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2014 DIGILAW 1045 (CAL)

Idol India Projects Ltd. v. Nupur Ghosh

2014-11-11

HARISH TANDON

body2014
JUDGMENT : Harish Tandon, J. This revisional application is directed against an order No.15 dated October 5, 2012 passed by Civil Judge (Senior Division), Baruipur, in Title Suit No. 137 of 2012 by which an application under Order 7, Rule 11 of the Code of Civil Procedure is dismissed. 2. The plaintiff/opposite party no.1 filed Title Suit No.137 of 2012 praying for decree for declaration that she is the absolute owner of the immovable property described in the Schedule thereto. With further declaration that the mortgage by the defendant no.1/opposite party no.2 with the defendant no.2 and 3 being the opposite party no.3 and 4 and purchased by the defendant no.4 being the opposite party no.5 herein are void. 3. The aforesaid declaration is sought on the facts that originally the suit property was owned between Nagendranath Ghosh who by executing and registering a deed of gift dated April 10, 1985 gifted the said property to the plaintiff/opposite party no.1. The opposite party no.1, thereafter, executed a lease in favour of Kamalkanti Ghosh, Parimal Banerjee, Shyamal Kumar Banerjee and Mihir Kumar Roy being the partners of the partnership firm i.e. Pekems International for a period of thirty years commencing from January 1, 1986 with the right to raise structures thereupon for running the said partnership business. The said partnership firm took loan from West Bengal Financial Corporation by mortgaging their lease hold interest. Subsequently, the said partnership was dissolved and the said Mihir Kumar Roy as a proprietor thereof continued with the said business. Subsequently, he introduced another person as a partner to the said business because of their failure to pay the loan amount to the West Bengal Financial Corporation. 4. The said Corporation contemplated a proceeding to recover the amount from the assets and properties of the said partnership firm. The opposite party no.2 entered into agreement with the said corporation and took over the entire assertion properties of the said partnership firm. Subsequently, the said opposite party agreed to purchase the said property from the plaintiff/opposite party no.1 and paid a paultry sum of Rs. 1,15,000/- as a part payment of the total consideration money with the stipulation that the balance consideration money would be paid at the time of execution and registration of the sale deed. Subsequently, the said opposite party agreed to purchase the said property from the plaintiff/opposite party no.1 and paid a paultry sum of Rs. 1,15,000/- as a part payment of the total consideration money with the stipulation that the balance consideration money would be paid at the time of execution and registration of the sale deed. However, he made a very innocuous request that the plaintiff/opposite party to hand over the deed of gift for the purpose of preparation of the sale deed and the plaintiff without scenting any foul play hand over the deed to the opposite party no.2. Since, thereafter, no progress could be made and the plaintiff/opposite party no.1 repeatedly requested the opposite party no.2 to hand over back the said deed of gift, but the same was being avoided on one pretext or another. Subsequently, it came to the notice of the plaintiff/opposite party no.1 that the opposite party no.2 taking advantage of the custody of the original deed of gift have collided with the opposite party bank and perpetrated fraud on the plaintiff by mortgaging the said deed of gift with the bank. The opposite party no.5, who purchased the said property in auction sale conducted under the provision of the Sarfaesi Act, filed an application under Order 7, Rule 11 of the Code praying for rejection of the plaint. The said application is filed on two grounds, firstly, that in view of Section 34 of the Sarfaesi Act, the Civil Court has not jurisdiction to entertain the suit touching and/or concerning any of the action taken under the said Act and secondly, the dispute as sought to be raised in the suit is capable of being adjudicated under Section 17 of the said Act by the Debt Recovery Tribunal. The Trial Court rejected the said application as the declaration which is sought relating to the title can only be passed by the Civil Court and, therefore, the jurisdiction cannot be said to have been excluded under Section 34 of the said Act. 5. Mr. The Trial Court rejected the said application as the declaration which is sought relating to the title can only be passed by the Civil Court and, therefore, the jurisdiction cannot be said to have been excluded under Section 34 of the said Act. 5. Mr. Saptangshu Basu, the learned Senior Advocate appearing for the petitioner submits that the intelligent and cleaver drafting creating an illusory cause of action should be nipped at the bar, more particularly, under Order 7, Rule 11 of the Code and placed reliance upon a judgment of the Apex Court in case of T. Arivandandam v. T.V. Satyapal & another reported in AIR 1977 SC 2421 . He, however, submits that if the averments made in the plaint is to be raised as a whole, it would lead to only one inference that the plaintiff/opposite party no.1 is trying to seek for a declaration that all the action taken in a proceeding initiated under the provision of Sarfaesi Act to be declared null and void. He strenuously submits that mere seeking a decree for declaration of title in absence of any pleading relating to the fraud and the collusion being perpetrated, the suit cannot be maintained. He further submits that there is no element of fraud exists in the plaint and, therefore, the Trial Court ought to have rejected the plaint under Order 7, Rule 11 of the Code. 6. Mr. Subrata Goswami, the learned Advocate appearing for the plaintiff/opposite party no.1 countenanced the submission of the petitioner in contending that there is a clear and unambiguous averments and/or elements of fraud in the plaint filed by his client which can only be determined by the Civil Court. He further submits that the partnership firm was a mere lessee or licensee for a term of thirty years and the Financial Corporation while initiating a proceeding against the firm for non-payment of the loan cannot sell the ownership of the property which itself spruce the fraud being perpetrated upon the plaintiff/opposite party no.1. 7. This suit is based on fraud. Fraud unravels all the actions. The Court always viewed the matter seriously where an allegation of fraud is made. 7. This suit is based on fraud. Fraud unravels all the actions. The Court always viewed the matter seriously where an allegation of fraud is made. The person, who is affected by an act of fraud, has a right to approach the forum and if the same is proved, all the actions taken shall be declared null and void as the person who is a party to fraud cannot reap the benefit therefrom. The fraud is a mixed question of facts and law and requires adjudication upon permitting the parties to lead evidence. It has an element of law which is well-recognised. The plaintiff/opposite party in the present suit have clearly and expressly jotted down the particulars of the fraud in the plaint which, if proved, would annul all the actions taken on the teeth thereof. The dispute which boils down in the present case is whether it is such an open and shut case warranting the Court to reject the plaint under Order 7, Rule 11 of the Code. From the respective submissions, it appears that the dispute hinges on the competence of the Civil Court to entertain the suit and is ousted by the provision of Section 34 of the SARFAESI Act. 8. Before proceeding to address the points as taken by the parties, it would be relevant to quote Section 17 & 34 of the SARFAESI Act which reads thus: "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 authorised 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 measures had been taken: Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower. (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. (2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder. (3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section 94) 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 subsection (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 to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder. 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." 9. Any person is an expression of wide import. It cannot be given a restrictive meaning to mean the borrower or the guarantor only but must be given an extensive meaning to include a person who is affected by the measures taken under Section 13 (4) of the said Act. If such an application is made, the Debt Recovery Tribunal may declare the recourse to anyone or more measures referred to in Section 13(4) thereof to be invalid or to restore the possession and pass such an order as considered appropriate and necessary in relation thereto. There is an absolute ouster clause, which denuded the Civil Court to entertain suit or proceeding in respect of any matter which the Debt Recovery Tribunal is empowered. In case of Mardia Chemicals Ltd. & Ors; v. Union of India & Ors., reported in (2004) 4 SCC 311 , the Apex Court held that if the dispute is capable of taking cognizance by the Debt Recovery Tribunal, Section 13 (4) has its fullest applicability. In case of Mardia Chemicals Ltd. & Ors; v. Union of India & Ors., reported in (2004) 4 SCC 311 , the Apex Court held that if the dispute is capable of taking cognizance by the Debt Recovery Tribunal, Section 13 (4) has its fullest applicability. An exception is carved out where the action of the secured creditor is fraudulent or the claim is so absurd and untenable which does not require a moment scrutiny. The Paragraph 50 & 51 of the said report is conveniently quoted as under: "50. It has also been submitted that an appeal is entertain able 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. 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 heavily by the learned Attorney General as well appearing for the Union of India, namely, V. Narasimhachariar, AIR at pp. 141 and 144, a judgment of the learned Single Judge where it is observed as follows in para 22: (AIR p. 143) "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. 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.)"" 10. The Supreme Court in case of Indian Overseas Bank & another v. Ashok Saw Mill reported in (2009) 8 SCC 366 was considering a point whether the DRT can set aside the sale transaction in post Section 13 (4) situation. (See Ghose, Rashbehary: Law of Mortgages, Vol. II, 4th Edn., p. 784.)"" 10. The Supreme Court in case of Indian Overseas Bank & another v. Ashok Saw Mill reported in (2009) 8 SCC 366 was considering a point whether the DRT can set aside the sale transaction in post Section 13 (4) situation. While upholding the power of the Debt Recovery Tribunal to deal with all the situations including the post-Section 13 (4) situations and recognised the power of the Debt Recovery Tribunal, it is held: "36. The intention of the legislature is, therefore, clear that while the banks and financial institutions have been vested with stringent powers for recovery of their dues, safeguards have also been provided for rectifying any error or wrongful use of such powers by vesting the DRT with authority after conducting an adjudication into the matter to declare any such action invalid and also to restore possession even though possession may have been made over to the transferee. 37. The consequences of the authority vested in the DRT under subsection (3) of Section 17 necessarily implies that the DRT is entitled to question the action taken by the secured creditor and the transactions entered into by virtue of Section 13(4) of the Act. The legislature by including sub-section (3) in Section 17 has gone to the extent of vesting the DRT with authority to even set aside a transaction including sale and to restore possession to the borrower in appropriate cases. Resultantly, the submissions advanced by Mr. Gopalan and Mr. Altaf Ahmed that the DRT has no jurisdiction to deal with a post-Section 13(4) situation, cannot be accepted. 38. The dichotomy in the views expressed by the Bombay High Court and the Madras High Court has, in fact, been resolved to some extent in Mardia Chemicals Ltd. case itself and also by virtue of the amendments effected to Sections 13 and 17 of the principal Act. The liberty given by the learned Single Judge to the appellants to resist SA No. 104 of 2007 preferred by the respondents before the DRT on all aspects was duly upheld by the Division Bench of the High Court and there is no reason for this Court to interfere with the same. 39. The liberty given by the learned Single Judge to the appellants to resist SA No. 104 of 2007 preferred by the respondents before the DRT on all aspects was duly upheld by the Division Bench of the High Court and there is no reason for this Court to interfere with the same. 39. We are unable to agree with or accept the submissions made on behalf of the appellants that the DRT had no jurisdiction to interfere with the action taken by the secured creditor after the stage contemplated under Section 13(4) of the Act. On the other hand, the law is otherwise and it contemplates that the action taken by a secured creditor in terms of Section 13(4) is open to scrutiny and cannot only be set aside but even the status quo ante can be restored by the DRT." 11. The law which emerges is that a person other than the borrower or the guarantor if affected by any measures taken under Section 13 (4) of the SARFAESI Act either at pre or post stage situation has a right to approach the Debt Recovery Tribunal who is otherwise competent to set aside all such actions including the sale and can restore the possession to such person. There is a remedy provided to such person to approach the Debt Recovery Tribunal by way of an appeal or otherwise under Section 17 of the SARFAESI Act and, therefore, he is not remediless. The Debt Recovery Tribunal is vested with such power, which is exercisable in all attending circumstances including fraud. 12. In the present case, the plaintiff alleged that she leased out the property to a partnership firm and subsequently, an agreement for sale of the entire property was also entered into. Apart from the earnest money, no other payment is made and, therefore, no sale, in fact, was affected in favour of the said lessee. It is categorically stated in the plaint that the deed of gift (title deed) was handed over to the said lessee for the purpose of preparation of the sale deed intended to be executed and registered upon payment of the balance consideration money. The plaintiff further alleged that a receipt in this regard was also issued by the said lessee in her favour and denied the intention to create any security against the alleged loan taken by the said lessee from the bank. The plaintiff further alleged that a receipt in this regard was also issued by the said lessee in her favour and denied the intention to create any security against the alleged loan taken by the said lessee from the bank. The plaintiff not only denied the intention to create a security but have also alleged that a fraud has been committed on her by the said lessee in connivance with the banks in creating an equitable mortgage. 13. The said dispute, in my opinion, is capable of being adjudicated by the Debt Recovery Tribunal, who is otherwise competent to provide the full remedy as claimed in the said suit. The jurisdiction of the Civil Court cannot be ousted unless expressly provided under the statute. Section 34 of the Act clearly excludes the jurisdiction of the Civil Court in respect of a matter, which the Tribunal is capable of adjudicating and/or determining. The apprehension of the plaintiff that he would be put to a burden of paying the fees taken out an application under Section 17 of the Act. It is sufficiently taken care of that he is not obliged to pay the fees admissible to a borrower or the guarantor. This Court must hasten to hold that the petitioner was proceeding bona fide under the wrong advice and the Tribunal, if approached, would definitely take care of the same. Order 7, Rule 11 (d) can be pressed in action on the meaningful reading of the plaint only. The allegation in the plaint appeared to be serious in nature and if the plaintiff succeeds in proving the same, shall be entitled to the absolute relief claimed therein. 14. This Court, therefore, concludes that the jurisdiction of the Civil Court is ousted in the attending facts of this case and the remedy of the plaintiff is to approach the Debt Recovery Tribunal under Section 17 of the SARFAESI Act. 15. The order impugned is thus set aside. 16. As a consequence thereof, the application under Order 7, Rule 11 of the Code succeeds. However, the rejection of the plaint shall not prevent the plaintiff to approach the Debt Recovery Tribunal under Section 17 of the SARFAESI Act on the same facts and circumstances. 17. With these observations, the revisional application is disposed of. 18. Urgent photostat certified copy of this order, if applied for, be given to the parties on priority basis.