1. Suit for recovery of money based on an equitable mortgage — Application under Order 11 Rule 12 CPC to summon departmental proceedings to challenge territorial jurisdiction. (Para 1 )
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1995 Supreme(SC) 65
SUPREME COURT OF INDIA
R.M. SAHAI AND S.B. MAJMUDAR, JJ.
Central Bank of India, Appellant
Versus
M/s. Shivam Udyog and others, Respondents.
Civil Appeal No. 706 of 1995 (arising out of S.L.P. (C) No. 4850 of 1993)
Decided on 13-1-1995.
Advocates:
AVADH BIHARI ROHTAGI, MANINDER SINGH, O.P.KHAITAN, SHANKAR GOPAL PAGIRE
AVADH BIHARI ROHTAGI, MANINDER SINGH, O.P.KHAITAN, SHANKAR GOPAL PAGIRE
To challenge a court's jurisdiction by claiming a mortgage is fictitious, it is not necessary to summon internal departmental proceedings against bank officials; such claims can be established through leading evidence and cross-examining witnesses.
Headnote:BANKING—SUIT BY BANK FOR ENFORCEMENT OF BANK SECURITY — APPLICATION BY DEFENDANT TO SUMMON DEPARTMENTAL PROCEEDING PENDING AGAINST BANK OFFICIAL—ONE OF THE CHARGES BEING THAT THE MORTGAGE WAS FICTITIOUS.
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2. Defendants contended that summoning departmental proceedings was necessary to prove the mortgage was fictitious, thereby challenging the court's territorial jurisdiction. (Para 1 )
3. Challenging the validity of a mortgage for jurisdictional purposes can be achieved through evidence and cross-examination without summoning internal disciplinary proceedings of the plaintiff. (Para 2 )
4. Internal disciplinary proceedings against employees are not necessary to establish the fictitious nature of a security for the purpose of challenging territorial jurisdiction. (Para 2 )
5. Appeal allowed — Orders of lower courts set aside — Application to summon enquiry proceedings dismissed — Suit to proceed with liberty to lead evidence on mortgage validity. (Para 3 )
6. Where should a suit for the enforcement of security be filed?
A suit for the enforcement of security must be filed in the court where the property serving as security is situated. (Para 2 )
7. Can a party challenge territorial jurisdiction by claiming a mortgage is fictitious?
Yes. If the mortgage is fictitious, the party may challenge the court's jurisdiction by leading evidence and cross-examining witnesses to prove the security was not created. (Para 2 )
8. Is it necessary to summon internal departmental proceedings to prove a security is fictitious for jurisdictional challenges?
No. Summoning disciplinary proceedings against officials is not necessary to establish that a security is fictitious, as such a fact can be established through evidence and cross-examination. (Para 2 )
JUDGMENT
R. M. SAHAI, J. :- This appeal is directed against judgment and order of the Allahabad High Court. The appellant, a bank constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 had filed a suit for recovery of Rs.8,86,864/- together with costs and interest against respondents Nos. 1 to 5. It was contested by respondents Nos. 1 to 4. It proceeded ex parte against respondent No.5 who had deposited the title deeds of his property over which equitable mortgage was created for repayment of the dues. The house of respondent No. 5 which was offered as security is situated at Ghaziabad. Therefore, the suit was filed at Ghaziabad. An application under O. 11. R.12 of the Code of Civil Procedure was filed by respondents Nos. 1 to 2 for summoning of the departmental proceedings against the employees of the bank as they had come to know that departmental proceedings had been initiated against the official for creation of the mortgage. The application was dismissed by the Trial Court but the order was recalled on review as if no mortgage was created by defendant No.5 then the Court at Ghaziabad shall have no jurisdiction to proceed with the matter. It was held that enquiry/proceedings regarding the equitable mortgage were the only material which could throw light over the matter in dispute. It was observed that the defendants were entitled to claim that no equitable mortgage was created and, therefore, the Court had no jurisdiction to proceed with the suit. In appeal the order was maintained.
2. The suit being for enforcement of the security, it could be filed only where the property is situated. In case the defendants desired to raise the question of jurisdiction as mortgage was fictitious they could do so. But for that it was not necessary to summon the disciplinary proceedings pending against the bank official even if one of the charges is that the security furnished by defendant No.5 was fictitious. It could be established by leading evidence and cross-examining the witnesses. In our opinion, the defendants have by this method attempted to delay the proceedings. We do not propose to say any further as any observation made by us may prejudice the case of parties.
3. In the result, this appeal succeeds and is allowed. The orders passed by the two Courts below are set aside and the application filed by the respondents to summon the enquiry proceedings is dismissed. The suit shall now proceed with liberty to respondents to lead evidence that the mortgage deed was fictitious.
Appeal allowed.
For Citation: AIR 1995 SC 711
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