Karnataka High Court
Sri K T Govinde Gowda vs The Industrial Development Bank Of ... on 4 September, 2025
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
®
DATED THIS THE 04TH DAY OF SEPTEMBER, 2025
PRESENT
THE HON'BLE MRS. JUSTICE ANU SIVARAMAN
AND
THE HON'BLE DR. JUSTICE K.MANMADHA RAO
COMMERCIAL APPEAL No.207 OF 2021
BETWEEN:
1. SRI K.T.GOVINDE GOWDA
S/O LATE THIMME GOWDA,
AGED ABOUT 72 YEARS,
2. SMT. G.ANURADHA
W/O SRI. K.T.GOVINDE GOWDA,
AGED ABOUT 62 YEARS,
BOTH ARE RESIDING AT NO.341,
16TH MAIN, M.C.LAYOUT,
VIJAYANAGAR,
BANGALORE-560 040.
...APPELLANTS
(BY SRI. AJESH KUMAR S A/W SRI DILEEP C.G. AND
MS. AMANDA CHAKRAVARTI, ADVOCATE)
AND:
1. THE INDUSTRIAL DEVELOPMENT
BANK OF INDIA [I.D.B.I.]
ABIDS BRANCH, HOUSE NO.5-9-89/1 & 2,
3RD FLOOR, OPPOSITE: LATIF COMPLEX,
CHAPEL ROAD, ABIDS,
HYDERABAD-500 001
REPRESENTED BY ITS DGM-ICG
2. THE COASTAL PROJECTS LIMITED
[A DULY REGISTERED COMPANY UNDER
2
COMPANIES ACT]
HAVING ITS REGISTERED OFFICE AT
[I] PLOT NO.304-0, ROAD NO.78,
FILM NAGAR, JUBILEE HILLS,
HYDERABAD-500 033
ANDHRA PRADESH
REPRESENTED BY ITS MANAGING DIRECTOR
SRI. SABBINENI SURENDRA OR ITS NOMINEE.
[II] AND HAVING ITS REGIONAL OFFICE NEAR
VIKRAM TRINETRA LANDMARK,
NO.3072, 14TH CROSS OF K.R.ROAD,
SHASTRINAGAR, BANASHANKARI II STAGE,
BANGALORE-560 069.
3. M/S. SARAF POLY SYNTHETICS PRIVATE LIMITED
HAVING ITS REGISTERED OFFICE
AT NO.3, 3RD CROSS,
LALBAGH ROAD, BANGALORE-560027
REP. BY ITS DIRECTOR,
SRI CHANDRA PRAKASH RAMSISARIA.
...RESPONDENTS
(BY SRI. T.P.MUTHANNA, ADVOCATE FOR R-1;
SRI. PARAS JAIN, ADVOCATE FOR R-3;
NOTICE TO R-2 IS SERVED ON THE FIRST ADDRESS
i.e., ANDHRA PRADESH AND UNREPRESENTED)
THIS COMMERCIAL APPEAL IS FILED UNDER SECTION
13(1A) OF THE COMMERCIAL COURTS ACT, 2015, PRAYING TO
A] CALL FOR RECORDS IN COM.O.S.NO.580/2021 (OLD
O.S.NO.895/2018) ON THE FILE OF HON'BLE X ADDITIONAL
DISTRICT AND SESSIONS JUDGE, BENGALURU RURAL DISTRICT,
BENGALURU AND SET ASIDE THE ORDER DATED 07.04.2021
PASSED IN COM.O.S.NO.580/2021 DISMISSING THE SUIT UNDER
ORDER 7 RULE 11(d) OF CPC AND ETC.
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 01.07.2025 AND COMING ON FOR
PRONOUNCEMENT OF JUDGMENT, THIS DAY, DR. K.MANMADHA
RAO, J., PRONOUNCED THE FOLLOWING:
3
CORAM: HON'BLE MRS. JUSTICE ANU SIVARAMAN
and
HON'BLE DR. JUSTICE K.MANMADHA RAO
CAV JUDGMENT
(PER: HON'BLE DR. JUSTICE K.MANMADHA RAO) The present Commercial Appeal No.207/2021 is filed by the Appellants/Plaintiffs challenging the judgment and decree dated 07.04.2021 passed in Com.O.S.No.580/2021, by the X Addl. District & Sessions Judge, (Commercial Court) Bengaluru (hereinafter referred to as 'the Commercial Court').
2. The appellants herein are the plaintiffs and the respondents herein are the defendants in Com.O.S.No.580/2021 before the Commercial Court.
3. For convenience of reference, the parties are hereinafter referred to as arrayed before the Commercial Court in Comm.O.S.No.580/2021.
4. The appellants/plaintiffs filed the Commercial Original Suit seeking the following prayers:-
[a] Declare that the Draft/Preliminary
Guarantee Agreement along with annexed
4
Declaration cum Undertaking Letter dated
10/06/2013 produced as Annexure-B & C, will not constitute as MORTGAGE DEED in respect of Lands in Sy.No.124/6 of Karivobanahalli Village, Yeswanthapura Hobil, Bangalore North Taluk, measuring 7 Acres 20 guntas pertaining to the Joan availed by Defendant No.2 from Defendant No:1 Bank.
[b] Declare that the Plaintiffs are not GUARANTORS OR SURETIES and/or have not created any SECURITY INTEREST in favour of Defendant No.1 Bank under the Draft/Preliminary Guarantee Agreement dated 10/06/2013 along with annexed Declaration cum Undertaking Letter dated 10/06/2013 produced as Annexure-B & C and are not liable under the above documents or any other documents in respect of short term loan availed by the Defendant No.2 from Defendant No.1 Bank.
[c] Consequently for a Mandatory Injunction directing the Defendant No.1 to return all the Original Title Deeds and other connected documents to the Plaintiffs pertaining to Lands in Sy.No.124/6 of Karivobanahalli Village, Yeswanthapura Hobli, Bangalore North Taluk, measuring 7 Acres 20 guntas which are owned and possessed by the Plaintiffs.
[d] For a Permanent Injunction restraining the Defendants 1 & 2 by themselves or any one else claiming through or under them in any way alienating, encumbering or auctioning the same to anyone.
5
5. The case of the plaintiffs is that the plaintiffs are the absolute owners in possession and enjoyment of land bearing Sy.No.124/6 measuring 7 acres 20 guntas situated at Karivobanahalli Village, Yeshwanthpura Hobli, Bangalore, North Taluk. On 10.04.2013, the representatives of defendant No.2 - Company registered under the Companies Act, namely Shri Surendra (Managing Director), Shri C. Suresh Babu (Proprietor of Uma Associates), Sri Shivayogi, Sri Ravindra, and Sri Ranganath, approached the Plaintiffs requesting them to act as guarantors for a short-term loan for a period of one year to be availed from Defendant No.1- Bank for Bangalore metro Rail Corporation (BMRCL)-related projects. Based on trust and discussions held repeatedly, particularly at Uma Associates, Bangalore, and on 10.04.2013, the plaintiffs handed over all original title deeds and documents pertaining to the said land to Defendant No.2, which were thereafter submitted to Defendant No.1 through Defendant No.2.
6. On 10.06.2013, the representatives of Defendant No.2 took the plaintiffs along with Sri D.J. Nagaraj to the office of Defendant No.1 - Bank at Hyderabad around 8:30 6 PM, where the plaintiffs were made to sign unfilled printed documents labelled as Draft/Preliminary Guarantee Agreement and Declaration cum Undertaking Letter. The plaintiffs assert that these signatures were obtained without the presence of any officials or witnesses from Defendant No.1 Bank. Thereafter, Defendants No.1 and 2 colluded and converted the unsigned preliminary drafts into fully executed Guarantee Agreements without the plaintiffs' knowledge, consent, or presence, thereby creating self-styled documents.
7. The Plaintiffs were not provided copies of the said documents despite repeated requests. On 24/02/2016, the Plaintiffs filed an RTI Application with Defendant No.1 seeking copies of (i) loan applications submitted by Defendant No.2,
(ii) collateral surety applications, and (iii) all other related documents. In response, on 10.03.2016, only the copies of the Draft/Preliminary Guarantee Agreement and Declaration cum Undertaking Letter were provided. The plaintiffs discovered that these were on undervalued stamp papers and notarized without their presence, with no entries in the notary 7 register, further substantiating their claims of fraud and collusion by the Defendants.
8. Upon review, the plaintiffs observed multiple defects in the documents. Notably, (a) no loan account number was mentioned; (b) terms of disbursement after registration of mortgage within 3 months were absent; (c) terms and conditions of the Facilities Agreement between Defendants No.1 and 2 were not disclosed to plaintiffs. The documents were allegedly signed at 8:30 pm under inadequate lighting and heavy rainfall, not before any Notary or bank official. The plaintiffs state that these documents were never intended to be final or enforceable and are not binding under the Indian Contract Act, Transfer of Property Act, Registration Act, and Karnataka Stamp Act.
9. On 24.06.2014, the plaintiffs issued a letter (Annexure-E) to both defendants, withdrawing their consent to the Draft/Preliminary Guarantee Agreement and Declaration cum Undertaking Letter and demanded return of original title deeds. In response, on 19.07.2014, Defendant No.1 sent a letter to Defendant No.2 (copy to Plaintiffs) 8 asking them to clear outstanding dues or substitute the collateral property (Annexure-F). Further reminder letters were sent by the plaintiffs on 21.02.2016 and 22.02.2016, again seeking discharge from the preliminary documents and return of title deeds. Despite these efforts, Defendants failed to respond or return the documents.
10. The Plaintiffs clarify that the Guarantee Agreement and Declaration were conditional, requiring registration of mortgage within 3 months from 10.06.2013. As the mortgage was not executed by 10.09.2013, the documents ceased to be valid. Plaintiffs did not execute any security agreement or create any security interest over their lands. They emphasize that under Clause 8 of the Declaration (Annexure-C), the mortgage had to be executed within three months or by an extended date permitted by IDBI in writing, which was never done. Further, defendant No.1 Bank failed to initiate any legal action within three years from the withdrawal letter dated 24.06.2014.
11. Without possessing mortgage or guarantee rights, defendant No.1 Bank published a Demand Notice dated 9 04.01.2018 in The Hindu newspaper on 05.01.2018 (Annexure-G). Plaintiffs issued a Legal Notice under Rule 3A of the SARFAESI Rules on 09.02.2018 (Annexure-H), which was replied to by the Bank on 23.02.2018 (Annexure-J) without furnishing required documents. Plaintiffs state they did not receive Possession Notice under Rule 8(1), yet Defendant No.1 published it on 07.02.2018 in The New Indian Express (Annexure-K), followed by an E-Auction Sale Notice dated 10.02.2018 in Prajavani, scheduling auction for 14.03.2018 (Annexure-L).
12. Aggrieved by the illegal action, the plaintiffs filed S.A. No.102/2018 before the DRT, which was dismissed as infructuous after the auction did not proceed. The Plaintiffs contend that this dispute pertains to civil rights governed by the CPC and not under the purview of SARFAESI Act. They maintain that the land, although temporarily converted, reverted to its agricultural status due to non-utilization, and the Bank has no locus standi under the SARFAESI Act or any other statute. Hence, they have instituted this declaratory 10 suit within the territorial jurisdiction of the appropriate civil court.
13. The defendant No.1 filed written statement before the Commercial Court while denying the allegations made in the plaint. The defendant No.1 states that the Guarantee Agreement and Declaration cum Undertaking were lawfully executed and duly acted upon. Defendant No.1 asserts that all documentation was completed in accordance with law, and the plaintiffs signed the documents voluntarily. It is contended that the Guarantee Agreement and Declaration cum undertaking dated 10.06.2013 were neither forged nor invalid and are enforceable under law.
14. It is submitted that Defendant No.1, pursuant to the RTI application filed by the plaintiffs dated 24.02.2016, furnished the required documents to the Plaintiffs. However, by letter dated 19.07.2014 addressed to Defendant No.2 (copy marked to Plaintiffs), Defendant No.1 clarified that such withdrawal letter dated 24.06.2014, filed by the plaintiffs could not take effect unless proper and acceptable substitute security was furnished. As no such substitution occurred, the 11 guarantee and mortgage continued to subsist and remained binding on the plaintiffs.
15. The defendant No.2 availed loans amounting to Rs.237.98 Crores from defendant No.1, secured inter alia by hypothecation of movables and by equitable mortgage created by the plaintiffs on their lands. Upon default by defendant No.2, the accounts were classified as Non- Performing Assets. Consequently, Defendant No.1 issued a demand notice dated 01.11.2017, followed by a Section 13(2) of the SARFAESI Act notice dated 06.11.2017 to both the borrower and guarantors, including the plaintiffs. Said notices were also published in Udayavani and The Hindu newspapers, and no valid objection was raised within the statutory time.
16. Possession and E-Auction proceedings when defendants and plaintiffs failed to discharge the outstanding dues, defendant No.1 issued a possession notice dated 02.02.2018 under Section 13(4) of the SARFAESI Act. Said notice was duly published in the newspapers. Subsequently, an E-auction notice dated 10.02.2018 was issued, scheduling auction of the suit schedule property for 12 14.03.2018. The plaintiffs, being aggrieved, filed S.A. No.102/2018 before the Debt Recovery Tribunal, Bengaluru. However, as the proposed auction did not materialise, the said application was dismissed as infructuous. Defendant No.1 specifically challenges the jurisdiction of this Court under Section 34 of the SARFAESI Act, stating that the reliefs sought by the plaintiffs, including a declaration that the documents dated 10.06.2013 are invalid, fall squarely within the ambit of the SARFAESI Act and can only be adjudicated by the Debt Recovery Tribunal under Section 17. It is further contended that the suit is barred by the express provisions of Section 34 of the SARFAESI Act.
17. It is the specific case of defendant No.1 that the plaintiffs, having executed the Guarantee Agreement and deposited the title deeds, remain jointly and severally liable along with defendant No.2. It is also submitted that as of 01.02.2019, the total dues recoverable from defendant No.2 and the guarantors, including the plaintiffs, stood at Rs.385,95,55,531.58/-. It is further the case of the defendants that the relief sought to declare the Guarantee 13 Agreement and Declaration cum Undertaking letter dated 10.06.2013, as non-binding and not amounting to a mortgage is within the exclusive jurisdiction of the Debt Recovery Tribunal u/s. 17 of the SARFAESI Act.
18. Based on the above pleadings, the Commercial Court has framed the following issues:
1. Whether the suit of the plaintiffs is barred under the provisions of SARFAESI Act?
2. What order or decree?
19. Having heard both the sides, the Commercial Court has decreed the suit Order dated 07.04.2021. The operative portion of the said Order is as follows:
"The plaint in the suit is rejected U/o.7 Rule 11(d) of CPC.
The plaintiffs are liable to pay cost of Rs.5,000/- to the defendant No.1.
Draw decree accordingly.
Office to issue copy of the order to the parties by electronic mode if Email ID is provided".14
20. The Commercial Court upon perusal of the pleadings and documents observed that it is an admitted fact that the plaintiffs are the absolute owners of land bearing Sy.No.124/6 measuring 7 acres 20 guntas situated at Karivobanahalli Village, Yeshwanthapura Hobli, Bengaluru North Taluk. Defendant No.2, a company, availed a loan of Rs.50 crores from defendant No.1, a Banking Institution, for its project in Bengaluru with BMRCL. The plaintiffs, reposing confidence in the representatives of defendant No.2, handed over the original title deeds and other relevant documents pertaining to the said land and signed documents in the office of defendant No.1 at Hyderabad on 10.06.2013. Thereafter, on account of default by defendant No.2 in repaying the loan amount, defendant No.1, being the secured creditor, initiated proceedings under the SARFAESI Act, including issuance of possession notice under Section 13(4) of the said Act and publication of notices in the newspapers The plaintiffs subsequently sought to withdraw their guarantorship; however, the defendant bank refused, citing that the 15 outstanding amount had not been cleared nor had alternative security been furnished.
21. The documentary evidence produced by the plaintiffs, including the guarantee agreement, declaration- cum-undertaking, and the act of handing over original title deeds, clearly indicates that they stood as guarantors and had created an equitable mortgage in favour of defendant No.1. There is nothing on record to support the contention that the documents were blank or signed under misrepresentation or fraud. The Commercial Court finds that the plaintiffs, being well aware of the contents, had voluntarily executed the documents in favour of defendant No.1 for the loan availed by defendant No.2. The execution of the mortgage by deposit of title deeds satisfies the legal requirement for creation of an equitable mortgage, and thus, the rights of the secured creditor stand established.
22. Further the Commercial Court observed that Section 17 of the SARFAESI Act, provides a specific remedy for any person, including a borrower or guarantor, aggrieved by the actions of the secured creditor under Section 13(4) of 16 the SARFAESI Act. The said provision empowers the DRT to adjudicate upon the validity and legality of such actions, including issuance of possession notices and enforcement of security interests. In the present case, the plaintiffs, having mortgaged their properties and having been issued notices under the SARFAESI Act, are persons aggrieved and fall within the scope of Section 17. Accordingly, their proper remedy lies before the DRT and not before a Civil Court.
Section 17 of the SARFAESI Act reads as under:-
17. Right to appeal:
(1) Any person (including borrower) aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorized officer under this chapter, may make an application along with such fee, as may be prescribed to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had-
been taken:
PROVIDED that different fees may be prescribed for making the application by the borrower and the person other than the borrower.
Explanation: For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including 17 borrower) to make an application to the Debts Recovery Tribunal under sub-section (1) of Section 1.
(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.
(3) it, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-
section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management of the secured assets to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to in sub-section (4) of section 13 taken by the secured assets as invalid and restore the possession of the secured assets to the borrower or restore the management of the secured assets to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of section 13.
(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section (4) of section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures 18 specified under sub-section (4) of section 13 to recover his secured debt.
(5) Any application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application: Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1).
(6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub-section (5), any party to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal.
(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of application in accordance with the provisions of the Recovery of Debts Due Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder.
23. Further, it was observed that Section 34 of the SARFAESI Act bars the jurisdiction of the civil court in relation to matters which the DRT or Appellate Tribunal is empowered 19 to adjudicate. The reliefs sought by the plaintiffs--such as declarations that the guarantee and undertaking do not amount to a mortgage, and injunctions restraining the bank from dealing with the property fall squarely within the matters governed by the SARFAESI Act. The bar under Section 34 of the SARFAESI Act is absolute and extends to both declaratory and injunctive reliefs. Therefore, this Court is precluded from entertaining the present suit in view of the specific bar of jurisdiction created by the said Act. Section 34 of the SARFAESI Act reads as under:-
"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 Debt 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).
24. In addition, as per Section 11 of the Commercial Courts Act, 2015, when jurisdiction of a Civil Court is expressly barred under any statute, a Commercial Court cannot assume jurisdiction. In light of the bar under Section 20 34 of the SARFAESI Act and the availability of an efficacious statutory remedy under Section 17 of the SARFAESI Act, before the DRT, Commercial Court concluded that the present suit is barred by law. Consequently, as mandated under Order VII Rule 11(d) of the CPC, the Commercial Court rejected the plaint as not maintainable in law.
25. Assailing the above Order dated 07.04.2021, passed in Com.O.S.No.580/2021 on the file of the Commercial Court, the present Commercial Appeal came to be filed.
26. Heard learned counsel appearing for the appellants and learned counsel appearing for the respondents. Perused the material on record.
27. Learned counsel appearing for the appellants while reiterating the averments made in the Commercial appeal, has argued that the impugned judgment rejecting the plaint as against respondents No.1 and 2, is erroneous who had not even filed any application under Order VII Rule 11(d) of the CPC. It is trite that rejection of plaint must be on the whole and not selectively against one defendant unless the cause of 21 action is entirely severable. In the absence of any application or grounds made out by respondent No.2, the rejection of suit as against them, without affording an opportunity of trial, is per se unsustainable.
28. It is contended by learned counsel for the appellants that the Commercial Court failed to issue summons or notices post-transfer of the file to the Commercial Court after identification of the matter as a commercial dispute on 11.12.2020. Despite the Order of the Commercial Court to issue notice for both the parties and their counsel to appear before the Court on 17.03.2021 for hearing, there exists no record of service, thereby violating principles of natural justice. The appellants were diligently prosecuting the matter until 14.12.2020. The abrupt rejection of the suit without notice is unsustainable.
29. It is further contended that a substantial ground of challenge lies in the assertion that the suit property comprises agricultural land, which is exempt from application of the Section 31(i) of the SARFAESI Act. Though a conversion order was granted conditionally for residential 22 purposes, it lapsed due to non-compliance with mandatory layout sanction conditions. Consequently, the land reverted to agricultural status and continued to be used for agricultural purposes. Consequently, no security interest could legally be created at all over such land.
30. It is contended that the preliminary documents relied upon by the respondents, such as the Draft/Preliminary Guarantee Agreement and Declaration cum undertaking dated 10.06.2013, were neither stamped in accordance with the Karnataka Stamp Act nor registered under the Registration Act, 1908. These documents were never executed into a valid Mortgage Deed. Moreover, the appellants withdrew their willingness through a Withdrawal Letter dated 24.06.2014. No action was initiated by the Respondent Bank within three years from the said withdrawal, thereby rendering any claim barred by limitation and unenforceable in law.
Para 8 of the Declaration cum Undertaking Letter which reads as under:
Para 8: "We, hereby agree and undertake that within a period of three moths from the date hereof 23 or such extended date as may be permitted by IDBI in writing shall"
a) "Assure the title to the properties comprised in the mortgage security and comply with all requisitions that many be made from time to time by or on behalf of the Lender in that behalf"
31. The learned counsel appearing for the appellants has placed reliance on the following judgments:
• J.K (Bombay) Private Ltd., v. New Kaiser-i-
Hind Spinning and Weaving Co.Ltd & others, reported in 1968 SCC Online SC 32 Para 27: an agreement to mortgage which can give rise to an obligation to specifically perform it, a personal obligation but do not constitute either a mortgage under Section 58 or a charge under Section 100 of the Transfer of Property Act.
• Haryana Financial Corporation v. Gurcharan Singh reported in 2014 (16) SCC 722 Para 9 to 12. A conjoint reading of Section 100 with Section 59 of the TP Act makes it clear that if by act of parties, any immovable property is made security for the payment of money to another and it does not amount to mortgage, then all the provisions which apply to a simple mortgage as far as may be apply to such charge. Consequently in view of Section 59 of the TP Act when there is a mortgage other than a mortgage by deposit of the title deeds it can be effected only by a registered Instrument.24
• Kedar Lal Seal and another v. Hari Lal Seat, reported in 1951 SCC 1189 Para 27. The whole law of mortgage in India Including the law of contribution arising out of a transaction of mortgage is now statutory and is embodied in the Transfer of Property Act read with the Civil Procedure Code. The Court cannot travel beyond these statutory provisions.
Para 28: When parties enter into a mortgage they know or must be taken to know that the law of mortgage provides for this very question of contribution. If confers rights on the mortgagor who redeems and directs that in the absence of a contract to the contrary he shall be reimbursed in a particular way out of particular properties.
• Suraj Lamp and Industries Private Limited v. State of Haryana and another, reported in 2012 (1) SCC 656 Para 16: Section 17 of the Registration Act clearly provides that any document (other than testamentary instruments) which purports or operates to create, declare, assign, limit or extinguish whether in present or in future "any right, title or interest' whether vested or contingent of the value of RS.100 and upwards to or in immovable property.
Para 17: Section 49 of the said Act provides that no document required by Section 17 to be registered shall affect any immovable property comprised therein or received as evidence of any transaction affected such property unless it has been registered. Registration of a 25 document gives notice to the world that such a document has been executed.
• Bank of Baroda v. Gopal Shriram Panda and another, reported in 2021 SCC Online Bom 466 Para 27: (E) Even in cases where the enforcement of a security interest involves issues as indicated in Mardia Chemicals (supra) of fraud as established within the parameters lald down in A.Ayyasamy (supra); a claim of discharge by a guarantor under Sections 133 and 135 of the Contract Act (Mardia Chemicals (supra)); a clalm of discharge by a guarantor under Sections 139, 142 and 143 of the Contract Act: Marshalling under Section 56 of the Transfer of Property Act [J.P.Builders (supra)]; the Civil Court shall have jurisdiction.
• Central Bank of India and another, v.
Smt.Prabha Jain and others, reported in 2025 SCC Online SC 121 Para 24: Even if one relief survives the plaint cannot be rejected under Order VII Rule 11 of the CPC.
Para 41: (a) That Civil Court's jurisdiction to entertain the suit is not ousted.
• Vinod Infra Developers Ltd., v. Mahaveer Lunia and others, reported in 2025 INSC 772 (Civil Appeal No.7109 of 2025) Para 9.6: Plaint cannot be rejected in its entirety merely because one of the prayers or relief sought is untenable, so long as other releifs are maintainable and based on Independent causes of action.
26
• Central Bank of India and another v.
Smt.Prabha Jain & others, reported in 2025 INSC 95 (Civil Appeal No.1876 of 2016) Paras 24 & 25: Plaint cannot be rejected partially. • Benny D' Souza and others v. Melvin D' Souza and others by Order dated 24.11.2023 passed in S.L.P (C) No.23809/2023 Order 41 Rule 17 of the CPC: Page 2:
If the appellant does not appear when the appeal is called for hearing it can only be dismissed for non- prosecution and not merits • Aman Lohia v. Kiran Lohia reported in (2021) 5 SCC 489 Para 47. Even if Court were to infer abandonment, it has to be express.
• K.J.Nathan v. S.V.Maruthi Rao and other reported in 1964 SCC OnLine SC 120 Paras 8, 9 and 10: Apex Court underscored that all three requisites i.e., debt, deed deposit, intention must be present and there is no presumption of mortgage just by depositing deeds. There is no presumption of law that the mere deposit of title deeds constitutes a mortgage.
The Appellants also rely on the principle that a mere undertaking to create a mortgage does not constitute a valid mortgage. As held by the Apex Court in the case of Haryana Financial Corporation v. Gurcharan Singh reported in 27 2014 (3) SCJ 125. Further, under Section 59 of the Transfer of Property Act, where the mortgage contract is reduced to writing, registration becomes compulsory. The reliance placed on unregistered and insufficiently stamped preliminary documents, in contravention of the Indian Contract Act, the Transfer of Property Act, and other statutes, is misplaced. Even if title deeds are deposited, once a written contract exists, registration under Section 17 of the Registration Act becomes mandatory. Further, any such document creating, assigning, or extinguishing rights in immovable property must be duly stamped and registered under Section 17 of the Registration Act and Section 34 of the Karnataka Stamp Act. The alleged documents relied upon by the Bank are not only unstamped and unregistered but are also devoid of any legal sanctity.
32. It is argued by the learned counsel for the appellants that the execution of documents was vitiated by fraud and misrepresentation. The Appellants contend that they were misled and induced by officials of respondent No.1
- Bank and respondent No.2 - Company into signing 28 documents under false pretexts and incomplete disclosure.
The absence of a tripartite agreement, non-execution by the borrower, lack of specific loan account numbers, and the fact that the documents were executed under suspicious circumstances at odd hours, render them void and unenforceable.
33. It is further contended that the core factual dispute, whether the appellants ever created a valid mortgage or stood as guarantors for the alleged debt, remains unresolved. The respondent No.1 - Bank has proceeded against the appellants for a sum of Rs.322 Crores when the original draft agreement referenced only a potential loan of up to Rs.50 Crores. The existence, enforceability and binding nature of the documents are seriously disputed. These are the issues requiring evidence and cannot be adjudicated at the stage of Order VII Rule 11(d).
34. It is further contended that serious allegations of fraud, breach of trust, collusion and misrepresentation have been raised by the appellants in their plaint. It is a settled principle that when allegations of fraud are raised, the Civil 29 Court retains jurisdiction, and such matters can only be adjudicated upon trial and not summarily dismissed under Order VII Rule 11(d) of the CPC. The question of whether a valid mortgage exists, the character of the land, and whether there exists a legally binding guarantee, requires detailed factual examination. Further, the Draft Guarantee Agreement was never executed by all three parties--namely, the Bank, the Borrower Company, and the alleged Guarantors. There is no mention of loan account numbers or detailed terms of the alleged sanction. The appellants claim that their signatures were obtained during odd hours, under dim lighting, and in the absence of attesting witnesses or proper notarization. Allegations of forgery, improper attestation and backdated filling of documents call for a detailed inquiry and cannot be brushed aside summarily.
35. Learned counsel for the appellants contends that the respondent Bank's conduct is alleged to be part of a larger fraudulent scheme amounting to "profile lending,"
wherein innocent landowners were misled into signing documents without full knowledge of consequences. The 30 Appellants claim they were used as fronts for securing illegal loans. The Bank is a public body under Article 12 of the Constitution of India and its failure to act transparently, lawfully, and in good faith vitiates the entire transaction. The appellants have been forced into litigation despite not having received any financial benefit nor having executed any registered Mortgage Deed. Lastly, the documents in question do not meet the requirements under the Indian Contract Act, the Transfer of Property Act, the SARFAESI Act, the Karnataka Stamp Act, and the Registration Act. The Judgment and Decree dated 07.04.2021 is riddled with procedural lapses, suppression of vital facts, and non-consideration of core legal issues. Accordingly, the same is arbitrary, illegal, and liable to be set aside, and the suit deserves to be restored for trial on merits.
36. Per contra, learned counsel for the respondents while denying the allegations made by the learned counsel for the appellant has argued that the Commercial Court has rightly concluded and decreed the suit and opposed for allowing the appeal and prayed to dismiss the same. 31
37. The learned counsel appearing for respondent No.3 has placed reliance on the following judgments:
• Shakeena v. Bank of India reported in (2021) 12 SCC 761;
29. Notably, the appellants took no steps, whatsoever, to pay the outstanding dues to the respondent Bank by way of a valid tender nor moved any formal application before the High Court after filing of the writ petitions on 19-1-2006, to permit them to deposit the requisite amount either in the loan accounts concerned or in the court. That was not done even until the disposal of the writ petitions by the Single Judge or during the pendency of the writ appeals before the Division Bench and until the disposal thereof vide the impugned judgment [K. Chidambara Manickam v. Shakeena, 2007 SCC OnLine Mad 675 : (2008) 1 CTC 660] . We must also notice the stand taken by the respondent Bank that even the legal notice sent by the appellants to the respondent Bank, in no way expresses unambiguous commitment of the appellants to exercise their right of redemption.
Suffice it to observe that the appellants, for reasons best known to them, have not chosen to deposit the amount in the loan accounts or attempted to seek permission of the Court to deposit the same in Court from 19-1-2006 immediately after filing of the writ petitions or for that matter until the registration of the sale certificate on 18- 9-2007. In this backdrop, it is not possible to countenance the stand of the appellants that they had made a valid tender to the respondent Bank or that the respondent Bank had mischievously or mala fide rejected their offer 32 to defeat their rights, to redeem the mortgage before registration of the sale certificate on 18-9-2007.
30. A fortiori, it must follow that the appellants have failed to exercise their right of redemption in the manner known to law, much less until the registration of the sale certificate on 18-9-2007. In that view of the matter no relief can be granted to the appellants, assuming that the appellants are right in contending that as per the applicable provision at the relevant time [unamended Section 13(8) of the 2002 Act], they could have exercised their right of redemption until the registration of the sale certificate -- which, indisputably, has already happened on 18-9-2007. Therefore, it is not possible to countenance the plea of the appellants to reopen the entire auction process. This is more so because, the narrative of the appellants that they had made a valid tender towards the subject loan accounts before registration of the sale certificate, has been found to be tenuous. Thus understood, their right of redemption in any case stood obliterated on 18-9-2007. Further, the amended Section 13(8) of the 2002 Act which has come into force w.e.f. 1-9-2016, will now stare at the face of the appellants. As per the amended provision, stringent condition has been stipulated that the tender of dues to the secured creditor together with all costs, charges and expenses incurred by him shall be at any time before the "date of publication of notice" for public auction or inviting quotations or tender from public or private deed for transfer by way of lease assessment or sale of the secured assets. That event happened before the institution of the subject writ petitions by the appellants. 33
• Dwarika Prasad v. State of Uttar Pradesh and others reported in (2018) 5 SCC 491;
9. In the present case, the appellant failed to comply with the provisions of Section 13(8). The statute mandates that it is only where the dues of the secured creditor are tendered together with costs, charges and expenses before the date fixed for sale or transfer that the secured asset is not to be sold or transferred. The appellant was aware of the proceedings initiated by the Bank for asserting its right to recover its dues by selling the property. The appellant moved the DRT in Securitisation Application No. 176 of 2015. During the pendency of those proceedings, orders were passed by the Tribunal on 1-2-2016 and 3-2-2016. The appellant moved the Allahabad High Court which by its order dated 9-3-2016 [Dwarika Prasad v. State of U.P., 2016 SCC OnLine All 2564] restrained the Bank and the auction- purchaser from executing the sale deed until 15-3-2016. The stay was extended till 28-3-2016 by which date the appellant was to deposit an amount of Rs 7,00,000. The balance was required to be deposited by 30-4-2016. While the appellant deposited an amount of Rs 7,00,000 with the Bank, he failed to deposit the balance in accordance with the provisions of Section 13(8). Even after the writ proceedings before the High Court were withdrawn, the appellant did not deposit the balance due together with the costs, charges and expenses. The sale was confirmed, a sale certificate was issued and a registered sale deed was executed on 12-4-2016. The appellant failed to ensure compliance with Section 13(8). The right to redemption stands extinguished on the execution of the registered sale deed. This is also the 34 view which has been expressed in the judgment in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC 610 : (2014) 3 SCC (Civ) 254]. • Canara Bank v. P. Selathal reported in (2020) 13 SCC 143;
9.2. In Church of Christ Charitable Trust & Educational Charitable Society v. Ponniamman Educational Trust [Church of Christ Charitable Trust & Educational Charitable Society v. Ponniamman Educational Trust, (2012) 8 SCC 706 : (2012) 4 SCC (Civ) 612] , this Court in para 13 has observed and held as under : (SCC p. 715) "13. While scrutinising the plaint averments, it is the bounden duty of the trial court to ascertain the materials for cause of action. The cause of action is a bundle of facts which taken with the law applicable to them gives the plaintiff the right to relief against the defendant. Every fact which is necessary for the plaintiff to prove to enable him to get a decree should be set out in clear terms. It is worthwhile to find out the meaning of the words "cause of action". A cause of action must include some act done by the defendant since in the absence of such an act no cause of action can possibly accrue."
9.3. In ABC Laminart (P) Ltd. v. A.P. Agencies [ABC Laminart (P) Ltd. v. A.P. Agencies, (1989) 2 SCC 163] , this Court explained the meaning of "cause of action" as follows : (SCC p. 170, para 12) "12. A cause of action means every fact, which if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the court. In 35 other words, it is a bundle of facts which taken with the law applicable to them gives the plaintiff a right to relief against the defendant. It must include some act done by the defendant since in the absence of such an act no cause of action can possibly accrue. It is not limited to the actual infringement of the right sued on but includes all the material facts on which it is founded. It does not comprise evidence necessary to prove such facts, but every fact necessary for the plaintiff to prove to enable him to obtain a decree. Everything which is not proved would give the defendant a right to immediate judgment must be part of the cause of action. But it has no relation whatever to the defence which may be set up by the defendant nor does it depend upon the character of the relief prayed for by the plaintiff."
• Dalip Singh v. State of Uttar Pradesh and others reported in (2010) 2 SCC 114; and • Ramjas Foundation and another v. Union of India and others reported in (2010) 14 SCC 38.
38. On hearing the learned counsel for the parties and perusal of the material on record, it is observed that the Bank had sanctioned various credit facilities, including a Working Capital Limit of Rs.50 Crores outside the consortium to respondent No. 2 - M/s Coastal Projects Ltd. The Appellants offered their land bearing Sy.No.124 measuring 6 acres 31 guntas as collateral and also executed a personal guarantee 36 dated 10.06.2013 in favour of the Bank. An equitable mortgage was created on 10.06.2013 by deposit of original title deeds, and a Memorandum of Entry was recorded on 17.06.2013. Upon appellants' request for release of security vide letter dated 22.02.2016, the Bank replied on 18.03.2016 that such release was conditional upon repayment of the outstanding dues or substitution of security. The appellants further approached this Court via W.P.No.4820/2021 and W.P.No.1085/2021. The latter was disposed of on 07.08.2024 with directions to the CBI to consider the complaint in accordance with law. Meanwhile, the Bank issued a fresh E- auction notice dated 16.09.2021, followed by a sale on 05.10.2021. The respondent No.3, Saraf Poly Synthetics Pvt. Ltd., emerged as the successful bidder, and the sale certificate was registered on 06.11.2021. S.A.(Dairy No. 1496/2021) filed before DRT Bengaluru was transferred and renumbered as TSA No.9/2022 before DRT Chennai. This challenge was dismissed by a detailed order dated 05.01.2024, holding that the Bank's actions were compliant with SARFAESI Act and relevant rules.
37
39. It is observed that the actions taken by the respondent - Bank are in strict conformity with the SARFAESI Act, the Banking Regulation Act, and judicial precedents. There are no infirmities in the loan sanction, mortgage creation, enforcement actions, or the public auction.
40. We have noticed that no registered mortgage deed was executed is incorrect since an equitable mortgage was created on 10.06.2013 by deposit of title deeds, and the same was supported by a declaration cum undertaking. Their argument that the mortgaged land retains agricultural character and thus SARFAESI Act does not apply is also untenable as the said land has been part of Bangalore Municipal Area since 2009, thereby losing its agricultural nature. The appellants' representation to BBMP to withhold khatha was responded to by BBMP with a direction to produce an interim Court order. The sale certificate having been duly registered, the auction purchaser has become the absolute owner and is entitled to all consequential rights, including registration of khatha and mutation of records. 38
41. Further, the actions taken by the respondent - Bank are in strict conformity with the SARFAESI Act, the Banking Regulation Act, and judicial precedents. There are no infirmities in the loan sanction, mortgage creation, enforcement actions, or the public auction. Further, it is observed and crystal clear that the appellants have disputed the execution of guarantee agreement and creation of mortgage in favour of the respondent No.1 in respect of their properties which is against the contents of the documents. The said reliefs fall under purview of the Debt Recovery Tribunal, so the remedy is available under Section 17 of the SERFEASI Act, 2002. Accordingly, a demand notice under Section 13(2) of the SERFEASI Act was issued and thereafter, possession notice under Section 13(4) of the Act is also issued. Thereafter, the appellants filed second appeal before the Tribunal and the said appeal was dismissed as infructuous. Thereafter, the appellants approached the Commercial Court under Section 11 of the Commercial Courts Act where the jurisdiction of Commercial Court is barred under Section 34 of the Civil Courts Act. In view of the same, 39 the Commercial Court shall not entertain the suit itself and the suit is rejected under Order VII Rule 11(d) of CPC, it appears that the Trial Court has rightly rejected the suit under Order VII Rule 11(d) of CPC. Further it is observed that appellants have not come to the Court with clean hands. The appellants raised so many bundle of facts in the cause of action, and every fact which is necessary for the appellants to enable him to get a decree has to be set out in clear terms. The appellants failed to take recourse on his grievance before the proper jurisdictional court and approached a forum having no jurisdiction. there are no merits in the appeal to interfere with the impugned order passed by the Commercial Court.
42. Having regard to the facts and circumstances and in view of the submissions of both the learned counsel, this Court is of the opinion that the appeal lacks merit and does not survive for consideration. There are no grounds to interfere with the well considered order passed by the Commercial Court. The impugned order dated 07.04.2021 passed by the X Additional District and Sessions Judge, 40 Bengaluru Rural District, Bengaluru in Com.O.S.No.580/2021 is hereby confirmed.
Accordingly, the Commercial Appeal is dismissed.
Sd/-
(ANU SIVARAMAN) JUDGE Sd/-
(DR. K.MANMADHA RAO) JUDGE BNV Ct-adp