Madras High Court
This Application Is Filed By The vs Unknown on 17 February, 2012
Author: K.B.K.Vasuki
Bench: K.B.K.Vasuki
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 17-02-2012 CORAM THE HON'BLE MS. JUSTICE K.B.K.VASUKI O.A.No.50 of 2012 in CS.No.705 of 2011 ORDER
This application is filed by the plaintiffs for an order of interim injunction restraining the respondents/defendants herein from alienating or encumbering 2/3rd undivided share of the applicants in the suit property by way of sale, mortgage, lease or public auction or by any transfer or from disturbing the possession of the applicants in the suit property pending disposal of the above suit.
2.The few facts, which are relevant for consideration of this court, are as follows: The applicants herein are none else than the major son and daughter of the first respondent herein. The first respondent is the son of one K.Subramanian since deceased and K.Subramanian had 4 brothers. During the life time of his father, there was partition of the property among the father and sons in respect of both ancestral and self acquired property of the father, as per the terms of which, one of the properties, which was also the self acquired property of the father, allotted to K.Subramanian, who is the father of the first respondent and grand father of the applicants/plaintiffs, is the suit property. After the death of K.Subramanian, the property is inherited by the first respondent. The first respondent during 2009 obtained a mortgage loan from the second respondent-United Bank of India and the first respondent by way of security created a simple mortgage upon the suit property by deposit of title deeds under registered memorandum of deposit of title deeds dated 23.12.2009. Thereafter, the first respondent defaulted in repayment of the loan amount, which compelled the second respondent bank to initiate recovery proceedings by resorting to the relevant provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter shortly referred to as 'SARFAESI Act'). The second respondent bank, after complying with all statutory and procedural formalities laid down under the Act, brought the property into auction for realisation of the amount due to the bank.
3.At that stage, the plaintiffs who are the major son and daughter of the first respondent/borrower come forward with the present suit against their father and the bank for the reliefs of preliminary decree for partition and allotment of 2/3rd share in the undivided suit schedule property on the premises that the suit scheduled house property and other properties allotted to their father are ancestral in nature and after the death of the ancestors, the plaintiffs and the first defendant have inherited the properties jointly and have been commonly enjoying the same and the first defendant is having only 1/3rd share in the suit property and he has no right, title or interest in the remaining 2/3 share and the same belong to the plaintiffs and the plaintiffs have been neglected to be maintained by their father and their persistent demand for partition of the suit property was not responded by their father, as such, 2/3 share in the undivided property belonging to the plaintiffs cannot be brought into auction for recovery of the amount due to the second defendant/bank from the first respondent.
4.The suit is originally filed along with O.A.No.868/2011 for identical relief of interim injunction for restraining the respondents/defendants therein from alienating or encumbering or in any way dealing with 2/3 undivided share of the applicants in the suit property by way of sale, mortgage, lease or public auction or by any transfer or disturbing the possession of the applicants in the suit property. This Court on earlier occasion on 9.11.2011 before entertaining the application, raised a question as to whether son and daughter of alleged Kartha of a joint family property can seek partition of the property and whether Kartha of the family can be restrained from alienating the joint Hindu family property and directed the learned counsel for the applicants to enlighten the court on the clarification so raised by producing relevant legal authorities. However, on 14.11.2011, the learned counsel for the applicants made an endorsement and the endorsement made in the application is "not pressing this application No.868/11 with liberty". In view of such endorsement, the application was dismissed as withdrawn. While doing so, no liberty was given to the applicants to file fresh application. However, the applicants came forward with the present application O.A.No.50 of 2012 for the same relief.
5.The learned counsel for the applicants has seriously contended that having regard to the ancestral nature of the property and 2/3 share of the plaintiffs, who are not party to the loan transaction, the bank has no right to bring 2/3 share of the plaintiffs for public auction pending disposal of the suit.
6.The first respondent/father did not choose to contest either the suit or this application and remained exparte and the second respondent/bank has seriously contested the suit as well as this application by filing counter and producing other relevant documents. The learned counsel for the second respondent has raised the question of maintainability of the suit as well as this application and also the relief sought for herein both on legal and factual objections.
7.The legal objection raised herein is that both the suit as well as this application are not maintainable, in view of the bar of civil proceedings under Section 34 of SARFEASI Act. On facts, it is seriously contended that the property is the self acquired property of the grand father and the same is settled in favour of his son for life estate and thereafter in favour of his grand son absolutely and the first respondent, who is the grand son, is the absolute owner of the property and the first respondent in his capacity as absolute owner of the property mortgaged the property as collateral security for cash limit of Rs.5 crores availed by the partnership firm having the first respondent as its partners and the borrowers defaulted to discharge their liability and the second respondent/bank having failed in all its attempts to recover the money, resorted to the provisions of the SARFAESI Act to recover the amount and has after duly complying with all the formalities, brought the property for auction. At that stage, the suit is filed at the instigation of the father to drag on the recovery proceedings and to deprive the second respondent bank to realise huge sum from the first respondent.
8.The learned counsel for both the applicants and the second respondent for and against the maintainability of the suit and the injunction application, submitted the following authorities:
(A)The authorities cited on the side of the applicants/plaintiffs are (i) 1953 SC 495 (C.N.Arunachala Mudaliar v. Murugananda Mudaliar and another (ii) 2009 (8) SCC 646 (Nahar Industrial Enterprises Limited v. Hong Kong and Shanghai Banking Corporation)(iii) AIR 1991 Bombay 10 (Dr.Nilkanth Krishnarao Apte v. Dr.Ramachandra Krishnarao Apte and another) and (iv) AIR 2006 Karnataka 21 (DB) (Krishna v. Kedarnath and others).
(B)The authorities cited on the side of the contesting second respondent are (i) 2009 (9) SCC 52 (R.Mahalakshmi v. A.V.Anantharaman and others (ii) (2008) 3 MLJ 1345(FB) (Lakshmi Shankar Mills (P) Ltd and others v. Authorised Officer/Chief Manager, Indian Bank and others (iii) 2011 (3) CTC 801 (V.Thulasi v. Indian Overseas Bank, Sowcarpet Branch, Chennai (iv) CDJ 2007 MHC 3767 (The authorised officer, Corporation Bank, Koottu Road, Sheep Farm Post, Attur Taluk, Salem District v. minor Sathiya and others) and (v) 2010 (3) CTC 310 (Punjab National Bank rep. by its Manager v. J.Samsath Beevi and others).
9.Heard the rival submissions made on both sides.
10.It is no doubt true that the dispute regarding declaration and determination of right of the parties in respect of the immovable property can be effectively decided only by way of civil suit before appropriate civil forum and the jurisdiction of the civil court to try the suit cannot be readily inferred, unless specifically barred. The present suit for declaration of partition and allotment of 2/3 share in the property, which is according to them, ancestral in nature, come to be filed by the plaintiffs, while recovery proceedings initiated by the second respondent against this property under SARFAESI Act, wherein under Section 34 of SARFAESI Act, "the civil court has no 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 conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993)". There are divergent views as to whether, civil suit for relief in respect of subject matter of the proceedings under SARFAESI Act is maintainable or not by virtue of bar created under Section 34 of the Act. In the judgments reported in AIR 2006 Karnataka 21, CDJ 2007 MHC 3767 and 2010 (3) CTC 310, the Division Bench of Karnataka High court and the learned brother judge of this Court have held that the civil court jurisdiction is not totally barred and such bar under Section 34 of the SARFAESI Act shall not come in the way of adjudication of the civil rights like declaration of title of the suit properties, partition rights in the ancestral properties etc. The learned brother Judge V.Ramasubramanian in 2010 (3) CTC 310 in Punjab National Bank case has in different context observed that civil suit filed on the ground of fraud and collusion can be maintained before the civil court. The learned brother judge while observing so, further cautioned the civil courts to ascertain whether the allegations of fraud and collusion made in the plaint are themselves a product of fraud and collusion between the family members of the borrowers, so as to escape liability and save the secured assets somehow or the other. The learned brother Judge referred to his earlier unreported case on this aspect in Cypress Semiconductor Technology India Private Limited as confirmed by the Division Bench in the judgement reported in 2008(1) CTC 471 in S.V.Subramaniam v. Chypress Semiconductor Technology India Prt. Ltd. and as further confirmed by the Hon'ble Apex Court. The learned brother judge in paras 9 and 10 of his Punjab National Bank case emphasised the responsibility upon the civil courts and cautioned the civil courts which reads as follows:
9. A Court is obliged to see if the allegations of fraud and collusion made in the plaint, are themselves a product of "fraud and collusion" between the family members of the borrowers, so as to escape liability and save the secured assets, somehow or the other. In the recent past, there is a sudden spurt in the number of Civil Cases filed against the actions initiated by Banks and Financial Institutions, either under the 1993 Act or under the SARFAESI Act, 2002. All these cases fall under 3 or 4 categories viz.,
(i)cases filed by strangers claiming that their properties are brought to sale on the basis of forged documents or certified copies of documents submitted by borrowers to Banks;
(ii)cases filed by guarantors claiming that they never signed letters of guarantee or offered their properties as securities;
(iii)cases filed by close relatives of borrowers such as spouses, children, brothers and sisters, claiming that they have a share in the properties mortgaged by the borrowers and that they were never aware of and they never gave consent to the properties being offered as securities; and
(iv)cases filed by third parties claiming that the properties were sold to them by the borrowers or guarantors by suppressing the creation of the mortgage and that they are bona fide purchasers for value without notice of the encumbrances. 10. It is not very difficult for a seasoned litigant or an intelligent lawyer to draft the Plaint in such a manner as to make a secured asset, come within anyone of the above 4 categories, by a clever drafting of the plaint, thereby creating an illusion of fraud, collusion, misrepresentation and the like. Today, with the advancement of technology, the creation of an illusion and the creation of a virtual would are both possible. The moment the Civil Suit is taken on file, the proceedings before the Debts Recovery Tribunal or under the SARFAESI Act, 2002 gets slowed down. This results in two consequences viz., (i) out of frustration, the Banks agree for one time settlements, or (ii) third party rights get created by taking advantage of the situation. Therefore, the Courts have a greater responsibility to scan the pleadings and see if the allegations of fraud and collusion made in the Plaint are actually a product of fraud and collusion between the borrowers and those making such claims. The learned brother judge in Punjab National Bank case having found that the institution of the suit alleging fraud and collusion is the last one among various unsuccessful attempts made by the plaintiffs to stall the recovery proceedings initiated by the bank and is nothing but an abuse of process of law, rejected the plaint.
11.The observation of learned single judge is quoted with approval by the Division Bench of our High Court in V.Tulasi v. Indian Overseas Bank case reported in 2011 (3) CTC 801, wherein, the Division Bench of our High Court applied the views of the full bench of our High Court in Lakshmi Shankar Mills (P) Ltd. v. the Authorised officer/Chief Manager, Indian Bank reported in 2008(2) CTC 529 among other judgments. In Lakshmi Shankar Mills's Case, the full bench has while answering the similar question, rendered its finding in para 22 as follows:
22.In the light of the foregoing discussions, we summarise our findings as follows:
(i) The right of the Bank is not automatically suspended upon filing of an Application under Section 17 of the Securitisation Act and the secured creditor can proceed to auction secured asset where no stay is granted by the tribunal.
(ii) The Tribunal has power to impose the condition relating to deposit for grant of stay of auction.
(iii) The Tribunal has no power to pass any interim mandatory order relating to restoration of possession or restoration of management before the finalisation of the proceedings under Section 17 of the Securitisation Act, and
(iv) All such grounds, which rendered the action of the Bank/Financial Institution illegal, can be raised in the proceedings under Section 17 of the Securitisation Act before the Debt Recovery Tribunal. It is for the Debt Recovery Tribunal to decide in each case whether the action of the Bank/Financial Institution was in accordance with the provisions of the said Act and legally sustainable.
12.The principles laid down in Lakshmi Shankar Mills's case was applied by the Division Bench of our High Court in V.Tulasi's case while dealing with the application for rejection of the plaint by virtue of specific bar of civil court jurisdiction created under Section 34 of the SARFAESI Act. The Division Bench is of the view that except under serious allegations of fraud and collusion, the jurisdiction of the civil court cannot be ousted. When no allegation of fraud against the first respondent/father or collusion between the first respondent and bank is raised, the jurisdiction of the civil court, as per the decision of the Division Bench of this Court in V.Thulasi case stands ousted.
13.However, the Division Bench of Karnataka High Court, our High Court and the learned brother judge of our High Court in the judgments reported in AIR 2006 Karnataka 21, CDJ 2007 MHC 3767 and 2010 (3) CTC 310, referred to above, uniformly held that no injunction can be granted in respect of any action taken or to be taken in pursuance of any power conferred by or under the SARFAESI Act or under Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Even in the judgment reported in AIR 2006 Karnataka 21, cited supra, on the side of the applicants, the Division Bench of Karnataka High court though upheld the maintainability of the suit for partition of the joint family properties, is not inclined to grant any order of injunction and the statusquo order passed in the suit, is set aside and the bank is given the liberty to proceed for the recovery of its amount by taking necessary steps in respect of mortgaged properties under the provisions of the SARFAESI Act. The same view is also adopted by our High Court in the judgment reported in CDJ 2007 MHC 3767 cited on the side of the applicants.
14.The judgments of the Hon'ble Supreme Court reported in 1953 SC 495 (C.N.Arunachala Mudaliar v. Murugananda Mudaliar and another and 2009 (8) SCC 646 (Nahar Industrial Enterprises Limited v. Hong Kong and Shanghai Banking Corporation cited on the side of the applicants arise on different context and in respect of the proceedings for recovery of debts dues to the bank and other financial institutions, are not applicable to the facts of the present case. The injunction sought for herein against the auction proceedings by the bank for recovery of the amount under SARFAESI Act is by virtue of Section 34 of the Act cannot be entertained by the Civil Court and the remedy available to the applicants is else where as provided under the Act and the injunction application is hence liable to be dismissed.
15.On facts, as rightly argued by the learned counsel for the second respondent, the second application filed for the same relief, after getting the first application dismissed as withdrawn, is barred by res judicata. Though the first application in O.A.No.868 of 2011 was dismissed as withdrawn, in view of the endorsement made by the learned counsel for the applicants, there is no specific order granting liberty to the applicants to file fresh application. Further, when the averments raised in the plaint and in the affidavit filed in support of this application proceed to say that the suit property and other property are allotted to their father/first respondent by the grand father of the plaintiffs, the suit for partition of one of the properties without any averments regarding availability or non-availability of other properties amounts to partial partition and is barred under law as laid down by the Supreme Court in the judgment reported in (2009) 9 SCC 52 (R.Mahalakshmi v. A.V.Anantharaman and others).
16.Viewing from any angle, pending determination of maintainability of the suit and by virtue of statutory bar created under Section 34 of the SARFAESI Act, the applicants are dis-entitled to get an order of injunction as sought for herein.
17.This application is hence dismissed.
rk