Karnataka High Court
Mr. Sriram Chitturi vs Mrs. D Indrani on 28 October, 2024
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RFA No.2024 of 2018
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 28TH DAY OF OCTOBER, 2024
PRESENT
THE HON'BLE MR JUSTICE V KAMESWAR RAO
AND
THE HON'BLE MR JUSTICE C M JOSHI
RFA NO. 2024 OF 2018
BETWEEN:
MR. SRIRAM CHITTURI,
AGED ABOUT 42 YEARS,
S/O. MR. CH.B.SUBRAHMANYAM,
RESIDING AT NO.2,
9TH CROSS, WILSON GARDEN,
BANGALORE - 560 027.
...APPELLANTS
(BY SRI. JAI PRAKASH RAO, ADVOCATE)
AND:
1. MRS. D. INDRANI.
AGED ABOUT 51 YEARS,
W/O. MR. E. MADHAV,
RESIDING AT NO.421,
3RD CROSS, WILSON GARDEN,
BANGALORE - 560 027.
2. EDELWELSS ASSET
RECONSTRUCTION COMPANY LTD.,
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RFA No.2024 of 2018
OFFICE AT CST ROAD,
KALINA, MUMBAI - 400 098,
REPRESENTED BY
THE VICE PRESIDENT
MR. SHIVANGI VARMA.
3. MR. SANJAY BHANSALI,
MAJOR,
FATHER'S NAME NOT KNOWN,
NO.38, 9TH 'B' CROSS,
WILSON GARDEN,
BANGALORE - 560 027.
...RESPONDENTS
(BY SRI. A. RAVISHANKAR FOR C/R1,
SMT. ANUPARNA BORDOLOI, ADVOCATE FOR R2,
SRI. GAJENDRA.S, ADVOCATE FOR R3)
THIS RFA IS FILED UNDER SECTION 96 OF CPC
AGAINST THE ORDER DATED 07.09.2018 PASSED ON
IA NO.III IN OS NO.3496/2018 ON THE FILE OF THE LIX
ADDL. CITY CIVIL AND SESSIONS JUDGE, BANGALORE
ALLOWING THE IA NO.III FILED BY RESPONDENT NO.2
UNDER ORDER VII RULE 11 READ WITH SECTION 151 OF
CPC FOR REJECTION OF PLAINT, ETC.
THIS RFA HAVING BEEN RESERVED FOR JUDGMENT ON
26.07.2024, COMING ON FOR PRONOUNCEMENT THIS DAY,
V KAMESWAR RAO J., DELIVERED THE FOLLOWING:
CORAM: THE HON'BLE MR JUSTICE V KAMESWAR RAO
AND
THE HON'BLE MR JUSTICE C M JOSHI
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RFA No.2024 of 2018
CAV JUDGMENT
(PER: THE HON'BLE MR JUSTICE V KAMESWAR RAO)
This regular first appeal (RFA) arises from the order
dated 07.09.2018 passed by the LIX Addl. City Civil and
Sessions Judge, Bengaluru City (henceforth called as 'Trial
Court') on an application being IA No.III in
OS No.3496/2018, which is an application filed by the
respondent No.2 herein under Order VII Rule 11 read with
Section 151 of CPC for rejection of the plaint filed by the
appellant herein, whereby the application is allowed and
the plaint has been rejected.
2. Some of the facts which are required to be noted
for the purpose of deciding this appeal are, that one M/s
Dasappa had on 13.03.2006 availed a term loan facility
from Lakshmi Vilas Bank for a sum of Rs.15,00,00,000/-.
On 07.04.2006, M/s Dasappa deposited the title deeds of
property bearing No.27, situated at 9th 'B' Cross, Park
Area, Wilson Garden, Bengaluru - 560027 with the
Lakshmi Vilas Bank. On 31.03.2007, the loan account of
M/s Dasappa was classified as Non-Performing Asset
(NPA). On 25.02.2008, a lease deed was entered into
between the respondent No.1 herein and Bagadia Estates
Developers represented by the appellant who was inducted
as a tenant. On 29.03.2010, Lakshmi Vilas Bank issued a
demand notice under Section 13(2) of the Securitisation
and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 ('SARFAESI Act' for short)
demanding payment of Rs.34,27,57,065/-. On
30.04.2010 after receipt of the demand notice, the
partners of M/s Dasappa sent their objections to the
demand notice through their Advocate under Section
13(3A) of SARFAESI Act. On 11.02.2011, Lakshmi Vilas
Bank assigned the account dues of M/s Dasappa to
Edelweiss Asset Reconstruction Company Ltd. (respondent
No.2 herein) by way of assignment agreement. On
22.12.2012, the Court concerned passed an order in
C.Misc.No.9117/2011 under Section 14 of the SARFAESI
Act to take physical possession of the schedule property.
It is the case of the appellant that a letter of offer was
issued by him to respondent No.2 to purchase the
schedule property for a sum of Rs.2,25,00,000/- and
offered to pay Rs.50,00,000/- upfront and attached a
cheque for a sum of Rs.50,00,000/-. On 01.02.2014, the
letter of acceptance, confirming sale of schedule property,
was issued by respondent No.2 to the appellant on paying
Rs.50,00,000/- and on a condition that the remaining
amount of Rs.1,75,00,000/- to be paid within 15 days i.e.,
on or before 15.02.2014. On 14.02.2014, the appellant
claims to have sent an e-mail stating he is ready with the
balance amount of Rs.1,75,00,000/- and is ready to do the
registration of the property on 29.05.2014. Respondent
No.1 filed SA No.31/2014 against respondent No.2 before
the DRT challenging the sale of the schedule property and
the same was dismissed. On 30.01.2018, an order has
been passed in C.Misc. No.3564/2018 under Section 14 of
the SARFAESI Act. On 28.02.2018, order was passed in
the C.Misc. to appoint a Court Commissioner to take
physical possession of the schedule property. On
09.03.2018, notice was issued by the Court Commissioner
to hand over the vacant possession of the schedule
property. On 14.10.2020, respondent No.2-Office issued
public auction notice in respect of the schedule property
and the same was published in newspapers both
vernacular and English. On 15.10.2020, the auction sale
notice was issued by respondent No.2 to respondent No.1
with respect to the schedule property. In the said auction,
one Sanjay Bhansali i.e., respondent No.3 herein became
the highest bidder for the property and in that regard,
respondent No.2 had, on 19.11.2020, issued a letter
confirming the payment made by Sanjay Bhansali. On
23.11.2020, the appellant's Advocate communicated
regarding the stay order passed in RFA No.2024/2018 on
13.08.2020. Respondent No.2 filed an application in the
suit being IA No.1/2024 under Section 151 of CPC for
vacating the stay. A reply to the same has been filed by
the appellant.
Submissions:
3. The submission of Sri. N.Jai Prakash Rao, learned
counsel for the appellant is, the appellant is neither a
borrower nor a guarantor of the loan sanctioned by
Lakshmi Vilas Bank to the consortium. The appellant was
a tenant of the schedule property inducted by the
respondent No.1 on 25.02.2008. He has been regularly
paying the monthly rent to respondent No.1. He was not
made aware of the fact that respondent No.1 had offered
the schedule property as security to the loan sanctioned
by Lakshmi Vilas Bank. He was also not aware of the loan
sanctioned by Lakshmi Vilas Bank has been declared NPA.
Respondent No.2 served the possession notice of the
schedule property which was in possession of the appellant
as a tenant.
4. According to him, at the time of service of
possession notice, the Authorized Officer of respondent
No.2 offered to sell the schedule property to the appellant
since the appellant was in possession of the Schedule
property and the sale consideration was finalized at
Rs.2,25,00,000/- and the Authorized Officer executed a
private treaty agreement dated 01.02.2014 and the
appellant had paid Rs.50,00,000/- advance by way of a
demand draft dated 01.02.2014 and the said demand draft
had been encashed, which has resulted in a concluded
contract between the appellant and respondent No.2 in
respect of Schedule property and the sale has been
confirmed. In fact, it is his submission that the appellant
had addressed an e-mail dated 10.02.2014 intimating the
respondent No.2 that the appellant is ready with the
balance payment of Rs.1,75,00,000/- and to share the
draft sale deed and confirm the registration. He lay stress
on the fact that the possession of the Schedule property
continued with the appellant after signing of the private
treaty. Thereafter, no communication or any
acknowledgment of the e-mail dated 10.02.2014 was
received. Later it transpired that respondent No.1 had
filed SA No.131/2014 before the Debt Recovery Tribunal,
Bengaluru ('DRT' for short) regarding the sale of schedule
property, which was dismissed on 29.05.2014 and
subsequently, SA No.168/2017 was filed by M/s Inbev
India International Ltd. which was dismissed on
19.06.2017. He also submits that even the appellant had
filed SA No.69/2018 before the DRT against the
possession notice, wherein respondent No.2 had filed a
counter-affidavit. The prayer in SA No.69/2018 was
primarily to quash the notice dated 09.03.2018 issued by
respondent No.2 and to restrain respondent No.2 from
taking possession of the schedule property. He do
concede to the fact that the DRT has dismissed SA
No.69/2018 vide order dated 23.04.2018. He concedes to
the fact that no appeal has been filed by the appellant
challenging the said order passed by the DRT. His
submission is that the DRT's observation that the appellant
has not chosen to initiate any action and apparently
allowed his claim for any refund from the respondent to be
barred by law of limitation is uncalled for, as by holding
so, the DRT has exceeded its jurisdiction in recording any
observation regarding either Civil Court's jurisdiction or on
the question of limitation. According to him, the
application before the DRT was neither for specific
performance nor for refund of the amount, but the
application was filed under Section 17 of the SARFAESI Act
against the possession notice. He lay stress on the fact
that respondent No.2 had in its counter-affidavit, taken a
stand that, the appellant can only assert on the basis of
such letter, a right for specific performance had accrued
and admittedly, the appellant had not filed any
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proceedings for specific performance. According to him,
the respondent No.2 has also stated in its counter-affidavit
that the appellant had not claimed any refund. He stated
that in view of the stand taken by respondent No.2 and
the limited prayer before the DRT under Section 17 of the
SARFAESI Act and the application is against the possession
notice, the appellant had rightly filed the aforesaid suit
before the Trial Court. He stated that the appellant has
rightly invoked the jurisdiction of the Civil Court as the
DRT do not have the jurisdiction nor such prayers were
made before the DRT as have been made in the suit. In
that sense, all matters of civil nature exclusively those to
be tried by the DRT under Section 17, shall be barred
under Section 34 of the SARFAESI Act. In fact, when the
civil rights of a person other than the borrower or
guarantor are involved, the Civil Court has the jurisdiction.
He also submits that allowing the application filed by
respondent No.2 is clearly erroneous. In fact, the Trial
Court has grossly misapplied the law regarding the original
jurisdiction of the Civil Court and misinterpreted the
provisions of Section 17 read with Section 34 of the
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SARFAESI Act which is a special enactment and the
preamble of the SARFAESI Act is very clear that the said
Act is enacted where the jurisdiction of Civil Court is
barred only in matter which the DRT or the Appellate
Tribunal are empowered to determine and not a blanket
statement for the Civil Court not to entertain those
matters coming squarely under Civil jurisdiction. In
support of his submissions, he has relied upon the
judgment of this Court in R. Venkatapathy -Vs.- Bank
of India, Zonal Office, Bangalore and Others [AIR
2014 KAR 33], judgments of Calcutta High Court in
Frontline Corporation Ltd. -Vs.- Punjab and Sind
Bank [AIR 2017 CALCUTTA 172], Delta International
Limited and Others -Vs.- Smt. Nupur Mitra and
Others [AIR 2018 CALCUTTA 8] and ICICI Bank Ltd. -
Vs.- Coventry Coil-O-Matic (Haryana) [(2005) 2
CALLT 77 HC], judgments of the Bombay High Court in
Mr. Alex Kuruvilla -Vs.- Oriental Bank of Commerce
and Others [Suit No.1910/2009, decided on
31.01.2013] and Bank of Baroda -Vs.- Gopal Shriram
Panda and Another [CRA No.29/2011 & connected
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cases, decided on 25.03.2021] and judgment of the
Supreme Court in Dahiben -Vs.- Arvindbhai Kalyanji
Bhanusali (Gajra) and Others [(2020) 7 SCC 366].
He also opposes the application filed by respondent No.1
to release the schedule property on payment of
Rs.3,55,00,000/- as the application SA No.13/2014 filed
by respondent No.1 has been dismissed.
5. On the other hand, Sri. A.Ravishankar, learned
counsel for respondent No.1 would submit that respondent
No.1 is the owner of the schedule property which is
situated at No.27, 9th 'B' Cross road, Park Area, Wilson
Garden, Bengaluru - 560027, which was offered as
collateral security by the Partnership Firm M/s. D.Dasappa
to the creditor Lakshmi Vilas Bank for the loan availed by
the said Partnership Firm. There were several immovable
properties offered as security for the loan, in addition to
other guarantees for the availment of the said loan. The
loan availed became sticky and was classified as NPA
pursuant to which the creditor Lakshmi Vilas Bank
assigned their debt in favour of the respondent No.2. He
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stated that pursuant to the assignment, recovery actions
were initiated. The schedule property was also brought for
sale by respondent No.2 without the consent of
respondent No.1 and a private treaty was entered into by
respondent No.2 with the appellant. The schedule
property was proposed to be purchased by the appellant
as claimed by him, from the Asset Reconstruction
Company for a consideration of Rs.2,25,00,000/- and paid
a sum of Rs.50,00,000/-, as claimed by him in his
communication; however, consent or concurrence of
respondent No.1 was not taken for the alleged transaction.
Respondent No.2 again brought the property for a private
sale, wherein it appears that the respondent No.3 has paid
Rs.87,00,000/- towards sale of the house belonging to
respondent No.1. According to him, none of these
transactions were completed as balance amounts were not
deposited. No permission was sought before this Court to
deposit the balance sale consideration by any of the
proposed purchasers. He refers to the suit filed by the
appellant for specific performance, contending that he
entered into an agreement with respondent No.2 on
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01.02.2014 and that they should sell the property to him.
He also stated that upon suggestion by this Court for an
out of Court settlement, respondent No.1 moved the
respondent No.2 and a detailed letter from them dated
30.01.2023 was received by respondent No.1 indicating
that they would give up their claim over the schedule
property, provided respondent No.1 is ready to pay a sum
of Rs.3,55,00,000/-. The respondent No.1 has filed an
application before this Court on 04.03.2023 requesting the
Court to permit her to deposit the said money.
6. He stated that the letter of the respondent No.2
said to have been written to the appellant is not a
concluded contract and therefore, the appellant does not
get any right to enforce the said letter. He also stated
that the respondent No.2 has already communicated to
the respondent No.1 on 30.01.2023 informing that they
are ready to receive Rs.3,55,00,000/- and consequently,
the claim of the appellant and the respondent No.3 cannot
be sustained as there is no concluded contract with either
of them.
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7. Sri. Ravishankar has also stated that the
communication of the respondent No.2 dated 30.01.2023
would clearly indicate that they are prepared to issue 'no
dues letter' with respect to the schedule property upon
receipt of Rs.3,55,00,000/- from respondent No.1 as per
clause-10(xii) of the said communication. Therefore, any
amount to be repaid either to the appellant or to the
respondent No.3 herein will have to be borne by the
respondent No.2 alone, as they are the beneficiaries of the
said receipt of money. According to him, to have a
complete disposal of the dispute between the parties and
to reach a logical conclusion, it is necessary that this Court
direct the respondent No.2 to receive money from the 1st
respondent, as stated above, and thereafter to return the
money to the appellant and the respondent No.3 and
release the property in favour of the 1st respondent, in the
ends of equity and justice. He has relied upon the
judgment of the Supreme Court in the case of Cellular
Operators Association of India and Others -Vs.-
Union of India and Others [(2003) 3 SCC 186] to
contend that if the decision is made other than what the
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statute contemplates, the same would be in excess of its
jurisdiction. For similar proposition, he has also relied
upon the judgment of the Supreme Court in the case of
Union of India -Vs.- Tarachand Gupta and Bros.
[1971 (1) SCC 486]. He has also relied upon the
judgment of House of Lords in the case of Anisminic Ltd.
-Vs.- Foreign Compensation Commission and
Another to contend that the Courts or Tribunals cannot
exceed their jurisdiction beyond permissible limits under
the statutes.
8. According to him, in the instant case, the order of
the DRT so far relating to limitation and the correctness or
otherwise of the agreements are outside the scope of
Section 34 of the SARFAESI Act, as the statute permits the
DRTs to adjudicate regarding measures taken by the
creditors under Section 13 of the SARFAESI Act only.
Therefore, there is an error of jurisdiction amounting to
transgression of civil rights.
9. Sri. Abhinav.R, learned counsel appearing for
respondent No.2 would justify the order passed by the
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Trial Court in as much as, as per Section 34 of the
SARFAESI Act, there is an express bar to the jurisdiction of
the Civil Court, making it clear that no Civil Court will have
jurisdiction to entertain any suit or proceedings in respect
of any matter which a DRT or the Appellate Tribunal is
empowered by or under the Act to determine. The
expression 'in respect of any matter' includes 'measures'
taken under Section 13(4) of the SARFAESI Act. In this
regard, he has relied upon the judgment of the Supreme
Court in the case of Sree Anandhakumar Mills Limited
-Vs.- Indian Overseas Bank and Others and connected
appeal [(2019) 14 SCC 788], more specifically
paragraphs No.26 and 28 thereof.
10. That apart, Sri. Abhinav has also stated that
Section 35 of the SARFAESI Act makes a provision
whereby the provisions of the Act shall have effect
notwithstanding anything inconsistent contained in any
other law for the time being in force or any instrument
having effect by virtue of any such law. It was his
submission that Section 17 of the SARFAESI Act provides a
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remedy whereby any person aggrieved by any measures
taken by the secured creditor under Chapter-III may make
an application to the DRT. Section 17(4) specifies that if
the DRT declares the recourse taken by any secured
creditor under Section 13(4) is in accordance with the
provisions of the Act/Rules, no interference is called for.
The expression 'any person' includes the appellant in the
present appeal. This according to him, is in view of the
judgment of the Supreme Court in the case of Jagdish
Singh -Vs.- Heeralal and Others [(2014) 1 SCC 479].
11. Sri. Abhinav further stated that the action of
forfeiting the part amount paid by the defaulting purchaser
under Rule 9(5) of the SARFAESI Act constitutes a
measure under Section 13(4). The grievance of any
person in relation to such measure has to be adjudicated
by DRT which has been rightly done. According to him,
such grievance cannot be addressed or brought before the
Civil Court. In this regard, he has relied upon the
judgment of the Supreme Court in the case of Agarwal
Tracom Private Limited -Vs.- Punjab National Bank
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and Others [(2018) 1 SCC 626]. Additionally, he
stated that if any such amount is required to be forfeited,
the same cannot be scrutinized wearing the glasses of
misplaced sympathy. In this regard, he has relied upon
the judgment of the Supreme Court in the case of State
Bank of India -Vs.- C. Natarajan and Another [2023
SCC OnLine SC 510]. That apart, it is his submission
that Section 18 of the SARFAESI Act provides for an
appeal to the Appellate Tribunal which can be preferred by
any person aggrieved by any order of the DRT under
Section 17. Admittedly, the appellant herein has not
challenged the order passed on the application filed by him
under Section 17 of the SARFAESI Act before the DRAT.
12. The related submission of Sri. Abhinav is in view
of the above, the jurisdiction of the Civil Court in respect
of suit filed by the appellant for specific performance to
enforce the sale agreement, is without jurisdiction.
According to him, if the sale agreement/sale transaction is
prior to the seller/owner offering the property in question
as a security interest in relation to any loan transaction or
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financial facility, then the jurisdiction of the Civil Court is
not barred to consider the claim for enforcement of such
sale agreement. He also stated that if the subject matter
of the sale transaction had been offered as a security
interest within the meaning of Section 2(zf) of the
SARFAESI Act, then the sale transaction is subject to the
rights of the secured creditor [as defined under Section
2(zd)] and therefore, in relation to such properties, the
jurisdiction of the Civil Court would be barred once the
secured creditor initiates action under Chapter-III/Section
13 of the SARFAESI Act. This would also be necessary to
protect the interest of the secured creditor and to preserve
the purpose and objectives behind the SARFAESI Act.
13. Sri. Abhinav has also justified the impugned
order passed by the Trial Court, wherein it is stated that
(i) the appellant has clearly admitted in the plaint that he
had approached the DRT when he came to know about the
refusal of the 2nd defendant to conclude the sale
transaction when the notice under Section 13(4) of the
SARFAESI Act was affixed on the property; (ii) the
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appellant has further stated in the plaint that he had filed
SA No.69/2018 before the DRT which was rejected by an
order dated 23.04.2018.
14. Similar submission was made by Sri. Abhinav to
contend that the appellant has admitted that respondent
No.2 has taken over the possession of the schedule
property. It was also his submission that the cause of
action according to the appellant, arose on 01.02.2014
and as such, the prayer (c) to direct the defendants to
deliver possession of the schedule property is barred by
limitation. That apart, he has also relied upon the
following observations made by the DRT while rejecting
the application of the appellant:
(i) The agreement is non-est in the eyes of law;
(ii) The period of limitation prescribed for
enforcement of the agreement or the refund is
barred by the law of limitation;
(iii) That the respondent has forfeited the advance
amount and cancelled the agreement as the
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appellant has failed to pay the balance sale
consideration.
Thus, according to him, in the absence of any challenge to
the order of the DRT, the order dated 23.04.2018 has
attained finality. As such, the matter once adjudicated, is
not maintainable before a Civil Court and is liable to be
dismissed. In this regard, he has relied upon the
judgment of the Supreme Court in the case of Charu
Kishor Mehta -Vs.- Prakash Patel and Others [2022
SCC OnLine SC 1962].
15. He has also stated that the suit is undoubtedly
barred under the provisions of the SARFAESI Act in the
present context on the ground: (a) schedule property has
been offered as a security interest on the basis of
which the respondent No.2/secured creditor has extended
loan/financial facility; (b) the proposal to sell the schedule
property is in furtherance of the measures initiated by
respondent No.2 pursuant to Section 13(4) of the
SARFAESI Act and Rule 8(5) of the SARFAESI Rules; (c)
the appellant having put forward his claim as prospective
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buyer and his possession in part performance, the same
was rejected by the DRT which had attained finality; (d)
the prayers sought in the suit are nothing but a second
round of litigation after having faced the ignominy of
rejection of his claim before the DRT; (e) the prayers
sought for, interfere with the rights of the secured creditor
to proceed against the schedule property (security
interest) and the respondent No.2 would be required to
deliver back possession of the schedule property which is
secured under Sections 13 and 14 of the SARFAESI Act;
and (f) the claim of the appellant has been found to be
barred by law.
16. He stated, Article 54 of the Limitation Act deals
with limitation in relation to action for specific
performance. The said Section comprises of two parts and
the limitation begins to run either from the date fixed for
specific performance or the date on which the plaintiff has
notice of the defendant's refusal to perform as per the
contract. In the instant case, admittedly, the sale was
required to be concluded on 15.02.2014. Therefore, the
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first limb of Article 54 would kick in as period of limitation
would commence from 16.02.2014. The claim for specific
performance or alternative reliefs such as refund/damages
as envisaged under the Specific Relief Act, 1963 were
required to be initiated on or before 15.02.2017.
Therefore, the Trial Court was absolutely right in holding
that the prayers for specific performance and other
alternative/consequential prayers such as refund,
damages, possession, etc., are all barred by limitation. In
the end, he stated, it is well settled law that the right to
choose forum for redressal of grievance does not permit
choice of two forums for the same reliefs. He also stated
that the judgments relied upon by Sri. Rao have no
applicability in the facts of this case. He stated that clever
drafting creating illusions of cause of action are not
permitted in law and frivolous litigation is required to be
immediately terminated/put to an end. In this regard, he
has relied upon the judgment of the Supreme Court in the
case of T. Arivandandam -Vs.- T.V. Satyapal and
Another [(1977) 4 SCC 467]. He seeks dismissal of the
appeal.
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17. The respondent No.3, who has been impleaded,
has also filed his written submissions through his counsel
viz., Sri. S.Gajendra. According to the counsel, pursuant
to respondent No.2 issuing a public notice for e-auction of
the sale of schedule property during the month of October
2020, respondent No.3 had participated in the same. The
respondent No.2 had confirmed that the respondent No.3
is the highest bidder for the sale of secured assets
mortgaged by the 1st respondent for the financial
assistance availed by M/s. Dasappa under the provisions of
the SARFAESI Act read with Security Interest
(Enforcement) Rules, 2002 ('Enforcement Rules' for short)
at a price of Rs.3,55,00,000/-. The respondent No.3 paid
a sum of Rs.35,00,000/- to the respondent No.2 as
earnest money deposit (EMD) to participate in the
e-auction. Respondent No.3 had also deposited
Rs.53,75,000/- with the respondent No.2 on 18.11.2020,
in total Rs.88,75,000/- which is 25% of the bid amount in
terms of the bid document. Respondent No.2 has issued
the receipt dated 19.11.2020 for the same and also
directed to arrange for the balance amount of
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Rs.2,66,25,000/- on or before 04.12.2020 so as to
complete the transaction. The respondent No.2 had not
informed the disputes between the 1st and the respondent
No.2 and also the pendency of the present appeal till
March 2021. The schedule property is the adjacent
property of the respondent No.3. Hence, the respondent
No.3 had decided to participate in the auction. After
confirmation that the respondent No.3 is the highest
bidder, he sold an industrial land situated at Kumbalagodu
Village, Kengeri Hobli, Bengaluru South Taluk, Bengaluru
District for lesser value in order to purchase the schedule
property. The respondent No.3 had deposited a sum of
Rs.1,60,00,000/- as capital gains in the bank account. A
reference is also made in the written submissions that the
respondent No.3 had sold the equity shares for an amount
of Rs.48,33,955/- against the market value of
Rs.1,62,00,000/-. Since the adjacent property of the
schedule property belongs to the respondent No.3, he had
decided to demolish the existing structure and planned to
construct office-cum-residence in the schedule property as
well as the neighbouring property belonging to him. The
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respondent No.3 had insisted for the registration of the
schedule property with the respondent No.2 from
December 2020 to March 2021, but the respondent No.2
had not informed about the pendency of RFA before this
Court to the respondent No.3. He would state that the
respondent No.3 being a bonafide purchaser in the auction
sale, has to be treated differently than a decree holder
purchasing such properties. In this regard, he has relied
upon the judgment of the Supreme Court in the case of
Ashwin S.Mehta and Another -Vs.- Custodian and
Others [(2006) 2 SCC 385], more specifically paragraph
No.70 thereof. He stated that the respondent No.3 has
also got vacated the tenants in his existing building as he
has plans to construct new building along with the
schedule property. His submission is, in view of the
above, the rights of the respondent No.3 as a successful
bidder in an auction, should be protected and also
respondent No.2 should be directed to issue sale certificate
in respect of the schedule property in favour of the
respondent No.3. He seeks dismissal of the appeal with
costs.
- 28 -
Analysis:
18. Having heard the learned counsel for the parties
and perused the record, the short issue which arises for
consideration is, whether the Trial Court is right in allowing
the application filed by respondent No.2 herein under
Order VII Rule 11 read with Section 151 of CPC, thereby
rejecting the plaint filed by the appellant herein?
19. The application filed by respondent No.2 was
primarily on two grounds:
(i) that the suit is barred in law in view of Section 34 of
the SARFAESI Act;
(ii) it is barred by law of limitation.
20. The plea of respondent No.1 in the application in
respect of (i) above was accepted by the Trial Court and
answered in the affirmative. Whereas ground No.(ii) is
concerned, the same was answered in negative i.e.,
against the applicant/respondent No.2 as it has held that,
the prayers made are within limitation.
- 29 -
21. The law in respect of scope of application filed
under Order VII Rule 11 of CPC is well settled. The Trial
Court has rightly captured the legal position that the
averments made in the plaint are only required to be
looked into while deciding the application Order VII Rule
11 of CPC.
22. It may be stated, the remedy under Order VII
Rule 11, CPC is an independent and special remedy
wherein the Court is within its power to dismiss a suit at
the threshold without proceeding to hold trial, on the basis
of the evidence adduced, if it is satisfied that the action
should be terminated on any of the ground contained in
the said provision.
23. It is also settled position that such power
conferred on the Court leading to termination of a civil
action, has to be strictly adhered to.
24. In the case in hand, the Trial Court has accepted
the plea of respondent No.2 herein by interalia holding
that the suit is barred under Section 34 of the SARFAESI
Act. In other words, the plaint has been rejected under
- 30 -
Order VII Rule 11(d), CPC and not under any other
provisions of Order VII Rule 11 of CPC.
25. At this stage, it need to be stated here that it is
settled law that a plaint cannot be rejected in part (Ref:
Geetha and Others -Vs.- Nanjundaswamy and Others
reported in 2023 SCC OnLine 1407). It follows, for
allowing an application under Order VII Rule 11 of CPC, it
must be held that all the prayers sought in the suit are
barred by law.
26. Having said that, it is necessary to reproduce the
prayers made by the appellant in the plaint:
a) To grant a decree of Specific Performance of the
suit agreement dated 01.02.2014 by directing the
defendants jointly to execute the sale deed within
the time to be stipulated by this Court in favour of
the plaintiff against the receipt of the balance sale
consideration by the 2nd defendant; for and on
behalf of the 1st defendant after allowing lawful
expenses incurred by the plaintiff.
b) That in the event of the failure on the part of the
defendants to execute the sale deed within the
time to be stipulated by this court against the
payment of the balance sale consideration after
defraying lawful expenses and court costs, this
- 31 -
court be pleased to permit the plaintiff to deposit
the balance sale consideration in Court and to
execute the sale deed on behalf of the defendants
in terms of the suit agreement contract dated
01.02.2014 Urough the Court Commissioner,
c) To direct the defendants to deliver possession of
the schedule property to the plaintiff within the
time to be stipulated by this court, failing which
the court be pleased to appoint a Court
Commissioner to take possession of the schedule
property by the plaintiff.
d) That if for any reason this court were to come to
the conclusion that not withstanding that the
plaintiff has established the case of Specific
Performance, but in terms of equities, the plaintiff
is not entitled for obtaining the Specific
Performance of the suit agreement dated
01.02.2014, this court be pleased to grant a
decree against the defendant No.2 for a sum of
Rs.50,00,000/- (Rupees fifty lakhs only) being the
advance amount paid under the suit agreement
and further to grant a compensation of
Rs.1,50,00,000/- (Rupees one Crore fifty lakhs
only) against the 2nd defendant; and to award
interest at the rate of 24% on the amount so
awarded from the date of the suit till the date of
realization on the amount awarded.
e) Then the event of this court were to grant anу
mоnеу decree, this court be pleased to order
- 32 -
charge on the schedule property under Section
100 of the Transfer of Property Act until the due
discharge of the decreetal amount.
f) To grant such other relief/s
g) To award costs of the above suit."
27. The prayers above, reveals that the suit has been
filed for specific performance of agreement dated
01.02.2014; for execution of the sale deed; possession;
recovery of advance amount and further grant of
compensation of Rs.1,50,00,000/-.
28. The appellant had approached the DRT by filing
an application being SA No.69/2018 under Section 17(1)
of the SARFAESI Act challenging the possession notice
dated 09.03.2018. The appellant had not challenged
either the measures taken by respondent No.2 for
auctioning the property nor he has sought amendment of
the prayers in the application seeking/challenging sale
transaction, forfeiture of amount. On a reading of Section
17 of SARFAESI Act, which we reproduce as under, it is
clear that it provides for a remedy to "any person" also
who is aggrieved by the measures taken by the secured
- 33 -
creditor under Section 13(4)/enforcement rules in relation
to the secured assets of the borrower. These measures
include the issuance of demand notice, sale of immovable
property, confirmation of sale, issuance of sale certificate,
delivery of possession and also forfeiting the deposit:
"17. Application against measures to
recover secured debts. -- (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,1 [may make an
application along with such fee, as may be
prescribed,] to the Debts Recovery Tribunal having
jurisdiction in the matter within fortyfive 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.
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.
- 34 -
(1A) An application under sub-section (1) shall
be filed before the Debts Recovery Tribunal within
the local limits of whose jurisdiction--
(a) the cause of action, wholly or in part,
arises;
(b) where the secured asset is located; or
(c) the branch or any other office of a bank or
financial institution is maintaining an
account in which debt claimed is
outstanding for the time being.
(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 or restoration of
possession, of the secured assets to the borrower or
other aggrieved person, it may, by order,--
(a) declare the recourse to any one or more
measures referred to in sub-section (4) of
section 13 taken by the secured creditor as
invalid; and
- 35 -
(b) restore the possession of secured assets or
management of secured assets to the
borrower or such other aggrieved person,
who has made an application under sub-
section (1), as the case may be; and
(c) pass such other direction 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.
(4A) Where--
(i) any person, in an application under sub-
section (1), claims any tenancy or leasehold rights
upon the secured asset, the Debt Recovery Tribunal,
after examining the facts of the case and evidence
produced by the parties in relation to such claims
shall, for the purposes of enforcement of security
interest, have the jurisdiction to examine whether
lease or tenancy,--
(a) has expired or stood determined; or
(b) is contrary to section 65A of the Transfer of
Property Act, 1882 (4 of 1882); or
- 36 -
(c) is contrary to terms of mortgage; or
(d) is created after the issuance of notice of
default and demand by the Bank under
subsection (2) of section 13 of the Act; and
(ii) the Debt Recovery Tribunal is satisfied that
tenancy right or leasehold rights claimed in secured
asset falls under the sub-clause (a) or sub-clause (b)
or sub-clause (c) or sub-clause (d) of clause (i), then
notwithstanding anything to the contrary contained
in any other law for the time being in force, the Debt
Recovery Tribunal may pass such order as it deems
fit in accordance with the provisions of this Act.
(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 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
- 37 -
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 (51 of 1993) and
the rules made thereunder."
29. The Section 34 of the SARFAESI Act, which we
reproduce as under, contemplates no Civil Court can hear
any suit or proceedings related to matters that DRT or the
Appellate Tribunal is empowered to decide:
"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)."
- 38 -
30. The issue before the Trial Court was whether the
appellant should have approached the DRT for the prayers
made in the suit.
31. Sri. Abhinav's submission is that the prayer for
specific performance is primarily made to enforce a sale
agreement dated 01.02.2014. According to him, in the
absence of challenge to the sale transaction/forfeiture of
the amount and even to the order in SA No.69/2018 filed
by the appellant challenging the notice dated 09.03.2018,
the same having attained finality, the prayer for specific
performance cannot be entertained by the Civil Court as
the sale of property is a measure contemplated under
Section 13(4)/enforcement rules. It was his submission
that, forfeiture of advance for which a prayer for refund
has been made by the appellant in the suit would also be
the subject matter before the DRT and as such, the said
prayer is also hit by Section 34 of the SARFAESI Act. The
submissions of Sri. Abhinav though are appealing on a first
blush, but on a deeper consideration it is noted, not all the
prayers as have been made by the appellant in the suit
- 39 -
would be hit by Section 34 of the SARFAESI Act. This we
say so because, the appellant has, in the alternative to the
prayer for specific performance, sought compensation
[prayer (d)], which is a prayer akin to damages. It is not
the submission of Sri. Abhinav, that if the appellant had
challenged the sale transaction/forfeiture of advance, he
could have also sought compensation/damages before the
DRT. In other words, the prayer for compensation/
damages could not have been sought before the DRT. It
follows, the claim for compensation in alternative, could
only be sought before the Civil Court, even if other prayers
for specific performance, possession, refund could be
claimed before DRT. In that sense, the Trial Court could
not have rejected the suit by invoking Order VII Rule
11(d) of CPC as it is well settled law that a Court while
considering an application under Order VII Rule 11 of CPC,
cannot reject a plaint in part even if some of the prayers
made by the plaintiff are hit by the provisions of law. In
this regard, we refer to the following paragraph of the
judgment of the Supreme Court in the case of Geetha
and Others (supra):
- 40 -
"12. There is yet another reason why the
judgment of the High Court is not sustainable. In an
application under Order VII Rule 11, CPC a plaint
cannot be rejected in part. This principle is well
established and has been continuously followed since
the 1936 decision in Maqsud Ahmad v. Mathra Datt &
Co. [AIR 1936 Lah 1021]. This principle is also
explained in a recent decision of this Court in Sejal
Glass Ltd. v. Navilan Merchants (P) Ltd. [(2018) 11
SCC 780], which was again followed in Madhav
Prasad Aggarwal v. Axis Bank Ltd. [(2019) 7 SCC
158]. The relevant portion of Madhav Prasad (supra)
is extracted hereinunder:
"10. We do not deem it necessary to
elaborate on all other arguments as we are
inclined to accept the objection of the
appellant(s) that the relief of rejection of
plaint in exercise of powers under Order 7
Rule 11(d) CPC cannot be pursued only in
respect of one of the defendant(s). In other
words, the plaint has to be rejected as a
whole or not at all, in exercise of power
under Order 7 Rule 11(d) CPC. Indeed, the
learned Single Judge rejected this objection
raised by the appellant(s) by relying on the
decision of the Division Bench of the same
High Court. However, we find that the
decision of this Court in Sejal Glass Ltd.
[Sejal Glass Ltd. v. Navilan Merchants (P)
Ltd., (2018) 11 SCC 780 : (2018) 5 SCC
(Civ) 256] is directly on the point. In that
case, an application was filed by the
defendant(s) under Order 7 Rule 11(d) CPC
stating that the plaint disclosed no cause of
action. The civil court held that the plaint is
to be bifurcated as it did not disclose any
cause of action against the Director's
Defendant(s) 2 to 4 therein. On that basis,
- 41 -
the High Court had opined that the suit can
continue against Defendant 1 company
alone. The question considered by this
Court was whether such a course is open to
the civil court in exercise of powers under
Order 7 Rule 11(d) CPC. The Court
answered the said question in the negative
by adverting to several decisions on the
point which had consistently held that the
plaint can either be rejected as a whole or
not at all. The Court held that it is not
permissible to reject plaint qua any
particular portion of a plaint including
against some of the defendant(s) and
continue the same against the others. In no
uncertain terms the Court has held that if
the plaint survives against certain
defendant(s) and/or properties, Order 7
Rule 11(d) CPC will have no application at
all, and the suit as a whole must then
proceed to trial.
... ... ...
12. Indubitably, the plaint can and
must be rejected in exercise of powers
under Order 7 Rule 11(d) CPC on account of
non-compliance with mandatory
requirements or being replete with any
institutional deficiency at the time of
presentation of the plaint, ascribable to
clauses (a) to (f) of Rule 11 of Order 7 CPC.
In other words, the plaint as presented
must proceed as a whole or can be rejected
as a whole but not in part..."
(emphasis supplied)"
The only way forward is, the issues need to be framed,
including the issue of maintainability, which shall be a
preliminary issue. In fact, the reliance placed by
- 42 -
Sri. Abhinav on the judgment of the Supreme Court in the
case of Jagdish Singh (supra) is a case, where the order
impugned for before the Supreme Court was an order of
possession granted by the Court below under Order VII
Rule 11, but on a finding on preliminary objection, after
framing of the issues including that the suit is barred
under the provisions of law i.e., Order VII Rule 11(d). It is
not to say that respondent No.2 cannot plead in the facts,
the appellant shall not be entitled to
compensation/damages, but such a plea is only available
while rendering the decision in the suit and not on an
application under order VII Rule 11, CPC in view of the
above position of law.
32. The issue can be looked from another angle i.e.,
if the appellant had filed a suit claiming damages without
the prayers for specific performance, refund of money or
possession, the suit would have been maintainable as a
claim for compensation/damages shall not lie before the
DRT being not a measure contemplated under Section
- 43 -
13(4) of the SARFAESI Act or under the enforcement
rules.
33. Though Sri. Abhinav had also made submissions
that the prayers sought are beyond limitation, suffice to
say on that the Trial Court has held that, the prayers
including that of compensation are within limitation. The
said finding is not under challenge by the respondent No.2
and as such, need to be rejected.
34. Insofar as the judgments relied upon by Sri.
Abhinav are concerned, in the case of Sree
Anandhakumar Mills Limited (supra), the Supreme
Court was concerned with facts wherein respondent No.2
has filed a suit for partition. It was held that the bar
under Section 34 of the SARFAESI Act shall affect the
maintainability of the suit. The Supreme Court followed its
earlier judgment in the case of Jagdish Singh (supra)
and set aside the order of the High Court by granting
liberty to respondent No.2 to approach the DRT. The said
judgment has no applicability to the facts of this case and
also in view of our findings above.
- 44 -
35. In the case of Agarwal Tracom Private
Limited (supra), the issue was on the maintainability of
the writ petition filed by the appellant challenging the
auction procedure and forfeiture of appellant's deposit
money. The writ petition was dismissed by the Single
Judge, which order was confirmed in an intra-court appeal.
The Supreme Court has dismissed the appeal by granting
liberty to the appellant to approach the DRT. Suffice to
state that, the judgment has no applicability to the issue
which arises for consideration in this appeal and also in
view of our findings above.
36. In the case of Charu Kishor Mehta (supra), the
SLP was filed by the petitioner challenging the order dated
13.06.2022 passed by the High Court in first appeal. The
appeal was against the order passed on an application
filed by the defendant/respondent under Order VII Rule
11, CPC which application was accepted and the plaint was
rejected. Suffice to state that the suit was filed by the
petitioner with the following prayers:
"(i) Declaration that the Defendant Nos. 1 and 2 are
not entitled to participate in the auction
- 45 -
proceedings conducted by DRT in respect of the
suit premises.
(ii) To restrain Defendant Nos. 1 and 2 from
participating in the auction proceedings.
(iii) To restrain Defendant Nos. 1 and 2 from
executing any documents from transfer of the suit
premises in favour of their nominee or acquire any
interest or right in the suit premises.
(iv) ... ... ... ."
The application was allowed on the ground that the
petitioner had approached the DRT and Deputy Registrar,
Co-operative Societies raising objection to the auction
proceedings as well as to the subsequent transfer of the
suit premises in favour of the successful bidder and the
suit is only for nullifying the effectiveness and operation of
the auction proceedings. The Trial Court held that bar
under Section 34 of the SARFAESI Act shall be applicable.
The Supreme Court while dismissing the SLP, has granted
liberty to the petitioner to approach the DRT. The said
judgment is not applicable to the facts of this case,
moreso in view of our findings above.
- 46 -
37. In view of our above discussion/conclusion, the
appeal filed by the appellant is allowed with the following
directions:
i) We set aside the order dated 07.09.2018
passed by the Court of LIX Addl. City Civil
and Sessions Judge, Bengaluru City on
IA No.III in OS No.3496/2018;
ii) The suit OS No.3496/2018 is restored on the
file of LIX Addl. City Civil and Sessions
Judge, Bengaluru City; the Court shall
proceed with the suit in accordance with law;
iii) The interim order dated 13.08.2020 passed
by this Court shall continue till the parties
appear before the Trial Court on
19.11.2024, when the Trial Court shall hear
the counsel for the parties on the
continuance of the interim order and pass
appropriate orders in respect of the same in
accordance with law;
iv) Respondent No.3, who was impleaded in
these proceedings, shall be impleaded by the
appellant/plaintiff in the suit by amending
the memo of parties in the suit and also by
filing a fresh memo of parties in the suit;
- 47 -
v) The IA No.1/2023 filed by respondent No.1
in this appeal is closed, granting liberty to
the respondent No.1 to file similar
application for the consideration of the Trial
Court;
vi) Liberty is also granted to the parties to file
such application with such prayers as deem
appropriate for the consideration of the Trial
Court and it goes without saying the Trial
Court shall decide the same in accordance
with law;
vii) The Trial Court records be sent back
forthwith.
Other pending IAs, if any, do not survive for
consideration and they stand disposed of.
No costs.
Sd/-
(V KAMESWAR RAO)
JUDGE
Sd/-
(C M JOSHI)
JUDGE
PA
