Delhi High Court
The Jammu & Kashmir Bank Ltd vs M/S Shakeel Enterprises on 8 May, 2012
Author: Indermeet Kaur
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Judgment:08.05.2012
+ C.R.P. 59/2006 & CM No. 2481/2006
THE JAMMU & KASHMIR BANK LTD. ..... Petitioner
Through Mr. G.M. Kawoosa, Adv.
versus
M/S SHAKEEL ENTERPRISES ..... Respondent
Through Mr. P.K. Sharma, Adv.
CORAM:
HON'BLE MS. JUSTICE INDERMEET KAUR
INDERMEET KAUR, J. (Oral)
1 Impugned order is dated 02.01.2006; the application filed by the
defendant under Order 7 Rule 11 of the Code of Civil Procedure
(hereinafter referred to as the 'Code') had been dismissed. This order
suffers from an illegality.
2 Record shows that the present suit has been filed by the plaintiff
M/s Shakeel Enterprises for mandatory and permanent injunction.
Contention of the petitioner is that he is the exporter of accessories; he
was maintaining his cash credit account with Jammu and Kashmir Bank
(the defendant); he has availed of certain cash credit facilities; during his
business dealings, he received an export order; thereafter a demand draft
of US $ 56400 was received by the plaintiff on 21.02.2004 which had
been deposited with the defendant bank; based on the aforenoted
payment, the plaintiff had placed certain orders for purchasing goods
which were duly received by the foreign buyer. The foreign buyer,
however, confirmed to the defendant that payment of US $ 56400 was
by a fraudulent instrument and these correspondences continued to be
exchanged between the foreign buyer and the defendant; the plaintiff
was informed of this and the immoveable property which had been
mortgaged by the plaintiff against availment of his cash credit facilities
was attached. The suit had accordingly been filed. The prayer made in
the suit is that the defendant bank be restrained from interfering in the
ownership right of the plaintiff which has been mortgaged as collateral
security against his account; his secured assets should not be taken over
by the bank.
3 In the course of these proceedings, the aforenoted application
under Order 7 Rule 11 of the Code had been filed. The contention was
that under Section 34 of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002
(SARFAESI) there is a complete bar on the civil Court to try any such
suit. Section 34 of the SARFAESI 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 count or other authority in respect of any
action taken or to be taken in pursuance to any power conferred by or under this Act
or under the Recovery of Debts Due to Banks and Financial Institution Act, 1993."
4 There is no doubt to this proposition.
5 The Apex Court in the case of Mardia Chemicals Limited Vs.
Union of India (2004) 4 SCC 311 while rejecting the prayer that the
provisions of Sections 13 & 17 of the SARFAESI Act are
unconstitutional had noted as under:-
"In the background we have indicated above, we may consider as to what
forums or remedies are available to the borrower to ventilate his grievance. The
purpose of serving a notice upon the borrower under sub-section (2) of Section 13
of the Act is, that a reply may be submitted by the borrower explaining the reasons
as to why measures may or may not be taken under sub-section (4) of Section 13 in
case of non-compliance of notice within 60 days. The creditor must apply its mind
to the objections raised in reply to such notice and an internal mechanism must be
particularly evolved to consider such objections raised in the reply to the notice.
There may be some meaningful consideration of the objections raised rather than to
ritually reject them and proceed to take drastic measures under sub-section (4) of
Section 13 of the Act. Once such a duty is envisaged on the part of the creditor it
would only be conducive to the principles of fairness on the part of the banks and
financial institutions in dealing with their borrowers to apprise them of the reason
for not accepting the objections or points raised in reply to the notice served upon
them before proceeding to take measures under sub-section (4) of Section 13. Such
reasons, overruling the objections of the borrower, must also be communicated to
the borrower by the secured creditor. It will only be in fulfillment of a requirement
of reasonableness and fairness in the dealings of institutional financing which is so
important from the point of view of the economy of the country and would serve the
purpose in the growth of a healthy economy. It would certainly provide guidance to
the secured debtors in general in conducting the affairs in a manner that they may
not be found defaulting and being made liable for the unsavoury steps contained
under sub-section (4) of Section 13. At the same time, more importantly we must
make it clear unequivocally that communication of the reasons not accepting the
objections taken by the secured borrower may not be taken to give an occasion to
resort to such proceedings which are not permissible under the provisions of the
Act. But communication of reasons not to accept the objections of the borrower,
would certainly be for the purpose of his knowledge which would be a step forward
towards his right to know as to why his objections have not been accepted by the
secured creditor who intends to resort to harsh steps of taking over the
management/business of viz. secured assets without intervention of the court. Such
a person in respect of whom steps under Section 13(4) of the Act are likely to be
taken cannot be denied the right to know the reason of non- acceptance and of his
objections. It is true, as per the provisions under the Act, he may not be entitled to
challenge the reasons communicated or the likely action of the secured creditor at
that point of time unless his right to approach the Debt Recovery Tribunal as
provided under Section 17 of the Act matures on any measure having been taken
under sub-section (4) of Section 13 of the Act.
6 It has noted that the Civil Court would have no jurisdiction to
entertain such pleas/objections raised to measures taken under Section
13 of the Act.
7 The Civil Court had no jurisdiction to deal with this suit. Petition
is allowed. Plaint stands rejected.
INDERMEET KAUR, J
MAY 08, 2012
A
