Karnataka High Court
Krishna And Anr. vs Kedarnath And Ors. on 21 September, 2005
Equivalent citations: AIR2006KANT21, III(2006)BC9, [2006]133COMPCAS700(KAR), ILR2005KAR5338, 2005(6)KARLJ337, [2006]66SCL260(KAR), AIR 2006 KARNATAKA 21, 2006 (1) ALL LJ NOC 71, 2005 AIR - KANT. H. C. R. 2899, 2006 CLC 640 (KAR), (2005) ILR (KANT) 5338, (2005) 6 KANT LJ 337, (2006) 1 CIVILCOURTC 153, (2006) 70 CORLA 14, (2006) 3 BANKCAS 9, (2006) 1 KCCR 136, (2006) 1 BANKJ 401, (2006) 2 CIVLJ 358, (2006) 133 COMCAS 700
Author: V. Gopala Gowda
Bench: V. Gopala Gowda
ORDER 7 RULE 11(d) - REJECTION OF PLAINT - JOINT FAMILY PROPERTIES MORTGAGED TO THE BANK TOWARDS THE LOAN AMOUNT BORROWED BY THEM AS COLLACTERAL SECURITY - WHETHER PLAINTIFFS HAVE A RIGHT TO SEEK DECREE FOR PARTITION OF THE MORTGAGED PROPERTY - WHETHER SECTION 34 OF THE SECURITISATION ACT IS A BAR FOR THE CIVIL COURTS TO ENTERTAIN THE SUITS IN RESPECT OF THE MATTERS WHICH ARE EMPOWERED TO BE DETERMINED BY THE DEBTS RECOVERY TRIBUNAL OR APPELLATE TRIBUNAL - CIVIL RIGHTS OF PARTIES - JURISDICTION TO TRY - HELD-Whether all the suits schedule properties are joint family properties and all the properties are mortgaged to the Bank and plaintiffs are entitled to partition etc. after the first charge upon the same is cleared, are all aspects required to be decided by the Civil Court as the plaintiffs rights are traceable to the provision of Section 9 of CPC. Section 34 of the Act is a bar for the Civil Court to entertain the suits in respect of the matters which are empowered to be determined by the Debts Recovery Tribunal or Appellate Tribunal. But, adjudication or determination of rights or claims of the parties for partition of the properties which are in the nature of civil rights, cannot be stopped. Partition suits that would be instituted by a party claiming civil rights in respect of either ancestral joint family properties or co-ownership properties will have to be exclusively dealt with by the Civil Court. While the Bank can enforce its security interest for realisation of its amount, right of the plaintiffs to claim partition in the suit schedule properties if they prove are ancestral joint family properties cannot be deprived off as contended by the Bank. For adjudication of such claims, the Bar under Section 34 of the Act shall not come in the way. Appeals allowed. JUDGMENT V. Gopala Gowda, J.
1. These two appeals are filed against the orders dated 10-1-2005 passed by the trial Court on LA. II filed by the UCO Bank under Order VII Rule II CPC rejecting the plaints holding that the suits are barred under Clause (d). The rejection of plaints amounts to Decrees and therefore appeals are filed.
2. The facts and question of law involved in both the appeals are common and hence they are heard together and disposed of by this common judgment.
3. The brief facts leading to these appeals are that, UCO Bank has given loan by mortgaging some properties, Since default was committed by the borrowers in the matter of repayment, the Bank approached the Debt. Recovery Tribunal and steps had been taken to sell the mortgaged properties in public auction. At that juncture, the plantiffs filed the suits for partition of the joint family properties, which also includes the properties mortgaged to the Bank, and obtained status quo order. In those circumstances, the Bank filed I.A.S. II under Order VII Rule II(d) C.P.C. requesting to reject the plaints on the ground that suits are barred under Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'the Act'). The trial Court allowed the applications and consequently rejected the plaints. Aggrieved by the same these two appeals are filed.
4. Mr. H. Subrmanya Jois, learned Senior Counsel appearing for the Appellants, cited the decision of the Madras High Court reported in Arasa Kumar v. Nallammal, II(12005) BC 127 Wherein it is held that Section 34 of the Act is no bar for the Civil Court to decide the rights of the parties in a suit for partition, Paragraphs 30 and 31 of the said decision is extracted hereunder:
"30, Section 9, C.P.C. and bar of Jurisdiction created under relevant Sections in respect of the Cooperative Societies Act, Arbitration and Conciliation Act, 1996 and also Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and under Rule 40 of the Income Tax (Certificate Proceedings) Rules, 1962 and also the bar under the Tamil Nadu Hindu Religious and chartable Endowments Act, 1959 were all considered by this Court and the Apex Court as referred supra and now, it is manifestly clear that the power under Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act is not absolute and the same is subject to certain restrictions, they are, (1) that the parties, who filed the suit must be a party to the liabilities created in favour of the secured creditor, (2) the disputes between the parties could be resolved under the provisions of the Act itself, (3) that if the claim made by the parties is outside the jurisdiction of the Debts Recovery Tribunal or the appellate Tribunal or any action taken or to be taken under this Act and also under the Recovery of Debt Due to Banks and Financial Institutions Act, 1993 and the dispute raised by the parties cannot be adjudicated by any of the Tribunal or authority, created under the act or under any other Act, the right of the parties to approach the Civil Court for appropriate relief cannot be deprived and taken away.
31. Admittedly, in our case, the petitioners have filed the suit for partition including the item, in respect of which, the 3rd respondent taken out proceedings to bring the same for sale without the intervention of the Court and till the rights of the parties are determined by the Civil Court, and the Civil Court alone could decide and determine the rights of the parties in respect of their respective claims in the suit for partition, the 3rd defendant, though a secured creditor, cannot bring the property for sale by invoking the bar under Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act or the bar under Section 13 of the Act. The Court below has not taken into consideration of these aspects and as a matter of fact, these salient features were not brought to the notice of the Court below, which resulted in passing of an erroneous order, which is liable to be set aside".
It is stated that all the suit schedule properties are not mortgaged to the Bank and therefore Sections 13 and 19 of the Act are not applicable to the case. The Counsel submits that right of the parties have to be determined by the Civil Court on the basis of the documentary and oral evidence that will be brought on record. Therefore, he seeks to set aside the orders/judgments under appeal.
5. Per Contra, learned Counsel Mr. Sudhakar appearing for the Bank Justifies the orders/judgments under appeal relying upon the decision of the Supreme Court reported in Mardia Chemicals Ltd. v. U.O.I., ILR 2004 Karnataka 2661 wherein the Constitutional validity of the provisions of the Act has been upheld except Section 17(2) thereof. He further submits that under Section 13 of the Act, notwithstanding anything contained in Sections 69 or 69A Transfer of Property Act, any security interest created in favour of any secured creditor can be enforced by the Banker and Financial Institution. He also submits that plaintiffs have no right to claim partition of the properties as all the properties are not joint family properties and that the partners of the firm have mortgaged the properties to the Bank towards the loan amount borrowed by them as collateral security and therefore the plaintiffs have no right to seek decree for partition of the mortgaged property. Therefore, he submits that no interference with the impugned judgment and Decree is warranted by this Court.
6. It is also stated at the Bar that during the pendency of the suits, status quo order was passed by the trial Court and the same was in force until the impugned orders were passed in the original suits by allowing the applications of the Bank and rejected the plaints holding that the suits are barred in law.
7. Whether all the suits schedule properties are joint family properties and all the properties are mortgaged to the Bank and plaintiffs are entitled to partition etc. after the first charge upon the same is cleared, are all the aspects required to be decided by the civil Court as the plaintiffs rights are traceable to the provision of Section 9 of CPC. Section 34 of the Act is a bar for the Civil Court to entertain the suits in respect of the matters which are empowered to be determined by the Debts Recovery Tribunal or Appellate Tribunal.
But, adjudication or determination of rights or claims of the parties for partition of the properties which are in the nature of civil rights, cannot be stopped. Partition suits that would be instituted by a party claiming civil rights in respect of either ancestral joint family properties or co-ownership properties will have to be exclusively dealt with by the Civil Court. That is the view taken by the Madras High Court in the decision referred, to above. Of course the said decision is rendered prior to Marida Chemicals Ltd. case. The Supreme Court has upheld the Constitutional validity of the provisions of the Act, at paragraph 51 in the above referred case, it is held that jurisdiction of the Civil Court also can be invoked for limited purposes. While the Bank can enforce its security interest for realization of its amount, right of the plaintiffs to claim partition in the suit schedule properties if they prove they are ancestral joint family properties cannot be deprived off as contended by the Bank, which contention was erroneously accepted by the trial Court. For adjudication of such claim, the Bar under Section 34 of the Act shall not come in the way.
8. For the reasons stated above, these appeals are allowed. The orders/judgments and decrees under appeals are set aside. The status quo order passed in the suits shall stand dissolved as there is express bar under Section 34 of the Act. The Bank is at liberty to proceed for the recovery of its amount by taking necessary steps in respect of the mortgaged properties by the Debtors under the provisions of the Act, as the same are mortgaged for collateral security of the loan amount borrowed by them.
9. At this juncture, learned Senior Counsel for the Appellants requested to make an observation that, if the partnership firm comes forward to settle the matter by one time payment, the Bank shall consider the same according to its norms and at its discretion as per the RBI Guidelines.