Karnataka High Court

Smt. Hemalatha vs M/S. Canara Bank on 1 March, 2024

Author: M.Nagaprasanna

Bench: M.Nagaprasanna

                                                 -1-
                                                          NC: 2024:KHC:8721
                                                        WP No. 1902 of 2024




                      IN THE HIGH COURT OF KARNATAKA AT BENGALURU

                          DATED THIS THE 1ST DAY OF MARCH, 2024

                                            BEFORE
                        THE HON'BLE MR JUSTICE M.NAGAPRASANNA


                         WRIT PETITION NO. 1902 OF 2024 (GM-RES)

                 BETWEEN:

                       SMT. HEMALATHA
                       W/O. RAJENDRA PRASAD
                       AGED ABOUT 47 YEARS
                       RESIDING AT NO.81-LIG,
                       HUDCO HEBBAL 1ST STAGE,
                       LAKSHMIKANTHA NAGARA,
                       VIJAYANAGAR II STAGE,
                       MYSURU-570 017.

                                                                ...PETITIONER
                 (BY SRI. MANMOHAN P N., ADVOCATE)


                 AND:


Digitally signed 1.    M/S. CANARA BANK
by NAGAVENI            SARASWATHIPURAM II BRANCH
                       HAVING OFFICE AT NO.26/A,
Location: HIGH
COURT OF               GUEST HOUSE ROAD,
KARNATAKA              NAZARBAD,
                       MYSURU-570 010,
                       REP. BY ITS AUTHORIZED OFFICER

                 2.    SRI. ARJUN. R
                       S/O. RAJA,
                       AGED ABOUT 32 YEARS,
                       RESIDING AT NO.53,
                       MAHADEVPURA ROAD,
                       BEHIND CORPORATION HOSTEL,
                       SHAKTHINAGARA,
                       MYSURU-570 009.
                               -2-
                                             NC: 2024:KHC:8721
                                          WP No. 1902 of 2024




3.   SRI. RAJU
     S/O. KARPA,
     AGED ABOUT 52 YEARS,
     RESIDING AT NO.15/1,
     THYAGARAJA ROAD MAIN,
     AGRAHARA,
     MYSURU-570 001.

4.   SRI. PRABHU. J
     S/O. JAYAMAHADEV,
     AGED ABOUT 46 YEARS,
     RESIDING AT NO.7,
     BAVI ROAD,
     VINAYAKA NAGARA,
     MYSURU-570 012.
                                                ...RESPONDENTS
(BY SRI. VIGNESH SHETTY, ADV. FOR R1)

     THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE
CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED
30/08/2023 PASSED IN CRIMINAL MISCELLANEOUS NO.185/2023
PASSED BY THE II ADDL. SENIOR CIVIL JUDGE AND C.J.M. MYSURU
(PRODUCED AS ANNEUXRE-K) AND THE NOTICE DATED 21/12/2023
BEARING NO.SARFAESI/2022-23 ISSUED BY THE R1 (PRODUCED AS
ANNEXURE-J).

    THIS PETITION, COMING ON FOR ORDERS, THIS DAY, THE
COURT MADE THE FOLLOWING:

                            ORDER

The petitioner is before this Court calling in question an

order dated 30.08.2023 passed in Crl.Misc.No.185/2023 under

Section 14 of the Securitization and Reconstruction of Financial

Assets and Enforcement of Security Interest Act, 2002 (for

short 'SARFAESI Act').

NC: 2024:KHC:8721

2. Heard the learned counsel Sri.Manmohan P.N.,

appearing for the petitioner and the learned counsel

Sri.Vignesh Shetty, appearing for respondent No.1.

3. The petitioner and the borrower entered into a

transaction of agreement of sale. Pursuant to the agreement of

sale, the petitioner is said to have been put in possession of the

property. The sale deed was not executed by the vendor and

therefore, the petitioner is before the concerned Civil court in

O.S.No.666/2015. The concerned Civil Court grants an order of

injunction against the vendor qua the schedule property. The

vendor then enters into an agreement of sale with the

petitioner.

4. After entering into the agreement of sale, the next

day, the vendor executes a deed of mortgage in favour of the

Bank. The petitioner claims to be an agreement holder from the

hands of the vendor executed on 03.11.1999. The vendor does

not come forward to execute the sale deed. Therefore, the

petitioner is before the Civil Court in O.S.No.666/2015. The

loan becomes sticky and the Bank is now seeking to initiate

proceedings under the SARFAESI Act, 2002, by the impugned

NC: 2024:KHC:8721

order passed by the learned Magistrate. The petitioner is

knocking at the doors of this Court on the score that he has a

injunction in his favour and after the injunction being granted,

the vendor has deliberately sold the property in favour of a

third party and the third party has entered into a mortgage

with the Bank becoming the borrower.

5. The learned counsel would submit that he has every

right to protect his property over and above the right of the

Bank under the SARFAESI Act. The issue need not be

answered, as the remedy available to the petitioner,

notwithstanding the fact that he is an agreement holder, is

before the Debt Recovery Tribunal, in the light of the judgment

rendered by the Apex Court in the case of JAGDISH SINGH VS.

HEERALAL AND OTHERS1, wherein the Apex Court has held as

follows:

"24. Statutory interest is being created in favour of the secured creditor on the secured assets and when the secured creditor proposes to proceed against the secured assets, sub-section (4) of Section 13 envisages various measures to secure the borrower's debt. One of the measures provided by the statute is to take possession of secured assets of the borrowers, including the right to transfer by way of lease, assignment or realising the

(2014) 1 SCC 479

NC: 2024:KHC:8721

secured assets. Any person aggrieved by any of the "measures" referred to in sub-section (4) of Section 13 has got a statutory right of appeal to the DRT under Section 17. 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 DRT or an Appellate Tribunal is empowered by or under the Securitisation Act to determine. The expression "in respect of any matter"

referred to in Section 34 would take in the "measures" provided under sub-section (4) of Section 13 of the Securitisation 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 DRT 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 Securitisation Act because those matters fell within the jurisdiction of the DRT and the Appellate Tribunal. Further, Section 35 says, the Securitisation Act overrides other laws, if they are inconsistent with the provisions of that Act, which takes in Section 9 CPC as well.

25. We are of the view that the civil court jurisdiction is completely barred, so far as the "measures" 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 "measures" taken. The Bank, in the instant case, has proceeded only against secured assets of the borrowers on which no rights of Respondents 6 to 8 (sic Respondents 1 to 5) have been crystallised, before creating security interest in respect of the secured assets.

26. In such circumstances, we are of the view that the High Court was in error in holding that only civil court has the jurisdiction to examine as to whether the "measures" 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 [Heeralal Kulmi v. Govind Kulmi, First Appeal No. 130 of 2008, order dated 5-8-2010 (MP)] of

NC: 2024:KHC:8721

the High Court is set aside. There shall be no order as to costs."

The Apex Court holds that all the contentions that were

raised before the High Court could always has been raised

before the Debt Recovery Tribunal, which would go into a

deeper delving into the matter.

6. In the light of the judgment of the Apex Court

afore-quoted, I deem it appropriate to terminate these

proceedings reserving liberty to the petitioner to knock at the

doors of the Debt Recovery Tribunal. The apprehension of the

petitioner is that the Bank would take possession of the

property in the light of the order hanging on the head of the