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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 9771 OF 2013

(Arising out of Special Leave Petition (Civil) No.18 of 2011)

Jagdish Singh …….. Appellant

Versus

Heeralal and others ……. Respondents

J U D G M E N T

K.S. Radhakrishnan, J.

Leave granted.

2.The appellant herein was the auction purchaser, being

the highest bidder for Rs.18,01,000/-, in respect of the land

admeasuring one acre in Khasra Nos.104/3 and 105/2,

Patwari Halka No.4, Village Segaon, Anjad Road, Barwani,

M.P., which was brought to sale for recovery of loan amounts

under the provisions of the Securitisation and Reconstruction

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of Financial Assets and Enforcement of Security Interest Act,

2002 (for short “the Securitisation Act”). The auction was

confirmed by the bank on 08.11.2005 on the appellant’s

depositing Rs.2,90,250/- by 09.11.2005 and remaining 75%

within 15 days. The appellant was not put in possession of

the property in question even though the auction was

confirmed.

3.The appellant – auction purchaser then came to know

that Respondent Nos.1 to 5 herein have filed a Civil Suit

No.16A/07 in the Court of District Judge, Barwani District for a

declaration of title, partition and permanent injunction

against Respondent Nos.7 to 9 and others in which the

appellant and the bank were also made parties. Following

are the reliefs sought for in the said civil suit:

“(A)Decree may be passed in favour of the

plaintiff and against the defendants for

declaration of title to this effect that one acre

land in survey No.104/3 and 105/2 described in

plaint para 4 (a) is undivided joint family

property of plaintiff and defendants No.1 to 4

and the defendants have no right to mortgage it

or attachment and auction of the same against

any loan recovery by defendant No.5 and if

defendants No.1 to 5 might have created any

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charge on the said land then it is not binding on

the plaintiff.

(B) Decree of partition may be passed in

favour of the plaintiffs and against the

defendants for division of the suit land by metes

and bounds and decree may be passed for

separating the land of title of the plaintiffs and

mutation effected in revenue papers.

(C) Decree of permanent injunction may be

passed in favour of the plaintiffs against the

defendant that the defendants shall not, directly

or indirectly, transfer, auction or interfere over

the suit land of the plaintiff in any manner.

(D) Costs of the suit may be awarded against

the defendants.

(E) Other relief which the Hon’ble Court may

deem proper may be granted to the plaintiff

against the defendants.”

4.Respondent Nos.7 to 9 herein, in the meanwhile, filed an

application before the Debt Recovery Tribunal (for short “the

DRT”), Jabalpur under Section 17 of the Securitisation Act

challenging the sale notice dated 08.11.2005. The

application was opposed by the bank and the same was

dismissed by the DRT vide its order dated 21.07.2006.

5.Respondent Nos.6 and 7 (the Bank) filed a preliminary

objection before the civil court stating that in view of Section

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13 read with Section 34 of the Securitisation Act, the civil

court has no jurisdiction to entertain the suit. The court,

therefore, framed the following issues:

“Whether under the provisions of Section 34 & 35

of SARFAESI Act 2002 this court does not have

the jurisdiction to decide the suit as mentioned in

special pleadings in para 10 of the written

statement of defendant No.10 and also

mentioned in para 15 of the written statement of

defendant Nos.6 & 7.”

6.The civil court upheld the preliminary objection stating

that if the plaintiffs had any right, they ought to have filed an

appeal under Section 17 of the DRT Act and not a suit in view

of the specific bar contained in Section 34 of the

Securitisation Act. Civil court, therefore, passed an order on

18.01.2008 holding that the suit is not maintainable and,

hence, the application preferred by the bank under Order 7

Rule 11 of the Civil Procedure Code (for short “the CPC”) was

allowed.

7.Aggrieved by the said order, Respondent Nos.1 to 5

herein filed Civil First Appeal No.130/08 before the High Court

of Madhya Pradesh at Indore. The High Court, however,

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allowed the appeal. The operative portion of the judgment

reads as follow:

“I have perused the contents of the plaint from

the record of the case. A bare perusal of the

plaint indicates that the plaintiffs have raised

the question of title, on the basis of Joint Hindu

Family property and they being the members of

the Joint Hindu Family, it has been pleaded by

them that the property in question had been

acquired through the earnings of the joint family

property. On that basis, it has been maintained

by them that the property in question was liable

to be treated as Joint Hindu Family property, and

not the exclusive property of the defendants. In

these circumstances, on the bare perusal of the

contents of the plaint, it cannot be suggested at

all that the civil suit, filed by the plaintiffs, is

barred under any provisions of the Securitisation

and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2000, or

that civil court has no jurisdiction in the matter.”

8.Aggrieved by the same, this appeal has been preferred.

Shri A.K. Chitale, learned senior counsel appearing for the

appellant, submitted that the High Court has not properly

appreciated the scope of Section 34 of the Securitisation Act

and has completely over-looked the principle laid down by

this Court in various Judgments with regard to the scope of

Section 9 CPC vis-à-vis Section 34 of the Securitisation Act.

Reference was made to the Judgments of this court in

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Mardia Chemicals and others v. Union of india and

others (2004) 4 SCC 311, Central Bank of India v. State

of Kerala and others (2009) 4 SCC 94, United Bank of

India v. Satyavati Tondon and others (2010) 8 SCC 110

and Authorised Officer, Indian Overseas Bank and

others v. Ashok Saw Mill (2009) 8 SCC 366. Learned

senior counsel submitted that the appellant is a bona fide

purchaser for value and the sale was confirmed in his favour

as early as on 08.11.2005. Further, it was pointed out that

the application preferred by Respondent Nos.7 to 9 before

the DRT, challenging the sale notice dated 08.11.2005, was

also dismissed by the DRT on 21.07.2006. Consequently, the

High Court was not justified in interfering with the order

passed by the District Judge.

9.Shri Sanjay Parikh, learned counsel appearing for the

respondents, on the other hand, submitted that the High

Court has rightly interfered with the order of the District

Judge after having found that the civil court has got the

jurisdiction to deal with the rights of the respondents –

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plaintiffs. Learned counsel submitted that the High Court has

correctly appreciated the scope of Section 34 of the

Securitisation Act. Reference was made to the Judgments of

this Court in Nahar Industrial Enterprises Limited v.

Hongkong Shanghai Banking Corporation (2009) 8 SCC

646, Indian Bank v. ABS Marine Products Pvt. Ltd.

(2006) 5 SCC 72 and also to the Mardia Chemicals Ltd.

(supra). Learned counsel submitted that the DRT, exercising

powers under Section 17 of the Securitisation Act, cannot

decide the rights of Respondent Nos.1 to 5 vis-à-vis

Respondent Nos.7 to 9 in a proceeding under Section 17 of

the Securitisation Act and civil court is the right forum to

decide as to whether the secured assets are ancestral

properties of a Hindu Undivided Family (HUF) and they were

acquired through the earnings out of the joint family

properties.

Discussion

10.The Bank of India had advanced a loan of Rs.25 lakhs to

M/s Guru Om Automobiles, 10

th

respondent herein, through

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its proprietor, the 6

th

respondent on 17.02.2000. The loan

was secured by equitable mortgage executed by Respondent

Nos.7 to 9 in respect of land measuring one acre in Khasra

No.104/3 and 105/2, Patwari Halka No.5, Village Seagon,

Anjad Road, Barwani, MP. Respondent Nos.6 to 8 had also

created equitable mortgage on three houses, which were in

their respective names. Original title deeds of all the above-

mentioned properties were duly deposited with the bank at

the time of availing of the loan. 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 01.03.2004. Auction notice was duly published in the

newspapers on 30.09.2005. No objection was raised by the

plaintiffs and the suit land was auctioned on 08.11.2005,

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. Respondent Nos.7 to 9 challenged the sale

notice, as already indicated, by filing an application

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No.19/2005 before the DRT, Jabalpur, which was dismissed

on 21.07.2006. No appeal was preferred against that order

and that order has attained finality.

11.We notice, at this juncture, Respondent Nos.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

Respondent Nos.6 to 9, alleging that the family members of

Respondent Nos.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 Respondent Nos.7 to 9 out of the funds of HUF and

house Nos.41/1, 42/3 and 42/2 were also purchased in the

names of Respondent Nos.6 to 8 respectively, out of the

funds of HUF and, therefore, the properties of HUF. But, the

facts would clearly indicate that the properties referred to

above were purchased by Respondent Nos.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

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property and not the individual property. Respondent Nos.7

to 9 had purchased those lands vide sale deed dated

14.09.1999 and the 6

th

respondent had also purchased in his

individual name House No.42/1 on 31.03.1998 vide

registered sale deed. Similarly, Respondent No.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 Respondent

Nos.6 to 8 herein.

12.We find that the bank had advanced loans on the

strength of the above-mentioned documents which stood in

the names of Respondent Nos.6 to 9. Due to non-repayment

of the loan amount, the Bank can always proceed against the

secured assets.

13.Security interest, within the meaning of Section 2(zf)

has been created in respect of the above mentioned

properties which are secured assets within the meaning of

Section 2(zc), in favour of the secured creditor (the bank)

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within the meaning of Section 2(zd). On failure to re-pay, the

bank, secured creditor can always enforce its security

interest over the secured assets.

14.Secured asset is defined under Section 2(zc) of the

Securitisation Act to mean the property on which security

interest is created. Section 13(1) of the Securitisation Act

states that notwithstanding anything contained in Section 69

or 69A of the Transfer of Property Act, 1882, any security

interest created in favour of any secured creditor may be

enforced, without the intervention of the court or tribunal by

such creditor, in accordance with the provisions of the Act. In

case the borrower fails to discharge his liability, the bank can

take the measures provided in Section 13(4) of the

Securitisation Act for recovery of the loan amount. The

“measures” available for enforcement of security interest is

dealt with in the following provision:

13. Enforcement of security interest –

(1) to (3) xxxxxxxxx

(4) In case the borrower fails to discharge his

liability in full within the period specified in sub-

section (2), the secured creditor may take

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recourse to one or more of the following

measures to recover his secured debt, namely:--

(a) take possession of the secured assets of the

borrower including the right to transfer by way

of lease, assignment or sale for realising the

secured asset;

(b) take over the management of the business of

the borrower including the right to transfer by

way of lease, assignment or sale for realising the

secured asset:

PROVIDED that the right to transfer by way

of lease, assignment or sale shall be exercised

only where the substantial part of the business

of the borrower is held as security for the debt:

PROVIDED further that where the

management of whole of the business or part of

the business is severable, the secured creditor

shall take over the management of such

business of the borrower which is relatable to

the security or the debt;

(c) appoint any person (hereafter referred to as

the manager), to manage the secured assets the

possession of which has been taken over by the

secured creditor;

(d) require at any time by notice in writing, any

person who has acquired any of the secured

assets from the borrower and from whom any

money is due or may become due to the

borrower, to pay the secured creditor, so much

of the money as is sufficient to pay the secured

debt.”

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15.Section 17 of the Securitisation Act confers a right of

appeal to any person, including the borrower, if that person is

aggrieved by any of the “measures” referred to in sub-

section (4) of Section 13 taken by the Secured Creditor. The

operative portion of Section 17 is extracted hereinbelow for

ready reference:

“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 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 sub-section (1) of Section 1.

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(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 secured

assets 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

assets as invalid and restore the possession of

the secured assets to the borrower or restore

the management of the secured assets 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

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specified under sub-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 sub-section (5), any

party 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 application in accordance with the

provisions of the Recovery of Debts Due to

Banks and Financial Institutions Act, 1993 and

the rules made thereunder.”

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16.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.

17.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 Satyavati Tondon’s case (supra).

18.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.

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19.Section 34 of the Securitisation Act ousts the civil court

jurisdiction. For easy reference, we may extract Section 34

of the Securitisation Act, which is as follow:

“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).

20.The scope of Section 34 came up for consideration

before this Court in Mardia Chemicals Ltd. (supra) and this

court held as follow:

“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

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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.”

21.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.

22.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-

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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 realizing 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 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. Civil Court in such

circumstances has no jurisdiction to entertain any suit or

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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.

23.We are of the view that the civil court jurisdiction is

completely barred, so far as the “measure” 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 Respondent Nos.6 to 8 have been

crystalised, before creating security interest in respect of the

secured assets. In such circumstances, we are of the view

that the High Court was in error in holding that only civil

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court has jurisdiction to examine as to 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 of the High Court is set aside. There shall be no

order as to costs.

……..……………………..J.

(K.S. Radhakrishnan)

……………………………J.

(A.K. Sikri)

New Delhi,

October 30, 2013.