Branch Manager, Indian Bank, Bharanikavu Branch and Another vs Krishnamoorthy

M. Sasidharan Nambiar, J.—Petitioners are the defendants in O.S. 195/2005 on the file of Munsiff Court, Sasthameottah. Respondent is the plaintiff. Respondent filed the suit seeking a decree for permanent prohibitory injunction restraining petitioner bank from trespassing into the plaint schedule property or transferring the property to third Parties, admitting that respondent is a borrower from the petitioner bank. Petitioner filed written statement contending that suit is not maintainable by virtue of Section 34 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (hereinafter referred to as the Act). As per order dated 12-4-2006, Munsiff dismissed I.A. 883/05 filed by petitioners challenging the maintainability of the suit and held that suit is maintainable. It is challenged in this revision petition filed u/s 115 of the Code of Civil Procedure.

Learned Counsel appearing for petitioners and respondent were heard.

Learned Counsel appearing for petitioners pointed out that respondent had borrowed the amount from petitioner bank and when respondent committed default, the Bank issued notice as provided under subsection (2) of Section 13 of the Act and instead of filing objection, respondent rushed to the Court and filed the suit which is barred u/s 34 of the Act. It was also argued that learned Munsiff without properly appreciating the provisions of Section 34 or following the decision of the Apex Court, relying on a decision of the Apex Court in Dhulabhai v. State of M.P. AIR 1969 SC 78 rendered much earlier to the enactment of the Act held that the suit is maintainable and that order is illegal and unsustainable.

Learned Counsel appearing for respondent argued that all suits are not barred u/s 34 and Apex Court has held that there are exceptions to the bar provided u/s 34 and when fraud is alleged the suit is maintainable. It was argued that notice contemplated u/s 13(2) of the Act is a notice providing the details of the amount due and the notice served on the respondent does not disclose the details and instead the total amount without the details is claimed and it is not a notice as provided u/s 13(2) and hence the suit is maintainable.

Section 13(2) and (3) of the Act reads:

(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 instalment 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 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).

(3) The notice referred to in Sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower.

The bar of suits provided u/s 34 reads:

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).

The Constitutional validity of the Act was consideration by the Apex Court in Mardia Chemicals Ltd. Vs. Union of India (UOI) and Others Etc. Etc., . Upholding the constitutional validity and repelling the contention against Section 34, their Lordship held:

It has also been submitted that an appeal is entertainable before the Debt Recovery Tribunal only after such measures as provided in Sub-section (4) of Section 13 are taken and Section 34 bars to entertain any proceeding in respect of a matter which the Debt Recovery Tribunal or the appellate Tribunal is empowered to determine. Thus before action or measure is taken under subsection (4) of Section 13, it is submitted by Mr. Salve one of the counsel for respondents that there would be no bar to approach the Civil Court. Therefore, it cannot be said no remedy is available to the borrowers. We, however, find that this contention as advanced by Shri Salve is not correct. A full reading of Section 34 shows that the jurisdiction of the Civil Court is barred in respect of matters which a Debt Recovery Tribunal or 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 Debt Recovery Tribunal though no measure in that direction has so far been taken under subsection (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 Debt Recovery Tribunal, apart from those matters in which measures have already been taken under Sub-section (4) of Section 13.

Their Lordships also considered the exception of the bar and held:

However, to a very limited extent jurisdiction of the Civil Court can also be invoked, where for example, the action of the secured creditor is alleged to be fraudulent of their claim may be so absurd and untenable which may not require any probe, whatsoever or to say precisely to the extent the scope is permissible to bring an action in the Civil Court in the cases of English mortgages.

The facts of the case establish that petitioner bank had already initiated steps under the Act. A notice as provided u/s 13(2) was sent to the respondent. According to learned Counsel appearing for petitioners in spite of the service of notice, respondent did not file any objection. When a notice as provided u/s 13(2) of the Act is sent to a borrower and borrower files an objection as provided u/s 13(3-A) the borrower has a right to raise any objection to the said notice. Sub-section (3-A) provides that on receipt of the notice under Sub-section (2), if the borrower makes objection, the secured creditor shall consider such representation or objection and if on such consideration comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for non-acceptance of the representation or objection. But the proviso to the sub-section makes it clear that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debt Recovery Tribunal u/s 17 or the Court of District Judge u/s 17-A of the Act. The right of the borrower to approach the Debt Recovery Tribunal will accrue only after measures are taken u/s 13(1) of the Act.

The question is whether in the light of these provisions a borrower, without filing an objection to the notice u/s 13(2), who is not entitled to prefer a petition u/s 17, even if he has filed objection and it was found untenable and the reasons was communicated can institute a civil suit in a Civil Court seeking a decree for injunction restraining the bank from entering the mortgaged property or putting the property for sale. The argument of the learned Counsel appearing for respondent was that as the notice does not contain the details of the amount as provided under Sub-section (3) of Section 13 respondent is entitled to approach the Civil Court for the remedy. I cannot agree with the submission. When the respondent did not dispute the amount due and did not claim that the notice sent u/s (2) is bad for non-mentioning the details as provided under Sub-section (3), he is not entitled to circumvent the provisions of the Act or avoid the bar u/s 34 contending that notice did not disclose the details. If the notice does not contain the details as contemplated under Sub-section (3) he should have filed representation or objection as provided under Sub-section (3-A). It is definitely not a ground to file a suit in spite of the bar provided u/s 34. Unfortunately Court below did not appreciate the provisions of Section 34 in the proper perspective. It appears that the decision of the Apex Court was not brought to the notice of the Court. It is absolutely clear that the suit is barred under the provisions of Section 34 of the Act. The impugned order is set aside and it is held that suit is barred u/s 34 of the Act. It is made clear that respondent is entitled to approach the Bank for one time settlement. If such a representation for one time settlement is made to the Bank, Bank has to consider the same and pass appropriate orders. Respondent is also entitled to approach the Bank for the details of the amount due and if such a representation is made, the Bank shall furnish the details.

Civil Revision is disposed as above.