Calcutta High Court
Delta International Ltd. & Ors vs Smt. Nupur Mitra & Ors on 24 July, 2017
Author: Soumen Sen
Bench: Soumen Sen
ORDER SHEET
CS No.151 of 2017
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
DELTA INTERNATIONAL LTD. & ORS.
Versus
SMT. NUPUR MITRA & ORS.
BEFORE:
The Hon'ble JUSTICE SOUMEN SEN
Date : 24th July, 2017.
Appearance:
Mr. Ranjan Deb Sr. Adv.
Mr. Kumar Gupta, Adv.
Mr. Rohitendra Chandra Deb, Adv.
Mr. Meghajit Mukherjee, Adv.
The plaintiffs have filed a suit for specific performance of
an agreement in the form of settlement between the parties. The
plaintiffs have prayed for leave under Clause 12 of the Letters
Patent. The relief under Clause 12 of the Letters Patent is
discretionary. The court is also required to be satisfied that
the suit is not barred by law. The plaintiffs were asked to
satisfy about the maintainability of the suit in this court in the
face of Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (hereinafter referred
to as "SARFAESI Act"). The reason being the defendant nos.1 to 4
are trustees of Stressed Assets Stabilization Fund and the purpose
and object of the suit is in effect to nullify a notice issued by
the said defendants under Section 13(2) of the SARFAESI Act.
2
Although the plaintiffs have not prayed for delivery up and
cancellation and or any adjudication on the notice issued by the
defendant no.5 on 19th May, 2017, but there cannot be any doubt
that the said securitisation notice was issued by reason of
failure on the part of the plaintiffs to act on the basis of the
settlement alleged to have been entered between the plaintiffs and
the defendants.
In the plaint, the plaintiffs allege that a one time
settlement was entered into between the plaintiffs and the
defendant nos.1 to 4 which would appear from the letters dated 4th
December, 2008, 15th January, 2009, 26th March, 2009, 2nd April,
2009, 14th October, 2009 and 23rd December, 2009. The plaintiffs
allege that by reason of one time negotiated settlement as would
appear from the aforesaid correspondence, the earlier financial
arrangements between the parties stood superseded and/or cancelled
and/or novated.
The respondent nos.1 to 4 in their communication dated 11th
July, 2014 have alleged that Delta International Ltd. is in default in compliance of equity allotment and execution of buy back agreement thereof. By the said communication, the negotiated settlement of dues was revoked and the securitization company reversed the waiver of dues and restored the original liability as per the terms of the loan agreement entered into between Delta and adjust the payment receive, if any, towards its dues. This 3 appears to be the precursor to the notice dated 19th May, 2017 issued on behalf of the securitization company under Section 13(2) of the SARFAESI Act.
The plaintiffs are aware that by reason of Section 34 of the SARFAESI Act, the plaintiffs would not be entitled to seek any relief covered under the provisions of the SARFAESI Act and have accordingly averred in paragraph 44 of the plaint that the plaintiffs are not challenging the notices, all dated 19th May, 2017, issued by the Deputy General Manager, SASF, acting as the authorized officer of SASF under Section 13(2) of the SARFAESI Act raising a claim on the basis of financial arrangement described in schedule-I mentioned in the plaint. The securitization company has recalled its loan on the ground of failure on the part of the plaintiffs to comply with the negotiated settlement terms as would be evident from the letter dated 11.12.2014 being Annexure F to the plaint. The plaintiffs being aware that a declaration to the effect that the said notices are not enforceable in view of Section 34 of the SARFAESI Act, have cleverly inserted prayer (a) of the plaint which in effect is to bypass and/or circumvent the notice under Section 13(2) of the SARFAESI Act. The other reliefs in the plaint are all dependent upon an adjudication to be made of the notices issued under Section 13(2) of the SARFAESI Act. The plaintiffs have contended that notwithstanding Section 34 of the SARFAESI Act, a suit for specific performance of the terms of an 4 agreement against a bank and/or financial institution is maintainable in law, relying upon a fairly recent judgment of our Division Bench in Frontline Corporation Limited versus Punjab & Sind Bank (2017 SCC OnLine Cal 123). In Frontline Corporation (supra), the Hon'ble Division Bench, on factual examination of the case, found that the property involved in the suit for specific performance was not the secured asset or could be treated to be so under the SARFAESI Act.
There cannot be any doubt that the suit for specific performance has been filed after issuance of the notice under Section 13(2) of the SARFAESI Act. The purpose is to nullify indirectly the notice under Section 13(2) of the SARFAESI Act. The SARFAESI Act is a complete Code. It provides the remedy as well.
There cannot be any doubt that the RDB Act completely ousts the jurisdiction of this Court. In the SARFAESI Act, the provisions are more stringent and there is a complete ouster of the jurisdiction of the Civil Court. Section 34 of the SARFAESI Act is the ouster clause. The said Section reads:
"S.34. Civil Court not to have jurisdiction - No civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine 5 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).
The scope of the said section was considered by the Hon'ble Supreme Court in Mardia Chemicals and Ors. Vs. Union of India and Ors. reported at (2004) 4 SCC 311.
The said decision was subsequently followed in Jagdish Singh vs. Heeralal and Ors. reported at 2014 (1) SCC 479 and the Standard Chartered Bank vs. Noble Kumar and Ors. reported at 2013 (9) SCC 620.
The scope of Section 34 came up for consideration in the said Mardia Chemicals (supra). In paragraph 50 of the said judgment the Hon'ble Court held:
"It has also been submitted that an appeal is entertainable before the Debts Recovery Tribunal only after such measures as provided in sub-section (4) of Section 13 are taken and Section 34 bars to entertain any proceeding in respect of a matter which the Debts Recovery Tribunal or the Appellate Tribunal is empowered to determine. Thus before any action or measure is taken under sub-Section (4) of Section 13, it is submitted by Mr. Salve, one of the counsel for the Respondents that there would be 6 no bar to approach the Civil Court. Therefore, it cannot be said that no remedy is available to the borrowers. We, however, find that this contention as advanced by Sri Salve is not correct. A full reading of Section 34 shows that the jurisdiction of the Civil Court is barred in respect of matters which a Debts Recovery Tribunal or an Appellate Tribunal is empowered to determine in respect of any action taken "or to be taken in pursuance of any power conferred under this Act." That is to say, the prohibition covers even matters which can be taken to cognizance of by the Debts Recovery Tribunal though no measures in that direction has so far been taken under Sub-Section (4) of Section
13. It is further to be noted that the bar of jurisdiction is in respect of a proceeding which matter may be taken to the Tribunal. Therefore, any matter in respect of which an action may be taken even later on, the Civil Court shall have no jurisdiction to entertain any proceeding thereof.
The bar of civil courts thus applies to all such matters which may be taken cognizance of by the Debts Recovery Tribunal, apart from those matters in which measures have already been taken under sub-section (4) of the Section 13.
Elaborating on these aspects, the Hon'ble Supreme Court in Jagdish Singh (supra) in paragraphs 22 and 23 held:-
"22. Statutory interest is being created in favour of the secured creditor on the secured assets and when the secured creditor proposes to 7 proceed against the secured assets, sub- section (4) of Section 13 envisages various measures to secure the borrower's debt. One of the measures provided by the statute is to take possession of secured assets of the borrowers, including the right to transfer by way of lease, assignment or realizing the secured assets. Any person arrived by any of the "measures" referred to in sub-section (4) of Section 13 has got a statutory right of appeal to the DRT under Section 17. The opening portion of Section 34 clearly states that no Civil Court shall have jurisdiction to entertain any suit or proceeding 'in respect of any matter' which a DRT or an Appellate Tribunal is empowered by or under the Securitisation act to determine. The expression in respect of any matter referred to in Section 34 would take in the "measures"
provided under sub-section (4) of Section 13 of the Securitisation Act. Consequently, if any aggrieved person has got any grievance against any "measures" taken by the borrower under Sub-section (4) of Section 13, the remedy open to him is to approach the DRT or the Appellate Tribunal and not the Civil Court. Civil Court in such circumstances has no jurisdiction to entertain any suit or proceedings in respect of those matters which fall under sub-section (4) of Section 13 of the Securitisation Act because those matters fell within the jurisdiction of the DRT and 8 the Appellate Tribunal. Further, Section 35 says, the Securitisation Act overrides other laws, if they are inconsistent with the provisions of that Act, which takes in Section 9, Code of Civil Procedure as well.
23. We are of the view that the Civil Court jurisdiction is completely barred, so far as the "measures" taken by a secured creditor under Sub-section (4) of Section 13 of the Securitisation Act, against which an aggrieved person has a right of appeal before the DRT or the Appellate Tribunal to determine as to whether there has been any illegality in the "measures" taken."
The plaintiffs cannot by clever drafting seek to create an illusion of a cause of action and thereby continue with an action in a civil Court bypassing the provisions of special statutes. The purpose and object of the special statures are required to be kept in mind while considering the claims made in the plaint. Parliament enacted SARFEASI Act because it was found that the legal mechanism available till then was wholly insufficient for recovery of the outstanding dues of banks and financial institutions [United Bank of India vs. Satyawati Tandon & Anr.]:2010(8)SCC 110 and Indian Bank vs. Blue Jaggers Estates Limited & Ors. : 2010(8)SCC 129) The plaint, as it stands, in my view, is not maintainable in this Court.
9
The Hon'ble Supreme Court in no uncertain terms has stated that once a notice under Section 13(2) of the SARFAESI Act is issued even a contemplated suit cannot be filed. It is settled law that what cannot be achieved directly cannot be achieved indirectly. It may so happen that the case pleaded in the plaint could be a defence to an action initiated under Section 13(4) of the SARFAESI Act but once a notice is issued under Section 13(2) of the SARFAESI Act the Civil Court is denuded of his jurisdiction where the Court would be required to adjudicate issues that will fall within the scope of the suit.
Under such circumstances, leave under Clause 12 of the letters patent is refused. CS No.151 of 2017 is not admitted.
(SOUMEN SEN, J.) SP / S.Kumar