Karnataka High Court
Sri K T Govinde Gowda vs The Industrial Development Bank Of ... on 4 September, 2025
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
®
DATED THIS THE 04TH DAY OF SEPTEMBER, 2025
PRESENT
THE HON'BLE MRS. JUSTICE ANU SIVARAMAN
AND
THE HON'BLE DR. JUSTICE K.MANMADHA RAO
COMMERCIAL APPEAL No.207 OF 2021
BETWEEN:
1. SRI K.T.GOVINDE GOWDA
S/O LATE THIMME GOWDA,
AGED ABOUT 72 YEARS,
2. SMT. G.ANURADHA
W/O SRI. K.T.GOVINDE GOWDA,
AGED ABOUT 62 YEARS,
BOTH ARE RESIDING AT NO.341,
16TH MAIN, M.C.LAYOUT,
VIJAYANAGAR,
BANGALORE-560 040.
...APPELLANTS
(BY SRI. AJESH KUMAR S A/W SRI DILEEP C.G. AND
MS. AMANDA CHAKRAVARTI, ADVOCATE)
AND:
1. THE INDUSTRIAL DEVELOPMENT
BANK OF INDIA [I.D.B.I.]
ABIDS BRANCH, HOUSE NO.5-9-89/1 & 2,
3RD FLOOR, OPPOSITE: LATIF COMPLEX,
CHAPEL ROAD, ABIDS,
HYDERABAD-500 001
REPRESENTED BY ITS DGM-ICG
2. THE COASTAL PROJECTS LIMITED
[A DULY REGISTERED COMPANY UNDER
2
COMPANIES ACT]
HAVING ITS REGISTERED OFFICE AT
[I] PLOT NO.304-0, ROAD NO.78,
FILM NAGAR, JUBILEE HILLS,
HYDERABAD-500 033
ANDHRA PRADESH
REPRESENTED BY ITS MANAGING DIRECTOR
SRI. SABBINENI SURENDRA OR ITS NOMINEE.
[II] AND HAVING ITS REGIONAL OFFICE NEAR
VIKRAM TRINETRA LANDMARK,
NO.3072, 14TH CROSS OF K.R.ROAD,
SHASTRINAGAR, BANASHANKARI II STAGE,
BANGALORE-560 069.
3. M/S. SARAF POLY SYNTHETICS PRIVATE LIMITED
HAVING ITS REGISTERED OFFICE
AT NO.3, 3RD CROSS,
LALBAGH ROAD, BANGALORE-560027
REP. BY ITS DIRECTOR,
SRI CHANDRA PRAKASH RAMSISARIA.
...RESPONDENTS
(BY SRI. T.P.MUTHANNA, ADVOCATE FOR R-1;
SRI. PARAS JAIN, ADVOCATE FOR R-3;
NOTICE TO R-2 IS SERVED ON THE FIRST ADDRESS
i.e., ANDHRA PRADESH AND UNREPRESENTED)
THIS COMMERCIAL APPEAL IS FILED UNDER SECTION
13(1A) OF THE COMMERCIAL COURTS ACT, 2015, PRAYING TO
A] CALL FOR RECORDS IN COM.O.S.NO.580/2021 (OLD
O.S.NO.895/2018) ON THE FILE OF HON'BLE X ADDITIONAL
DISTRICT AND SESSIONS JUDGE, BENGALURU RURAL DISTRICT,
BENGALURU AND SET ASIDE THE ORDER DATED 07.04.2021
PASSED IN COM.O.S.NO.580/2021 DISMISSING THE SUIT UNDER
ORDER 7 RULE 11(d) OF CPC AND ETC.
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 01.07.2025 AND COMING ON FOR
PRONOUNCEMENT OF JUDGMENT, THIS DAY, DR. K.MANMADHA
RAO, J., PRONOUNCED THE FOLLOWING:
3
CORAM: HON'BLE MRS. JUSTICE ANU SIVARAMAN
and
HON'BLE DR. JUSTICE K.MANMADHA RAO
CAV JUDGMENT
(PER: HON'BLE DR. JUSTICE K.MANMADHA RAO)
The present Commercial Appeal No.207/2021 is filed by
the Appellants/Plaintiffs challenging the judgment and decree
dated 07.04.2021 passed in Com.O.S.No.580/2021, by the X
Addl. District & Sessions Judge, (Commercial Court)
Bengaluru (hereinafter referred to as 'the Commercial Court').
2. The appellants herein are the plaintiffs and the
respondents herein are the defendants in
Com.O.S.No.580/2021 before the Commercial Court.
3. For convenience of reference, the parties are
hereinafter referred to as arrayed before the Commercial
Court in Comm.O.S.No.580/2021.
4. The appellants/plaintiffs filed the Commercial
Original Suit seeking the following prayers:-
[a] Declare that the Draft/Preliminary
Guarantee Agreement along with annexed
Declaration cum Undertaking Letter dated
10/06/2013 produced as Annexure-B & C, will not
constitute as MORTGAGE DEED in respect of
Lands in Sy.No.124/6 of Karivobanahalli Village,
Yeswanthapura Hobil, Bangalore North Taluk,
measuring 7 Acres 20 guntas pertaining to the Joan
availed by Defendant No.2 from Defendant No:1
Bank.
[b] Declare that the Plaintiffs are not
GUARANTORS OR SURETIES and/or have not
created any SECURITY INTEREST in favour of
Defendant No.1 Bank under the Draft/Preliminary
Guarantee Agreement dated 10/06/2013 along with
annexed Declaration cum Undertaking Letter dated
10/06/2013 produced as Annexure-B & C and are
not liable under the above documents or any other
documents in respect of short term loan availed by
the Defendant No.2 from Defendant No.1 Bank.
[c] Consequently for a Mandatory Injunction
directing the Defendant No.1 to return all the
Original Title Deeds and other connected
documents to the Plaintiffs pertaining to Lands in
Sy.No.124/6 of Karivobanahalli Village,
Yeswanthapura Hobli, Bangalore North Taluk,
measuring 7 Acres 20 guntas which are owned and
possessed by the Plaintiffs.
[d] For a Permanent Injunction restraining the
Defendants 1 & 2 by themselves or any one else
claiming through or under them in any way
alienating, encumbering or auctioning the same to
anyone.
5. The case of the plaintiffs is that the plaintiffs are
the absolute owners in possession and enjoyment of land
bearing Sy.No.124/6 measuring 7 acres 20 guntas situated at
Karivobanahalli Village, Yeshwanthpura Hobli, Bangalore,
North Taluk. On 10.04.2013, the representatives of defendant
No.2 - Company registered under the Companies Act, namely
Shri Surendra (Managing Director), Shri C. Suresh Babu
(Proprietor of Uma Associates), Sri Shivayogi, Sri Ravindra,
and Sri Ranganath, approached the Plaintiffs requesting them
to act as guarantors for a short-term loan for a period of one
year to be availed from Defendant No.1- Bank for Bangalore
metro Rail Corporation (BMRCL)-related projects. Based on
trust and discussions held repeatedly, particularly at Uma
Associates, Bangalore, and on 10.04.2013, the plaintiffs
handed over all original title deeds and documents pertaining
to the said land to Defendant No.2, which were thereafter
submitted to Defendant No.1 through Defendant No.2.
6. On 10.06.2013, the representatives of Defendant
No.2 took the plaintiffs along with Sri D.J. Nagaraj to the
office of Defendant No.1 - Bank at Hyderabad around 8:30
PM, where the plaintiffs were made to sign unfilled printed
documents labelled as Draft/Preliminary Guarantee
Agreement and Declaration cum Undertaking Letter. The
plaintiffs assert that these signatures were obtained without
the presence of any officials or witnesses from Defendant
No.1 Bank. Thereafter, Defendants No.1 and 2 colluded and
converted the unsigned preliminary drafts into fully executed
Guarantee Agreements without the plaintiffs' knowledge,
consent, or presence, thereby creating self-styled documents.
7. The Plaintiffs were not provided copies of the said
documents despite repeated requests. On 24/02/2016, the
Plaintiffs filed an RTI Application with Defendant No.1 seeking
copies of (i) loan applications submitted by Defendant No.2,
(ii) collateral surety applications, and (iii) all other related
documents. In response, on 10.03.2016, only the copies of
the Draft/Preliminary Guarantee Agreement and Declaration
cum Undertaking Letter were provided. The plaintiffs
discovered that these were on undervalued stamp papers and
notarized without their presence, with no entries in the notary
register, further substantiating their claims of fraud and
collusion by the Defendants.
8. Upon review, the plaintiffs observed multiple
defects in the documents. Notably, (a) no loan account
number was mentioned; (b) terms of disbursement after
registration of mortgage within 3 months were absent; (c)
terms and conditions of the Facilities Agreement between
Defendants No.1 and 2 were not disclosed to plaintiffs. The
documents were allegedly signed at 8:30 pm under
inadequate lighting and heavy rainfall, not before any Notary
or bank official. The plaintiffs state that these documents
were never intended to be final or enforceable and are not
binding under the Indian Contract Act, Transfer of Property
Act, Registration Act, and Karnataka Stamp Act.
9. On 24.06.2014, the plaintiffs issued a letter
(Annexure-E) to both defendants, withdrawing their consent
to the Draft/Preliminary Guarantee Agreement and
Declaration cum Undertaking Letter and demanded return of
original title deeds. In response, on 19.07.2014, Defendant
No.1 sent a letter to Defendant No.2 (copy to Plaintiffs)
asking them to clear outstanding dues or substitute the
collateral property (Annexure-F). Further reminder letters
were sent by the plaintiffs on 21.02.2016 and 22.02.2016,
again seeking discharge from the preliminary documents and
return of title deeds. Despite these efforts, Defendants failed
to respond or return the documents.
10. The Plaintiffs clarify that the Guarantee Agreement
and Declaration were conditional, requiring registration of
mortgage within 3 months from 10.06.2013. As the mortgage
was not executed by 10.09.2013, the documents ceased to
be valid. Plaintiffs did not execute any security agreement or
create any security interest over their lands. They emphasize
that under Clause 8 of the Declaration (Annexure-C), the
mortgage had to be executed within three months or by an
extended date permitted by IDBI in writing, which was never
done. Further, defendant No.1 Bank failed to initiate any legal
action within three years from the withdrawal letter dated
24.06.2014.
11. Without possessing mortgage or guarantee rights,
defendant No.1 Bank published a Demand Notice dated
04.01.2018 in The Hindu newspaper on 05.01.2018
(Annexure-G). Plaintiffs issued a Legal Notice under Rule 3A
of the SARFAESI Rules on 09.02.2018 (Annexure-H), which
was replied to by the Bank on 23.02.2018 (Annexure-J)
without furnishing required documents. Plaintiffs state they
did not receive Possession Notice under Rule 8(1), yet
Defendant No.1 published it on 07.02.2018 in The New Indian
Express (Annexure-K), followed by an E-Auction Sale Notice
dated 10.02.2018 in Prajavani, scheduling auction for
14.03.2018 (Annexure-L).
12. Aggrieved by the illegal action, the plaintiffs filed
S.A. No.102/2018 before the DRT, which was dismissed as
infructuous after the auction did not proceed. The Plaintiffs
contend that this dispute pertains to civil rights governed by
the CPC and not under the purview of SARFAESI Act. They
maintain that the land, although temporarily converted,
reverted to its agricultural status due to non-utilization, and
the Bank has no locus standi under the SARFAESI Act or any
other statute. Hence, they have instituted this declaratory
suit within the territorial jurisdiction of the appropriate civil
court.
13. The defendant No.1 filed written statement before
the Commercial Court while denying the allegations made in
the plaint. The defendant No.1 states that the Guarantee
Agreement and Declaration cum Undertaking were lawfully
executed and duly acted upon. Defendant No.1 asserts that
all documentation was completed in accordance with law, and
the plaintiffs signed the documents voluntarily. It is
contended that the Guarantee Agreement and Declaration
cum undertaking dated 10.06.2013 were neither forged nor
invalid and are enforceable under law.
14. It is submitted that Defendant No.1, pursuant to
the RTI application filed by the plaintiffs dated 24.02.2016,
furnished the required documents to the Plaintiffs. However,
by letter dated 19.07.2014 addressed to Defendant No.2
(copy marked to Plaintiffs), Defendant No.1 clarified that such
withdrawal letter dated 24.06.2014, filed by the plaintiffs
could not take effect unless proper and acceptable substitute
security was furnished. As no such substitution occurred, the
guarantee and mortgage continued to subsist and remained
binding on the plaintiffs.
15. The defendant No.2 availed loans amounting to
Rs.237.98 Crores from defendant No.1, secured inter alia by
hypothecation of movables and by equitable mortgage
created by the plaintiffs on their lands. Upon default by
defendant No.2, the accounts were classified as Non-
Performing Assets. Consequently, Defendant No.1 issued a
demand notice dated 01.11.2017, followed by a Section 13(2)
of the SARFAESI Act notice dated 06.11.2017 to both the
borrower and guarantors, including the plaintiffs. Said notices
were also published in Udayavani and The Hindu newspapers,
and no valid objection was raised within the statutory time.
16. Possession and E-Auction proceedings
when defendants and plaintiffs failed to discharge the
outstanding dues, defendant No.1 issued a possession notice
dated 02.02.2018 under Section 13(4) of the SARFAESI Act.
Said notice was duly published in the newspapers.
Subsequently, an E-auction notice dated 10.02.2018 was
issued, scheduling auction of the suit schedule property for
14.03.2018. The plaintiffs, being aggrieved, filed S.A.
No.102/2018 before the Debt Recovery Tribunal, Bengaluru.
However, as the proposed auction did not materialise, the
said application was dismissed as infructuous. Defendant No.1
specifically challenges the jurisdiction of this Court under
Section 34 of the SARFAESI Act, stating that the reliefs
sought by the plaintiffs, including a declaration that the
documents dated 10.06.2013 are invalid, fall squarely within
the ambit of the SARFAESI Act and can only be adjudicated
by the Debt Recovery Tribunal under Section 17. It is further
contended that the suit is barred by the express provisions of
Section 34 of the SARFAESI Act.
17. It is the specific case of defendant No.1 that the
plaintiffs, having executed the Guarantee Agreement and
deposited the title deeds, remain jointly and severally liable
along with defendant No.2. It is also submitted that as of
01.02.2019, the total dues recoverable from defendant No.2
and the guarantors, including the plaintiffs, stood at
Rs.385,95,55,531.58/-. It is further the case of the
defendants that the relief sought to declare the Guarantee
Agreement and Declaration cum Undertaking letter dated
10.06.2013, as non-binding and not amounting to a mortgage
is within the exclusive jurisdiction of the Debt Recovery
Tribunal u/s. 17 of the SARFAESI Act.
18. Based on the above pleadings, the Commercial
Court has framed the following issues:
1. Whether the suit of the plaintiffs is barred
under the provisions of SARFAESI Act?
2. What order or decree?
19. Having heard both the sides, the Commercial Court
has decreed the suit Order dated 07.04.2021. The operative
portion of the said Order is as follows:
"The plaint in the suit is rejected U/o.7 Rule
11(d) of CPC.
The plaintiffs are liable to pay cost of Rs.5,000/-
to the defendant No.1.
Draw decree accordingly.
Office to issue copy of the order to the parties
by electronic mode if Email ID is provided".
20. The Commercial Court upon perusal of the
pleadings and documents observed that it is an admitted fact
that the plaintiffs are the absolute owners of land bearing
Sy.No.124/6 measuring 7 acres 20 guntas situated at
Karivobanahalli Village, Yeshwanthapura Hobli, Bengaluru
North Taluk. Defendant No.2, a company, availed a loan of
Rs.50 crores from defendant No.1, a Banking Institution, for
its project in Bengaluru with BMRCL. The plaintiffs, reposing
confidence in the representatives of defendant No.2, handed
over the original title deeds and other relevant documents
pertaining to the said land and signed documents in the office
of defendant No.1 at Hyderabad on 10.06.2013. Thereafter,
on account of default by defendant No.2 in repaying the loan
amount, defendant No.1, being the secured creditor, initiated
proceedings under the SARFAESI Act, including issuance of
possession notice under Section 13(4) of the said Act and
publication of notices in the newspapers The plaintiffs
subsequently sought to withdraw their guarantorship;
however, the defendant bank refused, citing that the
outstanding amount had not been cleared nor had alternative
security been furnished.
21. The documentary evidence produced by the
plaintiffs, including the guarantee agreement, declaration-
cum-undertaking, and the act of handing over original title
deeds, clearly indicates that they stood as guarantors and
had created an equitable mortgage in favour of defendant
No.1. There is nothing on record to support the contention
that the documents were blank or signed under
misrepresentation or fraud. The Commercial Court finds that
the plaintiffs, being well aware of the contents, had
voluntarily executed the documents in favour of defendant
No.1 for the loan availed by defendant No.2. The execution of
the mortgage by deposit of title deeds satisfies the legal
requirement for creation of an equitable mortgage, and thus,
the rights of the secured creditor stand established.
22. Further the Commercial Court observed that
Section 17 of the SARFAESI Act, provides a specific remedy
for any person, including a borrower or guarantor, aggrieved
by the actions of the secured creditor under Section 13(4) of
the SARFAESI Act. The said provision empowers the DRT to
adjudicate upon the validity and legality of such actions,
including issuance of possession notices and enforcement of
security interests. In the present case, the plaintiffs, having
mortgaged their properties and having been issued notices
under the SARFAESI Act, are persons aggrieved and fall
within the scope of Section 17. Accordingly, their proper
remedy lies before the DRT and not before a Civil Court.
Section 17 of the SARFAESI Act reads as under:-
17. Right to appeal:
(1) Any person (including borrower) aggrieved by
any of the measures referred to in sub-section (4) of
section 13 taken by the secured creditor or his 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:
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 sub-section (1) of Section 1.
(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) it, the Debts Recovery Tribunal, after
examining the facts and circumstances of the case and
evidence produced by the parties, comes to the
conclusion that any of the measures referred to in sub-
section (4) of section 13, taken by the secured creditor
are not in accordance with the provisions of this Act and
the rules made thereunder, and require restoration of the
management of the secured assets to the borrower or
restoration of possession of the secured assets to the
borrower, it may by order, declare the recourse to any
one or more measures referred to in sub-section (4) of
section 13 taken by the secured assets as invalid and
restore the possession of the secured assets to the
borrower or restore the management of the secured
assets to the borrower, as the case may be, and pass
such order as it may consider appropriate and necessary
in relation to any of the recourse taken by the secured
creditor under sub-section (4) of section 13.
(4) If, the Debts Recovery Tribunal declares the
recourse taken by a secured creditor under sub-section
(4) of section 13, is in accordance with the provisions of
this Act and the rules made thereunder, then,
notwithstanding anything contained in any other law for
the time being in force, the secured creditor shall be
entitled to take recourse to one or more of the measures
specified under sub-section (4) of section 13 to recover
his secured debt.
(5) Any application made under sub-section (1)
shall be dealt with by the Debts Recovery Tribunal as
expeditiously as possible and disposed of within sixty
days from the date of such application: Provided that the
Debts Recovery Tribunal may, from 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 party to the
application may make an application, in such form as may
be prescribed, to the Appellate Tribunal for directing the
Debts Recovery Tribunal for expeditious disposal of the
application pending before the Debts Recovery Tribunal
and the Appellate Tribunal may, on such application,
make an order for expeditious disposal of the pending
application by the Debts Recovery Tribunal.
(7) Save as otherwise provided in this Act, the
Debts Recovery Tribunal shall, as far as may be, dispose
of application in accordance with the provisions of the
Recovery of Debts Due Banks and Financial Institutions
Act, 1993 (51 of 1993) and the rules made thereunder.
23. Further, it was observed that Section 34 of the
SARFAESI Act bars the jurisdiction of the civil court in relation
to matters which the DRT or Appellate Tribunal is empowered
to adjudicate. The reliefs sought by the plaintiffs--such as
declarations that the guarantee and undertaking do not
amount to a mortgage, and injunctions restraining the bank
from dealing with the property fall squarely within the
matters governed by the SARFAESI Act. The bar under
Section 34 of the SARFAESI Act is absolute and extends to
both declaratory and injunctive reliefs. Therefore, this Court
is precluded from entertaining the present suit in view of the
specific bar of jurisdiction created by the said Act.
Section 34 of the SARFAESI Act reads as under:-
"34. Civil Court not to have jurisdiction-
No Civil Court Shall have jurisdiction to entertain
any suit or proceeding in respect of any matter which a
Debt 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).
24. In addition, as per Section 11 of the Commercial
Courts Act, 2015, when jurisdiction of a Civil Court is
expressly barred under any statute, a Commercial Court
cannot assume jurisdiction. In light of the bar under Section
34 of the SARFAESI Act and the availability of an efficacious
statutory remedy under Section 17 of the SARFAESI Act,
before the DRT, Commercial Court concluded that the present
suit is barred by law. Consequently, as mandated under Order
VII Rule 11(d) of the CPC, the Commercial Court rejected the
plaint as not maintainable in law.
25. Assailing the above Order dated 07.04.2021,
passed in Com.O.S.No.580/2021 on the file of the
Commercial Court, the present Commercial Appeal came to
be filed.
26. Heard learned counsel appearing for the appellants
and learned counsel appearing for the respondents. Perused
the material on record.
27. Learned counsel appearing for the appellants while
reiterating the averments made in the Commercial appeal,
has argued that the impugned judgment rejecting the plaint
as against respondents No.1 and 2, is erroneous who had not
even filed any application under Order VII Rule 11(d) of the
CPC. It is trite that rejection of plaint must be on the whole
and not selectively against one defendant unless the cause of
action is entirely severable. In the absence of any application
or grounds made out by respondent No.2, the rejection of suit
as against them, without affording an opportunity of trial, is
per se unsustainable.
28. It is contended by learned counsel for the appellants
that the Commercial Court failed to issue summons or notices
post-transfer of the file to the Commercial Court after
identification of the matter as a commercial dispute on
11.12.2020. Despite the Order of the Commercial Court to
issue notice for both the parties and their counsel to appear
before the Court on 17.03.2021 for hearing, there exists no
record of service, thereby violating principles of natural
justice. The appellants were diligently prosecuting the matter
until 14.12.2020. The abrupt rejection of the suit without
notice is unsustainable.
29. It is further contended that a substantial ground of
challenge lies in the assertion that the suit property
comprises agricultural land, which is exempt from application
of the Section 31(i) of the SARFAESI Act. Though a
conversion order was granted conditionally for residential
purposes, it lapsed due to non-compliance with mandatory
layout sanction conditions. Consequently, the land reverted to
agricultural status and continued to be used for agricultural
purposes. Consequently, no security interest could legally be
created at all over such land.
30. It is contended that the preliminary documents
relied upon by the respondents, such as the Draft/Preliminary
Guarantee Agreement and Declaration cum undertaking dated
10.06.2013, were neither stamped in accordance with the
Karnataka Stamp Act nor registered under the Registration
Act, 1908. These documents were never executed into a valid
Mortgage Deed. Moreover, the appellants withdrew their
willingness through a Withdrawal Letter dated 24.06.2014. No
action was initiated by the Respondent Bank within three
years from the said withdrawal, thereby rendering any claim
barred by limitation and unenforceable in law.
Para 8 of the Declaration cum Undertaking Letter which
reads as under:
Para 8: "We, hereby agree and undertake that
within a period of three moths from the date hereof
or such extended date as may be permitted by IDBI
in writing shall"
a) "Assure the title to the properties comprised
in the mortgage security and comply with all
requisitions that many be made from time to time by
or on behalf of the Lender in that behalf"
31. The learned counsel appearing for the appellants
has placed reliance on the following judgments:
• J.K (Bombay) Private Ltd., v. New Kaiser-i-
Hind Spinning and Weaving Co.Ltd & others,
reported in 1968 SCC Online SC 32
Para 27: an agreement to mortgage which can give
rise to an obligation to specifically perform it, a personal
obligation but do not constitute either a mortgage under
Section 58 or a charge under Section 100 of the Transfer
of Property Act.
• Haryana Financial Corporation v. Gurcharan
Singh reported in 2014 (16) SCC 722
Para 9 to 12. A conjoint reading of Section 100 with
Section 59 of the TP Act makes it clear that if by act of
parties, any immovable property is made security for the
payment of money to another and it does not amount to
mortgage, then all the provisions which apply to a simple
mortgage as far as may be apply to such charge.
Consequently in view of Section 59 of the TP Act when
there is a mortgage other than a mortgage by deposit of
the title deeds it can be effected only by a registered
Instrument.
• Kedar Lal Seal and another v. Hari Lal Seat,
reported in 1951 SCC 1189
Para 27. The whole law of mortgage in India
Including the law of contribution arising out of a
transaction of mortgage is now statutory and is embodied
in the Transfer of Property Act read with the Civil
Procedure Code. The Court cannot travel beyond these
statutory provisions.
Para 28: When parties enter into a mortgage they
know or must be taken to know that the law of mortgage
provides for this very question of contribution. If confers
rights on the mortgagor who redeems and directs that in
the absence of a contract to the contrary he shall be
reimbursed in a particular way out of particular
properties.
• Suraj Lamp and Industries Private Limited v.
State of Haryana and another, reported in 2012
(1) SCC 656
Para 16: Section 17 of the Registration Act clearly
provides that any document (other than testamentary
instruments) which purports or operates to create,
declare, assign, limit or extinguish whether in present or
in future "any right, title or interest' whether vested or
contingent of the value of RS.100 and upwards to or in
immovable property.
Para 17: Section 49 of the said Act provides that no
document required by Section 17 to be registered shall
affect any immovable property comprised therein or
received as evidence of any transaction affected such
property unless it has been registered. Registration of a
document gives notice to the world that such a document
has been executed.
• Bank of Baroda v. Gopal Shriram Panda and
another, reported in 2021 SCC Online Bom 466
Para 27: (E) Even in cases where the enforcement
of a security interest involves issues as indicated in
Mardia Chemicals (supra) of fraud as established within
the parameters lald down in A.Ayyasamy (supra); a claim
of discharge by a guarantor under Sections 133 and 135
of the Contract Act (Mardia Chemicals (supra)); a clalm of
discharge by a guarantor under Sections 139, 142 and
143 of the Contract Act: Marshalling under Section 56 of
the Transfer of Property Act [J.P.Builders (supra)]; the
Civil Court shall have jurisdiction.
• Central Bank of India and another, v.
Smt.Prabha Jain and others, reported in 2025
SCC Online SC 121
Para 24: Even if one relief survives the plaint
cannot be rejected under Order VII Rule 11 of the CPC.
Para 41: (a) That Civil Court's jurisdiction to
entertain the suit is not ousted.
• Vinod Infra Developers Ltd., v. Mahaveer
Lunia and others, reported in 2025 INSC 772
(Civil Appeal No.7109 of 2025)
Para 9.6: Plaint cannot be rejected in its entirety
merely because one of the prayers or relief sought is
untenable, so long as other releifs are maintainable and
based on Independent causes of action.
• Central Bank of India and another v.
Smt.Prabha Jain & others, reported in 2025
INSC 95 (Civil Appeal No.1876 of 2016)
Paras 24 & 25: Plaint cannot be rejected partially.
• Benny D' Souza and others v. Melvin D' Souza
and others by Order dated 24.11.2023 passed in
Order 41 Rule 17 of the CPC: Page 2:
If the appellant does not appear when the appeal is
called for hearing it can only be dismissed for non-
prosecution and not merits
• Aman Lohia v. Kiran Lohia reported in (2021) 5
SCC 489
Para 47. Even if Court were to infer abandonment,
it has to be express.
• K.J.Nathan v. S.V.Maruthi Rao and other
reported in 1964 SCC OnLine SC 120
Paras 8, 9 and 10: Apex Court underscored that all
three requisites i.e., debt, deed deposit, intention must be
present and there is no presumption of mortgage just by
depositing deeds. There is no presumption of law that the
mere deposit of title deeds constitutes a mortgage.
The Appellants also rely on the principle that a mere
undertaking to create a mortgage does not constitute a valid
mortgage. As held by the Apex Court in the case of Haryana
Financial Corporation v. Gurcharan Singh reported in
2014 (3) SCJ 125. Further, under Section 59 of the
Transfer of Property Act, where the mortgage contract is
reduced to writing, registration becomes compulsory. The
reliance placed on unregistered and insufficiently stamped
preliminary documents, in contravention of the Indian
Contract Act, the Transfer of Property Act, and other statutes,
is misplaced. Even if title deeds are deposited, once a written
contract exists, registration under Section 17 of the
Registration Act becomes mandatory. Further, any such
document creating, assigning, or extinguishing rights in
immovable property must be duly stamped and registered
under Section 17 of the Registration Act and Section 34 of the
Karnataka Stamp Act. The alleged documents relied upon by
the Bank are not only unstamped and unregistered but are
also devoid of any legal sanctity.
32. It is argued by the learned counsel for the
appellants that the execution of documents was vitiated by
fraud and misrepresentation. The Appellants contend that
they were misled and induced by officials of respondent No.1
- Bank and respondent No.2 - Company into signing
documents under false pretexts and incomplete disclosure.
The absence of a tripartite agreement, non-execution by the
borrower, lack of specific loan account numbers, and the fact
that the documents were executed under suspicious
circumstances at odd hours, render them void and
unenforceable.
33. It is further contended that the core factual
dispute, whether the appellants ever created a valid
mortgage or stood as guarantors for the alleged debt,
remains unresolved. The respondent No.1 - Bank has
proceeded against the appellants for a sum of Rs.322 Crores
when the original draft agreement referenced only a potential
loan of up to Rs.50 Crores. The existence, enforceability and
binding nature of the documents are seriously disputed.
These are the issues requiring evidence and cannot be
adjudicated at the stage of Order VII Rule 11(d).
34. It is further contended that serious allegations of
fraud, breach of trust, collusion and misrepresentation have
been raised by the appellants in their plaint. It is a settled
principle that when allegations of fraud are raised, the Civil
Court retains jurisdiction, and such matters can only be
adjudicated upon trial and not summarily dismissed under
Order VII Rule 11(d) of the CPC. The question of whether a
valid mortgage exists, the character of the land, and whether
there exists a legally binding guarantee, requires detailed
factual examination. Further, the Draft Guarantee Agreement
was never executed by all three parties--namely, the Bank,
the Borrower Company, and the alleged Guarantors. There is
no mention of loan account numbers or detailed terms of the
alleged sanction. The appellants claim that their signatures
were obtained during odd hours, under dim lighting, and in
the absence of attesting witnesses or proper notarization.
Allegations of forgery, improper attestation and backdated
filling of documents call for a detailed inquiry and cannot be
brushed aside summarily.
35. Learned counsel for the appellants contends that
the respondent Bank's conduct is alleged to be part of a
larger fraudulent scheme amounting to "profile lending,"
wherein innocent landowners were misled into signing
documents without full knowledge of consequences. The
Appellants claim they were used as fronts for securing illegal
loans. The Bank is a public body under Article 12 of the
Constitution of India and its failure to act transparently,
lawfully, and in good faith vitiates the entire transaction. The
appellants have been forced into litigation despite not having
received any financial benefit nor having executed any
registered Mortgage Deed. Lastly, the documents in question
do not meet the requirements under the Indian Contract Act,
the Transfer of Property Act, the SARFAESI Act, the
Karnataka Stamp Act, and the Registration Act. The Judgment
and Decree dated 07.04.2021 is riddled with procedural
lapses, suppression of vital facts, and non-consideration of
core legal issues. Accordingly, the same is arbitrary, illegal,
and liable to be set aside, and the suit deserves to be
restored for trial on merits.
36. Per contra, learned counsel for the respondents
while denying the allegations made by the learned counsel for
the appellant has argued that the Commercial Court has
rightly concluded and decreed the suit and opposed for
allowing the appeal and prayed to dismiss the same.
37. The learned counsel appearing for respondent No.3
has placed reliance on the following judgments:
• Shakeena v. Bank of India reported in (2021)
12 SCC 761;
29. Notably, the appellants took no steps,
whatsoever, to pay the outstanding dues to the
respondent Bank by way of a valid tender nor moved any
formal application before the High Court after filing of the
writ petitions on 19-1-2006, to permit them to deposit the
requisite amount either in the loan accounts concerned or
in the court. That was not done even until the disposal of
the writ petitions by the Single Judge or during the
pendency of the writ appeals before the Division Bench
and until the disposal thereof vide the impugned
judgment [K. Chidambara Manickam v. Shakeena, 2007
SCC OnLine Mad 675 : (2008) 1 CTC 660] . We must also
notice the stand taken by the respondent Bank that even
the legal notice sent by the appellants to the respondent
Bank, in no way expresses unambiguous commitment of
the appellants to exercise their right of redemption.
Suffice it to observe that the appellants, for reasons best
known to them, have not chosen to deposit the amount in
the loan accounts or attempted to seek permission of the
Court to deposit the same in Court from 19-1-2006
immediately after filing of the writ petitions or for that
matter until the registration of the sale certificate on 18-
9-2007. In this backdrop, it is not possible to countenance
the stand of the appellants that they had made a valid
tender to the respondent Bank or that the respondent
Bank had mischievously or mala fide rejected their offer
to defeat their rights, to redeem the mortgage before
registration of the sale certificate on 18-9-2007.
30. A fortiori, it must follow that the appellants
have failed to exercise their right of redemption in the
manner known to law, much less until the registration of
the sale certificate on 18-9-2007. In that view of the
matter no relief can be granted to the appellants,
assuming that the appellants are right in contending that
as per the applicable provision at the relevant time
[unamended Section 13(8) of the 2002 Act], they could
have exercised their right of redemption until the
registration of the sale certificate -- which, indisputably,
has already happened on 18-9-2007. Therefore, it is not
possible to countenance the plea of the appellants to
reopen the entire auction process. This is more so
because, the narrative of the appellants that they had
made a valid tender towards the subject loan accounts
before registration of the sale certificate, has been found
to be tenuous. Thus understood, their right of redemption
in any case stood obliterated on 18-9-2007. Further, the
amended Section 13(8) of the 2002 Act which has come
into force w.e.f. 1-9-2016, will now stare at the face of
the appellants. As per the amended provision, stringent
condition has been stipulated that the tender of dues to
the secured creditor together with all costs, charges and
expenses incurred by him shall be at any time before the
"date of publication of notice" for public auction or inviting
quotations or tender from public or private deed for
transfer by way of lease assessment or sale of the
secured assets. That event happened before the
institution of the subject writ petitions by the appellants.
• Dwarika Prasad v. State of Uttar Pradesh and
others reported in (2018) 5 SCC 491;
9. In the present case, the appellant failed to
comply with the provisions of Section 13(8). The statute
mandates that it is only where the dues of the secured
creditor are tendered together with costs, charges and
expenses before the date fixed for sale or transfer that
the secured asset is not to be sold or transferred. The
appellant was aware of the proceedings initiated by the
Bank for asserting its right to recover its dues by selling
the property. The appellant moved the DRT in
Securitisation Application No. 176 of 2015. During the
pendency of those proceedings, orders were passed by
the Tribunal on 1-2-2016 and 3-2-2016. The appellant
moved the Allahabad High Court which by its order dated
9-3-2016 [Dwarika Prasad v. State of U.P., 2016 SCC
OnLine All 2564] restrained the Bank and the auction-
purchaser from executing the sale deed until 15-3-2016.
The stay was extended till 28-3-2016 by which date the
appellant was to deposit an amount of Rs 7,00,000. The
balance was required to be deposited by 30-4-2016.
While the appellant deposited an amount of Rs 7,00,000
with the Bank, he failed to deposit the balance in
accordance with the provisions of Section 13(8). Even
after the writ proceedings before the High Court were
withdrawn, the appellant did not deposit the balance due
together with the costs, charges and expenses. The sale
was confirmed, a sale certificate was issued and a
registered sale deed was executed on 12-4-2016. The
appellant failed to ensure compliance with Section 13(8).
The right to redemption stands extinguished on the
execution of the registered sale deed. This is also the
view which has been expressed in the judgment
in Mathew Varghese [Mathew Varghese v. M. Amritha
Kumar, (2014) 5 SCC 610 : (2014) 3 SCC (Civ) 254].
• Canara Bank v. P. Selathal reported in (2020)
13 SCC 143;
9.2. In Church of Christ Charitable Trust &
Educational Charitable Society v. Ponniamman
Educational Trust [Church of Christ Charitable Trust &
Educational Charitable Society v. Ponniamman
Educational Trust, (2012) 8 SCC 706 : (2012) 4 SCC (Civ)
612] , this Court in para 13 has observed and held as
under : (SCC p. 715)
"13. While scrutinising the plaint averments, it is
the bounden duty of the trial court to ascertain the
materials for cause of action. The cause of action is a
bundle of facts which taken with the law applicable to
them gives the plaintiff the right to relief against the
defendant. Every fact which is necessary for the plaintiff
to prove to enable him to get a decree should be set out
in clear terms. It is worthwhile to find out the meaning of
the words "cause of action". A cause of action must
include some act done by the defendant since in the
absence of such an act no cause of action can possibly
accrue."
9.3. In ABC Laminart (P) Ltd. v. A.P. Agencies [ABC
Laminart (P) Ltd. v. A.P. Agencies, (1989) 2 SCC 163] ,
this Court explained the meaning of "cause of action" as
follows : (SCC p. 170, para 12)
"12. A cause of action means every fact, which if
traversed, it would be necessary for the plaintiff to prove
in order to support his right to a judgment of the court. In
other words, it is a bundle of facts which taken with the
law applicable to them gives the plaintiff a right to relief
against the defendant. It must include some act done by
the defendant since in the absence of such an act no
cause of action can possibly accrue. It is not limited to the
actual infringement of the right sued on but includes all
the material facts on which it is founded. It does not
comprise evidence necessary to prove such facts, but
every fact necessary for the plaintiff to prove to enable
him to obtain a decree. Everything which is not proved
would give the defendant a right to immediate judgment
must be part of the cause of action. But it has no relation
whatever to the defence which may be set up by the
defendant nor does it depend upon the character of the
relief prayed for by the plaintiff."
• Dalip Singh v. State of Uttar Pradesh and
others reported in (2010) 2 SCC 114; and
• Ramjas Foundation and another v. Union of
India and others reported in (2010) 14 SCC 38.
38. On hearing the learned counsel for the parties and
perusal of the material on record, it is observed that the Bank
had sanctioned various credit facilities, including a Working
Capital Limit of Rs.50 Crores outside the consortium to
respondent No. 2 - M/s Coastal Projects Ltd. The Appellants
offered their land bearing Sy.No.124 measuring 6 acres 31
guntas as collateral and also executed a personal guarantee
dated 10.06.2013 in favour of the Bank. An equitable
mortgage was created on 10.06.2013 by deposit of original
title deeds, and a Memorandum of Entry was recorded on
17.06.2013. Upon appellants' request for release of security
vide letter dated 22.02.2016, the Bank replied on 18.03.2016
that such release was conditional upon repayment of the
outstanding dues or substitution of security. The appellants
further approached this Court via W.P.No.4820/2021 and
W.P.No.1085/2021. The latter was disposed of on 07.08.2024
with directions to the CBI to consider the complaint in
accordance with law. Meanwhile, the Bank issued a fresh E-
auction notice dated 16.09.2021, followed by a sale on
05.10.2021. The respondent No.3, Saraf Poly Synthetics Pvt.
Ltd., emerged as the successful bidder, and the sale
certificate was registered on 06.11.2021. S.A.(Dairy No.
1496/2021) filed before DRT Bengaluru was transferred and
renumbered as TSA No.9/2022 before DRT Chennai. This
challenge was dismissed by a detailed order dated
05.01.2024, holding that the Bank's actions were compliant
with SARFAESI Act and relevant rules.
39. It is observed that the actions taken by the
respondent - Bank are in strict conformity with the SARFAESI
Act, the Banking Regulation Act, and judicial precedents.
There are no infirmities in the loan sanction, mortgage
creation, enforcement actions, or the public auction.
40. We have noticed that no registered mortgage deed
was executed is incorrect since an equitable mortgage was
created on 10.06.2013 by deposit of title deeds, and the
same was supported by a declaration cum undertaking. Their
argument that the mortgaged land retains agricultural
character and thus SARFAESI Act does not apply is also
untenable as the said land has been part of Bangalore
Municipal Area since 2009, thereby losing its agricultural
nature. The appellants' representation to BBMP to withhold
khatha was responded to by BBMP with a direction to produce
an interim Court order. The sale certificate having been duly
registered, the auction purchaser has become the absolute
owner and is entitled to all consequential rights, including
registration of khatha and mutation of records.
41. Further, the actions taken by the respondent -
Bank are in strict conformity with the SARFAESI Act, the
Banking Regulation Act, and judicial precedents. There are no
infirmities in the loan sanction, mortgage creation,
enforcement actions, or the public auction. Further, it is
observed and crystal clear that the appellants have disputed
the execution of guarantee agreement and creation of
mortgage in favour of the respondent No.1 in respect of their
properties which is against the contents of the documents.
The said reliefs fall under purview of the Debt Recovery
Tribunal, so the remedy is available under Section 17 of the
SERFEASI Act, 2002. Accordingly, a demand notice under
Section 13(2) of the SERFEASI Act was issued and thereafter,
possession notice under Section 13(4) of the Act is also
issued. Thereafter, the appellants filed second appeal before
the Tribunal and the said appeal was dismissed as
infructuous. Thereafter, the appellants approached the
Commercial Court under Section 11 of the Commercial Courts
Act where the jurisdiction of Commercial Court is barred
under Section 34 of the Civil Courts Act. In view of the same,
the Commercial Court shall not entertain the suit itself and
the suit is rejected under Order VII Rule 11(d) of CPC, it
appears that the Trial Court has rightly rejected the suit
under Order VII Rule 11(d) of CPC. Further it is observed
that appellants have not come to the Court with clean hands.
The appellants raised so many bundle of facts in the cause of
action, and every fact which is necessary for the appellants to
enable him to get a decree has to be set out in clear terms.
The appellants failed to take recourse on his grievance before
the proper jurisdictional court and approached a forum having
no jurisdiction. there are no merits in the appeal to interfere
with the impugned order passed by the Commercial Court.
42. Having regard to the facts and circumstances and in
view of the submissions of both the learned counsel, this
Court is of the opinion that the appeal lacks merit and does
not survive for consideration. There are no grounds to
interfere with the well considered order passed by the
Commercial Court. The impugned order dated 07.04.2021
passed by the X Additional District and Sessions Judge,
Bengaluru Rural District, Bengaluru in Com.O.S.No.580/2021
is hereby confirmed.
Accordingly, the Commercial Appeal is dismissed.
Sd/-
(ANU SIVARAMAN)
JUDGE
Sd/-
(DR. K.MANMADHA RAO)
JUDGE
BNV
Ct-adp
