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2022 Supreme(Bom) 258
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
SANDEEP K. SHINDE, J.
Venkateshwaran J. Tirunillai and Another – Appellants
Versus
Pradeep Mansukhani and Others – Respondents
Appeal from Order No. 404 of 2021, Notice of Motion No. 2484 of 2021, S.C. Suit (St) No. 8637 of 2021
Decided On : 09-03-2022
Advocate Appeared:
For the Appellants : Mr. Aloukik R. Pai, Mr. Akshay R. Pai, Ms. Prajakta Shrinagarpure, Ms. Bina R. Pai.
For the Respondents: Mr. Sumanth Anchan, Mr. Abhijit Devkhile.
Point of Law : Section 13 contains a statutory prohibition, to say, that no borrower shall after receipt of notice under Sub-section (2) shall transfer by way of sale, lease or otherwise any of his secured assets without prior written consent of secured creditors.
Headnote:
Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 13, 13(2), 134), 13(13), 17 – Enforcement of security interest without intervention of Court or Tribunal - Plaintiffs are borrowers within meaning of Section 2(f) of the SARFAESI Act - They created a ‘security interest’ in suit property, in favour of State Bank of India, by executing security agreement - Whereupon, bank had sanctioned and disbursed loan to them - Plaintiffs’ account was, categorised, under stressed asset and transferred to asset recovery branch at Thane - Whether, evidence on record, prima-facie, establishes ‘the fraud’ practiced by defendant nos.1 and 2 and Bank on plaintiffs to extinguish their title over the Suit Property.
Findings of the Court : Plaintiffs had no cause of action against Secured Creditors, i.e., State Bank of India. Therefore, ‘measures’ taken by Bank for enforcing Security Interest, were immune from challenge in Civil Suit - In fact, material on record shows, that defendant nos.1 and 2 have invoked alternative dispute resolution mechanism and called upon plaintiffs to accept nomination of either persons to act as sole arbitrator - As such, if at all plaintiffs had suffered any losses for alleged breach of MOU by defendant nos.1 and 2, they may claim the appropriate relief before arbitrator - In circumstances, fact remains, security measures adopted by bank under Section 13 of SARFAESI Act cannot be faulted with nor it was open to plaintiffs to challenge in Civil Suit - Reason being, there is no material at all, on record even to, remotely suggest that bank and its officers in secret understanding with defendant no.1, sold property at undervalued price to overreach title of plaintiffs in Suit Property - In fact, affidavit-in-reply of State Bank of India signify, that measures to enforce security interest were taken by complying with provisions of Act - Aside from that, here plaintiffs have availed remedy under Section 17 of SARFAESI Act.
Result : Appeal dismissed.
JUDGMENT :
SANDEEP K. SHINDE, J.
1. Section 13 of the SARFAESI Act deals with enforcement of security interest without intervention of the Court or Tribunal but in accordance with the provisions of the said Act. In the case of Jagdish Singh vs. Hiralal, 2014 (1) SCC 479, the Apex Court has held that, when the secured creditors proposed to proceed against secured assets, Sub-Section (4) of Section 13 envisages various measures to secure the borrowers’ debt. One of the measures provided by the Statute is, to take possession of secured assets of the borrower including the right to transfer by way of lease, assignment for realising secured assets. Any person aggrieved by any of the measures referred to in Sub-Section (4) of Section 13 has got the statutory right to Debts Recovery Tribunal (‘DRT’ for short) under Section 17.
2. Therefore, if any aggrieved person has got any grievance against any “measure” taken by the borrower under Sub-Section (4) of Section 13, remedy is to approach the DRT and not the Civil Court. The Civil Court in such circumstances has no jurisdiction to entertain any suit or proceeding in respect of those matters, which fall under sub-section (4) of Section 13 of the Securitisation Act. Taking note of this settled law, trial Court declined to restrain Secured Creditors, from enforcing, security interest in the suit property. That order is challenged herein under Order 43 Rule 1(r) read with 104 of the Civil Procedure Code, 1908 passed by the learned Judge, City Civil Court at Greater Bombay.
3. Briefly stated, undisputed facts of the case are as under; Plaintiffs are borrowers within the meaning of Section 2(f) of the SARFAESI Act (‘Act’ for short). They created a ‘security interest’ in the suit property, in favour of State Bank of India (‘Bank’ for short), by executing security agreement. Whereupon, bank had sanctioned and disbursed loan to them. Plaintiffs’ account was, categorised, under stressed asset and transferred to asset recovery branch at Thane. Thereafter, on 15th May, 2019, notice under Section 13(2) under SARFAESI Act was issued, by which plaintiffs were called upon to pay Rs. 1,69,00,299/-. Despite, several reminders, plaintiffs failed and neglected to pay the dues to the bank. Thus, to enforce security interest, the bank (Secured Creditor) after complying with the mandatory provisions and rules of the SARFAESI, E-auctioned the suit property, on 25th October, 2021. Before auctioning, bank had published sale notices, in five newspapers, in various places. That apart, notice was also uploaded on NSTCE web-site. E-Auction was conducted through Government agency. As such, bank was not aware, about bidders, who had participated in auction before confirmation of sale. Respondent nos. 1 and 2 “Defendant Nos. 1 and 2” were successful bidders. Whereafter on 27th October, 2021, sale certificate was issued in favour of defendant nos. 1 and 2, in terms of Rule 9(6) of the Security Interest (Enforcement) Rules, 2002.
4. As against, these undisputed facts, Plaintiffs’ case is:
“3. Plaintiffs instituted suit on 12th October, 2021 in the City Civil Court at Greater Bombay. They pleaded, the defendant nos. 1 and 2 approached them and offered to purchase the suit property, although, they were informed about outstanding loan on the said property and ongoing One Time Settlement talks (OTS) with the Bank. Whereafter, on 11th February, 2021, Memorandum of Understanding (‘MOU’ for short) was executed between plaintiffs and defendant nos. 1 and 2. In terms of the MOU, defendant nos. 1 and 2 agreed to purchase suit property for Rs. 2,72,00,000/- (Rupees Two Crores and Seventy-two Lacs Only). Out of which Rs. 13 Lakhs were paid by defendant nos. 1 and 2 to the plaintiffs to initiate settlement process with the bank. It was agreed that the settlement amount payable by the plaintiffs to the bank for settlement of their dues was to be paid by the defendant nos. 1 and 2 and finally, the balance amount out of 2,72,00,000/- minus m
