Oriental Bank Of Commerce vs Harminder Singh & Ors.
2017 Latest Caselaw 7006 Del

*           IN THE HIGH COURT OF DELHI AT NEW DELHI

+                 FAO Nos. 303/2017 & 305/2017

%                                               6th December, 2017
1.    FAO No.303/2017

ORIENTAL BANK OF COMMERCE                  ..... Appellant
                  Through: Mr. S.A. Khan, Adv. with
                           Mr. Shadab Khan, Adv.
                  versus
HARMINDER SINGH & ORS.                             ..... Respondents

                 Through:            Mr. Rajiv Talwar, Adv. with
                                     Mr. Diwakar Singh, Adv.
2.    FAO No.305/2017

ORIENTAL BANK OF COMMERCE                  ..... Appellant
                  Through: Mr. S.A. Khan, Adv. with
                           Mr. Shadab Khan, Adv.
                  versus
HARMINDER SINGH & ORS.                             ..... Respondents
                 Through:            Mr. Rajiv Talwar, Adv. with
                                     Mr. Diwakar Singh, Adv.
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not? YES

VALMIKI J. MEHTA, J (ORAL)
Review Petition No.321/2017 in FAO No.303/2017
Review Petition No.317/2017 in FAO No.305/2017

1. 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, 1993") 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.

6. 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

9. 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.

10. 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."

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. ....."

(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."

(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.

3. 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.

4. 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.

5. 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.

6. Sections 17, 18 and 34 of the RDDBFI Act read as

under:-

"Section 17. Jurisdiction, powers and authority of Tribunals.-- (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.--

(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)"

7. 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)"

8. 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.

9. 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.

10. 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."

11. 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.

12. 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 possible".

(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

possible" 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.

14. 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.

15. 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.

16. 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.

DECEMBER 06, 2017                              VALMIKI J. MEHTA, J
Ne/godara