Back
IN THE HIGH COURT OF JUDICATURE AT MADRAS
V. BHAVANI SUBBAROYAN, J.
M/s. Kotak Mahindra Bank Limited, Rep. by the Authorised Officer, Noida & Another – Appellants
Versus
T.K. Karthikeyan & Others – Respondents
C.R.P. No. 1551 of 2021
Decided On : 07-07-2023
SARFAESI Act - Jurisdiction of Civil Court - [SARFAESI Act] - [Loan Agreement, Arbitration Proceedings, SARFAESI Act] - [The judgment discussed the loan agreement, arbitration proceedings, and the SARFAESI Act. The court highlighted the legal provisions of the SARFAESI Act, including Section 34, and its interpretation, which influenced the decision to set aside the order and terminate the suit.]
Fact of the Case:
The 1st and 2nd respondents obtained a loan from M/s Capital First Limited and defaulted on repayment. The petitioners, who acquired the loan, initiated SARFAESI proceedings. The respondents filed a suit challenging the proceedings and obtained an injunction. The petitioners filed a petition to set aside the order and terminate the suit.
Finding of the Court:
The court found that the SARFAESI Act applies to the case, and the civil court lacks jurisdiction to entertain the suit or proceedings related to SARFAESI matters. The court set aside the order and partially allowed the termination of the suit based on the absolute bar under Section 34 of the SARFAESI Act.
Issues: The issues were whether the order in I.A. No. 4 of 2021 in O.S. No. 78 of 2021 should be set aside and whether O.S. No. 78 of 2021 should be terminated based on the jurisdiction of the Civil Court to entertain suits in SARFAESI proceedings.
Ratio Decidendi: The court's decision was influenced by the interpretation of the SARFAESI Act, particularly Section 34, which bars the jurisdiction of the Civil Court in matters determined by the Debt Recovery Tribunal or Appellate Tribunal under the SARFAESI Act.
Final Decision: The court set aside the order and partially allowed the termination of the suit, citing the absolute bar under Section 34 of the SARFAESI Act.
JUDGMENT
(Prayer: Civil Revision Petition filed under Article 227 Constitution of India to set aside the petition and order passed in I.A.No.4 of 2021 in O.S.No.78 of 2021 dated 12.03.2021 and to terminate the O.S.No.78 of 2021 on the file of learned Principal Judge, Tiruvallur.)
1. The present Civil Revision Petition is filed as against the order dated 12-3 2021 made in I.A No 4 of 2021 in O.S. No 78 of 2021 and to terminate the O.S. No. 78 of 2021 on the file of the Principal Judge. Thiruvallur.
2. The brief facts of the case are as follows:-
(i) The 1st and 2nd Respondents had obtained loan from M/s Capital First Limited, formerly known as Future Capital Holding Limited/ 3rd and 4th respondents for a sum of Rs.89,82,000/- (Rupees Eighty Nine Lakhs and Eighty Two Thousand only) upon terms and conditions mentioned in the agreement dated 23.12.2010.
(ii) As per the said agreement, the said loan facility was repayable by the respondents 1 and 2 in 180 equated monthly installments to the tune of Rs. 1,16,615/-(Rupees One Lakh Sixteen Thousand Six Hundred and Fifteen only). The respondents 1 and 2 started to commit default in repayment of amount.
(iii) Pursuant to the default in making the repayment of amount, Capital First Limited has invoked the Arbitration proceedings and an award was passed on 29.01.2015 directing the respondents 1 and 2 to pay a sum of Rs.93,35,927.62/- together with interest at the rate of 15.25% per annum from 09.10.2014. Despite the receipt of award, the respondents 1 and 2 have not paid the amount. Consequently, their loan account was classified as Non Performing Assets (NPA) by Capital First Limited on 31.01.2016. The said Capital First Limited, vide Deed of Assignment dated 08.07.2016 inter alia sold, transferred, assigned in favour of the petitioners.
(iv) Thereafter the petitioners issued notice to the respondents 1 and 2 on 06.02.2017 under Section 13 (2) of the SARFAESI ACT 2002 and called upon them to pay an amount of Rs.1,18,34,766/- (Rupees One Crore Eighteen Lakhs Thirty Four Thousand Seven Hundred and Sixty Six only) as on 06.02.2017 with interest at 15.25% per annum from 07.02.2017 until payment in full within 60 days from the date of receipt of said notice. Since the said amount was not paid within the stipulated period, the petitioners had taken symbolic possession of the property in excise of power conferred on them under Section 13 (4) of SARFAESI ACT read with Rules 8 and 9 on 24.04.2017 and issued a Sale Notice dated 19.02.2021.
(v) Consequent to the same, the respondents 1 and 2 filed a suit in O.S.No.78 of 2021 before the District Court, Thiruvallur and ad-interim exparte injunction was granted against the petitioners till 31.03.2021 in I.A.No.4 of 2021 filed by them. The petitioners has filed the present petition to set aside the order of the trial court and also to strike off the plaint.
3. The learned counsel for the petitioners submits that the order passed by the Court below dated 12.03.2021 in I.A.No.4 of 2021 is bad in law and the same is liable to be quashed and set aside in view of the fact that the acts of the petitioner is covered under SARFAESI Act, 2002, which would be decided by the Recovery Tribunal or Appellate Tribunal not by the Civil Court. Also, the court below failed to appreciate the fact that the 1st and 2nd respondents are defaulting borrowers, who have succeeded in hindering and stalling the recovery process of the petitioners, just prior to the auction sale scheduled on 25.03.02021.
4. Besides the above, the learned counsel for the petitioners would rely upon the order passed by the Hon''ble Supreme Court in Harshad Goverdhan Sondagar Vs. International Assets Reconstruction Co., Ltd., and Ors., reported in 2014 (6) SCC 1, to substantiate that no civil court shall have jurisdiction to entertain any case, where action has been taken under SARFAESI Act, thereby pleaded to set aside the order passed by t
The main legal point established in the judgment is the absolute bar under Section 34 of the SARFAESI Act, ousting the jurisdiction of the Civil Court in matters determined by the Debt Recovery Tribu....
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.
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.
No civil court can exercise jurisdiction to entertain any suit or proceeding in respect of any matter which the Debt Recovery Tribunal is empowered to determined.
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.
The jurisdiction of a civil court is not barred under the relevant debt enforcement act where the dispute relates to the fundamental nature of the security interest or mortgage, as such matters do no....
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' jurisdiction is barred under Section 34 of the SARFAESI Act in matters that can be determined by Debt Recovery Tribunals.
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 ....
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
