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IN THE HIGH COURT OF CALCUTTA
JYOTIRMAY BHATTACHARYA, SHIVAKANT PRASAD, JJ.
Kaaiser Oils Private Limited and Ors. - Appellants
Versus
Allahabad Bank and Ors. - Respondent
F.A.T. 166 of 2017, CAN 2763 of 2017, F.M.A. 648 of 2017, CAN 2764 of 2017 and CAN 4475 of 2017
Decided On : 30-08-2017
SARFAESI Act - Recovery of Damages - Section 34 of SARFAESI Act - [FAT 166 of 2017] - [Title Suit No. 19 of 2016] - Summary of Acts and Sections: The court discussed the applicability of Section 34 of the SARFAESI Act, which bars the jurisdiction of the civil court in matters determinable by the Debt Recovery Tribunal. The court considered the plaintiffs' claim for damages and the legality of the notice under Section 13(2) and steps taken under Section 13(4) of the SARFAESI Act. The court referred to the Supreme Court's decision in Nahar Industrial Enterprises Ltd. Vs. Hong Cong and Shanghai Banking Corporation to establish the maintainability of a suit for recovery of damages before the Civil Court. The court also cited the decisions in Jagdish Sigh Vs. Hirlalal & Ors., Eureka Forbes Ltd. Vs. Allahabad Bank & Ors., and State Bank of Patiala Vs. Mukesh Jain & Anr. to demonstrate the limitations on the Civil Court's jurisdiction in matters triable by the Debt Recovery Tribunal. The court concluded that the suit for recovery of damages was maintainable before the Civil Court, as the dispute did not concern the legality of the notice under Section 13(2) and steps taken under Section 13(4) of the SARFAESI Act. The court also highlighted the possibility of raising issues of fraud and misrepresentation in the suit, which would require resolution through a trial on evidence before the Civil Court.
Fact of the Case:
The plaintiffs/appellants filed two appeals against the bank/defendant/respondent. The first appeal (FAT 166 of 2017) challenged the dismissal of a suit partially due to the bar under Section 34 of the SARFAESI Act. The second appeal (FMA 648 of 2017) challenged the rejection of an application for temporary injunction in the same suit. The plaintiffs' suit was based on allegations of breach of contract by the defendant bank in disbursing the loan amount and denial of benefits under RBI guidelines. The defendant bank challenged the maintainability of the suit, citing the jurisdiction of the Debt Recovery Tribunal under Section 34 of the SARFAESI Act.
Finding of the Court:
The court found that the suit for recovery of damages was maintainable before the Civil Court, as the dispute did not concern the legality of the notice under Section 13(2) and steps taken under Section 13(4) of the SARFAESI Act. The court also highlighted the possibility of raising issues of fraud and misrepresentation in the suit, which would require resolution through a trial on evidence before the Civil Court. The court allowed the second appeal, permitting the defendant bank to take physical possession of all mortgage properties except the office space where the plaintiffs conducted business, with a rider to not transfer, sell, or alter the properties until the suit's disposal.
Issues: The issues involved the maintainability of the plaintiffs' suit for recovery of damages before the Civil Court, the applicability of Section 34 of the SARFAESI Act, and the rejection of the application for temporary injunction.
Ratio Decidendi: The court's decision was based on the interpretation of Section 34 of the SARFAESI Act, the Supreme Court's rulings on the jurisdiction of the Civil Court in matters triable by the Debt Recovery Tribunal, and the possibility of raising issues of fraud and misrepresentation in the suit. The court emphasized the need for a trial on evidence before the Civil Court to resolve the disputed questions of facts raised in the suit.
Final Decision: The court allowed the first appeal, holding that the suit for recovery of damages was maintainable before the Civil Court. The court also allowed the second appeal, permitting the defendant bank to take physical possession of all mortgage properties except the office space where the plaintiffs conducted business, with a rider to not transfer, sell, or alter the properties until the suit's disposal.
Jyotirmay Bhattacharya, J.
1. Two appeals were filed by the plaintiffs/appellants against the bank/defendant/respondent. One of such appeals being FAT 166 of 2017 is directed against an order being No. 14 dated 28th February, 2017 passed by the learned Civil Judge, Senior Division, 2nd Additional Court at Burdwan, in Title Suit No. 19 of 2016; by which the suit was dismissed partially as the part of the relief claimed in the suit was found to be not maintainable due to the bar under Section 34 of the SARFAESI Act. The said order was passed on an application taken out by the defendant bank under Order 7 Rule 11 of the Civil Procedure Code. The learned Trial Judge while holding that the suit is not partially maintainable held that the relief which the plaintiffs have claimed for damages and/or compensation for the wrong or misdeed on the part of the bank is maintainable. As such, the suit was kept pending for consideration for that part of the relief claimed by the plaintiff in the said suit.
2. The other appeal being FMA 648 of 2017 is directed against an order being No. 13 dated 28th February, 2017 passed by the learned Civil Judge, Senior Division, 2nd Court at Burdwan, in the very same Title Suit being Title Suit No. 19 of 2016. By the impugned order, the application for temporary injunction which was filed by the plaintiffs/appellants was rejected on contest. The plaintiffs felt aggrieved. Hence, the plaintiffs/appellants have filed this First Miscellaneous Appeal.
3. Since the fate of the First Miscellaneous Appeal is dependent on the fate of the aforesaid regular First Appeal, this Court heard both the appeals and has decided to dispose of both the appeals simultaneously one after another.
Re: F.A.T. No. 166 of 2017
4. Let us first of all consider the merit of the First Appeal in the facts of the present case.
5. The plaintiffs approached the defendant bank for a loan. Loan was sanctioned. Subsequently, the plaintiffs again approached the said bank for restructuring loan account. The defendant/bank agreed to enhance the loan limit as per the revised proposal of the plaintiffs/appellants partially and also allowed the plaintiffs/appellants to raise further loan from a consortium bank. While the plaintiffs tried to get loan from the other consortium bank, the other consortium bank refused to give loan to the plaintiffs/appellants as the defendant bank declared the account of the plaintiffs/appellants company as 'Sub-standard Account. Problem started from this juncture between the parties.
6. Initially the plaintiffs filed a writ petition before this Court praying for the following reliefs:
(a) A writ of certiorari quashing and/or setting aside the restructuring made by the respondent bank in May, 2012 dehors the banking norms stipulated by the Reserve Bank of India vide its Master Circular being prudential norms on income recognition, asset classification and provision pertaining to advances dated July 02, 2012 and general guidelines on Sick Micro and Small Enterprises dated November 1, 2012.
(b) A writ of or in the nature of mandamus do issue commanding the respondent bank, their men, agents and assigns:-
(i) to act in accordance with law,
(ii) to forthwith rescind and/or withdraw and/or cancel the restructuring dated May 11, 2013.
(c) A writ of or in the nature of mandamus do issue declaring that the respondent's conduct of reporting the petitioner company's account as 'Substandard' to CIBIL database while maintaining in their books as 'Standard' and restructuring the same dehors the RBI Master Circular dated July 2, 2012 and the general guidelines for rehabilitation of Micro and Small Enterprises dated November 1, 2012 is mala fide, illegal, null and void.
(d) A writ of mandamus directing the respondent bank to act in all fairness and consider the accounts of the petitioner company as on 30th September, 2011 (Sic), 2012; i.e. as on the cutoff date considered in the application for restructuring.
7. While deciding the said wr
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