers. We, however, find that
this contention as advanced by Shri Salve is not
correct. A full reading of Section 34 shows that
the jurisdiction of the civil court is barred in
respect of matters which a Debts Recovery Tribunal
or an Appellate Tribunal is empowered to determine
in respect of any action taken ‘or to be taken in
pursuance of any power conferred under this Act’.
That is to say, the prohibition covers even
matters which can be taken cognizance of by the
Debts Recovery Tribunal though no measure in that
direction has so far been taken under sub-section
(4) of Section 13. It is further to be noted that
the bar of jurisdiction is in respect of a
proceeding which matter may be taken to the
Tribunal. Therefore, any matter in respect of
which an action may be taken even later on, the
civil court shall have no jurisdiction to
entertain any proceeding thereof. The bar of civil
court thus applies to all such matters which may
be taken cognizance of by the Debts Recovery
Tribunal, apart from those matters in which
measures have already been taken under sub-section
(4) of Section 13.”
23. Section 13, as already indicated, deals with the
enforcement of the security interest without the
intervention of the court or tribunal but in
accordance with the provisions of the Securitisation
Act.
25
24. Statutory interest is being created in favour of
the secured creditor on the secured assets and when
the secured creditor proposes to proceed against the
secured assets, sub-section (4) of Section 13
envisages various measures to secure the borrower's
debt. One of the measures provided by the statute is
to take possession of secured assets of the
borrowers, including the right to transfer by way of
lease, assignment or realising the secured assets.
Any person aggrieved by any of the “measures”
referred to in sub-section (4) of Section 13 has got
a statutory right of appeal to the DRT under Section
17. The opening portion of Section 34 clearly states
that no civil court shall have the jurisdiction to
entertain any suit or proceeding “in respect of any
matter” which a DRT or an Appellate Tribunal is
empowered by or under the Securitisation Act to
determine. The expression “in respect of any matter”
referred to in Section 34 would take in the
“measures” provided under sub-section (4) of Section
13 of the Securitisation Act. Consequently, if any
aggrieved person has got any grievance against any
“measures” taken by the borrower under sub-section
(4) of Section 13, the remedy open to him is to
approach the DRT or the Appellate Tribunal and not
the civil court. The civil court in such
circumstances has no jurisdiction to entertain any
suit or proceedings in respect of those matters
which fall under sub-section (4) of Section 13 of
the Securitisation Act because those matters fell
within the jurisdiction of the DRT and the Appellate
Tribunal. Further, Section 35 says, the
Securitisation Act overrides other laws, if they are
inconsistent with the provisions of that Act, which
takes in Section 9 CPC as well.
25. We are of the view that the civil court
jurisdiction is completely barred, so far as the
“measures” taken by a secured creditor under sub-
section (4) of Section 13 of the Securitisation Act,
against which an aggrieved person has a right of
appeal before the DRT or the Appellate Tribunal, to
determine as to whether there has been any
illegality in the “measures” taken. The Bank, in the
instant case, has proceeded only against secured
assets of the borrowers on which no rights of
Respondents 6 to 8 (sic Respondents 1 to 5) have
been crystallised, before creating security interest
in respect of the secured assets .
26. In such circumstances, we are of the view that
the High Court was in error in holding that only
civil court has the jurisdiction to examine as to
26
whether the “measures” taken by the secured creditor
under sub-section (4) of Section 13 of the
Securitisation Act were legal or not. In such
circumstances, the appeal is allowed and the
judgment [Heeralal Kulmi v. Govind Kulmi, First
Appeal No. 130 of 2008, order dated 5-8-2010 (MP)]
of the High Court is set aside. There shall be no
order as to costs.”
(emphasis supplied)
28.Thus, in paras 18, 19 & 20 respectively referred to above,
this Court held that the words “any person” are wide enough to
cover any person affected by action taken under Section 13(4).
However, it appears that this Court overlooked the fact that while
the words are wide enough, the DRT has powers only to grant
reliefs with respect to the measures taken by the secured creditor
under Section 13(4) and not beyond that. This Court missed to take
note of the word “restore” used in Section 17(3) which means that
the DRT can only restore back the possession to the one who was in
possession and not to one who was not in possession.
29.In para 24, this Court held that DRT has jurisdiction with
respect to “measures” taken by the secured creditor under Section
13(4) and that in respect of such matters, the civil court’s
jurisdiction is ousted. However, thereafter, there is no further
discussion on the nature of the suit and without recording any
finding that DRT has the power to decide partition suits, this
Court straightaway affirmed the rejection of the plaint under Order
VII, Rule 11. While doing so, this Court missed to consider that
under Section 17, DRT has no power to partition properties and
hence, civil court’s jurisdiction to grant a decree of partition
cannot be said to be ousted. When there is no finding in the
27
judgement that the DRT has the jurisdiction to grant the relief of
partition, the judgement cannot be said to be a precedent on that
point.
30. The aforesaid was looked into by a Division Bench of the Bombay
High Court in Bank of Baroda v. Gopal Shriram Panda and Another,
reported in (2021) SCC OnLine Bom 466 and the reasonings assigned
in our view are very commendable. We quote the relevant
observations made by the Bombay High Court as regards the Jagadish
(supra):
“21.3. In Jagdish v. Heeralal (supra), the appellant
was an auction purchaser, who was not put in
possession, acquired knowledge that civil suit for
declaration of title, partition and permanent
injunction was pending, in which a plea was raised,
that the respondent nos. 1 to 5 therein being the
sons/grandsons of deceased Premji, constituted a HUF
engaged in agriculture and the auctioned property
was purchased in the names of the respondent nos. 7
to 9 out of the funds of the HUF and the houses were
also purchased in the names of the respondent nos. 6
to 8, out of the same HUF funds and therefore a
declaration that the properties were HUF properties
and the respondents nos. 1 to 5 had a right and
share therein was claimed. The Bank filed an
application raising a preliminary objection under
Section 9 of C.P.C. in the suit regarding the bar of
jurisdiction as contained in Section 34 of
the SARFAESI Act, which was upheld. However, in a
challenge to the said order, accepting the
preliminary objection, the High Court, in appeal,
considering that the plaint raised a question of
title on the basis of joint Hindu Family property,
held that the Civil Court had jurisdiction, which in
turn, came to be challenged before the Apex Court.
The Apex Court, found that the lands in question,
were purchased by the respondent nos. 6 to 8 in
their individual names, long after the death of the
common ancestor Premji and that too by registered
sale-deeds and no claim was ever made at any stage
by any member of the HUF that the said properties
were HUF properties and not the individual
properties. It was further held that the respondent
28
nos. 7 to 9 had also purchased properties in their
individual names vide sale-deed dated 14/9/1999 and
the sixth respondent had also purchased in his
individual name house no. 42/1 on 31/3/1998 by
registered sale-deed. The loan was advanced by the
Bank on 17/2/2000 on the strength of the above
documents, which stood in the names of the
respondent nos. 6 to 9. It is in light of the above
factual position, it was held that the expression
“any person” used in Section 17 of the SARFAESI
Act was of wide import and would include within its
hold not only the borrower but also the guarantor or
any other person, who may be affected by the action
taken under Section 13 (4) of the SARFAESI
Act including the persons/plaintiffs, who had filed
the suit as mentioned above. …”
31.This Court in State Bank of Patiala v. Mukesh Jain & Anr.
reported in (2017) 1 SCC 53 relied on Section 34 and declared that
no civil court can entertain any suit wherein the proceedings
initiated under Section 13 are challenged. Thus, this judgment
highlighted that when the measures under Section 13 are challenged
before the civil court, its jurisdiction to look into the challenge
is ousted under Section 34. The relevant paragraphs are:
“16. Upon perusal of Section 34 of the Act, it is
very clear that no civil court is having jurisdiction
to entertain any suit or proceeding in respect of any
matter which a Debts Recovery Tribunal or the
Appellate Tribunal is empowered by or under the Act
to determine the dispute. Further, the civil court
has no right to issue any injunction in pursuance of
any action taken under the Act or under the
provisions of the DRT Act .
17. In view of a specific bar, no civil court can
entertain any suit wherein the proceedings initiated
under Section 13 of the Act are challenged. The Act
had been enacted in 2002, whereas the DRT Act had
been enacted in 1993. The legislature is presumed to
be aware of the fact that the Tribunal constituted
under the DRT Act would not have any jurisdiction to
entertain any matter, wherein the subject-matter of
the suit is less than Rs 10 lakhs.”
(emphasis supplied)
29
32.In Robust Hotels Private Limited & Ors. v. EIH Limited & Ors.
reported in (2017) 1 SCC 622, this Court held that Section 34 bars
the jurisdiction of civil court for (i) suits or proceedings
relating to matters that the Debts Recovery Tribunal or Appellate
Tribunal can decide under this Act, and (ii) no injunction may be
granted by any court or authorities regarding actions under this
Act or the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993. Therefore, the bar of jurisdiction of civil
court has to correlate to the abovementioned conditions. This
finding is central to the matter: the bar of jurisdiction
correlates with the conditions mentioned in Section 34. The
relevant paragraphs are:
“31. The scope and ambit of Section 34 of the
SARFAESI Act, 2002 have been considered by this
Court in several cases. It is sufficient to refer to
the judgment of this Court in Nahar Industrial
Enterprises Ltd. v. Hong Kong & Shanghai Banking
Corpn. [Nahar Industrial Enterprises Ltd. v. Hong
Kong & Shanghai Banking Corpn., (2009) 8 SCC 646 :
(2009) 3 SCC (Civ) 481] This Court held that the
jurisdiction of the civil court is plenary in
nature, unless the same is ousted, expressly or by
necessary implication, it will have jurisdiction to
try all types of suits.
32. Following was laid down in paras 110-111 :
(Nahar Industrial case [Nahar Industrial Enterprises
Ltd. v. Hong Kong & Shanghai Banking Corpn., (2009)
8 SCC 646 : (2009) 3 SCC (Civ) 481] , SCC p. 697)
“110. It must be remembered that the jurisdiction
of a civil court is plenary in nature. Unless the
same is ousted, expressly or by necessary
implication, it will have jurisdiction to try all
types of suits.
111. In Dhulabhai v. State of M.P. [Dhulabhai v.
State of M.P., AIR 1969 SC 78] , this Court
opined : (AIR p. 89, para 32)
‘32. … The result of this inquiry into the
30
diverse views expressed in this Court may be
stated as follows:
XXXXXXXXX
(2) Where there is an express bar of the
jurisdiction of the court, an examination of
the scheme of the particular Act to find the
adequacy or the sufficiency of the remedies
provided may be relevant but is not decisive
to sustain the jurisdiction of the civil
court.
Where there is no express exclusion the
examination of the remedies and the scheme of
the particular Act to find out the intendment
becomes necessary and the result of the
inquiry may be decisive. In the latter case it
is necessary to see if the statute creates a
special right or a liability and provides for
the determination of the right or liability
and further lays down that all questions about
the said right and liability shall be
determined by the Tribunals so constituted,
and whether remedies normally associated with
actions in civil courts are prescribed by the
said statute or not.’
33. A perusal of Section 34 indicates that there is
express bar of jurisdiction of the civil court to
the following effect:
“(i) Any suit or proceeding in respect of any
matter in which the Debts Recovery Tribunal or
Appellate Tribunal is empowered by or under this
Act to determine.
(ii) Further, 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 this Act or under the
Recovery of Debts Due to Banks and Financial
Institutions Act, 1993.”
Thus the bar of jurisdiction of civil court has to
correlate to the abovementioned conditions. For the
purposes of this case, we are of the view that this
Court need not express any opinion as to whether
suits filed by EIH were barred by Section 34 or not,
since the issues are yet to be decided on merits and
the appeal by Robust Hotels has been filed only
against an interim order.”
(emphasis supplied)
31
33.In Authorised Officer, SBI v. Allwyn Alloys Private Limited &
Ors. reported in (2018) 8 SCC 120, this Court, while dealing with a
case in which the unregistered memorandum of understanding (which
would not confer any right, title and interest) was subsequently
created after the equitable mortgage, held that in such facts and
circumstances, the suit was barred under Section 34. The relevant
paragraphs are as under:
“2. The Debts Recovery Tribunal (DRT) as well as the
Debts Recovery Appellate Tribunal (DRAT), after
examining the plea taken by Respondents 5 and 6, came
to hold that the document styled as memorandum of
understanding dated 13-3-2011, relied upon by
Respondents 5 and 6, was subsequently created after
the equitable mortgage and more so it was an
unregistered document which would not confer any
right, title and interest in their favour in the said
flat. Further, the share certificate of the said flat
has already been transferred by the Society in the
name of the Directors of Respondent 1 Company i.e.
Mrs Zahoor K. Dhanani, Mr Karim K. Dhanani and Mrs
Habika K. Dhanani (Respondents 2, 3 and 4 herein). It
is also held that the Society has contemporaneously
recorded the factum of mortgage created by the said
respondents in respect of the subject flat in favour
of the Bank; and that the said respondents were not
coming forward to deny the stated mortgage.
xxx xxx xxx
8. After having considered the rival submissions of
the parities, we have no hesitation in acceding to
the argument urged on behalf of the Bank that the
mandate of Section 13 and, in particular, Section 34
of the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002
(for short “the 2002 Act”), clearly bars filing of a
civil suit. For, no civil court can exercise
jurisdiction to entertain any suit or proceeding in
respect of any matter which a DRT or DRAT is
empowered by or under this Act to determine and no
injunction can be granted by any court or authority
in respect of any action taken or to be taken in
pursuance of any power conferred by or under the Act.
9. The fact that the stated flat is the subject-
matter of a registered sale deed executed by
Respondents 5 and 6 (writ petitioners) in favour of
Respondents 2 to 4 and which sale deed has been
32
deposited with the Bank along with the share
certificate and other documents for creating an
equitable mortgage and the Bank has initiated action
in that behalf under the 2002 Act, is indisputable.
If so, the question of permitting Respondents 5 and 6
(writ petitioners) to approach any other forum for
adjudication of issues raised by them concerning the
right, title and interest in relation to the said
property, cannot be countenanced. The High Court has
not analysed the efficacy of the concurrent finding
of fact recorded by DRT and DRAT but opined that the
same involved factual issues warranting production of
evidence and a full-fledged trial. The approach of
the High Court as already noted hitherto is
completely fallacious and untenable in law .
xxx xxx xxx
12. Be that as it may, since we are setting aside the
impugned judgment [Meherangiz J. Rangoonwalla v. SBI,
2016 SCC OnLine Bom 8878] of the High Court, we
direct that Writ Petition No. 7480 of 2014 shall
stand restored to the file of the High Court to its
original number for being decided on its own merits
and in accordance with law. As the proceeding for
recovery is pending since 2010, concerning the
equitable mortgage created by Respondents 2 to 4 in
respect of the subject flat and having failed to
repay the loan amount, which is quite substantial, we
request the High Court to dispose of the writ
petition expeditiously, preferably by the end of July
2018.”
(emphasis supplied)
34. In Madhav Prasad Aggarwal & Anr. v. Axis Bank Limited & Anr.
reported in (2019) 7 SCC 158, this Court declared that under Order
VII Rule 11, plaint cannot be rejected in part or against one of
the defendants. The plaintiff’s claim was based on allotment
letters for agreement to specific flats, which were prior in time
to the mortgage in favour of the bank by the builder. Hence when
the plaintiff became aware of the subsequent mortgage it filed the
suit against the builder and the bank. Bank moved an application
under Order VII Rule 11.
33
A Ld. Single Judge of the High Court after considering
Mardia Chemicals Ltd. (supra) & Jagdish Singh
(supra)declined to reject the plaint in part.
A Division Bench took exception to the judgement of the Ld.
Single Judge and by relying on Section 34 declared the suit
to be barred in law.
This Court upheld the order of the Ld. Single Judge and
also kept the question of law open regarding DRT’s and
Appellate Authority’s power to pass a decree and decide the
matters outside the scope of Section 17. The question at
hand is extremely important because, although this Court
kept it open, yet it acknowledged the limited jurisdiction
of Section 17. Therefore, it left the issue open regarding
the competence of the DRT to pass a decree and to decide
matters outside the scope of Section 17. This question
requires finality and the laying down of the law.
The relevant paragraphs are as follows:
“2. The appellant(s) being the original
plaintiff(s) in the respective suit(s) wanted to
purchase flats in a project known as “Orbit Heaven”
(for short “the project”) being developed by Orbit
Corporation Ltd. (In Liq.) (for short “the
builder”), at Nepean Sea Road in Mumbai and in
furtherance thereof parted with huge amounts of
money to the builder ranging in several crores
although the construction of the project was
underway. The appellant(s) had started paying
instalments towards the consideration of the flats
concerned from 2009. Admittedly, no registered
agreement/document for purchase of flats concerned
has been executed in favour of the respective
appellant(s). The appellant(s), however, would rely
on the correspondence and including the letter of
allotment issued by the builder in respect of the
flats concerned — to assert that there was an
agreement between them and the builder in respect
34
of the earmarked flat(s) mentioned therein and
which had statutory protection.
3. The Respondent 1 Bank gave loan facility to
builder against the project only around year 2013,
aggregating to principal sum of Rs 150 crores in
respect of which a mortgage deed is said to have
been executed between the builder and the bank.
That transaction came to the notice of the
plaintiff(s) concerned only after publication of a
public notice on 13-9-2016 in Economic Times,
informing the general public that the said project
(Orbit Heaven) has been mortgaged. The sum and
substance of the assertion made by the appellant(s)
is that the appellant(s) were kept in the dark
whilst the mortgage transaction was executed
between the builder and the bank whereunder their
rights have been unilaterally jeopardised, to
receive possession of the flats concerned earmarked
in the allotment letter(s) and in respect of which
the appellant(s) concerned have paid substantial
contribution and the aggregate contribution of all
the plaintiff(s) would be much more than the loan
amount given by the bank to the builder in terms of
the mortgage deed for the entire project. In this
backdrop, the appellant(s) concerned had asked for
reliefs not only against the builder but also the
parties concerned joined as the defendant(s) in the
suit(s) filed by them and including Respondent 1
Bank.
xxx xxx xxx
6. Be that as it may, the notice of motion(s) in
the appeals concerned came to be dismissed by the
learned Single Judge of the High Court by a common
judgment dated 26-7-2017 [Padma Ashok Bhatt v.
Orbit Corpn. Ltd., 2017 SCC OnLine Bom 7740 :
(2017) 6 Mah LJ 102] , on the finding that there
was no bar from entertaining civil suit(s) in
respect of any other matter which is outside the
scope of matters required to be determined by the
Debts Recovery Tribunal (for short “DRT”)
constituted under the 2002 Act. The learned Single
Judge held that the facts of the present case
clearly indicate that the cause of action and the
reliefs claimed by the plaintiff(s) concerned fell
within the excepted category and the bar under
Section 34 read with Section 17 of the 2002 Act
would be no impediment in adjudicating the subject-
matter of the suit concerned. The learned Single
Judge referred to the decisions of this Court in
Mardia Chemicals Ltd. v. Union of India [Mardia
Chemicals Ltd. v. Union of India, (2004) 4 SCC 311]
35
, Jagdish Singh v. Heeralal [Jagdish Singh v.
Heeralal, (2014) 1 SCC 479 : (2014) 1 SCC (Civ)
444] and of the High Courts in SBI v. Jigishaben B.
Sanghavi [SBI v. Jigishaben B. Sanghavi, 2010 SCC
OnLine Bom 1868 : (2011) 3 Bom CR 187] and Arasa
Kumar v. Nallammal [Arasa Kumar v. Nallammal, 2004
SCC OnLine Mad 250 : (2005) 2 BC 127] . However,
the learned Single Judge rejected the
argument/objection raised by the appellant(s) that
it is impermissible to reject the plaint only
against one of the defendant(s), in exercise of
power under Order 7 Rule 11(d) CPC by relying on
the decision of the Division Bench of the same High
Court in MV “Sea Success I” v. Liverpool and London
Steamship Protection and Indemnity Assn. Ltd. [MV
“Sea Success I” v. Liverpool and London Steamship
Protection and Indemnity Assn. Ltd., 2001 SCC
OnLine Bom 1019 : AIR 2002 Bom 151] As the notice
of motion moved by Respondent 1 Bank came to be
dismissed, Respondent 1 carried the matter in
appeal before the Division Bench by way of separate
five appeals in the suit concerned. All these
appeals came to be allowed by the Division Bench
vide the impugned judgment [Axis Bank Ltd. v.
Madhav Prasad Aggarwal, 2018 SCC OnLine Bom 3891 :
(2018) 6 Bom CR 738] .
7. The impugned judgment has reversed the opinion
of the learned Single Judge that bar under Section
34 will not come in the way of the appellant-
plaintiffs. The Division Bench also opined that the
averments in the plaint concerned do not spell out
the case of fraud committed by the Bank and/or the
builder. As a result of which, the Court held that
the suit(s) instituted by the appellant(s) did not
come within the excepted category predicated in
Mardia Chemicals Ltd. [Mardia Chemicals Ltd. v.
Union of India, (2004) 4 SCC 311] and thus the
plaint against Respondent 1 Bank was not
maintainable, being barred by Section 34 of the
2002 Act.
xxx xxx xxx
10. We do not deem it necessary to elaborate on all
other arguments as we are inclined to accept the
objection of the appellant(s) that the relief of
rejection of plaint in exercise of powers under
Order 7 Rule 11(d) CPC cannot be pursued only in
respect of one of the defendant(s). In other words,
the plaint has to be rejected as a whole or not at
all, in exercise of power under Order 7 Rule 11(d)
CPC. Indeed, the learned Single Judge rejected this
objection raised by the appellant(s) by relying on
the decision of the Division Bench of the same High
36
Court. However, we find that the decision of this
Court in Sejal Glass Ltd. [Sejal Glass Ltd. v.
Navilan Merchants (P) Ltd., (2018) 11 SCC 780 :
(2018) 5 SCC (Civ) 256] is directly on the point.
In that case, an application was filed by the
defendant(s) under Order 7 Rule 11(d) CPC stating
that the plaint disclosed no cause of action. The
civil court held that the plaint is to be
bifurcated as it did not disclose any cause of
action against the Director's Defendant(s) 2 to 4
therein. On that basis, the High Court had opined
that the suit can continue against Defendant 1
company alone. The question considered by this
Court was whether such a course is open to the
civil court in exercise of powers under Order 7
Rule 11(d) CPC. The Court answered the said
question in the negative by adverting to several
decisions on the point which had consistently held
that the plaint can either be rejected as a whole
or not at all. The Court held that it is not
permissible to reject plaint qua any particular
portion of a plaint including against some of the
defendant(s) and continue the same against the
others. In no uncertain terms the Court has held
that if the plaint survives against certain
defendant(s) and/or properties, Order 7 Rule 11(d)
CPC will have no application at all, and the suit
as a whole must then proceed to trial.
11. In view of this settled legal position we may
now turn to the nature of reliefs claimed by
Respondent 1 in the notice of motion considered by
the Single Judge in the first instance and then the
Division Bench of the High Court of Bombay. The
principal or singular substantive relief is to
reject the plaint only qua the applicant,
Respondent 1 herein. No more and no less.
12. Indubitably, the plaint can and must be
rejected in exercise of powers under Order 7 Rule
11(d) CPC on account of non-compliance with
mandatory requirements or being replete with any
institutional deficiency at the time of
presentation of the plaint, ascribable to clauses
(a) to (f) of Rule 11 of Order 7 CPC. In other
words, the plaint as presented must proceed as a
whole or can be rejected as a whole but not in
part. In that sense, the relief claimed by
Respondent 1 in the notice of motion(s) which
commended to the High Court, is clearly a
jurisdictional error. The fact that one or some of
the reliefs claimed against Respondent 1 in the
suit concerned is barred by Section 34 of the 2002
37
Act or otherwise, such objection can be raised by
invoking other remedies including under Order 6
Rule 16 CPC at the appropriate stage. That can be
considered by the Court on its own merits and in
accordance with law. Although, the High Court has
examined those matters in the impugned judgment the
same, in our opinion, should stand effaced and we
order accordingly.
13. Resultantly, we do not wish to dilate on the
argument of the appellant(s) about the
inapplicability of the judgments taken into account
by the Division Bench of the High Court or for that
matter the correctness of the dictum in the
judgment concerned on the principle underlying the
exposition in Nahar Industrial Enterprises Ltd. v.
Hong Kong and Shanghai Banking Corpn. [Nahar
Industrial Enterprises Ltd. v. Hong Kong and
Shanghai Banking Corpn., (2009) 8 SCC 646 : (2009)
3 SCC (Civ) 481] to the effect that DRT and also
the appellate authority cannot pass a decree nor is
it open to it to enter upon determination in
respect of matters beyond the scope of power or
jurisdiction endowed in terms of Section 17 of the
2002 Act. We leave all questions open to be decided
afresh on its own merits in accordance with law .
14. A fortiori, these appeals must succeed on the
sole ground that the principal relief claimed in
the notice of motion filed by Respondent 1 to
reject the plaint only qua the said respondent and
which commended to the High Court, is replete with
jurisdictional error. Such a relief “cannot be
entertained” in exercise of power under Order 7
Rule 11(d) CPC. That power is limited to rejection
of the plaint as a whole or not at all .”
(emphasis supplied)
35.This Court in Sree Anandhakumar Mills Ltd. v. Indian Overseas
Bank & Ors. reported in (2019) 14 SCC 788, has followed the case of
Jagdish Singh (supra) and declared the suit for partition as not
maintainable.
36. This Court in Electrosteel Castings Ltd. v. UV Asset
Reconstruction Co. Ltd . & Ors. (2022) 2 SCC 573 has held that mere
38
allegations of fraud in the plaint will not overcome the bar under
Section 34. The said case involved the assignment deed whereby
Section 13(2) notice was issued to the plaintiff. The plaintiff
claimed the assignment deed to be fraudulent and filed the suit.
This Court declared that the suit was barred under Section 34. The
case is crucial because it hinged on the fact that there were only
allegations of fraud in the plaint without anything further. The
drafting was clever to overcome Section 34. Thus, if there is
something more than mere allegations of fraud, certainly, the civil
court’s jurisdiction won’t be ousted. The relevant paragraphs are:
“9. Having considered the pleadings and averments
in the suit more particularly the use of word
“fraud” even considering the case on behalf of the
plaintiff, we find that the allegations of “fraud”
are made without any particulars and only with a
view to get out of the bar under Section 34 of the
SARFAESI Act and by such a clever drafting the
plaintiff intends to bring the suit maintainable
despite the bar under Section 34 of the SARFAESI
Act, which is not permissible at all and which
cannot be approved. Even otherwise it is required
to be noted that it is the case on behalf of the
plaintiff-appellant herein that in view of the
approved resolution plan under IBC and thereafter
the original corporate debtor being discharged
there shall not be any debt so far as the
plaintiff-appellant herein is concerned and
therefore the assignment deed can be said to be
“fraudulent”.
10. The aforesaid cannot be accepted. By that
itself the assignment deed cannot be said to be
“fraudulent”. In any case, whether there shall be
legally enforceable debt so far as the plaintiff-
appellant herein is concerned even after the
approved resolution plan against the corporate
debtor still there shall be the liability of the
plaintiff and/or the assignee can be said to be
secured creditor and/or whether any amount is due
and payable by the plaintiff, are all questions
which are required to be dealt with and considered
39
by the DRT in the proceedings initiated under the
SARFAESI Act.
11. It is required to be noted that as such in the
present case the assignee has already initiated the
proceedings under Section 13 which can be
challenged by the plaintiff-appellant herein by way
of application under Section 17 of the SARFAESI Act
before the DRT on whatever the legally available
defences which may be available to it. We are of
the firm opinion that the suit filed by the
plaintiff-appellant herein was absolutely not
maintainable in view of the bar contained under
Section 34 of the SARFAESI Act. Therefore, as such
the courts below have not committed any error in
rejecting the plaint/dismissing the suit in view of
the bar under Section 34 of the SARFAESI Act .”
(emphasis supplied)
PRECEDENT ON “IN RESPECT OF ANY MATTER ARISING UNDER SARFAESI
ACT
37. This Court in Bank of Baroda v. Moti Bhai & Ors. reported in
(1985) 1 SCC 475, had to consider the maintainability of the
recovery suit filed by the Bank. The claim of the respondents
therein was that the suit was not maintainable in light of the
Rajasthan Tenancy Act, 1955. The High Court accepted the said
contention. This Court took exception to the judgement of the High
Court and relied on the expression “ in respect of any matter
arising under this Act ” to conclude that the State Act did not
encompass the recovery suit within it’s ambit. The relevant
paragraphs are:
“3. Section 207 of the Act reads thus:
“207. Suit and applications cognizable by revenue
court only.—(1) All suits and applications of the
nature specified in the Third Schedule shall be
heard and determined by a revenue court.
40
(2) No court other than a revenue court shall take
cognizance of any such suit or application or of
any suit or application based on a cause of action
in respect of which any relief could be obtained
by means of any such suit or application .
Explanation.—If the cause of action is one in
respect of which relief might be granted by the
revenue court, it is immaterial that the relief
asked for from the civil court is greater than, or
additional to, or is not identical with, that
which the revenue court could have granted.”
4. Section 256 of the Act, which is complementary to
Section 207, reads thus:
“256. Bar to jurisdiction of civil courts.—(1)
Save as otherwise provided specifically by or
under this Act, no suit or proceeding shall lie
in any civil court with respect to any matter
arising under this Act or the Rules made
thereunder, for which a remedy by way of suit,
application, appeal or otherwise is provided
therein.
(2) Save as aforesaid, no order passed by the
State Government or by any revenue court or
officer in exercise of the powers conferred by
this Act or the Rules made thereunder shall be
liable to be questioned in any civil court.”
5. A combined reading of these two sections would
show that the jurisdiction of civil courts is barred
only in respect of suits and applications of the
nature specified in the Third Schedule to the Act
and in respect of suits or applications based on a
cause of action in respect of which any relief could
be obtained by means of a suit or application of the
nature specified in the Third Schedule. The civil
court has no jurisdiction to entertain a suit or
proceeding with respect to any matter arising under
the Act or the Rules made thereunder, provided that
a remedy by way of a suit, application or appeal or
otherwise is provided in the Act.
6. The legal position of the question of
jurisdiction which is stated above requires
41
examination of the various entries in the Third
Schedule. That schedule is divided into three parts,
the first of which is called “Suits”, the second is
called “Applications”, and the third is called
“Appeals”. We are concerned in this appeal with the
35 entries which are comprehended in the first part
which deals with suits. It is common ground, and the
High Court has not held to the contrary, that none
of the specific Entries 1 to 34 is applicable to the
suit filed by the appellant Bank. The argument is
that the residuary Entry 35 would govern the suit
and, therefore, by reason of Sections 207 and 256 of
the Act, the revenue court alone could entertain it.
Entry 35 is described in the Third Schedule as a
“General” entry, that is to say, not relatable to
any particular section of the Act. The description
of the entry as “General” is given in column 2 of
the Third Schedule which is headed “Section of Act”.
The third column of the Schedule carries the heading
“Description of suit, application or appeal”. Under
that column, the relevant description runs thus:
“Any other suit in respect of any matter arising
under this Act , not specifically provided for
elsewhere in this Schedule.”
We are unable to appreciate how the suit filed by
the Bank can fall under this “General” or residuary
entry. The suit of the Bank to recover the loan is
not in respect of any matter arising under the Act.
The long title of the Act shows that it was passed
in order “to consolidate and amend the law relating
to tenancies of agricultural lands, and to provide
for certain measures of land reforms and matters
connected therewith”. A loan given by a Bank to an
agriculturist, which is in the nature of a
commercial transaction, is outside the contemplation
of the Act and can, by no stretch of imagination, be
said to be in respect of any matter arising under
the Act.
7. The High Court has relied on Section 43 of the
Act in order to come to the conclusion that the deed
of mortgage was executed by Respondent 1 in favour
of the Bank in accordance with that section and,
therefore, the suit for the sale of the tenancy
rights of the mortgage by enforcement of the
mortgage is a suit in respect of a matter arising
under the Act. The High Court holds that such a suit
would attract the residuary entry since the matter
to which it relates has not been specifically
42
provided for elsewhere in the Third Schedule. With
respect, we are unable to accept this line of
reasoning. Section 43(1) of the Act, which is
relevant for this purpose, reads thus:
“43 Mortgage.—(1) Khatedar tenant, or, with the
general or special permission of the State
Government or any officer authorised by it in this
behalf, a Ghair Khatedar tenant, may hypothecate
or mortgage his interest in the whole or part of
his holding for the purpose of obtaining loan from
the State Government or a Land Development Bank as
defined in the Rajasthan Cooperative Societies
Act, 1965 (Act 13 of 1965) or a Cooperative
Society registered or deemed to be registered as
such under the said Act or any Scheduled Bank or
any other institution notified by the State
Government in that behalf.”
The High Court is in error in saying that “it cannot
be disputed” that the mortgage was executed by
Respondent 1 in pursuance of the provisions of
Section 43. The business of the Bank, insofar as
lending transactions are concerned, is not to lend
moneys on mortgages but the business is to lend
moneys. In this particular case, the Bank lent a
certain sum of money to Respondent 1 in the usual
course of its commercial business and nothing could
be further removed from the contemplation of the Act
than such a transaction. It is only by way of a
collateral security that the Bank obtained a
hypothecation bond and a deed of mortgage from
Respondent 1 and a letter of guarantee from
Respondents 2 and 3. The entire judgment of the High
Court is based on the assumption that the mortgage
was executed in pursuance of Section 43 of the Act
and, therefore, residuary Entry 35 of the Third
Schedule is attracted. Once it is appreciated that
the mortgage executed by Respondent 1 is outside the
scope of the Act, the reasoning of the High Court
has to be rejected.
8. On the question of jurisdiction, one must always
have regard to the substance of the matter and not
to the form of the suit. If the matter is approached
from that point of view, it would be clear that,
primarily and basically, the suit filed by the Bank
is one for recovering the amount which is due to it
from the respondents on the basis of the promissory
note executed by Respondent 1 and the guarantee
43
given by Respondents 2 and 3 . The relief sought by
the Bank is that the suit should be decreed for the
repayment of the amount due from the respondents. By
the second prayer, the Bank has asked that “in case
of” non-payment of the decretal amount”, the
mortgaged property should be brought to sale and if
the proceeds of that sale are not enough to meet the
decretal liability, the other movable and immovable
properties of the respondents should be put to sale.
The suit is not one to enforce the mortgage and,
even assuming for the purpose of argument that it
is, the mortgage not having been executed under
Section 43 of the Act, nor being one relatable to
that section, the residuary Entry 35 can have no
application. If that entry is out of way, there is
no other provision in the Act which would apply to
the instant suit. The civil court has, therefore,
jurisdiction to entertain the suit filed by the
appellant Bank.”
(emphasis supplied)
TRIBUNAL IS A CREATURE OF STATUTE AND CANNOT GO BEYOND THE
FOUR CORNERS OF THE SARFAESI ACT.
38. The Debts Recovery Tribunal is a creature of the RDB Act of
1993 and is empowered to exercise powers under that Act and the
SARFAESI Act of 2002. The Tribunal is bound by the powers conferred
to it by the Parliament. Interestingly, when this Court in Harshad
Govardhan Sondagar v. International Assets Reconstruction Co. Ltd.
reported in (2014) 6 SCC 1 held that the tenant cannot approach the
DRT because the re-possession can be only in favour of the
borrower, the Parliament stepped in and amended the SARFAESI Act.
Sub-sections (3) and (4) of Section 17 respectively are instructive
to the level of examination that the DRT can undertake, and the
same is limited to the validity of the measures under sub-section
(4) of section 13. Hence, the DRT is not permitted to examine the
44
validity of the earlier sale deed, whereafter the mortgage was
executed in favour of the Bank.
39.This Court in M.P. Wakf Board v. Subhan Shah (Dead) by LRs.
reported in (2006) 10 SCC 696 has held that the Tribunal in absence
of any power vested in it cannot transgress beyond the four corners
of the Act. The relevant paragraphs are:
“28. The Tribunal had been constituted for the
purposes mentioned in Section 83 of the 1995 Act. It
is an adjudicatory body. Its decision is final and
binding but then it could not usurp the jurisdiction
of the Board. Our attention has not been drawn to any
provision which empowers the Tribunal to frame a
scheme. In absence of any power vested in the
Tribunal, the Tribunal ought to have left the said
function to the Board which is statutorily empowered
therefor. Where a statute creates different
authorities to exercise their respective functions
thereunder, each of such authority must exercise the
functions within the four corners of the statute .”
(emphasis supplied)
40. The Constitution Bench in Om Prakash Gupta v. Dr. Rattan Singh
& Anr. reported in 1962 SCC OnLine SC 111, has declared that the
tribunals being creatures of the statute have limited jurisdiction.
The relevant paragraphs are as under:
“4………The Controller, therefore, must be taken to have
decided that there was a relationship of landlord and
tenant between the parties, and secondly, that the
tenant was entitled to the protection under the Act.
It is true that the Act does not in terms authorise
the authorities under the Act to determine finally
the question of the relationship of landlord and
tenant. The Act proceeds on the assumption that there
is such a relationship. If the relationship is
denied, the authorities under the Act have to
determine that question also, because a simple denial
of the relationship cannot oust the jurisdiction of
the tribunals under the Act. True, they are tribunals
of limited jurisdiction, the scope of their power and
authority being United by the provisions of the
45
Statute. But a simple denial of the relationship
either by the alleged landlord or by the alleged
tenant would not have the effect of ousting the
jurisdiction of the authorities under the Act,
because the simplest thing in the world would be for
the party interested to block the proceedings under
the Act to deny the relationship of landlord and
tenant. The tribunals under the Act being creatures
of the Statute have limited jurisdiction and have to
function within the four-corners of the Statute
creating them. But within the provisions of the Act,
they are tribunals of exclusive jurisdiction and
their orders are final and not liable to be
questioned in collateral proceedings like a separate
suit or application in execution proceedings. In our
opinion, therefore, there is no substance in the
contention that as soon as the appellant denied the
relationship of landlord and tenant, the jurisdiction
of the authorities under the Act was completely
ousted. Nor is there any justification in the
contention that the provision of sub-section (7) of
Section 15 of the Act had been erroneously applied to
the appellant. ……”
(emphasis supplied)
MAINTAINABILITY OF THE CIVIL SUIT AGAINST THE BANK UNDER THE
RDB ACT, 1993
41. In Bank of Rajasthan Ltd. v. VCK Shares & Stock Broking
Services Ltd., reported in (2023) 1 SCC 1, due to conflicting
decisions of Benches comprising of two Judges, a reference Bench
of this Court was called upon to decide whether the jurisdiction
of the civil court is ousted as regards an independent suit
against the Bank in the context of the provisions of the RDB Act,
1993, and whether such a suit can be transferred to the DRT with
or without consent. This Court held:
(a)That civil court’s jurisdiction to entertain the
suit is not ousted.
46
(b)In the absence of any power, the independent suit
cannot be transferred to the DRT .
(c)As there is no power, the transfer of the suit
cannot be done with or without consent .
(d) That the barring of jurisdiction of the civil
court is to be strictly interpreted and not to be
readily inferred.
(emphasis supplied)
42. The relevant paragraphs are:
“39. On a plain reading of the provisions, the
conclusion reached was that Section 17 of the RDB Act
bars the jurisdiction of the civil court only in
respect of applications filed by the Bank or
financial institution. This provision did not bar the
jurisdiction of the civil court to try a suit filed
by the borrower. There was also an absence of
provisions in the Act for transfer of suits and
proceedings except Section 31, which relates to
pending suit proceedings by a bank or financial
institution for recovery of debt.
xxx xxx xxx
Our view
43. We must note at the threshold itself that there
are no restrictions on the power of a civil court
under Section 9 of the Code unless expressly or
impliedly excluded. This was also reiterated by a
Constitution Bench of this Court in Dhulabhai v.
State of M.P. [Dhulabhai v. State of M.P., (1968) 3
SCR 662 : AIR 1969 SC 78] Thus, it is in the
conspectus of the aforesaid proposition that we will
have to analyse the rival contentions of the parties
set out above. Our line of thinking is also
influenced by a three-Judge Bench of this Court in
Dwarka Prasad Agarwal v. Ramesh Chander Agarwal
[Dwarka Prasad Agarwal v. Ramesh Chander Agarwal,
(2003) 6 SCC 220] where it was opined that Section 9
of the Code confers jurisdiction upon civil courts to
determine all disputes of civil nature unless the
same is barred under statute either expressly or by
necessary implication and such a bar is not to be
readily inferred. The provision seeking to bar
47
jurisdiction of a civil court requires strict
interpretation and the Court would normally lean in
favour of construction which would uphold the
jurisdiction of the civil court .
44. Now, if we turn to the objective of the RDB Act
read with the scheme and provisions thereof; it is
abundantly clear that a summary remedy is provided in
respect of claims of Banks and financial institutions
so that recovery of the same may not be impeded by
the elaborate procedure of the Code. The defendant
has a right to defend the claim and file a
counterclaim in view of sub-sections (6) and (8) of
Section 19 of the RDB Act. In case of pending
proceedings to be transferred to DRT, Section 31 of
the RDB Act took care of the issue of mere transfer
of the Bank's claim, albeit without transfer of the
counterclaim. Thus, if the debtor desires to
institute a counterclaim, that can be filed before
DRT and will be tried along with the case. However,
it is subject to a caveat that the Bank may move for
segregation of that counterclaim to be relegated to a
proceeding before a civil court under Section 19(11)
of the RDB Act, though such determination is to take
place along with the determination of the claim for
recovery of debt.
45. We are thus of the view that there is no
provision in the RDB Act by which the remedy of a
civil suit by a defendant in a claim by the Bank is
ousted, but it is the matter of choice of that
defendant. Such a defendant may file a counterclaim,
or may be desirous of availing of the more strenuous
procedure established under the Code, and that is a
choice which he takes with the consequences thereof.
xxx xxx xxx
47. We may also refer to the judgment of this Court
in Transcore [Transcore v. Union of India, (2008) 1
SCC 125 : (2008) 1 SCC (Civ) 116] opining that DRT,
being a Tribunal and a creature of the statute, does
not have any inherent power which inheres in civil
courts such as Section 151 of the Code.
48. We now draw our attention to Chapter 5 of the RDB
Act, which deals with recovery of debt determined by
DRT. Section 25 of the RDB Act prescribes the mode of
recovery of debts, which takes place pursuant to a
certificate issued under sub-section (7) of Section
19 to recover the amount of debt specified in the
certificate by any of the modes specified therein.
The expanse of the reliefs the defendant may claim in
the suit proceeding can certainly go beyond mere
48
adjustments of the amounts of claim, for which DRT
would not have any power.
49. Now, turning to the issue of the power of the
civil court to transfer an independent proceeding
instituted by a defendant to be tried alongside a
recovery proceeding before DRT. There is gainsay that
there is no specific power to transfer a suit to DRT.
A plaint can be returned only under the provisions of
Order 7 Rule 10 of the Code for the reasons specified
therein. In the absence of such reasons, Section 151
of the Code cannot be utilised as a residuary power
to achieve the transfer, which is really a
consequence of return of the plaint when the grounds
under Order 7 Rule 10 of the Code are not satisfied.
The absence of any legislative power cannot give a
power by implication to the civil court. We believe
that it would not be appropriate to read such power
to transfer a suit to a DRT under Section 151 of the
Code when DRT is a creature of a statute and that
statute does not provide for such eventuality.
50. We must also notice an important aspect that even
where a defendant is to invoke the jurisdiction of
DRT by filing a counterclaim, the Bank has a right to
seek a relegation of that claim to the civil court
and DRT has been empowered to do so, albeit, at the
final adjudication stage. This is so in view of the
summary nature of remedy provided before DRT and
thus, if certain inquiries beyond the contours of
what DRT does are envisaged, a civil court remedy may
be considered as appropriate.
xxx xxx xxx
56. In view of the discussion aforesaid, the
questions framed above are to be answered as under:
(c) Is the jurisdiction of a civil court to try a
suit filed by a borrower against a bank or financial
institution ousted by virtue of the scheme of the RDB
Act in relation to the proceedings for recovery of
debt by a bank or financial institution?
The aforesaid question ought to be answered first and
is answered in the negative.
(a)Whether an independent suit filed by a borrower
against a bank or financial institution, which
has applied for recovery of its loan against the
plaintiff under the RDB Act, is liable to be
transferred and tried along with the application
under the RDB Act by DRT?
49
In the absence of any such power existing in the
civil court, an independent suit filed by the
borrower against the Bank or financial institution
cannot be transferred to be tried along with
application under the RDB Act, as it is a matter of
option of the defendant in the claim under the RDB
Act. However, the proceedings under the RDB Act will
not be impeded in any manner by filing of a separate
suit before the civil court.
(b) If the answer is in the affirmative, can such
transfer be ordered by a court only with the
consent of the plaintiff?
Since there is no such power with the civil court,
there is no question of transfer of the suit whether
by consent or otherwise.”
(emphasis supplied)
HOW TO INTERPRET THE CLAUSES WHICH BAR THE CIVIL COURT’S
JURISDICTION
43. This Court in Dwarka Prasad Agarwal (Dead) by LRs. & Anr. v.
Ramesh Chander Agarwal & Ors. reported in (2003) 6 SCC 220 (3 Judge
Bench) has explained that bar of jurisdiction of the civil court is
not to be readily inferred. Such a provision requires strict
interpretation. It was further held that this Court would lean in
favour of construction which would uphold the retention of the
civil court's jurisdiction. The relevant paragraphs are:
“22. The dispute between the parties was eminently a
civil dispute and not a dispute under the provisions
of the Companies Act. Section 9 of the Code of Civil
Procedure confers jurisdiction upon the civil courts
to determine all disputes of civil nature unless the
same is barred under a statute either expressly or
by necessary implication. Bar of jurisdiction of a
civil court is not to be readily inferred. A
provision seeking to bar jurisdiction of a civil
court requires strict interpretation. The court, it
is well settled, would normally lean in favour of
50
construction, which would uphold retention of
jurisdiction of the civil court . The burden of proof
in this behalf shall be on the party who asserts
that the civil court's jurisdiction is ousted. (See
Sahebgouda v. Ogeppa [(2003) 6 SCC 151 : (2003) 3
Supreme 13].) Even otherwise, the civil court's
jurisdiction is not completely ousted under the
Companies Act, 1956.
xxx xxx xxx
25. In that view of the matter, we are of the
opinion that the civil suit was maintainable. In any
event, we fail to understand and rather it is
strange as to how the High Court while rejecting
relief to the original plaintiff (late Dwarka Prasad
Agarwal), granted a similar relief in favour of the
first respondent herein.”
(emphasis supplied)
44. Before we close this litigation, we deem it necessary to
observe that Banks should remain very careful with inadequate title
clearance reports, more particularly, when such reports are
obtained cheaply and at times for external reasons. This concerns
the protection of public money and is in the larger public
interest. Therefore, it is essential for the Reserve Bank of India
and other stakeholders to collaborate in developing a standardized
and practical approach for preparing title search report before
sanctioning loans and also for the purpose of determining liability
(including potential criminal action) of the Officer who approves
loan. Additionally, there should be standard guidelines for fees
and costs associated with title search reports so as to ensure that
they maintain high quality.
45.In such circumstances referred to above, no error not to speak
of any error of law could be said to have been committed by the
51
High Court in passing the impugned order.
46.In the result, this appeal fails and is hereby dismissed. The
interim order earlier granted by this Court stands vacated. The
civil suits shall now proceed further expeditiously in accordance
with law. All connected appeals stand disposed of in the aforesaid
terms.
47.Pending application(s), if any, shall stand disposed of.
…………………………………………………………………………J.
[J.B. PARDIWALA]
…………………………………………………………………………J.
[R. MAHADEVAN]
NEW DELHI;
09
th
JANUARY 2025.
52
ITEM NO.121 COURT NO.14 SECTION IV-C
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No(s).1876/2016
CENTRAL BANK OF INDIA & ANR. Appellant(s)
VERSUS
SMT. PRABHA JAIN & ORS. Respondent(s)
([FOR DIRECTIONS])
WITH
C.A. No. 1877/2016 (IV-C)
C.A. No. 1896/2016 (IV-C)
C.A. No. 1893/2016 (IV-C)
C.A. No. 1897/2016 (IV-C)
C.A. No. 1915/2016 (IV-C)
C.A. No. 1907/2016 (IV-C)
C.A. No. 1913/2016 (IV-C)
C.A. No. 1900/2016 (IV-C)
C.A. No. 1898/2016 (IV-C)
C.A. No. 1916/2016 (IV-C)
C.A. No. 1914/2016 (IV-C)
C.A. No. 1892/2016 (IV-C)
C.A. No. 1910/2016 (IV-C)
C.A. No. 1899/2016 (IV-C)
C.A. No. 1917/2016 (IV-C)
Date : 09-01-2025 These appeals were called on for hearing today.
53
CORAM :
HON'BLE MR. JUSTICE J.B. PARDIWALA
HON'BLE MR. JUSTICE R. MAHADEVAN
For Appellant(s) Mr. O. P. Gaggar, AOR
Mr. Sachindra Karn, Adv.
For Respondent(s) Mr. Umesh Babu Chaurasia, Adv.
Ms. Prity Kumari, Adv.
Ms. Manjula Chaurasia, Adv.
Mr. Maneesh Pathak, Adv.
Mr. Rameshwar Prasad Goyal, AOR
Ms. Pragati Neekhra, AOR
Mr. Aditya Bhanu Neekhra, Adv.
Mr. Atul Dong, Adv.
Mr. Aniket Patel, Adv.
UPON hearing the counsel the Court made the following
O R D E R
These civil appeals are disposed of in terms of the
signed reportable order.
Pending application(s), if any, shall stand disposed of.
(SAPNA BISHT) (POOJA SHARMA)
COURT MASTER (SH) COURT MASTER (NSH)
(Signed reportable order is placed on the file)
In a significant and reportable judgment, the Supreme Court of India has meticulously clarified the boundaries of `Civil Court Jurisdiction` in disputes involving properties under the `SARFAESI Act`. This landmark ruling, now thoroughly analyzed on CaseOn, underscores the inherent powers of civil courts to adjudicate matters of title and possession that fall outside the limited scope of the Debt Recovery Tribunal (DRT).
The case originated with Smt. Prabha Jain (Respondent No.1), who filed a Civil Suit challenging a sale deed and subsequent mortgage. Her father-in-law had purchased the suit land in 1967. Following his death in 2005, the land was inherited in equal shares by his wife, his son Mahendra Kumar Jain (Smt. Prabha Jain’s late husband), and another son, Sumer Chand Jain (Defendant No.4). Upon Mahendra Kumar’s demise, Smt. Prabha Jain inherited his 1/3rd share. However, Sumer Chand Jain allegedly partitioned the land illegally without the consent of other heirs and sold one plot to Parmeshwar Das Prajapati (Defendant No.3), who then mortgaged it to the Central Bank of India (Defendant No.1) for a loan.
The Bank subsequently initiated proceedings under Section 13 of the SARFAESI Act due to loan default, taking possession of the property and advertising it for auction. Smt. Prabha Jain filed a civil suit seeking:
The Central Bank of India filed an application under Order VII Rule 11 of the Code of Civil Procedure (CPC), arguing that the civil court lacked jurisdiction due to Section 34 of the SARFAESI Act. The trial court agreed, rejecting the plaint and also noting improper court fee payment.
On appeal, the High Court of Madhya Pradesh at Jabalpur set aside the trial court’s order. The High Court held that the DRT lacked jurisdiction to determine questions of title involving persons other than the mortgagor, especially concerning the validity of the sale deed and its consequential impact on the mortgage. It also found that proper court fees had been paid.
The primary issue before the Supreme Court was whether the civil court's jurisdiction to entertain Smt. Prabha Jain's suit, seeking declarations regarding the validity of a sale deed and mortgage, and for possession, was barred by Section 34 of the SARFAESI Act.
Section 34 of the SARFAESI Act explicitly bars civil courts from entertaining any suit or proceeding concerning matters that a Debts Recovery Tribunal (DRT) or Appellate Tribunal (DRAT) is empowered to determine under the Act. It also prohibits injunctions against actions taken under the Act.
Section 17(1) allows “any person (including borrower) aggrieved” by measures taken by a secured creditor under Section 13(4) to apply to the DRT. Section 17(3), as it stood prior to the 2016 amendment, empowered the DRT to declare measures invalid and “restore the possession of the secured assets back to the borrower” if the measures were not in accordance with the Act or rules.
The Court reiterated that tribunals, including the DRT, are creatures of statute with limited jurisdiction. They cannot transgress beyond the powers explicitly vested in them by the enabling Act. Their primary function under Section 17 is to examine whether measures taken by a secured creditor are in accordance with the Act, not to adjudicate complex questions of title or partition.
The Supreme Court agreed with the High Court that the DRT’s jurisdiction under Section 17 is limited to examining the legality of measures taken by a secured creditor under Section 13(4). It does not extend to adjudicating complex questions of title, especially when they involve third parties not directly related to the borrowing or the mortgage. The declarations sought by Smt. Prabha Jain regarding the nullity of the sale and mortgage deeds concerned actions taken *prior* to the secured creditor’s involvement and the invocation of SARFAESI provisions. Such matters, involving the final determination of title, are inherently within the civil court's domain under Section 9 of the CPC.
The Court meticulously distinguished between the DRT’s power to “restore” possession under unamended Section 17(3) and the plaintiff’s prayer to “be handed over” possession. “Restore” implies returning something to an earlier condition or position, typically to the borrower who was previously in possession. Smt. Prabha Jain was neither the borrower nor in possession; her claim was independent and adverse to the borrower. Therefore, the DRT, with its limited power to merely “restore” possession, could not “hand over” possession to a third party who had never been in possession. This relief, too, fell outside the DRT’s competence.
A crucial procedural point reiterated was that a plaint cannot be rejected in part under Order VII Rule 11 of the CPC. Even if one of the reliefs sought were barred by the SARFAESI Act, the plaint, if other reliefs survived, would have to proceed as a whole. Since the first two reliefs (declaration of nullity of sale and mortgage deeds) were clearly within the civil court's jurisdiction, the entire plaint could not be rejected.
For legal professionals needing quick insights into such intricate rulings, CaseOn.in provides concise 2-minute audio briefs that distill the essence of these judgments, making it easier to grasp complex legal analysis and implications on the go.
The Court carefully examined previous judgments, particularly `Jagdish Singh (supra)`, noting that while it held the civil suit barred, it might have overlooked the DRT's lack of power to decide partition or complex title disputes involving non-borrowers. The Court emphasized the `Dhulabhai` principle, asserting that civil court jurisdiction should not be readily inferred as ousted, and statutory bars must be strictly interpreted.
Drawing from `Electrosteel Castings (supra)`, the Court clarified that while allegations of fraud can be an exception to the Section 34 bar, they must be substantiated with particulars. Mere clever drafting using the word “fraud” without concrete details will not suffice to circumvent the statutory bar.
Citing `Bank of Baroda v. Moti Bhai (supra)`, the Court stressed the importance of looking at the “substance of the matter” rather than merely the “form of the suit” when determining jurisdiction. The recovery of a commercial loan by a bank was deemed outside the contemplation of a State Tenancy Act, thus affirming civil court jurisdiction in that context, a principle applicable here to determine the DRT's limits.
The Supreme Court found no error in the High Court’s decision to allow Smt. Prabha Jain’s appeal and restore her civil suit. The appeals filed by the Central Bank of India were dismissed. The Court vacated any interim orders previously granted, directing that the civil suits proceed expeditiously in accordance with law.
This judgment provides crucial clarity on the demarcation of jurisdiction between civil courts and the DRT under the SARFAESI Act. It solidifies the principle that complex title disputes, especially those involving third parties or claims adverse to the borrower, remain within the civil court's purview, as DRTs are not equipped to conduct full-fledged trials on such matters.
It highlights the statutory limitations of the DRT, particularly regarding the relief of possession. The distinction between “restore” and “hand over” possession is significant, indicating that DRTs cannot grant possession to those who were never in possession or whose claims are independent of the borrower.
The ruling reinforces the procedural aspect of Order VII Rule 11 CPC, reiterating that a plaint must be rejected entirely or not at all. This prevents piecemeal rejection and ensures that legitimate claims in civil courts are not summarily dismissed due to a partial jurisdictional bar.
The Supreme Court also issued a vital observation urging banks to exercise greater caution and due diligence with title clearance reports before sanctioning loans. This is critical for protecting public money and mitigating risks, suggesting a need for standardized guidelines and accountability for officers approving loans.
All information provided in this article is for informational purposes only and does not constitute legal advice. While efforts have been made to ensure accuracy, readers should consult a qualified legal professional for advice on specific legal issues.
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