Bangalore District Court
Sri. R. Sharath Kumar vs M/S Federal Bank Limited on 16 March, 2018
Govt. Of Karnataka
C.R.P.67] TITLE SHEET FOR JUDGMENTS IN SUITS
Form No.9(Civil)
Title sheet for
Judgment in suits AT MAYOHALL UNIT, (CCH-29)
(R.P.91)
BENGALURU.
Present: Sri J.R.Mendonca, B.A.L, LL.B.,
Dated: This the 16th day of March 2018
Original suit No.26939/2009
Plaintiff:- Sri. R. Sharath Kumar,
S/o Ramanjaneyam,
Aged about 35 years,
R/o No.15, 22nd Main Road,
'T' Block, 50 ft. Road,
Girinagar, Bangalore-95.
(By Pleader Sri. Raghavendra Gowda B.G
Adv.,)
V/s
Defendants:- 1. M/s Federal Bank Limited,
Gandhinagar Branch,
Gandhinagar,
Bangalore-560 009.
Represented by its Manager.
2. Sri. Bhavesh V. Solanki,
S/o Vimal Kumar Solanki,
Aged about 30 years,
R/o No.17, II Floor,
Jain Temple Cross,
V.V.Puram, Bangalore-560 004.
2 O.S.No.25275/ 2009
3. Smt. Shanthamma,
W/o Ramanjaneym,
Aged 63 years,
R/o No.15, 22nd Main Road,
'T' Block, 50 ft. Road,
Girinagar, Bangalore-95.
4. Asset Reconstruction Company
(India) Limited,
A Company incorporated under
the Companies Act, 1956, and
registered as securitization and
asset reconstruction company
pursuant to Section 3 of the
SARFAESI Act having its
registered Office at Times Tower,
9th Floor, Kamla Mills Compound,
Senapati Bapat Marg, Lower Parel
(W) Mumbai-400 013 interallia
Branch Office at Flat No.305, 3rd
Floor, 'Kedia Arcade' No.92,
Infantry Road, Bangalore-560
001, represented by its Officer
Harish Kumar.G.
(By Pleader Sri. Vijayakumar.V Adv., for D.1,
Sri. Francis Xavier Adv., for D.4,
D.2 and D.3 ex-parte)
JUDGMENT ON PRELIMINARY ISSUE
This is a suit filed by the plaintiff seeking declaration
that the 1st and 2nd Defendant have no legal right whatsoever
to auction the suit property till the determination of the share
3 O.S.No.25275/ 2009
of the Plaintiff in the suit property in the pending suit in
OS.No.372/2009 and for permanent injunction restraining the
1st Defendant or persons acting under or through it from
auctioning or creating any third party interest on the suit
property or meddling with the suit property and for costs of
the suit.
2. The description of the Suit Schedule Properties is as
follows:
SCHEDULE PROPERTY
All that piece and parcel of the property
bearing No.15, situated at 22nd Main, Girinagar
'T' Block, 50 ft. Road, Bangalore-85 (earlier
Avalahalli, BSK III Stage), bounded on the:
East by : Property No.11.
West by : Road.
North by : Property No.14.
South by : Private Property.
3. The case of the plaintiff in brief is as follows:-
The Plaintiff has stated that his grand-father has
purchased the Plaint Schedule Property in the name of his
4 O.S.No.25275/ 2009
mother the 3rd Defendant as the Plaintiff was a minor at the
time of the purchase. The Sale Deed was executed in the
name of the 3rd Defendant on 25.2.1984. There was a specific
understanding that the 3rd Defendant has no legal right to deal
with the schedule property in any manner. The Plaintiff has
stated that without his consent and knowledge the 3rd
Defendant has executed the Sale Deed in favour of the 2nd
Defendant. The 2nd Defendant in the guise of helping the 3rd
Defendant has obtained a Power of Attorney and
Memorandum of Understanding based on which a Sale Deed
was obtained and thereafter the property was mortgaged for
the purpose of borrowing the loan on the security of the Plaint
Schedule Property. The Plaintiff was not aware of the same.
The Plaintiff has instituted the suit in OS.No.372/2009 against
the parents of the Plaintiff for partition and separate
possession of his 1/3rd share in the Plaint Schedule Property.
An order of temporary injunction restraining the Defendants
of the said suit from alienating the property is also granted in
the said suit. The transaction between the Defendants is not
binding on the Plaintiff. The Plaintiff has now come to know
that the 1st Defendant has obtained an order for sale of the
5 O.S.No.25275/ 2009
property and is also contemplating to take possession of the
Plaint Schedule Property. The 1st Defendant is also trying to
auction the Plaint Schedule Property for the realization of the
loan amount. The 2nd Defendant has no right to create any
charge. Therefore, the Plaintiff has prayed to decree the suit.
4. In pursuance of the suit summons the Defendant No.1
has appeared through his counsel and has filed the written
statement. The Defendant Nos.2 and 3 are placed ex-parte.
The Defendant No.4 was impleaded as the Defendant No.1 has
assigned its rights and liabilities in respect of the loan in favour
of the Defendant No.4.
5. The Defendant No.1 in the written statement has
denied that the Plaintiff has any right over the Plaint Schedule
Property. The Defendant No.1 has stated that the 3rd Defendant
was the absolute owner of the Plaint Schedule Property as
could be seen from the Sale Deed in her favour. The 2nd
Defendant has purchased the property from the 3rd Defendant
for a sale consideration of Rs.36,00,000/- under a Sale Deed
dtd: 22.3.2006. The 2nd Defendant had obtained the home loan
from the 1st Defendant for a sum of Rs.31,60,000/- and as
6 O.S.No.25275/ 2009
security for repayment of the loan has created the equitable
mortgage in respect of the Plaint Schedule Property. The
Plaintiff has no right in the property and has no right to seek
partition of the Plaint Schedule Property. The suit is a collusive
suit filed against the 1st Defendant in order to prevent the 1st
Defendant from proceeding against the Plaint Schedule
Property under the provisions of SARFAESI Act. The Defendant
No.1 has already initiated the proceedings under the said Act.
The Plaintiff has no right to question the same. The suit is not
maintainable in view of Section 34 of the SARFAESI Act.
Therefore, the Defendant No.1 has prayed to dismiss the suit.
6. This Court has framed the issues and the Issue No.4
which is as follows is ordered to be tried as a preliminary issue.
"Whether suit is not maintainable u/Sec.34 of the
SARFAESI Act?
7. Perused the case records and heard both the
sides.
8. My findings on the above preliminary issue is
in the Affirmative for the following:-
REASONS
7 O.S.No.25275/ 2009
9. The Plaintiff has claimed the following reliefs
in this suit:
(i) Declaration declaring that the 1st and 2nd
Defendant have no legal right whatsoever to auction
the suit property till the determination of the share of
the Plaintiff in the suit property in the pending suit in
OS.No.372/2009.
(ii) Consequently, for a permanent injunction
restraining the 1st Defendant, its men, its officials, its
subordinates, its representatives or any person or
persons acting under or through it from auctioning or
creating any third party interest on the suit property or
meddling with the suit property.
(iii)Costs of the suit.
(iv) Grand such other relief or reliefs as this
Hon'ble Court deems fit under the facts and
circumstances of the case in the interest of justice and
equity.
10. It is the contention of the Defendant No.1 that the
suit is barred under Section 34 of the SARFAESI Act. It is
relevant to consider the Section 17 and Section 34 of the said
Act. The Section 17 of the SARFAESI Act reads as follows:-
17. Right of Appeal:-
8 O.S.No.25275/ 2009
(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.
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
9 O.S.No.25275/ 2009
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 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
10 O.S.No.25275/ 2009
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
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
11 O.S.No.25275/ 2009
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.
(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)
12 O.S.No.25275/ 2009
to make an application to the Court of District
Judge under this section.
11. Section 34 of SARFAESI Act reads thus:-
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).
12. It is an admitted fact that the Plaint Schedule
Property is mortgaged to the Defendant No.1 Bank and the
Defendant No.1 Bank has initiated the proceedings under the
SARFAESI Act.
13. The relief claimed by the plaintiff is for declaration
that the Defendant No.1 has no right to auction the Plaint
Schedule Property and for permanent injunction restraining the
13 O.S.No.25275/ 2009
Defendant No.1 from auctioning or creating any third party
right in the property. If the suit is decree the Defendant No.1
or Defendant No.4 would be prevented from proceedings as
per the provisions of SARFAESI Act.
14. The Hon'ble Supreme Court in the ruling reported in
AIR 2014 SC 371 the case of Jagadish Singh V/s. Heeralal and
others, has held that the jurisdiction of the Civil Curt is
completely barred so far as the "measure" taken by the
secured creditor under section 13(4) of the SARFAESI Act.
15. Section 13(4) of the said Act reads as follows:-
13. Enforcement of security interest
(1) to (3) xxxxxxxxxxxx
(4) In case the borrower fails to discharge
his liability in full within the period specified in
sub-section (2), the secured creditor may take
recourse to one or more of the following
measures to recover his secured debt, namely:--
(a) Take possession of the secured assets of
the borrower including the right to transfer
by way of lease, assignment or sale for
realising the secured asset;
14 O.S.No.25275/ 2009
(b) Take over the management of the business
of the borrower including the right to
transfer by way of lease, assignment or
sale for realising the secured asset:
PROVIDED that the right to transfer by way of
lease, assignment or sale shall be exercised only
where the substantial part of the business of the
borrower is held as security for the debt:
PROVIDED FURTHER that where the
management of whole of the business or part of
the business is severable, the secured creditor
shall take over the management of such business
of the borrower which is relatable to the security
for the debt.
(c) appoint any person (hereafter referred to as
the manager), to manage the secured
assets the possession of which has been
taken over by the secured creditor;
(d) require at any time by notice in writing, any
person who has acquired any of the
secured assets from the borrower and from
whom any money is due or may become
due to the borrower, to pay the secured
creditor, so much of the money as is
sufficient to pay the secured debt.
15 O.S.No.25275/ 2009
16. Therefore, under this provision the secured creditor
can take possession of the assets and the management of the
business. It is also held that in the said ruling that the
expression "any person" (i.e., the person who can approach
the DRT) used in Section 17 refers to not only the borrower
but also any other person who may be affected by the action
taken under section 13(4) of the said Act. It is also held in the
said ruling (AIR 2014 SC 371) by relying on the ruling reported
in AIR 2004 SC 2371 in the case of Mardia Chemicals and
Others V/s. Union of India and others that the bar of the
Civil Court thus applies to all such maters which may be taken
cognizance of by the Debt Recovery Tribunal apart from those
matters in which measures have already been taken under
sub-section (4) of Section 13.
17. Therefore, as already observed the granting of the
relief as prayed by the plaintiff would be in effect coming in
the way of the secured creditor in enforcing the security
interest and it is the DRT which has the jurisdiction to consider
the question and disputes relating to the same. The cause of
action for the suit is the Defendant No.1 Bank taking action
against the property under the SARFAESI Act.
16 O.S.No.25275/ 2009
18. Under the above circumstances, this court holds that
the suit of the plaintiff is barred as per Sections 13(4), 17 and
34 of the SARFAESI Act. Hence, this issue is answered in the
affirmative.
19. Hence this Court proceeds to pass the
following:-
ORDER
The Issue No.4 is answered in the Affirmative holding that the suit of the Plaintiff is not maintainable in view of provisions of Section 17 and 34 of the SARFAESI Act.
The suit of the Plaintiff is dismissed with costs payable to the Defendant No.4.
Draw up decree accordingly.
[Dictated to the Stenographer, directly on computer, corrected, signed and then pronounced by me in the open Court on this the 16th day of March 2018].
[ J.R.MENDONCA ], XXVIII Addl. City Civil & Sessions Judge, Mayohall, Bengaluru.
17 O.S.No.25275/ 2009Orders pronounced in the open court (vide separate detailed order) ORDER The Issue No.4 is answered in the Affirmative holding that the suit of the Plaintiff is not maintainable in view of provisions of Section 17 and 34 of the SARFAESI Act.
The suit of the Plaintiff is dismissed with costs payable to the Defendant No.4.
Draw up decree accordingly.
(J.R.Mendonca) XXVIII ADDL.CITY CIVIL JUDGE BENGALURU