Back
IN THE HIGH COURT OF CHHATTISGARH AT BILASPUR
RAKESH MOHAN PANDEY, J.
Bank of Baroda, Through Its Authorized Officer, Raman Kumar – Appellant
Versus
Suresh Yadav S/o Late P.L. Yadav – Respondent
CR No. 125 of 2023
Decided on : 10-07-2024
(A) Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 34 - Civil Procedure Code, 1908 - Order 7 Rule 11 - Jurisdiction of civil courts - The civil suit filed by the plaintiff was dismissed as it was found to be barred under Section 34 of the Act, which prohibits civil court jurisdiction in matters that a Debts Recovery Tribunal is empowered to determine. The court emphasized that allegations of fraud must be substantiated with particulars to avoid the bar under the Act. (Paras 13, 34, 33)
(B) Fraud - Allegations of fraud against secured creditors - The court reiterated that mere allegations of fraud without particulars do not suffice to maintain a civil suit when the matter falls under the jurisdiction of the DRT. (Paras 30, 14)
Facts of the case:
The plaintiff alleged that his property was fraudulently mortgaged by defendants No. 2 to 4 to secure a loan from the bank, despite not being a party to the loan transaction. The plaintiff sought to quash the orders of the trial court and the District Magistrate regarding the loan recovery process initiated by the bank.
Findings of Court:
The court found that the civil suit was not maintainable due to the jurisdictional bar under Section 34 of the Act, and the allegations of fraud were insufficiently detailed. The application under Order 7 Rule 11 was allowed, dismissing the civil suit.
Issues: The main issues included whether the civil suit was maintainable given the allegations of fraud and the jurisdictional bar under Section 34 of the Act.
Ratio Decidendi: The court held that the civil court lacks jurisdiction in matters covered by the SARFAESI Act, and allegations of fraud must be specific to overcome this bar. The plaintiff's failure to provide particulars of fraud rendered the suit untenable.
Result: The civil suit was dismissed.
Key Points: - Civil suit barred by Section 34 when matter is within DRT's jurisdiction; mere allegations of fraud without particulars are insufficient. (!) (!) (!) (!) - The court must examine plaint contents for Order 7 Rule 11 CPC and cannot consider extrinsic pleadings. (!) - Sections 13(2), 14, and 17 provide frameworks for securitization, possession, and tribunal remedies; civil courts lack jurisdiction for measures under SARFAESI except where fraud is specifically alleged with sufficient particulars. (!) (!) (!) (!) (!) - If remedy exists under Section 17, the civil suit may be not maintainable; DRT proceedings are the proper forum for challenges to measures. (!) (!) - The present revision allowed; civil suit dismissed for bar under Section 34; pendency of civil suit cannot override SARFAESI remedies. (!) - Fraud allegations against secured creditors require particularization to avoid bar under Section 34; broad or vague fraud claims are not enough. (!) (!) - The judgment emphasizes that fraud in the context of bank actions may still be examined in civil courts only with proper particulars, and that there is a limited exception recognized in some judgments. (!) (!) - The plaintiff's signatures on documents and alleged non-consent are examined to determine maintainability under the bar. (!) (!) - The court outlines the object and scope of SARFAESI in securing assets and expediting recovery, with DRT as the appropriate forum for disputes over measures. (!) (!) (!)
ORDER :
1) By way of this revision, the revisioner/applicant has made the following prayer(s):-
ii. quash/set-aside the order 12.05.2023, whereas directed to maintain status and not comply the order passed by the District Magistrate under Section 14 of SARFAESI, Act.”
2) The revisioner has challenged the order passed by the Ist Additional District Judge, Bilaspur dated 04.03.2023 whereby the application moved by the applicant/defendant No. 6 under Order 7 Rule 11(d) read with Section 151 of the CPC was rejected.
3) Facts of the present case are that defendants No. 2, 3 & 4 applied for a loan before respondent No.6/Bank of Rs. 60 lakhs and immovable property i.e. building situated at Patwari Circle No. 21/25, Plot No. 60/13, Diverted Sheet No. 31/18, ad-measuring 2400 sq ft. was mortgaged belonging to the plaintiff/respondent No.1.
4) There is no pleading concerning the loan transaction, but it appears that the loan was sanctioned in the year 2018. The loan was not repaid by the borrowers, therefore, notices were issued to the borrowers under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the Act, 2002).
5) The letter of confirmation of mortgage was prepared on 21.02.2018, a memorandum of entry was also reduced into writing on 20.03.2018 and on the same date, a letter of undertaking was executed. The general form of guarantee, declaration-cum-undertaking-cum-authority dated 20.03.2018 and request for sanction of cash credit limit 20.03.2018 were executed between the bank, borrowers and the plaintiff.
6) The bank issued a notice under Section 13(2) of the Act, 2002 and thereafter, an application under Section 14 of the Act, 2002 was moved before the District Magistrate which was allowed vide order dated 30.01.2023. Though an order was passed by the District Magistrate to hand over the possession to the Bank, the same was not complied with as an order of status quo was passed by the Civil Court vide order dated 12.05.2023.
7) Learned counsel appearing for the revisioner/Bank argued that just to avoid the refund of the loan amount, a civil suit was filed by the plaintiff/respondent No.1. He further argued that according to Section 34 of the Act, 2002, the civil suit is not maintainable. He also argued that an application under Order 7 Rule 11 CPC was moved before the Ld. Trial Court but the same was rejected on the ground that since there is an allegation of fraud against the plaintiff/respondent No.1, the Civil Suit cannot be dismissed. In support of his arguments, Mr. Ruparel placed reliance on the judgment rendered by the Hon’ble Supreme Court in the matters of Jagdish Singh v. Heeralal and others, (2013) 11 AD (SC) 624; Electrosteel Castings Limited v. UV Asset Reconstruction Company Limited and others, (2022) 2 SCC 573; Sree Ananndhakumar Mills Limited v. Indian Overseas Bank and others, (2019) 14 SCC 788.
8) On the other hand, the learned counsels appearing for the respondents submitted that the plaintiff was never a part of any transaction between the bank and defendants No. 2 to 4. They further submitted that respondents No. 2 to 4 in collusion with the bank, fabricated certain documents and mortgaged the property of the plaintiff. They also submitted that a notice was issued by the bank on 21.01.2023, thereafter, a civil suit was filed. The plaintiff has sought a declaration to the effect that the entire transaction including the documents executed between defendants No. 2 to 4 are null and void. They further argued that the plaintiff never mortgaged his property and fraudulently, documents were prepared by
Civil courts lack jurisdiction under Section 34 of the SARFAESI Act for matters within the DRT's purview, and vague fraud allegations do not suffice to maintain a civil suit.
Application against measures to recover secured debts – Jurisdiction - Jurisdiction of Civil Court is not ousted. However, Civil Courts have to be extremely cautious while granting any interim order ....
The bar under Section 34 of the SARFAESI Act cannot be extended to claims involving collusion and fraud, which are better addressed before the Civil Court.
Civil courts' jurisdiction is barred under Section 34 of the SARFAESI Act in matters that can be determined by Debt Recovery Tribunals.
Fraud allegations must provide specific particulars to circumvent the jurisdictional bar under Section 34 of the SARFAESI Act, 2002; vague claims are insufficient.
The jurisdiction of the civil court is excluded in matters related to the classification of loan accounts as NPA under the SARFAESI Act.
Civil Courts have jurisdiction in SARFAESI Act matters only when the secured creditor has not initiated actions under the Act. Limitation laws apply strictly to such actions.
Point of Law : When there is no embargo on civil court to record evidence on preliminary issue, dismissal of suit on concluding that plaintiff did not produce material in support of his allegation wo....
The civil court retains jurisdiction to adjudicate on the validity of sale and mortgage deeds under the SARFAESI Act, and a plaint cannot be partially rejected under Order VII Rule 11.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
