State Bank of India vs Jigishaben B. Sanghavi

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2010 Supreme(Bom) 1712

2011(4) ALLMR 262
High Court of Judicature at Bombay
THE HONOURABLE DR. JUSTICE D.Y. CHANDRACHUD & THE HONOURABLE MR. JUSTICE ANOOP V. MOHTA
State Bank of India
Versus
Smt.Jigishaben B.Sanghavi & Others
APPEAL NO.244 OF 2010 IN CHAMBER SUMMONS NO.907 OF 2008 IN SUIT NO.1076 OF 2005
Decided on: 08-12-2010

Advocates Appeared:
For the Appellant:Chirag Balsara with Ms.Shreevardhini Parchure i/b.Negandhi, Shah & Himayatullah, Advocates.
For the Respondents:R1 to R4, Sanjay Jain with Vinod Thakar, R5 to R7, Ms.Anjali Trivedi, Advocates.

Headnote:Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 13(2)-Notice by secured creditor-Objection to-A remedy provided to borrower to raise objection-No cause of action accrues to challenge action of secured creditor at that stage-A challenge at stage of notice under Section 13(2) of Act barred.-The Securitization Act provides a comprehensive scheme, under which initially upon a notice being served under sub-section (2) of Section 13, a remedy is provided, to raise an objection, to the borrower. The objection has to be considered by the secured creditor and reasons for non-acceptance have to be communicated. No cause of action accrues to challenge that action of the secured creditor at that stage. Once a measure is adopted sub-section (4) of Section 13, the Act provides for a remedy of an appeal under Section 17. The scheme which is enunciated under the Act cannot be rendered nugatory by seeking recourse to the jurisdiction either of a civil Court or, for that matter, in adopting a writ proceeding under Article 226 the Constitution at the stage where notice is issued under Section 13(2). A challenge at the stage of a notice under Section 13(2) is not envisaged by the legislation and to allow it at that stage is to defeat the law. Such a challenge is barred.
       Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 17-Right of appeal-To any person, including a borrower-Expression "any person" used in Section 17(1) of Act-It takes within its fold not only borrower but any person who is affected by action taken by secured creditor.-Section 17 provides a right of appeal to any person, including a borrower. The expression "any person" is broad enough in include not only the borrower, but any person who is aggrieved by a measure which is taken by the secured creditor under sub-section (4) of Section 13. This is emphasized in the judgment of the Supreme Court in United Bank of India v. Satyawati Tondon, 2010 (3) Bankers’ Journal 581 : 2010 (5) All MR 902 (SC) at paragraph 17 :
       "The expression ’any person’ used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also guarantor or any other person who may be affected by the action taken under Section 13(4) of Section 14."
       Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 34-Civil Procedure Code, 1908, Section 9-Jurisdiction of civil Courts-Bar of-Section 34 of Act operates as a bar in respect of a civil Court entertaining any suit or proceeding with regard to a matter which can be determined under Act by Debts Recovery Tribunal or Appellate Tribunal-Section 34 prohibits issuance of injunction by a Court in respect of an action to be taken in pursuance of Act or RDDB Act.-Under Section 34, jurisdiction of the civil Court to entertain a suit or proceeding is barred in respect of any matter which the Debts Recovery Tribunal and/or appellate Tribunal, "is empowered by or under this Act to determine". The second part of Section 34 bars the grant of an injunction by any Court or authority "in respect of any action taken or to be taken" in pursuance of the power conferred by the Act or by the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The first part of Section 34 operates as a bar in respect of a civil Court entertaining any suit or proceeding. The bar applies in respect which can be determined under the Act by the Debts Recovery Tribunal or the appellate Tribunal. The second part of Section 34 prohibits the issuance of an injunction by a Court or other authority in respect of an action which has been taken or which is to be taken in pursuance of the Act or the RDDB Act.

Judgment :

ORAL JUDGMENT: (DR. D.Y.CHANDRACHUD, J.)

Admit. With the consent of all the Learned Counsel for the parties, the appeal has been taken up for hearing and final disposal.

2. The Learned Single Judge dismissed a Chamber Summons, seeking the rejection of a plaint under Order 7 Rule 11(d) of the Code of Civil Procedure, 1908. The State Bank of India, the First Defendant to the suit, is in appeal. The bar to the maintainability of the suit, according to the Appellant, is Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

3. In March 1996, the Appellant sanctioned a financial facility of Rs.70 crores to Crosslink Shipbreakers (P) Ltd. The Second, Third and Fourth Defendants executed letters of guarantee. The Second and Third Defendants are spouses, and the Second Defendant is the Karta of an HUF. The Fourth Defendant is the son of the Second and Third Defendants. The First Plaintiff is the wife of the Fourth Defendant, while the Second and Third Plaintiffs are their children. The Fourth Plaintiff is the daughter of the Second and Third Defendants. The case of the Appellant is that the Second, Third and Fourth Defendants executed a memorandum of deposit of title deeds by which a residential flat – Flat 1402, at Benhur, Narayan Dabholkar Road, Malabar Hill, Mumbai was mortgaged in its favour. The Appellant, on a default in the payment of its dues, instituted an application before the Debts Recovery Tribunal, Ahmedabad for the recovery of Rs.9.56 crores against the Second, Third and Fourth Defendants. The application was allowed by the Tribunal on 17 October 2003. In the recovery proceedings, the flat was attached. A sale proclamation was issued.

4. On 11 December 2004, the Bank issued a notice under Section 13(2) of the Securitisation Act to the principal borrower and to the Second, Third and Fourth Defendants. A writ proceeding was instituted before the Gujarat High Court to challenge the notice, which was dismissed on 31 March 2005. An appeal was dismissed by a Division Bench of the Gujarat High Court on 5 April 2005. The suit before this Court, in which the Appellant moved a Chamber Summons under Order 7 Rule 11(d), was lodged on the same day as the dismissal of the appeal by the Gujarat High Court.

5. Order 7, Rule 11(d) provides that the plaint shall be rejected “where the suit appears from the statement in the plaint to be barred by any law”. The plain language of the provision mandates the rejection of the plaint when a case falls within one of the clauses of Rule 11. For clause (d) to apply, the bar to the suit must be under any law and the bar must appear from the statement in the plaint. It is trite law that while considering an application for rejection under Order 7 Rule 11(d), the averments in the plaint as they stand, have to be construed. The pleas of the Defendants in the Written Statement are wholly irrelevant. The plaint has to be construed meaningfully, reading it as a whole to ascertain its true import. These principles are emphasized in the decision of the Supreme Court in Saleem Bhai vs. State of Maharashtra (2003) 1 SCC 557). In Popat and Kotecha vs. State Bank of India Staff Association, (2005) 7 SCC 510) the Supreme Court, on a review of its earlier judgments, formulated the principle thus:

“There cannot be any compartmentalisation, dissection, segregation and inversions of the language of various paragraphs in the plaint. If such a course is adopted it would run counter to the cardinal canon of interpretation according to which a pleading has to be read as a whole to ascertain its true import. It is not permissible to cull out a sentence or a passage and to read it out of the context in isolation. Although it is the substance and not merely the form that has to be looked into, the pleading has to be construed as it stands without addition or subtraction of words or change of its apparent grammatical sense. The intention of the

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2010 Supreme(Bom) 1712

Cases Referred (3)