M/S Shree Garodi Steels vs M/S Yojaka India Private Ltd
2024 Latest Caselaw 18657 Kant

Karnataka High Court

M/S Shree Garodi Steels vs M/S Yojaka India Private Ltd on 26 July, 2024

Author: H.P. Sandesh

Bench: H.P. Sandesh

                            1



       IN THE HIGH COURT OF KARNATAKA AT BENGALURU      R
           DATED THIS THE 26TH DAY OF JULY, 2024

                          BEFORE

           THE HON'BLE MR. JUSTICE H.P. SANDESH

                R.S.A. NO.2243/2023 (INJ)

BETWEEN:

1.     M/S. SHREE GARODI STEELS
       DOOR NO.3-131/2
       OPP. GARODI TEMPLE,
       NAGORI, KANAKANADY
       MAGNALURU-575002
       REP. BY ITS MANAGING PARTNER
       MR. MANOJ KUMAR (MAJOR)
       S/O S. AITHAPPA POOJARY
       MANGALURU-575002.                  ... APPELLANT

          (BY SRI K.V.SHYAMAPRASADA, ADVOCATE)

AND:

1.     M/S. YOJAKA INDIA PRIVATE LTD.,
       DOOR NO.3-28/43, II FLOOR, ABCO,
       TRADE CENTER, NH66,
       KOTTARA HCOWKI, MANGALURU-575006
       REP. BY ITS MANAGING DIRECTOR
       SHRI. JAGDISH BOLOOR
       S/O LATE GOPALAKRISHNA SUVARNA
       AGED ABOUT 60 YEARS
       R/AT 'SIDDHI' FLAT NO.1006,
       10TH FLOOR, ABHIMAN PALACE
       OPP. CANARA HIGH SCHOOL
       MANNUGUDDA, MANGALURU-575003.
                                            ... RESPONDENT

         (BY SRI NAVEEN KUMAR M.G., ADVOCATE C/R)
                                2



      THIS R.S.A. IS FILED UNDER SECTION 100 OF CPC,
AGAINST THE JUDGMENT AND DECREE DATED 30.10.2023
PASSED IN R.A.NO.9/2023 ON THE FILE OF THE PRINCIPAL
SENIOR CIVIL JUDGE AND CJM, MANGALURU D.K, ALLOWING
THE APPEAL AND SETTING ASIDE THE ORDER DATED
03.02.2023 PASSED ON I.A.NO.III IN O.S.NO.739/2022 ON THE
FILE OF THE II ADDITIONAL CIVIL JUDGE, C/C OF V
ADDITIONAL CIVIL JUDGE, MANGALURU ALLOWING THE
I.A.NO.III FILED UNDER ORDER VII RULE XI (d) OF CPC FOR
REJECTION OF PLAINT.

    THIS R.S.A. HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT   ON    12.07.2024 THIS  DAY, THE   COURT
PRONOUNCED THE FOLLOWING:

                       JUDGMENT

1. This Second Appeal is filed against the divergent

finding of the First Appellate Court passed in R.A.No.9/2023

dated 30.10.2023 on the file of Prl. Senior Civil Judge and CJM,

Mangaluru.D.K in allowing the appeal and setting aside the order

passed by the Trial Court in allowing the application filed under

Order 7 Rule 11(d) of CPC.

2. This second appeal listed for admission and with the

consent of both the counsel, heard the appeal on merits.

3. The parties are referred to as per their original

rankings before the Trial Court to avoid confusion and for the

convenience of the Court.

4. The factual matrix of case of plaintiff/respondent

before the Trial Court that he has prayed restrain the defendant

in interfering with peaceful possession and enjoyment of the suit

schedule property consequent upon purchase made by the

defendant/appellant herein. The suit schedule property which

was purchased in the auction and contend that no possession is

delivered to the auction purchaser. It is also contended that he

had borrowed the loan and could not repay the amount and

hence, the creditor Bank of Baroda classified the plaintiff's

company account as NPA on 01.04.2017 and proceeded for

recovery by bringing the property of the plaintiff company for

public auction etc. The company has given an OTS proposal to

the Bank of Baroda for a sum of Rs.14.25 crore and the same

has been accepted by the Bank. In pursuant of the OTS, opened

a no lien account with the Bank of Baroda and deposited Rs.1.00

crore. When the creditor bank proceeded to recover the money,

the plaintiff/respondent had approached the High Court by filing

the W.P.No.1016/2022 and High Court was pleased to grant an

interim order dated 28.01.2022 directing the bank to restore the

possession of the subject property to the plaintiff's company and

not to confirm the then proposed e-auction sale scheduled to be

held on 29.01.2022 without leave of the Court by directing the

plaintiff company to deposit 10% of the OTS amount of Rs.14.25

Crore within 3 weeks from 28.01.2022 and another 10% within

three weeks thereafter towards the upfront amount for the said

OTS compromised. The bank had withdrawn the amount of

Rs.1.00 crore deposited by the plaintiff company in no lien

account and the plaintiff company has also deposited a sum of

Rs.1.80 crores and reported compliance of the condition stated

in the interim order dated 28.01.2022.

5. It is contended that Bank of Baroda was not

conducted the e-auction to be held on 29.01.2022 and published

a fresh e-auction dated 13.03.2022 fixing the date of auction on

13.03.2022 deliberately by disobeying the interim order of the

High Court and plaintiff company had filed I.A.No.3/2022 again

praying for the e-auction and High court declined to consider

sum of Rs.1.00 crore withdrawn by the Bank of Baroda from no

lien account pursuant to the OTS entered into between the bank

and the plaintiff company also filed an application to recall the

order giving an undertaking that company would further deposit

a sum of Rs.1.00 crore on or before 07.04.2022 and accordingly

purchased D.D and the same is pending for consideration. It is

contended that in disobeying the order of the High Court, auction

was conducted and property was sold in favour of the defendant.

Immediately, he had filed O.S.No.444/2022 seeking the relief of

permanent injunction restraining the Mangalore City Corporation

for mutating the khata and khata was transferred and hence the

suit become infructuous and the same was withdrawn. It is

contended that the defendant on the basis of revenue

documents raised a false claim and attempting to take forcible

physical possession of the schedule property by illegally

dispossessing the plaintiff quite contrary to law. An attempt was

made to take the possession and hence the same was resisted

and filed the suit for the relief of permanent injunction wherein

the following prayer is made:

"Wherefore, the plaintiff prays that Hon'ble Court may pleased to pass the judgment and decree in his favour and against the defendant for the following relief's:

a) For a permanent prohibitory injunction restraining the defendant his men, agents, servants, assignees in interest or any persons claiming under or through him from forcibly dispossessing the

plaintiff or taking the forcible possession of the schedule property from the plaintiff without due process of the law.

b) Grant such other and further relief's as this Court deems fit to grant under the circumstances of this case in the interest of justice.

c) For the costs of the suit.

6. The defendant has appeared and filed an application

I.A.No.3 under Section 9 R/w Order VII Rule XI(d) of CPC

wherein contended that suit is prohibited under Securitisation

and Reconstruction of Financial Assets and Enforcement of

Security Interest Act, 2002 ('SARFAESI Act' for short). The Court

cannot entertain the suit. The entire proceedings are under

SARFAESI Act, 2002 already taken place and sale is also

concluded in an auction and defendant had purchased the

property in the auction and there is a bar and plaint is liable to

be rejected.

7. In pursuance of the said application, the plaintiff filed

objection to the said I.A re-iterating the averments made in the

plaint contending that no documentary evidence is placed before

the Court by the defendant to substantiate that actual physical

possession of the plaint schedule has been delivered to the

defendant. The application filed under Section 14 of the

SARFAESI Act has been withdrawn. Hence, no merit in the

application and the same is liable to be rejected.

8. The Trial Court having considered grounds urged in

the application as well as the averment made in the plaint and

considering the material on record and discussed Order VII Rule

11(d) of CPC in paragraph No.11 and also taken note of

proceedings was taken place before the High Court and so also

discussed Section 13 and 17 of the SARFAESI Act and ultimately

comes to the conclusion that even under the scheme of OTS is

also sum of Rs.14.25 crores and Court is not having jurisdiction

to entertain the dispute with regard to OTS scheme when the

matter was settled for 14.25 crores and remedy is only before

the appropriate forum invoking under Section 17 of SARFAESI

Act and also comes to the conclusion that there is a bar under

Section 34 of SARFAESI Act and allowed the application and

rejected the plaint.

9. Being aggrieved by the said order, an appeal is filed

in R.A.No.9/2023 and First Appellate Court considering the

grounds urged in the appeal memo, formulated the point

whether the Trial Court is justified in rejecting the plaint and

whether it requires interference. The First Appellate Court having

taken note of specific contention and also considering the

Section 9 of CPC as well as Section 4, 14, 17 and 34 of

SARFAESI Act comes to the conclusion that prayer of the plaintiff

against the defendant does not warrant the plaintiff to approach

the debt recovery tribunal which is empowered to deal with the

provisions of SARFAESI Act. However, relief claimed by the

plaintiff is permanent injunction which is discretionary relief in

nature which can be granted by the Civil Court only and not the

debt recovery tribunal. It is also held that Section 34 of

SARFAESI Act it bars the Civil Court from taking jurisdictions to

deal with proceedings with respect of any matter which a debt

recovery tribunal or the appellate Tribunal is empowered. In this

case, secured creditor bank is not a party and no relief is claimed

against the said secured creditor and hence suit is maintainable.

It is held that the Trial Court committed an error in invoking

Section 34 of SARFAESI Act and erroneously comes to the

conclusion that plaint does not discloses cause of action to

proceed with the case and the same is erroneous and merits of

the case of the parties to the suit is not considered and

committed an error in rejecting the plaint and reversed the

finding of the Trial Court.

10. Being aggrieved by the divergent finding, the

present second appeal is filed before this Court. The main

contention of the appellant in this case that the First Appellate

Court fail to consider Section 9 of CPC as well as Section 17 and

34 of SARFAESI Act and contend that the First Appellate Court

fail to observe that Bank of Baroda delivered the possession of

the property and also executed registered sale deed in favour of

the appellant herein in terms of e-auction and proceedings dated

30.03.2022. The observation made by the First Appellate Court

that secured creditor bank is not a party to the present suit and

there cannot be any bar under the SARFAESI Act is erroneous. It

is contended that debt recovery tribunal which is empowered to

deal with the provisions of SARFAESI Act and not the relief of

injunction is also erroneous. The First Appellate Court wrongly

comes to the conclusion that relief claimed by the respondent is

permanent injunction and the discretionary relief in nature which

can be granted by the Civil Court and not by the recovery

tribunal. The reasons assigned by the First Appellate Court is

erroneous. The First Appellate Court erroneously comes to the

conclusion that an application filed under Section 14 of

SARFAESI Act was withdrawn and fail to take note of the fact

that possession of the property was already delivered to the

appellant on 29.04.2022 itself and observation that the appellant

has not produced any document regarding the possession is

incorrect. Hence, the same requires its interference.

11. The counsel appearing for the appellant re-iterated

the grounds in the appeal memo and contend that the relief

granted by the High Court in the Writ Petition is also subject to

compliance and the same has not been complied and thereafter

an application is filed and the same is also rejected and

permitted the bank to proceed on auction sale. Accordingly,

property brought for sale and the same was sold in favour of this

appellant. The bank also delivered the possession and hence

withdrawn the application filed under Section 14 of SARFAESI

Act. The word contemplated in Section 14 of SARFAESI Act is

also 'may' and not 'shall' and in the case on hand, the sale

certificate is issued and possession is also delivered immediately

after the same and even earlier also possession was taken and

voluminous documents are produced for having taken the

possession along with memo and the same has to be considered.

On the other hand, the counsel appearing for the respondent

would vehemently contend that the very auction was challenged

before the DRT and only symbolic possession was given and not

physical possession. The counsel also brought to notice of this

Court, Section 14 and Section 13 of SARFAESI Act. The counsel

would contend that the suit is filed for the relief of bare

injunction. The Fact that earlier application which was filed under

Section 14 of SARFAESI Act is also not in dispute and no physical

possession was taken.

12. The counsel would vehemently contend that the

condition imposed by the High Court in Writ Petition is complied

and there was an amount of Rs.1.00 crore with the bank and an

attempt was made to adjust the said amount. Subsequently, an

application is also filed for depositing of balance amount. The

said application was dismissed and fresh application was filed

and the same is pending for consideration. The counsel would

contend that only symbolic possession was given and not

physical possession, though it is contended that possession was

taken in the year 2018, then what made the bank to file an

application in the year 2001 under Section 14 of SARFAESI Act if

really physical possession was taken. Hence, it is clear that

possession is not delivered and filing of suit will not come in the

way of initiation of proceedings under the SARFAESI Act. It is

between the auction purchaser and the defendant and bank is

not a party. Hence, the First Appellate Court assigned the

reasons while reversing the judgment.

13. In reply to this argument, the counsel would

vehemently contend that the SARFAESI Act is a special

enactment under which when the plaintiff committed default in

payment of loan amount proceeded in accordance with law

invoking Section 13 of SARFAESI Act. The counsel also would

contend that possession was taken in the year 2018 itself, but

by mistake inadvertently an application was filed under Section

14 of SARFAESI Act and the same came to the knowledge of the

bank, the same was withdrawn. Hence, cannot find fault with the

procedure adopted by the bank under SARFAESI Act.

14. Having heard the appellant's counsel and also the

counsel appearing for the respondent and also taking into note

of Section 13, 14 and Section 34 and also with regard to Section

9 of CPC and Specific Relief Act seeking the relief of permanent

injunction, the matter has to be re-analyzed before this Court.

15. Having considered the material on record, this

matter is listed for admission and hence this Court heard the

matter on merits with the consent of both the parties regarding

admission and framed the following substantial question of law:

1) Whether the Appellate Court committed an error in setting aside the order of the Trial Court that the SARFAESI Act not pressed into service and matter requires trial?

16. Having considered the material on record, it is not in

dispute that the respondent/plaintiff filed the suit for the relief of

bare injunction and prayer is also narrated as above the relief

sought before the Trial Court. It is also not in dispute that the

plaintiff who had approached the Court filed the suit for bare

injunction. Admittedly, borrowed the loan from the bank. He did

not repay the amount. Hence, bank treated the same as NPA

account. In the meanwhile, OTS team is also proposed by the

plaintiff and the same is also accepted by the bank for an

amount of Rs.14.25 crores. It is also not in dispute that an

amount of Rs.1.00 crore was deposited. When the plaintiff fails

to pay the amount in terms of the OTS proposal for an amount

of Rs.14.25 crores which he had accepted, the Bank proceeded

to recover the said amount. It is also not in dispute that the

bank proceeded to conduct the auction and notice was given for

e-auction. The documents are also produced before the Court

and before the e-auction, bank initiated the proceedings of

taking possession of the property by sending notice on

16.01.2018 and notice is also affixed and paper publication was

also taken on the very same day i.e., on 16.01.2018.

17. It is also important to note that possession was

taken on 18.01.2018 by conducting the panchanam to show that

the physical possession was taken. It is important to note that

sale notice was issued on 13.03.2022 and prior to that when the

plaintiff approached the High Court, High Court also granted the

relief of permitting the plaintiff to deposit 10% of OTS amount of

14.25 crores within 3 weeks from 28.01.2022 and another 10%

within three weeks thereafter towards upfront amount for the

said OTS compromise. In the plaint itself, in paragraph No.5, the

very plaintiff has stated that High Court was pleased to grant an

interim order dated 28.01.2022 directing the bank to restore the

possession of the subject property to the plaintiff company and

not to confirm the then proposed e-auction sale schedule to be

held on 29.01.2022 without the leave of the Court. The very

contention that the possession was not taken as contended by

the respondent cannot be accepted. The very pleading of the

plaintiff is very clear that directed the bank to restore the

possession of the subject property to the plaintiff company if

possession was not taken, what was the need of directing the

bank to restore the possession of the subject property and there

is an admission in the pliant itself that possession was taken. No

doubt in the plaint as contended that the defendant is making

claim based on the revenue records that possession was taken,

but the fact is that auction was conducted subsequently when

the High Court order has not been complied and an attempt is

made to get the order of extension of time in the High Court and

the same was also rejected as admitted by the plaintiff.

Subsequently also, it is contended that an application is filed

which is pending for consideration and no such order was

passed. In view of non-compliance of High Court order also, the

auction was conducted subsequently in the month of March and

sale certificate was issued and possession was also delivered and

to that effect also the documents are produced before the Court

and even the appellant also produced the recent photographs of

taking of possession and continuing of construction by obtaining

the permission from the concerned Municipal Corporation of

Mangalore and in the year 2023, the said plan was also

sanctioned. No doubt the respondent also produced 23

voluminous documents along with memo, but those documents

are prior to the sale auction and order passed by the Court and

IAs' filed before the High Court and also the suit filed before the

Court and objections, applications. The fact that the sale was

made and confirmed the sale and issuance of sale certificate is

not disputed and revenue records are also transferred in favour

of the respondent is not in dispute. It is also not in dispute that a

challenge was made before the DRT by the respondent. The very

auction was conducted and the same was questioned before the

DRT.

18. The main contention of the counsel appearing for the

respondent that an application was filed under Section 14 and

the same was withdrawn. But, voluminous documents are

produced before the Court having given the notice before the

possession was taken and the same is also given through paper

publication and also mahazar was drawn. I have already pointed

out that in the plaint in paragraph No.5 itself stated that a

direction was given by the High Court as per the plaint

averments to restore the possession subject to compliance of

order of the High Court and the same was not complied and an

attempt was made to deposit the amount and the same is also

not permitted by the High Court and auction was also conducted

and sale certificate was issued. The defendant is the purchaser

and he had invested the money and photographs which placed

before the Court evidence the fact that he had undertaken the

work and no documents of photographs are produced before the

Court that still the possession with the plaintiff and when such

being the material on record when the proceedings was taken

place in terms of the SARFAESI Act and it is nothing but the

forum shopping by the plaintiff since he had approached the

High Court to scuttle the e-auction proceedings. Even though

High Court came to rescue of the plaintiff and conditional order

was passed and condition was not complied and also an attempt

was made before the High Court initiating contempt proceedings

and contempt C.C.C proceedings was also withdrawn by the

plaintiff. The fact that he had approached the DRT is also not in

dispute and also filed a suit not to transfer the khatha and later

withdrew the suit. Inspite of it, he had approached the Civil

Court. It is for scuttling the SARFAESI proceedings, but Court

has to take note of genesis of the dispute between the parties.

The appellant/defendant is a auction purchaser and he had

purchased the property under the auction when the proceedings

was initiated under the SARFAESI Act. If any grievances, the

plaintiff is having, he has to get the relief before the DRT under

Section 17 of SARFAESI Act with regard to if any irregularity in

selling the property. Unless, the sale has been set-aside, he

cannot maintain a suit against a auction purchaser. The records

also discloses that possession has also delivered in favour of the

appellant. The very contention that possession has not been

delivered cannot be accepted even as on the date of filing of the

suit. Even revenue entries are also found in the name of the

appellant and even filed a suit for restraining transfer of khata

and there also he was unsuccessful and the said suit was also

withdrawn by the plaintiff. The Mangalore Corporation is given

permission and sanction and accordingly the appellant has

undertaken the construction. When such being the material on

record, the Trial Court has given the reasoning for invoking

Section 34 also. Even extracted Section 34 of SARFAESI Act

taking into note of genesis for the litigation and rightly invoked

Section 34 of SARFAESI Act and comes to the conclusion that

suit itself is not maintainable and rejected the plaint.

19. This Court would like to even refer the Section 13,

14 and 17 of SARFAESI Act.

Section 13: Enforcement of security interest.

(1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act.

(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any installment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to

discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4).

Section 14: Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.

(1) Where the possession of any secured assets is required to be taken by the secured creditor or if any of the secured assets is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured assets, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or as the case may be, the District Magistrate shall, on such request being made to him--

(a) Take possession of such asset and documents relating thereto; and

(b) Forward such asset and documents to the secured creditor:

(2) For the purpose of securing compliance with the provisions of sub-section (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary.

(3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any court or before any authority.

Section 17: In the securitization and Reconstruction of Financial Assets and enforcement of Security Interest Act, 2002.

(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 authorized officer under this Chapter, [may make an application along with 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.

20. Having considered the Section 13, 14 and 17 of the

SARFAESI Act, it is not in dispute that bank has invoked Section

13 and also conducted the auction and the same has attained its

finality. It is also important to note that Section 17 is also very

clear that any person aggrieved by any of the measures referred

to in Section 4(13) of SARFAESI Act taken by the secured

creditor by making an application to question the same before

the DRT. Admittedly, already the creditor had approached the

D.R.T invoking Section 17 of the SARFAESI Act.

21. This Court also would like to refer the judgment

reported in (2014) 1 Supreme Court Cases 479 in case of

Jagdish Singh V/s Heeralal and others held that irrespective

of issue of maintainability of civil suit, remedy lay under Section

17 where bank (secure creditor) adopts any measure as

contemplated under Section 13(4) for enforcement of its security

interest including sale of secured assets, in respect of his

respondent Nos.1 to 5 were claiming an interest. The High Court

erred in holding that civil Court had such jurisdiction. The

Section 35 says, the SARFAESI Act overrides other law, if they

are inconsistent with the provisions of that Act, which takes in

Section 9 of C.P.C as well. It is also held that respondent Nos.1

to 5 have prayed for a declaration of title, partition and

permanent injunction against respondent Nos.7 to 9 and others

in which the appellant and the Bank were also made parties. The

bank and the appellant filed preliminary objection in the suit

stating that in view of Section 13 R/w Section 34 of SARFAESI

Ac, the Civil Court has no jurisdiction to entertain the above civil

suit. The Apex Court also taking into note of the proviso under

Section 34 of SARFAESI Act in paragraph No.21 discussed in

detail and summed up in paragraph No.24. The opening portion

of Section 34 clearly states that no civil Court shall have the

jurisdiction to entertain any suit or proceeding in respect of any

matter which a D.R.T or an appellate Tribunal are empowered by

or under the SARFAESI Act to determine. The expression in

respect of 'any matter' referred to in section 32 would take in

the measures provided under Sub-section 4 of Section 13 of

SARFAESI Act. Consequently, if any aggrieved person has got

any grievance against any 'measures' taken by the borrower

under Sub-Section (4) of Section 13, the remedy open to him is

to approach the D.R.T or the appellate Tribunal and not the civil

Court. The civil Court in such circumstances has no jurisdiction

to entertain any suit or proceedings in respect of those matters

which fall under sub-section (4) of Section 13 of the

Securitization Act because those matters fell within the

jurisdiction of the DRT and the appellate Tribunal. The Apex

Court also held that the civil Court jurisdiction is completely

barred. In the present case, when the suit was filed for the

relief of declaration of title, partition and permanent injunction

and in the case on hand also, suit is filed for permanent

injunction by which barrower against the auction purchaser and

auction purchaser participated in the auction and purchased the

property in accordance with law and already the borrower had

approached the DRT and when such being the case, in view of

Section 34 of SARFAESI Act, he cannot even maintain a suit for

bare injunction against the auction purchaser since the right of

auction purchaser is genesis of Section 13 of the SARFAESI Act.

22. The Madras High Court sitting at Madurai judgment

reported in (2016) SCC online Mad 29996 in case of Central

Bank of India, Regional office, Madurai represented

through its Regional Manager V/s Central Bank of India,

Ambasamuthram Branch represented through its branch

manager also taken note of suit for the relief of permanent

injunction restraining the bank referring the judgment of Apex

Court in Jagadish Singh referred supra held that the suit is not

maintainable and in a case of Jagadish Singh case, when the

borrower had filed the suit, the same was questioned before the

Appellate Court by the auction purchaser and laid down the law.

23. This Court would like to rely upon the judgment of

the Hon'ble Apex Court in the case of AUTHORISED OFFICER,

STATE BANK OF INDIA v. M/S. ALLWYN ALLOYS PVT. LTD.

reported in AIR 2018 SC 2721, wherein having considered the

grounds which have been urged in the said matter, in paragraph

No.4 observed that the Bank has assailed the aforesaid decision

of the High Court primarily on the ground that all the issues

concerning the mortgaged/secured property are required to be

decided only by the DRT; and not in any civil proceedings as has

been observed by the High Court in the impugned judgment.

For, filing of a civil suit in respect of secured assets is barred by

law. The DRT has to examine the merits of the controversy.

The Apex Court in paragraph No.6 of its judgment held as

follows:

"6. After having considered the rival submissions of the parties, we have no hesitation in acceding to the argument urged on behalf of the Bank that the mandate of Section 13 and, in particular, Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement

of Security Interest Act, 2002 (for short, "the 2002 Act"), clearly bars filing of a civil suit. For, no civil Court can exercise jurisdiction to entertain any suit or proceeding in respect of any matter which a DRT or DRAT is empowered by or under this Act to determine and no injunction can be granted by any Court or authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the Act.............."

24. The Apex Court in the judgment in the case of SREE

ANANDHAKUMAR MILLS LIMITED v. INDIAN OVERSEAS

BANK AND OTHERS reported in (2019) 14 SCC 788, relying

upon Section 34 read with Sections 2(zf), 2(zc), 13(1), 13(4),

17, 18 and 35 of the SARFAESI Act, when the suit was filed for

the relief of partition, held as non-maintainable when action

under the SARFAESI Act stands initiated. It is also held that the

remedy lies before the DRT by way of proceedings under

Sections 17 and 18 of the SARFAESI Act by relying upon the

judgment of the Apex Court in the case of Jagdish Singh

(supra), wherein it is held that suit for partition would not be

maintainable in a situation where proceedings under the

SARFAESI Act have been initiated and the remedy of any person

aggrieved by the initiation of proceedings under the SARFAESI

Act lies under Section 17.

25. Having taken note of the principles laid down in the

above two judgments, it is clear that no civil Court can exercise

the jurisdiction to entertain any suit or proceedings in respect of

any matter which a DRT or DRAT is empowered by or under the

SARFAESI Act to determine and no injunction can be granted by

any Court or authority in respect of any action taken or to be

taken in pursuance of any power conferred by or under the Act.

The words used is very clear that any action taken or to be taken

in pursuance of any power conferred by or under the Act. The

words used in the judgment of the Apex Court in the case of

Sree Anandhakumar Mills (supra) also is clear that any person

aggrieved by the initiation of proceedings under the SARFAESI

Act lies under Section 17. The discussion made in the case of

Jagdish Singh (supra), has been referred in paragraph No.4 of

the judgment and extracted paragraph No.24 and hence it is

clear that any action taken, if it affects the borrower, he cannot

maintain a suit for bare injunction against the auction purchaser.

26. The Patna High Court in the case of HIRA NAND

LALL v. SANTOSH KUMAR BADHWANI AND OTHERS

reported in (2012) 05 PAT CK 0114, when a suit was filed for

the relief of partition, held that the appeal was filed under

Section 17 of the SARFAESI Act and once proceeding under the

provisions of the SARFAESI Act had already been initiated, there

was a restriction for exercise of jurisdiction of the Civil Court and

extracted Section 34 of the SARFAESI Act and held that it is

evident that there is a specific bar in granting injunction by any

Civil Court in respect of any action taken in pursuance of the

power conferred by SARFAESI Act.

27. The Allahabad High Court in its judgment in the case

of TRILOKCHAND FABRICATION PVT. LTD. v. STATE OF

U.P. AND OTHERS reported in 2024 SCC Online All 103, in

paragraph No.28 referred to the judgment of the Apex Court in

the case of Sree Anandhakumar Mills (supra), wherein it is

held that no Civil Court shall have jurisdiction to entertain any

suit or proceeding if an aggrieved person has got any grievance

against any measures taken under Section 13(4) of the

SARFAESI Act. It is also categorically held that if any aggrieved

person has got any grievance against any measures taken by the

borrower under sub-section (4) of Section 13, the remedy open

to him is to approach the DRT or the Appellate Tribunal and not

the civil Court. An observation is also made that Section 34 of

the SARFAESI Act, read in conjunction with Section 9 of the CPC

1908, places a bar on the institution of civil suits regarding

matters which a DRT or the Appellate Tribunal has been

empowered to deal with under the SARFAESI Act. Furthermore,

no civil Court, can entertain a suit or proceedings, if an

aggrieved person has grievance against any measures taken

under Section 13(4) of the SARFAESI Act.

28. Having considered the principles laid down in the

judgments referred (supra), it is clear that when action was

taken under Section 13 of the SARFAESI Act, admittedly the

property was sold in auction in favour of the defendant in the

present suit and if any grievance, even a third party also can

question the same before the DRT and the same has been

observed by the Trial Court in paragraph No.19 while passing the

order invoking Section 34 of the SARFAESI Act. The Trial Court

even taken note of the writ proceedings initiated before the High

Court and also observation is made that the Karnataka High

Court had also not restrained the defendant from proceeding

against the plaintiff according to law. It is also clear that when

approach was made to the High Court, the High Court passed a

conditional order and condition also has not been complied and

the Trial Court rightly comes to the conclusion that a suit for

injunction against the auction purchaser is not maintainable in

view of the bar under Section 34 of SARFAESI Act.

29. The First Appellate Court, however committed an

error in coming to the conclusion that the Bank is not a party in

the suit. Whether the Bank is a party or not, the First Appellate

Court fails to take note of the genesis of the right conferred upon

the defendant, who had purchased the property in the auction

when the recovery proceedings was initiated under Section 13 of

the SARFAESI Act and conducted 'e' auction and sold the

property to the defendant. The First Appellate Court discussed

Section 9 of CPC and Section 14 of the SARFAESI Act. No doubt,

the Bank had initiated the proceedings under Section 14 of the

SARFAESI Act and later withdrew the same when they came to

know that already physical possession was taken and the

documents are also placed for having taken the possession by

issuing the notice and even making the paper publication with

regard to the physical possession and mahazar is also produced

before the Court for having taken the possession. The First

Appellate Court made an observation that the relief claimed by

the plaintiff is permanent injunction, which is discretionary relief

in nature, which can be granted by the Civil Court only and not

the DRT and fails to take note of Section 34 of the SARFAESI Act

which clearly bars even including the suit for bare injunction if

action is taken under Section 13 of the SARFAESI Act.

30. The other observation made by the First Appellate

Court is that the Civil Court is barred from taking jurisdiction to

deal with the proceedings in respect of any matter which a DRT

or the Appellate Tribunal is empowered under the SARFAESI Act

and this observation is against the principles laid down in the

judgments referred (supra). The Apex Court categorically held

that any action taken under Section 13(4) of the SARFAESI Act

cannot be questioned. The observation made in paragraph

No.20 is also erroneous that it is an admitted fact that the

creditor Bank of Baroda has taken action against the plaintiff

Company under Section 13 of the SARFAESI Act, but simply

because of that reason, it cannot be said that the Civil Court has

no jurisdiction to entertain the matter between the parties to the

suit in question who are admittedly independent parties. The

parties are not independent parties and admittedly the plaintiff is

a borrower and committed default in repayment of the money

and accordingly the proceedings was initiated under Section 13

of the SARFAESI Act. The observation that the merits of the

case of the parties to the suit is not considered in this case is

nothing but utter disregard to the principles laid in the

judgments of the Apex Court and the High Court. The borrower

aggrieved by the action taken under Section 13 of the SARFAESI

Act, questioned before the DRT and when the matter is pending

before the DRT, made an attempt to question the sale

proceedings before the High Court and though relief was granted

conditionally and the condition imposed by the High Court was

not complied. Even an attempt was made to get the extension

of time for making payment and the same was rejected and the

Bank also issuing fresh proceedings, conducted auction and in

the auction, the defendant had purchased the property for

valuable consideration. When such being the material on record,

the very approach of the First Appellate Court is erroneous and it

requires to be set aside by answering the substantial question of

law.

31. In view of the discussions made above, I pass the

following:

ORDER

(i) The second appeal is allowed.

(ii) The impugned judgment and decree of the First Appellate Court dated 30.10.2023 passed in R.A.No.9/2023, is set aside and the judgment and decree of the Trial Court dated 03.02.2023 passed in O.S.No.739/2022 allowing I.A.No.3 filed under Order 7 Rule 11(d) of CPC and Section 9 of CPC, is hereby confirmed.

Sd/-

JUDGE

RHS/MD