Civil Courts retain jurisdiction to hear suits alleging fraud against secured creditors, despite Section 34 of the SARFAESI Act, provided specific allegations are made.

JUDGMENT :

(Bharat P. Deshpande, J.)

1. Rule.

2. Rule made returnable forthwith.

3. Heard finally with consent.

4. The present petition is filed thereby challenging the impugned order passed in Commercial Appeal no.6/2023 on 2.5.2024. By the said impugned order First Appellate Court dismissed the said appeal thereby confirming the order passed by the Commercial Court dated 2.11.2023 in Commercial Suit No. 2/2023.

5. Petitioner is the plaintiff in Commercial Suit No. 2/2023 filed before the Commercial Court at Ponda. Respondent no.1 being defendants filed an application under Order 7 Rule 11 of CPC for rejection of the plaint.

6. Vide order dated 2.11.2023 Commercial Court rejected the plaint on observing that suit is barred by law i.e Section 34 of SARFAESI Act. Petitioner/plaintiff filed Commercial Appeal No.6/2023 which was dismissed by the impugned order upholding the contentions of the respondents and confirming the findings of the trial Court, which is challenged in the present proceedings amongst various grounds as disclosed in the Writ Petition.

7. Heard Mr S. S. Kantak, learned Senior Advocate with Mr S. Gaonkar, learned Counsel for the Petitioner, Mr S. D. Lotlikar, learned Senior Counsel with Mr A. Nayak Salatry, learned Counsel for respondent no.1, Mr S. Desai, learned Counsel along with Mr J. Ramaiya, learned Counsel for the respondent no.5, Mr A. D. Bhobe, learned Counsel Ms S. Shaikh, Advocate for respondent no. 6 and Mr Bhupendara Dave, learned Counsel for the Administrator.

8. Mr Kantak learned Senior Counsel appearing for the petitioner/plaintiff would submit that petitioner is one of the directors and shareholders of the company i.e. respondent no.2. Petitioner started trading in potassium permanganate since 1988 by importing it along with certain other chemicals in his proprietory concern in the name and style as “Chemiman”. Somewhere in the year 1998, respondent no. 2 M/s Super Electro Manganese Chemicals was declared as bankrupt but subsequently petitioner decided to take over the assets of respondent no.2 for the purpose of manufacturing potassium permanganate and formed a company i.e. respondent no. 2 registered somewhere in November 2000. Respondent nos. 3 and 4 subscribed the shares of respondent no. 2 company. However, somewhere in the year 2002 Mr Om Prakash sold all his shares in respondent no.2 except retaining one share and thereafter the share capital of respondent no. 2 company as held to be to the extent of 33.33.% each by the petitioner, respondent no. 3 and respondent no. 4.

9. Since respondent no.2 was incorporated, some dispute arose between the petitioner and the respondent nos. 3 and 4 with regard to credit notes. Subsequently, respondent nos. 3 and 4 took over the complete control of the day to day affairs of respondent no.2 company and started pressuring the petitioner to sell his share. An attempt was made by the respondent nos. 3 and 4 to shut down the company by obtaining an unwarranted loan for the personal benefit of respondent nos.3 and 4 and they also incorporated a new company namely Speed International India Pvt. Ltd with an intention to siphoning of the funds and diverting customers of respondent no.2 company. Respondent nos.3 and 4 mismanaged the affairs of respondent no.2 company by recklessly borrowing the funds against the assets of respondent no. 2. Petitioner filed a company petition under the provisions of Section 241 and Section 242 before the NCLT Mumbai wherein detail order is passed however, before filing of such petition, respondent nos.3 and 4 without following due process of law and without the knowledge and consent of the petitioner obtained loan from respondent no.1 bank somewhere in October 2020 to the tune of Rs. 3.5 crores, under the pretext of expansion of business.

10. Petitioner observed that respondent no.1 bank without following due process of law and in collusion with respondent nos. 3 and 4 sanctioned the loan and thereafter respondent nos. 3 and 4 deliberately