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2020 DIGILAW 94 (CAL)

Manager, State Bank Of India v. Md Jahir

2020-01-24

MANOJIT MANDAL

body2020
JUDGMENT Manojit Mandal, J. - None is present to represent the opposite party. 2. Though none appears for the opposite party, at the instance of the petitioner the matter is taken up for hearing and disposal on merit. 3. Heard Mr. Banerjee, learned Advocate for the petitioner and perused the materials available on record. 4. This application is directed against the Order No. 21 dated 18.04.2019 passed by the learned Judge, 12th Bench, City Civil Court at Calcutta in Title Suit No. 1467 of 2017 thereby rejecting an application under Order 7 Rule 11 of the Code of Civil Procedure filed by the defendant/petitioner. 5. Plaintiff/Opposite party herein instituted a suit being Title Suit No. 1467 of 2017 against the petitioner praying for relief that the plaintiff is entitled to ply vehicle being No. WB 23C-7167 peacefully without any disturbance and/or interference by the defendant, his men and agents. He further claimed that a decree be passed declaring that the plaintiff is entitled to get all papers and documents upon which signatures were taken up by the defendant in blank form including the cheques without putting the amount and date and the same are all invalid. He further claimed that the order of permanent injunction be passed restraining the defendant, his men and agents from seizing and/or taking possession of the vehicle being No. WB 23C-7167 and/or disturbing the peaceful possession of the plaintiff in respect of the said vehicle. 6. The petitioner entered appearance in the said suit and filed an application under Order 7 Rule 11 of the Code of Civil Procedure for rejection of the plaint on the ground that the said suit is barred in view of the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security and Interest Act (2002) (hereinafter referred to as "SARFAESI" Act, 2002). The plaintiff filed a written objection to the said application. Upon hearing both sides, the learned Trial Judge has rejected the said application. Being aggrieved, the defendant/petitioner has preferred this application. 7. Now, the point for consideration is whether the impugned order should be sustained? 8. Mr. The plaintiff filed a written objection to the said application. Upon hearing both sides, the learned Trial Judge has rejected the said application. Being aggrieved, the defendant/petitioner has preferred this application. 7. Now, the point for consideration is whether the impugned order should be sustained? 8. Mr. Banerjee, learned Advocate appearing for the petitioner has drawn the attention of the provisions of Sections 13, 17 and 34 of the SARFAESI Act, 2002, and has submitted that once the petitioner bank had taken steps for enforcement of the security interest, any person claiming any right in the security interest, aggrieved by any of the measures referred to in Section 13 may make an application to the Debts Recovery Tribunal. While drawing attention to this Court to the provisions of Section 34 of the said Act, 2002, he submits that no Civil Courts shall have jurisdiction. 9. In the present case, the plaintiff in the plaint has specifically pleaded that the defendant sanctioned a loan of Rs. 17 lakhs in favour of the plaintiff on February 27, 2013, and the said vehicle was kept as security and hypothecated for the said loan. Therefore, the vehicle was mortgaged in favour of the defendant/ bank. The petitioner has clearly stated in the application under Order 7 Rule 11 of the Code of Civil Procedure that as per terms and conditions of loan-cum-hypothecation agreement, the plaintiff defaulted in payment of monthly installments of Rs. 40,218/- (Rupees Forty Thousand Two Hundred Eighteen) only commencing on April 2013 and last installment falling due on December 2017. The defendant bank caused legal notice dated February 12, 2016, through their learned Advocate to repay the sum of Rs. 10,62,516/-(Rupees Ten Lakhs Sixty Two Thousand Five Hundred Sixteen) only and the plaintiff failed to comply with the said notice. Therefore, the defendant instituted a case being O.A. No. 150 of 2016 before the Debts Recovery Tribunal-I, at Kolkata for recovery of Sum of Rs. 10,62,216/-(Rupees Ten Lakhs Sixty Two Thousand Five Hundred Sixteen) only. The said O.A. application was filed on February 23, 2016, and the summons of the case was duly published in daily newspaper as the plaintiff failed to appear before the Debts Recovery Tribunal, Kolkata. 10. Sections 13, 17 and 34 of the SARFAESI Act, 2002 are extracted as under: "13. 10,62,216/-(Rupees Ten Lakhs Sixty Two Thousand Five Hundred Sixteen) only. The said O.A. application was filed on February 23, 2016, and the summons of the case was duly published in daily newspaper as the plaintiff failed to appear before the Debts Recovery Tribunal, Kolkata. 10. Sections 13, 17 and 34 of the SARFAESI Act, 2002 are extracted as under: "13. Enforcement of security interest.- (1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882 ), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act. (2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as on- performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub- section (4): [Provided that - (i) the requirement of classification of secured debt as no performing asset under this sub-section shall not apply to a borrower who has raised funds through issue of debt securities: and (ii) in the event of default, the debenture trustee shall be entitled to enforce security interest in the same manner as provided under this section with such modification as may be necessary and in accordance with the terms and conditions of security documents executed in favour of the debenture trustee] (3) The notice referred to in sub- section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non- payment of secured debts by the borrower. [(3A If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate [within fifteen days] of receipt o such representation or objection the reasons for non-acceptance of the representation or objection to the borrower: Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under Section 17 or the Court of District Judge under Section 17-A.] (4) In case the borrower fails to discharge his liability in full within the period specified in sub- section (2), the secured creditor may take recourse to one or more of the 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 secured assets of the borrower including the right to transfer by way of lease, assignment or sale and realise 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 for the debt:] (c) appoint any person (hereafter 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. (5) Any payment made by any person referred to in clause (d) of sub- section (4) to the secured creditor shall give such person a valid discharge as if he has made payment to the borrower. [(5A) Where the sale of an immovable property, for which a reserve price has been specified, has been postponed for want of a bid of an amount not less than such reserve price, it shall be lawful for any officer of the bid for the immovable property on behalf of the secured creditor at any subsequent sale. (5-B) Where the secured creditor, referred to in sub-section (5-A), is declared to be the purchaser of the immovable property at any subsequent sale, the amount of the purchase price shall be adjusted towards the amount of the claim of the secured creditor for which the auction of enforcement of security interest is taken by the secured creditor, under sub-section (4) of Section 13. (5-C)The provisions of Section 9 of the Banking Regulation At, 1949(10 of 1949) shall, as far as may be, apply to the immovable property acquired by secured creditor under sub-section (5-A).] (6) Any transfer of secured asset after taking possession thereof or take over of management under sub- section (4), by the secured creditor or by the manager on behalf of the secured creditor shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset. (7) Where any action has been taken against a borrower under the provisions of sub- section (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in ischarge of the dues of the secured creditor and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interests. (8) If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the s cured creditor, and no further step shall be taken by him for transfer or sale of that secure asset. (i) the secured assets shall not be transferred by way of lease assignment or sale by the secured creditor; and (ii) in case, any step has been taken by the secured creditor for transfer by way of lease or assignment or sale of the assets before tendering of such amount under this sub-section, no further step shall be taken by such secured creditor for transfer by way of lease or assignment or sale of such secured assets.] (9) [Subject to the provisions of the Insolvency and Bankruptcy Code, 2016, in the case of financing of a financial asset by more than one secured creditors or joint financing of a financial asset by secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to sub- section (4) unless exercise of such right is agreed upon by the secured creditors representing not less than three- fourth in value of the amount outstanding as on a record date and such action shall be binding on all the secured creditors: Provided that in the case of a company in liquidation, the amount realised from the sale of secured assets shall be distributed in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956 ): Provided further that in the case of a company being wound up on or after the commencement of this Act, the secured creditor of such company, who opts to realise his security instead of relinquishing his security and proving his debt under proviso to sub- section (1) of section 529 of the Companies Act, 1956 (1 of 1956 ), may retain the sale proceeds of his secured assets after depositing the workmen' s dues with the liquidator in accordance with the provisions of section 529A of that Act: Provided also that liquidator referred to in the second proviso shall intimate the secured creditor the workmen' s dues in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956 ) and in case such workmen' s dues cannot be ascertained, the liquidator shall intimate the estimated amount of workmen' s dues under that section to the secured creditor and in such case the secured creditor may retain the sale proceeds of the secured assets after depositing the amount of such estimate dues with the liquidator: Provided also that in case the secured creditor deposits the estimated amount of workmen' s dues, such creditor shall be liable to pay the balance of the workmen' s dues or entitled to receive the excess amount, if any, deposited by the secured creditor with the liquidator: Provided also that the secured creditor shall furnish an undertaking to the liquidator to pay the balance of the workmen' s dues, if any. Explanation.- For the purposes of this sub- section,- (a) " record date" means the date agreed upon by the secured creditors representing not less than three- fourth in value of the amount outstanding on such date; (b) " amount outstanding" shall include principal, interest and any other dues payable by the borrower to the secured creditor in respect of secured asset as per the books of account of the secured creditor. (10) Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent court, as the case may be, for recovery of the balance amount from the borrower. (11) Without prejudice to the rights conferred on the secured creditor under or by this section, secured creditor shall be entitled to proceed against the guarantors or sell the pledged assets without first taking any of the measured specifies in clause (a) to (d) of sub- section (4) in relation to the secured assets under this Act. (12) The rights of a secured creditor under this Act may be exercised by one or more of his officers authorised in this behalf in such manner as may be prescribed. (13) No borrower shall, after receipt of notice referred to in sub- section (2), transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice, without prior written consent of the secured creditor. 17. (13) No borrower shall, after receipt of notice referred to in sub- section (2), transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice, without prior written consent of the secured creditor. 17. Application against measures to recover secured debts.- (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, 1[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:-(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, 1[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\:" 2[Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.] 3[Explanation.-For the removal of doubts it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under sub-section (1) of section 17.]3[Explanation.-For the removal of doubts it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under sub-section (1) of section 17.]" 4[(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 (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management of the secured assets to the borrower or restoration of possession of the secured assets to the borrower, it may by order, (a) 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 (b)restore the possession of the secured assets to the borrower or restore the management of the secured assets to the borrower or such other aggrieved person, who has made an application under sub-section (1) , as the case may be, and (c) 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 l3 to recover his secured debt. [(4-A)Where- (i) any person, in an application under sub-section (1), claims any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy - (a) has expired or stood determined; or (b)is contrary to section 65-A of the Transfer of Property Act, 1882 (4 of 1882); or(c) is contrary to terms of mortgage; or (d) is created after the issuance of notice of default and demand by the Bank under sub-section (2) of section 13 of the Act; and (ii) the Debt Recovery Tribunal is satisfied that tenancy right or lease hold rights claimed in secured asset falls under the sub-clause(a) or sub-clause (b) or subclause(c) or sub-clause (d) if clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act.] (5) Any application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application: Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1). (6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub-section (5), any party to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal. (7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of application in accordance with the provisions of the Recovery of Debts Due 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 (51 of 1993)." 11. From the above, it is clear that Section 17 of the SARFAESI Act, 2002, enables any person including borrower to make an application against the measures which are being taken by the secured creditors under the provisions of the SARFAESI Act, 2002. Debts Recovery Tribunal has been constituted and empowered to adjudicate upon the claim not only of the borrower and the creditor but of any other person. Section 34 of the SARFAESI Act, 2002 also provides that the jurisdiction of the Civil Court has been excluded in respect of any matter to which a Debts Recovery Tribunal and the Appellate Tribunal is empowered by or under this Act of 2002 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 under the SARFAESI Act, 2002. 12. In the present case, I find that the plaintiff ultimately seeks to challenge the action taken by the petitioner/defendant. The question which would ultimately arise in this suit is whether the petitioner/defendant has any right to issue and/or taking possession of the vehicle was legal and valid or not. In my view, such question would exclusively fall within the domain of the Debts Recovery Tribunal as provided under Section 17 of the SARFAESI Act, 2002. The intentions of enacting the provisions of the SARFAESI Act, 2002, are very clear and specific. The SARFAESI Act, 2002, has been enacted so as to expedite the recovery of the amount due to the financial institutions. The intentions of enacting the provisions of the SARFAESI Act, 2002, are very clear and specific. The SARFAESI Act, 2002, has been enacted so as to expedite the recovery of the amount due to the financial institutions. Banks and financial institution have been given powers to take over the possession of the securities and to sell them without intervention of the Court. The Courts while examining such issue must closely examine the provisions of the SARFAESI Act, 2002, and the real intention behind filing the suit before the Civil Court. If the Court arrives at a conclusion that the suit has been filed just to defeat the rights of a secured creditor and proceedings under the SARFAESI Act, 2002, have been initiated, the Civil Court should not proceed with such suit and direct the parties to file appropriate proceedings before the Debts Recovery Tribunal. 13. The Hon'ble Apex Court in the case United Bank of India v. Satyawati Tondon & Ors., (2010) AIR SC 3413 observed that:- "If the respondent No. 1 had any tangible grievance against the notice issued under Section 13(4) or action taken under Section 14, then she could have availed remedy by filing an application under Section 17(1). The expression 'any person' used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 14. Both, the Tribunal and the Appellant Tribunal are empowered to pass interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SARFAESI Act are both expeditious and effective. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc., the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasijudicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute." 14. The Hon'ble Apex Court in the case of Jagdish Singh v. Heeralal and Others., (2013) AIRSCW 6378 observed that:- "22. Statutory interest is being created in favour of the secured creditor on the secured assets and when the secured creditor proposes to proceed against the secured assets, sub-section (4) of Section 13 envisages various measures to secure the borrower's debt. One of the measures provided by the statute is to taken possession of secured assets of the borrowers, including the right to transfer by way of lease, assignment or realizing the secured assets. Any person aggrieved by any of the "measures" referred to in sub-section (4) of Section 13 has got a statute right of appeal to the DRT under Section 17. The opening portion of Section 34 clearly states that no civil court shall have jurisdiction to entertain any suit or proceeding "in respect of any matter" which a DRT or an Appellate Tribunal is empowered by or under the Securitization Act to determine. The expression 'In respect of any matter' referred to in Section 34 would take in the "measures" provided under sub-section (4) of Section 13 of the Securitization Act. Consequently if any aggrieved person has got any grievance against any "measures" taken by the borrower under sub-section (4) of Section 13,l the remedy open to him is to approach the DRT or the Appellate Tribunal and not the civil court. Civil Court in such circumstances has no jurisdiction to entertain any suit or proceedings in respect of those maters which fall under sub-section (4) of Section 13 of the Securitization Act because those mattes fell within the jurisdiction of the DRT and the Appellate Tribunal. Civil Court in such circumstances has no jurisdiction to entertain any suit or proceedings in respect of those maters which fall under sub-section (4) of Section 13 of the Securitization Act because those mattes fell within the jurisdiction of the DRT and the Appellate Tribunal. Further, Section 35 says, the Securitization Act overrides other law, if they are inconsistent with the provisions of that Act, which takes in Section 9, CPC as well. 23. We are of the view that the civil court jurisdiction is completely barred, so far as the "measure" taken by a secured creditor under subsection (4) of Section 13 of the Securitization Act, against which an aggrieved person has a right of appeal before the DRT or the Appellate Tribunal, to determine as to whether there has been any illegality in the "measures" taken. The bank, in the instant case, has proceeded only against secured assets of the borrowers on which no rights of Respondent Nos. 6 to 8 have been crystallized, before creating security interest in respect of the secured assets. In such circumstances, we are of the view that the High Court was in error in holding that only civil court has jurisdiction to examine as to whether the "measures" taken by the secured creditor under sub-section (4) of Section 13 of the Securitization Act were legal or not. In such circumstances, the appeal is allowed and the judgment of the High Court is set aside there will be no order as to costs." 15. In view of the findings as observed above, I am of the opinion, that the secured creditors i.e. the petitioner is entitled to take over the possession of the mortgaged property and the plaintiff/opposite party herein has a remedy under Section 17(1) of the SARFAESI Act, 2002. The suit filed by the plaintiff/opposite party herein is not maintainable in view of Section 34 of the SARFAESI Act, 2002. Therefore, I hold that the plaint comes within mischief of Order 7 Rule 11(d) of the Code of Civil Procedure and for that reason the plaint should have been rejected by the learned trial Judge by allowing the application under Order 7 Rule 11(d) of the Code of Civil Procedure. The learned trial Judge has committed errors of law in rejecting the application under Order 7 Rule 11 of the CPC. The learned trial Judge has committed errors of law in rejecting the application under Order 7 Rule 11 of the CPC. The impugned order cannot be supported and it should be set aside. 16. Accordingly, the revisional application is allowed. The impugned order is hereby set aside. The application under Order 7 Rule 11 of the CPC stands allowed. Consequently, the plaint filed by the plaintiff/opposite party herein stands rejected. 17. Considering the circumstances, there will be no order as to costs. 18. Urgent Photostat certified copy of this order, if applied for, be given to the parties on priority basis.