Karnataka High Court
Sri Raghavan S vs Sri N B Rajeev on 22 January, 2020
Bench: B.V.Nagarathna, Jyoti Mulimani
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 22nd DAY OF JANUARY, 2020
PRESENT
THE HON'BLE MRS. JUSTICE B. V. NAGARATHNA
AND
THE HON'BLE MS. JUSTICE JYOTI MULIMANI
REGULAR FIRST APPEAL No.1947 of 2016 (DEC/INJ)
BETWEEN :
SRI.RAGHAVAN.S
SINCE DEAD REPRESENTED BY HIS LR
SRI.SAMPATH KUMAR.R
AGED ABOUT 59 YEARS
R/AT.FLAT NO.A-2,
FIRST FLOOR, PAVAMANA PARADISE
1-C-4/5, 3RD CROSS, 1ST PHASE
BEHIND CANARA BANK, GIRINAGAR
BENGALURU - 560 085.
... APPELLANT
(BY SMT.SHWETHA RAVISHANKAR, ADV.,)
AND:
1. SRI.N.B.RAJEEV
S/O.N.R.BHEEMACHAR
AGED ABOUT 46 YEARS
R/AT.NO.80/B, 1ST FLOOR
1ST PHASE, NEHRU ROAD
GIRINAGAR
BENGALURU - 560 085.
2
2. M/S.D.I.PROPERTIES
PATNERSHIP FIRM HAVING OFFICE AT
80/B, NEHRU ROAD, 1ST PHASE
GIRINAGAR
BENGALURU - 560 085
REPRESENTED BY ITS PARTNERS
B.S JAYATHEERTHA AND D.T.PRAKASH
3. B.S.JAYATHEERTHA
S/O.LATE SATYANARAYANA RAO
AGED ABOUT 52 YEARS
RESIDING AT FLAT NO.A-4
3RD FLOOR, PAVAMA PARADISE
3RD CROSS, 1ST PHASE
BEHIND CANARA BANK
GIRINAGAR
BENGALURU - 560 085.
4. D.T.PRAKASH
S/O.LATE D.TIRUMALA RAO
AGED ABOUT 56 YEARS
R/AT.NO.1, MANASARA ROAD
INDIRNAGAR
MYSORE - 570 010.
5. M/S.SUNDARAMA PNB
PARIBAS HOME FINANCE LTD.,
NO.8, "SAI PRABHU" B-STREET
PARK ROAD, SHESHADRIPURAM
BENGALURU - 560 020
REPRESENTED BY ITS MANAGER
6. S.KIRAN KUMAR
S/O.SOMANNA
R/AT.NO.68, 7TH CROSS
6TH PHASE, 2ND STAGE
BDA LAYOUT, NAGARABHAVI
NEAR CORPORATION BANK ATM
BENGALURU - 560 072.
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7. SMT.BHAVANI
W/O.KIRAN KUMAR
R/AT.NO.68, 7TH CROSS
6TH PHASE, 2ND STAGE
BDA LAYOUT, NAGARABHAVI
NEAR CORPROTATION BANK ATM
BENGALURU - 560 072.
8. THE UNITED BANK OF INDIA
BENGALURU CANTONMENT BRANCH
NO.40/2, BRIGADE ROAD
BENGALURU - 560 001.
REPRESENTED BY ITS CHIEF MANAGER
9. T.N.S.MANJUNATH
S/O.SRI.NINGA RAJE GOWDA
R/A.NO.22, BYRAVA NAGAR
DUPASIPALYA
R.V.COLLEGE (POST)
KENGERI
BENGALURU - 560 059.
10. T.N.SATISH
S/O.SRI.NINGARAJEGOWDA
R/A.NO.22, BYRAVA NAGAR
DUPASIPALYA
R.V.COLLEGE (POST), KENGERI
BENGALURU - 560 059.
...RESPONDENTS
(SRI.S.K.M.SHETTY, ADV., FOR C/R8,
SRI.HARSHA.G, ADV., FOR
SMT.R.RADHA, ADV., FOR R5,
V/O.DTD.02.01.2020, SERVICE OF NOTICE
TO R2 TO R4, R6 & R7 ARE DISPENSED WITH,
R1, R9 AND R10 ARE SERVED)
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THIS REGULAR FIRST APPEAL IS FILED UNDER
SECTION 96 R/W.ORDER 41 RULE 1 OF CODE OF CIVIL
PROCEDURE, 1908 PRAYING TO SET ASIDE THE
IMPUGNED ORDER (ANNEXURE-A) DATED 11.11.2016
PASSED BY THE HON'BLE XXVIII ADDITIONAL CITY CIVIL
JUDGE AT MAYO HALL UNIT (CCH-29) OF BENGALURU IN
O.S.NO.26444/2014.
THIS REGULAR FIRST APPEAL COMING ON FOR
ADMISSION THIS DAY, NAGARATHNA J., DELIVERED
THE FOLLOWING:
JUDGMENT
Though this appeal is listed for admission, with the consent of learned counsel on both sides it is heard finally.
2. The appellant was the plaintiff in O.S.No.26444/2014, while the respondents herein were the defendants in the said suit. The plaintiff filed the said suit seeking the following reliefs:
"Wherefore, the plaintiff most respectfully prays that this Hon'ble Court be pleased to pass a judgment and decree against the defendants that:-
a. Declaring that the plaintiff is the absolute owner of the plaint 'B' schedule property.5
b. Consequentially pass an order of permanent injunction restraining the defendants from interfering with the plaintiff's peaceful possession and enjoyment of the plaint 'B' schedule property.
c. Pass any other relief / reliefs as this Hon'ble Court deem fit in the facts and circumstances of the case and;
d. To award the costs of the suit in the interest of justice and equity."
3. The aforesaid reliefs pertain to the following suit schedule properties.
"Schedule 'A' "All that piece and parcel of immoveable property bearing site No.1-C4, situated at 1st phase of Vishweabhrathi Housing Complex Layout, Girinagar, Bengaluru 085 formed by the Vishwabharathi House Building Co- Operative Society Limited (VBHCS) in Sy.No.7,8,9,10 and Part 11 of Avalahalli village, Uttarahalli Hobli, Bengaluru South Taluk, within the limits of BMP Ward No.54, New Ward No.162 and assigned property number as Municipal No.1/C-4, Vishwabharathi HBCS, BSK 3rd Stage, Bengaluru, having property identification No.PID No.54-169-I/C-4 and bounced on 6 East by Private Property, West by Site No.1-C3, North by Private property, South by Road.
SCHEDULE 'B' All that piece and parcel of the residential apartment flat bearing No.A-2, 'first floor', measuring 1100 sq.ft., of super built up area (built up area 920 Sq.Ft.) put up on property forming part of Apartmental Building known as 'PAVAMANA PARADISE' in site No.1- C4, situated at 1st phase of Vishwabharati Housing Complex Layout, Girinagar, Bengaluru 560 085, formed by the Vishwabharathi House Building Co-Operative Society Limited in Sy.No.7,8,9,10 and part 11 of Avalahalli village, Uttarahalli Hobli, Bengaluru South Tq., within the limits of BMP war No.54, Bruhath Bengaluru Mahanagara Palike New Ward 162 and assigned property number as municipal number New 1/C-4/5, (Old No.Flat No.FF-A-2), Vishwabharati, HBCS, BSK, 3rd stage, Bengaluru, having property identification (PID) number 54-169-1/C-4/5, more fully described in SCHEDULE A herein above, together with 316 Sq. Ft. of undivided share, right, title, interest and ownership and sital area comprising of flat consisting of 2 bedrooms, hall, kitchen, bathroom and toilets, consisting of flush doors and steel windows having mosaic flooring and one car parking area in the basement as per the norms."7
4. At this stage, itself it may be stated that 'B' schedule property is a part of 'A' schedule property.
5. In response to the suit summons and Court notices, some of the defendants appeared, defendant Nos.5 and 8, being the financiers of defendant Nos.6, 7, 9 and 10 respectively, appeared. Defendant No.8 / respondent No.8 herein filed an application under Order VII Rule 11 (d) read with Section 151 of the Code of Civil Procedure, 1908 (CPC), seeking rejection of the plaint. By the impugned order and decree dated 11.11.2016, the plaint filed by the appellant - plaintiff has been rejected. Being aggrieved, the plaintiff has preferred this appeal.
6. We have heard learned counsel for the appellant / plaintiff and learned counsel for respondent Nos.5 and 8 / defendant Nos.5 and 8 - financiers/Banks. Respondent No.8 is on caveat, while respondent No.5 is represented through counsel. Service of notice to respondent Nos.2 to 4, 6 and 7 has been dispensed with. 8 Respondent Nos.1, 9 and 10 are served and unrepresented.
7. Appellant's counsel submitted that the trial Court was not right in rejecting the plaint at the instance of defendant No.8 on an application filed by the said defendant under Order VII Rule 11(d) read with Section 151 of CPC by holding that the suit was barred in view of Section 13(4), 17 and 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act' for the sake of convenience). She contended that the suit filed by the plaintiff was with regard to two reliefs and it was a comprehensive suit. The main relief was for declaring that the plaintiff is the absolute owner of plaint 'B' schedule property and consequential relief was for a decree of permanent injunction restraining the defendants from interfering with plaintiff's peaceful possession and enjoyment of plaint 'B' schedule property. The trial Court could not have rejected the plaint by holding that the suit 9 was barred in view of Section 34 of the SARFAESI Act. She contended that the suit was not for challenging the measures taken by the 5th or 8th defendants - Banks under the provisions of the SARFAESI Act, the suit was instituted having regard to Section 9 of the CPC, seeking a declaration of title and consequential reliefs under Section 34 of the Specific Relief Act, 1963.
8. It is the case of the plaintiff that 'B' schedule property had been purchased by him under a registered sale deed and he had been put in possession of the said flat. That the sale was executed by defendant Nos.1 to 4 for a valuable consideration of Rs.34,98,000/-. Defendant Nos.5 and 8 are stated to be the Banks who have lent monies to defendant Nos.6, 7, 9 and 10 respectively and claim that certain immovable property has been mortgaged to them for the purpose of financial assistance to the said defendants, but it is not 'B' schedule property which has been purchased by the plaintiff. Therefore, plaintiff being troubled by defendants' Bank's sought a 10 declaratory and consequential relief of permanent injunction vis-à-vis his title and possession of 'B' schedule property; that the Civil Court is the Court of competent jurisdiction before which such a plaint could be instituted. That the trial Court was not right in rejecting the plaint by holding that the suit was barred on the premise that the 'B' schedule property was indeed the subject matter of mortgage to the respondent Nos.5 and 8 - Bank. It is the case of the plaintiff that what has been mortgaged by the borrowers of the respondent Nos.5 and 8 - Bank is in respect of non-existing flat; that what has been purchased by the borrowers therein is not 'B' schedule property which has been purchased by the plaintiff, that the Bankers have proceeded to take certain steps against the borrowers, but in effect were trying to interfere with plaintiff's possession of 'B' schedule property. Therefore, the plaintiff was constrained to file the suit.
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9. Further, learned counsel for the appellant contended that the trial Court misdirected itself and instead of reading the averments in the plaint has been carried away what has been stated by defendant No.8 in the application and has concluded that the plaint has to be rejected and has accordingly, rejected the same. She further submitted that it was only defendant No.8, who has made such an application, the other defendants namely, defendant No.5 did not prefer such application. On the other hand, defendant No.5 has only filed written statement; that the vendors of the plaintiffs are yet to appear in the suit, but the plaint has been rejected, which is erroneous. As a result, the attempt of the plaintiff to seek the relief of declaration and permanent injunction before the Civil Court has been frustrated. In support of her submissions, she has placed reliance on the decision in MARDIA CHEMICALS LTD. AND OTHERS v. UNION OF INDIA AND OTHERS - [(2004) 4 SCC 311] (Mardia Chemical Lt.) as well as other judgments of the Hon'ble Supreme Court and various High Courts. Learned counsel 12 for the appellant, therefore, submitted that the impugned order and decree may be set aside and the suit may be restored on the file of the trial Court, so that it could be disposed of in accordance with law.
10. Per contra, learned counsel for respondent No.8 / defendant No.8 who had filed the application under Order VII Rule 11(d) read with Section 151 of the CPC supported the impugned order and decree of the trial Court. He contended that the 'B' schedule property is indeed the property which has been mortgaged by defendant Nos.9 and 10 to the Bank. That defendant Nos.9 and 10 are the prior purchasers of the said property while the plaintiff is the subsequent purchaser. That defendant Nos.9 and 10, who are borrowers of the Bank have mortgaged the said property and therefore, any further encumbrance is not permissible in law. He further submitted that the 'B' schedule property is a secured asset and hence, action was initiated under Section 13 of SARFAESI Act against the borrowers; that if any person 13 including a borrower is aggrieved by the action initiated by the Bank or financial institution, then remedy is provided under Section 17 of SARFAESI Act; that Section 34 of the said Act clearly bars the Civil Court from having any jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal (DRT) or the Appellate Tribunal (DRAT) is empowered by or under the said 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 (hereinafter referred to as 'DRT' for the sake of convenience). He stated that Hon'ble Supreme Court in the case of JAGDISH SINGH v. HEERALAL reported in (2014) 1 SCC 479 and by a subsequent judgment passed in the case of M/S.SREE ANANDHAKUMAR MILLS LTD. v. M/S.INDIAN OVERSEAS BANK in Civil Appeal Nos.7214-7216/2012 disposed of on 03.05.2018, have clearly held that in respect of a secured asset to a Bank or 14 financial institution, a suit is not maintainable, either by a borrower or any other person; that the plaintiff can approach the DRT under Section 17 of SARFAESI Act and seek relief by assailing the action taken by the Bank. In the instant case, the plaintiff has, instead, approached the Civil Court seeking the reliefs, which suit filed by the plaintiff could not have been entertained in view of the bar under Section 34 of the SARFAESI Act; that the trial Court has rightly rejected the plaint under Order VII Rule 11(d) of the CPC. There is no merit in the appeal. Hence, appeal may be dismissed.
11. By way of reply, learned counsel for the plaintiff submitted that there are intrinsic questions regarding title to 'B' schedule property which arise in the suit as well as other rights touching upon the 'B' schedule property and the reliefs sought for by the plaintiff. One of the questions that would arise is, as to, whether, the vendors of the plaintiff have sold a non-existing flat in 'A' schedule property to the borrower or whether it is indeed 15 the 'B' schedule property which belongs to the plaintiff which has been sold; that it is the case of the plaintiff that 'B' schedule property has been sold by plaintiff's vendors to the plaintiff. But, the bankers are mistaken by contending that the said 'B' schedule property is the subject matter of mortgage and proceedings initiated against the borrower; that the subject matter of mortgage is totally distinct from the subject matter of the suit. In the circumstances, the plaintiff was justified in seeking a comprehensive relief in the nature of declaration and injunction and therefore, the appeal may be allowed by setting aside the order and decree of the trial court.
12. Having heard the learned counsel for the respective parties and on perusal of the material on record as well as the judicial precedent cited at the bar, the following points would arise for our consideration:
1. Whether the order and decree of the trial Court passed under Order VII Rule 11 (d) 16 read with Section 151 of CPC, calls for any interference in this appeal?
2. What order?
13. The fact that the appellant - plaintiff had filed O.S.No.26444/2014 before the trial Court seeking the aforesaid reliefs namely, the relief of declaration of title and consequential decree of permanent injunction against the defendants/ respondents herein in respect of 'B' schedule property which is situated in 'A' schedule property is not in dispute.
14. It is the case of the appellant - plaintiff that defendant No.1 was the owner of the immovable property in 'A' schedule property; that defendant No.1 was desirous of developing the 'A' schedule property and entered into a joint development agreement with defendant No.2. Defendant No.2 is a partnership firm, represented by its partners namely, defendant Nos.3 and 4; that defendant No.2 being the developer has constructed a residential Apartment in the name and style of "Pavamana Paradise" 17
on the 'A' schedule property; that flat No.A-2 in the first floor of the said apartment was sold by defendant Nos.1 to 4 under a registered sale deed to the plaintiff on 06.09.2010. The plaintiff was also put in possession of the said flat and he has obtained Khata and other documents in his name and has been paying taxes in respect of the 'B' schedule flat; that in September 2012, the representatives of defendant No.5 - financial institution alleged claim over 'B' schedule property by contending that the same was mortgaged by defendant Nos.6 and 7 to their Bank and thereafter, the plaintiff had filed O.S.No.69/2013 before the City Civil Court, Bengaluru, seeking the relief of permanent injunction. The said suit was rejected under Order VII Rule 11(d) of the CPC and RFA No.1554/2013 was preferred. The same was dismissed with liberty to approach the Debts Recovery Tribunal, Bengaluru. It is the further case of the plaintiff that in the meanwhile, 8th defendant - Bank claimed that 'B' schedule property was mortgaged to their Bank by defendant Nos.9 and 10.
Plaintiff preferred IR No.82/2014 before the DRT, 18 challenging the action of defendant No.8. There was an order of status quo granted by the DRT; that the plaintiff seriously questioned defendant Nos.2 to 4 with regard to the dispute raised by the Banks, but defendant Nos.2 to 4 did not clear the queries raised by the plaintiff; that plaintiff had filed a complaint in Girinagar Police Station on 20.08.2013, which was registered as Crime No.225/2013 under Section 420 read with Section 34 of Indian Penal Code, against defendant Nos.3 and 4, who are the Power of Attorney Holders of defendant No.1; that the investigation is on; that defendant Nos.1 to 4 have created sale deeds in respect of non-existent flats in "Pavamana Paradise Apartment", without showing the Proper Identification Numbers and they have colluded with defendant Nos.6, 7, 9 and 10; that the Bankers have extended loan to defendant Nos.6, 7, 9 and 10 on the basis of certain mortgages made by the said parties; that the mortgages do not concern the 'B' schedule property.
Defendant Nos.5 and 8 have been trying to interfere with the lawful possession of the plaintiff. Hence, the plaintiff 19 has filed the suit seeking the aforesaid reliefs. It is in the aforesaid factual matrix, the plaintiff has sought the declaratory as well as the consequential relief.
15. Learned counsel for the respondent No.8 have contended that 'B' schedule property is a subject matter of mortgage and the Bank has the right to initiate action against the borrower and take measures under the provisions of Section 13 and other provisions of the SARFAESI Act. There cannot be any interference with such measures being taken by the Bank; that the object and purpose of Section 34 of SARFAESI Act is that the Civil Court has no jurisdiction to entertain any suit in respect of property which is a subject matter of mortgage to a Bank or financial institution i.e., a secured asset. But the plaintiff has filed the suit in respect of the very same secured asset. Therefore, Section 34 of the SARFAESI Act, being a bar, the plaint was rightly rejected by the trial Court.
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16. As opposed to this argument, learned counsel for the plaintiff contended that it is the clear case of the plaintiff that 'B' schedule property flat is not the subject matter of claim made by defendant Nos.1 to 4 to the borrowers; that 'B' schedule flat has been conveyed to the plaintiff and plaintiff is the owner and in possession of the said flat. Therefore, on the basis of the title deed which is in favour of the plaintiff, the suit for declaration of title and consequential injunction has been sought. It is contended that the crux of the matter, in the instant case, is with regard to the title and ownership and possession of the 'B' schedule property in respect of which a declaration has been sought by the plaintiff. The plaintiff has not challenged any of the measures initiated by respondent Nos.5 and 8 - Bank, against the borrowers who are also the defendants in the suit. If the Bankers assume that it is the 'B' schedule property which is mortgaged and therefore, is the secured asset and measures have been taken in respect of that secured asset, the assumption is wrong and in order to prove that the 'B' schedule property 21 is not a subject matter of mortgage, the plaintiff has approached the Civil Court seeking the aforesaid reliefs.
17. At this stage, we shall consider the decisions relied upon at the Bar:
18. Learned counsel for the respondent-Bank has relied upon Jagadish Singh vs. Heeralal, [AIR 2014 SC 371], (Jagadish Singh), in support of his submissions that Sections 34 of 'SARFAESI Act' ousts the jurisdiction of the Civil Court and hence, this Court may not interfere with the impugned judgment and order. In the said case, the suit was for declaration of title and for partition and consequential decree of permanent injunction. The Hon'ble Supreme Court relied upon paragraph 50 of Mardia Chemical Limited and others vs. Union of India and others, [(2004) 4 SCC 311], (Mardia Chemical Limited), wherein it has been observed as under:
"50. ............... A full reading of Section 34 shows that the jurisdiction of the civil court is barred in respect of matters which a Debts 22 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 cognizance of by the Debts Recovery Tribunal though no measure 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 court 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 Section 13."
And thereafter, in paragraph 22 and 23 observed as under:
"22. Statutory interest is being created in favour of the secured creditor on the secured assets and when the secured creditor proposes 23 to 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 realising the secured assets. Any person aggrieved 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 the 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.24
The 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 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 CPC 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 Bank, in the instant case, has proceeded only against secured assets of the borrowers on which no rights of Respondent Nos.6 to 8 have been crystallised, before creating security interest in respect of the secured assets."
(Underlining by us) 25 In the said case, the suit filed was for a declaration that the suit schedule property was undivided joint family of plaintiff and defendant Nos.1 to 4 therein and for a decree of partition and separate possession and for permanent injunction. In substance, the suit was one for partition and separate possession between the members of the family.
19. The aforesaid judgment has been followed in M/s.Sree Anandhakumar Mills Limited vs. M/s. Indian Overseas Bank and others, [(2019) 14 SCC 788] (Sree Anandhakumar Mills) wherein the suit filed was for seeking partition and an order of injunction had been passed therein. Placing reliance on Jagadish Singh, the Hon'ble Supreme Court permitted the appellant therein to approach the jurisdictional Debts Recovery Tribunal to seek relief.
20. In Madhav Prasad Aggarwal and Another vs. Axis Bank Limited and Another, [(2019) 7 SCC 158] (Madhav Prasad Aggarwal), the Hon'ble Supreme 26 Court on perusal of the relief sought for in the said suit held that the relief of rejection of the plaint in exercise of powers under Order VII Rule 11(d) of the Code of Civil Procedure, 1908 (CPC) cannot be pursued only in respect of one of the defendants. In other words, the plaint has to be rejected as a whole or not at all, in exercise of power under Order VII Rule 11(d) of CPC. Reliance was placed on Sejal Glass Limited vs. Navilan Merchants Private Limited, [(2018) 11 SCC 780] (Sejal Glass Limited), in support of their reasoning. In other words, the plaint as presented must proceed as a whole or rejected as a whole but not in part. It was further observed that the fact that one or some of the reliefs claimed against respondent No.1 in the concerned suit was barred by Section 34 of SARFAESI Act or otherwise, can be considered when an objection is raised by invoking other remedies including Order VI Rule 16 CPC at the appropriate stage. The same can be considered by the Courts on its own merits in accordance with law.
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21. Further, reference was made to Nahar Industrial Enterprises Limited vs. Hong Kong and Shanghai Banking Corporation, [(2009) 8 SCC 646], (Nahar Industrial Enterprises), to the effect that the Debts Recovery Tribunal and also its Appellate Authority cannot pass a decree nor it is open to it to enter upon its determination in respect of the matters beyond the scope of power or jurisdiction endowed in terms of Section 17 of the SARFAESI Act.
22. In Nahar Industrial Enterprises Limited, the Hon'ble Supreme Court held that under Section 34 of the SARFAESI Act, a suit is not barred nor is the jurisdiction of the Civil Court ousted altogether to entertain a suit under Section 9 of CPC. That the Debts Recovery Tribunal cannot be treated as a Civil Court, as the same is constituted for a particular purpose and has a limited jurisdiction and neither can it pass a decree nor a declaratory relief can be granted by the Tribunal. That the Tribunal can only issue a recovery certificate. 28
23. Further, a Division Bench of the Calcutta High Court in Kaaiser Oils Private Limited and others vs. Allahabad Bank and Others, [2015 SCC Online Cal.1652], (Kaaiser Oils Private Limited), after considering the similar contentions, has observed as under:
"This Court has given an anxious consideration to the decisions cited at the bar. On perusal of those decisions, it appears to us that if the amount of debt due to the Bank is more than Rs.10 lakh, no Civil Court, in view of Section 34 of the SARFAESI Act, will have jurisdiction to entertain any suit or any proceeding in respect of any matter which a Debts Recovery Tribunal or Appellate Tribunal is empowered to determine by or under the Act. However, there are some exceptions to the general principles which are as follows:-
(i) Civil Court's jurisdiction to entertain a declaratory suit is not barred as the DRT is not authorized to issue any declaration relating to title of the parties etc. DRT's jurisdiction is 29 restricted only to issuance of certificate.
(ii) Civil Court's jurisdiction to entertain a civil suit is not barred when complicated questions of disputed facts are involved in the lis which is required to be resolved by elaborate trial on evidence.
(iii) Civil Court's jurisdiction to entertain a suit is not barred when ultimate decision is to be taken on the allegations of fraud and misrepresentation.
(iv) Civil Court's jurisdiction to entertain any suit filed before the Bank takes any step for recovery of its dues by following the provisions of the Debts Recovery Act or the SARFAESI Act, is not barred
(v) Civil Court's jurisdiction to entertain any suit in the nature of set off or counter-claim is also not barred, particularly when any of the actions of the bank to recover its dues as per the SARFAESI Act is not challenged in the suit."30
24. In the said case, the Division Bench of the Calcuatta High Court also distinguished the facts as they obtained in Jagadish Singh's case and in the case under its consideration. The plaintiff therein had filed a title suit before the trial court and the cause of action for the said suit was mainly founded on the allegation of breach of contract made by the defendant-Bank in the disbursement of loan amount as per the agreement and/or illegal adjustment of cash credit and a letter of credit limited against interest that was debited against the long-term loans and adjustment of interest as against short-term loan through plaintiff No.1 was not allowed to run its plant in terms of the rehabilitation scheme due to the failure of the bank to provide nearly 70% of the incremental portion of the working capital facilities as per the bank's own assessment as appearing in the sanctioned letter in respect thereof. It was also alleged by the plaintiffs / appellants that denial and refusal of defendant No.1 to provide the plaintiff with the bank's benefits under the said RBI guidelines / circulars also formed part of cause of 31 action of the suit. The plaintiffs claim that it suffered huge losses due to short and delayed financing, non-providing the reliefs available to MSME sector, non-compliance of the directions of the RBI, etc. Consequently, the plaintiff sought for a decree for Rs.15,219.86 lakhs as against defendant No.1 and alternatively, sought an enquiry into damages and decree for such sums as may be found due and payable to the plaintiffs by defendant No.1. Mandatory injunction was also sought for return of title deeds and directing defendant No.1 to discharge the guarantee given by defendant No.2 therein to defendant No.1 for the plaintiff No.1's credit facilities and such other incidental and ancillary reliefs.
25. On going through the reliefS sought, the Calcutta High Court found that the suit was essentially for recovery of damages where incidentally other reliefs regarding release of title deeds, etc., were also claimed by the plaintiffs by way of mandatory injunction. If, in such a suit, the plaintiffs could establish their claim for damages 32 and if a decree was passed in favour of the plaintiffs/appellants and the decretal amount exceeded the bank's claim, the certificate which could be issued by the Tribunal to the extent of the bank's claim would be ultimately adjusted by way of set off against the decree for damages to be passed by the Civil Court and in that event, the bank could not retain the title deeds which the plaintiffs deposited for securing the loan taken by the plaintiffs from the Bank by way of equitable mortgage. If, on the contrary, the Civil suit was dismissed and certificate of recovery was ultimately issued by the Debts Recovery Tribunal, then the bank could realise its dues by selling the mortgaged property.
26. The Calcutta High Court further observed that the Tribunal was incompetent to decide the disputed questions of facts raised in the suit concerning plaintiffs' claim for damages. It was further observed that if the primary reliefs were held to be maintainable before the Civil Court, then incidental reliefs could also be considered 33 by the Civil Court. More significantly, it was observed that if the suit had been concerning any of the actions taken by the Bank, either by issuance of notice under Section 13(2) and/or the steps taken by the Bank under Section 13(4) of the SARFAESI Act thereof which has been challenged in the suit, then the civil court could have lost the jurisdiction to entertain the suit which related to such challenge regarding legality of issuance of notice under Section 13(2) and/or the steps taken by the Bank under Section 13(4) of the SARFAESI Act. It was found that no part of the cause of action was founded on the basis of any challenge with regard to the legality of the notice under Section 13(2) of the said Act and/or the steps taken by the Bank under Section 13(4) of the said Act. Hence, Section 34 of the SARFAESI Act did not stand in the way of maintaining the suit which was primarily a suit for recovery of damages along with other incidental reliefs which were claimed by way of mandatory injunction for release of the title deeds etc. Allegations were also made by the defendant bank against the plaintiff therein for 34 siphoning off the loan amount to the other company and thereby the plaintiff having committed fraud upon the bank by not utilizing the fund by the plaintiff company for which the loan was advanced by the bank. Thus, an issue relating to element of fraud was likely to be raised in the said suit along with other issues. It was observed that such issues to be raised in such suit could be resolved by trial court on recording evidence and not by the Debts Recovery Tribunal. In fact, in the said case, the plaintiffs had approached the Tribunal on identical issues seeking identical reliefs but, the Tribunal had accepted the fact that the dispute was of such a nature that it had to be tried by the Civil Court and not by the Tribunal. Hence, the Calcutta High Court observed that defendant Bank could not take different stands at different point of time to non- suit plaintiffs therein.
27. In fact, in Mardia Chemicals Limited in paragraph 51, the Hon'ble Supreme Court has observed that to a very limited extent, even in the case of asset 35 mortgaged to the Bank, which is a secured creditor, the jurisdiction of the civil Court could be invoked where there is an allegation of fraud. In such a case, the mortgager can invoke the civil court's jurisdiction by contending that the power of sale was being exercised in a fraudulent or improper manner, contrary to the terms of mortgage. In such limited circumstances, the civil court can entertain the suit when there is a discovery of fraud provided the pleadings in such a suit clearly discloses fraud or irregularity on the basis of which relief is sought.
28. Learned counsel for the appellant also placed reliance on a judgment of the Madras High Court in the case of K.Deenadayalan vs. N.Sathish Kumar, represented by his power of attorney Agent N.Ashok Kumar, [(2015) 1 Mad.L.J. 170 : 2014 SCC Online Mad.12187] (K.Deenadayalan), wherein there was a comparative consideration of Section 34 of the SARFAESI Act and Section 18 of the Recovery of Debts due to Banks and Banking Institutions Act, 1993 as well as the judgment 36 of the Hon'ble Supreme Court in Jagadish Singh's case and it was observed as under:
"24. Learned Senior Counsel appearing for the petitioner strongly relied on a recent decision of the Honourable Supreme Court reported in 2014 (1) SCC 479 (Jagdish Singh Vs. Heeralal) to contend that the Civil Court's jurisdiction is ousted in the present matter. A perusal of the said decision would show that the same is in respect of the proceedings under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, 'the SARFAESI Act'), wherein Section 34 of the SARFAESI Act deals with the ousting of jurisdiction of the Civil Court. The Honourable Supreme Court, while considering the scope of Section 34 of the SARFAESI Act, ousting the Civil Court's jurisdiction, held that the suit filed therein is not maintainable. The relevant paragraphs 21 and 24 of the said decision are extracted hereunder:
"21. Section 34 of the Securitisation Act ousts the civil 37 court jurisdiction. For easy reference, we may extract Section 34 of the Securitisation Act, which is as follows:
"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 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. Statutory interest is being created in favour of the secured creditor on the secured assets and when the secured creditor proposes to 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 realising the secured assets. Any person aggrieved by any of the "measures" referred to in sub-section (4) of Section 38 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 the 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. The 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 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 CPC as well."
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25. In my considered view, the scope of Section 34 of the SARFAESI Act and Section 18 of the Recovery of Debts Due to Banks and Financial Institutions Act, is not one and the same or similar in its application. While Section 34 of the SARFAESI Act contemplates ouster of Civil Court's jurisdiction to entertain any suit or proceeding in respect of any matter which a DRT or the Appellate Tribunal is empowered to determine under the SARFAESI Act, Section 18 of the Recovery of Debts Due to Banks and Financial Institutions Act contemplates the bar of jurisdiction only in relation to the matters specified under Section 17 of the Act therein. This aspect has already been discussed in the earlier paragraph of this order. Therefore, the above decision of the Apex Court, which was rendered while considering the scope of Section 34 of the SARFAESI Act, will not help the petitioner/fourth defendant, as I find that the scope of the relevant provisions of the SARFAESI Act and the Recovery of Debts Due to Banks and Financial Institutions Act, as discussed supra, is not one and the same. Even otherwise, a perusal of the factual aspects of the matter before the Hon'ble 40 Supreme Court in the Jagdish Singh's case (cited supra) would show that there was no plea of fraud or misrepresentation or failure to follow due procedures. Therefore, I consider that the said decision in Jagdish Singh's case (cited supra) is also factually distinguishable."
29. Reliance was also placed by the appellant's counsel on a judgment of Kerala High Court, in KHDFC Bank Limited vs. Prestige Educational Trust, [2015 SCC Online Ker.22758 : AIR 2015 Ker.272] [OP(C) No.889/2015(O), DD: 30.07.2015], wherein it was observed that if a creditor is initiating action against an asset, which is not a 'secured asset', he cannot be termed as a 'secured creditor'. Further, such action by this would not be an exercise of any power conferred by or under the SARFAESI Act. In such a case, it cannot be said that the civil court has no power to grant an injunction.
30. In Central Bank of India vs. Mr.Ram Rattan alias Rattan Lal and others, [2015 SCC Online P&H 7482], [CR No.2475/2015 DD: 09.04.2015], 41 (Ram Rattan @ Rattan Lal) the learned Single Judge of Punjab and Haryana High Court has observed that the observations of the Hon'ble Supreme Court in the case of United Bank of India vs. Satyawati Tondon and others, [(2010) 8 SCC 110], (Satyawati Tondon) in the context of a person who is aggrieved but who was not a borrower to resort to a remedy under Section 17 of the SARFAESI Act, did not extend to a person who is not a borrower and who claims that his property was wrongfully mortgaged by a person claiming the property to belong to him could have remedy only under Section 17. It was further observed as under:
"3. ............ A suit for a declaration or a claim by a person who is owner of an immovable property will have a right to seek for such a declaration as a statutory exercise of a right conferred under Section 34 of the Specific Relief Act and Section 9 CPC will also allow an action of civil nature to be entertained by the Civil court. Section 34 of the SARFAESI Act cannot constitute a bar for a person who is not borrower himself and would lay a 42 paramount claim to right to the property which is mortgaged. If the plaintiff's contention that the suit property is his own property and the borrower had no right to create a mortgage interest in respect of the same, the Bank will be entitled to join issues on the same and then establish in the Court that the plaintiff is not the owner and the property was rightfully mortagaged in its favour by a person who was the owner. While considering the issue of whether the plaintiff had a genuine case or whether he was being set up by the borrower or the plea made by him that there was any collusion between the borrower and the plaintiff as claimed by the defendant/petitioner are all matters, which will be decided in suit. I will not take these to be matters that can be thrown out at the threshold by an application filed under Order 7 Rule 11 CPC. I decline to make any intervention.
4. The order passed is sustained and the civil revision is dismissed."
31. In the same vein, a Single Judge of the Madras High Court in M/s. Consolidated Construction 43 Consortium Limited vs. M/s. Indian Bank, [AIR 2010 Madras 68], (M/s. Consolidated Construction) has observed that a suit instituted challenging proceedings on the ground of fraud cannot simply be dismissed by invoking Section 34 of the SARFAESI Act by a Civil Court.
32. Similarly, in State Bank of India vs. Sagar Pramod Deshmukh and Others, [AIR 2011 Bombay 144], a learned Single Judge of Nagpur Bench of Bombay High Court, has held that the jurisdiction of the civil court under section 34 of SARFAESI Act is barred only to the extent of matter the Debts Recovery Tribunal or its Appellate Tribunal which is empowered to determine. The jurisdiction of the said Tribunal cannot be enlarged beyond examination of validity of action of secured creditor under Section 13. Thus, in all other disputes in respect of secured assets, which do not fall within the jurisdiction of Debts Recovery Tribunal under Section 17 or its Appellate Tribunal under Section 18, can be decided by Civil court under Section 9 CPC.
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33. What emerges from the aforesaid judicial precedent is that the jurisdiction of the Civil Court under Section 34 of the SARFAESI ACT is barred in respect of which jurisdiction the Debts Recovery Tribunal or an Appellate Tribunal is empowered to determine a question. In this regard, it would be useful to refer to Sections 17 and 18 of the SARFAESI Act. The same read 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 authorised officer under this Chapter, may make an application alongwith 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.45
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 borrower) to make an application to the Debts Recovery Tribunal under this sub-section.
(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) If, 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 46 business 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 creditors as invalid and restore the possession of the secured assets to the borrower or restore the management of the business 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 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 47 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 part 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.48
(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the rules made thereunder.
17A. Making of application to Court of District Judge in certain cases In the case of a borrower residing in the State of Jammu and Kashmir, the application under section 17 shall be made to the Court of District Judge in that State having jurisdiction over the borrower which shall pass an order on such application. 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 shall not entitle the person (including borrower) to make an application to the Court of District Judge under this section.
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18. Appeal to Appellate Tribunal--(1) Any person aggrieved, by any order made by the Debts Recovery Tribunal under section 17, may prefer an appeal alongwith such fee, as may be prescribed to the Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal: PROVIDED that different fees may be prescribed for filing an appeal by the borrower or by the person other than the borrower:
PROVIDED FURTHER that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent. of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less:
PROVIDED ALSO that the Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent. of debt referred to in the second proviso.
(2) Save as otherwise provided in this Act, the Appellate Tribunal shall, as far as may be, dispose of the appeal in accordance with the 50 provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder."
34. Therefore, the prohibition or the bar of jurisdiction of a Civil Court does not extend to any matter over which the Debts Recovery Tribunal or an Appellate Authority could adjudicate. In other words, if a person is aggrieved by any of the measures initiated by a secured creditor under Section 13 or any other Sections of the SARFAESI Act, in such a situation, the aggrieved party could approach the Debts Recovery Tribunal or the Appellate Tribunal under Sections 17 and 18 respectively. Therefore, no suit could be filed as per Section 9 of CPC to challenge any of the measures initiated by a secured creditor under the provisions of the SARFAESI Act. Hence, the Civil Courts' jurisdiction to entertain a suit for the purpose of declaration of a title of a secured asset or to seek any other relief in respect of that asset is not barred as Debts Recovery Tribunal or an Appellate Tribunal cannot grant such reliefs. The decision of the Division Bench of 51 the Calcutta High Court in Kaaiser Oil Pvt. Limited is categorical in the above context.
35. Similarly, in Ram Rattan @ Rattan Lal, the Punjab and Haryana High Court has held that if the plaintiff approaches a Civil Court to contend that the secured asset is his own property and the borrower had not created a mortgaged interest in respect of the same, the Bank will be entitled to contend that the plaintiff was not the owner of the property which was rightfully mortgaged in his favour by a person who was the owner. Of course, in such circumstances, there could also be a collusion between the borrower and the plaintiff so as to defeat the rights of the secured creditor to enforce measures for recovery of the outstanding dues. Civil Court will have to determine if there is any such collusion or not and accordingly decide the suit.
36. Thus, the catena of cases discussed above have clearly brought about a distinction between the jurisdiction of the Debts Recovery Tribunal and the 52 Appellate Tribunal to entertain a proceeding or an appeal under Sections 17 and 18 of the SARFAESI Act by any person aggrieved by the measures initiated under Sections 13 and 14 or any other provisions of SARFAESI Act as opposed to a person filing a suit before a Civil Court in respect of any immoveable property which incidentally happens to be a secured asset. In the latter situation, the person could approach a Civil Court and seek a declaratory or other relief in respect of the secure asset. Such a relief cannot be granted by the Debts Recovery Tribunal or the Appellate Tribunal as they are not a Civil Court acting under Section 9 of CPC.
37. We find considerable force in the argument of learned counsel for the plaintiff inasmuch as the DRT does not have the jurisdiction to grant the relief of declaration of title and injunction in respect of any immovable property; that power is exclusively in the domain of the Civil Court. It is coincidental in the instant case, the Banks have assumed that 'B' schedule property which is stated to 53 be purchased by the plaintiff is the subject matter of mortgage. It is for the plaintiff to prove his case and for the defendants and Banks to prove otherwise. After trial, the trial Court could always dismiss the suit if plaintiff fails to prove his case. But in the instant case, it is not on the averments of the plaint, but on the contentions and submissions and the averments made in the affidavit in support of the application filed under Order VII Rule 11(d) of the CPC; that the trial Court has proceeded to reject the plaint. Infact, the trial Court has made certain observations which could have been made only after trial of the suit and at that stage.
38. Further, in the case of Jagdish Singh, the suit was for partition and separate possession of the suit schedule property, which was also a secured asset and subject to action initiated under the SARFAESI Act. Similarly, in the case of M/S.SREE ANANDHAKUMAR MILLS LTD., the suit was for partition and separate possession. But in the instant case, the suit is for the relief of 54 declaration of title and injunction in respect of the 'B' schedule property. As already stated, the plaintiff would have to prove his case in accordance with law and there has to be an adjudication of title vis-à-vis the suit schedule property. In the circumstances, there would have to be trial of the suit.
39. Hence, we find that the impugned order and decree of the trial Court is erroneous. The same is set aside. O.S.No.26444/2014 is restored on the file of the trial Court. Accordingly, the appeal is allowed.
40. The trial Court shall issue fresh suit summons and notices to all the parties and thereafter, to dispose of the suit in accordance with law.
Parties to bear their respective costs. Since the matter has been remanded to the trial Court, the plaintiff is entitled to refund of the entire Court fee paid by him in terms of Section 64 of the Karnataka Court-Fees and Suits Valuation Act, 1958. 55
Registry to refund the Court fee to the appellant forthwith.
In view of the disposal of the appeal, pending applications stand disposed.
Sd/-
JUDGE Sd/-
JUDGE VMB/RK/-