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Andhra High Court · body

2007 DIGILAW 311 (AP)

K. Janga Reddy v. G. Srinivas

2007-03-22

P.S.NARAYANA

body2007
Judgment :- 1. This Civil Miscellaneous Appeal is filed under Order 43 Rule 1 of the Code of Civil Procedure (hereinafter, in short, referred to as ‘Code’ for the purpose of convenience) as against an order dated 26-6-2006 made in I.A.No.1220/2006 in O.S.No.1378/2006 on the file of II-Additional Senior Civil Judge, Ranga Reddy District at L.B.Nagar. The 3rd respondent in the present Civil Miscellaneous Appeal is the Corporation Bank, S.P.Road, Secunderabad represented by its Authorized Officer and Chief Manager. 2. The appellant herein, as petitioner, filed I.A.No.1220/2006 in O.S.No.1378/2006 as specified above under Order XXXIX rules 1 and 2 of the Code praying for temporary injunction restraining respondent No.3 from interfering with the peaceful possession and enjoyment of the appellant-petitioner over the plaint schedule property. Before the learned II-Additional Senior Civil Judge, Ranga Reddy District, Ex.P.1 to Ex.P.23 were marked. The learned Judge after recording some reasons, came to the conclusion that in view of the bar imposed by Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter, in short, referred to as ‘Act’ for the purpose of convenience) the appellant-petitioner is not entitled to the relief of injunction and accordingly dismissed the application. Aggrieved by the same, the present Civil Miscellaneous Appeal had been preferred. 3. Contentions of Sri Jagan Mohan Reddy:- Sri Jagan Mohan Reddy, the learned Counsel representing appellant-petitioner-plaintiff would maintain that even if Section 34 of the Act to be taken into consideration, from the language employed in the said provision, it cannot be said that a Civil Suit is absolutely barred. The learned Counsel would contend that the civil suit is perfectly maintainable and may be on the ground that the transaction itself is fraudulent or the recovery proceedings are so absurd, that such proceedings cannot be further proceeded with. The learned Counsel also would submit that there is no effective remedy provided under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 for adjudicating on questions of title and hence to say that the suits are not maintainable at all, cannot be sustained. The learned Counsel also would submit that there is no effective remedy provided under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 for adjudicating on questions of title and hence to say that the suits are not maintainable at all, cannot be sustained. The learned Counsel while further elaborating his submissions would contend that specific pleading is there in the plaint that the Bank in question had not verified the documents properly and there was negligence or at least non-diligence on the part of the Bank in verifying the documents and in the light of the same and also in view of the language of Section 9 of the Code, the civil suit is perfectly maintainable. The learned Counsel also would submit that inasmuch as the application was dismissed mainly on the ground of non-maintainability and in view of the fact that the merits and demerits had not been touched by the learned II-Additional Senior Civil Judge, Ranga Reddy, the matter may have to be sent back for the purpose of appreciating the merits and demerits. The learned Counsel also would comment that this Court granted interim order for a limited period and the same is being extended and hence in view of the facts and circumstances, it would be just and proper to set aside the impugned order by sending the matter back to the learned II-Additional Senior Civil Judge, Ranga Reddy with a direction to dispose of the application in accordance with law. The learned Counsel placed strong reliance on several decisions. 4. Contentions of Smt. Dyumani:- Smt. Dyumani, the learned Counsel representing the 3rd respondent – Corporation Bank had taken this Court through the relevant provisions of the Act and would comment that in the light of the clear language of Section 34 of the Act, the suit for injunction itself is not maintainable and even otherwise the Counsel would maintain that it is suffice to state at this stage that when the statute clearly prohibits the maintainability of the suit, definitely it can be said that such plaintiff, the appellant herein, is not having a strong prima facie case. The Counsel also would submit that in such circumstances, the appellant-petitioner is also not having either balance of convenience or that he would be put to irreparable loss and damage. The Counsel also would submit that in such circumstances, the appellant-petitioner is also not having either balance of convenience or that he would be put to irreparable loss and damage. The learned Counsel also would point out that it is not as though the appellant-petitioner-plaintiff is remediless and even otherwise the general or vague averments made in the plaint even if to be taken as prima facie true, it cannot be said that the ground of fraud had been specifically averred in accordance with law. In any view of the matter, this is not a fit matter to be interfered with. The learned Counsel also incidentally touched the merits and demerits of the matter and had referred to certain documents and the relevant provisions of the Indian Contract Act in relation thereto. The learned Counsel also placed strong reliance on certain decisions to substantiate her contentions. 5. Heard the Counsel. 6. The appellant herein as petitioner-plaintiff filed the application I.A.No.1220/2006 in O.S.No.1378/2006 on the file of II-Additional Senior Civil Judge, Ranga Reddy District, under Order XXXIX Rules 1 and 2 of the Code praying for temporary injunction restraining respondent No.3– Corporation Bank from interfering with the peaceful possession and enjoyment over the plaint schedule property. 7. The parties hereinafter would be referred to as petitioner and respondents as shown in I.A.No.1220/2006 in O.S.No.1378/2006, as specified above. 8. The petitioner-plaintiff had stated that originally the land in Sy.No.69 total admeasuring Ac.15-00 guntas of Old Bowenpally was purchased by his father and grandfather namely Kanukula Nagi Reddy and Kanukula Sami Reddy under registered sale deed bearing No.29/65, thereafter Nagi Reddy, Eswar Reddy and Laxma Reddy being the legal heirs of Sami Reddy partitioned the said land and the father of the petitioner i.e., Nagi Reddy got share to an extent of Ac.4-00 gts., thereafter the petitioner, his father, brother were enjoying the said land. That the petitioner, his father and brother entered into two separate registered developments agreements-cum-GPAs with the first respondent for construction of duplex houses. As per the said agreement, the first respondent is entitled to 70% share whereas the petitioner, his brother and his father are entitled to 30% share and that the petitioner has obtained permission for construction of houses over Plots 31 to 33 (Parts) from Kukatpally Municipality and the petitioner got the schedule property over the plot Nos.30 and 31 (Parts). As per the said agreement, the first respondent is entitled to 70% share whereas the petitioner, his brother and his father are entitled to 30% share and that the petitioner has obtained permission for construction of houses over Plots 31 to 33 (Parts) from Kukatpally Municipality and the petitioner got the schedule property over the plot Nos.30 and 31 (Parts). As the respondent No.1 failed to complete the construction, the petitioner, his brother and father cancelled the Registered Development Agreement-cum-G.P.A.s vide two separate registered Deed of Cancellation of Development Agreement-cum-G.P.As., dated 18-8-2001. That in the meanwhile some third party disputes arose in respect of title over the plot Nos.26, 27 and 28 and thereby the said dispute was settled with the third parties and that the respondent No.1, the petitioner, his brother and father of the petitioner entered into Memorandum of Understanding dt.19-11-2001 and respondent No.1 agreed to complete the pending work in the plot of the petitioner within one month but as he failed to do so, the petitioner completed the construction in the schedule property and he is in possession and enjoyment of the same and that he came to know in the month of November, 2004 that respondent No.3 sanctioned the loan in respect of the schedule property without verifying the documents and possession. The first respondent without having any right, title or interest over the property alienated the schedule property in favour of respondent No.2 vide sale deed dt.23-9-2004 and basing on the said document, he obtained loan from respondent No.3. After sanctioning the loan by respondent No.3, the first respondent against executed a registered rectification deed dt.6-12-2004. On 10-6-2006, the third respondent and its officials came to the schedule property and tried to obtain the possession under Securitisation Act, thereafter the petitioner filed a Writ Petition respect of the schedule property to quash the orders of the Chief Metropolitan Magistrate, Cyberabad at L.B.Nagar, as such, at any point of time the respondent No.3 will come and take the possession of schedule property by dispossessing the petitioner and in such circumstances the petitioner-plaintiff approached the Court by filing the suit aforesaid, praying for temporary injunction as specified above. 9. The 3rd respondent filed counter denying certain allegations and stating that the 2nd respondent approached it in September, 2004 for “C” Home loan of Rs.25,00,000/- for the purpose of purchase of schedule property. 9. The 3rd respondent filed counter denying certain allegations and stating that the 2nd respondent approached it in September, 2004 for “C” Home loan of Rs.25,00,000/- for the purpose of purchase of schedule property. One Francis Enubothulu stood as guarantor to the 2nd respondent. They executed necessary documents. The 2nd respondent deposited his original sale deed dt.23-9-2004 and other connected documents and created an equitable mortgage over the schedule property. Thereafter the 2nd respondent failed to repay the said lone and so the 3rd respondent was constrained to classify the account as Non-Performing Asset and it invoked the provisions of Securitization Act, 2002 and issued demand notice on 10-3-2005 under Section 13(2) of the Act demanding the payment of Rs.21,19,355/- together with future interest. But the said notice was not served and so the 3rd respondent was constrained to publish the demand notice in Hindu daily newspaper dt.11-8-2005 and Enaadu daily newspaper dt.12-8-2005. The respondent No.2 filed Crl.M.P.No.140/2006 of the Securitization Act before the Chief Metropolitan Magistrate, Cyberabad seeking assistance and Chief Metropolitan Magistrate was pleased to appoint an Advocate-Commissioner vide his orders dt.20-5-2006 for taking possession of the secured asset. The Advocate-Commissioner fixed date as 10-6-2006 for taking possession of the secured asset. But the petitioner requested time for one week on the ground that he filed Writ Petition. As per Section 34 of the Securitization Act, Civil Court is having no jurisdiction to entertain any suit or proceedings and the petitioner has to approach the Debts Recovery Tribunal. The cancellation of Development Agreements-cum-G.P.A. dt.18-8-2001 is invalid documents and the said documents do not contain the signatures of developer. The petitioner in collusion with respondent No.1 and 2 is trying to play fraud on respondent No.3. 10. Ex.P.1 to Ex.P.23 were marked and the learned Judge framed the following point for consideration:- “Whether the petitioner is entitled for relief of temporary injunction as prayed for?” 11. After narrating the facts, the learned Judge referred to Section 34 of the Act and also the decision of the Division Bench in BRANCH MANAGER, STATE BANK OF INDIA, COMMERCIAL BRANCH, ONGOLE AND ANOTHER vs. CHINIGEPALLI LATHANGI AND OTHERS 2006 (1) ALT 20 (DB) and came to the conclusion that the appellant-petitioner-plaintiff is not entitled to the temporary injunction. After narrating the facts, the learned Judge referred to Section 34 of the Act and also the decision of the Division Bench in BRANCH MANAGER, STATE BANK OF INDIA, COMMERCIAL BRANCH, ONGOLE AND ANOTHER vs. CHINIGEPALLI LATHANGI AND OTHERS 2006 (1) ALT 20 (DB) and came to the conclusion that the appellant-petitioner-plaintiff is not entitled to the temporary injunction. The petitioner-plaintiff instituted the suit praying for declaration that the registered sale deed dt.23-9-2004 is null and void and also for permanent injunction restraining respondent No.3 from interfering into peaceful possession and enjoyment of the plaint schedule property. The stand taken by the petitioner is that there was Development Agreement-cum-General Power of Attorney between the petitioner and the first respondent and the first respondent had not completed the work as per the Development Agreement-cum-General Power of Attorney and hence the same was cancelled by executing Deed of Cancellation of Development Agreement-cum-General Power of Attorney dt.18-8-2001 and the first respondent executed registered sale deed in respect of the schedule property in favour of 2nd respondent without having any right, title or interest and the 2nd respondent obtained loan from 3rd respondent and thus, the 3rd respondent is now trying to take possession of the plaint schedule property. The stand taken by the 3rd respondent is that the 2nd respondent availed housing loan from the 3rd respondent Bank by mortgaging the schedule land by way of deposit of title deed dt.23-9-2004 and as the 2nd respondent committed default in rapying the amount, the 3rd respondent was constrained to classify the account as Non-Performing Asset and it invoked the provisions of Securitization Act, 2002 and further approached the Chief Metropolitan Magistrate for appointment of Advocate Commissioner to take possession of the suit schedule property and since the provisions of the Act had been invoked, the Civil Court cannot entertain the suit praying for the relief of injunction. It is also brought to the notice of this Court that showing the Corporation Bank as R.1, the self-same petitioner filed wpno.11459/2006, virtually praying for the self-same relief and the said Writ Petition is said to be pending and no interim orders had been made. It is also brought to the notice of this Court that showing the Corporation Bank as R.1, the self-same petitioner filed wpno.11459/2006, virtually praying for the self-same relief and the said Writ Petition is said to be pending and no interim orders had been made. Section 34 of the Act dealing with Civil Court not to have jurisdiction reads as hereunder:- “No civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or an Appellate Tribunal is empowered by or under this Act to determine and jo 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”. Strong reliance was placed on the decision of the Apex Court in STATE OF A.P. vs MANJETI LAXMI KANTHA RAO (DEAD) BY LRs AND OTHERS (2000) 3 SCC 689 ) wherein the Apex Court while dealing with the aspect of jurisdiction of the Civil Court and exclusion thereof not to be readily inferred in the context of Section 9 of the Code held as hereunder:- “The normal rule of law is that civil Courts have jurisdiction to try all suits of civil nature except those of which cognizance by them is either expressly or impliedly excluded as provided under Section 9 of the Code of Civil Procedure but such exclusion is not readily inferred and the presumption to be drawn must be in favour of the existence rather than exclusion of jurisdiction of the civil Courts to try a civil suit. The test adopted in examining such a question is (i) whether the legislative intent to exclude arises explicitly or by necessary implication, and (ii) whether the statute in question provides for adequate and satisfactory alternative remedy to a party aggrieved by an order made under it. The test adopted in examining such a question is (i) whether the legislative intent to exclude arises explicitly or by necessary implication, and (ii) whether the statute in question provides for adequate and satisfactory alternative remedy to a party aggrieved by an order made under it. In Dhulabhai v State of M.P. (AIR 1969 S.C., 78) it was noticed that where a statute gives finality to the orders of the Special Tribunals, jurisdiction of the civil Courts must be held to be excluded if there is adequate remedy to do what the civil Courts would normally do in a suit and such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure.” Further strong reliance was placed on INDIAN BANK vs. ABS MARINE PRODUCTS (P) LTD (2006) 5 SCC 72 ) wherein the Apex Court while dealing with the relevant provisions of Recovery of Debts Due to Banks and Financial Institutions Act, 1993, observed as hereunder:- “AS far as sub-sections (6) to (11) of section 19 are concerned, they are merely enabling provisions. The Debts Recovery Act, as it originally stood, did not contain any provision enabling a defendant in an application filed by the Bank/financial institution to claim any set-off or make any counter-claim against the Bank/financial institution. On that among other grounds, the Act was held to be unconstitutional (See Delhi High Court Bar Association v. Union of India, AIR 1995 Delhi 323). During the pendency of appeal against the said decision, before this Court, the act was amended by Act 1 of 2000 to remove the lacuna by providing for set-off and counter-claims by defendants in the applications filed by Banks/financial institutions before the Tribunal. During the pendency of appeal against the said decision, before this Court, the act was amended by Act 1 of 2000 to remove the lacuna by providing for set-off and counter-claims by defendants in the applications filed by Banks/financial institutions before the Tribunal. The provisions of the Act as amended were upheld by this Court in Union of India v. Delhi High Court Bar association [ 2002 (4) SCC 275 ] The effect of sub-sections (6) to (11) of Section 19 of the amended Act is that any defendant in a suit or proceeding initiated by a bank or financial institution can: (a) claim set-off against the demand of a Bank/ financial institution, any ascertained sum of money legally recoverable by him from such Bank/financial institution; and (b) set-up by way of counter-claim against the claim of a Bank/financial institution, any right or claim in respect of a cause of action accruing to such defendant against the Bank/financial institution, either before or after filing of the application, but before the defendant has delivered his defence or before the time for delivering the defence has expired, whether such a counter-claim is in the nature of a claim for damages or not. What is significant is that Sections 17 and 18 have not been amended. Jurisdiction has not been conferred on the Tribunal, even after amendment, to try independent suits or proceedings initiated by borrowers or others against Banks/financial institutions, nor the jurisdiction of civil courts barred in regard to such suits or proceedings. The only change that has been made is to enable defendants to claim set-off or make a counter-claim as provided in sub-sections (6) to (8) of Section 19 in applications already filed by the Bank or financial institutions for recovery of the amounts due to them. The only change that has been made is to enable defendants to claim set-off or make a counter-claim as provided in sub-sections (6) to (8) of Section 19 in applications already filed by the Bank or financial institutions for recovery of the amounts due to them. In other words, what is provided and permitted is a cross-action by a defendant in a pending application by the Bank/financial institution, the intention being to have the claim of the Bank/financial institution made in its application and the counter-claim or claim for set-off of the defendant, as a single unified proceeding, to be disposed of by a common order.” Strong reliance was placed on the decision of the Apex Court in MARDIA CHEMICALS LTD., vs UNION OF INDIA 2004 (4) ALT 4 (SC) wherein at Para 51, the Apex Court observed:- “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 their 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 recognized in the two decisions of the Madras High Court which have been relied upon heavily by the learned Attorney General as well appearing for the Union of India, namely V. NARASIMHACHARIAR vs EGMORE BENEFIT SOCIETY (AIR 1955 Madras 135) p.135 at p.141 and 144, a Judgment of the learned single Judge where it is observed as follows in Para 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 (1859) 7 WR (Eng.) 213 (Z49). 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 (1859) 7 WR (Eng.) 213 (Z49). 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.” 12. Elaborate submissions were made on the strength of the observations made in the decision referred to supra to the effect that if the claim is either fraudulent or absurd, it cannot be said that the civil Court has no jurisdiction at all to entertain the suit. The learned Counsel representing appellant had pointed out to the relevant portions of paras 6 and 7 of the plaint and would maintain that in the light of these averments made in the plaint, the suit is perfectly maintainable. At para 6 it was averred that the plaintiff further submit that while the plaintiff enjoying the schedule petition, in the month of November, 2004, the plaintiff came to know that the defendant No.3 sanctioned the loan in respect of schedule property without verifying the documents and possession. As on the date of sanctioning of loan, the plaintiff has been in possession of the schedule property. Then the plaintiff submitted his objections with all connected documents with the defendant No.s and he acknowledged the same and assured to take necessary action against the defendants 1 & 2. At para 7, the relevant portion reads as hereunder:- “The defendant No.3 herein without verification of property and its link documents sanctioned loan hand in glove with the defendants 1 and 2. After sanctioning the loan by the defendant No.3, the defendant No.1 again executed a Registered Rectification Deed vide Doc.No.7796/2004, dt.6-12-2004. In fact, the alleged Registered Sale Deed bearing Doc.No.5937/2004 is not binding against the plaintiff and the schedule property, as such the same is liable to be declared as null and void.” 13. Certain averments, no doubt, were made in relation to the collusion or non-diligence on the part of the Banking Institution in the verification of the documents. In fact, the alleged Registered Sale Deed bearing Doc.No.5937/2004 is not binding against the plaintiff and the schedule property, as such the same is liable to be declared as null and void.” 13. Certain averments, no doubt, were made in relation to the collusion or non-diligence on the part of the Banking Institution in the verification of the documents. Further strong reliance was placed on KRISHNA vs KEDARNATH (AIR 2006 Karnataka 21) and also ARASA KUMAR vs NALLAMMA (2005) 2 Bank Cas 127 (Mad) to convince this Court that civil Court has jurisdiction to entertain suits and it cannot be laid down as a broad proposition that under no circumstances civil Court can entertain a suit at all. At present, this Court is concerned with whether temporary injunction to be granted or to be negatived or whether the order impugned refusing to grant temporary injunction to be interfered with or not at this stage. The Division Bench of Karnataka High Court in Krishna’s case (5th referred supra) while referring to Section 34 of the Act observed that it is manifestly clear that the power under Section 34 of the Act is not absolute and the same is subject to certain restrictions, they are (1) that the parties, who filed the suit must be a party to the liabilities created in favour of the secured creditor; (2) the disputes between the parties could be resolved under the possession of the Act itself; and (3) that if the claim made by the parties is outside the jurisdiction of the Debts Recovery Tribunal or the Appellate Tribunal or any action taken or to be taken under Debts Due to Banks and Financial Institutions Act, 1993 and the dispute raised by the parties cannot be adjudicated by any of the Tribunal or authority, created under the Act or under any other Act, the right of the parties to approach the Civil Court for appropriate relief cannot be deprived and taken away. However, the learned Division Bench at para 8 observed that for the reasons stated above, these appeals are allowed. The orders/Judgments and decrees under appeals are set aside. The status quo order passed in the suits shall stand dissolved, as there is express bar under Section 34 of the Act. However, the learned Division Bench at para 8 observed that for the reasons stated above, these appeals are allowed. The orders/Judgments and decrees under appeals are set aside. The status quo order passed in the suits shall stand dissolved, as there is express bar under Section 34 of the Act. The Bank is at liberty to proceed for the recovery of its amount by taking necessary steps in respect of the mortgaged properties by the debtors under the provisions of the Act, as the same are mortgaged for collateral security of the loan amount borrowed by them. 14. Certain submissions were made in relation to the decision of the Division Bench of this Court in BRANCH MANAGER, STATE BANK OF INDIA vs CHINIGEPALLI LATHANGI 2006 (1) ALT 20 (DB) to the effect that the view expressed by the Apex Court had been lost sight of. This Court is making clear that it is one thing to decide relating to the maintainability of the suit as such and it is yet another thing to say whether the ingredients for the granting of temporary injunction are satisfied in a particular given case or not. In the light of the averments made in the plaint, this Court is satisfied that those averments as such may not be sufficient to prima facie arrive at a conclusion that the appellant-petitioner-plaintiff made out a strong prima facie case or balance of convenience is in his favour so as to arrive at a conclusion that Section 34 of the Act may have to be ignored in the light of the decision of the Apex Court referred to supra either on the ground that the transaction is fraudulent or there is some element of absurdity in the said transaction. Further, the learned Counsel representing the 3rd respondent placed strong reliance on the decision of the Apex Court in TRANSCORE vs UNION OF INDIA (UOI) AND ANOTHER Civil Appeal Nos.908, 1374, 2841, 3225, 3226 and 3228 of 2006 (Supreme Court) and had pointed out to the relevant portions of the said Judgment. 15. This Court is not inclined to express, in detail, any opinion relating to the other merits and demerits of the matter since this Court is deciding a Civil Miscellaneous Appeal preferred as against an interlocutory order wherein temporary injunction had been refused. 15. This Court is not inclined to express, in detail, any opinion relating to the other merits and demerits of the matter since this Court is deciding a Civil Miscellaneous Appeal preferred as against an interlocutory order wherein temporary injunction had been refused. It is needless to say that these findings recorded, if any, in an interlocutory application may not come in way of the learned Judge deciding the respective contentions of the parties while disposing of the main suit. Suffice to state that in the light of the facts and circumstances the order impugned in the present Civil Miscellaneous Appeal cannot be found fault and accordingly subject to the observations made supra, the Civil Miscellaneous Appeal shall stand dismissed. No order as to costs.