Rajasthan High Court - Jaipur
Icici Bank Ltd vs Pramod Kumar Garg And Anr on 30 November, 2017
Author: Prakash Gupta
Bench: Prakash Gupta
HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT
JAIPUR
S.B. Civil Revision No. 127 / 2017
ICICI Bank Limited through its Authorized Signatory Mohit Diwan,
having its Branch Office at: New Mandi, Bharatpur.
----Petitioner
Versus
1. Pramod Kumar Garg, S/o Tikaram, R/o Plot No.2, Gita Colony
Bharatpur.
2. Smt. Sudha Garg, W/o Pramod Kumar Garg, R/o Plot No.2, Gita
Colony Bharatpur.
----Respondents
_____________________________________________________
For Petitioner(s) : Mr. Pankaj Gupta
For Respondent(s) : Mr. G. C. Goel
_____________________________________________________
HON'BLE MR. JUSTICE PRAKASH GUPTA
Judgment
30/11/2017
1. This revision petition has been filed by the petitioner against
the order dated 23.05.2017 passed by the learned District Judge,
Bharatpur rejecting an application under Order 7 Rule 11 CPC,
filed by the petitioner in the civil suit No.34/2017.
2. Brief facts giving rise to this revision petition are that the
petitioner-Bank issued a notice under Section 13 (2) of The
Securitisation and Reconstruction of Financial Assets and
Enforcement Of Security interest Act, 2002 (for short "SARFAESI
Act") to enforce its security interest against the three properties
specified in the notice which as per the petitioner Bank were
mortgaged by the non-petitioners with the petitioner to secure the
cash credit facility extended by the petitioner to a partnership firm
(2 of 9)
[CR-127/2017]
in the name and style of M/s. Tikaram Industries in which non-
petitioners are partners. On receipt of the notice, non-petitioners
filed a civil suit No.34/2017 before the learned District Judge,
Bharatpur for a decree of declaration to the effect that the
mortgage interest of the bank in the non-petitioners' property may
be declared unenforceable under the "SARFAESI Act" without
interference of the civil court and for a perpetual injunction to the
effect that the petitioner must be restrained from enforcing its
mortgage interest under Section 13 (2) of the "SARFAESI Act" as
it is barred under Section 31 (1) of the said act. In the suit, the
petitioner filed an application under Order 7 Rule 11 CPC, claiming
that the suit was barred by section 34 of the "SARFAESI Act". The
learned District Judge, Bharatpur having heard both the parties,
rejected the application with the liberty to the petitioner bank that
it may raise the issue in its reply to the suit.
Hence, the revision petition.
3. I have heard learned counsel for the parties and perused the
record.
4. The main submission of the learned counsel for the petitioner
Shri Pankaj Gupta is that the suit is barred by section 34 of the "SARFAESI Act" and the learned court below has committed jurisdictional and legal error in rejecting the application filed by the petitioner under Order 7 Rule 11 CPC. In this regard, it is submitted by him that the learned trial court has not rightly interpreted "security interest" as defined in Section 2 (ZF) of the "SARFAESI Act". The petitioner has a right to enforce its security (3 of 9) [CR-127/2017] interest over the properties mortgaged by way of equitable mortgage by the respondents in favour of the petitioner. The learned court below has misinterpreted section 31 of the "SARFAESI Act". Section 31 of the "SARFAESI Act" as well as Sections 125 to 127 of the Indian Contract Act have no application in the present matter. The finding of the court below is erroneous that jurisdiction of DRT is ousted in the present matter. It is an admitted case of the parties that properties had been equitably mortgaged in favour of the petitioner. The petitioner issued a valid notice under Section 13 (2) of the "SARFAESI Act" and thereafter, proceedings of attachment etc. were duly initiated. In view of section 69 of the Transfer of Property Act, security interest can be enforced without intervention of the court in view of section 69 of Transfer of Property Act, has overridden to the "SARFAESI Act".
5. Learned counsel for the petitioner has placed reliance upon the judgments of the Hon'ble Supreme Court in the cases of Mardia Chemicals Vs. Union Of Inida, AIR 2004 SC 2371, Branch Manager, State Bank of India Vs. Chinigepalli Lathangi & Ors., III (2007) BC 35 ( AP), Yuth Development Co-operative Bank Ltd. Kolhapur, Vs. Balasaheb Dinkarrao Salokhe & Ors, AIR 2008 Bombay High Court 167, Bank of India Vs. B. Sundari, IV (2008) BC 309 Madras High Court, Nahar Industrial Enterprises Ltd. Vs. Hong Kong & Shanghai Banking Corporation, (2009) 8 SCC 646, Sunayana Malhotra Vs. ICICI Bank, 163 (2009) DLT 602, Mahesh Kumar Sharma Vs. Bheru Lal & Ors., (4 of 9) [CR-127/2017] Manu/RH/0852/2011, KHDFC Bank Ltd. Vs. Prestige Educational Trust, AIR 2015 Ker 272.
6. On the other hand, learned counsel for the non-petitioners inter-alia contends that the debt was not directly and concurrently secured by the non-petitioners by mortgage of their properties but it was secured by their personal guarantee and in turn, properties were mortgaged to secure the guarantee obligation. A guarantee is a security which is given under Section 126 of the Indian Contract Act. Therefore, the secured creditor having lien on such security, cannot enforce the same under "SARFAESI Act" as the same is prohibited under clause (a) of Section 31 and ancillary linked security i.e. the property mortgaged to secure the guarantee obligation cannot be enforced directly without there being an adjudication by a civil court about the liability of the guarantor in case of his failure to meet/fulfill his obligation. It is further submitted that section 34 of the "SARFAESI Act" applies only when the matter is such in which the Debt Recovery Tribunal (for short 'DRT') or the Appellate Tribunal has jurisdiction. In this matter, the kind of right that the petitioner has in the property in question is disputed, which is not within the jurisdiction of the said tribunals. Hence, the suit is not barred by section 34 of the "SARFAESI Act". In short, he disputes applicability of section 34 of the "SARFAESI Act" to the suit in question. He placed reliance upon the judgment of the Hon'ble Supreme Court in the case of Robust Hotels Pvt. Ltd. & Ors. Vs. E.I.H Limited & Ors., 1 (2017) BC 116 (SC), KHDFC Bank Ltd., Mumbai & Ors., Vs. Prestige Educational Trust, 1 (2016) BC 739 (Ker.), Indian (5 of 9) [CR-127/2017] Renewable Energy Development Agency Vs. Official Liquidator, High Court, Madras & Ors., III (2011)BC 588, P. Abdu Vs. Federal Bank Ltd., I (2017) BC 713 (Ker.), Bank of Baroda Vs. Ranjan Chetia & Ors., III (2015) BC 721 (Gau.), Om Prakash Choudhary Vs. Dr. Kailash Garg & Ors., 2012 (3) DNJ (Raj.) 1180, Shree Hanuti Hanuman Ji Mandir Trust Vs. Shri Hanuti Hanuman Sevak Samiti Bavari Koshlya Das & Ors., 2017 (1) DNJ (Raj.) 505, Nahar Industrial Enterprises Ltd. & Ors. Vs. Hong Kong & Shanghai Banking Corporation & Ors., III (2009) BC 539 (SC).
7. I have considered the rival submissions made by the learned counsel for the parties.
8. The following issues appear to be germane for the decision of the present petition:-
(i) whether in the facts and circumstances of the case, the suit is barred by section 34 of the "SARFAESI Act"; and
(ii) whether the learned court below has committed any jurisdictional or legal error in rejecting the application of the petitioner filed under Order 7 Rule 11 CPC?
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 Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken (6 of 9) [CR-127/2017] 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).
9. In para 32 of the judgment in Robust Hotel's case (supra), the Hon'ble Supreme Court while analysing the provisions of Section 34, observed as under:-
"32. A perusal of Section 34 indicates that there is express bar of jurisdiction of the Civil Court to the following effect:
(i) Any suit or proceeding in respect of any matter in which Debt Recovery Tribunal or Appellate Tribunal is empowered by or under this Act to determine.
(ii) Further, 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." Thus the bar of jurisdiction of Civil Court has to correlate to the above mentioned conditions. For purposes of this case, we are of the view that this Court need not express any opinion as to whether suits filed by EIH were barred by Section 34 or not, since the issue are yet to be decided on merits and the appeal by Robust Hotels have been filed only against an interim order."
10. Thus, the bar of jurisdiction of civil suit has to correlate to the above mentioned conditions.
In Mardia Chemicals case (supra), the Hon'ble Supreme Court in para 50 of the judgment held that the jurisdiction of the civil suit is barred in respect of the matters which the DRT or the Appellate Tribunal is empowered to deal (7 of 9) [CR-127/2017] with, in respect of any action taken "or to be taken in pursuance of any power conferred under this Act". The jurisdiction of civil court is barred for such matters which are to be dealt with cognizance by the DRT. Apart from all those matters in which measures have already been taken under Sub-section 4 of Section
13.
11. From the above provisions of Section 34 as interpreted by the Hon'ble Supreme Court, it is clear that the jurisdiction of civil suit is barred only with respect to such matters which DRT or Appellate Tribunal is empowered to determine. It is well settled that while deciding an application under Order 7 Rule 11 CPC, the averments made in the plaint and documents annexed thereto are to be taken into consideration and I need not to delve into the various authorities in this regard.
12. The perusal of the plaint filed by the plaintiff shows that the questions raised before the learned court below are:-
(i) whether the property in question was directly or concurrently mortgaged to secure the disputed loan,
(ii) whether the loan was secured by personal guarantee and the property was mortgaged to secure the personal obligation of the plaintiff,
(iii) whether the loan was a secured loan and the property in question is secured assets.
13. Section 17 and 18 of the "SARFAESI Act" provide for the matters which are to be determined by the DRT and the Appellate Tribunal. Section 17 provides that any person aggrieved by any of (8 of 9) [CR-127/2017] the measures referred to in sub-section (4) of section 13 taken by the secured creditor, may apply to the DRT. Section 18 provides that any person aggrieved by an order made by the DRT under Section 17 may file an appeal to the Appellate Tribunal. Thus, DRT and Appellate Tribunal are empowered to determine the actions taken or to be taken under Section 13 (4) of the "SARFAESI Act".
Section 13 (4) of the "SARFAESI Act" reads as under:-
(4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:--
(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;
(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;
Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt:
Provided further that where the management of whole, of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security or the debt;]
(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;
(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.
(9 of 9) [CR-127/2017]
14. A perusal of the provisions of above sub-section 4 of section 13 of the "SARFAESI Act" shows that none of the actions that may be taken under this sub-section by the secured creditor were in question before the learned District Judge, Bharatpur and none of the issues required to be determined in the aforesaid suit are covered by the aforesaid provision. Therefore, the bar of Section 34 of the "SARFAESI Act" does not operate against the suit filed before the learned District Judge, Bharatpur.
15. In view of the above, the learned court below has committed no jurisdictional or legal error in rejecting the application under Order 7 Rule 11 CPC filed by the petitioner-Bank.
16. In the result, the revision petition is dismissed, no order as to costs.
(PRAKASH GUPTA) J.
Sanjay Gaur/78