Chief Manager, State Bank of India, vs Sagar Villa Apartment Owners Association

Ishan Chandra Das, J. - Assailing the order no. 10 dated 04.12.2016 passed by learned Civil Judge, Junior Division, 1st Court, Barasat in T.S. No. 306 of 2014, the instant revisional application has been preferred by the defendants no. 1 & 2 of the said suit where learned trial Court while disposing of an application under Order 7, Rule 11 of the Code of Civil Procedure, filed by these defendants/petitioners no. 1 & 2, rejected the same.

The background of the instant revisional application is that the defendants/opposite parties no. 1 & 2 filed the suit for declaration that the deed of conveyance being deed no. 1028 of 2006 dated 08.02.2006 is void ab initio and the defendant no. 1 did not acquire right, title and interest over the property referred to in the schedule of the plaint and further prayed for mandatory injunction directing the defendants/petitioners and the opposite parties no. 3 to handover the vacant possession of the suit property in favour of the plaintiff/opposite party no. 1/Association and they also prayed for other consequential reliefs as well. As the defendants of T.S. No. 306 of 2014 i.e. the defendants no. 2 & 3/petitioners herein filed an application before learned trial Court under Order 7, Rule 11 of the Code of Civil Procedure read with Section 34 of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (and hereinafter referred to as SARFAESI Act), 2002 wherein it was claimed that the defendants/opposite party no. 1 & 2 filed the instant suit against the petitioners no. 1 & 2/State Bank of India and another & sought for certain reliefs against the State Bank of India on the strength of a notice under Section 13(4) and rule 8(1) of the SARFAESI Act.

The defendant/opposite party no. 3 (Sanjoy Naskar) being the proprietor of M/s. S.N. Electric & Sagar Travels applied for loan for augmentation of his business and the defendants/petitioners no. 1 & 2 sanctioned a loan of Rs. 3 lac to the said defendant no. 1 with certain terms and conditions and as per such terms and conditions of the said loan was sanctioned on equitable mortgage in respect of the scheduled immoveable property as security of such loan. Subsequently as the opposite party no. 3/defendant no. 1 wilfully defaulted in making repayment of loan, the defendants/petitioners no. 1 & 2 issued a notice under Section 13(2) of the SARFAESI Act upon him on the 13th day of March, 2012 and after issuing the said notice, the defendant no. 1 took no steps for repayment of the said loan within the stipulated period and on expiry of the period given in the notice the petitioners herein issued notice under Section 13(4) of the SARFAESI Act, 2002 upon the said defendant/opposite party no. 3 and took symbolic possession of the mortgaged property and thereafter took physical possession of the same by serving notice upon him (the defendant/opposite party no. 3). The petitioners herein further stated that the plaintiffs of T.S. 306 of 2014 in collusion with the defendant/opposite party no. 3 filed a suit against the present petitioner for causing harassment and delay in recovering the loan from the opposite party no. 3 for which the petitioners herein had to file an application for rejection of the plaint under Order 7, Rule 11 of the Code of Civil Procedure, taking recourse of the provisions of Section 34 of the SARFAESI Act, 2002.

The principal opposite parties no. 1 & 2 in their written objection against the petition under Order 7, Rule 11 of the Code of Civil procedure read with Section 34 of the SARFAESI Act contended that the said application under disposal before learned trial Court was not maintainable and the reliefs sought for in the original suit being T.S. 306 of 2014 could only be granted by the Civil Court having jurisdiction to try the same and not by any authority prescribed under the SARFAESI Act.

Learned trial Court while disposing of the said application under Order 7, Rule 11 rejected the same on certain grounds and observed -- "that due to lack of the documents there is a tinge of doubts as to the veracity of the statements made out in the petition. Should the documents as mentioned in the order are produced then, the Court would be willing to pass such an order as is prayed for and only thereafter the plaint can be taken off the record for transfer to the DRT."

Learned Counsel for the petitioners herein in course of his argument drew my attention to the provision of Section 34 of the SARFAESI Act and pointed out that no civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Debt Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall have to 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. He also drew my attention to the provision of Section 13(4) of the Act and pointed out that the Act itself empowered the Banks and Financial Institutions Act to take possession of the securities and to sell them without the intervention of the regular Court, to realise long term assets, to improve recovery by exercising powers and to take possession of the securities etc.

To fortify his argument, learned Counsel for the petitioner relied on a decision of the Hon''ble Apex Court in Jagdish Singh v. Hiralal reported in 2013 AIR SCW 6378 where the Hon''ble Apex Court held the following:-

"22. 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. Subsection (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 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. 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.

We are of the view that the civil court jurisdiction is completely barred, so far as the "measure" 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 crystalized, before creating security interest in respect of the secured assets. In such circumstances, we are of the view that the High Court was in error in holding that only civil court has jurisdiction to examine as to whether the "measures" taken by the secured creditor under sub-section (4) of Section 13 of the Securitisation Act were legal or not����."

Similar view was expressed by the Hon''ble Apex Court in United Bank of India v. Satyavati Tondon and Ors. reported in AIR 2010 Supreme Court 3413. Hon''ble Apex Court in Mardia Chemicals Limited and Ors. v. United Bank of India and Ors. reported in (2004) 4 SCC 311 categorically held that Section 34 bars to entertain any proceeding in respect of a matter which the Debts Recovery Tribunal or the Appellate Tribunal is empowered to determine. Thus before any action or measure under sub-Section 4 or Section 13, the Civil Court does not have jurisdiction to entertain any proceeding which may be taken cognizance by the Debts Recovery Tribunal.

A single Bench of this Hon''ble Court in State Bank of India and Ors. v. Ramkrishna Biilders & another reported in 2004 ICC 564 (cal) while allowing the petition under Order 7, Rule 11 of the Code of Civil Procedure categorically held that the suit challenging the notice issued by the Bank under sub-section (2) of Section 13 of the Act, 2002 or any measure adopted by the secured creditor under Section 13 (4) cannot be called in question before the regular Civil Court.

In this context, reliance was placed by learned Counsel for the petitioners on a decision of this Court, in Authorise Signatories Deutsche Bank & another v. Sandip Dey & another, reported in (2011) 4 WBLR (cal) 594 where it was held that when Section 34 of the Act of 2002 excluded the jurisdiction of a civil Court to entertain any dispute over which the above Act had jurisdiction and when under Section 35, that Act had an overriding effect over any other law for the time being in force, the provisions of Section 17 of the said Act was only applicable in this case. Identical view was also expressed by this Hon''ble Court in Central Bank of India v. Aloke Goenka & others, reported in (2014) 4 W.B.L.R.(cal) 292.

Having regard to the facts and circumstances of the case and on the strength of the discussion made above, I firmly conclude that learned trial Court was not justified in rejecting the application under Order 7, Rule 11 of the Code of Civil Procedure and the order impugned is liable to be set aside.

Hence, the revisional application is allowed, resulting that the plaint of T.S. 306 of 2014 to stand rejected.

I make to order as to costs.

Urgent Photostat certified copy of this order, if applied for, be given to the parties on priority basis after compliance with all necessary formalities.