IN THE GAUHATI HIGH COURT (High Court of Assam, Nagaland, Mizoram and Arunachal Pradesh) The Federal Bank Ltd. Petitioner VERSUS Mahendra Kumar Choukhany & Ors. Respondents CRP No. 220/2014 The Federal Bank Ltd. Petitioner VERSUS Bajrang Tea manufacturing Co. [P] Ltd. Respondents BEFORE HON BLE MR. JUSTICE SUMAN SHYAM For the Petitioner : Mr. G.P. Bhowmik, Sr. Advocate For the Respondent : Mr. S.S. Roy, Advocate Mr. T.C. Chutia, Advocate Date of Hearing & Judgment : 18-08-2016 Judgment and Order (Oral) Heard Mr. G.P. Bhowmik, learned Sr. counsel appearing for the petitioner in both the revision petitions. Also heard Mr. S.S. Roy, learned counsel representing respondent Nos. 1 and 2 in CRP No. 216/2014 as well as Mr. T.C. Chutia, learned counsel representing respondent Nos. 1 and 2 in CRP No. 220/2014. CRP No. 220/2014 Page 1 of 12
2. Both these revision petition have arisen out of two similar orders passed by the Trial Court rejecting the applications filed by the petitioner Bank under Order VII Rule 11(d) CPC praying for rejection of the plaints on the ground that the jurisdiction of the civil court to try the respective suits was barred under Section 34 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI). Since common question of law and fact are involved in both the revision petitions, hence, I propose to dispose of the same by this common judgment and order. 3. For the purpose of better appreciation of the issues involved in these proceedings, the facts connected with are briefly discussed herein below: The respondent No. 7 (M/s Maxworth Tea Co. Ltd.) had earlier availed cash credit limit of Rs. 60,00,000/- as working capital and a further amount of Rs. 1,15,00,000/- as term loan from the Petitioner Bank. However, the respondent No. 7 failed to repay the loan as per the agreement as a result of which the loan account had become Non- Performing Asset (NPA). The petitioner Bank had, therefore, initiated measures under Section 13(4) of the SARFAESI Act, 2002 for attachment of the mortgaged property given by the respondent No. 7 as collateral security and accordingly, the bank had published a notice CRP No. 220/2014 Page 2 of 12
on 23-01-2011 in the newspaper notifying that the possession of the immovable properties mentioned there-in has been taken over by its authorized officer. Subsequently, a proceeding being OA No. 03/2010 was also initiated by the Petitioner Bank before the Debt Recovery Tribunal (DRT), Guwahati against respondent No. 7 and its two promoters viz. Sri Surya Prakash Dhand and Sri Makhan Lal Agarwal for issuance of a certificate of recovery. Eventually, the learned DRT had issued a certificate dated 07-09-2013 in favour of the Petitioner Bank for a total amount of Rs. 2,27,45,871.44/- together with interest @ 17% per annum for the cash credit limit and @17.25% per annum for the term loan, to be recovered jointly and severally from the defendants in OA No. 03/2010. 4. Having come to know about the aforementioned process initiated by the petitioner, the respondent Nos. 1 and 2 as plaintiffs had instituted Title Suit No. 09/2012 in the court of Civil Judge at Tinsukia on 21-02-2012, inter alia, praying for a decree declaring that the mortgage created by the respondent No. 7 in respect of properties mentioned in the schedule to the plaint be declared as null and void and not valid in the eye of law. The case of the respondent Nos. 1 and 2 (i.e. plaintiff Nos. 1 and 2 in Title Suit No. 09/2012) in brief was that the respondent No. 1 together with proforma respondent Nos. 3, 4 and 5 had promoted the respondent No. 6 (M/s Bajrang Tea Manufacturing CRP No. 220/2014 Page 3 of 12
Co. Pvt. Ltd. where-after, land measuring about 43B-4K-18L covered by various dag numbers and patta numbers situated in the district of Tinsukia described in the schedules- A to F to the plaint, was transferred in favour of the said respondent No. 6. However, according to the respondent Nos. 1 and 2, although the entire land was shown to have been sold to the respondent No. 6 as per a family arrangement, yet, save and except a small portion of land described in the schedule- I to the plaint, the possession of the remaining land was never delivered to the respondent No. 6 and the same remained with the original owners. It was their further case that the respondent No. 6 had subsequently transferred the said land in favour of the respondent No. 7 through its constituted attorney Liluram Sharma i.e. the respondent No. 8 on the basis of an unregistered Power of Attorney notwithstanding the fact that there was no resolution of the Board of Directors of the respondent No. 6 authorizing such transfer of land. According to the respondent Nos. 1 and 2, the sale of land made by the respondent No. 6 in favour of respondent No. 7 through the respondent No. 8 is invalid in the eye of law and therefore, the mortgage created in respect of the said land by the respondent No. 7 so as to secure the loan amount is also a nullity and liable to be declared so. CRP No. 220/2014 Page 4 of 12
5. The respondent No. 6 herein i.e. M/s Bajrang Tea Manufacturing Co. Pvt. Ltd. and one Shri Vinod Agarwalla as plaintiff Nos. 1 and 2 respectively had also instituted a separate Title Suit No. 18/2012 in the court of Civil Judge, Tinsukia on 02-04-2012 praying for similar reliefs seeking a declaratory decree that the sale deed bearing No. 1633/2006 by means of which a plot of land measuring 10B-3K-2L belonging to the respondent No. 6 was transferred in favour of the respondent No. 7 be declared null and void as the same was effected by perpetrating fraud by respondent No. 8 who did not have any authority to execute the sale deed in question in favour of the respondent No.7. Therefore, the mortgage created in respect of the said land to secure the loan availed by the respondent No 7 from the petitioner bank was also void, invalid and in-operative in the eye of law. 6. Upon receipt of summons in connection with the aforementioned two title suits the petitioner herein had entered appearance and thereafter, filed two separate applications under Order VII Rule 11(d) of the CPC praying for rejection of the plaints filed in the aforementioned suits on the ground that jurisdiction of the civil court to try the suits was barred under Section 34 of the SARFAESI Act, 2002. After hearing the learned counsel for the parties the Trial Court had rejected the applications filed by the petitioner by separate orders, both dated 12-03-2014, passed in the respective Title Suits. Being aggrieved CRP No. 220/2014 Page 5 of 12
by the order dated 12-03-2014 passed in Title Suit No. 09/2012 the petitioner has preferred. Likewise, assailing the order dated 12-03-2014 passed in Title Suit No. 18/2012, CRP No. 220/2014 has been preferred. 7. Referring to the decision of the Supreme Court in the case of Mardia Chemicals Ltd. & Ors. Vs. Union of India & Ors. reported in (2004) 4 SCC 311, Mr. Bhowmik, learned Sr. counsel appearing for the petitioner submits that the law is well settled that the matters in respect of which the DRT would have jurisdiction to determine under Section 17 of the SARFAESI Act, 2002, the jurisdiction of the civil court would be barred. Although the plaintiffs in both the suits have made an attempt to project fraud having been committed by the respondent No. 8, yet, according to Mr. Bhowmik, there is no specific pleadings to that effect. That apart, the fraud that is sought to be alleged is not pertaining to the activities of the Petitioner Bank but concerning one of their own employees. Therefore, according to the learned Sr. counsel, the title suits filed by respondent Nos. 1 and 2 in both the proceedings would not come within the purview of the exception carved out by the Supreme Court in the case of Mardia Chemicals (Supra) conferring limited jurisdiction to the civil court in these matters. CRP No. 220/2014 Page 6 of 12
8. Resisting the aforesaid contention Mr. T.C. Chutia, learned counsel for the respondent Nos. 1 and 2 in CRP No 220/2014 has submitted that the civil court would have jurisdiction to entertain the suit on account of the fact that the plaintiffs had clearly made out a case of fraud having been perpetrated by the respondent No. 8 involving their properties. Mr. Chutia submits that since the alleged sale deeds had been executed by the respondent No. 8 in favour of respondent No. 7 on the strength of an unregistered deed of Power of Attorney behind the back of the plaintiffs, hence, it is self evident that fraud has been committed in the instant case. Therefore, according to the learned counsel, this is a fit case that deserves to be tried by the civil court as the DRT would not have the required expertise to decide the contentious issues involved in the title suit. 9. Supporting the aforesaid contention, Mr. Roy, learned counsel for the respondent Nos. 1 and 2 in has added that this Court has already passed similar judgments in a number of cases holding that fraud would vitiate all actions and if fraud is alleged then in that event the civil court alone would have the jurisdiction to try the matter notwithstanding the bar created by Section 34 of the SARFAESI Act, 2002. In support of his aforesaid contention Mr. Roy has relied upon two unreported decisions of this Court rendered in CRP No. 256/2014 Bhopal Thapa Vs. Smti. Bina Boro & Ors (judgment CRP No. 220/2014 Page 7 of 12
dated 01-09-2014) and CRP No. 187/2013 Bank of Baroda Vs. Ranjan Chetia & Ors. (judgment dated 08-09-2014). 10. I have considered the submission made by and on behalf of the parties and have also perused the materials available on record. Following the decisions of the Supreme Court in the case of Mardia Chemicals (Supra) the law is now well settled that the jurisdiction of the civil court is barred under Section 34 in respect of all matters which a Debts Recovery Tribunal or an Appellate Tribunal in empowered to determine in respect of any action taken by the bank in pursuance of power conferred under the SARFAESI Act, 2002. Section 17(1) of the SARFAESI Act, 2002 provides that any person aggrieved by any of the measures referred to under Sub-Section 4 of Section 13 taken by secured creditor may make an application before the Tribunal in the manner prescribed there-in. If such an application is made, Sections 17(2) and (3) of the Act of 2002 enjoins a duty upon the Tribunal to examine the facts and circumstances of the case including the evidence produced by the parties and thereafter, consider as to whether the measures taken by the secured creditor is in accordance of the provisions of the Act and the Rules framed there-under or not. Section 35 of the Act of 2002 provides that the provisions of the Act to have over riding effect over other laws. A reading of Section 17(1), therefore, makes it clear that even a third party who is affected by any CRP No. 220/2014 Page 8 of 12
measure initiated under Section 13(4) of the SARFAESI Act, 2002 by a secured creditor or its authorized agent may prefer an application under the said provision questioning the legality and validity of such action. Law on the aforesaid point has been authoritatively laid down by the Supreme Court in the case of Jagdish Singh Vs. Heeralal reported in (2014) 1 SCC 479. 11. It is no doubt true that in Mardia Chemicals (Supra) the Supreme Court has recognized a limited jurisdiction of the civil court to entertain disputes of this nature notwithstanding the bar of Section 34 of the SARFAESI Act, 2002. The observations made in paragraph 51 are quoted herein below: 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 prove 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, AIR at pp. 141 and 144, a judgment of the learned Single Judge where it is observed as follows in para 22: 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. CRP No. 220/2014 Page 9 of 12
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: Adms V. Scott. I need not point out that this restraint on the exercise of the power of sale 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 annual one of the chief securities on which persons advancing moneys on mortgages rely. (See Ghosh, Rashbehary: Law of Mortgages, Vol.II, 4 th Edn., p. 784) 12. From the above, what can be seen is that save and except the exception created and recognised by the Supreme Court, the jurisdiction of the civil court would be completely barred in all such matters which comes within the ambit of Section 17 of the SARFAESI Act, 2002. 13. From a perusal of the pleadings in the plaint filed in both the title suits, it prima facie appears that the cause of action for filing the suits was on account of the measures initiated by the petitioner Bank under the SARFAESI, Act 2002 involving the immovable properties mentioned the schedules to the plaints. In the garb of the pleadings contained in the plaint and the reliefs prayed therein, the plaintiffs were basically aiming at stalling the process initiated by the bank under Section 13(4) of the SARFAESI. In other words, both the Title Suits have been filed more or less on the same line and on identical grounds with the only exception that plaintiffs as well as the plots of land in the two title suits are different. Since, the plea of the plaintiffs pertain to validity of the CRP No. 220/2014 Page 10 of 12
mortgage created by the respondent No. 7, there is no reason to hold that the DRT would be incompetent to decide the said issue in an appropriate application filed by an aggrieved party. 14. Order VI Rule 4 of the CPC provides that in all cases in which a party pleading relies on any fraud, misrepresentation, undue influence, breach of trust, the necessary particulars in respect thereof shall be stated in the pleadings. Although a case of fraud has been sought to be made out in the plaint, yet, a meticulous scrutiny of pleadings contained in the paint filed in both the title suits does not disclose such particulars of fraud as is required under Order VI Rule 4 CPC. Moreover, there is also no allegation of fraud against the secured creditor in both the suits. Therefore, this Court is of the opinion that present is not a case falling within the exception carved out by the Supreme Court in paragraph 51 in the case Mardia Chemicals (Supra). 15. By the impugned orders dated 12-03-2014, the learned Trial Court had rejected the applications filed by the petitioner Bank by observing that the jurisdiction of the DRT is limited and cannot be enlarged so as to examine the validity of the secured creditor under Section 13 of the SARFAESI Act, 2002 and further that dispute in respect of secured assets do not fall within the ambit of Section 17 of CRP No. 220/2014 Page 11 of 12
the SARFAESI Act, 2002. In my opinion the learned Trial Court was not correct in making such observations as the provision of Section 17(1) of the SARFAESI Act, 2002 confers wide jurisdiction upon the DRT to examine the legality and validity of all such measures taken by the secured creditor. 16. For the foregoing reasons, I am of the opinion that the learned court below had erred in properly exercising its jurisdiction vested by law and had passed the impugned orders dated 12-03-2014 on an incorrect interpretation of the law. As such, the impugned orders dated 12-03-2014 are set aside. It is held that the Trial Court did not have the jurisdiction to entertain Title Suit No. 09/2012 as well as Title Suit No. 18/2012 due to the bar created under Section 34 of the SARFAESI Act, 2002. Notwithstanding the determination as above, it would remain open to the respondent Nos. 1 and 2 in both the revision petitions to avail remedy under Section 17(1) of the SARFAESI Act, 2002 by making appropriate application. allowed. With the above observations, the revision petitions stand JUDGE GS CRP No. 220/2014 Page 12 of 12