Delhi High Court
Gopi Ram vs Rakesh Kumar Aggarwal & Anr on 25 August, 2014
$~ 22
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(OS) 2118/2013
% Judgment dated 25.08.2014
GOPI RAM ..... Plaintiff
Through: Mr.R.L. Kohli, Advocate
versus
RAKESH KUMAR AGGARWAL & ANR..... Defendant
Through: Ms.Shikha Goyal, Adv. for D=1
Mr.S.V. Tyagi and Ms.Reena Jain Malhotra,
Advocates for defendant no.2
CORAM:
HON'BLE MR. JUSTICE G.S.SISTANI
G.S.SISTANI, J (ORAL)
I.A. 9627/2014 (u/O.7 R.11 CPC)
1. Plaintiff has filed the present suit for declaration and perpetual injunction.
Plaintiff is the father of defendant no.1. Defendant no.2 is a bank, who
has advanced loan to defendant no.1.
2. Admittedly, defendant no.1 has mortgaged the property bearing No.919/1-
B, Ward No.7, Mehrauli, New Delhi to the defendant no.2-Bank. As the
defendant no.1 did not clear the outstanding loan amount, the bank has
declared the account of the defendant no.1 as a NPA and proceedings
under Section 13(2) of the SARFAESI Act have been initiated. In the
meanwhile, father of defendant no.1 has filed the present suit for
declaration. The plaintiff was a tenant prior to the property being
purchased by defendant no.1 and the tenancy continues till date after the
purchase.
CS(OS)No.2118/2013 Page 1 of 10
3. As expected in the written statement, defendant no.1 has supported the
plea of the plaintiff, who is none-else but his father.
4. Counsel appearing for the bank has filed the present application under
Order 7 Rule 11 CPC for dismissal of the suit primarily on the ground
that the jurisdiction of the Civil Court is expressly barred and even
otherwise, it is contended that the plaintiff is not a tenant of the defendant
no.1 nor plaintiff was a tenant prior to the purchase of the property by
defendant no.1, nor he continues to remain as a tenant thereafter.
5. Mr.Kohli, counsel for the plaintiff has relied upon various documents
filed along with the plaint in support of his plea of a prior tenancy.
Counsel for the defendant bank submits that the remedy available to the
plaintiff is under Section 17 of the SARFAESI Act and the present suit is
not maintainable. Reliance is placed on Jagdish Singh Vs. Heeralal &
Ors. 2014 (2) Rajdhani Law Reporter 11; and Radnik Exports Vs.
Standard Chartered Bank, 211 (2014) DLT 436 in support of her
contention.
6. I have heard learned counsel for the parties. Before considering the rival
contentions of counsel for the parties, it would be useful to refer to
Section 17 of the SERFASE Act:
"17. Right to appeal - (1) Any person (including 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
under this Chapter, may make an application alongwith such fee, as
may be prescribed to the Debts Recovery Tribunal having
jurisdiction in the matter within forty-five days from the date on
which such measure had been taken:
[PROVIDED that different fees may be prescribed for
making the application by the borrower and the person other than
the borrower.]
CS(OS)No.2118/2013 Page 2 of 10
[Explanation : For the removal of doubts, it is hereby
declared that the communication of the reasons to the borrower by
the secured creditor for not having accepted his representation or
objection or the likely action of the secured creditor at the stage of
communication of reasons to the borrower shall not entitle the
person (including borrower) to make an application to the Debts
Recovery Tribunal under this sub-section.]
(2) The Debts Recovery Tribunal shall consider whether any of the
measures referred to in sub-section (4) of section 13 taken by the
secured creditor for enforcement of security are in accordance with
the provisions of this Act and the rules made thereunder.
(3) If, the Debts Recovery Tribunal, after examining the facts and
circumstances of the case and evidence produced by the parties,
comes to the conclusion that any of the measures referred to in sub-
section (4) of section 13, taken by the secured creditor are not in
accordance with the provisions of this Act and the rules made
thereunder, and require restoration of the management of the
business to the borrower or restoration of possession of the secured
assets to the borrower, it may by order, declare the recourse to any
one or more measures referred to in sub-section (4) of section 13
taken by the secured creditors as invalid and restore the possession
of the secured assets to the borrower or restore the management of
the business to the borrower, as the case may be, and pass such
order as it may consider appropriate and necessary in relation to
any of the recourse taken by the secured creditor under sub-section
(4) of section 13.
(4) If, the Debts Recovery Tribunal declares the recourse taken by a
secured creditor under sub-section (4) of section 13, is in
accordance with the provisions of this Act and the rules made
thereunder, then, notwithstanding anything contained in any other
law for the time being in force, the secured creditor shall be entitled
to take recourse to one or more of the measures specified under
sub-section (4) of section 13 to recover his secured debt.
(5) Any application made under sub-section (1) shall be dealt with
by the Debts Recovery Tribunal as expeditiously as possible and
disposed of within sixty days from the date of such application:
PROVIDED that the Debts Recovery Tribunal may, from
CS(OS)No.2118/2013 Page 3 of 10
time to time, extend the said period for reasons to be recorded in
writing, so, however, that the total period of pendency of the
application with the Debts Recovery Tribunal, shall not exceed four
months from the date of making of such application made under
sub-section (1).
(6) If the application is not disposed of by the Debts Recovery
Tribunal within the period of four months as specified in sub-
section (5), any part to the application may make an application, in
such form as may be prescribed, to the Appellate Tribunal for
directing the Debts Recovery Tribunal for expeditious disposal of
the application pending before the Debts Recovery Tribunal and the
Appellate Tribunal may, on such application, make an order for
expeditious disposal of the pending application by the Debts
Recovery Tribunal.
(7) Save as otherwise provided in this Act, the Debts Recovery
Tribunal shall, as far as may be, dispose of the application in
accordance with the provisions of the Recovery of Debts Due to
Banks and Financial Institutions Act, 1993 and the rules made
thereunder."
7. It will also be useful to refer to Section 34 of the Act, which reads as
under:
"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)."
8. Although the plaintiff may not be a party to the proceedings pending
before the DRT, but a reading of section 17 of SERFASE Act as extracted
hereinabove, makes it clear that the section is wide enough to include any
person. Reading of Section 34 also makes it abundantly clear that the
jurisdiction of the civil court is expressly barred.
CS(OS)No.2118/2013 Page 4 of 10
9. In my view, the judgment rendered in the case of Jagdish Singh Vs.
Heera Lal & Ors reported in 2014(2) Rajdhani Law Reporter 11, is fully
applicable to the facts of this case. The relevant portion of the judgment
reads as under:-
"16. Any person aggrieved by any order made by the DRT under
Section 17 may also prefer an appeal to the Appellate Tribunal
under Section 18 of the Act.
17. The expression àny person'used in Section 17 is of wide
import and takes within its fold not only the borrower but also the
guarantor or any other person who may be affected by action taken
under Section 13(4) of the Securitisation Act. Reference may be
made to the judgment of this Court in Satyawati Tondon's case,
(2010) 8SCC 110(supra).
18. Therefore, the expression àny person'referred to in Section
17 would taken in the plaintiffs in the suit as well. Therefore,
irrespective of the question whether the civil suit is maintainable or
not, under the Securitisation Act itself, a remedy is provided to such
persons so that they can invoke the provisions of Section 17 of the
Securitisation Act, in case the bank (secured creditor) adopt any
measure including the sale of the secured assets, on which the
plaintiffs claim interest.
23. 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 "measure"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
crystalised, 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 "measure"taken by the
secured creditor under sub-section (4) of Section 13 of the
Securitisation Act were legal or not. In such circumstances, the
appeal is allowed and the judgment of the High Court is set aside.
There shall be no order as to costs."
10. Further in the case of In Radnik Exports vs. Standard Chartered Bank:
211(2014) Delhi Law Times 436, this court has held as under:-
"32. Applying the aforesaid principles, the jurisdiction of
this Court to entertain this suit has to be necessarily held to
be barred. It matters not whether on the date of institution of
this suit the bank had initiated any proceedings before the
DRT or not and whether not any proceedings are pending or
not. As long as the declaration claimed in the suit is the same
as the defence which could be raised by the plaintiff to a
claim by the defendant Bank before the DRT, the jurisdiction
of the Civil Court would be barred. The consequential relief
of permanent injunction against recovery would also be thus
barred.
33. Notice in this regard may also be taken of Section 34
of the SARFAESI Act which prohibits a Civil Court from
granting any injunction in respect of any action "taken or to
be taken"in pursuance of any power conferred by or under,
not only the SARFAESI Act, but also the DRT Act. Thus the
grant by this Court, of the relief claimed in suit of permanent
injunction restraining the defendant Bank from acting upon
or seeking to enforce any transaction under the agreement
qua which the relief of declaration as void is claimed, is
prohibited. The defendant Bank, before the DRT is
enforcing its claim against the plaintiff under the said
agreements/transactions. The claim of the defendant Bank
against the plaintiff, before the DRT, is "an action taken in
pursuance of a power under the DRT Act". Section 34 supra,
prohibits this Court from injuncting the defendant Bank from
agitating its claim against the plaintiff before the DRT.
34. I have wondered that if the jurisdiction of this Court to
grant the consequential relief of injunction is barred, can this
Court have jurisdiction to grant the relief of declaration
and/or should this Court grant the relief of declaration,
which, without the consequential relief of injunction, would
be a toothless declaration, incapable of saving the plaintiff
from the claim of the defendant Bank if the DRT was to
conclude otherwise and thus, but a mere scrap of paper. I am,
(without foraying into the aspect of whether the jurisdiction
to grant declaration would also be barred) of the view that in
these circumstances this Court ought to refuse to grant the
relief of declaration also, which is but a discretionary relief.
It cannot be forgotten that grant of every injunction entails
declaration of rights and no injunction can be granted without
adjudicating conflicting rights of the parties. Thus, where
grant of injunction is prohibited, such prohibition cannot be
circumvented by instead granting declaration. This follows
from Section 34 of the Specific Relief Act also which bars
making of such a declaration where the plaintiff, able to seek
further relief, omits to do so. The only difference here is that
though the plaintiff has claimed further relief, such further
relief is barred by Section 34 of the SARFAESI Act.
35. I would be failing in my duty if do not record that I have
in Sunayana Malhotra supra taken a view that a Civil Court
will have jurisdiction, if no proceeding before DRT is
initiated. However, the same cannot be said to be good law in
view of the subsequent dicta of the Supreme Court in Jagdish
Singh supra. In the same vein, reference may also be made to
Richa Industries Ltd.Vs. ICICI Bank Ltd. : 190 (2012) DLT
500 where another single Judge, though held the suit for
declaration, injunction and damages to be maintainable,
refused interim relief. However I do not consider myself
bound thereby because the suit was so held maintainable on a
prima facie view of the matter and also because FAO(OS)
No. 577/2011 preferred there against was disposed off as
compromised on 28th February, 2013.
36. The suit is thus found to be not maintainable. The
amendment claimed to the plaint does not affect its
maintainability. Thus, the suit is dismissed and resultantly the
pending applications are infructuous. The plaintiff is also
burdened with costs of the suit. Counsel's fee assessed at Rs.
20,000/-."
11. Mr.Kohli, counsel for the plaintiff submits that an almost identical
situation has arisen in the case of Harshad Govardhan Sondagar Vs.
International Assets Reconstruction Co. Ltd & Ors. 2014 LawSuit (SC)
236, where the Supreme Court had the occasion to lay down the
guidelines where a lessee in the premises resists the attempt of the secured
creditor to take possession. The Supreme Court has held that the lessee
cannot be evicted by force, but on an application filed before the Chief
Metropolitan Magistrate or District Magistrate and a notice would be
required to be given to the lessee. Paragraph 21 of the judgment reads
as under:
"21. When, therefore, a lessee becomes aware of the
possession being taken by the secured creditor, in respect of
the secured asset in respect of which he is the lessee, from
the possession notice which is delivered, affixed or published
in sub-rule (1) and sub-rule (2) of Rule 8 of the Security
Interest (Enforcement) Rules, 2002, he may either surrender
possession or resist the attempt of the secured creditor to take
the possession of the secured asset by producing before the
authorised officer proof that he was inducted as a lessee prior
to the creation of the mortgage or that he was a lessee under
the mortgagor in accordance with the provisions of Section
65A of the Transfer of Property Act and that the lease does
not stand determined in accordance with Section 111 of the
Transfer of Property Act. If the lessee surrenders possession,
the lease even if valid gets determined in accordance with
clause (f) of Section 111 of the Transfer of Property Act, but
if he resists the attempt of the secured creditor to take
possession, the authorised officer cannot evict the lessee by
force but has to file an application before the Chief
Metropolitan Magistrate or the District Magistrate under
Section 14 of the SARFAESI Act and state in the affidavit
accompanying the application, the name and address of the
person claiming to be the lessee. When such an application is
filed, the Chief Metropolitan Magistrate or the District
Magistrate will have to give a notice and give an opportunity
of hearing to the person claiming to be the lessee as well as
to the secured creditor, consistent with the principles of
natural justice, and then take a decision. If the Chief
Metropolitan Magistrate or District Magistrate is satisfied
that there is a valid lease created before the mortgage or there
is a valid lease created after the mortgage in accordance with
the requirements of Section 65A of the Transfer of Property
Act and that the lease has not been determined in accordance
with the provisions of Section 111 of the Transfer of
Property Act, he cannot pass an order for delivering
possession of the secured asset to the secured creditor. But in
case he comes to the conclusion that there is in fact no valid
lease made either before creation of the mortgage or after
creation of the mortgage satisfying the requirements of
Section 65A of the Transfer of Property Act or that even
though there was a valid lease, the lease stands determined in
accordance with Section 111 of the Transfer of Property Act,
he can pass an order for delivering possession of the secured
asset to the secured creditor."
12. At this stage, Mr.Kohli, learned counsel for the plaintiff, submits that in
case the Bank is willing to give an undertaking that they would follow the
procedure as laid down in the case of Harshad Govardhan(Supra) and
also follow the due process of law, he would not press his suit.
13. Counsel for the bank submits that without admitting the plaintiff to be a
tenant of the mortgaged property, in case any resistance is offered, the
bank will follow the due process of law, including by making an
application to the Metropolitan Magistrate or the District Magistrate under
Section 14 of the SARFAESI Act and take action as available in
accordance with law and as per the dictate of the judgment of Harshad
Govardhan (Supra). Mr.Kohli, submits that the defendant should be
bound by the statement made and rights of all the parties should be kept
open to be agitated in the appropriate court of jurisdiction.
14. In view of the stand taken by the parties, present suit [CS(OS) 2118/2013]
is disposed of. The Bank will remain bound by the statement made by the
counsel in Court and as agreed the rights of both the parties are kept open,
to be agitated in the appropriate court of jurisdiction.
15. It is expected that the bank and the Metropolitan Magistrate will follow
the principles of natural justice, as laid down in para 21 of Harshad
Govardhan (Supra).
16. The application is allowed, in above terms.
17. Let the original documents be returned to the plaintiff in accordance with
law.
IA.No.17620/2013
18. Interim order dated 1.11.2013 stands vacated.
19. Application stands disposed of.
IA.No.9626/2014 (u/O.39 R= 4 CPC)
20. In view of the order passed in the application IA.No.17620/2013 today,
the present application also stands dismissed.
CS(OS) 2118/2013
21. In view of the order passed in the application IA.No.9627/2014 today, the
present suit stands disposed of.
G.S.SISTANI, J
AUGUST 25, 2014
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