Kerala High Court
Mrs.Elsamma vs The Kaduthuruthy Urban Co Operative ... on 6 December, 2018
Equivalent citations: AIR 2019 KERALA 23, (2019) 1 KER LT 191 (2019) 200 ALLINDCAS 683, (2019) 200 ALLINDCAS 683, (2019) 200 ALLINDCAS 683 (2019) 1 KER LT 191, (2019) 1 KER LT 191, AIRONLINE 2018 KER 901
Author: V.Chitambaresh
Bench: V.Chitambaresh
IN THE HIGH COURT OF KERALA AT ERNAKULAM
Present:
THE HONOURABLE MR.JUSTICE V.CHITAMBARESH
&
THE HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI
Thursday, the 6th day of December 2018/15th Agrahayana, 1940
RSA No.763/2018
AGAINST THE JUDGMENT AND DECREE DATED 8.6.2018 IN A.S.No.16/2017 OF THE DISTRICT
COURT, KOTTAYAM
AGAINST THE JUDGMENT AND DECREE DATED 14.12.2016 IN O.S.No.262/2016 OF THE
MUNSIFF'S COURT, VAIKOM
APPELLANTS/APPELLANTS/PLAINTIFFS:
1. MRS.ELSAMMA, AGED 53 YEARS,
W/O.LATE P.J.JACOB, PUTHENPURACKAL HOUSE,
MUTTUCHIRA POST, KOTTAYAM DISTRICT, PIN-686 613.
2. MRS. SHINI JACOB,
AGED 29 YERS, D/O.LATE P.J.JACOB, PUTHENPURACKAL HOUSE,
MUTTUCHIRA POST, KOTTAYAM DISTRICT, PIN-686 613.
3. MR.JITHIN JACOB,
AGED 25 YEARS, S/O.LATE P.J.JACOB,PUTHENPURACKAL HOUSE,
MUTTUCHIRA POST, KOTTAYAM DISTRICT, PIN-686 613.
BY ADVS.
SRI.G.CHANDRASEKHAR
SRI.SIJO GEORGE
RESPONDENTS/RESPONDENTS/DEFENDANTS:
1. THE KADUTHURUTHY URBAN CO OPERATIVE BANK LTD.
NO.K-399, KADUTHURUTHY POST, KOTTAYAM DISTRICT, PIN-686 604,
REPRESENTED BY ITS CHAIRMAN.
2. MR. RAJU M.C.,
GENERAL MANAGER, KADUTHURUTHY URBAN CO OPERATIVE BANK LTD.NO.K-399,
KADUTHURUTHY POST, KOTTAYAM DISTRICT, PIN-686 604.
3. SUNNY VARKEY, AGED 50 YEARS,
S/O.JOSEPH VARKEY, KALAYATHANALKUZHY, NEEZHOOR POST, KOTTAYAM,WORKING AS
AUTHORISED OFFICER WITH THE KADUTHURUTHY URBAN CO OPERATIVE BANK LTD.,
NO.K-399, KADUTHURUTHY POST, KOTTAYAM DISTRICT, PIN-686 604.
4. JOHN K.J., KOCHUNIRAPPEL,
VELLASHERRY, KADUTHURUTHY POST, KOTTAYAM DISTRICT,PIN-686 604.
R1 TO R3 BY ADV. SRI. VARGHESE C.KURIAKOSE
ADVOCATE COMMISSIONER SRI.RAJESH KANNAN
This Regular Second Appeal having been heard on 4.12.2018, the court on
6.12.2018 passed the following:
RSA763/2018
2
"CR"
Order
Chitambaresh, J.
1.The regular second appeal comes before us on a reference made by the learned single Judge doubting the correctness of the decision in KHDFC Bank Ltd. and others v. Prestige Educational Trust [ILR 2015 (4) Kerala 938].
2.The suit in O.S.No.262/2016 is one for a decree of permanent prohibitory injunction restraining the defendants from trespassing or otherwise taking possession of the plaint A schedule property. The plaintiffs assert that the secured asset under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ['SARFAESI Act'] is the plaint B schedule. An attempt to take possession of the plaint A schedule property over which no security interest has been created is the cause of action alleged. It is averred that the plaintiffs are the owners in possession RSA763/2018 3 of the plaint A schedule property which lies adjacent to the plaint B schedule property. The defendants are the Bank who is the secured creditor, its General Manager and its authorised officer who have taken measures under the provisions of the SARFAESI Act.
3.A preliminary objection was raised by the defendants as regards the maintainability of the suit by filing I.A.No.2344/2016 on the ground that the suit is barred under Section 34 of the SARFAESI Act. The trial court allowed I.A.No.2344/2016 and dismissed the suit as not maintainable thereby also dismissing I.A.No.2305/2016 filed for injunction. The lower appellate court in A.S.No.16/2017 has concurred with the view of the trial court about the maintainability of the suit and dismissed the appeal. The plaintiffs are in regular second appeal contending that the suit is very much maintainable since relief is sought not in respect of a secured asset. The appellants rely on the decision in KHDFC Bank Ltd.'s case (supra) to RSA763/2018 4 contend that the bar under Section 34 of the SARFAESI Act does not apply. The respondents on the other hand point out that the afore- cited decision is no longer good law in view of Jagdish Singh v. Heeralal and others [AIR 2014 SC 371].
4.We heard Mr.Chandrasekhar G., Advocate on behalf of the appellants and Mr.Varghese Kuriakose, Advocate on behalf of the respondents. The local inspection report filed by Mr.K.Rajesh Kannan, Advocate was also perused.
5.Section 2(1)(zc) of the SARFAESI Act defines 'secured asset' as follows:
"(zc) 'Secured asset' means the property on which security interest is created."
Section 2(1)(zd) of the SARFAESI Act defines 'secured creditor' as follows:
"(zd) 'Secured creditor' means-RSA763/2018
5
(i) any bank or financial institution or any consortium or group of banks or financial institutions holding any right, title or interest upon any tangible asset or intangible asset as specified in clause (l);
(ii) debenture trustee appointed by any bank or financial institution; or
(iii) an asset reconstruction company whether acting as such or managing a trust set up by such asset reconstruction company for the securitisation or reconstruction, as the case may be; or
(iv) debenture trustee registered with the Board appointed by any company for secured debt securities; or
(v) any other trustee holding securities on behalf of a bank or financial institution, in whose favour security interest is created by any borrower for due repayment of any financial assistance;"
Section 2(1)(zf) of the SARFAESI Act defines 'security interest' as follows:
"(zf) 'Security interest' means right, title or interest of any kind, other than those specified in section 31, upon RSA763/2018 6 property created in favour of any secured creditor and includes-
(i) any mortgage, charge, hypothecation, assignment or any right, title or interest of any kind, on tangible asset, retained by the secured creditor as an owner of the property, given on hire or financial lease or conditional sale or under any other contract which secures the obligation to pay any unpaid portion of the purchase price of the asset or an obligation incurred or credit provided to enable the borrower to acquire the tangible asset; or
(ii) such right, title or interest in any intangible asset or assignment or licence of such intangible asset which secures the obligation to pay any unpaid portion of the purchase price of the intangible asset or the obligation incurred or any credit provided to enable the borrower to acquire the intangible asset or licence of intangible asset;"
6.Section 13(4) of the SARFAESI Act empowers the secured creditor to take recourse to several measures in case the borrower fails to RSA763/2018 7 discharge his liability within the period specified in Section 13(2) thereof. The measures include taking possession of the secured assets of the borrower, taking over the management of the business of the borrower and appointing any person to manage the secured assets. Any person including the borrower aggrieved by any of the measures taken by the secured creditor under Section 13(4) of the SARFAESI Act can move the Debts Recovery Tribunal under Section 17 thereof. The measures referred to in Section 13(4) of the SARFAESI Act are in relation to the secured asset by a secured creditor to recover the secured debt. The remedy under Section 17 of the SARFAESI Act cannot therefore be invoked when the dispute is in relation to a property which is not a secured asset.
7.It was inter alia contended that Sub-sections (2) and (3) of Section 17 of the SARFAESI Act provide sufficient safeguards for restoration of possession of property which is not a secured asset. Section 17(2) RSA763/2018 8 enables the Debts Recovery Tribunal to consider as to whether the measures taken by the secured creditor for enforcement of security are proper. Section 17(3) which follows Section 17(2) empowers the Debts Recovery Tribunal to declare the measures taken as invalid and restore possession. Both Sections 17(2) and 17(3) of the SARFAESI Act are confined to the measures taken by the 'secured creditor' and in relation to the 'secured asset'. We do not think that the above statutory provisions can be called in aid when property which is allegedly not a secured asset is to be taken possession of. The parties need be relegated to Section 17 of the SARFAESI Act only if it is found that the acts complained of are in relation to a property which is a secured asset.
8.Authorised Officer, Indian Overseas Bank and another v. M/s. Ashok Saw Mill [AIR 2009 SC 2420] was cited wherein it was held as follows:
RSA763/20189
"23. The intention of the legislature is, therefore, clear that the banks and financial institutions have been vested with stringent powers for recovery of their dues, safeguards have also been provided for rectifying any error or wrongful use of such powers by vesting the DRT with authority after conducting an adjudication into the matter to declare any such action invalid and also to restore possession even though possession may have been made over to the transferee. The consequences of the authority vested in DRT under sub-section (3) of section 17 necessarily implies that the DRT is entitled to question the action taken by the secured creditor and the transactions entered into by virtue of section 13(4) of the Act. The legislature by including sub-section (3) in section 17 has gone to the extent of vesting the DRT with authority to even set aside a transaction including sale and to restore possession to the borrower in appropriate cases........
24. We are unable to agree with or accept the submissions made on behalf of the appellants that the RSA763/2018 10 DRT had no jurisdiction to interfere with the action taken by the secured creditor after the stage contemplated under section 13(4) of the Act. On the other hand, the law is otherwise and it contemplates that the action taken by a secured creditor in terms of section 13(4) is open to scrutiny and cannot only be set aside but even the status quo ante can be restored by the DRT ." (emphasis supplied) The above only clarifies that the action of the 'secured creditor' can be scrutinised by the Debts Recovery Tribunal implying thereby that it should relate to the secured asset.
9.Section 34 of the SARFAESI Act is as follows:
"34. Civil Court not to have jurisdiction No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power RSA763/2018 11 conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993)."
The bar of jurisdiction of civil court is obviously in relation to a matter which the Debts Recovery Tribunal can determine in respect of any action taken under the SARFAESI Act. The jurisdiction is abundant in the civil court to entertain any suit or proceeding in respect of matters falling outside the scope of Section 13(4) of the SARFAESI Act. True it is that the remedies available to an aggrieved person under the SARFAESI Act are efficacious as held in Union Bank of India v. Satyawati Tondon and others [(2010) 8 SCC 110]. But a person cannot be pinned down to the remedies under the SARFAESI Act when he asserts in a civil suit that the property is not a secured asset. It may perhaps be open to any person aggrieved to move the Debts Recovery Tribunal to clarify that the measures taken are not in respect of the secured asset.
RSA763/201812
10.Much reliance was placed on the following observations in Jagdish Singh' case (supra):
"23. We are of the view that the civil court jurisdiction is completely barred, so far as the 'measure' taken by a secured creditor under sub-section (4) of section 13 of the Securitisation Act, against which an aggrieved person has a right of appeal before the DRT or the Appellate Tribunal to determine as to whether there has been any illegality in the 'measures' taken. The bank, in the instant case, has proceeded only against secured assets of the borrowers on which no rights of respondents 6 to 8 have been crystalised, before creating security interest in respect of the secured assets. In such circumstances, we are of the view that the High Court was in error in holding that only civil court has jurisdiction to examine as to whether 'the measures' taken by the secured creditor under sub-section (4) of section 13 of the Securitisation Act were legal or not........." (emphasis supplied) The property in the above case was admittedly the secured asset RSA763/2018 13 and the dispute therein was in relation to the title of the person who created security interest and the partibility thereof. Yet another decision cited is Sree Anandhakumar Mills Ltd. v. Indian Overseas Bank and others [2018 (2) KHC 883] wherein also the property was admittedly a secured asset. It was held therefore that the civil court has no jurisdiction to proceed with the suit for partition of the secured asset pending proceedings under the SARFAESI Act.
11.The following observations in Mardia Chemicals v. Union of India [2004 (2) KLT 273(SC)] are apposite:
"..............A full reading of Section 34 shows that the jurisdiction of the civil court is barred in respect of matters which a Debt Recovery Tribunal or Appellate Tribunal is empowered to determine in respect of any action taken 'or to be taken in pursuance of any power conferred under this Act'. That is to say the prohibition covers even matters which can be taken cognizance of by the Debt Recovery Tribunal though no measure in that RSA763/2018 14 direction has so far been taken under sub-section (4) of section 13. It is further to be noted that the bar of jurisdiction is in respect of a proceeding which matter may be taken to the Tribunal. Therefore, any matter in respect of which an action may be taken even later on, the civil court shall have no jurisdiction to entertain any proceeding thereof. The bar of civil court thus applies to all such matters which may be taken cognizance of by the Debt Recovery Tribunal, apart from those matters in which measures have already been taken under sub- section (4) of section 13.
51. However, to a very limited extent jurisdiction of the civil court can also be invoked, where for example, the action of the secured creditor is alleged to be fraudulent or their claim may be so absurd and untenable which may not require any probe, whatsoever or to say precisely to the extent the scope is permissible to bring an action in the civil court in the cases of English mortgages........" (emphasis supplied) Attempting to take possession of a property which is not a secured asset under the guise of the SARFAESI Act is certainly a fraudulent RSA763/2018 15 action which can be called in question in a civil court.
12.A similar question arose under the Land Acquisition Act, 1894 wherein property not covered by the notifications were assumed possession of under the guise of acquisition. It was held in Kerala State Housing Board, Thiruvananthapuram v. R.Omana and others [2017 (1) KLT 954(DB)] as follows:
"7. The implied bar of jurisdiction however does not apply in respect of lands encroached upon by the State whereby the claimants lose possession of lands otherwise than under the Act. Assume that the lands so lost possession of lie beyond the boundaries marked under section 4(2) and section 8 of the Act in regard to which no dispute as regards measurement could have been raised before. There was therefore no scope for an award considering also the issue of measurement or an opportunity to seek a reference by the claimants under section 18 of the Act. A suit by the claimants is maintainable either for recovery of possession on title or RSA763/2018 16 for damages if the complaint is that the State has taken possession of lands not acquired under the Act........."
The bar of jurisdiction under Section 34 of the SARFAESI Act does not apply if the property is not a secured asset in relation to which only measures can be taken under Section 13(4) thereof.
13.To sum up:
(i) The jurisdiction of the civil court is not barred if the plea is that the plaint schedule property is not the secured asset in respect of which a security interest is created.
(ii) The civil court shall decline jurisdiction if it is found in the midst of adjudication that the disputed property is in fact the secured asset over which security interest is created.
(iii) Any person aggrieved can also move the Debts Recovery Tribunal under Section 17 seeking clarification about the measures taken under Section 13(4) of the SARFAESI Act .
(iv) The decision in KHDFC Bank Ltd.'s case (supra) is RSA763/2018 17 approved and does not militate against Jagdish Singh's case (supra) wherein the property is admittedly a secured asset.
The reference is answered as above. The Registry to post the regular second appeal as per roster for final hearing.
Sd/-
V. CHITAMBARESH, JUDGE Sd/-
R. NARAYANA PISHARADI, JUDGE Sha/041118