IN THE HIGH COURT OF KARNATAKA, BENGALURU PRESENT THE HON' BLE MR. JUSTICE N.KUMAR AND THE HON' BLE MR. JUSTICE PRADEEP D.

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1 1 IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 21 ST DAY OF JANUARY, 2016 PRESENT THE HON' BLE MR. JUSTICE N.KUMAR AND THE HON' BLE MR. JUSTICE PRADEEP D.WAINGANKAR RFA NO 483 OF 2015 BETWEEN: SRI V JAYAPRAKASH, S/O.LATE T.VENKATARAMAIAH, AGED ABOUT 50 YEARS, RESIDING AT NO.522, 15TH MAIN, MANJUNATHANAGAR, WEST OF CHORD ROAD, BANGALORE APPELLANT (BY SMT. PUSHPAVENI AJITH, ADV. FOR SHRI. CHINMAY J MIRJI, ADVOCATE) AND: 1.SRI CHANDRASHEKHAR, S/O.SRI.C.VIJAYA, AGED ABOUT 41 YEARS, R/ AT NO.17, 4TH MAIN, MSR CITY, 8TH PHASE, J.P.NAGAR, BANGALORE

2 2 2.SRI CHANDRA KEERTHI, S/O.SRI.C.VIJAYA, AGED ABOUT 41 YEARS, R/ AT NO.17, 4TH MAIN, MSR CITY, 8TH PHASE, J.P.NAGAR, BANGALORE SMT ROOPA J D/O.SRI.K.V.JAGANNATHA, AGED ABOUT 37 YEARS, R/ AT NO.363, 9TH MAIN, DOLLARS COLONY, 4TH PHASE, JP NAGAR, BANGALORE GOVINDASWAMY, MANAGER, PNB HOUSING FINANCE LTD., NO.690, 39TH CROSS, 16TH MAIN, 4TH BLOCK, JAYANAGAR, BANGALORE PNB HOUSING FINANCE LTD A REGISTERED COMPANY HAVING ITS REGISTERED OFFICE AT NO.690, 39TH CROSS, 16TH MAIN, 4TH BLOCK, JAYANAGAR, BANGALORE , REP. BY ITS MANAGING DIRECTOR. 6.P UDAYA KUMAR AGED ABOUT 49 YEARS, R/ AT NO.66, CHANNAMMA LAYOUT, T.I.R. NAGAR, BANGALORE RESPONDENTS (BY SHRI. K V LOKESH, ADVOCATE FOR C/R5) THIS RFA IS FILED UNDER SEC.96 OF CPC., AGAINST THE JUDGMENT AND DECREE DATED PASSED IN O.S.NO.4030/2011 ON THE FILE THE C/C

3 3 XXXVII ADDL. CITY CIVIL JUDGE, (CCH 38), BENGALURU, REJECTING THE PLAINT AS THE SUIT IS BARRED UNDER SEC.34 OF THE SARFAESI ACT. THE SUIT FOR DECLARATION, CANCELLATION OF THE SALE DEEDS. THIS APPEAL COMING ON FOR ADMISSION THIS DAY, N.KUMAR J, DELIVERED THE FOLLOWING; JUDGMENT This is a plaintiff s regular first appeal against the order passed by the XXXVII Addl. City Civil & Sessions Judge, Bangalore City, rejecting the plaint under Order VII Rule 11(d) of the Code of Civil Procedure, on the ground that Section 34 of the SARFEASI Act comes in the way of maintaining the suit in the civil court. 2. For the purpose of convenience, parties would be referred to as they are referred in the original suit. 3. The plaintiff Jayaprakash filed the suit O.S. No.4030/2011 seeking following reliefs:- i) Cancellation of the Sale Deed dated , alleged to be executed by the Plaintiff in favour of the 2 nd Defendant, in Book No. I, Volume No.2077/07-08, at pages 1-10 at the Sub-Registrar, Rajajinagar.

4 4 ii) Cancellation of the Sale Deed dated , alleged to be executed by the Plaintiff in favour of the 3 rd Defendant, in Book No.I, Volume No.2076/07-08, at pages 1-10 at the Sub-Registrar, Rajajinagar. iii) Declaration that the Defendants 2 and 3 did not have any legal or valid right to keep the Suit Schedule Property as security for their loan transaction with the 5 th Defendant. iv) Permanent Injunction restraining the 5 th Defendant Bank or any of its agents from dispossessing the Plaintiff from the Suit Schedule Property. v) Grant such other or further reliefs as this Hon ble Court deems fit in the interest of justice and equity. 4. After service of summons, the defendants entered appearance and filed a detailed written statement contesting the claim of the plaintiff. Thereafter, they filed an application (I.A. No.7) under Order VII Rule 11(d) of the Code of Civil Procedure to reject the plaint. They contended that the plaintiff has sold the suit schedule

5 5 property in favour of defendants 2 and 3 by registered sale deeds dated Thereafter, the defendants 2 and 3 approached the bank seeking loan to purchase the suit schedule property from the plaintiff and the bank has advanced a sum of Rs.30 lakhs each to the defendants 2 and 3. The loan was disbursed by way of Payee Bankers cheque to the plaintiff. The plaintiff received the amount and executed registered sale deeds in favour of defendants 2 and 3. The defendants 2 and 3 became defaulters having not paid the EMI amount to defendant No.5/bank as agreed upon. Therefore, they were constrained to initiate proceedings under the provisions of the SARFAESI Act by issuing demand notice dated under Section 13(2) of the SARFAESI Act. Inspite of the same, they failed to discharge the loan. Therefore, possession notice was issued under Section 13(4) of the SARFAESI Act and symbolic possession was taken. It is thereafter, the plaintiff has filed the present suit for the aforesaid reliefs.

6 6 5. They sought stay of the possession notice issued under Section 13(4) of the SARFAESI Act and obtained an interim order. Therefore, they contended that Section 34 of the Act takes away the jurisdiction of the civil court to deal with this matter. 6. The said application was opposed by the plaintiff by filing a detailed objection statement. 7. The trial court after hearing both the parties was of the view that the material on record discloses that the plaintiff has executed the sale deed in favour of defendants 2 and 3 and the bank has advanced the loan to the defendants 2 and 3 to purchase the property and in fact the loan amount was paid directly to the plaintiff. The plaintiff went to the Sub-Registrar Office and executed the sale deed and got it registered. Under these circumstances, the court below did not find any substance in the claim of the plaintiff. According to the trial court, Section 34 of the SARFEASI Act comes in the way of entertaining the suit and hence the application was allowed

7 7 and the plaint was rejected. Aggrieved by the said order, the plaintiff is in appeal. parties. 8. We have heard the learned counsel for both the 9. The short point that arises for our consideration in this appeal is as under; Whether the suit filed by the plaintiff for cancellation of the sale deed under Section 34 of the SARFEASI Act is sustainable? Section 34 of the Act reads as under:- 34. Civil court not to have jurisdiction No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of

8 8 Debts Due to Banks and Financial Institutions Act, Therefore, it is only the proceedings over which the Debt Recovery Tribunal has jurisdiction are excluded from the purview of the civil court. The suit is one for cancellation of the sale deeds. The Debt Recovery Tribunal is not conferred the jurisdiction to declare any sale deed obtained by them as null and void and consequently pass any judgment and decree of cancellation. It is only the civil court which is conferred with the said jurisdiction to cancel the sale deeds. Therefore, the finding of the trial court that Section 34 of the SARFAESI Act prevents the civil court from entertaining the suit is illegal. May be the trial court was influenced by the fact that the plaintiff has executed the registered sale deeds in favour of defendants 2 and 3 and has received the sale consideration directly from the bank by way of Pay Orders, that itself is not sufficient to reject the plaint under Order VII Rule 11(d) of the Code of Civil Procedure. If the Court holds that no case is made out for cancellation of the sale deed, after trial certainly it

9 9 could dismiss the suit, but this is not a stage to reject the plaint on the aforesaid grounds. Therefore, to the said extent, the order passed by the trial court on I.A.7 under Order VII Rule 11(d) of the Code of Civil Procedure is unsustainable. 10. The learned counsel for the appellant submitted that in the suit they had the benefit of temporary injunction/stay order staying possession notice issued under Section 13(2) of the SARFAESI Act not to dispossess the defendants during pendency of the suit. However, after passing of the impugned order, now 3-4 days back they have been dispossessed. She further submits that when suit is restored to its original file by remanding the matter, the interim order passed in that case also requires to be restored and consequently an order of possession is to be passed. 11. As is clear from Section 34 of the SARFAESI Act, there is a mandate to a civil court not to grant injunction in respect of any action taken or to be taken in pursuance

10 10 of any power conferred by this Act. Therefore, the trial court had granted an injunction/ order to maintain status quo thereby preventing taking of possession in pursuance of Section 13(4) of the said Act. The civil court had no jurisdiction to pass such order and at any rate now possession is taken and only in the event of the plaintiff succeeding in the suit she could seek for re-delivery of possession which is taken during the pendency of the proceedings. This court by way of interim order cannot restore possession. 12. It is submitted that movable properties in the suit schedule property belonging to the plaintiff continues to be in the possession of the defendant-bank. 13. The learned counsel appearing for the bank submits that they would hand over movable properties. 14. In that view of the matter, the appeal is allowed. The order passed by the trial court is set aside. The suit is restored to its original file. The matter is remanded back to

11 11 the trial court for disposal in accordance with law. The trial court shall hand over movables found in the suit schedule property to the plaintiff. The trial court is at liberty to pass appropriate orders depending on the result of the suit regarding possession of the property which is now taken over by the bank, in pursuance of the possession notice under Section 13(4) of the SARFAESI Act. Sd/- JUDGE Sd/- JUDGE Msu