IMPORTANT POINT
Civil Court jurisdiction is completely barred so far as measures taken by secured creditor under Sub-Section (4) of Section 13 of Securitisation Act.

Soumen Sen, J. —This application is at the instance of the defendant Bank for rejection and or dismissal of the plaint on the ground that the suit is barred under Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as SARFAESI Act).

2. The plaintiff has instituted the suit on 18th December, 2013 praying, inter alia, for a declaration that the classification of the account of the plaintiff borrower in the cash credit account maintained with the bank as non-performing asset is bad and all measures taken on the basis of such classification is invalid and unforeseeable.

3. The plaintiff is a constituent of the defendant bank. The plaintiff availed cash credit facility to the tune of Rs.4.50 crores in terms of a letter of sanction dated 25th June, 2007. The account was classified as non-performing asset on 8th July, 2013. According to the defendant such classification was made following the Reserve Bank guidelines. The defendant had issued a notice under Section 13(2) of the SARFAESI Act followed by measures taken under Section 13 (4) of the SARFAESI Act.

4. The possession notice was issued on 3rd December, 2013. The plaintiff following measures taken by the Sate Bank of India has filed an appeal under Section 17 of the SARFAESI Act being S.A. No. 1447 of 2013 on 26th December, 2013. Admittedly, the suit was filed subsequent to the measures being taken by the defendant and also the appeal preferred by the plaintiff before the Debt Recovery Tribunal.

5. The learned Counsel appearing on behalf of the bank submits that the suit is barred under Section 34 of the SARFAESI Act.

6. Section 34 of the SARFAESI Act is the ouster clause. The said Section oust the jurisdiction of the Civil Court. The said Section reads:-

“S.34. Civil Court not to have jurisdiction – No civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993).”

7. The scope of the said section was considered by the Hon’ble Supreme Court in Mardia Chemicals and Ors. Vs. Union of India and Ors., 2014 (1) SCC 479

8. The said decision was subsequently followed in Jagdish Singh vs. Heeralal and Ors., (2004) 4 SCC 311. and the Standard Chartered Bank vs. Noble Kumar and Ors., 2013 (9) SCC 620.

9. In Standard Chartered Bank (supra), the Hon’ble Supreme Court in paragraph 37 referred to three modes of taking possession of the Secured Assets by the Secured Creditors which are as follows:-

i) The first method would be where the secured creditor gives the requisite notice under rule 8(1) and where he does not meet with any resistance. In that case, the authorized officer will proceed to take steps as stipulated under rule 8(2) onwards to take possession and thereafter for sale of the secured assets to realize the amounts that are claimed by the secured creditor.

ii) The second situation will arise where the secured creditor meets with resistance from the borrower after the notice under rule 8(1) is given. In that case he will take recourse to the mechanism provided under section 14 of the Act viz. making application to the Magistrate. The Magistrate will scrutinize the application as provided in section 14 and then if satisfied, appoint an officer subordinate to him as provided under Section 14(1)(A) to take possession of the assets and documents. For that purpose the Magistrate may authorize the officer concerned to use such force as may be necessary. After the possession is taken the assets and documents will be forwarded to the secured creditor.

iii) The third situation will be