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2023 Supreme(Online)(Bom) 24756
BOMBAY HIGH COURT
SMT. M.S. JAWALKAR, J
The Regional Manager, Union Bank of India – Appellant
Versus
M/s Punya Coal Road Lines – Respondent
Civil Revision Application No. 05/2021 | Civil Revision Application No. 04/2021 | Special Civil Suit No.69/2020
For the Appellants/Petitioners: Shri C.S. Kaptan, Shri S.D. Ingole
For the Respondents: Shri Anand Jaiswal, Shri J.M. Gandhi
Jurisdiction of civil court is barred under Section 34 of the SARFAESI Act; recovery matters must be pursued in DRT, and allegations of fraud must be specifically pleaded to maintain a civil suit.
Headnote:(A) Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 13(2) and Section 34 - Jurisdiction of Civil Court - The Bank classified the borrower's loan account as Non-Performing Asset (NPA) due to default and initiated recovery proceedings, thereby invoking the SARFAESI Act - Respondents alleged illegalities by the Bank in classifying their loan as NPA and requested damages - The court found that the jurisdiction of the Civil Court is barred under Section 34 of the SARFAESI Act, mandating that matters concerning the recovery of dues must precede in the Debt Recovery Tribunal (DRT) (Paras 6, 55).
(B) Nature of Suit - The court rejected the Plaintiffs' suit primarily due to it being related to matters exclusively addressed by DRT, ruling that once the bank's notice classifying the loan as NPA was issued, the jurisdiction of the civil court was fully ousted (Paras 34, 54).
(C) No Allegation of Fraud - The court noted the absence of adequate pleading of fraud as required to maintain a civil suit outside the discretion of the SARFAESI Act (Paras 15, 17).
Facts of the case:
The Applicants (Union Bank) were acting on debts owed by the Respondents (M/s Punya Coal Road Lines and others), which totalled over Rs.20 crores. The Respondents contended that the classification as NPA was illegal and sought damages in civil court.
Findings of Court:
The court maintained the exclusive jurisdiction of DRT in matters relating to NPA classification and recovery under SARFAESI, quashing the lower court's orders and dismissing the suits.
Issues: Whether the Plaintiffs' suit was maintainable in civil court despite the debt being classified as NPA, and if they could claim damages against the Bank.
Ratio Decidendi: The bank's classification action was within the SARFAESI Act's framework, thus preventing civil court interference; only allegations of fraud could maintain civil suit jurisdiction, which were not proven here.
Result: Civil Revision Applications allowed, with lower court's judgments quashed and suits rejected.
| Table of Content |
|---|
| 1. facts of the case including parties involved and dispute (Para 1 , 2 , 3 , 4 , 5) |
| 2. arguments presented by both parties regarding jurisdiction and actions taken (Para 6 , 7 , 8 , 9 , 10 , 11) |
| 3. court's detailed analysis and observations on law and jurisdiction (Para 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52) |
| 4. decisions made regarding the applicability of law and jurisdiction (Para 53) |
| 5. final orders and directives issued by the court (Para 54 , 55) |
JUDGMENT
. Heard.
(2) Since the subject matter of both the Revision Applications are same, both are disposed of by common judgment.
(3) Since the Civil Revision Application No. 05/2021 is treated as lead Revision Application, the facts and contentions of the said Revision Application are set out hereunder for proper adjudication of the issue involved in both the Revision Applications.
(4) The present Revision Applications is filed by original Defendant - Union Bank of India being aggrieved by the order dated 11/11/2020 passed by the learned 10th Joint Civil Judge, Senior Division, Nagpur below Exhibit 23 in Special Civil Suit No.69/2020.
(5) The brief facts for filing of present Revision Application are as under:-
The Applicant No.1 is the Regional Manager, original Defendant No. 1 and Applicant No. 2 is Assistant General Manager of Union Bank of India - Defendant No.2. The Respondents herein are the original Plaintiffs in the Special Civil Suit No.69/2020. It is submitted that Respondent No.1 is a proprietary concern of Respondent No.2.
Respondent No.4 is a Company registered under the Companies Act. Respondent Nos. 2 and 3 are the Directors and Promoters of Respondent No.4. It is the case of the Applicants herein that Respondent No.1 concern had availed various credit facilities from the Applicant - Bank since the year 2010 and the same were renewed and enhanced time to time and it was lastly sanctioned, renewed and enhanced to the extent of Rs.40 Crores (Rupees Forty Crores) by way of sanction letter dated 24/05/2015. In order to secure the said credit facilities, the Respondents had executed various security documents and the loan agreements in favour of Bank and also secured the said credit facilities by mortgaging their immovable properties by executing a simple Registered Mortgage dated 26/05/2015 and thereby created the security interest of the Applicant - Bank over their immovable properties. After availing and utilizing the aforesaid credit facilities of Rs.40 Crores (Rupees Forty Crores), the Respondents had committed default in operating the loan accounts as per the terms and conditions of the sanction letter and loan agreements. As a result of which, the loan accounts of the Respondent No.1 became N.P.A. as on 30/11/2017, as per directives and guidelines issued by Reserve Bank of India and the amount of Rs.20,36,06,163.24 was due and outstanding against the Respondents as on 30/11/2017. Left with no alternative, the Bank initiated the action for the recovery of its outstanding dues by exercising rights available against the Respondents under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as “SARFAESI Act”). Accordingly, the Bank issued a demand notice under Section 13(2) of the SARFAESI Act to the Respondents on 27/12/2017 and thereby called upon the Respondents to make outstanding payment within a period of 60 days. As there was no compliance of the said notice, the Applicant - Bank moved an Application under Section 14 before the District Magistrate Nagpur for grant of assistance for taking the physical possession of the mortgaged properties. The said Proceedings are pending before the District Magistrate, Nagpur. The Applicant – Bank, apart from this Application, filed a recovery suit before the Debts Recove
