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DELHI HIGH COURT
Najmi Waziri, J.
Golf Technologies (P) Ltd. & Anr. —Plaintiffs
versus
AXIS Bank Ltd. & Ors. —Defendants
CS (OS) No.4095 of 2014
Decided on 29.5.2015
For the Plaintiffs:Mr. Vikas Singh, Sr. Advocate with Mr. Vivek Chib, Mr. Ajay Marwah, Mr. Joby P. Varghese & Mr. Kailash Seth, Advocates
For the Defendant No.1:Mr. Salman Khurshid & Mr. Ashwini Mata, Sr. Advocates with Mr. Suresh Dutt Dobhal, Mr. S. Chaudhary, Mr. Raghav & Ms. Gitanjali Kapoor, Advocates
IMPORTANT POINT
Jurisdiction of civil courts can be invoked only when action of secured creditor is alleged to be fraudulent or his claim so absurd and untenable.
Headnote:(A) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002—Sections 13, 17 and 34—Possession of secured asset—Ouster of jurisdiction of Civil Court—Bar of jurisdiction is twofold—Firstly, civil courts shall not entertain any suit or proceeding in respect of any matter which a DRT or Appellate Tribunal is empowered by or under the Act—Secondly, 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 order conferred under SARFAESI Act or RDDB Act—Jurisdiction of civil courts can be invoked only when action of secured creditor is alleged to be fraudulent or his claim so absurd and untenable. (Para 21)
(B) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002—Sections 13, 17 and 34—Possession of secured asset—Ouster of jurisdiction of Civil Court—If a standard classic defence such as fraud by Bank, is allowed to form basis for maintaining suit, then provisions of the Act would become redundant, all the more so in face of express stipulation in Section 34 thereof— Court cannot be oblivious to whether allegations of fraud and misrepresentation are made only for the purpose of creating cause of action thereby leading to maintainability of suit—Allegation is simply of signatures on blank letter heads which was allegedly misused by Bank—It is a standard classic defence and no fraud had taken place—There are no complicated facts leading to allegation of fraud—Plaintiffs’ grievances could well be agitated before Tribunal in a proceeding under Section 17 of the Act. (Paras 28, 34 and 35)
Result: Suit dismissed.
Najmi Waziri, J.—This is a suit challenging the measures taken by defendant No. 1 (hereafter ‘Bank’) under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (for short ‘SARFAESI’) Act, 2002 (hereinafter referred to as the ‘Act’).
2. On 21.4.2015, after summons were issued, the Bank took a preliminary objection to the maintainability of the suit on the ground that the appropriate remedy available to the plaintiffs is under Section 17 of the Act and that it was always open to the plaintiffs to have approached the Debts Recovery Tribunal (for short ‘DRT’) concerned for the reliefs sought in the present suit. Accordingly, the learned counsel for the parties were heard on the issue of maintainability of the suit.
Contentions
3. Mr. Ashwini Mata, the learned Senior Advocate for the Bank submits that the suit is not maintainable since: (i) Section 34 of the Act specifically bars the jurisdiction of a civil court, (ii) the appropriate remedy is to file an application before the DRT under Section 17 of the Act, (iii) the suit is nothing but an endeavour to block the process of recovery initiated by the Bank under the Act; (iv) that OA No.46/2015 before the DRT is already pending between the parties and the plaintiffs defences against the defendants action can be adequately dealt with in those proceedings and (v) this suit is nothing but forum shopping by the plaintiffs since they have initiated multiple proceedings and are creating complications in the recovery of debts due to the Bank.
4. He submits that the plaintiffs had first pursued a frivolous litigation by filing a writ petition before the Bombay High Court wherein they had challenged the orders dated 12.09.2014 and 03.01.2015 passed by the learned Chief Metropolitan Magistrate, Esplanade, Mumbai. The order of 12.09.2014 was passed under Section 14 of the Act for taking possession of the plaintiffs’ secured asset(s) and by the latter order, the plaintiffs’ application seeking recall of the earlier order was dismissed on the ground that after having passed the earlier order on 12.9.2014, the Magistrate had become functus officio and that the plaintiffs did not have any locus standi to challenge the same.
5. It is submitted that by an order dated 07.04.2015, the aforesaid writ petition was dismissed by a Division Bench on the ground that that a borrower does not have any locus to appear before the Magistrate under Section 14 of the Act since the procedure envisaged therein is non-adjudicatory in nature and that the borrower has an alternate remedy of filing an appeal under Section 17 of the Act. The operative part of the said order is reproduced as under:
“Be that as it may, in our view, this issue as to whether the amount was merely twenty per cent and whether the signatures of the petitioners’ Directors were forged and whether the correspondence made by the bank with the petitioners was on a old letter head will have to be agitated in the proceedings which are initiated by either parties before the Debt Recovery Tribunal under Section 17 of the SARFAESI Act or RBBI (sic)”.
6. The learned Senior Advocate for the Bank further submits that an SLP filed by the plaintiffs impugning the aforesaid order was withdrawn unconditionally, only to proceed with this suit. It is therefore, submitted that the observations of the Bombay High Court apropos appropriate remedy being available under Section 17 of the Act would be binding on the plaintiffs. It is also argued that the exception carved out by the Supreme Court in Mardia Chemicals Ltd. & Ors. v. Union of India & Ors., (2004) 4 SCC 311. which was followed in Nahar Industrial Enterprises Ltd. v. Hong Kong & Shanghai Bank Corporation Ltd., (2009) 8 SCC 646, for invoking the jurisdiction of civil courts on the ground of fraud is very limited and that it is the nature and character of fraud alleged which has to be seen.
7. The learned Senior Advocate for the Bank further submits t
