Karnataka High Court
Sri S Gowtham vs Sri K Sundar Babu on 17 November, 2014
Bench: N.K.Patil, Rathnakala
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 17TH DAY OF NOVEMBER 2014
PRESENT
THE HON'BLE MR. JUSTICE N.K. PATIL
AND
THE HON'BLE MRS. JUSTICE RATHNAKALA
REGULAR FIRST APPEAL NO.1468 OF 2014
BETWEEN:
SRI S.GOWTHAM
S/O K.SUNDAR BABU,
AGE: 21 YEARS,
RESIDING AT: KRISHNA REDDY INDUSTRIAL AREA,
HONGASANDRA VILLAGE,
BEGUR HOBLI,
BANGALORE - 560 068. ...APPELLANT
(BY SRI S.VIJAY SHANKAR, SR.COUNSEL
FOR SRI T.SESHAGIRI RAO, ADV.)
AND:
1. SRI K.SUNDAR BABU,
S/O LATE KRISHNA REDDY,
AGE: 53 YEARS,
R/AT: KRISHNA REDDY INDUSTRIAL AREA,
HONGASANDRA VILLAGE,
BEGUR HOBLI,
BANGALORE - 560 068.
2. SRI S.VINITH
S/O K.SUNDAR BABU,
AGE: 23 YEARS,
R/AT KRISHNA REDDY INDUSTRIAL AREA,
HONGASANDRA VILLAGE,
BEGUR HOBLI,
2
BANGALORE - 560 068.
3. SMT.SHOBHA,
W/O K.SUNDAR BABU,
AGE: 43 YEARS,
R/AT KRISHNA REDDY INDUSTRIAL AREA,
HONGASANDRA VILLAGE,
BEGUR HOBLI,
BANGALORE - 560 068.
4. THE MANAGER,
ING VYSHA BANK,
JAYANAGAR BRANCH,
BANGALORE -27
5. M/S.PHOENIX ARC PRIVATE LIMITED
A PRIVATE LIMITED
7TH FLOOR, DANI CORPORATE PARK,
158, CST ROAD, KALINA
SANTACRUZ (EAST)
MUMBAI - 400 98. ... RESPONDENTS.
(BY SRI.ADITYA SONDHI, SR.COUNSEL
FOR SRI B.C.AVINASH FOR C/R5)
THIS REGULAR. FIRST APPEAL IS FILED UNDER SECTION
96 R/W ORDER 41 RULE OF CPC, AGAINST THE JUDGMENT &
ORDERS DATED:26.09.2014 PASSED IN O.S.573/2013 ON THE
FILE OF THE II-ADDITIONAL SENIOR CIVIL JUDGE,
BENGALURU RURAL DISTRICT, BENGALURU, DISMISSING THE
SUIT FOR PARTITION AND SEPARATE POSSESSION, AND
THEREBY VACATING THE ORDER OF STATUS-QUO.
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 13/11/2014 AND COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, RATHNAKALA J.,
DELIVERED THE FOLLOWING:-
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JUDGMENT
This appeal is by the aggrieved plaintiff of O.S.No.573/2013 on the file of the II Additional Senior Civil Judge, Bangalore Rural District, Bangalore, whereby his case is dismissed as not maintainable vide order dated 26th September 2014, in view of the bar under Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short hereinafter referred to as 'the Act').
2. For the sake of convenience, the parties will be referred to as per their status before the trial court.
3. As the facts unfurl, the plaintiff filed a suit for partition against his father, brother, mother and the Bank in respect of his 1/3rd share in the suit schedule property. His case was, himself and defendants-1 to 3 constitute Hindu Joint Family and the first defendant is the Manager of the family. Suit item No.2 i.e., land 4 bearing Sy.No.82 measuring 4 acres 30 guntas of Shivanahalli village, Jigani Hobli, Anekal Taluk, was purchased by the joint family in the name of the first defendant out of joint family fund. The suit item No.1 is allotted to the share of the first defendant in an oral partition effected between himself, his father and brother. The oral partition is reduced into writing in the form of Panchayat Palupatti on 10.2.1995. The first defendant started acting detrimental to the interest of the joint family. He borrowed a sum of Rs.13 crores from the fourth defendant-Bank by mortgaging the property to the fourth defendant, but failed to repay loan. Consequently, the suit item No.1 is brought for sale in public. There was no legal necessity for the family to borrow said huge amount. The Bank has no right or authority in respect of suit item No.1 in which the plaintiff gas 1/3rd share. Unless partition is effected, suit item No.1 cannot be brought for sale to recover the loan. Hence, the suit for partition. 5
4. As the impugned order reflects, on the application of the plaintiff filed under Order XXXIX Rule 1 and 2 of CPC, initially status quo was ordered against fourth defendant/ING Vysya Bank, subsequently, M/s.Phoenix Arc Private Limited impleaded itself in the place of ING Vysya Bank and filed objection to I.A.No.1 with a prayer to vacate the status quo order and challenged the maintainability of the suit.
The case of the fourth defendant was, it has purchased non-performing assets, which was mortgaged by the first defendant under assignment agreement dated 2.4.2014. The property having been assigned in favour of the fourth defendant and in view of the Act, the suit is not maintainable and the Civil Court has no jurisdiction. In the meanwhile, on fourth defendant approaching this Court by way of writ petition, a direction was given to take up the case, which was posted to 30.9.2014 for orders on maintainability before 6 Dasara Vacation. By consent of both parties, the case was advanced and order was passed as below:
"The suit filed by the plaintiff is not maintainable as there is a bar under Section 34 of Securitization Act. Consequently, the order of status-quo granted is hereby stands vacated. Hence, suit is dismissed."
5. Sri.S.Vijayashankar, learned Senior Counsel appearing for the appellant submits, in view of the judgment of the Apex Court rendered in Alka Gupta - vs- Narender Kumar Gupta reported in (2010) 10 SCC 141, the trial court ought to have framed an issue regarding maintainability after completion of pleadings, given opportunity to the parties to adduce their evidence and then given its finding on maintainability. But in the case on hand, the stage was yet for vacation of the status quo order. Though the case was taken on the direction of this Court, it was not for the Trial Court to circumvent the mandatory procedure and dismiss the 7 suit once for all. The plaintiff did not have enough opportunity to meet the contention of the fourth defendant and the abrupt dismissal of the suit is in violation of the established procedure of law contemplated in the Code of Civil Procedure. As such, no application was filed by the 4th defendant under Order VII Rule 11 of CPC to reject the plaint.
He further submitted that, the fourth defendant is set for auction of the suit schedule property on 17.11.2014. He has filed an interlocutory application under Order XXXIX Rule 1 and 2 read with Section 151 CPC for an order of ad-interim temporary injunction restraining fourth and fifth respondents (the Bank and the assignee) from bringing the schedule property for auction pending disposal of the appeal. If the defendant is not restrained from auctioning the property, the very purpose of filing of this appeal will be defeated. 8
6. In reply, Sri.Aditya Sondhi, learned Senior Counsel appearing for fifth respondent/fourth defendant while supporting the order of the trial court submits that, the first defendant availed loan from the fourth defendant and on his failure to repay the same, the fourth defendant being the assignee of the non- performing assets mortgaged by the first defendant under the assignment agreement dated 2.4.2014. All the formalities for sale of secured assets contemplated under the Security Interest (Enforcement) Rules, 2002, is followed after serving notice on the borrower and on publishing the matter in the newspaper, etc., auction sale is fixed to 17.11.2014. It is a collusive suit filed to defeat valuable rights of the creditor. In view of Section 34 of the Act, the suit itself is not maintainable and that the law on the point is squarely covered by the recent judgment of the Apex Court in the matter of Jagdish Singh -vs- Heeralal and others reported in 2014(1) AKR 97. The forum to work out the rights, if any, for 9 the plaintiff is by way of an application under Section 17 of the Act before the Debt Recovery Tribunal. Arguments were addressed by both parties before the Trial Court about maintainability of the suit and now it is not for the plaintiff that the suit is dismissed as of surprise.
7. The matter is heard even before issue of notice to respondents, as the caveat had been entered by fourth respondent. While the appellant was pressing for an order of status quo, along with his submission on office objection, the caveator vehemently opposed any such order being passed; finally by consent of both parties, the case was heard for final disposal.
8. After giving our anxious consideration to the rival submissions made at the Bar and on perusal of the impugned order, the following point arises for our consideration:
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Whether a suit for partition is maintainable in respect of the secured assets/property over which statutory interest is created in favour of the secured creditor?
9. The plaint averments reflect that, the plaintiff and the defendant Nos.1 to 3 being his parents and sibling, are residing under the same roof and he is a young person aged 20 years; the suit schedule properties are claimed to be ancestral and joint family properties. The suit came to be filed on 17.4.2013. At the first instance, notice to defendant Nos.1 to 3 returned unserved as "address not traced". The erstwhile fourth defendant i.e., ING Vysya Bank appeared through its Counsel, took time for filing objection to the I.A. filed by the plaintiff under Order XXXIX Rule 2 of CPC restraining the fourth defendant from auctioning the plaint schedule property. But did not file any objection before status quo came to be passed.
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10. On 20.12.2013, the Trial court heard on I.A.No.1 and ordered the fourth defendant to maintain status quo. Thereafter, M/s.Phoenix Arc Pvt.Ltd. put its appearance along with I.A.No.2 seeking permission to come on record in the place of original fourth defendant/ING Vysya Bank. I.A. was allowed. The present fourth defendant filed its objection to I.A.I. At that stage, the plaintiff got the plaint amended with the permission of the Court. The case was posted to hear on maintainability and on I.A.No.1. In the meanwhile, the fourth defendant appears to have approached this Court and got a direction to hear the matter before Dasara Vacation. Accordingly, the case, which was posted to 30.9.2014 was advanced to 19.9.2014 and the matter was heard and the impugned order is passed on 26.9.2014. This is how the events went on before the trial court.
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11. Now coming to the judgment of the Apex Court in Alka Gupta's case, relied by the appellant - the Apex Court in this case enumerated the basic principles of the Code of Civil Procedure that, a suit cannot be dismissed without trial merely because the court feels dissatisfied with the conduct of the plaintiff. The circumstances in which civil suit can be dismissed without trial are emphasized as under:
"28. The Code enumerates the circumstances in which a civil suit can be dismissed without trial. We may refer to them (not exhaustive):
(a) Dismissal as a consequence of rejection of plaint under Order 7 Rule 11 of the Code in the following grounds :
(i) where it does not disclose a cause
of action;
(ii) where the relief in the plaint is
undervalued and the plaintiff fails
to correct the valuation within the
time fixed;
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(iii) where the court fee paid is
insufficient and the plaintiff fails
to make good the deficit
within the time fixed by court:
(iv) where the suit appears from
the statement in the plaint to be
barred by law;
(v) where it is not filed in duplicate
and where the plaintiff fails to
comply with the provisions of
Order 7 Rule 9 of the Code.
(b) Dismissal under Order 9 Rule 2 or
Rule 3 or Rule 5 or Rule 8 for non-service of
summary or non-appearance or failure
to apply for fresh summons.
(c) Dismissal under Order 11 Rule 21 for
non-compliance with an order to answer interrogatories, or for discovery or inspection of documents.
(d) Dismissal under Order 14 Rule 2(2) where issues both of law and fact arise in the same suit and the court is of opinion that the case or any part thereof may be disposed of 14 on an issue of law only and it tries such issue relating to jurisdiction of the court or a bar to a suit created by any law for the time being in force first and dismisses the suit if the decision on such preliminary issue warrants the same.
(e) Dismissal under Order 15 Rule 1 of the Code when at the first hearing of the suit it appears that the parties are not at issue on any question of law or fact.
(f) Dismissal under Order 15 Rule 4 of the Code for failure to produce evidence.
(g) Dismissal under Order 23 Rules 1 and 3 of the Code when a suit is withdrawn or settled out of court.
12. On a reading of the impugned order, it is obvious that Alka Gupta's judgment was not brought to the knowledge of the trial court. Admitting the said fact, Sri.Vijayashankar, learned Senior Counsel submits that it is the established procedure that unless an issue regarding maintainability was framed on the basis of the 15 pleading and the parties given opportunity to adduce evidence on the said issue, the suit could not have been struck off as not maintainable. Though there was a direction by this Court to hear the matter within time frame, that does not mean that the court shall circumvent the mandatory procedure.
13. Turning to Jagdish Singh's case (supra), the Supreme Court has dealt with Sections 13, 17 and 34 of the Act, in detail. The facts in the said case are contended to be more or less similar to the case on hand. It was also a proceeding before Debt Recovery Tribunal under the Act. The property was purchased. The sale was confirmed on the purchaser depositing the sale amount, but he was not put into possession even after confirmation of sale. The auction purchaser came to know about pendency of a partition suit in respect of the property he had purchased. In the meanwhile, application was filed before the Debt Recovery Tribunal 16 under Section 17 of the Act challenging the sale notice. The Bank and the purchaser approached the Civil Court and filed preliminary objection that in view of Section 13 read with Section 34 of the Act, the Civil Court has no jurisdiction to entertain the suit. The Civil Court upheld the preliminary objection by stating that, if the plaintiff had any right, they ought to have filed an appeal under Section 17 of the Act, but not a suit in view of the specific bar contained in Section 34 of the Act. Accordingly, the trial court dismissed the suit as not maintainable. The Civil First Appeal filed by the aggrieved family members before the High Court of Madhya Pradesh at Indore. While allowing the appeal, it was observed by the learned Single Judge reversed the judgment of the trial court by holding that: "it cannot be suggested at all that the civil suit, filed by the plaintiffs, is barred under any provisions of the Securitisation and Reconstruction of Financial Assets and 17 Enforcement of Security Interest Act, 2000, or that civil court has no jurisdiction in the matter."
14. Aggrieved purchaser forwarded the lis to the Apex Court. As against the case set up by plaintiff that the properties were purchased in the names of respondent Nos.6 to 8, out of the funds of Hindi Undivided Family, the Apex Court drew inference that, these properties were purchased by respondent Nos.6 to 8 in their individual names long after the death of the original propositus under registered sale deed and no claim was ever made at any stage by any member of the Hindu Undivided Family that it was a HUF property and not the individual property. The Bank had advanced loan on the strength of the registered sale deeds, which stood in the names of borrowers and on non-payment of the loan amount, the Bank could proceed against the secured assets. Finally, it was concluded that the civil court's jurisdiction is completely barred insofar as the 18 "measure" taken by the secured creditor under sub- section (4) of Section 13 of the Act, against which an aggrieved person has a right to appeal before the Debt Recovery Tribunal or the Appellate Tribunal to determine as to whether there has been any illegality in the measures taken.
15. On the showing of the plaintiff himself it is a loan transaction of 2006. As on the date of the filing of the suit, the plaintiff was aged 20 years i.e., the loan was transacted, by the 1st defendant-father/the Kartha of the Hindu Undivided Family while the plaintiff was still a minor. Nothing is shown that any action had been taken against the first defendant by the family members alleging any hostility to the interest of the family. But that much of semblance between matrix on hand to the facts involved in Jagadish Singh's case is insufficient to non suit the plaintiff. As such, there is no conflict between Alka Gupta and Jagadish Singh's 19 cases. While Alka Gupta's case emphasizes on the fundamental procedure contemplated under the Civil Procedure Code, Jagadish Singh's case is about ouster of jurisdiction of the civil Court, so far as the 'measure' taken by a secured creditor under Sub-section (4) of Section 13 of the Act, against which an aggrieved person has a right of appeal before the Debt Recovery Tribunal or Appellate Tribunal as to whether there has been any illegality in the measures taken. There is merit in the contention, that the Court at the stage of hearing I.A.No.1 filed under Section 39 Rule 1 and 2 of CPC, and without framing an issue on maintainability could not have rejected the case. As such, there was no application before the Court for rejection of the plaint; no preliminary issue was framed on the basis of the rival pleadings, though the parties candidly argued before the trial Court in respect of maintainability or otherwise of the suit. In the case of Jagadish Singh, before the Bank and Purchaser approached the Court, 20 sale was complete. They filed their respective statements on which preliminary issue was framed and heard.
16. In the present case, the task before the Trial Court at that stage was only to pass an order on I.A.No.1 either by granting injunction as prayed for, if it was found that the case qualifies to the golden principles reigning the field of temporary injunction i.e., prima facie case, balance of convenience and immeasurable loss, if temporary injunction is refused. If it was found that no prima facie case was made out, on the basis of records before the Court, conveniently, I.A.No.1 could have been rejected. Perhaps, carried away by the direction of this Court to hear the matter before Dasara Vacation, the trial Judge has disposed of the suit once for all. Another factor which is overlooked by both the parties and the trial Court is, the fourth defendant is laying it's hand on suit item No.1 only. 21 Suit item No.2 as per the plaint allegations is also a joint family property purchased from the nucleus of the ancestral property. The suit is dealt as if both suit properties are offered as security to the loan transaction. This is where the impugned judgment fails to cope up with the procedural aspects and the principles laid down in Alka Gupta's case. when a procedure is laid down by a statute for doing of a thing, that thing has to be done in accordance with the said procedure only. The trial Court has circumscribed the procedure in a hurry, thereby committed error. In that view of the matter, we hold that the appeal is liable to be allowed and the original suit has to be restored so that the case can meet it's logical end in accordance with law.
17. We are not impressed by the request made on behalf of the appellant to restrain the fourth respondent from proceeding with the auction sale which is 22 scheduled to 17.11.2014. Firstly, for the reason that, I.A.No.1 is not put up today; Secondly, we are not convinced about the urgency at this stage to restrain the auction sale which is scheduled, for realization of the secured loan amount. We are informed that the third defendant / mother of the plaintiff has already approached the Debt Recovery Tribunal under Section 17 of the Act.
Accordingly, appeal is allowed. The order in O.S.No.573/2013 passed by the II Additional Senior Civil Judge, Bangalore Rural District, Bangalore, dated 26.09.2014 is set aside.
The Original Suit No.573/2013 is restored and the matter is remanded to the Trial Court to proceed with the case from the stage at which it was dismissed, after issuing a notice to unserved defendants. The plaintiff is given liberty to implead ING Vysya Bank as one of the defendants, by filing necessary application before 23 the Trial Court and the parties are directed to bear their own costs.
The Trial Court shall dispose of the case as expeditiously as possible not later than six months from the date of appearance of the parties.
Without waiting for any notice from the Court, the parties are directed to appear before the concerned Court on 1st December 2014 at 11.00 a.m. either personally or through their Counsel and collect the further date of hearing.
Registry is directed to communicate this order to the Trial Court forthwith.
Sd/-
JUDGE Sd/-
JUDGE KNM/NVJ/-