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BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
D. BHARATHA CHAKRAVARTHY, J.
The Branch Manager, M/s. Cholamandalam Investment and Finance Company Limited, Tirunelveli – Petitioner
Versus
Uma Maheswari – Respondent
C.R.P. (MD) No. 1361 of 2024, C.M.P. (MD) No. 7935 of 2024
Decided On : 25-07-2024
SARFAESI - Consumer Disputes - SARFAESI Act Section 34 - The court interpreted Section 34 of the SARFAESI Act, emphasizing that no civil court can grant injunctions against actions taken under the Act, thus affirming the jurisdiction of the Debt Recovery Tribunal over such matters.
Fact of the Case:
The petitioners, a Financial Institution, sought to challenge an interim injunction order from a Consumer Forum that restrained them from taking possession of mortgaged properties after the respondent's husband defaulted on a loan post his death.
Finding of the Court:
The court found that the Consumer Forum lacked jurisdiction to grant an injunction against the Financial Institution's actions under the SARFAESI Act, as the Debt Recovery Tribunal had exclusive jurisdiction over such matters.
Issues: Whether the Consumer Forum had the jurisdiction to grant an interim injunction against the Financial Institution's actions under the SARFAESI Act.
Ratio Decidendi: The court held that Section 34 of the SARFAESI Act bars civil courts from intervening in matters under the Act, affirming that the Debt Recovery Tribunal is the appropriate forum for such disputes.
Result: The Civil Revision Petition is allowed, setting aside the interim injunction order and directing the respondent to approach the Debt Recovery Tribunal.
ORDER :
(A) The Petition:
1. The Civil Revision petition is filed challenging the order dated 08.05.2024 made in M.A. No. 128 of 2024 in C.C. No. 383 of 2022 on the file of the District Consumer Disputes Redressal Commission, Tirunelveli.
1.1 The Miscellaneous Application No. 128 of 2024 is filed for grant of an ad-interim injunction restraining the respondents therein from taking possession of the properties pursuant to the notice dated 08.03.2023 or to take any other steps till the disposal of the main complaint. The complaint was being adjourned for enquiry. It was actually posted for respondents' side arguments on 08.05.2024 and it seems that on the said day, since representation is made on behalf of the petitioners that the Financial Institution was trying to take physical possession, an ad-interim order is passed, even while adjourning the matter further. Aggrieved by the same, the petitioner/ Financial Institution is before this Court.
(B) The Factual Background:
2. The factual background in which this petition arises is that the petitioners/Financial Institution would submit that this is a case, where a sum of Rs.1,70,00,000/- was advanced to the husband of the respondent on 22.12.2021 vide loan Account No. HE01MAM00000018943. Thereafter, the respondent's husband died on 01.05.2022 and even thereafter, there was no payment towards the discharge of principal or interest in respect of the loan amount due and therefore, the petitioners/ Financial Institution resorted to initiation of proceedings under the SARFAESI Act (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002).
2.1 A demand notice under Section 13(2) of the SARFAESI Act was issued on 15.12.2022. Since no payment was made even within the period of 60 days, a possession notice under Section 13(4) of the SARFAESI Act was issued taking symbolic possession on 08.03.2023 in respect of the properties mortgaged with the Financial Institution.
2.2 While so, the respondent filed a complaint before the District Consumer Disputes Redressal Commission, Tirunelveli, on 01.11.2023 claiming that even at the time of disbursal, a sum of Rs.3,35,825/- was deducted from the account towards payment of premium of Life Insurance. Such Life Insurance premium having been paid, there must have been a policy and upon the death of the respondent's husband, the entire sum outstanding should be covered by the said policy and therefore, the complaint was filed to direct the Financial Institution to pay a sum of Rs.1,80,00,000/- as the loss for the negligent act in not issuing the policy till the lifetime of the respondent's husband and also to pay another sum of Rs.20,00,000/- as damages to the complainant.
2.3 Simultaneously, the respondent also challenged the demand notice and the consequential possession notice by way of W.P. (MD) No. 7858 of 2023 on the self same ground stating that the amount is not due to the petitioner/Financial Institution in view of the deduction of the premium towards Insurance Policy. The said writ petition was disposed of by an order dated 08.04.2024 and it is essential to extract paragraphs 16 to 18 of the said judgment, which read as follows:
16. It is the specific case of the Insurance Company that after waiting for a few months, they have refunded the premium amount vide RTGS in HDFC bank account bearing No. 00040310005866 on 04.04.2022 and the amount was credited on 06.04.2022 to the account of the Housing Finance Company namely respondents 1 and 2. Therefore, it is clear that the respondents 1 and 2 have refunded the premium amount even while the borrower was alive. Since the Insurance Company had not issued any policy document covering the life of the deceased borrower and they have refunded the premium amount to the Housing Finance Company even before the death of the borrower, they cannot be found fault with.
17. As far as the case of the Housing Finance Company namely respondents 1 and 2 are concerned,
Jurisdiction of the Consumer Disputes Redressal Commission under SARFAESI Act not entertained; proper course to address jurisdictional issues is through the District Commission.
The provisions of the SARFAESI Act overrule other laws, including the Consumer Protection Act. Consumer commissions lack jurisdiction in matters covered by SARFAESI when statutory remedies are availa....
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 ....
Civil courts' jurisdiction is barred under Section 34 of the SARFAESI Act in matters that can be determined by Debt Recovery Tribunals.
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....
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 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.
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