Point of Law : SARFAESI Act- Recovery of Debt – Jurisdiction of Civil Court – DRT has exclusive jurisdiction – jurisdiction of the Civil Court to decide all the matters of civil nature, excluding those to be tried by the Debts Recovery Tribunal under Sections 13 and 17 of the SARFAESI Act.

ORDER :

AVINASH G. GHAROTE, J.

1. A reference is made, for answering the following question :-

“Whether the jurisdiction of a Civil Court to decide all the matters of civil nature, excluding those to be tried by the Debts Recovery Tribunal under Section 17 of the Securitisation Act, in relation to enforcement of security interest of a secured creditor, is barred by Section 34 of the Securitisation Act ?

2. The above question was framed, noticing the apparent discord between the judgment of the Division Bench of this Court in State Bank of India Vs. Jigishaben B. Sanghavi and others, 2011 (2) Mh.L.J. 342 : 2010 SCC OnLine Bom 1868 and State Bank of India Vs. Shri Sagar s/o Pramod Deshmukh and others, 2011 (3) Mh.L.J. 71.

2.1. In Jigishaben (supra) the Court was considering a situation, where the immovable property, a residential flat, was mortgaged with the Bank as a security interest, by the Karta of the HUF. On default, the application before the Debts Recovery Tribunal (for short “the DRT” hereinafter) for recovery was allowed on 17/10/2003 and in the recovery proceedings, the flat was attached and a sale proclamation was issued. On 11/12/2004, a notice under Section 13 (4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, “the SARFAESI Act” hereinafter) was issued against which, a writ was instituted before the Gujarat High Court, which came to be dismissed on 31/3/2005, appeal against which, was also dismissed by a Division Bench on 5/4/2005. A suit came to be instituted on 5/4/2005, by the respondents claiming to be the members of the HUF, thereby having a right and interest in the property, seeking reliefs that the action on part of the Bank was illegal, malafide, there was no legal and valid mortgage nor any security interest was created in favour of the Bank, vis-a-vis the rights of the plaintiffs, who were members of the HUF. On an application filed under Order VII Rule 11 (d) of C.P.C., for rejection of the plaint, in view of the bar under Section 34 of the SARFAESI Act, the same was rejected, against which an appeal came to be filed before the High Court. The High Court in the above background held that the bar under Section 34 applies in respect of a matter which can be determined under the SARFAESI Act by the DRT or the Appellate Tribunal and once it is held that the matter is of a description, which the Tribunal or the Appellate Tribunal is empowered to determine by or under the provisions of the Act, the jurisdiction of the Civil Court to entertain a suit in respect of that matter, would be barred. It also held that the powers of the DRT under Section 17 were of width and amplitude and if the Tribunal comes to the conclusion that any of the measures referred to in Section 13 (4) have not been taken by the secured creditor, in accordance with the Act and Rules, the Tribunal may require the restoration of the management of the business of the borrower or restoration of the possession to the borrower and this power of the Tribunal includes a power to direct the restoration of the status quo ante in order to provide relief to the borrower (or to any person sic.) against an action which is not in accordance with law. The High Court found, relying upon United Bank of India Vs. Satyawati Tondon and others, (2010) 8 SCC 110 and M/s. Trade Well, a Proprietorship Firm, Mumbai Vs. Indian Bank and another, 2007 (3) AIR Bom. R. 656 (DB) that the expression “any person” used in Section 17 (1) was of wide import and took 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) or Section 14. It also found that once a measure is adopted under Section 13 (4), a statutory remedy provided is not only available to the borrower, but to any person aggrieved by the taking of a measure and while enquiring into an appeal under Section 17, the Tribunal is empowered to determine whether the ac