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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
H.P. SANDESH, J.
M/s. Shree Garodi Steels - Appellant
Versus
M/s. Yojaka India Private Ltd. – Respondent
R.S.A. No.2243 of 2023 (INJ)
Decided on : 26-07-2024
SARFAESI - Injunction - SARFAESI Act Sections 13, 14, 17, 34 - The court interpreted the provisions of the SARFAESI Act, emphasizing that civil courts lack jurisdiction over matters under the Act, particularly regarding injunctions against auction purchasers, affirming the exclusivity of the DRT's authority.
Fact of the Case:
The plaintiff sought an injunction against the defendant, claiming interference with property possession after an auction conducted by the bank. The bank had classified the plaintiff's account as NPA and proceeded with recovery actions, leading to the auction sale of the property to the defendant.
Finding of the Court:
The Trial Court rejected the plaint based on the SARFAESI Act's provisions, asserting that the civil court lacked jurisdiction. The First Appellate Court initially reversed this decision, but the higher court found that the appeal was justified, confirming the Trial Court's ruling.
Issues: Whether the First Appellate Court erred in setting aside the Trial Court's order rejecting the plaint based on the SARFAESI Act's jurisdictional bars.
Ratio Decidendi: The court held that the SARFAESI Act bars civil suits regarding matters under its jurisdiction, particularly injunctions against auction purchasers, affirming that the appropriate remedy lies with the DRT.
Result: The second appeal is allowed, confirming the Trial Court's judgment and decree.
JUDGMENT :
1. This Second Appeal is filed against the divergent finding of the First Appellate Court passed in R.A.No.9/2023 dated 30.10.2023 on the file of Prl. Senior Civil Judge and CJM, Mangaluru.D.K in allowing the appeal and setting aside the order passed by the Trial Court in allowing the application filed under Order 7 Rule 11(d) of CPC.
2. This second appeal listed for admission and with the consent of both the counsel, heard the appeal on merits.
3. The parties are referred to as per their original rankings before the Trial Court to avoid confusion and for the convenience of the Court.
4. The factual matrix of case of plaintiff/respondent before the Trial Court that he has prayed restrain the defendant in interfering with peaceful possession and enjoyment of the suit schedule property consequent upon purchase made by the defendant/appellant herein. The suit schedule property which was purchased in the auction and contend that no possession is delivered to the auction purchaser. It is also contended that he had borrowed the loan and could not repay the amount and hence, the creditor Bank of Baroda classified the plaintiff’s company account as NPA on 01.04.2017 and proceeded for recovery by bringing the property of the plaintiff company for public auction etc. The company has given an OTS proposal to the Bank of Baroda for a sum of Rs.14.25 crore and the same has been accepted by the Bank. In pursuant of the OTS, opened a no lien account with the Bank of Baroda and deposited Rs.1.00 crore. When the creditor bank proceeded to recover the money, the plaintiff/respondent had approached the High Court by filing the W.P.No.1016/2022 and High Court was pleased to grant an interim order dated 28.01.2022 directing the bank to restore the possession of the subject property to the plaintiff’s company and not to confirm the then proposed e-auction sale scheduled to be held on 29.01.2022 without leave of the Court by directing the plaintiff company to deposit 10% of the OTS amount of Rs.14.25 Crore within 3 weeks from 28.01.2022 and another 10% within three weeks thereafter towards the upfront amount for the said OTS compromised. The bank had withdrawn the amount of Rs.1.00 crore deposited by the plaintiff company in no lien account and the plaintiff company has also deposited a sum of Rs.1.80 crores and reported compliance of the condition stated in the interim order dated 28.01.2022.
5. It is contended that Bank of Baroda was not conducted the e-auction to be held on 29.01.2022 and published a fresh e-auction dated 13.03.2022 fixing the date of auction on 13.03.2022 deliberately by disobeying the interim order of the High Court and plaintiff company had filed I.A.No.3/2022 again praying for the e-auction and High court declined to consider sum of Rs.1.00 crore withdrawn by the Bank of Baroda from no lien account pursuant to the OTS entered into between the bank and the plaintiff company also filed an application to recall the order giving an undertaking that company would further deposit a sum of Rs.1.00 crore on or before 07.04.2022 and accordingly purchased D.D and the same is pending for consideration. It is contended that in disobeying the order of the High Court, auction was conducted and property was sold in favour of the defendant. Immediately, he had filed O.S.No.444/2022 seeking the relief of permanent injunction restraining the Mangalore City Corporation for mutating the khata and khata was transferred and hence the suit become infructuous and the same was withdrawn. It is contended that the defendant on the basis of revenue documents raised a false claim and attempting to take forcible physical possession of the schedule property by illegally dispossessing the plaintiff quite contrary to law. An attempt was made to take the possession and hence the same was resisted and filed the suit for the relief of permanent injunction wherein the following prayer is made:
Civil courts cannot entertain suits regarding matters under the SARFAESI Act, including injunctions against auction purchasers, as jurisdiction lies exclusively with the DRT.
Civil Courts have jurisdiction in SARFAESI Act matters only when the secured creditor has not initiated actions under the Act. Limitation laws apply strictly to such actions.
Under Section 17, it implies the phrase “any person aggrieved by any of the measures under Section 13(4)” which implies any and every action resorted to by the bank, it is authorised to take recourse....
The civil court retains jurisdiction to adjudicate on the validity of sale and mortgage deeds under the SARFAESI Act, and a plaint cannot be partially rejected under Order VII Rule 11.
Civil courts lack jurisdiction in matters under the SARFAESI Act, as grievances must be addressed to the DRT, per Section 34.
The SARFAESI Act does not render a sale agreement void if executed without the secured creditor's consent; rather, it allows for specific performance as long as the secured creditor's rights are pres....
Application against measures to recover secured debts – Jurisdiction - Jurisdiction of Civil Court is not ousted. However, Civil Courts have to be extremely cautious while granting any interim order ....
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