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.

JUDGMENT

Saurabh Banerjee, J. Appellant-bank/original defendant no.1 before the learned Trial Court has impugned the judgment dated 18.02.2020¹ whereby its application under Order VII rule 11 of the Code of Civil Procedure, 1908² in a suit for declaration instituted by respondent nos. 1, 2 and 3/original plaintiffs³ against the appellant-bank and Union of India/respondent no.4 has been rejected and a judgment under Order XII rule 6, CPC has been pronounced against the appellant bank, in favour of the respondents.

2. Facts before us disclose that one Mr. Ajay Gupta⁴ availed loan after mortgaging House No. H-208, Ashok Vihar, Phase-I, Delhi-110052⁵ with the appellant-bank. As the said original borrower defaulted in repaying the loan, appellant-bank initiated proceedings under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002⁶ and after taking possession, issued notice for public auction. Respondents, vide e-auction dated 15.07.2016 bought the property for Rs.6,10,05,000/- and deposited 25% of the bid amount alongwith the TDS of 1% from 15.07.2016 to 17.08.2016. Sale thereof was confirmed on 25.07.2016 and the balance sale consideration of Rs.4,50,00,000/- was to be paid within 15 days of the date of confirmation of sale i.e., by 10.08.2016.

3. Appellant-bank, Mayur Vihar Branch, after sanctioning loan of Rs.4,50,00,000/- credited it to respondents on 09.08.2016. Thereafter, a Sale Certificate was issued in favour of respondents and the possession of the property was also handed over to them on 11.08.2016 itself. Meanwhile, the original borrower filed S.A. No. 265/2016 titled as Ajay Gupta vs. PNB before the Debt Recovery Tribunal-III, Delhi⁷ , wherein, though the appellant-bank was restrained from creating any third-party interest in the property vide an order dated 08.09.2016 in the presence of learned counsel for appellant-bank, the DRT was neither apprised about the auction of property in favour of respondents nor about the issuance of Sale Certificate dated 09.08.2016 in their favour.

4. In view thereof, as per appellant-bank, it was unable to proceed for registration of the Sale Deed of the property in favour of respondents. However, upon disposal of the aforesaid proceeding before the DRT in its favour vide order dated 25.05.2017, the appellant-bank revalidated the Sale Certificate of property on 29.05.2017 and thence also executed a Sale Deed in favour of respondents on 30.05.2017. Though the respondents deposited the loan amount of Rs. 4,50,00,000/- from time to time {Rs.2,00,00,000/- from 12.06.2017 to 11.07.2017 + Rs.30,00,000/- on 04.08.2017 + Rs.2,20,00,000/- on 06.08.2019}, however, the execution of the said Sale Deed on 30.05.2017, was done only after an inordinate delay of 10.5 months.

5. Resultantly, respondents instituted a suit before the learned Trial Court, inter alia, praying for passing of a decree of declaration against the appellant-bank, claiming that in view of the re-validation of Sale Certificate done by appellant-bank on 29.05.2017, it was estopped from claiming any interest from them prior to 30.05.2017 i.e., the date of registration of the title of the said property in their favour, with requisite compensation, damages with interest alongwith other reliefs flowing therefrom. Pursuant to receipt of summons, appellant-bank filed a written statement and an application under Order VII rule 11, CPC pleading that the said suit was not maintainable as Civil Court had no jurisdiction in view of Section 34 of the SARFAESI Act.

6. As a result, learned Trial Court during the course of proceedings, vide order dated 13.01.2020, sought clarification from the appellant-bank as to whether any action under SARFAESI Act has been initiated by appellant-bank against the respondents. In its reply dated 20.01.2020, appellant bank categorically stated that though no action under SARFAESI Act had yet been initiated against respondents, ho