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High Court of Karnataka (Circuit Bench At Dharwad)
A.N. VENUGOPALA GOWDA, J.
Yashavant
Versus
Senior Manager, A.B.N. Amro Bank N.V., New Delhi
R.S.A. No. 5317 of 2010 (DEC/INJ) C/w etc.
Decided on: 28-02-2013
SECURITIZATION AND RECONSTRUCTION OF FINANCIAL ASSETS & ENFORCEMENT OF SECURITY INTEREST ACT, 2002 - Section 34: [A.N. Venugopala Gowda, J] Bar of jurisdiction of Civil Court in the matter recovery of debt covered under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Held, From the provisions of Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 it is clear that no Civil Court shall have jurisdiction to entertain any suit in respect of any matter which a Debt Recovery Tribunal empowers by or under the Act to determine and no injunction shall be granted by any Court or other authorities in respect of any action taken or to be taken back. Further held, The preamble of the Act shows that it was enacted to regulate securitization and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The Act is a special law. It confers jurisdiction upon the Tribunal and the Appellate Tribunal constituted in pursuance of Sections 17 and 18. On account of the enforcement of the Act, the specialized forums i.e., the Debt Recovery Tribunal and the Debt Recovery Appellate Tribunal have been constituted for expeditious adjudication of disputes relating to debts due to Banks and Financial Institutions. The analysis of the provisions of the Debt Recovery Tribunal Act shows that its primary object is to facilitate creation of special machinery for speedy recovery of dues of Banks and Financial Institutions. The Act has empowered the secured creditors to take steps for recovery of their dues without the intervention of Courts or the Tribunals. In view of the machinery provided under Sections 17 and 18 of the Act, Civil Court’s jurisdiction to entertain a suit or a proceeding in respect of any matter which a Tribunal or DRAT is empowered by or under the Act has been taken away as per Section 34 of the Act and hence, no Civil Court shall have jurisdiction to grant injunction in respect of any action taken or to be taken in pursuance of any power conferred by or under the provisions of the Act. On facts, held, A perusal of the plaint averments in the case on hand would clearly indicate that the plaintiff executed loan documents, availed the loans, purchased the machinery and created equitable mortgage in favour of the defendant. Due to non-repayment of loan/s availed, the defendant proceeded against the plaintiff under the provisions of the Act in respect of secured property. In view of the clear provision under Section 34 of the Act, the Action initiated by the defendant under Section 13 of the Act cannot be subjected matter of consideration in a Civil Court. Section 34 of the Act imposes a specific bar to grant any relief of injunction in respect of any action taken by the Bank.
CODE OF CIVIL PROCEDURE, 1908 -Order 7 Rule 11(d): [A.N. Venugopala Gowda, J] Application under - Order passed by the Trial Court rejecting the plaint/s as the suit/s are barred under Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, in the absence of written statement of the defendant - Order confirmed by the First Appellate Court -- Held, A plaint shall be liable for rejection in exercise of the jurisdiction under Order 7 rule 11(d) CPC, if it appears from the averments made therein that the suit is barred by any law in force. For the purposes of deciding an application under Clauses (a) and (d) of Rule 11 of Order 7 CPC, the averments in the plaint are germane. The pleas taken by the defendant in the written statement would be irrelevant.
Venugopala Gowda, J.
1. The appellant/plaintiff calls in question legality of the identical but separate Order/s passed by the Trial Judge rejecting the plaint’s in terms of Order 7 Rule 11(d) of the Code of Civil Procedure, 1908, as the suits are barred by S.34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the Act). Said orders were upheld by identical but separate Judgment/s and Decree/s passed by the First Appellate Court. This group of second appeals were heard together as the parties are common and the appeals involve common questions of fact and law. For convenience, parties will be referred by their rank in the Trial Court.
2. The plaintiff’s case in brief:
The plaintiff, carrying on business in supply of iron ore and other materials at Hospet, made representations and availed different loans. To secure the loans, plaintiff mortgaged the suit property – equipment/machinery etc., in favour of the defendant. Plaintiff committed default in remittance of loan installments. His accounts were declared as ‘non performing assets’ by the defendant, which sent notices through the Authorised Officer, under S.13(2) of the Act, demanding the plaintiff to clear the outstanding in full, within the statutory period of 60 days. Apprehending that the defendant through the Authorized Officer would seize the mortgaged machines/equipments etc, and that he will not be able to carry on the business and clear the outstanding loans, the suits were instituted. Since the prayers in all the suits are identical, suffice to notice the prayers in O.S.No.103/2009, which are to the following effect:
“(a) a decree declaring that due to loss in supply of iron ore the rate falling to Rs.750/- per ton and the recession in the market the plaintiff is unable to make the payment of installments that requires rescheduling and modifications thereof.
(b) Consequently, by permanent prohibitory injunction the Defendant, their men, agents and servants or any person claiming through them should be restrained from seizing suit machines and not to create third party charge on the suit machine by way of sale or transfer.
(c) By way of mandatory injunction directions be issued to the Defendant bank to reschedule the entire loan the installments thereof and fix it to 25% per month payable by the Plaintiff.
(d) Cost of the suit, any other relief deemed fit and further the Plaintiff also reserves has right to effect, alter and amend the plaint as and when found necessary.
(e) Draw the decree accordingly in the above terms in the interest of justice and equity.”
3. The defendant filed I.A.3 under Order 7 Rule 11 read with S.151 CPC and contended that the plaintiff failed to adhere to financial discipline and committed willful defaults, on account of which, his accounts were declared as ‘non performing assets’ in consonance with the RBI Prudential Guidelines of Asset Classification and notices dated 12.02.2009 were sent through the Authorized Officer, under S.13(2) of the Act, demanding the plaintiff to clear the outstanding loans in full, within a period of 60 days, failing which, it shall be entitled to take steps under S.13(4) of the Act, for enforcement of the rights. It stated that, despite service of the said notices the plaintiff failed to comply with the demand and therefore, it has a right to act in terms of S.13(4) of the Act. It was stated that the relationship of the parties is that of a ‘borrower’ and a ‘secured creditor’ and that the bank has a security interest in the mortgaged property/secured assets and that, it fell within the definition of ‘secured creditor’ as defined under S.2(zd) read with S.2(c) of the Act and as such is entitled to relief under the provisions of the Act. It was stated that, under S.34 of the Act, jurisdiction of the Civil Court is expressly barred and for that reason, the Court has no jurisdiction to entertain and decide the suits.
4. Learned Trial Judge, by separ
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