State Bank Of India vs Smt.Jigishaben B.Sanghavi & Ors
2010 Latest Caselaw 264 Bom

    VBC                                       1                           app244.10-8.12


            IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                             O. O. C. J.




                                                                                         
                        APPEAL NO.244 OF 2010




                                                                 
                                  IN
                   CHAMBER SUMMONS NO.907  OF 2008
                                  IN
                         SUIT NO.1076 OF 2005




                                                                
    State Bank of India.                                          ...Appellant.
                            Vs.
    Smt.Jigishaben B.Sanghavi & Ors.                              ...Respondents.




                                                   
                                    ....
    Mr.Chirag   Balsara   with   Ms.Shreevardhini   Parchure   i/b.Negandhi 
                                   
    Shah & Himayatullah   for the Appellant.
    Mr.Sanjay Jain with Mr.Vinod Thakar  for Respondent Nos.1 to 4.
    Ms.Anjali Trivedi for Respondent Nos.5 to 7.
                                  
                                    .....
                                    CORAM : DR.D.Y.CHANDRACHUD AND 
                                                   ANOOP V. MOHTA,  JJ.

December 8, 2010.

ORAL JUDGMENT (PER DR.D.Y.CHANDRACHUD, J.) :

Admit. With the consent of all the Learned Counsel for

the parties, the appeal has been taken up for hearing and final

disposal.

2. The Learned Single Judge dismissed a Chamber

Summons, seeking the rejection of a plaint under Order 7 Rule

VBC 2 app244.10-8.12

11(d) of the Code of Civil Procedure, 1908. The State Bank of

India, the First Defendant to the suit, is in appeal. The bar to the

maintainability of the suit, according to the Appellant, is Section 34

of the Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002.

3. In March 1996, the Appellant sanctioned a financial

facility of Rs.70 crores to Crosslink Shipbreakers (P) Ltd. The

Second, Third and Fourth Defendants executed letters of

guarantee. The Second and Third Defendants are spouses, and the

Second Defendant is the Karta of an HUF. The Fourth Defendant

is the son of the Second and Third Defendants. The First Plaintiff

is the wife of the Fourth Defendant, while the Second and Third

Plaintiffs are their children. The Fourth Plaintiff is the daughter of

the Second and Third Defendants. The case of the Appellant is that

the Second, Third and Fourth Defendants executed a memorandum

of deposit of title deeds by which a residential flat - Flat 1402, at

Benhur, Narayan Dabholkar Road, Malabar Hill, Mumbai - was

mortgaged in its favour. The Appellant, on a default in the

payment of its dues, instituted an application before the Debts

VBC 3 app244.10-8.12

Recovery Tribunal, Ahmedabad for the recovery of Rs.9.56 crores

against the Second, Third and Fourth Defendants. The application

was allowed by the Tribunal on 17 October 2003. In the recovery

proceedings, the flat was attached. A sale proclamation was

issued.

4. On 11 December 2004, the Bank issued a notice under

Section 13(2) of the Securitisation Act to the principal borrower

and to the Second, Third and Fourth Defendants. A writ proceeding

was instituted before the Gujarat High Court to challenge the

notice, which was dismissed on 31 March 2005. An appeal was

dismissed by a Division Bench of the Gujarat High Court on 5 April

2005. The suit before this Court, in which the Appellant moved a

Chamber Summons under Order 7 Rule 11(d), was lodged on the

same day as the dismissal of the appeal by the Gujarat High Court.

5. Order 7, Rule 11(d) provides that the plaint shall be

rejected "where the suit appears from the statement in the plaint to

be barred by any law". The plain language of the provision

mandates the rejection of the plaint when a case falls within one of

VBC 4 app244.10-8.12

the clauses of Rule 11. For clause (d) to apply, the bar to the suit

must be under any law and the bar must appear from the

statement in the plaint. It is trite law that while considering an

application for rejection under Order 7 Rule 11(d), the averments

in the plaint as they stand, have to be construed. The pleas of the

Defendants in the Written Statement are wholly irrelevant. The

plaint has to be construed meaningfully, reading it as a whole to

ascertain its true import. These principles are emphasized in the

decision of the Supreme Court in Saleem Bhai vs. State of

Maharashtra.1 In Popat and Kotecha vs. State Bank of India

Staff Association,2 the Supreme Court, on a review of its earlier

judgments, formulated the principle thus:

"There cannot be any compartmentalisation, dissection, segregation and inversions of the language of various

paragraphs in the plaint. If such a course is adopted it would run counter to the cardinal canon of interpretation according to which a pleading has to be read as a whole to ascertain its true import. It is not permissible to cull out a sentence or a passage and to

read it out of the context in isolation. Although it is the substance and not merely the form that has to be looked into, the pleading has to be construed as it stands without addition or subtraction of words or change of its apparent grammatical sense. The intention of the party concerned is to be gathered primarily from the tenor

1 (2003) 1 SCC 557 2 (2005) 7 SCC 510

VBC 5 app244.10-8.12

and terms of his pleadings taken as a whole. At the same time it should be borne in mind that no pedantic

approach should be adopted to defeat justice on hair- splitting technicalities."

6. Now, in order to consider whether the Learned Single

Judge was correct in dismissing the application for rejection of the

Plaint under Order 7, Rule 11(d), the averments contained in the

plaint would need to be considered. The Plaintiffs claim to be

members of a Hindu Undivided Family together with the Second,

Third and Fourth Defendants. According to them, the residential

flat was purchased on 1 April 1982 by the Second, Third and

Fourth Defendants and by the HUF with a contribution by the HUF.

The plaint sets out that the Bank had granted a facility to the

principal borrower in which the Second, Third and Fourth

Defendants are Directors. The Second, Third and Fourth

Defendants had furnished personal guarantees to secure the

outstandings. The Bank claimed a purported equitable mortgage

created by the Second, Third and Fourth Defendants in respect of

the residential flat. Since the HUF is a co-owner/tenant in

common, it had permitted the title deeds to be deposited with the

VBC 6 app244.10-8.12

Bank for creating a mortgage to the extent of the share of the Third

and Fourth Defendants. According to the Plaintiffs, the HUF was

not a borrower, guarantor or mortgagor. The Bank, according to

the Plaintiffs, was aware of the circumstance that the HUF was a

co-owner/tenant in common. However, it is alleged that the Bank

has suppressed the fact that the HUF is a co-owner maliciously in

all proceedings. The plaint thereafter contains a reference to the

institution of the proceedings before the Debts Recovery Tribunal;

the issuance of the Recovery Certificate; the initiation of the

recovery proceedings and the attachment of the residential flat.

The Plaintiffs state that they raised objections to the settlement of

the terms of the sale by the Recovery Officer on 22 June 2004. In

the meantime, the Bank issued a notice under Section 13(2). The

Plaintiffs claim that the notice under Section 13(2) is in "disregard"

of the provisions of the Securitisation Act, in the following

averments:

"Needless to state that action on the part of Defendant No.1 are illegal, highly objectionable and initiated with ulterior motives and malafide intention ignoring statutory provisions and settled principles of law and natural justice. These Plaintiffs further state that the said notice under section 13(2) of the Securitisation Act has been taken out and likely to proceeded further with in

VBC 7 app244.10-8.12

complete disregard to the provisions of the Securitization Act itself and is liable to be set aside as per the provisions

of law. The Plaintiffs are informed that Defendant No.2 to 4 have filed a Petition in the Hon'ble Gujarat High

court and a Letters Patent Appeal is preferred from the order of dismissal of the said Petition."

7. The case of the Plaintiffs is that there is no legal and

valid mortgage, nor is any security created in favour of the Bank as

against the rights of the HUF of which the Plaintiffs are members.

The mortgage, it is alleged, is defective since the original Share

Certificates are not with the Bank. There is, according to the

Plaintiffs, no valid basis for the Bank to initiate action under

Section 13(4) of the Securitisation Act and the averment in that

regard is contained in paragraph 12 thus:

"Therefore, Defendant No.1 having no security interest

as well as no secured asset, as against the rights of these Plaintiffs' HUF in the suit premises, upon which this Defendant No.1 can take any action under any law much less under the Section - 13(4) of Securitisation Act. The Plaintiffs repeat that as no legal or valid mortgage can be

said to have been created in favour of Defendant No.1 and therefore they cannot claim any remedy as and by way of attachment, possession, sale, etc. in any manner whatsoever as in respect of the suit premises specifically against the rights of the said HUF, more so as the same being only place of residence of these Plaintiffs."

VBC 8 app244.10-8.12

8. Even if the Bank has enforceable remedies against the

Second to Fourth Defendants, it is not entitled, according to the

Plaintiffs, to take possession of the premises from the Plaintiffs,

who are not borrowers or guarantors. The Plaintiffs have averred

that they are not parties to the transaction between the Third and

Fourth Defendants with the Bank. An allegation of fraud which is

contained in paragraph 15 of the plaint is as follows:

"The Plaintiffs further state that it is in fact a systematic fraud played by Defendant No.1 so as to pressurise these Plaintiffs to succumb to the malafide intentions of

Defendant No.1 for enjoying the wrongful gains that in law Defendant No.1 is not entitled to, with its illegal action to deprive them of their valid and settled right, title and interest over the suit premises."

9. The Plaintiffs claim that it was from the reply filed by the

Bank to their objections before the Recovery Officer that they

learnt about the memorandum of deposit of title deeds by the

Second Defendant as the Karta of the HUF. The mortgage,

according to the Plaintiffs, is unenforceable in the absence of legal

necessity. The reliefs that are sought in the plaint are: (i) A

declaration that the Bank has no right or interest in the residential

flat and is not entitled to take any action with respect to the flat

VBC 9 app244.10-8.12

under the Securitisation Act; (ii) A declaration that the Bank has no

right, title or interest either by way of mortgage or in any other

manner to the extent of the share of the HUF in the residential flat;

(iii) A declaration that the alienation and/or mortgage created by

the Second Defendant in favour of the Bank is, to the extent of the

share of the HUF in the premises null and void; (iv) A decree

setting aside the alienation and/or mortgage to the extent of the

share of the HUF; and (v) A permanent injunction restraining the

First Defendant and officers appointed under the Securitisation Act

and the Recovery of Debts Due to Banks and Financial Institutions

Act, 1993 from disturbing the possession of the Plaintiffs.

10. The bar which is set up by the Bank in its Chamber

Summons is under Section 34 of the Securitisation Act which reads

as follows:

"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 (5 of

VBC 10 app244.10-8.12

1993)."

11. Under Section 34, the jurisdiction of a Civil Court to

entertain a suit or proceeding is barred in respect of any matter

which the Debts Recovery Tribunal and/or Appellate Tribunal, "is

empowered by or under this Act to determine". The second part of

Section 34 bars the grant of an injunction by any Court or authority

"in respect of any action taken or to be taken" in pursuance of the

power conferred by the Act or by the Recovery of Debts Due to

Banks and Financial Institutions Act, 1993. The first part of

Section 34 operates as a bar in respect of a Civil Court entertaining

any suit or proceeding. The bar applies in respect of a matter

which can be determined under the Act by the Debts Recovery

Tribunal or the Appellate Tribunal. The second part of Section 34

prohibits the issuance of an injunction by a Court or other authority

in respect of an action which has been taken or which is to be

taken in pursuance of the Act or the RDDB Act.

12. Now, in evaluating what the Debts Recovery Tribunal or

the Appellate Tribunal is empowered by or under the Act to

VBC 11 app244.10-8.12

determine, a reference must be made to the provisions of Sections

13 and 17. Section 13 provides for the enforcement of a security

interest created in favour of a secured creditor without the

intervention of the Court or Tribunal. Sub-section (2) of Section

13 contemplates the issuance of a notice by the secured creditor to

the borrower in default to fulfill his liability within sixty days

failing which the secured creditor is entitled to exercise his rights

under sub-section (4). The provisions of Section 13 were

amended by Amending Act 30 of 2004 in view of the judgment of

the Supreme Court in Mardia Chemicals Ltd. vs. Union of India.3

Under sub-section 3(a) as amended, on receipt of a notice under

sub-section (2), the borrower is permitted to raise an objection or

make a representation. The secured creditor has to furnish reasons

to the borrower in the event that the objection/representation of

the borrower is not accepted. The proviso to sub-section 3(a)

entails that the communication of reasons of the likely action of the

secured creditor at that stage shall not confer a right upon the

borrower to prefer an application to the Tribunal under Section

17. Under sub-section (4), the secured creditor is entitled to take

3 AIR 2004 SC 2371

VBC 12 app244.10-8.12

recourse to various measures to recover the secured debt in the

event that the borrower fails to discharge his liability in full within

the period specified in sub-section (2). Among the powers which

are conferred on the secured creditor is the power to take

possession of the secured assets including the right to transfer them

by assignment or sale.

13.

Section 17 provides a right of appeal to the Debts

Recovery Tribunal to any person, including a 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. While

construing the provisions of Section 34, the crucial words which

have a bearing on the bar of jurisdiction of the civil court to

entertain a suit or proceeding are "in respect of any matter which

the Tribunal or Appellate Tribunal is empowered by or under this

Act to determine". Once a matter is of a description which the

Tribunal or Appellate Tribunal is empowered to determine by or

under the provisions of the Act, the jurisdiction of the civil court to

entertain a suit in respect of that matter is barred. Similarly, no

Court or authority can grant an injunction in respect of an action

VBC 13 app244.10-8.12

taken or which is to be taken under the Act or the RDDB Act. The

powers of the Debts Recovery Tribunal under Section 17 are

powers of width and amplitude. If the Tribunal comes to the

conclusion that any of the measures referred to in sub-section (4)

of Section 13 have not been taken by the secured creditor in

accordance with the Act and the Rules, the Tribunal may require

the restoration of the management of the business of the borrower

or the restoration of the possession of the secured assets to the

borrower. The Tribunal is empowered to pass such orders as it

may consider appropriate and necessary in relation to the recourse

taken by the secured creditor under Section 13(4). This power of

the Tribunal includes a power to direct the restoration of the status

quo ante in order to provide relief to the borrower against an

action which is not in accordance with law.

14. On behalf of the Appellant, it is urged that (i) The

Learned Single Judge has erred in coming to the conclusion that

the averments contained in paragraphs 3, 4, 12 and 15 of the plaint

brought the case of the Plaintiffs within the ambit of the exception

carved out by the Supreme Court in paragraph 51 of the judgment

VBC 14 app244.10-8.12

in Mardia Chemicals (supra); (ii) Clearly in view of the law laid

down by the Supreme Court in Mardia Chemicals, until the Bank

had taken recourse to a measure under Section 13(4) no cause of

action would have accrued to the borrower or to a third person and

the provisions of the Act cannot be rendered nugatory by taking

recourse to the Civil Court on the basis that no measure under

Section 13(4) has yet been adopted; (iii) Section 17 of the Act

confers a remedy of an appeal to any person, including a borrower.

The remedy would, therefore, be available even to the Plaintiffs

once possession was taken over under Section 13(4); (iv)

Admittedly, the Second Defendant is the Karta of the HUF.

Whether the mortgage by deposit of title deeds executed by the

Second Defendant was for the benefit of the HUF or for compelling

legal necessity, is a matter which could and ought to be decided by

the Debts Recovery Tribunal under Section 17. The Debts

Recovery Tribunal is competent to decide whether there was a

mortgage at all and whether, if a mortgage existed, it would govern

the alleged share of the HUF in the residential flat. The averments

contained in the plaint, would show that there was both a

challenge to the validity of the securitization notice under Section

VBC 15 app244.10-8.12

13(2) besides which, the Plaintiffs claim that there was no valid

basis to invoke the provisions of Section 13(4). These are all

matters which have to be exclusively decided by the Debts

Recovery Tribunal; (v) The Supreme Court in its judgment in

Mardia Chemicals carved out a limited exception in respect of the

maintainability of a civil suit in cases involving fraud on the part of

the secured creditor or where the claim is so absurd or untenable

that it does not require any probe whatsoever. The mere use in a

stray averment in the plaint of the expression "systematic fraud",

would not be sufficient to bring the case within the scope of the

exception carved out in Mardia Chemicals since the plaint has to

be read and construed as a whole. So construed, it is clear that the

case of the Plaintiffs clearly falls within a matter which the Debts

Recovery Tribunal is empowered by and under the Act to

determine. Moreover, no injunction of the nature sought could be

granted by the Court in respect of any action taken or to be taken

in pursuance of the Act.

15. On the other hand, it has been urged on behalf of the

original Plaintiffs that the order of the Learned Single Judge must

VBC 16 app244.10-8.12

be sustained for the following reasons:

-(i). The suit, in the present case, was instituted before the

Bank had taken recourse to the measure under Section 13(4). At

that stage, no appeal under Section 17 could have been filed

before the Tribunal. Consequently, there is no bar to the

maintainability of the suit, on the date when the suit was instituted

since no measure had been taken by the Bank under Section

13(4);

-(ii) The case of the Plaintiffs is that (a) There is no mortgage

in respect of the residential flat; (b) No mortgage was in any event

executed by the HUF; (c ) The mortgage, if any, is illegal in respect

of the share of the HUF in the residential flat; and (d) No action

had been initiated against the HUF before the Tribunal by the

Bank, yet the property of the HUF was sought to be taken away;

-(iii) There are sufficient pleadings to substantiate the case of

the Plaintiffs that the action of the Bank was fraudulent. In any

event, the exception which is carved out by the Supreme Court in

Mardia Chemicals does not cover only a situation of fraud, but

VBC 17 app244.10-8.12

includes one where the claim of the secured creditor is so absurd

and untenable as to not require any probe whatsoever. Similarly, a

suit can be instituted where the power of sale is being exercised in

any improper manner contrary to the terms of the mortgage. The

averments in the plaint, it was urged, would fall within the purview

of the exception carved out in Mardia Chemicals.

16.

In the earlier part of this judgment, we have already

elicited the extent of the bar which is created by Section 34. The

bar, in the first part of Section 34, is in respect of any matter

which the Tribunal or the Appellate Tribunal is empowered by or

under the Act to determine. When the Tribunal or the Appellate

Tribunal is empowered to determine any matter by or under the

Act, the jurisdiction of the Civil Court to entertain a suit in respect

of that matter is barred. In the second part, the Legislature has

used equally comprehensive language when it imposes a

prohibition on the issuance of an order of injunction. In that

context, the Legislature has adverted "to any action taken or to be

taken" in pursuance of the provisions of the Act or the RDDB Act.

An action taken is a course of conduct already adopted. An action

VBC 18 app244.10-8.12

to be taken is a course of conduct which is in contemplation, but

one which is necessarily referable to the provisions of the Act or the

RDDB Act. Section 17 provides a right of appeal to any person,

including a borrower. The expression "any person" is broad

enough to include not only the borrower, but any person who is

aggrieved by a measure which is taken by the secured creditor

under sub-section (4) of Section 13. This is emphasized in the

judgment of the Supreme Court in United Bank of India vs.

Satyawati Tondon,4 at paragraph 17:

"The expression 'any person' used in Section 17(1) is of

wide import. It takes within its fold, not only the

borrower but also guarantor or any other person who

may be affected by the action taken under Section 13(4)

or Section 14."

-17. The same view has been taken by a Division Bench of

this Court in M/s.Trade Well vs. Indian Bank.5 The Division

Bench has held that the remedy provided under Section 17 is

available to the borrower as well as to a third party. Moreover, the

4 2010(3) Bankers' Journal 581 5 2007(3) AIR Bom R 656 (DB)

VBC 19 app244.10-8.12

remedy provided under Section 17 is an efficacious alternate

remedy available to a third party as well as to the borrower where

all grievances can be raised.

-18, In Mardia Chemicals vs. Union of India (supra), the

Supreme Court held that an opportunity has to be granted to the

borrower to furnish his objection on a notice under Sub-section

(2) of Section 13, in the interest of fairness. Moreover, the

Supreme Court held that the reasons for non-acceptance of the

objection raised by the borrower must be communicated. The

directions of the Supreme Court were statutorily embodied by the

amendment which was brought about inter alia by the insertion of

Sub-section (3a) of Section 13 by Amending Act 30 of 2004.

During the course of its judgment, the Supreme Court held that the

reasons communicated of the likely action of the secured creditor

cannot at that stage furnish a cause of action for a challenge until

it has matured in a measure which is actually taken under Sub-

section (4) of Section 13. A right, the Supreme Court held, would

accrue only after a measure was taken by the secured creditor.

    19.         The     Securitization   Act   provides   a   comprehensive 





     VBC                                      20                           app244.10-8.12

scheme, under which initially upon a notice being served under

Sub-section (2) of Section 13, a remedy is provided, to raise an

objection, to the borrower. The objection has to be considered by

the secured creditor and reasons for non-acceptance have to be

communicated. No cause of action accrues to challenge the action

of the secured creditor at that stage. Once a measure is adopted

Sub-section (4) of Section 13, the Act provides for a remedy of an

appeal under Section 17. The scheme which is enunciated under

the Act cannot be rendered nugatory by seeking recourse to the

jurisdiction either of a Civil Court or, for that matter, in adopting a

writ proceeding under Article 226 of the Constitution at the stage

where notice is issued under Section 13(2). A challenge at the

stage of a notice under Section 13(2) is not envisaged by the

legislation and to allow it at that stage is to defeat the law. Such a

challenge is barred. When the law expressly contemplates a

challenge to a measure taken under Section 13(4) and a challenge

before the Tribunal, it bars a challenge at an anterior stage and a

challenge before any forum other than that created for hearing an

appeal under Section 17 after a measure is taken. Once a measure

is adopted under Section 13(4), a statutory remedy is provided not

VBC 21 app244.10-8.12

only to the borrower but to any person aggrieved by the taking of a

measure. While enquiring into an appeal under Section 17, the

Tribunal is empowered to determine whether the action which is

taken by the secured creditor is in accordance with the provisions

of the Act and the Rules made thereunder. If the Tribunal comes to

the conclusion that the action was invalid, it is vested with wide

powers, including both to restore the management of the business

or restoration of the possession to the borrower and to pass such

orders as it may consider appropriate and necessary in relation to

the recourse taken by a secured creditor under Sub-section (4) of

Section 13. When a person other than a borrower is aggrieved by a

measure taken by the secured creditor under Sub-section (4) of

Section 13, a remedy is equally made statutorily available to such

a person.

19A. In a recent judgment of the Supreme Court in

Authorised Officer, Indian Overseas Bank vs. M/s.Ashok Saw

Mill,6 the Supreme Court adverting to the wide powers conferred

upon banks and financial Institutions observed that in order to

6 2009(2) Bankers' Journal 721

VBC 22 app244.10-8.12

prevent a misuse of those powers and to prevent prejudice to a

borrower on account of an error on the part of a bank or financial

Institution, certain checks and balances have been introduced in

Section 17 which allow any person, including a borrower, who is

aggrieved by the measures taken under Section 13(4) by the

secured creditor to make an application before the Debts Recovery

Tribunal. In that context, the Supreme Court held as follows :

"The intention of the legislature is, therefore, clear that while the Banks and Financial Institutions have been vested with stringent powers for recovery of their dues,

safeguards have also been provided for rectifying any error or wrongful use of such powers by vesting the DRT with authority after conducting an adjudication into the matter to declare any such action invalid and also to

restore possession even though possession may have been made over to the transferee. The consequences of

the authority vested in DRT under sub-section (3) of Section 17 necessarily implies that the DRT is entitled to question the action taken by the secured creditor and the

transactions entered into by virtue of Section 13-(A) of the Act. The Legislature by including sub-section (3) in Section 17 has gone to the extent of vesting the DRT with authority to even set aside a transaction including sale and to restore possession to the borrower in

appropriate cases. .... The action taken by a secured creditor in terms of Section 13(4) is open to scrutiny and cannot only be set aside but even the status quo ante can be restored by the DRT".

20. Where as in the present case, the grievance by a third

VBC 23 app244.10-8.12

person is that : (i) There was no mortgage; (ii) There was no

mortgage by the HUF; (iii) The mortgage, if any, is illegal in

relation to the share alleged to be that of the HUF; and (iv) No

action had been instituted against the HUF before the Tribunal;

these are all grounds of challenge which, in substance, can be

asserted before the Debts Recovery Tribunal. These are matters

which the Debts Recovery Tribunal is empowered by or under the

Act to determine. None of the grounds which are sought to be

urged in the plaint fall outside the province and jurisdiction of the

Debts Recovery Tribunal. Once we come to that conclusion, the

necessary corollary is that recourse to proceedings in the form of a

civil suit is barred by Section 34.

21. The case, however, which has been sought to be

established in these proceedings on behalf of the original Plaintiffs

is that the Plaintiffs have in the averments in the plaint brought

their case within the purview of the exception carved out by the

Supreme Court in Mardia Chemicals. Now, as we have stated

earlier, in determining whether such a plea has to be accepted, the

Plaint as a whole has to be read. As the Supreme Court observed

VBC 24 app244.10-8.12

in Popat and Kotecha (supra), a plaint cannot be

compartmentalized or dissected, nor can the averments be read in

isolation. The pleading has to be construed as a whole. In Mardia

Chemicals, the Supreme Court held that "to a very limited extent,

the jurisdiction of the Civil Court can also be invoked" (at para

51, page 2392). The limited exception which is carved out by the

Supreme Court is where the action of the secured creditor is

alleged to be fraudulent or where the claim of the secured creditor

is so absurd and untenable that it would not require any probe

whatsoever. Similarly, the Supreme Court held that an exception

would be carved out to the extent the scope is permissible to bring

an action in a Civil Court in a case involving an English mortgage.

In that context, the Supreme Court reiterated the principle which

was enunciated by the Madras High Court that a mortgagor can

come to the Court before sale with an injunction for staying the

sale if there are materials to show that the power of sale is being

exercised in a fraudulent or improper manner contrary to the terms

of the mortgage. But even in such a case, the pleadings in an

action for restraining a sale by a mortgagee must "clearly disclose"

a fraud or irregularity on the basis of which the relief is sought.

     VBC                                     25                           app244.10-8.12


    21A         These observations of the Supreme Court emphasize that 




                                                                                      

the exception which is carved out is a limited exception. Like all

exceptions, this exception must be strictly construed. A borrower

or a third party cannot be permitted to defeat or to render

nugatory the provisions of the Act merely by a stray reference to

an allegation of fraud or, as in the present case, by an averment in

paragraph 15 of the plaint of "a systematic fraud". The entirety of

the plaint has to be construed. Essentially, in the present case, the

averments in the plaint are that: (i) The HUF was a co-

owner/tenant in common of the residential flat; (ii) The Bank has

taken recourse to proceedings for recovery to which the HUF was

not a party; (iii) The Plaintiffs had, in the course of the recovery

proceedings, raised an objection before the Recovery Officer to the

tenability of the action taken by the Bank; (iv) The Bank had taken

recourse to its remedy under the Securitization Act without

awaiting the result of the objection raised by the Plaintiffs; (v) The

action under Section 13(2) was initiated in disregard to the

provisions of the Securitization Act; (vi) The mortgage executed by

the Second, Third and Fourth Defendants was defective because

the original Share Certificates were not with the Bank; (vii) The

VBC 26 app244.10-8.12

First Defendant had no security interest and no secured assets and,

therefore, was not entitled to invoke the provisions of Sub-section

(4) of Section 13 against the right claimed by the HUF; (viii) A

'systematic fraud' was played by the First Defendant to pressurise

the Plaintiffs; and (ix) There was an absence of legal necessity

which would vitiate the mortgage alleged to have been created by

the Second Defendant as Karta of the HUF. The reliefs which are

sought in the suit have already been adverted to earlier. These

averments, when construed in their entirety, would reveal that the

grievance which the Plaintiffs have in the suit is in respect of the

validity of the mortgage which is alleged to have been executed by

the Second Defendant as Karta of the HUF and of the tenability of

the action adopted by the Bank under the Securitization Act, so as

to meet the interest of the HUF claimed in the residential flat. The

Plaintiffs as third parties have sufficient recourse to challenge the

lawfulness of the action of the Bank by invoking their remedies

under Section 17. Thus, clearly within the meaning of Section 34,

a suit in respect of any matter which the Tribunal is empowered by

or under the provisions of Section 17 to determine is barred. The

suit, therefore, in our view, was clearly barred by Section 34. The

VBC 27 app244.10-8.12

stray reference to an allegation of fraud in paragraph 15 of the

Plaint is not sufficient to bring the case within the scope of the

exception carved out by the Supreme Court in Mardia Chemicals.

22. The error, with respect, in the judgment of the Learned

Single Judge is that the Court has not construed the ambit of the

provisions of Section 34 or of the recourse which is available

under Section 17 to a third party, such as the Plaintiffs, against a

measure taken under Section 13(4). The Learned Single Judge

referred to the decision of the Supreme Court in Mardia

Chemicals. We are of the view that the reasons which weighed

with the Learned Single Judge in holding that the averments

contained in the plaint fall within the purview of the exception

carved out are erroneous for the reasons which we have already

indicated earlier.

23. For these reasons, we are of the view that the appeal

would have to be allowed and is accordingly allowed. The order of

the Learned Single Judge dated 15 February 2010 is set aside. The

Chamber Summons would accordingly have to be made absolute,

VBC 28 app244.10-8.12

by directing, in pursuance of the provisions of Order 7 Rule 11(d)

that the Plaint shall stand rejected on the ground that the suit,

from the statement contained in the plaint is barred under Section

34 of the Securitization Act, 2002. There shall be, in the

circumstances, no order as to costs.

24. On the conclusion of the judgment, Counsel appearing

on behalf of the original Plaintiffs seeks a certificate for appeal to

the Supreme Court under Section 134A read with Article 133(1).

We do not find that the case involves a substantial question of law

of general importance. On the request of Counsel for the

Respondents, however, in order to enable the original Plaintiffs to

seek their remedies against this judgment, we direct that the status

quo in respect of possession of the residential flat in question shall

be maintained for a period of six weeks from today.

( Dr.D.Y.Chandrachud, J.)

( Anoop V. Mohta, J.)