(BY SRI K.G. RAGHAVAN, SENIOR ADVOCATE FOR
SRI MANU PRABHAKAR KULKARNI, ADVOCATE)
THIS COMMERCIAL APPEAL IS FILED UNDER SECTION
13 (1A) OF THE COMMERCIAL COURTS ACT, 2015, PRAYING
TO CALL FOR RECORDS FROM THE FILE OF THE LXXXV
ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BENGALURU.,
IN COM. OS NO.1159/2023. (b) PASS AN ORDER TOWARDS
SETTING ASIDE THE IMPUGNED ORDER DATED 25.07.2024
PASSED BY THE HON'BLE LXXXV CITY CIVIL AND SESSIONS
JUDGE, BENGALURU (COMMERCIAL COURT -CCH-86), ON IA
NO.2 UNDER ORDER 39 RULES 1 AND 2 R/W SEC.151 OF CPC.,
1908, IN COM. OS NO.1159 OF 2023 & ETC.
THIS COMMERCIAL APPEAL HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT, COMING ON FOR
PRONOUNCEMENT THIS DAY, JUDGMENT WAS
PRONOUNCED AS UNDER:
5. SBI had, in terms of the letter of arrangement dated
development of real estate. The said loan was sanctioned to enable
named 'Townsville'. The letter of arrangement dated 06.07.2018
was sanctioned. The said letter was accepted by the Developer and
6. The terms and conditions also refer to the guarantees
required to be provided. The relevant portion of the tabular
7. The loan was also required to be secured by a mortgage of
No. 155/11) at Hulimangala Village, Jigani Hobli, Anekal Taluk,
to the said letter.
8. The guarantors, including PEL, also executed the 'Guarantee
Agreement' dated 06.07.2018 [the guarantee deed]. It is relevant to
mentioned) 4. M/s Patel Engineering Limited (For
the value not below the value of their
share of land mortgaged)
9. It is relevant to note that although in the letter of arrangement,
body of the guarantee deed did not contain any such qualification.
7. The Guarantors shall forthwith on demand made by the
Bank deposit such sum or security as the Bank may
specify for the due fulfillment of their obligations hereunder
and the Bank shall have the liberty to sell any security so
deposited with the Bank in or towards the satisfaction or
non-fulfillment of the said obligations by the Guarantors.
10. That if the Borrower(s) being an individual becomes an
insolvent or being a company enters into liquidation or
winding up or if the management of the undertaking of the
Borrower(s) is taken over or nationalized under any law or
makes any arrangement or composition with creditors, the
Bank may (notwithstanding payment to the Bank by the
Guarantors or any other person of the whole or any part of
the amount hereby secured) rank as creditor and prove
against the estate of the Borrower(s) for the full amount of
all the Bank's claims against the Borrower(s) or agree to
and accept any composition in respect thereof and the
Bank may receive and retain the whole of the dividends,
composition or other payments thereon to the exclusion of
all the rights of the Guarantors in completion with the
Bank, until all the Bank's claims are fully satisfied and the
Guarantors will not be paying off the amounts payable by
them or any part thereof or otherwise prove or claim
against the estate of the Borrower(s) until the whole of the
Bank's claims against the estate of the Borrower have
been satisfied and the Bank may enforce and recover
payment from the Guarantors of the full amount payable
by the Guarantors, notwithstanding any such proof or
compassion as aforesaid. On the happening of any of the
aforesaid events, the Guarantors shall forthwith inform the
Bank in writing of the same.
12. This Guarantee is independent and distinct from any
security that the Bank has taken or may take in any
manner whatsoever and the liability of the Guarantors
shall be in addition to such security and the loss,
impairment, failure, realization or release of or parting with
any such security shall not diminish, extinguish or affect
the liability of the Guarantors hereunder and the Bank
shall have fullest liberty to call upon the Guarantors to pay
the principal sum together with interest, cost, charges,
expenses and all other monies payable under all or any of
the said facilities without requiring the Bank to realize from
the Borrower(s) the amounts due to the Bank and/or
enforcing any remedies or securities available to the
Bank."
10. PEL states that it was the owner of the subject land (Schedule
A properties) measuring 4 acres and 38 guntas, comprising Survey
No. 352 (old Survey No. 155/11), located at Hulimangala Village,
Jigani Hobli, Anekal Taluk, Bengaluru Urban District. In the year
2011, the Karnataka Industrial Areas Development Board [KIADB]
had sanctioned a project comprising 124 residential units with
structures, open spaces, common entrances, passages, etc., by the
name 'Townsville'. PEL states that as of 21.11.2017 - the date
when it entered into a Joint Development Agreement [JDA] with the
Developer to complete the project - the rights in respect of 63 of the
124 residential units [the sold units] had already been sold by PEL
to various customers. The Developer was required to complete the
project at its costs and recover the same from the sale of the 61
units that remained unsold [the unsold units]. The unsold units
were, in effect, the Developers' share of the project.
11. Under the JDA, the borrower was authorised to obtain
financing from banks and financial institutions against the security of
the unsold units.
12. PEL also passed a resolution to mortgage the subject land to
SBI by depositing the title deeds, enabling the Developer to avail of
financial assistance for the completion of the project.
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13. As noted above, SBI lent a sum of `49,00,00,000/- (Rupees
Forty Nine Crores only) to the Developer (the Principal Borrower).
14. The Principal Borrower defaulted in repayment of the loan
availed from the SBI. On 29.11.2022, SBI issued a notice calling
upon the borrower to pay an overdue amount of `9.16 crores' for
regularising the same. Admittedly, the Principal Borrower did not
repay the amount due, and SBI classified the loan account as a
Non-Performing Asset [NPA] on 04.12.2022.
15. On 05.12.2022, the SBI issued a demand notice under
Section 13(2) of the SARFAESI Act, claiming an amount of
`54,64,50,739/-. It called upon PEL, as a guarantor, to pay the said
amount, which, according to the SBI, was due as on 04.12.2022.
16. In response to the letter dated 05.12.2022, the PEL denied its
liability and claimed that the SBI was entitled to the Principal
Borrower's share of 61 villaments units, but that would be available
only after completion of the project. PEL claims that the Principal
Borrower had abandoned the project. PEL stated that 63 residential
units had already been sold to third-party purchasers, along with the
undivided right, title, and interest in the schedule 'A' property, and
that their rights could not be defeated. PEL also contested the
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notice as vague and failing to clearly explain how the dues were
calculated. It is also material to note that the PEL claimed that its
liability under the corporate guarantee would, at most, be limited to
the value of its share of the mortgaged land.
17. SBI responded to the PEL's response dated 02.02.2023 by a
letter dated 14.02.2023 asserting that the PEL was liable to pay the
entire extent of the loan amount of `49,00,00,000/-. Thereafter, on
07.08.2023, the SBI issued a notice of possession to the Principal
Borrower informing that it had taken possession of the mortgaged
properties. The Principal Borrower filed a writ petition,
W.P.No.5/2023, which was disposed of by this Court by an order
dated 01.09.2023, relegating the Principal Borrower to avail its
remedies before the Debts Recovery Tribunal.
18. Thereafter, on 16.09.2023, the SBI filed an application (CP
(IB) No.4/2024) under Section 7 of IBC against the Principal
Borrower. Subsequently, on 20.09.2023, the SBI initiated
proceedings under Section 7 of the IBC before the NCLT against
PEL.
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19. Thereafter, on 11.10.2023, PEL filed a Commercial Suit,
Com.O.S.No.1159/2023. PEL also sought an ex parte ad interim
order in the said proceedings, which was not acceded to.
20. Thereafter, PEL filed a writ petition, W.P.No.24556/2023,
impugning the SBI's demand notice. The learned Single Judge of
this Court passed an interim order dated 29.11.2023 in the said writ
petition, restraining SBI from taking any precipitative steps against
the PEL for a period of four weeks.
21. Meanwhile, the borrower also filed an appeal, W.A. No.
1214/2023, against the order dated 01.09.2023 passed in
W.P.No.5/2023. The appeal was dismissed by an order dated
23.11.2023.
22. SBI states that in view of the interim order dated 29.11.2023
passed by this Court in W.P.No.24556/2023, the learned NCLT
stayed the proceedings in CP (IB) No.1092/2023 by its order dated
08.12.2023. Subsequently, by an order dated 17.01.2024, this Court
vacated the interim order granted in W.P.No.24556/2023.
23. The learned Commercial Court passed an interim order dated
09.07.2024, restraining the parties from precipitating the matter till
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the disposal of PEL's interim application. In view of the said order,
the NCLT adjourned the proceedings in CPIB No.1092/2023, by an
order dated 11.07.2024. Thereafter, the Commercial Court passed
the impugned order.
24. On 12.02.2024, SBI filed an application under Order VII Rule
11 of the CPC, praying that the plaint be rejected for want of
jurisdiction. However, the learned Commercial Court did not accept
the application and dismissed it by an order dated 01.03.2025.
25. SBI has impugned the said order in WP No.38417/2025,
which is pending.
THE PLAINT
26. Before proceeding, it is relevant to examine PEL's plaint filed
before the Commercial Court. PEL states that, under clause 15 of
the JDA, the Principal Borrower was not entitled to raise any loan
against the security of the sold units. It also referred to the
addendum to the JDA dated 22.06.2018, which entitled the Principal
Borrower to obtain financial facilities against the mortgage of its
share of unsold units.
- 14 -
27. PEL claims that the documents were examined by the SBI
and that the SBI was therefore fully aware that 63 units had been
sold. Therefore, the sold units with the commensurate area of land
could not be mortgaged. It claimed that, in line with the said
understanding, a memorandum of deposit of title deeds in respect to
Schedule 'A' property (Schedule 'A' property) was executed.
28. PEL acknowledged that it was aware that SBI disbursed loans
amounting to 49,00,00,000/- to the Principal Borrower on various
dates between 11.07.2018 and 12.02.2020. The tenure of the loan
was 48 months including a moratorium period of twenty-four (24)
months. However, due to COVID-19, the Principal Borrower
requested an extension of the moratorium and repayment periods.
29. PEL also accepted that it had executed the guarantee deed
as claimed and that the same was necessitated and intended only
to ensure that PEL did not create any hindrance if SBI intended to
enforce the mortgage. PEL claimed that its liability was limited to
the value of its share of the land mortgaged to the SBI. PEL claimed
that since only the Principal Borrower's share (the unsold units) was
mortgaged to SBI, PEL's share in the mortgaged property was nil.
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Consequently, PEL's liability as a guarantor under the guarantee
deed was also nil.
30. On the basis of the pleadings as briefly noted hereinbefore,
PEL sought the following reliefs:
"a. Declare that no liability accrues to the plaintiff under
the Guarantee dated 06.07.2018;
b. In the alternative to (a) above, this Hon'ble Court may
be pleased to determine the liability if any of the plaintiff
under Guarantee dated 06.07.2018;
c. Cost of the suit to the plaintiff;
d. Pass such other and further orders as the nature and
circumstances of the case may require."
31. It is clear from the above that PEL essentially seeks a
declaration that it is not liable to pay any amount to SBI against the
guarantee deed dated 06.07.2018 executed by it.
THE IMPUGNED ORDER
32. It is SBI's case that the PEL has guaranteed the Principal
Borrower's repayment obligations, and that its liability is co-terminus
with that of the Principal Borrower. SBI states that it has initiated
proceedings against the Principal Borrower and the guarantors and
has commenced the process to enforce its security interest under
the SARFAESI Act.
- 16 -
33. SBI disputes PEL's interpretation of the guarantee deed. It
states that the terms of the guarantee are clear and that the
Principal Borrower and the guarantors, including PEL, are jointly
and severally liable for the amounts owed by the Principal Borrower.
34. As is apparent from the above, the principal dispute revolves
around the interpretation of the terms of the guarantee deed dated
06.07.2018, which was admittedly executed by PEL. Whilst PEL
claims that its liability under the agreement of mortgage is nil; SBI
claims that its liability is to the full extent of the amounts payable by
the borrower.
35. The learned Commercial Court examined the plaint and also
considered SBI's defence as set out in the written statement. The
court noted that the bone of contention between the parties was the
extent of PEL's liability under the guarantee deed. After considering
the said contentions, the learned Commercial Court observed as
under:
"22. Upon considering the above contentions the
pleadings and documents placed on record it is clear that
the entire extent of 4 acres 38 guntas owned by the
plaintiff has been mortgaged for the loan sanctioned to
GM Infinite. Under the terms of JDA the borrower GM
Infinite was not permitted to raise any loan on the 63 sold
units. As per the terms of sanction letter the liability of
plaintiff is restricted to the value of plaintiff's share in the
land mortgaged. The letter of the bank dated 21.06.2018
- 17 -
stipulates that the land on which 63 sold units are situated
is not available for the mortgage. Even in the letter dated
14.02.2023 also there is mention of the same. Had the
liability of the plaintiff being not restricted, there was no
occasion for the defendant bank to mention the same in its
letter to the plaintiff. Upon considering the rival contention
the document filed on record and narrated as above and
and on following observation in the judicial
pronouncement referred supra, it can be held without
hesitation the plaintiff cannot be proceed against without
its liability being determined. It is restricted to the value not
below the value of share in the land mortgaged. Hence, it
can be held without hesitation that plaintiff has made out
prima-facie case for grant of temporary injunction and the
balance of convenience lies in its favour. Also it would be
the plaintiff who would suffer irreparable loss or injury if
temporary injunction is not granted. In so far direction to
the defendant bank to withdraw/remove the name of the
plaintiff from CIBIL as defaulter of corporate guarantee the
same can be considered at the time of final disposal of the
suit."
36. According to the learned commercial court, it was essential to
determine liability under the guarantee deed before SBI could be
permitted to pursue the proceedings initiated on the strength of that
deed. In view of the said findings, the learned commercial court
passed the impugned order restraining SBI from taking any further
steps/proceedings pursuant to the deed of guarantee dated
06.07.2018.
SUBMISSIONS
37. Mr K.G. Raghavan, the learned Senior Counsel appearing for
the PEL, opposed the present appeal on several grounds.
- 18 -
38. First, he argued that the contention that the suit was barred
under Section 34 of the SARFAESI Act, Section 18 of the RDB Act,
and Section 63 of the IBC was not pleaded by SBI. He contended
that this was neither articulated in SBI's written statement nor in the
grounds of challenge in the present appeal. He argued that, in the
absence of any pleadings, it was not permissible for SBI to raise
these grounds to challenge the impugned order. He accepted that
the question of whether the Commercial Court's jurisdiction was
barred by the relevant statutes was a question of law. However,
contended that a question of law could not be raised unless it was
pleaded. He referred to the decision of the Supreme Court in
Sulthan Said Ibrahim v. Prakasan and others1 in support of his
contention.
39. Second, he submitted that SBI had filed an application
(I.A.No.6 in COM.OS.No.1159/2023) under Order VII Rule 11 of the
CPC based on the said assertion, which was rejected by the learned
commercial court. He submitted that since SBI had filed a writ
petition challenging the learned Commercial Court's order rejecting
its application under Order VII Rule 11 of the CPC on the ground
2025 SCC online SC 1218
- 19 -
that the Suit was not maintainable, it was estopped from agitating
the said issue in the present appeal. He contended that raising the
question of jurisdiction in the present appeal is an abuse of the
process of the Court.
40. Third, he earnestly contended that PEL's guarantee could not
be invoked as its liability under the guarantee deed was yet to be
determined. He submitted that without prior determination of the
value of the guarantee, it could not be invoked. He referred to the
decision of Punjab National Bank v. Vikram Cotton Mills2 in
support of the said contention.
41. Fourth, he contended that the DRT lacked jurisdiction to
adjudicate the issues raised. He submitted that although SBI issued
a notice under Section 13(2) of the SARFAESI Act, it had neither
initiated any proceedings under the SARFAESI Act nor under the
RDB Act till the date of filing of the suit.
42. Fifth, he contended that since SBI had not instituted any
proceedings before the DRT, the PEL was not entitled to approach
the DRT. He referred to Section 17 of the RDB Act and submitted
that Section 18 of the RDB Act bars the jurisdiction of Civil Courts in
(1970) 1 SCC 60
- 20 -
respect of the matters specified under Section 17. And, since
Section 17 confers jurisdiction on the DRT to entertain applications
from banks and financial institutions for recovery of debts, recourse
to the DRT was not available to PEL.
43. Sixth, he submitted that DRT cannot grant any declaratory
relief; it can only issue recovery certificates. He also submitted that
adjudication of the questions raised necessarily requires evidence
regarding the determination of PEL's share of mortgage land and its
valuation, and this would require extensive cross-examination,
which, according to him, DRT was not empowered to conduct. He
contended that the issues raised in the suit could not be adjudicated
by the NCLT. The NCLT could not grant any declaratory relief as it
exercises only summary jurisdiction.
44. In his written submissions, he stated that although SBI had
filed an application (OA No.1373/2024) before the learned DRT-II,
Bengaluru, the summons in the said application was issued on
16.10.2024, which was more than a year after the filing of the suit.
He also referred to the decisions of the Supreme Court in Dwarka
Prasad Agarwal v. Ramesh Chander Agarwal3 and Central Bank
(2003) 6 SCC 220
- 21 -
of India v. Prabha Jain4 in support of the contention that a bar on
the jurisdiction of the Civil Court could not be readily inferred.
REASONS AND CONCLUSION
45. As is apparent from the above, the principal dispute raised by
the PEL concerns its liability under the guarantee deed. According
to PEL, the notation against its name - "for the value not below the
value of their share of land mortgaged" - limits its liability under the
guarantee deed to Nil. As noted earlier, this is the case set out in
the plaint. However, we may also observe that before the learned
Commercial Court, the counsel representing PEL argued that PEL
was not avoiding its liability as a guarantor. Instead, it was merely
attempting to determine the value of its share. The said argument,
as recorded by the learned Commercial Court in the impugned
order, is outlined below.
"17. In the reply argument the learned senior counsel for
the plaintiff submitted that at no point of time the plaintiff is
escaping from its liability as a guarantor for the loan. On
the other hand, the plaintiff is only seeking for
determination of the value of its share and till then the
plaintiff cannot be proceeded against by the defendant
bank by undertaking any coercive measures. In other
words the plaintiff is seeking in determination of liability
under dated 06.07.2018"
(2025) 4 SCC 38
- 22 -
46. It is at once clear from the above that PEL has essentially
filed a suit to preempt and obstruct the proceedings initiated by the
SBI before the NCLT under the IBC and under the SARFAESI Act
and to prevent SBI from initiating any recovery proceedings under
the RDB Act.
47. As noted hereinbefore, it is the PEL's case that its liability
under the guarantee is nil, as it is confined to the value of its share
in the mortgage property and the mortgage property is confined to
the Principal Borrower's share in the real estate development, that
is, 61 residential units in the project with a proportionate share of the
subject land (i.e., land measuring 4 acres 38 guntas falling in Survey
No.352 of Hulimangala Village, Jigani Hobli, Anekal Taluk,
Bengaluru). However, it is SBI's case that the PEL's liability in the
guarantee deed executed is coextensive with the liability of the
Principal Borrower and is not restricted.
48. It is once clear from the above that the PEL's suit is
essentially to reaffirm its defence to the claim set up by SBI. It is
important to note that PEL has not raised any claim against SBI. But
has sought a declaration holding that it has no liability under the
guarantee deed executed by it. It is thus apparent that this suit
- 23 -
essentially covers the subject matter which would fall within the
jurisdiction of the DRT under the RDB Act.
49. The written submissions filed by Mr Raghavan indicate that
the SBI has already filed an original application before the DRT,
being OA No.1373/2024. The contention that PEL was not
precluded from filing a suit because, at the material time, SBI had
not filed any application under the RDB Act is also without merit.
50. It is well settled that the jurisdiction of the Civil Courts, in
respect of matters which the Debts Recovery Tribunal or the Debts
Recovery Appellate Tribunal is empowered to determine under the
SARFAESI Act, is excluded.
51. Section 34 of the SARFAESI Act, which ousts the jurisdiction
of the civil court, 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 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)."
52. A plain reading of Section 34 of the SARFAESI Act indicates
that it has two limbs. First, that the jurisdiction of the Civil Court to
- 24 -
entertain a suit or any proceeding in respect of matters, which can
be determined by the Debts Recovery Tribunal or the Appellate
Tribunal are excluded. And second, that no injunction can be
granted by any court or any other authority in respect of any action
taken or to be taken pursuant to the powers conferred under the
SARFAESI Act or RDB Act. We may also note that Section 35 of
the SARFAESI Act expressly provides that the provisions of the
SARFAESI Act have an overriding effect over any other law
inconsistent with the SARFAESI Act.
53. In Mardia Chemicals Limited and Others v. Union of India
and Others5, the Supreme Court had authoritatively held that the
jurisdiction of the Civil Court was barred in respect of all matters
which could be determined by the Debts Recovery Tribunal even
though no measures under Section 13(4) of the SARFAESI Act
were taken.
54. It is also apposite to refer to the following extract of the
decision of the Supreme Court in Punjab & Sind Bank v. Frontline
Corporation Limited6:
"20. The issue as to the exclusion of the jurisdiction of
a civil court is no more res integra. The provisions of
(2004) 4 SCC 311
(2023) 16 SCC 331
- 25 -
Section 34 of the Sarfaesi Act have been considered by a
Bench of three Judges of this Court in Mardia Chemicals
Ltd. v. Union of India [Mardia Chemicals Ltd. v. Union of
India, (2004) 4 SCC 311] . It will be relevant to refer to the
following observations of this Court in the said case :
(SCC pp. 349-50, paras 50-51)
"50. It has also been submitted that an appeal is
entertainable before the Debts Recovery Tribunal only
after such measures as provided in sub-section (4) of
Section 13 are taken and Section 34 bars to entertain any
proceeding in respect of a matter which the Debts
Recovery Tribunal or the Appellate Tribunal is empowered
to determine. Thus before any action or measure is taken
under sub-section (4) of Section 13, it is submitted by Mr
Salve, one of the counsel for the respondents that there
would be no bar to approach the civil court. Therefore, it
cannot be said that no remedy is available to the
borrowers. We, however, find that this contention as
advanced by Shri Salve is not correct. A full reading of
Section 34 shows that the jurisdiction of the civil court is
barred in respect of matters which a Debts Recovery
Tribunal or an Appellate Tribunal is empowered to
determine in respect of any action taken "or to be taken in
pursuance of any power conferred under this Act". That is
to say, the prohibition covers even matters which can be
taken cognizance of by the Debts Recovery Tribunal
though no measure in that direction has so far been taken
under sub-section (4) of Section 13. It is further to be
noted that the bar of jurisdiction is in respect of a
proceeding which matter may be taken to the Tribunal.
Therefore, any matter in respect of which an action may
be taken even later on, the civil court shall have no
jurisdiction to entertain any proceeding thereof. The bar of
civil court thus applies to all such matters which may be
taken cognizance of by the Debts Recovery Tribunal,
apart from those matters in which measures have already
been taken under sub-section (4) of Section 13.
51. However, to a very limited extent jurisdiction of the
civil court can also be invoked, where for example, the
action of the secured creditor is alleged to be fraudulent or
his claim may be so absurd and untenable which may not
require any probe whatsoever or to say precisely to the
extent the scope is permissible to bring an action in the
civil court in the cases of English mortgages. We find such
a scope having been recognised in the two decisions of
the Madras High Court which have been relied upon
- 26 -
heavily by the learned Attorney General as well appearing
for the Union of India, namely, V. Narasimhachariar [V.
Narasimhachariar v. Egmore Benefit Society, 1954 SCC
OnLine Mad 352 : AIR 1955 Mad 135] , AIR at pp. 141 &
144, a judgment of the learned Single Judge where it is
observed as follows : (SCC OnLine Mad para 22 : AIR
para 22)
'22. The remedies of a mortgagor against the
mortgagee who is acting in violation of the rights, duties
and obligations are twofold in character. The mortgagor
can come to the court before sale with an injunction for
staying the sale if there are materials to show that the
power of sale is being exercised in a fraudulent or
improper manner contrary to the terms of the mortgage.
But the pleadings in an action for restraining a sale by
mortgagee, must clearly disclose a fraud or irregularity on
the basis of which relief is sought
: Adams v. Scott [Adams v. Scott, (1859) 7 WR 213, 249] .
I need not point out that this restraint on the exercise of
the power of sale will be exercised by courts only under
the limited circumstances mentioned above because
otherwise to grant such an injunction would be to cancel
one of the clauses of the deed to which both the parties
had agreed and annul one of the chief securities on which
persons advancing moneys on mortgages rely.
(See Ghose, Rashbehary : Law of Mortgages, Vol. II, 4th
Edn., p. 784.)' "
21. It could thus be seen that this Court in Mardia
Chemicals [Mardia Chemicals Ltd. v. Union of India,
(2004) 4 SCC 311] has held that the jurisdiction of the civil
court is barred in respect of matters which a DRT or an
Appellate Tribunal is empowered to determine in respect
of any action taken "or to be taken in pursuance of any
power conferred under this Act". The Court has held that
the prohibition covers even matters which may be taken
cognizance of by the DRT though no measure in that
direction has so far been taken under sub-section (4) of
Section 13 of the Sarfaesi Act. It has been held that the
bar of jurisdiction is in respect of a proceeding which
matter may be taken to the Tribunal. It has categorically
been held that any matter in respect of which an action
may be taken even later on, the civil court shall have no
jurisdiction to entertain any proceeding thereof. The Court
held that the bar of civil court thus applies to all such
matters which may be taken cognizance of by the DRT,
apart from those matters in which measures have already
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been taken under sub-section (4) of Section 13 of
the Sarfaesi Act."
55. It is material to note that Section 34 of the SARFAESI Act
proscribes a court or any other authority from issuing an injunction
in respect of action 'taken or to be taken' pursuant to any power
conferred by or under (i) the SARFAESI Act, or (ii) the RDB Act.
56. Thus the contention that the PEL was not precluded from
filing a suit because SBI had not initiated any action under the
SARFAESI Act or the RDB Act, is unmerited. Section 34 of the
SARFAESI Act expressly proscribes the court from issuing an
injunction in respect of any action that had been "taken or to be
taken". Thus, even though no proceedings had been instituted
under the RDB Act when the suit was filed, no injunction could have
been granted by the learned Commercial Court as Section 34 of the
SARFAESI Act also covered matters in respect of which action
could be taken, though not taken, under the SARFAESI Act or the
RDB Act.
57. As noted above, the dispute in the suit centres around PEL's
liability under the guarantee deed. Plainly, the learned Commercial
Court could not have issued any injunction that would, in effect,
- 28 -
restrain SBI from instituting or pursuing any action under the
SARFAESI Act or the RDB Act.
58. We may, at this stage, briefly examine the matters which the
Debts Recovery Tribunal or the Appellate Tribunal are empowered
to determine under the SARFAESI Act.
59. Section 13 of the SARFAESI Act contains provisions for the
enforcement of a security interest. Under Section 13(2), if the
borrower has defaulted, the secured creditor is entitled to issue a
notice calling upon a borrower to discharge his full liability to the
secured creditor within a period of sixty days from the date of the
notice. In terms of Sub-section (3A) of Section 13 of the SARFAESI
Act, the borrower is entitled to make a representation on receipt of a
notice under Section 13(2). If the borrower makes such a
representation, the secured creditor must consider it and
communicate the reasons for accepting or rejecting the
representation.
60. If the borrower fails to discharge his liability, the secured
creditor is entitled to take action under Section 13(4) of the
SARFAESI Act and take possession of the secured assets or take
over the management of the business of the borrower, including the
- 29 -
right to transfer by way of lease, assignment or sale for realising the
secured assets. The secured creditor can also appoint a person to
manage the secured asset.
61. Any person aggrieved by the measures taken under Section
13(4) of the SARFAESI Act, is entitled to make an application to the
Debts Recovery Tribunal under Section 17 of the SARFAESI Act.
By virtue of Section 17(2) of the SARFAESI Act, the Debts
Recovery Tribunal is required to consider whether the measures
taken by the secured creditor under Section 13(4) of the SARFAESI
Act are in accordance with the provisions of SARFAESI Act and the
rules thereunder. A notice under Section 13(2) of the SARFAESI Act
can only be issued once there is a default by the borrower. Action
under Section 13(4) of the SARFAESI Act can be taken only if the
liability demanded under Section 13(2) is not discharged. The
question of whether a notice under Section 13(2) of the SARFAESI
Act was issued in accordance with the SARFAESI Act would involve
the question of whether there was a default by the borrower. Thus,
the question whether there has been a default on the part of the
borrower can be agitated before the DRT under Section 17 of the
SARFAESI Act.
- 30 -
62. In view of the above, the PEL's claim that it has not defaulted
in its obligations under the guarantee deed could be determined by
the Debts Recovery Tribunal under Section 17 of the SARFAESI Act
if measures under Section 13(4) were taken. Admittedly, a notice
under Section 13(2) of the SARFAESI Act was issued, and the PEL
was called upon to make the payment. As noted above, it is the
PEL's case that it has no liability to make a payment under the
guarantee deed and thus, there is no default on its part. Plainly, the
Debts Recovery Tribunal has jurisdiction to determine this question.
It follows that the jurisdiction of the Civil Court or any authority to
consider the same stood ousted by virtue of Section 34 of the
SARFAESI Act. And, in any event, Section 34 of the SARFAESI Act
prohibited the issuance of the order of injunction.
63. The RDB Act and the SARFAESI Act constitute a scheme for
the recovery of debts by banks and financial institutions and for the
enforcement of a security interest by secured creditors. Both
enactments contain provisions excluding the civil courts from
adjudicating matters that could be determined and adjudicated by
the Debts Recovery Tribunal and the Appellate Tribunal under the
respective enactments.
- 31 -
64. In view of the above, we are unable to accept that the learned
Commercial Court had jurisdiction to entertain PEL's suit, which, in
essence, seeks adjudication of its liability to SBI under the
guarantee deed. In any event, no injunction could have been issued
restraining SBI from taking action which had the effect of injuncting
SBI from taking or proceeding with any action under the SARFAESI
Act or the RDB Act.
65. It is also relevant to refer to Sections 17 and 18 of the RDB
Act. The same are set out below:
"17. Jurisdiction, powers and authority of
Tribunals.--(1) A Tribunal shall exercise, on and from the
appointed day, the jurisdiction, powers and authority to
entertain and decide applications from the banks and
financial institutions for recovery of debts due to such
banks and financial institutions.
(1A) Without prejudice to sub-section (1),--
(a) the Tribunal shall exercise, on and from the date
to be appointed by the Central Government, the
jurisdiction, powers and authority to entertain and
decide applications under Part III of Insolvency and
Bankruptcy Code, 2016 (31 of 2016).
(b) the Tribunal shall have circuit sittings in all
district headquarters.
(2) An Appellate Tribunal shall exercise, on and
from the appointed day, the jurisdiction, powers and
authority to entertain appeals against any order made, or
deemed to have been made, by a Tribunal under this Act.
(2A) Without prejudice to sub-section (2), the
Appellate Tribunal shall exercise, on and from the date to
be appointed by the Central Government, the jurisdiction,
powers and authority to entertain appeals against the
order made by the Adjudicating Authority under Part III of
the Insolvency and Bankruptcy Code, 2016 (31 of 2016).
** ** **
- 32 -
18. Bar of jurisdiction.--On and from the
appointed day, no court or other authority shall have, or be
entitled to exercise, any jurisdiction, powers or authority
(except the Supreme Court, and a High Court exercising
jurisdiction under articles 226 and 227 of the Constitution)
in relation to the matters specified in section 17:
Provided that any proceedings in relation to the
recovery of debts due to any multi-State co-operative bank
pending before the date of commencement of the
Enforcement of Security Interest and Recovery of Debts
Laws (Amendment) Act, 2012 (1 of 2013) under the Multi-
State Co-operative Societies Act, 2002 (39 of 2002) shall
be continued and nothing contained in this section shall,
after such commencement, apply to such proceedings."
66. The plain language of Section 17 of the RDB Act makes it
amply clear that the DRT has jurisdiction to entertain and decide
any application by banks and financial institutions for the recovery of
debts due to them. By virtue of Section 18 of the RDB Act, no Court
or any authority has, or is entitled to exercise, jurisdiction
concerning the matters specified in Section 17. Considering the
explicit wording of Section 18, the learned commercial court could
not have entertained a suit that primarily seeks to establish PEL's
liability under the guarantee deed, and therefore, SBI's claim for
recovery of the amount owed by PEL.
67. The import of Mr Raghavan's arguments is that whilst the
Commercial Court has no jurisdiction in relation to matters specified
in Section 17 of the RDB Act, the Court could grant an injunction
order restraining the assumption of jurisdiction by the DRT by
- 33 -
preventing a bank or a financial institution from filing an application
for recovery of debts before the DRT. In our view, the contention is
fundamentally flawed.
68. It is necessary to note the language of Section 18. The
import of the words "in relation to matters specified in Section 17",
as used in Section 18, must be understood as referring to the nature
of matters in respect of which the jurisdiction of a Civil Court is
barred. Thus, matters concerning the recovery of debts by banks,
which can be adjudicated by the DRT, are beyond the jurisdiction of
the Civil Court to examine. In the present case, PEL has couched its
defence to the SBI's claim for recovery of debts as a declaratory
suit. The subject matter of the plaint is in substance PEL's defence
to SBI's claim for recovery. In our view, the suit is clearly barred
under Section 18 of the RDB Act.
69. At this stage, we may also note the Supreme Court's decision
in Bank of Rajasthan v. VCK Shares7. In that case, the Court
considered whether a borrower could file an independent suit to
assert a claim instead of filing a counterclaim in the action for
recovery. In this context, the Court observed as under:
(2023) 1 SCC 1
- 34 -
"43. We must note at the threshold itself that there are no
restrictions on the power of a Civil Court under Section
9 of the Code unless expressly or impliedly excluded. This
was also reiterated by a Constitution Bench of this Court
in Dhulabhai vs. State of Madhya Pradesh. Thus, it is in
the conspectus of the aforesaid proposition that we will
have to analyse the rival contentions of the parties set out
above. Our line of thinking is also influenced by a Three-
Judges Bench of this Court in Dwarka Prasad Agarwal v.
Ramesh Chander Agarwal where it was opined
that Section 9 of the Code confers jurisdiction upon Civil
Courts to determine all disputes of civil nature unless the
same is barred under statute either expressly or by
necessary implication and such a bar is not to be readily
inferred. The provision seeking to bar jurisdiction of a Civil
Court requires strict interpretation and the Court would
normally lean in favour of construction which would uphold
the jurisdiction of the Civil Court.
44. Now, if we turn to the objective of the RDB Act read
with the scheme and provisions thereof; it is abundantly
clear that a summary remedy is provided in respect of
claims of banks and financial institutions so that recovery
of the same may not be impeded by the elaborate
procedure of the Code. The defendant has a right to
defend the claim and file a counterclaim in view of sub-
Sections (6) and (8) of Section 19 of the RDB Act. In case
of pending proceedings to be transferred to the DRT,
Section 31 of the RDB Act took care of the issue of mere
transfer of the Bank's claim, albeit without transfer of the
counterclaim. Thus, if the debtor desires to institute a
counterclaim, that can be filed before the DRT and will be
tried along with the case. However, it is subject to a
caveat that the bank may move for segregation of that
counterclaim to be relegated to a proceeding before a Civil
Court under Section 19(11) of the RDB Act, though such
determination is to take place along with the determination
of the claim for recovery of debt.
45. We are thus of the view that there is no provision in
the RDB Act by which the remedy of a civil suit by a
defendant in a claim by the bank is ousted, but it is the
matter of choice of that defendant. Such a defendant may
file a counterclaim, or may be desirous of availing of the
more strenuous procedure established under the Code,
and that is a choice which he takes with the
consequences thereof.
- 35 -
46. We may notice that the RDB Act was amended from
time to time, including by amendments made under Act 1
of 2000, Act 30 of 2004, Act 1 of 2013 and Act 44 of 2016.
The anomaly, inter alia, initially sought to be cured was on
account of the non-availability of provisions on
counterclaim and set-off. It is to get over such a scenario
that amendment through Act 1 of 2000 was made by the
Legislature itself to cure the problem. The Legislature did
not, at any stage, make any further amendment for
excluding the jurisdiction of the Civil Court in respect of a
claim of a defendant in such a proceeding being filed
along with the suit. The Legislature in its wisdom has also
not considered it appropriate to bring any amendment to
enhance the powers of the DRT in this respect."
70. The Supreme Court held that a suit by a borrower to make a
claim against a bank or financial institution is not barred. Section 18
of the RDB Act essentially bars the Court's jurisdiction to adjudicate
a claim by a bank or financial institution for the recovery of debts.
71. As noted in the present case, the nature of the suit filed by
PEL is essentially its defence to the SBI's demand. PEL has not set
up any separate claim against SBI. Whilst the Supreme Court held
that a borrower could maintain a separate suit to claim against the
bank, it also held that, if any such suit was filed, the proceedings
before the DRT could not be stayed. It is relevant to refer to the
following directions issued by the court:
"52. We however have a word of caution keeping in mind
the nature of powers exercised by the DRT and the
objective of its creation. The interpretations in Abhijit Tea
Co. and Ranjan Chemicals (supra), seeking to give power
of transfer to the Civil Court, whether by consent or
- 36 -
otherwise, were apparently predicated on an
apprehension that a defendant may launch a suit before
the Civil Court in order to delay the proceedings before the
DRT.
53. We certainly would not like that the process envisaged
under the RDB Act be impeded in any manner by filing of
a separate suit if a defendant chooses to do so. A claim
petition before the DRT has to proceed in a particular
manner and would so proceed. There can be no question
of stay of those proceedings by way of a civil proceeding
instituted by a defendant before the Civil Court. The suit
would take its own course while a petition before the DRT
would take its own course. We appreciate that this may be
in the nature of parallel proceedings but then it is the
defendant's own option. We see no problem with the
same as long as the objective of having expeditious
disposal of the claim before the DRT under the RDB Act is
not impeded by filing a civil suit. Thus, it is not open to a
defendant, who may have taken recourse to the Civil
Court, to seek a stay on the decision of the DRT awaiting
the verdict of his suit before the Civil Court as it is a matter
of his choice.
54. We thus make it abundantly clear that in case of such
an option exercised by the defendant who filed an
independent suit, whatever be the nature of reliefs, the
claim petition under the RDB Act would continue to
proceed expeditiously in terms of the procedure
established therein to come to a conclusion whether a
debt is due to a bank and/or financial institution and
whether a recovery certificate ought to be issued in that
behalf."
72. In view of the express language of Section 34 of the
SARFAESI Act and the authoritative direction issued by the
Supreme Court in Bank of Rajasthan (supra), the impugned order
restraining SBI to take further steps pursuant to the guarantee deed,
cannot be sustained.
- 37 -
73. The contention that SBI is precluded from raising any ground
regarding the jurisdiction of the Commercial Court to entertain the
suit is without any merit. It is well settled that the question of law can
be raised at any stage. The Supreme Court has in several decisions
held that where a question of law arises that can be decided without
additional evidence; courts should not refuse to consider it merely
on the ground that it was not raised earlier8. The Supreme Court in
Vasantkumar Radhakisan Vora v. Board of Trustees of the Port
of Bombay9 and subsequently in Odisha State Financial Corpn.
v. Vigyan Chemical Industries & Ors.10 explained that pure
questions of law, which go to the root of the jurisdiction in a case,
can be raised for the first time in an appeal11.
74. Additionally, if the Court is prohibited from entertaining any
action or issuing any injunction, it would be necessary for the Court
to take note of the same, notwithstanding that the parties have not
taken any such plea12.
Masalti v. State of U.P., 1964 SCC OnLine SC 30; Chandrika Misir v. Bhaiya Lal (1973)
2 SCC 474; P.M.A. Metropolitan v. Moran Mar Marthoma, 1995 Supp (4) SCC 286;
Saurav Jain v. A.B.P. Design (2022) 18 SCC 633
(1991) 1 SCC 761
2025 SCC OnLine SC 1609
(2025) SCC Online SC 1609
R. Kandasamy v. T.R.K. Sarawathy, (2025) 3 SCC 513
- 38 -
75. Mr. Raghavan's argument that a challenge to jurisdiction must
be explicitly pleaded and cannot be raised otherwise is unfounded.
His reliance on the Supreme Court's decision in Sulthan Said
Ibrahim (supra) is misplaced. In that decision, one of the issues
before the court was whether the application to delete the
appellant's name from the list of parties was barred by res judicata.
The Court held that, in that case, the appellant had been impleaded
as a legal heir under Order XXII Rule 4 of the CPC after proper
inquiry by the Court and had participated in the proceedings without
objection. However, later, he filed an application to have his name
removed, which the Supreme Court noted raised serious doubts
about its bona fides. The said principle is not applicable in the
present case. First, the SBI has never accepted the jurisdiction of
the Commercial Court. Although SBI has not explicitly stated its
objection to the jurisdiction, it has clearly denied that the
Commercial Court had jurisdiction, as was averred by PEL.
76. SBI filed an application seeking rejection of the plaint under
Order VII Rule 11 of the CPC on the ground that the Commercial
Court could not have jurisdiction. The said application (I.A.No.6)
was dismissed by the learned Commercial Court, by an order dated
01.03.2025. SBI did not accept that order. Since the order was not
- 39 -
appealable under Order XLIII Rule 1 of the CPC, SBI filed a writ
petition, which is pending.
77. Mr Raghavan's contention that SBI is estopped from
questioning the jurisdiction of the Commercial Court in these
proceedings because it has filed a writ petition, is insubstantial. The
contention that SBI is precluded from instituting any recovery
proceedings until PEL's liability under the guarantee deed is
determined is equally bereft of any merit. According to SBI, PEL's
liability is co-extensive with the Principal Borrower's. It has
quantified its claim against the Principal Borrower; therefore, it is
entitled to institute proceedings to recover the said amount. PEL's
claim that its liability is nil as it is confined to its interest in the
mortgaged land, which admittedly is nil, is clearly PEL's defence
against the SBI's claim. SBI's right to institute proceedings for
recovery of the amounts claimed by it or enforce its security interest,
is not contingent on the determination of PEL's liability in a separate
action.
78. The import of Mr Raghavan's contention is that PEL's liability
under the guarantee deed must be adjudicated in separate
proceedings before SBI can institute any proceedings under the
- 40 -
RDB Act, IBC, or SARFAESI Act. This contention is ill-founded and
without merit, and is accordingly rejected.
79. The said contention was advanced on the strength of the
Supreme Court's decision in Punjab National Bank (supra).
However, a plain reading of the said judgment indicates that it has
no application to the facts of the present case. In the said case, the
bank had instituted a suit for recovery against the principal borrower
(Company), and one Ranjit Singh, who was the director of the
Managing Agent. The amount claimed was the balance of the cash
credit. Since the petition for winding up of the company had been
filed in the High Court of Allahabad, the trial Court found that the suit
was not maintainable against the Company without obtaining the
leave of the Company Court. The trial court had no jurisdiction to
adjudicate on the merits of the bank's claims, as under the scheme,
the Board of Trustees were to scrutinise the claim, and their
decision was final. The suit against Ranjit Singh was rejected as
premature on the ground that he had not defaulted in making any
payment of dues under the terms of the guarantee as the dues of
the Company were not determined. Two appeals were preferred
against the trial court's decree dismissing the suit. Insofar as
dismissal of suit against Ranjit Singh was concerned, the Court
- 41 -
found that the bond executed by him expressly provided that the
guarantee was to the extent of the "ultimate balance" remaining due
to the bank on such cash credit account. The 'ultimate balance' was
to be determined after taking into account the dividends,
compositions and payments towards the debt. The same had not
been determined as the Board of Trustees, which was required to
take a final decision, had not made a decision regarding the balance
payable by the Company. Accordingly, the decree passed by the
trial Court was confirmed. In the aforesaid context, the Supreme
Court faulted the courts for dismissing the suit against Ranjit Singh.
However, it was held that the suit was required to be stayed until the
'ultimate balance' was determined. It is material to note that in the
said case, the ultimate balance was not required to be determined
by the court, but by the Board of Trustees. In the present case, the
learned DRT has the jurisdiction to determine the amount due to
SBI under the guarantee deed. The learned NCLT has the
jurisdiction to determine whether PEL has defaulted in its payment
obligations.
80. As noted at the outset, SBI has also filed a petition under
Section 7 of the IBC, initiating the Corporate Insolvency Resolution
- 42 -
Process [CIRP] against the PEL before NCLT. It is necessary to
refer to Section 7 of the IBC, which is set out below.
"7. Initiation of corporate insolvency resolution
process by financial creditor.--(1) A financial creditor
either by itself or jointly with 1 [other financial creditors, or
any other person on behalf of the financial creditor, as
may be notified by the Central Government,] may file an
application for initiating corporate insolvency resolution
process against a corporate debtor before the
Adjudicating Authority when a default has occurred.
[Provided that for the financial creditors, referred to
in clauses (a) and (b) of sub-section (6A) of section 21, an
application for initiating corporate insolvency resolution
process against the corporate debtor shall be filed jointly
by not less than one hundred of such creditors in the
same class or not less than ten per cent. of the total
number of such creditors in the same class, whichever is
less:
Provided further that for financial creditors who are
allottees under a real estate project, an application for
initiating corporate insolvency resolution process against
the corporate debtor shall be filed jointly by not less than
one hundred of such allottees under the same real estate
project or not less than ten per cent. of the total number of
such allottees under the same real estate project,
whichever is less:
Provided also that where an application for initiating
the corporate insolvency resolution process against a
corporate debtor has been filed by a financial creditor
referred to in the first and second provisos and has not
been admitted by the Adjudicating Authority before the
commencement of the Insolvency and Bankruptcy Code
(Amendment) Act, 2020, such application shall be
modified to comply with the requirements of the first or
second proviso within thirty days of the commencement of
the said Act, failing which the application shall be deemed
to be withdrawn before its admission.
Explanation.--For the purposes of this sub-section,
a default includes a default in respect of a financial debt
- 43 -
owed not only to the applicant financial creditor but to any
other financial creditor of the corporate debtor.
(2) The financial creditor shall make an application
under sub-section (1) in such form and manner and
accompanied with such fee as may be prescribed.
(3) The financial creditor shall, along with the
application furnish--
(a) record of the default recorded with the information
utility or such other record or evidence of default as may
be specified;
(b) the name of the resolution professional proposed to act
as an interim resolution professional; and
(c) any other information as may be specified by the
Board.
(4) The Adjudicating Authority shall, within fourteen
days of the receipt of the application under sub-section
(2), ascertain the existence of a default from the records of
an information utility or on the basis of other evidence
furnished by the financial creditor under sub-section (3).
Provided that if the Adjudicating Authority has not
ascertained the existence of default and passed an order
under sub-section (5) within such time, it shall record its
reasons in writing for the same.
(5) Where the Adjudicating Authority is satisfied
that--
(a) a default has occurred and the application under sub-
section (2) is complete, and there is no disciplinary
proceedings pending against the proposed resolution
professional, it may, by order, admit such application; or
(b) default has not occurred or the application under sub-
section (2) is incomplete or any disciplinary proceeding is
pending against the proposed resolution professional, it
may, by order, reject such application:
Provided that the Adjudicating Authority shall,
before rejecting the application under clause (b) of sub-
section (5), give a notice to the applicant to rectify the
defect in his application within seven days of receipt of
such notice from the Adjudicating Authority.
- 44 -
(6) The corporate insolvency resolution process
shall commence from the date of admission of the
application under sub-section (5).
(7) The Adjudicating Authority shall communicate--
(a) the order under clause (a) of sub-section (5) to the
financial creditor and the corporate debtor;
(b) the order under clause (b) of sub-section (5) to the
financial creditor, within seven days of admission or
rejection of such application, as the case may be."
81. In terms of Section 7(1), the financial creditor (in this case
SBI) is entitled to file an application for initiating CIRP against a
corporate debtor (in this case PEL) before the adjudicating authority
(NCLT).
82. SBI has made a demand for payment of the dues claimed by
it and PEL has not discharged the said demand. According to SBI, a
default has occurred. Thus, consistent with it stand, SBI has initiated
the CIRP by filing an application under Section 7 of IBC. In terms of
Sub-section (4) of Section 7 of IBC, the Adjudicating Authority is
required to ascertain the existence of a default from the records of
an information utility or on the basis of other evidence furnished by
the financial creditor. The question of whether PEL has defaulted,
thus has to be ascertained by the learned NCLT on the basis of the
- 45 -
material produced, which would necessarily also include the
guarantee deed admittedly executed by the PEL.
83. In terms of Section 63 of the IBC no Civil Court has authority
or jurisdiction to entertain any proceedings in respect of any matter
on which NCLT or National Company Law Appellate Tribunal
[NCLAT] has jurisdiction under the IBC. It is relevant to refer to
Section 63 of the IBC, which bars the jurisdiction of a Civil Court.
The same is set out below:
"63. Civil court not to have jurisdiction.--No civil court
or authority shall have jurisdiction to entertain any suit or
proceedings in respect of any matter on which National
Company Law Tribunal or the National Company Law
Appellate Tribunal has jurisdiction under this Code".
84. By virtue of Section 63 of IBC, no Civil Court has authority or
jurisdiction to entertain a suit or proceedings in respect of any
matter on which NCLT or NCLAT has jurisdiction under that law.
85. Section 60 of the IBC stipulates that the Adjudicating
Authority in relation to insolvency, resolution and liquidation for
corporate persons, including corporate debtors of the company, is
the NCLT, having territorial jurisdiction over the place where the
registered office of the corporate person is located.
- 46 -
86. Thus, the learned NCLT has exclusive jurisdiction to decide
on SBI's application and to ascertain whether there is a default on
the part of PEL. Plainly, the learned Commercial Court has no
jurisdiction to interdict the learned NCLT from exercising its
jurisdiction to ascertain whether PEL has defaulted in its financial
obligations. The order injuncting SBI from proceeding pursuant to
the guarantee deed, in effect, interdicts SBI from pursuing its
application before the learned NCLT.
87. Before concluding, it is also relevant to refer to the terms of
the guarantee deed. As noted, at the outset, the name of the
guarantors as reflected in the guarantee deed also mentions "For
the value not below the value of their share of land mortgaged'' in
parentheses against the name PEL. However, the body of the
guarantee deed contains no such qualification or notation. The
relevant clauses of the guarantee deed - as extracted hereinbefore
- do not restrict or limit the PEL's liability under the guarantee deed.
88. It is also not disputed that the liability of a surety or a
guarantor is coextensive with that of the principal borrower.
- 47 -
89. In Industrial Investment Bank of India Limited v.
Biswanath Jhunjhunwala13, the Supreme Court held that initiating
proceedings in the National Company Law Tribunal against a
principal debtor would not be a bar for the institution or continuation
of proceedings against a guarantor. In Union Bank of India v.
Satyawati Tondon14, the Supreme Court noted that the
Government of India had accepted the recommendations of the
Narasimham Committee and the Andhyarujina Committee,
constituted by the Central Government, to examine the banking
sector, which led to the enactment of the SARFAESI Act. The
Supreme Court noted the object of the SARFAESI Act and held that
the High Court had completely misdirected itself by assuming that
the lender could not have initiated action against the guarantor
without first making efforts to recover its dues from the borrower.
90. Thus, in our view, even if the suit was not barred and the
issuance of the injunction as granted was not prohibited by law, the
given facts did not warrant any order restraining SBI from taking
steps pursuant to the guarantee furnished by PEL. The learned
commercial court has completely misdirected itself in passing the
impugned order.
(2009) 9 SCC 478
(2010) 8 SCC 110
- 48 -
91. In view of the above, the impugned order is unsustainable.
The appeal is, accordingly, allowed and the impugned order is set
aside.
Sd/-
(VIBHU BAKHRU)
CHIEF JUSTICE
Sd/-
(C.M. POONACHA)
JUDGE
KPS/KMV
