Gujarat High Court
Maitry Trading Private Limited vs Gujarat State Financial Corporation on 19 March, 2014
Author: S.G.Shah
Bench: S.G.Shah
C/FA/1810/2012 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
FIRST APPEAL NO. 1810 of 2012
With
CIVIL APPLICATION NO. 6747 of 2012
In
FIRST APPEAL NO. 1810 of 2012
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE S.G.SHAH Sd/-
===============================================
1 Whether Reporters of Local Papers may be allowed to see the No judgment ?
2 To be referred to the Reporter or not ? No 3 Whether their Lordships wish to see the fair copy of the judgment ? No 4 Whether this case involves a substantial question of law as to the No interpretation of the Constitution of India, 1950 or any order made thereunder ?
5 Whether it is to be circulated to the civil judge ? No =============================================== MAITRY TRADING PRIVATE LIMITED....Appellant(s) Versus GUJARAT STATE FINANCIAL CORPORATION....Defendant(s) =============================================== Appearance:
MR KUNAL P VAISHNAV, ADVOCATE for the Appellant MR. S. M. GOHIL, ADVOCATE for the Defendant =============================================== CORAM: HONOURABLE MR.JUSTICE S.G.SHAH Date :19/03/2014 CAV COMMON JUDGMENT
1. Appellant is original plaintiff, whereas respondent is original defendant before the trial Court, they are referred in the same capacity in this appeal.
2. By impugned order dated 07.06.2012, the trial Court has disposed of the suit stating that in view of the order passed below Page 1 of 23 C/FA/1810/2012 CAV JUDGMENT Exh.14 dated 07.06.2012 the suit does not survive. Thereby, suit has been disposed of without trial considering the order below Exh.14, which was submitted by the defendant praying to reject the plaint under Order VII, Rule 11(d), of the Code of Civil Procedure, 1908, submitting that the suit is barred by the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred as to the 'SARFAESI Act').
3. The perusal of impugned order, makes it clear that trial Court has taken care of each and every aspects touching to the issue of maintainability of the suit before it and all submissions as well as citations by both the sides for coming to the conclusion that suit as per the statements and averments set-out in the plaint, appear to have been made with a view to seek impediment and circumvent the action of the defendant initiated under the SARFAESI Act, 2002 and by virtue of, provision of Section 17 of the said Act proper remedy is provided to the borrower including aggrieved persons. It is further held that as per the Section 34 and particularly Section 35 of the said Act jurisdiction of the Civil Court appears to be expressly barred. It is also further held, on facts, that the plaintiff has been relying on the so-called rent agreement, though no authentic proof as to the execution of the said agreement on a particular date on which agreement is alleged to have been executed, has been produced by the plaintiff and if alleged rent agreement is executed in the year, 1989 the rent between the parties has not been enhanced for long time and that no receipt of payment of rent or other authentic document to prove the payment of rent has been produced, except the bare receipt for a period of 1990-1994. It is further held that while mortgaging the suit property in favour of the defendant, its owners have categorically stated that the property is free from any Page 2 of 23 C/FA/1810/2012 CAV JUDGMENT encumbrance and they are in possession of the suit shops. It is also observed that defendant has sanctioned the loan based on such declaration. It is also held that decree inter se between the guarantors/owners of the suit properties who are the Directors of the plaintiff's company has been obtained by suppressing the fact as to creation of mortgage in favour of the defendant.
4. Trial Court has also considered the observation made by this High Court in Special Civil Application No.1067 of 2008 wherein, in judgment dated 29.09.2008 it was observed that "upon hearing the learned counsels appearing for both the sides, it appears that owner of the property in question stood as a guarantor with the respondent Corporation and the property in question thereafter, has been rented by the owner to the petitioners." Therefore relying upon all above findings the Trial Court has considered that the tenancy in favour of the plaintiff has been made subsequently and that conduct of the plaintiff and guarantors do not inspire any bona fide to repay the amount of the loan in question and that several inter se litigation were filed by them and prohibitory orders were adopting in collusive manner and thereby plaintiffs are creating a hindrance and impediment in actions initiated by the defendant under the SARFAESI Act, 2002. Therefore, considering the overall aspects the Trial Court has believed that the equity does not raise in favour of the plaintiff and when suit is time barred, the plaint is required to be rejected.
Such rejection is under challenged in the present appeal.
5. Following facts are emerging from the submissions of by the appellant as well as from perusal of Record and Proceedings and pleadings:-
(i) It is not disputed that defendant had extended loan Page 3 of 23 C/FA/1810/2012 CAV JUDGMENT facilities to one M/s. Marc Walker Opticals Limited and said firm has failed to repay the amount of loan.
(ii) It is also not disputed that for getting the loan, M/s. Marc Walker Opticals Limited has mortgaged certain properties with the defendant and its directors have also mortgaged several properties in favour of the defendant as guarantors.
(iii) It is also not disputed that because of non-payment of loan amount, defendant is entitled to initiate actions both against the borrower and its guarantors under SARFAESI Act.
(iv) It is also not disputed that shops in question are owned by Shri Dipak Kantilal Zaveri, Shri Kirit K.Zaveri and Shri Mahesh K.Zaveri in the name of K.M.Family Trust as well as Shri Bhavin P.Shah and Shri Kunjal P.Shah.
(v) It is also not disputed that such owners of the suit shops are guarantors of the original term loan to M/s.Marc Walker Opticals Limited.
(vi) It is also not disputed that Directors of said M/s.Marc Walker Opticals Limited and partners of the present plaintiff are the same persons namely Shri Dipak Kantilal Zaveri, Shri Kirit K.Zaveri, Shri Mahesh K.Zaveri and also Bharat R.Contractor as well as Shurabhi Pradip Shah, who is the mother of Bhavin Pradip Shah and Kunjal Pradip Shah.
(vii) It is also not disputed that Bharat R.Contractor is also the Director of M/s.Marc Walker Opticals Limited and guarantor of the term loan.Page 4 of 23 C/FA/1810/2012 CAV JUDGMENT
(viii) It is also not disputed that Shurabhi Pradip Shah one of the partners of plaintiff firm, is mother of Bhavin Pradip Shah, and Kunjal Pradip Shah owners of one of the suit shop and guarantors of M/s.Marc Walker Opticals Limited.
(ix) It is also not disputed that thereby, practically landlords and tenants are though different legal entity, practically they are the same persons and therefore, it is clear and certain that the same persons have rented the premises to themselves but in different capacity i.e. to their own firm, wherein they are the partners.
(x) It is also not disputed that they have mortgaged such shop in favour of the defendant to have financial benefits and now when they could not pay the borrowed amount and when they are liable to pay the borrowed amount even from disposing their properties, they came forward with case and story that suit property is already rented and they hold possession in the name of present plaintiff, a partnership firm of themselves.
(xi) It is also not disputed that defendant has initiated proceedings against borrower and guarantors and that guarantors are none but the same persons who are claiming protection of their possession in different capacities as a tenant.
(xii) It is also not disputed that in previous proceedings between the landlord and tenant, there is the decree in favour of the tenant, where in surprisingly, as aforesaid, the persons/individual are one and same and to that extent it is Page 5 of 23 C/FA/1810/2012 CAV JUDGMENT more surprisingly to digest that same set of human being have threatened themselves for the possession of the rented premises and therefore, they have rushed to the rent Court for saving their tenancy right over the suit properties.
6. Therefore, to that extent, there is nothing wrong in the allegations by the defendant that decree by rent Court in H.R.P. Suit Nos.1208/2001, 1209/2001 and 1210/2001 are sham and collusive. Such observations are required to be recollected here mainly because of the reason that now in the present suit plaintiff is strongly relying upon decree in such previous suits to protect its rights over the suit properties.
7. Plaintiff has preferred this suit against defendant, a State Financial Corporation, to restraint it permanently from taking possession under the SARFAESI Act, so as to recover the loan amount from the suit properties, which are otherwise mortgaged with the Corporation by guarantors to the loan transaction, on the ground that plaintiff is tenant of the suit property and there is decree in their favour in previous suits.
8. As against that, defendant is relying upon the provisions of the SARFAESI Act, to confirm that under the SARFAESI Act, they are entitled to take the possession of the properties of the borrower and guarantors for recovery of that loan amount and that there is specific bar of filing suit against their activities. In application at Exh.14, the rights of the defendant, limitation of the Civil Court and conduct of the plaintiff with case law is explained in detail.
9. The trial Court has also dealt with all issues properly.
Page 6 of 23 C/FA/1810/2012 CAV JUDGMENT10. On perusal of the impugned order, I do not see any illegality or irregularity or perverseness or arbitrariness so as to interfere in such reasoned judgment when it does not decide the dispute between the parties on merits, but confirming that Civil Court has no jurisdiction because of the provisions of the SARFAESI Act, and thereafter, making it clear that plaintiff may initiate action against the defendant before the appropriate forum.
11. However, before such conclusion, I have to deal with legal issues raised by both the sides by citing several decisions:
[A] The appellant is relying upon the judgment in the case of Saleem Bhai and others Versus State of Maharashtra and others, reported in AIR 2003 SC 759, wherein it was held that application under Order VII, Rule 11 for rejection of plaint can be decided by Court on the basis of averments made in the plaint only and for deciding such application, it is not necessary for the defendant to file written statement and therefore, direction to file written statement by trial Court without deciding application under Order VII, Rule 11 cannot be said to be procedural irregularities touching exercise of jurisdiction by trial Court. But if we refer the entire judgment, it becomes clear that in fact appellant before the Apex Court is original defendant and when their application was not decided by the trial Court without filing written statement, it was contended by the appellant, as defendant that filing of written statement is not must for deciding application under Order VII, Rule 11 and hence, Supreme Court has also held that such procedural irregularities is touching the exercise of jurisdiction to decide an application under Order VII, Rule 11. In view of such fact this judgment is not touching the issue regarding jurisdiction of the Court and specific bar to entertain suit, therefore, such judgment would not Page 7 of 23 C/FA/1810/2012 CAV JUDGMENT help the plaintiff to succeed in the appeal.
[B] The appellant is also relying upon the judgment in the case of Kamala & others Versus K.T.Eshwara Sa and Others, reported in AIR 2008 SC 3174, wherein, while dealing with the provisions of Order VII, Rule 11, it is held that application under Order VII, Rule 11(d), must be decided from averments made in the plaint only and no amount of evidence can be looked into at such stage and that issues on merit of matter would not be within realm of Court. However, such sentences in head notes and even judgment cannot be read separately and isolated from the entire judgment, wherein what is decided with reference to the factual details in hand is having different meaning then bare reading of head notes. The perusal of judgment make it clear that it was pertaining to some preliminary decree of partition and when it was found that practically there was no execution of preliminary decree at any point of time and when there was no possibility for partition by metes and bounds and when some properties were alienated before preliminary decree and therefore, when previous judgments were unenforcible and not resulting into resolution between the parties, it was held that there is no bar of filing fresh suit. The Hon'ble Supreme Court observed that:-
"We may proceed on the assumption that the shares of the parties were defined. There was a partition amongst the parties in the sense that they could transfer their undivided share. What would, however, be the effect of a partition suit which had not been taken to its lo9gical conclusion by getting the properties partitioned by metes and bounds is a question which, in our opinion, cannot be gone into in a proceeding under Order VII, Rule 11(d) of the code. Whether any property is available for partition is itself a question of fact."
It is also observed by the Apex Court that:-
"What would be its effect is again a question which cannot fall for determination under Order VII, Rule 11(d) of the Code. These Page 8 of 23 C/FA/1810/2012 CAV JUDGMENT facts require adjudication. The identity of the properties which were the subject-matter of the earlier suit vis-a-vis the properties which were subsequently acquired and the effect thereof is beyond the purview of Order VII, Rule 11(d) of the Code."
Therefore, it is clear that when dispute between the parties regarding partition of joint property was not resolved, the technicality of rejection of plaint on the ground of cause of action as disclosed in the suit, is not proper; more particularly when bar to suit was claimed under Section 12 of Code of Civil Procedure and not under the SARFAESI Act. Therefore, I do not see any reason to rely upon such judgment in favour of the appellant so as to decide and hold that even there is bar of the suit under SARFAESI Act, the same principle would apply.
[C] The appellant is also relying upon the judgment in the case of Dena Bank Versus Shri Sihor Nagarik Sahakari Bank Ltd. & Others, reported in 2008(2) GLR 1796, wherein though it is stated that notwithstanding provisions under the SARFAESI Act, relating to ouster of Civil Court's jurisdiction, action to confirm pre-existing right of a tenant would be open to challenge before the Civil Court under the ordinary civil law, it can not be ignored that in such reported case the tenancy was not only pre-existing but it was brought to the notice of respondent-Bank in writing at the time of sanction of loan and creation of mortgage. Therefore, it is categorically stated in this judgment that;
"It is in this narrow compass and peculiar factual situation, it is not open for the respondent-Bank to resort to the provisions contained in the Securitisation Act so to evict the tenant."
Therefore, this reported judgment would not help the appellant inasmuch as it is made clear by the learned Single Judge of this High Court that it is the case of peculiar factual situation viz, there was no dispute regarding pre-existing tenancy and when same fact was Page 9 of 23 C/FA/1810/2012 CAV JUDGMENT categorically conveyed in writing to the Bank at the time of sanction of loan and creating mortgage. Whereas, in present case factual situation is quite diverse, inasmuch as there is dispute regarding pre- existing tenancy as borrower and guarantors have made a false declaration and statement before the financial institution regarding possession and right over the suit property, which is to the effect that they are owners and occupying the suit property. Therefore, now when same individual are coming forth with a decree in their favour in the suit, which was filed by themselves, such decree cannot be considered as a conclusive proof regarding pre-existence of the tenancy. It cannot be ignored that sanctioning of loan and mortgage is prior to such decree. An attempt by plaintiff to prove that tenancy was prior to mortgage could not give confidence to admit the same since there is no substance in such submission. Moreover it cannot be ignored that the learned Single Judge has relied upon the decision in the case of Mardia Chemicals Ltd. Versus Union of India, reported in 2004(4) SCC 311, however, therein also what is held is to the effect that it will be open to maintain a civil suit in Civil Court within the narrow scope and on the limited grounds on which they are permissible, in the matters relating to an English mortgage enforceable without intervention of the Court. At the cost of repetition, it is to be noted that though all relevant provisions of law; that of the SARFAESI Act regarding bar of Civil Court's jurisdiction are disclosed by the learned Single Judge; the ultimate result is based upon the fact that in that case tenancy was not only pre-existing but the Bank has sufficient notice thereof at the time of creating mortgage. Whereas, in our case it is totally reverse. The Judgment dated 03.03.2008 in Special Civil Application No.3943 of 2008, by the same Bench for the same dispute is also referred. However, as aforesaid, it is with altogether different factual position and therefore, it has no relevance whatsoever, with the present case. Moreover said judgment is overruled by the Division Bench of this Court in the case of IDBI Bank Ltd. v. Hytaisun Magnetics Ltd., reported in AIR Page 10 of 23 C/FA/1810/2012 CAV JUDGMENT 2011 Guj. 129.
12. As against that, respondent is relying upon several cases which categorically confirms that in given set of facts and circumstances, the bar of litigation before Civil Court would survive and thereby, Civil Court would have no jurisdiction to entertain such suit. Though lists of cited cases are good in numbers, considering the rival submissions, it would be appropriate to refer them even in brief:-
[A] The respondent is relying upon the judgment in the case of Kailashpati Asthana Versus Authorized Officer, State Bank of India & Others, reported in 2011(8) ADJ 793, wherein after considering the two judgments of the Division Bench of the Madras High Court and Allahabad High Court, it was held that tenant's rights, if any, under the local law will be overridden by the SARFAESI Act, 2002, since right of tenant is flowing from the right of the landlord. Therefore, if landlord's right is challengeable, tenants will have to suffer because tenant's right is subject to the right of the landlord. It is specifically confirm that Section 34 of the SARFAESI Act, restrict the jurisdiction of the Civil Court, whereas Section 35 specifically override other laws. Therefore, the only remedy is open to the petitioner to approach the Debt Recovery Tribunal under Section 17 of the SARFAESI Act, even if he is not borrower but as an aggrieved person being affected with the situation. The Division Bench of Allahabad High Court was dealing with the similar issue when petitioner before the Court was a tenant and because of non-payment of certain loan taken by its landlord, a proceedings under Section 13(4) of the SARFAESI Act, was initiated by the Bank in respect of the mortgaged property. Therefore, when petitioner before that Court was claiming statutory protection on the ground of statutory tenancy and submitted that he does not stand in the way of taking symbolic possession as per the law but before taking physical possession, his right is required to be determined, the Division Bench has rejected Page 11 of 23 C/FA/1810/2012 CAV JUDGMENT such submission.
[B] The respondent is also relying upon the judgment in the case of M.G.Ashwatha Shastri Versus Canara Bank, Chamarajpet Branch, Chamarajpet, Bangalore & Others, reported in 2011 AIR (Kar) 138, wherein it is held that the scheme of the SARFAESI Act is such that the Civil Court's jurisdiction to entertain any suit in respect of a matter which the Debt Recovery Tribunal or the Appellate Tribunal is empowered to determine, is ousted. It was further held that the legislature has visualized not only a borrower but a non-borrower could also be aggrieved by the action of the Bank, and remedy of the aggrieved person is to file the appeal under SARFAESI Act. It is further observed that Delhi High Court has rightly put up a meaningful interpretation on the word "any person" found in Section 17 and held that it is inclusive of the borrower, guarantor, tenant or any other person. In view of such an inclusive definition, in the case of Vickey Kumar Rana Versus Kamal Kumar Nangia & Others, reported in 2010 AIR (Del) 210, it was held that the plaintiff has to approach specialized forum created under the statute.
[C] The respondent is also relying upon the judgment in the case of Vikas Book Ltd. Versus Bank of Baroda, Nehru Place, Tonk Road, Jaipur & Others, reported in 2012 AIR (Raj) 93, wherein also while dealing with the similar issue, the High Court has held that Civil Court does not have jurisdiction in such case, since the provisions of the SARFAESI Act has to override other laws.
[D] In the case of State Bank of India Versus Jigishaben B. Sanghavi & Others, reported in 2011(2) MhLJ 342, while dealing with the similar issue, the Division Bench has held that a borrower or the 3rd party cannot be permitted to defeat or to render nugatory the provisions of the Act merely by a stray reference to an allegation of fraud. In such reported cases also, situation was some what similar, Page 12 of 23 C/FA/1810/2012 CAV JUDGMENT inasmuch as one the HUF was claiming his right as a co-owners and tenant of a property. Ultimately High Court confirms that the rejection of plaint under Order VII, Rule 11(d) is proper, since it is barred under section 34 of the SARFAESI Act. The Division Bench has after referring several other citations, distinguished the judgment of the Apex Court in the case of Mardia Chemicals Ltd. Versus Union of India, reported in 2004 AIR(SC) 2371, [E] The respondent is also relying upon the judgment in the case of V.Thulasi Versus Indian Overseas Bank, reported in 2011(3) CTC 801, wherein the Division Bench of Madras High Court has, while dealing with the issue regarding jurisdiction, held that in view of the specific bar under Section 34 of the SARFAESI Act, the suit is specifically excluded from the purview of the Civil Court when the partnership firm is claiming possession of the mortgaged property as a tenant and when suit was filed to protect tenancy right against mortgage in favour of the Bank. Ultimately rejection of plaint under Order VII, Rule 11(d) of the Code of Civil Procedure was confirmed.
[F] The respondent is also relying upon the judgment in the case of Pushpangadan Versus Federal Bank Ltd., reported in 2012 AIR(Ker) 27, wherein the full bench of the High Court while dealing with the similar issue held that provisions of the SARFAESI Act to override other laws. The full bench was dealing with following questions:-
(i) Whether the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'Securitisation Act') has an overriding effect over the provisions of the Kerala Buildings (Lease and Rent Control) Act, 1965? and
(ii) Whether a tenant under the provisions of the Kerala Page 13 of 23 C/FA/1810/2012 CAV JUDGMENT Buildings (Lease and Rent Control) Act of a premise which is the subject matter of securitisation proceedings can be summarily evicted under Section 13(4) and 14 of the Securitisation Act irrespective of the protection available to him under the Rent Control Act?
After referring several citation and the relevant law, the Court has held that Debt Recovery Tribunal has jurisdiction to entertain the application and to enquire into the question whether the application had any right, title or interest or possession anterior to the creation of the security interest and to what extent such interest could be protected. If the claim made by the plaintiff is found to be genuine and legal, appropriate orders can be passed by the Tribunal holding that:(a) his actual possession shall not be disturbed; (b) only symbolic possession shall be taken; (c) any sale shall be subject to the rights of the applicant; and/or (d) any other order or direction which is required in the facts and circumstances of the case. Thereby, it is made clear that petitioners have an adequate, alternative and efficacious remedy to make an application to the Debt Recovery Tribunal under Section 17 of the SARFAESI Act and answered the above question as follows:-
The Securitization Act has no overriding effect over the provisions of the Kerala Buildings (Lease and Rent Control) Act, 1965. A tenant inducted in the premises before creation of the security interest cannot be summarily evicted under Section 13(4) and 14 of the Securitisation Act. We also hold that such a tenant, whose right, title, interest or possession is affected by a measure taken under Section 13(4) of the Securitisation Act, would be entitled to make an application to the Debts Recovery Tribunal under Section 17 of the Securitisation Act.
It is clear that in such reported cases petitioners have claimed Page 14 of 23 C/FA/1810/2012 CAV JUDGMENT protection on the ground that they are tenant of the suit property, which was mortgaged to Bank. However, full bench of High Court has refused to extend protection confirming that the Civil Court has no jurisdiction to protect such tenant who are holding mortgaged property.
[G] The respondent is also relying upon the judgment in the case of Vickey Kumar Rana Versus Kamal Kumar Nangia & Others, reported in 2010 AIR (Del) 210, wherein it was again confirmed that Civil Court has not jurisdiction and that the plaintiff is free to approach the Debt Recovery Tribunal under Section 17 of the Act in case he still feels aggrieved that his right has been jeopardized by the Bank. In this case also it was alleged that plaintiff is a tenant of the suit property, which is mortgaged to the Bank and therefore, Bank has no authority to get such property vacated under the SARFAESI Act.
[H] The respondent is also relying upon the judgment in the case of M/s.Al-Habib Food Processing through its Proprietor, Meerut Versus Punjab National Bank, Branch Kankarkhera, Meerut, reported in AIR 2013 Allahabad 204, wherein it was held that civil suit seeking declaration that notice under Section 13(2) of the SARFAESI Act is illegal, is barred by Section 34 of the SARFAESI Act and that aggrieved borrower has remedy to file representation under Section 3(3A) and there is right of appeal under Section 17.
[I] The respondent is also relying upon the judgment in the case of Mardia Chemicals Ltd. Versus Union of India & Ors., reported in 2004 AIR(SC) 2371. Even Apex Court has dealt with similar issue wherein it is categorically held that provision of the SARFAESI Act, which bars the civil suit, thus applies to all such matters which may be taken cognizance of by the Debt Recovery Tribunal. Thereby, bar of jurisdiction is in respect of a proceeding which can be dealt with by Page 15 of 23 C/FA/1810/2012 CAV JUDGMENT 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. However, to a very limited extent, jurisdiction of the Civil Court can be invoked, where, for example, the action of the secured creditor is alleged to be fraudulent or their claim may be so absurd or untenable which may not require any probe, whatsoever or to so precisely to the extent the scope is permissible to bring an action in the Civil Court in the case of English mortgage. As discussed earlier in this judgment, we find that it will be open to maintain a civil suit in Civil Court, within the narrow scope and on the limited grounds on which they are permissible, in the matters relating to an English mortgage enforceable without intervention of the Court.
[J] The respondent is also relying upon the judgment in the case of Pankajkumar Chandulal Antala Versus Central Bank of India through Branch Manager, reported in 2010(1) G.L.H. 262, wherein also while considering the provision of Section 17 and Section 35 of the SARFAESI Act and even after referring the case of Dena Bank Versus Shri Sihor Nagarik Sahakari Bank Ltd. (Supra), this High Cort has held that decision of Dena Bank Versus Shri Sihor Nagarik Sahakari Bank Ltd.(Supra) is not applicable in view of amended provisions of Section 4 of Bombay Rent Act, since it was never fell for consideration before the learned Judge and otherwise also in view of the facts considered by the learned Single Judge of this Court. In Shri Sihor Bank's case there was pre-existing tenancy and that was not in all disputed. Thereby, even after considering the case of Mardia Chemicals Ltd.(Supra), the Court has held that creation of tenancy prior to mortgage is disputed by the Bank, the remedy to the tenant is to approach D.R.T., by way of an Page 16 of 23 C/FA/1810/2012 CAV JUDGMENT application under Section 17 of the SARFAESI Act, 2002 to establish his right, and that D.R.T. has all powers to put clock back and to pass an order restoring possession in case if the party is dispossessed not in accordance with the provisions of the Act. It was further held that by purview of Section 17(4) read with Section 35 of the SARFAESI Act, 2002, the Act being Central Act and later in time then State law while have overriding effect unless first charge is created by the State statute. Thereby, in clear terms it is held that question of possession or occupation of the mortgaged premises shall have to be examined by the Debt Recovery Tribunal as it has all the powers.
[K] The respondent is also relying upon the judgment in the case of Jagdish Singh Versus Heeralal & Ors., reported in 2014(1) SCC 479, wherein recently the Apex Court has dealt with similar issue in detail and even for auction purchaser, the Apex Court has said that the only remedy lies is under the SARFAESI Act and not by way of Civil Court. Reproduction of all factual details of all cases will unnecessarily burden to this order and hence, it is avoided.
13. Both the parties are relying upon the judgment of the Division Bench of this High Court in the case of Rajkot Nagarik Sahakari Bank Limited Versus Jignesh Jayantilal Ramanuj, reported in 2011 Gujarat 163. It is submitted by both the sides that said judgment is in their favour. However, appellant has to recall the settle legal position which is well narrated in the recent judgment dated 12.12.2013 of Arasmeta Captive Power Company Private Limited and another Versus Lafarge India Private Limited, in Civil Appeal No.11003 of 2013 by the Apex Court, wherein relying upon in the case of Krishena Kumar Versus Union of India and others, reported in (1990) 4 SCC 207, the constitution bench of the Apex Court has referred the observations made by Sir Frederick Pollock in the case of Caledonian Railway Co. Versus Walker's Trustees and Quinn, reported in (1882) 7 App Cas 259: 46 LT Page 17 of 23 C/FA/1810/2012 CAV JUDGMENT 826 (HL), which is as follows:-
"The ratio decidendi is the underlying principle, namely, the general reasons or the general grounds upon which the decision is based on the test or abstract from the specific peculiarities of the particular case which gives rise to the decision. The ratio decidendi has to be ascertained by an analysis of the facts of the case and the process of reasoning involving the major premise consisting of a pre- existing rule of law, either statutory or judge-made, and a minor premise consisting of the material facts of the case under immediate consideration. If it is not clear, it is not the duty of the Court to spell it out with difficulty in order to be bound by it. In the words of Halsbury (4th edn., Vol.26, para
573) "The concrete decision alone is binding between the parties to it but it is the abstract ratio decidendi, as ascertained on a consideration of the judgment in relation to the subject matter of the decision, which alone has the force of law and which when it is clear it is not part of a tribunal's duty to spell out with difficulty a ratio decidendi in order to bound by it, and it is always dangerous to take one or two observations out of a long judgment and treat them as it they gave the ratio decidendi of the case. If more reasons than one are given by a tribunal for its judgment, all are taken as forming the ratio decidendi."
[Emphasis added]
14. With above clarity, if we consider the judgment in Rajkot Nagarik Sahakari Bank Limited (Supra), it becomes clear that Page 18 of 23 C/FA/1810/2012 CAV JUDGMENT barring some discussion, what is decided by the Division Bench is clear in favour of the respondent that the Debt Recovery Tribunal does not have jurisdiction to decide tenancy dispute or the dispute concerning landlord-tenant relationship. However, the same judgment also confirms that the D.R.T. has jurisdiction to direct secured creditor to resort possession to the borrower if measures taken by the creditor under Section 13(4) are not in accordance with provisions of the Act. The reading of entire judgment makes it clear that the D.R.T. has ascertained, examined and evaluated the evidence pertaining to tenancy dispute and finally decided and pronounced its conclusion regarding tenancy dispute and therefore, the Division Bench has concluded that decision of D.R.T. to that extent is not sustainable. Whereas, in the present case, there is no dispute that appellant is claiming them as a tenant and landlord is accepting them as a tenant, the only issue is that whether respondent State Financial Cooperation can initiate action under the SARFAESI Act against the tenant, more particularly when a tenant is also none but landlords themselves, may be in their different capacity, wherein landlords are members of H.U.F. and they have rented the suit premises to a partnership firm where they themselves are partner and thereby, they are holding the property as a tenant though they are owner also. It is also clear and obvious that they have not disclosed the tenancy at the time of mortgage the property, on the contrary it was disclosed that they are holding the possession free of any encumbrance. It is not also not disputed that to confirm the tenancy rights they preferred a suit against themselves and obtaining a decree of Rent Court in their favour, when there is no threat of dispossession, since they are one and same both as landlord and as tenant.
15. Therefore, so far as Civil Court's jurisdiction is concerned, there is settled legal position that though dispute between the landlord and tenant regarding tenancy cannot be decided by the authority under Page 19 of 23 C/FA/1810/2012 CAV JUDGMENT the SARFAESI Act i.e. the Debt Recovery Tribunal, but when there is no discloser regarding existing tenancy at the time of executing mortgage in favour of the financial institution, then at the time of action taken under the SARFAESI Act by the financial institution, the remedy available to the occupient is only under the SARFAESI Act and the Civil Court would not have jurisdiction to decide the rights of such occupients, who are practically objectors to the provisions of the SARFAESI Act.
16. In the present case, it is certain that, though plaintiffs are claiming that there was pre-existing tenancy, at the time of mortgage the suit property in favour of the defendant, they have not disclosed such tenancy, on the contrary, what is disclosed is otherwise, that the suit properties are owned and occupied by the borrower free of any encumbrance. It is also not disputed that decree in H.R.P. Suits under reference seems to be collusive, inasmuch as the same individual have filed suit against themselves, may be in different capacity i.e. as a owner and again as a partner of the plaintiff firm alleging that there is likelihood that their possession would be vacated forcefully. Therefore, what is pleaded before the Rent Court is that same persons individually will eject themselves. Therefore, practically there was no necessity to file a rent suit for getting declaration regarding tenancy or direction against dispossession, which shows that plaintiffs have acted what mala fide.
17. Moreover in Special Civil Application No. 1067 of 2008 between the parties, this Hon'ble Court has also categorically observed that the owner of the property in question stood as a guarantor with a respondent corporation and a property in question thereafter, has been rented by the owner to the petitioner. Therefore, when there is no attempt to clarify such order of the High Court, if at all it is factually incorrect, then the same is to be believed in its entirety that tenancy was created after the mortgage. In view of such fact, citation Page 20 of 23 C/FA/1810/2012 CAV JUDGMENT relied upon by the appellant would not help it.
18. The only technical issue remains is to the effect that in some cited cases it was held that while deciding Order VII, Rule 11(d), statement in plaint alone is to be looked in to for considering the jurisdiction of the Civil Court. If we refer the plaint it becomes clear that in Para-12 of the plaint, it is specifically stated that the cause of action arises only when notice under Section 13(2) of the SARFAESI Act has been issued and what is pleaded in the plaint is to the effect that property was mortgaged with existing tenancy, though it is not the correct position. It is certain that the suit is not for deciding the issue regarding tenancy between the landlord and tenant but for restraining the financial authority to Act in accordance with the SARFAESI Act. In any case, though defence or written statement is not looked into, contentions in application filed for the purpose cannot be ignored, which clarifies entire issue.
19. So far as case of the Saleem Bhai(Supra) is concerned, judgment in case of P.K.Palanisamy Versus N.Arumugham, reported in 2009 AIR SCW 5385, give the answer that in the case of Saleem Bhai(Supra) a direction to file the written statement was given without deciding the application under Order VII, Rule 11 of the Code. Thus it was held to be a procedural irregularity touching the exercise of jurisdiction by the Civil Court. But in any case the observation is to be held to be confined to the fact that case only and it does not lay down a general preposition of law.
20. So far as case of the Dena Bank(supra) cited by the appellant is concerned, in connected matter between the Dena Bank versus The District Magistrate & 25 on Special Civil Application No. 3943 of 2008 and case between the authorized officer, Canara Bank v. Sulay Traders through Bipin Kantilal Vakta (AIR 2010 Guj 91) are concerned, the Division Bench of the Gujarat High Court has in Page 21 of 23 C/FA/1810/2012 CAV JUDGMENT the case of IDBI Bank v. Hytaisun Magnetics Ltd., reported in AIR 2011 Gujarat 129, held that above two cases that is Canara Bank(Supra) and Dena Bank (Supra) do not lay down good law.
21. Reference to the case of Delhi Development Authority v. Skipper Construction Co.(P) Ltd., reported in 1996(2) G.L.H. 36, is worth in the present case wherein the Apex Court has observed that promotion of trade and commerce could not be permitted to commit illegalities or to defraud people. The Court would ignore the corporate character and will look at the reality behind the corporate veil so as to enable it to pass appropriate orders to do justice between the parties are concerned. In that case also different legal entity created by the family members of one person was treated as one entity belonging to and controlled by the same persons since the device of incorporated was really a ploy adopted for committing illegalities and/or fraud.
22. In present case, when same individual are filing a suit again themselves as a partner of partnership firm alleging that there is possibility of taking of possession forcefully, and thereafter obtaining a decree to confirm that they are in possession as a tenant, though property was mortgaged in favour of the financial institution, it can be easily said that this is nothing but attempt to take disadvantage of the judicial proceedings.
23. In view of above discussed, factual and legal position, the plaintiff has appropriate remedy to challenge the notice in question before the bar of SARFAESI Act, which would prevail over the Civil Court.
24. I have perused the impugned judgment and order, the trial Court has dealt with the entire issue for coming to the conclusion that Civil Court has got no jurisdiction. I do not see any illegality or Page 22 of 23 C/FA/1810/2012 CAV JUDGMENT irregularity or perverseness or arbitrariness so as to interfere and set aside such detailed and reasoned order, wherein all facts and laws have been taken care of.
25. In view of the above facts and circumstances, I do not see any substance in the First Appeal. Therefore, when such appeal is touching the issue regarding jurisdiction, it has been heard and decided at such admission stage as being merit less. Hence, Appeal is dismissed at such admission stage. Civil Application also stands disposed of accordingly.
Sd/-
(S.G.SHAH, J.) dharmendra Page 23 of 23