Karnataka High Court
M/S Shree Garodi Steels vs M/S Yojaka India Private Ltd on 26 July, 2024
Author: H.P. Sandesh
Bench: H.P. Sandesh
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU R
DATED THIS THE 26TH DAY OF JULY, 2024
BEFORE
THE HON'BLE MR. JUSTICE H.P. SANDESH
R.S.A. NO.2243/2023 (INJ)
BETWEEN:
1. M/S. SHREE GARODI STEELS
DOOR NO.3-131/2
OPP. GARODI TEMPLE,
NAGORI, KANAKANADY
MAGNALURU-575002
REP. BY ITS MANAGING PARTNER
MR. MANOJ KUMAR (MAJOR)
S/O S. AITHAPPA POOJARY
MANGALURU-575002. ... APPELLANT
(BY SRI K.V.SHYAMAPRASADA, ADVOCATE)
AND:
1. M/S. YOJAKA INDIA PRIVATE LTD.,
DOOR NO.3-28/43, II FLOOR, ABCO,
TRADE CENTER, NH66,
KOTTARA HCOWKI, MANGALURU-575006
REP. BY ITS MANAGING DIRECTOR
SHRI. JAGDISH BOLOOR
S/O LATE GOPALAKRISHNA SUVARNA
AGED ABOUT 60 YEARS
R/AT 'SIDDHI' FLAT NO.1006,
10TH FLOOR, ABHIMAN PALACE
OPP. CANARA HIGH SCHOOL
MANNUGUDDA, MANGALURU-575003.
... RESPONDENT
(BY SRI NAVEEN KUMAR M.G., ADVOCATE C/R)
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THIS R.S.A. IS FILED UNDER SECTION 100 OF CPC,
AGAINST THE JUDGMENT AND DECREE DATED 30.10.2023
PASSED IN R.A.NO.9/2023 ON THE FILE OF THE PRINCIPAL
SENIOR CIVIL JUDGE AND CJM, MANGALURU D.K, ALLOWING
THE APPEAL AND SETTING ASIDE THE ORDER DATED
03.02.2023 PASSED ON I.A.NO.III IN O.S.NO.739/2022 ON THE
FILE OF THE II ADDITIONAL CIVIL JUDGE, C/C OF V
ADDITIONAL CIVIL JUDGE, MANGALURU ALLOWING THE
I.A.NO.III FILED UNDER ORDER VII RULE XI (d) OF CPC FOR
REJECTION OF PLAINT.
THIS R.S.A. HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 12.07.2024 THIS DAY, THE COURT
PRONOUNCED THE FOLLOWING:
JUDGMENT
1. This Second Appeal is filed against the divergent finding of the First Appellate Court passed in R.A.No.9/2023 dated 30.10.2023 on the file of Prl. Senior Civil Judge and CJM, Mangaluru.D.K in allowing the appeal and setting aside the order passed by the Trial Court in allowing the application filed under Order 7 Rule 11(d) of CPC.
2. This second appeal listed for admission and with the consent of both the counsel, heard the appeal on merits.
3. The parties are referred to as per their original rankings before the Trial Court to avoid confusion and for the convenience of the Court.
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4. The factual matrix of case of plaintiff/respondent before the Trial Court that he has prayed restrain the defendant in interfering with peaceful possession and enjoyment of the suit schedule property consequent upon purchase made by the defendant/appellant herein. The suit schedule property which was purchased in the auction and contend that no possession is delivered to the auction purchaser. It is also contended that he had borrowed the loan and could not repay the amount and hence, the creditor Bank of Baroda classified the plaintiff's company account as NPA on 01.04.2017 and proceeded for recovery by bringing the property of the plaintiff company for public auction etc. The company has given an OTS proposal to the Bank of Baroda for a sum of Rs.14.25 crore and the same has been accepted by the Bank. In pursuant of the OTS, opened a no lien account with the Bank of Baroda and deposited Rs.1.00 crore. When the creditor bank proceeded to recover the money, the plaintiff/respondent had approached the High Court by filing the W.P.No.1016/2022 and High Court was pleased to grant an interim order dated 28.01.2022 directing the bank to restore the possession of the subject property to the plaintiff's company and not to confirm the then proposed e-auction sale scheduled to be 4 held on 29.01.2022 without leave of the Court by directing the plaintiff company to deposit 10% of the OTS amount of Rs.14.25 Crore within 3 weeks from 28.01.2022 and another 10% within three weeks thereafter towards the upfront amount for the said OTS compromised. The bank had withdrawn the amount of Rs.1.00 crore deposited by the plaintiff company in no lien account and the plaintiff company has also deposited a sum of Rs.1.80 crores and reported compliance of the condition stated in the interim order dated 28.01.2022.
5. It is contended that Bank of Baroda was not conducted the e-auction to be held on 29.01.2022 and published a fresh e-auction dated 13.03.2022 fixing the date of auction on 13.03.2022 deliberately by disobeying the interim order of the High Court and plaintiff company had filed I.A.No.3/2022 again praying for the e-auction and High court declined to consider sum of Rs.1.00 crore withdrawn by the Bank of Baroda from no lien account pursuant to the OTS entered into between the bank and the plaintiff company also filed an application to recall the order giving an undertaking that company would further deposit a sum of Rs.1.00 crore on or before 07.04.2022 and accordingly 5 purchased D.D and the same is pending for consideration. It is contended that in disobeying the order of the High Court, auction was conducted and property was sold in favour of the defendant. Immediately, he had filed O.S.No.444/2022 seeking the relief of permanent injunction restraining the Mangalore City Corporation for mutating the khata and khata was transferred and hence the suit become infructuous and the same was withdrawn. It is contended that the defendant on the basis of revenue documents raised a false claim and attempting to take forcible physical possession of the schedule property by illegally dispossessing the plaintiff quite contrary to law. An attempt was made to take the possession and hence the same was resisted and filed the suit for the relief of permanent injunction wherein the following prayer is made:
"Wherefore, the plaintiff prays that Hon'ble Court may pleased to pass the judgment and decree in his favour and against the defendant for the following relief's:
a) For a permanent prohibitory injunction restraining the defendant his men, agents, servants, assignees in interest or any persons claiming under or through him from forcibly dispossessing the 6 plaintiff or taking the forcible possession of the schedule property from the plaintiff without due process of the law.
b) Grant such other and further relief's as this Court deems fit to grant under the circumstances of this case in the interest of justice.
c) For the costs of the suit.
6. The defendant has appeared and filed an application I.A.No.3 under Section 9 R/w Order VII Rule XI(d) of CPC wherein contended that suit is prohibited under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act' for short). The Court cannot entertain the suit. The entire proceedings are under SARFAESI Act, 2002 already taken place and sale is also concluded in an auction and defendant had purchased the property in the auction and there is a bar and plaint is liable to be rejected.
7. In pursuance of the said application, the plaintiff filed objection to the said I.A re-iterating the averments made in the plaint contending that no documentary evidence is placed before 7 the Court by the defendant to substantiate that actual physical possession of the plaint schedule has been delivered to the defendant. The application filed under Section 14 of the SARFAESI Act has been withdrawn. Hence, no merit in the application and the same is liable to be rejected.
8. The Trial Court having considered grounds urged in the application as well as the averment made in the plaint and considering the material on record and discussed Order VII Rule 11(d) of CPC in paragraph No.11 and also taken note of proceedings was taken place before the High Court and so also discussed Section 13 and 17 of the SARFAESI Act and ultimately comes to the conclusion that even under the scheme of OTS is also sum of Rs.14.25 crores and Court is not having jurisdiction to entertain the dispute with regard to OTS scheme when the matter was settled for 14.25 crores and remedy is only before the appropriate forum invoking under Section 17 of SARFAESI Act and also comes to the conclusion that there is a bar under Section 34 of SARFAESI Act and allowed the application and rejected the plaint.8
9. Being aggrieved by the said order, an appeal is filed in R.A.No.9/2023 and First Appellate Court considering the grounds urged in the appeal memo, formulated the point whether the Trial Court is justified in rejecting the plaint and whether it requires interference. The First Appellate Court having taken note of specific contention and also considering the Section 9 of CPC as well as Section 4, 14, 17 and 34 of SARFAESI Act comes to the conclusion that prayer of the plaintiff against the defendant does not warrant the plaintiff to approach the debt recovery tribunal which is empowered to deal with the provisions of SARFAESI Act. However, relief claimed by the plaintiff is permanent injunction which is discretionary relief in nature which can be granted by the Civil Court only and not the debt recovery tribunal. It is also held that Section 34 of SARFAESI Act it bars the Civil Court from taking jurisdictions to deal with proceedings with respect of any matter which a debt recovery tribunal or the appellate Tribunal is empowered. In this case, secured creditor bank is not a party and no relief is claimed against the said secured creditor and hence suit is maintainable.
It is held that the Trial Court committed an error in invoking Section 34 of SARFAESI Act and erroneously comes to the 9 conclusion that plaint does not discloses cause of action to proceed with the case and the same is erroneous and merits of the case of the parties to the suit is not considered and committed an error in rejecting the plaint and reversed the finding of the Trial Court.
10. Being aggrieved by the divergent finding, the present second appeal is filed before this Court. The main contention of the appellant in this case that the First Appellate Court fail to consider Section 9 of CPC as well as Section 17 and 34 of SARFAESI Act and contend that the First Appellate Court fail to observe that Bank of Baroda delivered the possession of the property and also executed registered sale deed in favour of the appellant herein in terms of e-auction and proceedings dated 30.03.2022. The observation made by the First Appellate Court that secured creditor bank is not a party to the present suit and there cannot be any bar under the SARFAESI Act is erroneous. It is contended that debt recovery tribunal which is empowered to deal with the provisions of SARFAESI Act and not the relief of injunction is also erroneous. The First Appellate Court wrongly comes to the conclusion that relief claimed by the respondent is 10 permanent injunction and the discretionary relief in nature which can be granted by the Civil Court and not by the recovery tribunal. The reasons assigned by the First Appellate Court is erroneous. The First Appellate Court erroneously comes to the conclusion that an application filed under Section 14 of SARFAESI Act was withdrawn and fail to take note of the fact that possession of the property was already delivered to the appellant on 29.04.2022 itself and observation that the appellant has not produced any document regarding the possession is incorrect. Hence, the same requires its interference.
11. The counsel appearing for the appellant re-iterated the grounds in the appeal memo and contend that the relief granted by the High Court in the Writ Petition is also subject to compliance and the same has not been complied and thereafter an application is filed and the same is also rejected and permitted the bank to proceed on auction sale. Accordingly, property brought for sale and the same was sold in favour of this appellant. The bank also delivered the possession and hence withdrawn the application filed under Section 14 of SARFAESI Act. The word contemplated in Section 14 of SARFAESI Act is 11 also 'may' and not 'shall' and in the case on hand, the sale certificate is issued and possession is also delivered immediately after the same and even earlier also possession was taken and voluminous documents are produced for having taken the possession along with memo and the same has to be considered. On the other hand, the counsel appearing for the respondent would vehemently contend that the very auction was challenged before the DRT and only symbolic possession was given and not physical possession. The counsel also brought to notice of this Court, Section 14 and Section 13 of SARFAESI Act. The counsel would contend that the suit is filed for the relief of bare injunction. The Fact that earlier application which was filed under Section 14 of SARFAESI Act is also not in dispute and no physical possession was taken.
12. The counsel would vehemently contend that the condition imposed by the High Court in Writ Petition is complied and there was an amount of Rs.1.00 crore with the bank and an attempt was made to adjust the said amount. Subsequently, an application is also filed for depositing of balance amount. The said application was dismissed and fresh application was filed 12 and the same is pending for consideration. The counsel would contend that only symbolic possession was given and not physical possession, though it is contended that possession was taken in the year 2018, then what made the bank to file an application in the year 2001 under Section 14 of SARFAESI Act if really physical possession was taken. Hence, it is clear that possession is not delivered and filing of suit will not come in the way of initiation of proceedings under the SARFAESI Act. It is between the auction purchaser and the defendant and bank is not a party. Hence, the First Appellate Court assigned the reasons while reversing the judgment.
13. In reply to this argument, the counsel would vehemently contend that the SARFAESI Act is a special enactment under which when the plaintiff committed default in payment of loan amount proceeded in accordance with law invoking Section 13 of SARFAESI Act. The counsel also would contend that possession was taken in the year 2018 itself, but by mistake inadvertently an application was filed under Section 14 of SARFAESI Act and the same came to the knowledge of the bank, the same was withdrawn. Hence, cannot find fault with the procedure adopted by the bank under SARFAESI Act. 13
14. Having heard the appellant's counsel and also the counsel appearing for the respondent and also taking into note of Section 13, 14 and Section 34 and also with regard to Section 9 of CPC and Specific Relief Act seeking the relief of permanent injunction, the matter has to be re-analyzed before this Court.
15. Having considered the material on record, this matter is listed for admission and hence this Court heard the matter on merits with the consent of both the parties regarding admission and framed the following substantial question of law:
1) Whether the Appellate Court committed an error in setting aside the order of the Trial Court that the SARFAESI Act not pressed into service and matter requires trial?
16. Having considered the material on record, it is not in dispute that the respondent/plaintiff filed the suit for the relief of bare injunction and prayer is also narrated as above the relief sought before the Trial Court. It is also not in dispute that the plaintiff who had approached the Court filed the suit for bare injunction. Admittedly, borrowed the loan from the bank. He did not repay the amount. Hence, bank treated the same as NPA account. In the meanwhile, OTS team is also proposed by the 14 plaintiff and the same is also accepted by the bank for an amount of Rs.14.25 crores. It is also not in dispute that an amount of Rs.1.00 crore was deposited. When the plaintiff fails to pay the amount in terms of the OTS proposal for an amount of Rs.14.25 crores which he had accepted, the Bank proceeded to recover the said amount. It is also not in dispute that the bank proceeded to conduct the auction and notice was given for e-auction. The documents are also produced before the Court and before the e-auction, bank initiated the proceedings of taking possession of the property by sending notice on 16.01.2018 and notice is also affixed and paper publication was also taken on the very same day i.e., on 16.01.2018.
17. It is also important to note that possession was taken on 18.01.2018 by conducting the panchanam to show that the physical possession was taken. It is important to note that sale notice was issued on 13.03.2022 and prior to that when the plaintiff approached the High Court, High Court also granted the relief of permitting the plaintiff to deposit 10% of OTS amount of 14.25 crores within 3 weeks from 28.01.2022 and another 10% within three weeks thereafter towards upfront amount for the 15 said OTS compromise. In the plaint itself, in paragraph No.5, the very plaintiff has stated that High Court was pleased to grant an interim order dated 28.01.2022 directing the bank to restore the possession of the subject property to the plaintiff company and not to confirm the then proposed e-auction sale schedule to be held on 29.01.2022 without the leave of the Court. The very contention that the possession was not taken as contended by the respondent cannot be accepted. The very pleading of the plaintiff is very clear that directed the bank to restore the possession of the subject property to the plaintiff company if possession was not taken, what was the need of directing the bank to restore the possession of the subject property and there is an admission in the pliant itself that possession was taken. No doubt in the plaint as contended that the defendant is making claim based on the revenue records that possession was taken, but the fact is that auction was conducted subsequently when the High Court order has not been complied and an attempt is made to get the order of extension of time in the High Court and the same was also rejected as admitted by the plaintiff. Subsequently also, it is contended that an application is filed which is pending for consideration and no such order was 16 passed. In view of non-compliance of High Court order also, the auction was conducted subsequently in the month of March and sale certificate was issued and possession was also delivered and to that effect also the documents are produced before the Court and even the appellant also produced the recent photographs of taking of possession and continuing of construction by obtaining the permission from the concerned Municipal Corporation of Mangalore and in the year 2023, the said plan was also sanctioned. No doubt the respondent also produced 23 voluminous documents along with memo, but those documents are prior to the sale auction and order passed by the Court and IAs' filed before the High Court and also the suit filed before the Court and objections, applications. The fact that the sale was made and confirmed the sale and issuance of sale certificate is not disputed and revenue records are also transferred in favour of the respondent is not in dispute. It is also not in dispute that a challenge was made before the DRT by the respondent. The very auction was conducted and the same was questioned before the DRT.
18. The main contention of the counsel appearing for the respondent that an application was filed under Section 14 and 17 the same was withdrawn. But, voluminous documents are produced before the Court having given the notice before the possession was taken and the same is also given through paper publication and also mahazar was drawn. I have already pointed out that in the plaint in paragraph No.5 itself stated that a direction was given by the High Court as per the plaint averments to restore the possession subject to compliance of order of the High Court and the same was not complied and an attempt was made to deposit the amount and the same is also not permitted by the High Court and auction was also conducted and sale certificate was issued. The defendant is the purchaser and he had invested the money and photographs which placed before the Court evidence the fact that he had undertaken the work and no documents of photographs are produced before the Court that still the possession with the plaintiff and when such being the material on record when the proceedings was taken place in terms of the SARFAESI Act and it is nothing but the forum shopping by the plaintiff since he had approached the High Court to scuttle the e-auction proceedings. Even though High Court came to rescue of the plaintiff and conditional order was passed and condition was not complied and also an attempt 18 was made before the High Court initiating contempt proceedings and contempt C.C.C proceedings was also withdrawn by the plaintiff. The fact that he had approached the DRT is also not in dispute and also filed a suit not to transfer the khatha and later withdrew the suit. Inspite of it, he had approached the Civil Court. It is for scuttling the SARFAESI proceedings, but Court has to take note of genesis of the dispute between the parties. The appellant/defendant is a auction purchaser and he had purchased the property under the auction when the proceedings was initiated under the SARFAESI Act. If any grievances, the plaintiff is having, he has to get the relief before the DRT under Section 17 of SARFAESI Act with regard to if any irregularity in selling the property. Unless, the sale has been set-aside, he cannot maintain a suit against a auction purchaser. The records also discloses that possession has also delivered in favour of the appellant. The very contention that possession has not been delivered cannot be accepted even as on the date of filing of the suit. Even revenue entries are also found in the name of the appellant and even filed a suit for restraining transfer of khata and there also he was unsuccessful and the said suit was also withdrawn by the plaintiff. The Mangalore Corporation is given 19 permission and sanction and accordingly the appellant has undertaken the construction. When such being the material on record, the Trial Court has given the reasoning for invoking Section 34 also. Even extracted Section 34 of SARFAESI Act taking into note of genesis for the litigation and rightly invoked Section 34 of SARFAESI Act and comes to the conclusion that suit itself is not maintainable and rejected the plaint.
19. This Court would like to even refer the Section 13, 14 and 17 of SARFAESI Act.
Section 13: Enforcement of security interest.
(1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act.
(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any installment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to 20 discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4).
Section 14: Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.
(1) Where the possession of any secured assets is required to be taken by the secured creditor or if any of the secured assets is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured assets, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or as the case may be, the District Magistrate shall, on such request being made to him--
(a) Take possession of such asset and documents relating thereto; and
(b) Forward such asset and documents to the secured creditor:21
(2) For the purpose of securing compliance with the provisions of sub-section (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary.
(3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any court or before any authority.
Section 17: In the securitization and Reconstruction of Financial Assets and enforcement of Security Interest Act, 2002.
(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 authorized officer under this Chapter, [may make an application along with 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.
20. Having considered the Section 13, 14 and 17 of the SARFAESI Act, it is not in dispute that bank has invoked Section 13 and also conducted the auction and the same has attained its finality. It is also important to note that Section 17 is also very 22 clear that any person aggrieved by any of the measures referred to in Section 4(13) of SARFAESI Act taken by the secured creditor by making an application to question the same before the DRT. Admittedly, already the creditor had approached the D.R.T invoking Section 17 of the SARFAESI Act.
21. This Court also would like to refer the judgment reported in (2014) 1 Supreme Court Cases 479 in case of Jagdish Singh V/s Heeralal and others held that irrespective of issue of maintainability of civil suit, remedy lay under Section 17 where bank (secure creditor) adopts any measure as contemplated under Section 13(4) for enforcement of its security interest including sale of secured assets, in respect of his respondent Nos.1 to 5 were claiming an interest. The High Court erred in holding that civil Court had such jurisdiction. The Section 35 says, the SARFAESI Act overrides other law, if they are inconsistent with the provisions of that Act, which takes in Section 9 of C.P.C as well. It is also held that respondent Nos.1 to 5 have prayed for a declaration of title, partition and permanent injunction against respondent Nos.7 to 9 and others in which the appellant and the Bank were also made parties. The 23 bank and the appellant filed preliminary objection in the suit stating that in view of Section 13 R/w Section 34 of SARFAESI Ac, the Civil Court has no jurisdiction to entertain the above civil suit. The Apex Court also taking into note of the proviso under Section 34 of SARFAESI Act in paragraph No.21 discussed in detail and summed up in paragraph No.24. 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 D.R.T or an appellate Tribunal are empowered by or under the SARFAESI Act to determine. The expression in respect of 'any matter' referred to in section 32 would take in the measures provided under Sub-section 4 of Section 13 of SARFAESI 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 D.R.T 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 Securitization Act because those matters fell within the jurisdiction of the DRT and the appellate Tribunal. The Apex 24 Court also held that the civil Court jurisdiction is completely barred. In the present case, when the suit was filed for the relief of declaration of title, partition and permanent injunction and in the case on hand also, suit is filed for permanent injunction by which barrower against the auction purchaser and auction purchaser participated in the auction and purchased the property in accordance with law and already the borrower had approached the DRT and when such being the case, in view of Section 34 of SARFAESI Act, he cannot even maintain a suit for bare injunction against the auction purchaser since the right of auction purchaser is genesis of Section 13 of the SARFAESI Act.
22. The Madras High Court sitting at Madurai judgment reported in (2016) SCC online Mad 29996 in case of Central Bank of India, Regional office, Madurai represented through its Regional Manager V/s Central Bank of India, Ambasamuthram Branch represented through its branch manager also taken note of suit for the relief of permanent injunction restraining the bank referring the judgment of Apex Court in Jagadish Singh referred supra held that the suit is not maintainable and in a case of Jagadish Singh case, when the 25 borrower had filed the suit, the same was questioned before the Appellate Court by the auction purchaser and laid down the law.
23. This Court would like to rely upon the judgment of the Hon'ble Apex Court in the case of AUTHORISED OFFICER, STATE BANK OF INDIA v. M/S. ALLWYN ALLOYS PVT. LTD. reported in AIR 2018 SC 2721, wherein having considered the grounds which have been urged in the said matter, in paragraph No.4 observed that the Bank has assailed the aforesaid decision of the High Court primarily on the ground that all the issues concerning the mortgaged/secured property are required to be decided only by the DRT; and not in any civil proceedings as has been observed by the High Court in the impugned judgment. For, filing of a civil suit in respect of secured assets is barred by law. The DRT has to examine the merits of the controversy. The Apex Court in paragraph No.6 of its judgment held as follows:
"6. After having considered the rival submissions of the parties, we have no hesitation in acceding to the argument urged on behalf of the Bank that the mandate of Section 13 and, in particular, Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement 26 of Security Interest Act, 2002 (for short, "the 2002 Act"), clearly bars filing of a civil suit. For, no civil Court can exercise jurisdiction to entertain any suit or proceeding in respect of any matter which a DRT or DRAT is empowered by or under this Act to determine and no injunction can be granted by any Court or authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the Act.............."
24. The Apex Court in the judgment in the case of SREE ANANDHAKUMAR MILLS LIMITED v. INDIAN OVERSEAS BANK AND OTHERS reported in (2019) 14 SCC 788, relying upon Section 34 read with Sections 2(zf), 2(zc), 13(1), 13(4), 17, 18 and 35 of the SARFAESI Act, when the suit was filed for the relief of partition, held as non-maintainable when action under the SARFAESI Act stands initiated. It is also held that the remedy lies before the DRT by way of proceedings under Sections 17 and 18 of the SARFAESI Act by relying upon the judgment of the Apex Court in the case of Jagdish Singh (supra), wherein it is held that suit for partition would not be maintainable in a situation where proceedings under the SARFAESI Act have been initiated and the remedy of any person 27 aggrieved by the initiation of proceedings under the SARFAESI Act lies under Section 17.
25. Having taken note of the principles laid down in the above two judgments, it is clear that no civil Court can exercise the jurisdiction to entertain any suit or proceedings in respect of any matter which a DRT or DRAT is empowered by or under the SARFAESI Act to determine and no injunction can be granted by any Court or authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the Act. The words used is very clear that any action taken or to be taken in pursuance of any power conferred by or under the Act. The words used in the judgment of the Apex Court in the case of Sree Anandhakumar Mills (supra) also is clear that any person aggrieved by the initiation of proceedings under the SARFAESI Act lies under Section 17. The discussion made in the case of Jagdish Singh (supra), has been referred in paragraph No.4 of the judgment and extracted paragraph No.24 and hence it is clear that any action taken, if it affects the borrower, he cannot maintain a suit for bare injunction against the auction purchaser. 28
26. The Patna High Court in the case of HIRA NAND LALL v. SANTOSH KUMAR BADHWANI AND OTHERS reported in (2012) 05 PAT CK 0114, when a suit was filed for the relief of partition, held that the appeal was filed under Section 17 of the SARFAESI Act and once proceeding under the provisions of the SARFAESI Act had already been initiated, there was a restriction for exercise of jurisdiction of the Civil Court and extracted Section 34 of the SARFAESI Act and held that it is evident that there is a specific bar in granting injunction by any Civil Court in respect of any action taken in pursuance of the power conferred by SARFAESI Act.
27. The Allahabad High Court in its judgment in the case of TRILOKCHAND FABRICATION PVT. LTD. v. STATE OF U.P. AND OTHERS reported in 2024 SCC Online All 103, in paragraph No.28 referred to the judgment of the Apex Court in the case of Sree Anandhakumar Mills (supra), wherein it is held that no Civil Court shall have jurisdiction to entertain any suit or proceeding if an aggrieved person has got any grievance against any measures taken under Section 13(4) of the SARFAESI Act. It is also categorically held that if any aggrieved 29 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. An observation is also made that Section 34 of the SARFAESI Act, read in conjunction with Section 9 of the CPC 1908, places a bar on the institution of civil suits regarding matters which a DRT or the Appellate Tribunal has been empowered to deal with under the SARFAESI Act. Furthermore, no civil Court, can entertain a suit or proceedings, if an aggrieved person has grievance against any measures taken under Section 13(4) of the SARFAESI Act.
28. Having considered the principles laid down in the judgments referred (supra), it is clear that when action was taken under Section 13 of the SARFAESI Act, admittedly the property was sold in auction in favour of the defendant in the present suit and if any grievance, even a third party also can question the same before the DRT and the same has been observed by the Trial Court in paragraph No.19 while passing the order invoking Section 34 of the SARFAESI Act. The Trial Court even taken note of the writ proceedings initiated before the High 30 Court and also observation is made that the Karnataka High Court had also not restrained the defendant from proceeding against the plaintiff according to law. It is also clear that when approach was made to the High Court, the High Court passed a conditional order and condition also has not been complied and the Trial Court rightly comes to the conclusion that a suit for injunction against the auction purchaser is not maintainable in view of the bar under Section 34 of SARFAESI Act.
29. The First Appellate Court, however committed an error in coming to the conclusion that the Bank is not a party in the suit. Whether the Bank is a party or not, the First Appellate Court fails to take note of the genesis of the right conferred upon the defendant, who had purchased the property in the auction when the recovery proceedings was initiated under Section 13 of the SARFAESI Act and conducted 'e' auction and sold the property to the defendant. The First Appellate Court discussed Section 9 of CPC and Section 14 of the SARFAESI Act. No doubt, the Bank had initiated the proceedings under Section 14 of the SARFAESI Act and later withdrew the same when they came to know that already physical possession was taken and the 31 documents are also placed for having taken the possession by issuing the notice and even making the paper publication with regard to the physical possession and mahazar is also produced before the Court for having taken the possession. The First Appellate Court made an observation that the relief claimed by the plaintiff is permanent injunction, which is discretionary relief in nature, which can be granted by the Civil Court only and not the DRT and fails to take note of Section 34 of the SARFAESI Act which clearly bars even including the suit for bare injunction if action is taken under Section 13 of the SARFAESI Act.
30. The other observation made by the First Appellate Court is that the Civil Court is barred from taking jurisdiction to deal with the proceedings in respect of any matter which a DRT or the Appellate Tribunal is empowered under the SARFAESI Act and this observation is against the principles laid down in the judgments referred (supra). The Apex Court categorically held that any action taken under Section 13(4) of the SARFAESI Act cannot be questioned. The observation made in paragraph No.20 is also erroneous that it is an admitted fact that the creditor Bank of Baroda has taken action against the plaintiff 32 Company under Section 13 of the SARFAESI Act, but simply because of that reason, it cannot be said that the Civil Court has no jurisdiction to entertain the matter between the parties to the suit in question who are admittedly independent parties. The parties are not independent parties and admittedly the plaintiff is a borrower and committed default in repayment of the money and accordingly the proceedings was initiated under Section 13 of the SARFAESI Act. The observation that the merits of the case of the parties to the suit is not considered in this case is nothing but utter disregard to the principles laid in the judgments of the Apex Court and the High Court. The borrower aggrieved by the action taken under Section 13 of the SARFAESI Act, questioned before the DRT and when the matter is pending before the DRT, made an attempt to question the sale proceedings before the High Court and though relief was granted conditionally and the condition imposed by the High Court was not complied. Even an attempt was made to get the extension of time for making payment and the same was rejected and the Bank also issuing fresh proceedings, conducted auction and in the auction, the defendant had purchased the property for valuable consideration. When such being the material on record, 33 the very approach of the First Appellate Court is erroneous and it requires to be set aside by answering the substantial question of law.
31. In view of the discussions made above, I pass the following:
ORDER
(i) The second appeal is allowed.
(ii) The impugned judgment and decree of the First Appellate Court dated 30.10.2023 passed in R.A.No.9/2023, is set aside and the judgment and decree of the Trial Court dated 03.02.2023 passed in O.S.No.739/2022 allowing I.A.No.3 filed under Order 7 Rule 11(d) of CPC and Section 9 of CPC, is hereby confirmed.
Sd/-
JUDGE RHS/MD