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2016 DIGILAW 1190 (RAJ)

SYNDICATE BANK v. SITA RAM PITTI

2016-08-17

SANGEET LODHA

body2016
JUDGMENT : 1. This revision petition is directed against order dated 23.3.15 passed by the Additional District Judge No.1, Bikaner in Civil Suit No.342/11, whereby an application preferred by the petitioner-defendant under Order VII Rule 11 CPC, stands rejected. 2. The relevant facts are that the petitioner-Syndicate Bank extended credit facility to M/s. Murlidhar Sitaram. Smt. Manjulata mortgaged her property situated at Nahata Sukhani Mohalla, Bikaner and created security interest in favour of the petitioner Bank. On account of failure of the loanee in repayment of loan, the petitioner Bank, a secured creditor, proceeded to enforce the security interest under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short “the SARFAESI Act”). The mortgaged property was taken possession of and put to auction. The respondent-plaintiff being the highest bidder for Rs.22,00,000/-, the auction was knocked down in his favour and he deposited 25% of the sale price amounting to Rs.5,50,000/- with the petitioner Bank. Thereafter, the Bank confirmed the sale and demanded the balance amount a sum of Rs.16,50,000/-. The respondent-plaintiff was required to deposit the balance amount latest by 6.9.07. The amount was not deposited by the respondent-plaintiff alleging defects in the title of the property. Ultimately, on failure of the respondent-plaintiff to deposit the amount, the petitioner Bank proceeded to forfeit the amount of Rs.5,50,000/- deposited by the respondent-plaintiff. 3. Aggrieved thereby, the respondent-plaintiff filed a complaint before the District Consumer Forum, Jaipur I, Jaipur, which stood rejected vide order dated 15.9.08. Aggrieved thereby, an appeal preferred by the respondent plaintiff before the State Consumer Forum was allowed and the petitioner Bank was directed to refund the amount of Rs.5,50,000/- deposited by him alongwith interest @ 8% from the date of deposit till the repayment thereof. Aggrieved by the appellate order, the petitioner Bank preferred a revision petition before the National Consumer Forum. The National Consumer Forum while relying upon its various earlier decisions holding that in absence of arrangement of hiring of service for consideration between the parties, complaint before Consumer Forum is not maintainable, allowed the appeal vide order dated 4.1.10 and while setting the order passed by the State Consumer Forum, the order passed by the District Consumer Forum, rejecting the complaint was restored. It is informed that aggrieved thereby, the Special Leave Petition preferred by the respondent-plaintiff stood rejected by the Hon'ble Supreme Court. It is informed that aggrieved thereby, the Special Leave Petition preferred by the respondent-plaintiff stood rejected by the Hon'ble Supreme Court. 4. After conclusion of the proceedings laid under the Consumer Protection Act, 1986, as aforesaid, the respondent-plaintiff preferred a suit before the District Judge, Bikaner for recovery of Rs.5,50,000/- alongwith interest, which is being contested by the petitioner Bank by filing a written statement thereto. 5. During the pendency of the suit, the petitioner Bank preferred an application under Order VII Rule 11 seeking rejection of the plaint on the ground that in view of the bar contained in Section 34 of SRFAESI Act, the Civil Court has no jurisdiction to entertain the suit and therefore, the same deserves to be rejected. The application was contested by the respondent-plaintiff by filing a reply thereto. After due consideration of the rival submissions, the application stands rejected by the trial court by the order impugned. Hence, this petition. 6. Learned counsel appearing for the petitioner contended that the auction of secured assets was conducted by the petitioner-Bank invoking the provisions of Section 13 of SRFAESI Act and since the respondent-plaintiff failed to deposit the balance amount of 75% within the stipulated period in terms of the auction notice, 25% amount deposited by him was forfeited. Learned counsel submitted that Section 17 of SRFAESI Act confers a right to appeal to any person including borrower if the person is aggrieved by any of the measures referred to in subsection (4) of Section 13 taken by the secured creditor and therefore, even the respondent-plaintiff, the auction purchaser, if aggrieved by the action of Bank in forfeiting the 25% amount deposited on account of his failure to deposit the remaining 75% amount after confirmation of bid, nothing prevented him from making an application before the Debts Recovery Tribunal under the provisions of Section 17 of the Act. Learned counsel urged that in view of Section 17 read with Sections 13 & 34 of the SRFAESI Act, the civil court has no jurisdiction to entertain the suit for recovery preferred by the respondent-plaintiff and thus, the court below has erred in dismissing the application preferred by the petitioner-Bank under Order VII Rule 11 CPC seeking rejection of the plaint. In support of the contentions, learned counsel has relied upon the decisions of the Hon'ble Supreme Court in the matters of 'Jagdish Singh Vs. In support of the contentions, learned counsel has relied upon the decisions of the Hon'ble Supreme Court in the matters of 'Jagdish Singh Vs. Heeralal and Others' (2014) 1 SCC 479 and 'United Bank of India Vs. Satyawati Tondon & Ors.' 2010 (8) SRJ 406 and a coordinate Bench decision of this Court in the matter of 'State Bank of India, Bhilwara Vs. M/s Sharda Spuntex Pvt. Ltd.' AIR 2010 Rajasthan 1. 7. On the other hand, counsel appearing for the respondent submitted that in the suit filed, the plaintiff has not raised grievance in respect of the measures adopted by the petitioner Bank to recover its secured debt. Learned counsel submitted that as a matter of fact the petitioner, an auction bidder has nothing to do with the measures adopted by the petitioner Bank, a secured creditor, for enforcement of security interest and therefore, the question of petitioner's act in participating in the auction sale and the action of the respondent Bank in forfeiting the 25% amount deposited by the petitioner on the auction being knocked down in his favour does not fall within the purview of Section 13(4) of SRFAESI Act and thus, the question of petitioner being entitled to invoke the jurisdiction of Debts Recovery Tribunal under Section 17 of the SRFAESI Act does not arise and thus, the court below has committed no jurisdictional error in rejecting the application preferred by the petitioner Bank under Order VII Rule 11 CPC. 8. I have considered the rival submissions and perused the material on record. 9. Indisputably, as per provisions of Section 9 of CPC, the Civil Court has jurisdiction to try all suits of civil nature excepting those which are expressly or implied barred by any other law. But then, there is always a strong presumption that the Civil Court have jurisdiction to decide all questions of civil nature and therefore, the exclusion of jurisdiction of Civil Court is not readily inferred. 10. In the instant case, ouster of jurisdiction of Civil Court is claimed by the petitioner-defendant by virtue of provisions of Section 34 of the SARFAESI Act which may be beneficially quoted: “34. 10. In the instant case, ouster of jurisdiction of Civil Court is claimed by the petitioner-defendant by virtue of provisions of Section 34 of the SARFAESI Act which may be beneficially quoted: “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 Dut to Banks and Financial Institutions Act, 1993 (51 of 1993).” 11. A bare perusal of Section 34 makes it abundantly clear that the jurisdiction of the Civil Court to entertain any suit or proceedings in respect of any matter which Debts Recovery Tribunal or Appellate Tribunal is empowered by or under the Act to determine shall stand excluded and therefore, undoubtedly, if the lis between the parties in the suit pending before the Civil Court is cognizable by Debts Recovery Tribunal or the Appellate Tribunal, the suit is liable to be rejected as barred by law. 12. It is to be noticed that Section 17 of SRFAESI Act provides for a remedy to any person including borrower aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditors or his Authorised Officer. 13. 12. It is to be noticed that Section 17 of SRFAESI Act provides for a remedy to any person including borrower aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditors or his Authorised Officer. 13. As per Section 13(4), in case the borrower fails to discharge his liability in full within the period specified in subsection (2) of Section 13, the secured creditor may take course to one or more following measures to recover his secured debt, namely: (a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset; (b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset: Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt: Provided further that where the management of whole, of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security or the debt. (c) appoint any person (hereinafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor; (d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.” 14. A perusal of the plaint, reveals that the respondent-plaintiff has filed the suit not aggrieved by the measure adopted by the petitioner Bank, a secured creditor, in taking possession of the secured assets of the borrower or putting the same to auction for realisation of the secured debts in terms of clause (a) of subsection (4) of Section 13. The grievance raised by the respondent-plaintiff also does not fall within the measures to be adopted by the secured creditor as specified under clause (c) to (d) of sub-section (4) of Section 13 either. The grievance raised by the respondent-plaintiff also does not fall within the measures to be adopted by the secured creditor as specified under clause (c) to (d) of sub-section (4) of Section 13 either. As a matter of fact, the respondent-plaintiff has no lis with the borrower or anybody else claiming right over the secured assets rather, his lis is with the petitioner Bank, which has forfeited 25% of the bid amount deposited by him on the auction being knocked down in his favour. Thus, precisely, the contentious issue between the parties to the suit is whether the petitioner Bank was justified in forfeiting the 25% of the bid amount deposited by the respondent-plaintiff, on account of his failure to deposit remaining bid amount within the stipulated period. 15. In the considered opinion of this court, the lis between the petitioner Bank, a secured creditor, and the respondent-plaintiff, an auction bidder, in no manner could be construed to be a dispute raised aggrieved by the measures adopted by the secured creditor to recover its secured debt in terms of provisions of Section 13(4), and the measures referred to in Section 13(4) permissible to be adopted by the secured creditor for realisation the secured debt, cannot be given extended meaning so as to infer the exclusion of jurisdiction of the Civil Court in respect of the lis of the civil nature between the petitioner Bank and the respondent-plaintiff, wherein the measures adopted by the petitioner Bank to recover its secured debt i.e. taking possession of the secured assets of the borrower or right to transfer the secured assets by way of auction sale for realising the secured debt, are not questioned. 16. At this stage, it would be appropriate to refer to the decisions of the Hon'ble Supreme Court and this court relied upon by the learned counsel appearing for the petitioner Bank. 17. In Jagdish Singh's case (supra), where the plaintiff had filed a civil suit challenging sale of secured property on the ground that same was HUF property and prayed for a declaration of title, partition and permanent injunction, the Hon'ble Supreme Court held that irrespective of the issue of maintainability of the civil suit, the remedy lay under Section 17 where the Bank, a secured creditor, adopt any measures for enforcement of security interest including sale of secured assets in respect whereof the plaintiff was claiming an interest. The Hon'ble Supreme Court observed that the expression “any person” used in Section 17 of SARFAESI Act is of wide import and takes within its fold not only borrower but also guarantor or any other person who may be affected by the action taken under Section 13(4) of the SARFAESI Act. It is pertinent to note that in the said case the Bank had proceeded only against secured assets of the borrowers on which no rights of the plaintiff had been crystalised before creating security interest in respect of the secured assets and therefore, the Court held that the jurisdiction of the civil court in respect of lis between the parties stands ousted by virtue of provisions of Section 34 of the SARFAESI Act. 18. In United Bank of India's case (supra), the Hon'ble Supreme Court taking into consideration the facts of the case held that the High Court was not at all justified in injuncting the Bank from taking action in furtherance of notice issued under Section 13(4) of SARFAESI Act. The Court observed : “18. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance. It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance. It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Of course, it if the petitioner is able to show that its case falls within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad AIR 1969 SC 556 , Whirlpool Corporation v. Registrar of Trade Marks, Mumbai (1998) 8 SCC 1 and Harbanslal Sahnia and another v. Indian Oil Corporation Ltd. and others (2003) 2 SCC 107 and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass appropriate interim order. xxxxxxxx 27. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Court continue to ignore the availability of statutory remedies under the DRT Act and SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection.” 19. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection.” 19. In State Bank of India's case (supra), where the plaintiff Company doing business of export and receiving payment in foreign currency executed Forward Exchange Purchase Contract with the Bank to get “Forward Contract Limit” of Rs.80 crores, the Court while negating contention of the plaintiff that the disputes relates to cancellation of forward exchange purchase contract which has nothing to do with the debt, a coordinate Bench of this Court held that for all purposes the plaintiff Company is “borrower” of the Bank and accordingly, the order passed by the trial court, rejecting the application preferred by the Bank under Order VII Rule 11 CPC, was set aside and while allowing the application preferred, the suit was rejected as barred by law. 20. This court is of the opinion that none of the decisions cited on behalf of the petitioner Bank are applicable to the facts of the case inasmuch as in all the three matters relied upon by the petitioner there was a direct challenge to the measures adopted by the Bank for enforcement of the security interest for recovery of secured debt whereas in the instant case, as discussed hereinabove, the plaintiff, an auction bidder is not questioning any of the measures adopted by the secured creditor for enforcement of security interest rather he has questioned only the action of the Bank in forfeiting the 25% of the bid amount deposited by him on account of his failure to deposit remaining 75% of the bid amount. 21. In view of the discussion above, this Court is of the opinion that the dispute raised by the plaintiff in the suit filed is of civil nature which is cognizable by the civil court of competent jurisdiction and keeping in view the nature of the lis between the parties, it cannot be accepted that the jurisdiction of the civil court stands ousted either specifically or by necessary implication by virtue of provisions of Section 34 read with Section 13(4) & Section 17 of the SARFAESI Act. Thus, the court below has committed no illegality, irregularity or jurisdictional error in rejecting the application preferred by the petitioner defendant under Order VII Rule 11, seeking rejection of the plaint so as to warrant interference by this court in exercise of its revisional jurisdiction. 22. In the result, the revision petition fails, it is hereby dismissed. No order as to costs.