Oriental Bank Of Commerce vs Harminder Singh & Ors

Valmiki J. Mehta, J

Review Petition No.321/2017 in FAO No.303/2017

Review Petition No.317/2017 in FAO No.305/2017

These review petitions have been preferred by the respondent no.1 in the appeals. Respondent no.1 in the appeals is the plaintiff in the two suits

filed in the trial court. Review petitions are filed seeking review of the judgment passed by this Court deciding two appeals being FAO Nos.303/2017

and 305/2017. The two appeals were preferred by the appellant/Oriental Bank of Commerce, a defendant in the suit. In the suit, in which impugned

order is passed which is subject matter of the FAO No.303/2017, the appellant/bank is arrayed as defendant no.3. In the impugned order which is

passed in the suit which is subject matter of FAO No.305/2017, the appellant/bank is arrayed as defendant no.5. By the impugned orders dated

15.5.2017, the applications filed by the respondent no.1/plaintiff in the suit under Order XXXIX Rules 1 & 2 of the Code of Civil Procedure, 1908

(CPC) were allowed and the defendants in the suit including the appellant/bank were restrained from dispossessing the respondent no.1/plaintiff from

the suit properties during the pendency of the suits. The suit property which is subject matter of the suit resulting in FAO No.305/2017 is SFS Flat

No.1104, 3rd Floor (with scooter garage), Pocket-GH-13, G-17, Area Paschim Vihar, New Delhi. The property which is subject matter of the suit

resulting in FAO No.303/2017 is DDA Flat No.781, Ground Floor, Pocket GH-13, G-17, Area Category II (MIG) Paschim Vihar, New Delhi. The

appeals FAO Nos. 303/2017 and 305/2017 were allowed in terms of the judgment delivered by this Court on 21.7.2017. The effect of the judgment

passed by this Court dated 21.7.2017 was that the impugned order passed in the suits allowing the injunction applications of the respondent no.

1/plaintiff under Order XXXIX Rules 1 & 2 CPC were modified by holding that it would not be that the respondent no.1/plaintiff would not be

dispossessed during the pendency of the suit but that the respondent no.1/plaintiff would not be dispossessed from the suit property except in

accordance with law i.e subject to the decision in the proceedings pending under the Recovery of Debts Due to Banks and Financial Institutions Act,

1993 (RDDBFI Act) (renamed from 26.5.2017 as “The Recovery of Debts and Bankruptcy Act, 1993â€) and also if any pending under the

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). By the judgment dated

21.7.2017 disposing of the appeals it has been held that in view of Sections 34 of the RDDBFI Act and the SARFAESI Act the jurisdiction of civil

court will be barred with respect to issues which have to be heard and decided by the relevant authorities under these Acts. The relevant paras of the

judgment dated 21.7.2017 are 5, 6, 9 and 10 and these paras read as under:-

“5. In my opinion, the only limited modification which is required in the impugned order is in its para 16 containing the operative portion of the order

which states that the respondent no. 1/plaintiff will not be dispossessed from the suit property during the pendency of the suit. Actually the injunction

which should have been granted was that the respondent no. 1/plaintiff will not be dispossessed without due process of law. This is because the

jurisdiction of a civil court is barred by virtue of Section 34 of the RDDBFI Act and Section 34 of the SARFAESI Act. A civil court cannot decide

any issue which will come up for decision before the Debt Recovery Tribunal/authority under the two Acts with respect to the issues involving loans

granted by the Bank. As per Section 17 of the RDDBFI Act it is the Debt Recovery Tribunal as well as the Debt Recovery Appellate Tribunal under

the RDDBFI Act which has the authority to decide applications of banks and therefore all issues arising thereunder. Section 34 of the SARFAESI

Act also provides that civil court will not have jurisdiction to entertain any suit or proceedings in respect of which the Debt Recovery Tribunal or a

Debt Recovery Appellate tribunal is empowered under the SRFAESI Act to determine.

The issue which requires determination between the parties is that whether a valid equitable mortgage was created in favour of the appellant/Bank

or that there was no valid mortgage and therefore the respondent no. 1/plaintiff has a valid title to the property. Since with respect to this issue,

decision can only be of the authorities as prescribed under the RDDBFI Act and the SARFAESI Act, in view of the provisions of Sections 34 of both

the Acts and which bar the jurisdiction of the civil courts, it is hence not open to the civil court, before whom the subject suit is pending to decide the

issues which are directly or incidental to deciding the issues of recoveries filed by the banks and actions taken by the banks under the RDDBFI Act

and the SARFAESI Act.

xxxxx xxxxx xxxxx

I may note and I take on record the statement of the counsel for the appellant/Bank that the appellant/Bank had filed a case under the RDDBFI

Act, which has been decreed, and presently recovery proceedings are going on before the Recovery Officer wherein the respondent no. 1/plaintiff is

appearing, and the issue which arises with respect to validity or otherwise mortgage in favour of the appellant/Bank is also very much in lis and alive in

terms of the objections filed by the respondent no. 1/plaintiff before the Recovery Officer.

In view of the above discussion these appeals are disposed of by modifying the operative para 16 of the impugned order and observing that it is not

that the respondent no. 1/plaintiff will not be dispossessed from the suit property during the pendency of the suit but the respondent no. 1/plaintiff will

not be dispossessed form the suit property except in accordance with law i.e subject to the decision in the proceedings pending under the RDDBFI

Act and/or the SARFAESI Act. Parties are left to bear their own costs.â€​

2.(i) These review petitions have now been filed by the respondent no. 1/plaintiff and arguments in these review petitions are urged before this Court

for reviewing the judgment dated 21.7.2017 for this Court to hold that the jurisdiction of the civil court is not barred. There are two grounds which are

urged in support of these review petitions. First ground which is urged is on the basis of the observations of the Supreme Court in para 51 of the

judgment in the case of Mardia Chemicals Ltd. and Others Vs. Union of India and Others AIR 2004 SC 2371 that filing of a civil suit is not barred

when fraud is found to exist, and the relevant portion of this para reads as under:-

“51. 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 or his 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. .....â€​

(ii) The second ground argued and urged for reviewing of the judgment dated 21.7.2017 is by placing reliance upon the provision of Rule 47 of the

Income Tax (Certificate Proceedings) Rules, 1962 which provides that decision of the Income Tax Officer, i.e Recovery Officer under the RDDBFI

Act, is not final and the claim of title has to be decided and established in a civil court. This Rule 47 reads as under:-

“R.47. Right to file a suit.

Any party not being a defaulter against whom an order is made under rule 42 or rule 43 or rule 45 may institute a suit in a civil court to establish the

right which he claims to the present possession of the property.â€​

(iii) On behalf of the review petitioner reliance is placed upon the judgment of the learned single Judge of this Court in the case of Ashok Kumar

Raizada Vs. Bank of Rajasthan & Anr. 207 (2014) DLT 10 as also the judgment of the Supreme Court in the case of C.N. Paramsivan and Another

Vs. Sunrise Plaza (Through Partner) and Others (2013) 9 SCC 460. The judgment in the case of Ashok Kumar Raizada (supra) is relied upon to

argue that the civil court has jurisdiction once there is an issue of fraud which is raised by the respondent no. 1/plaintiff in the present case. The

judgment in the case of C.N. Paramsivan (supra) is relied upon to argue that the Income Tax (Certificate Proceedings) Rules are valid and have to be

mandatorily applied.

In my opinion no grounds are made out for review of the judgment dated 21.7.2017 passed by this Court. The reasons for the same are given

hereinafter along with the discussion for rejecting the arguments urged on behalf of the review petitioner.

The first ground urged on behalf of the review petitioner is by placing reliance upon para 51 of the judgment of the Supreme Court in the case of

Mardia Chemicals Ltd. (supra) which is reproduced above. In order to appreciate and decide this contention which is urged, the facts and issues in the

subject suits have to be understood.

The facts of the suits are that the review petitioner/respondent no. 1/plaintiff set up a case that he has purchased the suit properties by means of

sale deeds dated 21.8.2012 and 25.10.2012 from Smt. Ruchi Singh and her sole proprietorship concern M/s Ruchika Plastic Industries. Respondent no.

1/plaintiff pleaded that he had possession of the original title documents of the suit properties after he purchased the said properties in terms of the sale

deeds. Appellant/bank however pleaded, and its case was that, that the appellant/bank had a better right to the suit properties because there was an

equitable mortgage created by deposit of original title deeds of the suit properties with the bank on 27.3.2012 i.e prior to the sale deeds executed in

favour of the respondent no.1/plaintiff. The issue in the suits was whether the original title deeds/documents of the suit properties were those real and

original title deeds/documents which came into possession of the respondent no.1/plaintiff on purchase of the properties or that the original title

deeds/documents of the suit properties with the respondent no.1/plaintiff/review petitioner are not genuine documents because the equitable mortgage

was created in favour of the appellant/bank by deposit of the real original title deeds/documents of the suit properties with the appellant/bank on

27.3.2012. Equitable mortgages were created in favor of the appellant/bank by Smt. Ruchi Singh and her sole proprietorship concern M/s Ruchika

Plastic Industries/respondent nos. 2 and 3 by deposit of original title deeds to secure the loans which were availed of by Smt. Ruchi Singh and her sole

proprietorship concern M/s Ruchika Plastic Industries.

Sections 17, 18 and 34 of the RDDBFI Act read as under:-

“Section 17. Jurisdiction, powers and authority of Tribunals.â€

(1) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks

and financial institutions for recovery of debts due to such banks and financial institutions.

(2) An Appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order

made, or deemed to have been made, by a Tribunal under this Act.

Section 18. Bar of Jurisdiction

On and from the appointed day, no court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the

Supreme Court, and a High Court exercising jurisdiction under articles 226 and 227 of the Constitution) in relation to the matters specified in section

17:

Provided that any proceedings in relation to the recovery of debts due to any multi-State co-operative bank pending before the date of commencement

of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2012 under the Multi-State Co-operative Societies Act,

2002 (39 of 2002) shall be continued and nothing contained in this section shall, after such commencement, apply to such proceedings. Section 34. Act

to have over-riding effect.â€

(1) Save as provided under subsection (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any

other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.

(2) The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act,

1948 (15 of 1948), the State Financial Corporations Act, 1951 (63 of 1951), the Unit Trust of India Act, 1963 (52 of 1963), the Industrial

Reconstruction Bank of India Act, 1984 (62 of 1984), the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and the Small

Industries Development Bank of India Act, 1989 (39 of 1989)â€​

Section 34 of the SARFAESI Act reads as under:-

“Section 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)â€​

A reading of the aforesaid provisions leave no manner of doubt that what is to be decided by the concerned authorities under these two Acts, is

finally decided by these authorities and the civil court will not have jurisdiction to decide the issues which competent authorities under the two Acts

can decide.

The next question which arises is that if the competent authorities under the aforesaid two Acts have exclusive jurisdiction to decide the issues

before them then whether Rule 47 of the Income Tax (Certificate Proceedings) Rules will still vest jurisdiction with the civil court. In my opinion Rule

47 of the Income Tax (Certificate Proceedings) Rules at the first blush may seem to show that the civil court will continue to have jurisdiction to

finally decide the issues with respect to the title of immovable properties, however the same is not and cannot be so. The reasons are given

hereinafter.

Let me at this stage reproduce Rules 42, 43 and 45 of the Income Tax (Certificate Proceedings) Rules, and which Rules have to be read in

addition to Rule 47 which has already been reproduced above, and these Rules read as under:-

“R.42. Resistance or obstruction by defaulter.

Where the Tax Recovery Officer is satisfied that the resistance or obstruction was occasioned without-any just cause by the defaulter or by some

other person at his instigation, he shall direct that the applicant be put into possession of the property, and where the applicant is still resisted or

obstructed in obtaining possession, the Tax Recovery Officer may also, at the instance of the applicant, take steps to put the applicant into possession

of the property by removing the defaulter or any person acting at his instigation.

R.43. Resistance or obstruction by bona fide claimant.

Where the Tax Recovery Officer is satisfied that the resistance or obstruction was occasioned by any person (other than the defaulter) claiming in

good faith to be in possession of the property on his own account or on account of some person other than the defaulter, the Tax Recovery Officer

shall make an order dismissing the application.

R.45. Bona fide claimant to be restored to possession.-Where the Tax Recovery Officer is satisfied that the applicant was in possession of the

property on his own account or on account of some person other than the defaulter, he shall direct that the applicant be put into possession of the

property.â€​

There therefore appears to be a prima facie conflict between Rule 47 of the Income Tax (Certificate Proceedings) Rules on the one hand and

Sections 17, 18 and 34 of the RDDBFI Act on the other. The issue is that which is the final and competent authority to decide the issues as regards

title of an immovable property i.e whether it is the competent authority under the RDDBFI Act or the issue of title has to be finally decided by the civil

court.

At this stage to complete the factual narration, it is also relevant to mention that the appellant/bank had instituted proceedings under the RDDBFI

Act against the borrower (Smt. Ruchi Singh) to whom financial limits were given and when the suit properties mortgaged to the appellant/bank, and

that the appellant/bank has been successful in obtaining a recovery certificate from the Debt Recovery Tribunal. This recovery certificate is now

being executed before the Recovery Officer under the RDDBFI Act and the respondent no.1/plaintiff in these execution/recovery proceedings has

filed objections before the Recovery Officer claiming right, title and interest to the properties and which is the same cause of action which is pleaded

in the subject suits in which the impugned orders have been passed which were the subject matter of the main appeals being FAO Nos. 303/2017 and

305/2017.

13.(i) In my opinion though there appears to be apparent conflict between Rule 47 of the Income Tax (Certificate Proceedings) Rules on the one hand

and Sections 17, 18 and 34 of the RDDBFI Act on the other, the conflict is resolved by noting that provisions of Sections 17, 18 and 34 of RDDBFI

Act and Section 34 of the SARFAESI Act are later provisions than Rule 47 of the Income Tax (Certificate Proceedings) Rules. Once later provisions

of a statute specifically deal with the subject in hand that which is the competent authority which will finally decide the title to the suit property, the

earlier provision being Rule 47 of the Income Tax (Certificate Proceedings) Rules must give way. Any doubt in this regard is removed when we refer

to the judgment of the Supreme Court in the case of C.N. Paramsivan (supra) relied upon by the respondent no.1/plaintiff itself and this judgment in

the case of C.N. Paramsivan (supra) by referring to Section 29 of the RDDBFI Act holds that the provision of the Income Tax (Certificate

Proceedings) Rules apply only “as far as possibleâ€​.

(ii) In the case of C.N. Paramsivan (supra) in para 21 Supreme Court has further clarified that object of using the expression “as far as possibleâ€

and “with necessary modifications†appearing in Section 29 of the RDDBFI Act have been used to take care of the situation where certain

provisions of the Income Tax Rules may have no application on account of the scheme of the RDDBFI Act being different than the Income Tax Act

or the Rules framed thereunder. Since the schemes of the RDDBFI Act as also the SARFAESI Act is to not vest jurisdiction with the civil court in

view of the specific language of the afore-quoted provisions of the RDDBFI Act and the SARFAESI Act, consequently Rule 47 of the Income Tax

(Certificate Proceedings) Rules therefore gives way and cannot aid the respondent no.1/plaintiff to contend that the decision on question of title will

have to be taken by civil court in the subject suit filed by the respondent no.1/plaintiff and not in the proceedings which are already pending before the

Recovery Officer under the RDDBFI Act and before which later authorities the question of title will have to be finally decided.

(iii) Therefore it is not as if the Rules are hide bound in their applicability to the proceedings under the RDDBFI Act and these Rules only apply as far

as possible and consequently this is another reason why it is only the competent authorities under the RDDBFI Act and the SARFAESI Act which

would have entitlement to determine the issue of title to a premises finally and a civil court would not have jurisdiction to do so in view of categorical

language of Sections 17, 18 and 34 of the RDDBFI Act and Section 34 of the SARFAESI Act.

The next argument which was urged on behalf of the respondent no.1/plaintiff was by placing reliance upon para 51 of the judgment in the case of

Mardia Chemicals Ltd. (supra) that in spite of the provisions of the RDDBFI Act, the civil court's jurisdiction can be invoked where the action of the

bank is fraudulent or the bank's claim was so absurd and untenable which may not require any probe whatsoever. In the present case it is not found

that there is a case of ex facie fraud because actually the present is a case where two bonafidely contested cases of respective parties have been set

up and which of the two cases can be said to be acceptable cannot be done without going into the disputed questions of fact. This issue will thus have

to be decided by the Recovery Officer under the RDDBFI Act and which would be as to whether the title documents of the suit properties in

possession of the respondent no.1/plaintiff are genuine or the title documents of the suit properties in possession of the appellant/bank are genuine in

terms of which equitable mortgage has been created i.e it cannot ex facie today be said without trial that whether the bank/secured creditor is

perpetuating fraud so that only the civil courts jurisdiction can be invoked. The observations of the Supreme Court in the case of Mardia Chemicals

Ltd. (supra) in para 51 have not to be read so as to effectively set aside the main ratio of the Supreme Court judgment in the case of Mardia

Chemicals Ltd. (supra)of exclusive jurisdiction of the authorities under the RDDBFI Act and SARFAESI Act. Supreme Court in the case of Mardia

Chemicals Ltd. (supra) had made observations in para 51 conditioned whereby it has the existence of jurisdiction of the civil court by amplifying that if

ex facie the claim is fraudulent which can be decided without deciding disputed questions of fact or the claim is so absurd and untenable which may

not require any probe whatsoever only then jurisdiction exists of the civil court and not otherwise. Therefore in my opinion the observations of the

Supreme Court in the case of Mardia Chemical (supra) as also the decision of the learned Single Judge of this Court in the case of Ashok Kumar

Raizda (supra) would not help the respondent no.1/plaintiff/review petitioner as the present is not a case of ex-facie fraud being perpetuated by the

secured creditor and/or that it cannot be argued that claim of the appellant/bank of equitable mortgage in its favour is not genuine on account of not

having the original title deeds and that the claim of the appellant/bank is completely absurd and untenable that the civil court can exercise jurisdiction.

At the cost of repetition there exists a seriously contested disputed question of fact which has to be decided that whether the title deeds in favour

of the respondent no.1/plaintiff are genuine or title deeds in possession of the appellant/bank are genuine. Whoever has the original title deeds would

have rights in his favour and such an issue is pending adjudication and being decided by the Recovery Officer under the RDDBFI Act while executing

the recovery certificate which has been obtained by the appellant/bank against its borrower/Smt. Ruchi Singh who mortgaged to the appellant/bank the

suit properties.

In view of the above discussion I do not find that there is any error apparent on the face of the record or that there exists sufficient reason in the

interest of justice for reviewing of the judgment dated 21.7.2017. Review petitions are accordingly dismissed.