JAGDISH SINGH Vs HEERALAL .
Bench: K.S. RADHAKRISHNAN,A.K. SIKRI
Case number: C.A. No.-009771-009771 / 2013
Diary number: 37260 / 2010
Advocates: NIRAJ SHARMA Vs
PRANAB KUMAR MULLICK
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9771 OF 2013 (Arising out of Special Leave Petition (Civil) No.18 of 2011)
Jagdish Singh …….. Appellant
Versus
Heeralal and others ……. Respondents
J U D G M E N T
K.S. Radhakrishnan, J.
Leave granted.
2. The appellant herein was the auction purchaser, being
the highest bidder for Rs.18,01,000/-, in respect of the land
admeasuring one acre in Khasra Nos.104/3 and 105/2,
Patwari Halka No.4, Village Segaon, Anjad Road, Barwani,
M.P., which was brought to sale for recovery of loan amounts
under the provisions of the Securitisation and Reconstruction
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2 of Financial Assets and Enforcement of Security Interest Act,
2002 (for short “the Securitisation Act”). The auction was
confirmed by the bank on 08.11.2005 on the appellant’s
depositing Rs.2,90,250/- by 09.11.2005 and remaining 75%
within 15 days. The appellant was not put in possession of
the property in question even though the auction was
confirmed.
3. The appellant – auction purchaser then came to know
that Respondent Nos.1 to 5 herein have filed a Civil Suit
No.16A/07 in the Court of District Judge, Barwani District for a
declaration of title, partition and permanent injunction
against Respondent Nos.7 to 9 and others in which the
appellant and the bank were also made parties. Following
are the reliefs sought for in the said civil suit:
“(A) Decree may be passed in favour of the plaintiff and against the defendants for declaration of title to this effect that one acre land in survey No.104/3 and 105/2 described in plaint para 4 (a) is undivided joint family property of plaintiff and defendants No.1 to 4 and the defendants have no right to mortgage it or attachment and auction of the same against any loan recovery by defendant No.5 and if defendants No.1 to 5 might have created any
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3 charge on the said land then it is not binding on the plaintiff.
(B) Decree of partition may be passed in favour of the plaintiffs and against the defendants for division of the suit land by metes and bounds and decree may be passed for separating the land of title of the plaintiffs and mutation effected in revenue papers.
(C) Decree of permanent injunction may be passed in favour of the plaintiffs against the defendant that the defendants shall not, directly or indirectly, transfer, auction or interfere over the suit land of the plaintiff in any manner.
(D) Costs of the suit may be awarded against the defendants.
(E) Other relief which the Hon’ble Court may deem proper may be granted to the plaintiff against the defendants.”
4. Respondent Nos.7 to 9 herein, in the meanwhile, filed an
application before the Debt Recovery Tribunal (for short “the
DRT”), Jabalpur under Section 17 of the Securitisation Act
challenging the sale notice dated 08.11.2005. The
application was opposed by the bank and the same was
dismissed by the DRT vide its order dated 21.07.2006.
5. Respondent Nos.6 and 7 (the Bank) filed a preliminary
objection before the civil court stating that in view of Section
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4 13 read with Section 34 of the Securitisation Act, the civil
court has no jurisdiction to entertain the suit. The court,
therefore, framed the following issues:
“Whether under the provisions of Section 34 & 35 of SARFAESI Act 2002 this court does not have the jurisdiction to decide the suit as mentioned in special pleadings in para 10 of the written statement of defendant No.10 and also mentioned in para 15 of the written statement of defendant Nos.6 & 7.”
6. The civil court upheld the preliminary objection stating
that if the plaintiffs had any right, they ought to have filed an
appeal under Section 17 of the DRT Act and not a suit in view
of the specific bar contained in Section 34 of the
Securitisation Act. Civil court, therefore, passed an order on
18.01.2008 holding that the suit is not maintainable and,
hence, the application preferred by the bank under Order 7
Rule 11 of the Civil Procedure Code (for short “the CPC”) was
allowed.
7. Aggrieved by the said order, Respondent Nos.1 to 5
herein filed Civil First Appeal No.130/08 before the High Court
of Madhya Pradesh at Indore. The High Court, however,
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5 allowed the appeal. The operative portion of the judgment
reads as follow:
“I have perused the contents of the plaint from the record of the case. A bare perusal of the plaint indicates that the plaintiffs have raised the question of title, on the basis of Joint Hindu Family property and they being the members of the Joint Hindu Family, it has been pleaded by them that the property in question had been acquired through the earnings of the joint family property. On that basis, it has been maintained by them that the property in question was liable to be treated as Joint Hindu Family property, and not the exclusive property of the defendants. In these circumstances, on the bare perusal of the contents of the plaint, it cannot be suggested at all that the civil suit, filed by the plaintiffs, is barred under any provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2000, or that civil court has no jurisdiction in the matter.”
8. Aggrieved by the same, this appeal has been preferred.
Shri A.K. Chitale, learned senior counsel appearing for the
appellant, submitted that the High Court has not properly
appreciated the scope of Section 34 of the Securitisation Act
and has completely over-looked the principle laid down by
this Court in various Judgments with regard to the scope of
Section 9 CPC vis-à-vis Section 34 of the Securitisation Act.
Reference was made to the Judgments of this court in
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6 Mardia Chemicals and others v. Union of india and
others (2004) 4 SCC 311, Central Bank of India v. State
of Kerala and others (2009) 4 SCC 94, United Bank of
India v. Satyavati Tondon and others (2010) 8 SCC 110
and Authorised Officer, Indian Overseas Bank and
others v. Ashok Saw Mill (2009) 8 SCC 366. Learned
senior counsel submitted that the appellant is a bona fide
purchaser for value and the sale was confirmed in his favour
as early as on 08.11.2005. Further, it was pointed out that
the application preferred by Respondent Nos.7 to 9 before
the DRT, challenging the sale notice dated 08.11.2005, was
also dismissed by the DRT on 21.07.2006. Consequently, the
High Court was not justified in interfering with the order
passed by the District Judge.
9. Shri Sanjay Parikh, learned counsel appearing for the
respondents, on the other hand, submitted that the High
Court has rightly interfered with the order of the District
Judge after having found that the civil court has got the
jurisdiction to deal with the rights of the respondents –
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7 plaintiffs. Learned counsel submitted that the High Court has
correctly appreciated the scope of Section 34 of the
Securitisation Act. Reference was made to the Judgments of
this Court in Nahar Industrial Enterprises Limited v.
Hongkong Shanghai Banking Corporation (2009) 8 SCC
646, Indian Bank v. ABS Marine Products Pvt. Ltd.
(2006) 5 SCC 72 and also to the Mardia Chemicals Ltd.
(supra). Learned counsel submitted that the DRT, exercising
powers under Section 17 of the Securitisation Act, cannot
decide the rights of Respondent Nos.1 to 5 vis-à-vis
Respondent Nos.7 to 9 in a proceeding under Section 17 of
the Securitisation Act and civil court is the right forum to
decide as to whether the secured assets are ancestral
properties of a Hindu Undivided Family (HUF) and they were
acquired through the earnings out of the joint family
properties.
Discussion
10. The Bank of India had advanced a loan of Rs.25 lakhs to
M/s Guru Om Automobiles, 10th respondent herein, through
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8 its proprietor, the 6th respondent on 17.02.2000. The loan
was secured by equitable mortgage executed by Respondent
Nos.7 to 9 in respect of land measuring one acre in Khasra
No.104/3 and 105/2, Patwari Halka No.5, Village Seagon,
Anjad Road, Barwani, MP. Respondent Nos.6 to 8 had also
created equitable mortgage on three houses, which were in
their respective names. Original title deeds of all the above-
mentioned properties were duly deposited with the bank at
the time of availing of the loan. Since they committed
default in re-paying the loan, the bank issued notice under
Section 13(2) of the Securitisation Act and took steps under
Section 13(4) of the Securitisation Act in respect of properties
on 01.03.2004. Auction notice was duly published in the
newspapers on 30.09.2005. No objection was raised by the
plaintiffs and the suit land was auctioned on 08.11.2005,
which was settled in favour of the highest bidder – the
appellant herein. The entire auction price was paid by the
auction purchaser and the sale in his favour was duly
confirmed. Respondent Nos.7 to 9 challenged the sale
notice, as already indicated, by filing an application
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9 No.19/2005 before the DRT, Jabalpur, which was dismissed
on 21.07.2006. No appeal was preferred against that order
and that order has attained finality.
11. We notice, at this juncture, Respondent Nos.1 to 5 filed
Civil Suit No.16A/07 in the Court of the District Judge,
Barwani against the appellant, as well as the bank and
Respondent Nos.6 to 9, alleging that the family members of
Respondent Nos.1 to 9 herein being sons/grandsons of
deceased Premji, constituted a HUF engaged in agriculture.
It was stated that the said properties were purchased in the
names of Respondent Nos.7 to 9 out of the funds of HUF and
house Nos.41/1, 42/3 and 42/2 were also purchased in the
names of Respondent Nos.6 to 8 respectively, out of the
funds of HUF and, therefore, the properties of HUF. But, the
facts would clearly indicate that the properties referred to
above were purchased by Respondent Nos.6 to 8 in their
individual names, long after the death of Premji and that too
by registered sale deeds and no claim was ever made at any
stage by any member of the HUF that the suit land was a HUF
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10 property and not the individual property. Respondent Nos.7
to 9 had purchased those lands vide sale deed dated
14.09.1999 and the 6th respondent had also purchased in his
individual name House No.42/1 on 31.03.1998 vide
registered sale deed. Similarly, Respondent No.7 had also
purchased House No.42/3 in his individual name. No claim,
whatsoever, was made at any stage by any member of the
family that those properties and buildings were HUF
properties and not the individual properties of Respondent
Nos.6 to 8 herein.
12. We find that the bank had advanced loans on the
strength of the above-mentioned documents which stood in
the names of Respondent Nos.6 to 9. Due to non-repayment
of the loan amount, the Bank can always proceed against the
secured assets.
13. Security interest, within the meaning of Section 2(zf)
has been created in respect of the above mentioned
properties which are secured assets within the meaning of
Section 2(zc), in favour of the secured creditor (the bank)
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11 within the meaning of Section 2(zd). On failure to re-pay, the
bank, secured creditor can always enforce its security
interest over the secured assets.
14. Secured asset is defined under Section 2(zc) of the
Securitisation Act to mean the property on which security
interest is created. Section 13(1) of the Securitisation Act
states that notwithstanding anything contained in Section 69
or 69A of the Transfer of Property Act, 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 the Act. In
case the borrower fails to discharge his liability, the bank can
take the measures provided in Section 13(4) of the
Securitisation Act for recovery of the loan amount. The
“measures” available for enforcement of security interest is
dealt with in the following provision:
13. Enforcement of security interest – (1) to (3) xxx xxx xxx (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
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12 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 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 (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.”
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13 15. Section 17 of the Securitisation Act confers a right of
appeal to any person, including the borrower, if that person is
aggrieved by any of the “measures” referred to in sub-
section (4) of Section 13 taken by the Secured Creditor. The
operative portion of Section 17 is extracted hereinbelow for
ready reference:
“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 measure had been taken:
PROVIDED that different fees may be prescribed for making the application by the borrower and the person other than the borrower.
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 1.
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14 (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, 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
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15 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 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 and the rules made thereunder.”
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16 16. Any person aggrieved by any order made by the DRT
under Section 17 may also prefer an appeal to the Appellate
Tribunal under Section 18 of the Act.
17. The expression ‘any person’ used in Section 17 is of
wide import and takes within its fold not only the borrower
but also the guarantor or any other person who may be
affected by action taken under Section 13(4) of the
Securitisation Act. Reference may be made to the Judgment
of this Court in Satyavati Tondon’s case (supra).
18. Therefore, the expression ‘any person’ referred to in
Section 17 would take in the plaintiffs in the suit as well.
Therefore, irrespective of the question whether the civil suit
is maintainable or not, under the Securitisation Act itself, a
remedy is provided to such persons so that they can invoke
the provisions of Section 17 of the Securitisation Act, in case
the bank (secured creditor) adopt any measure including the
sale of the secured assets, on which the plaintiffs claim
interest.
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17 19. Section 34 of the Securitisation Act ousts the civil court
jurisdiction. For easy reference, we may extract Section 34
of the Securitisation Act, which is as follow:
“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).
20. The scope of Section 34 came up for consideration
before this Court in Mardia Chemicals Ltd. (supra) and this
court held as follow:
“50. It has also been submitted that an appeal is entertainable 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
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18 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.”
21. Section 13, as already indicated, deals with the
enforcement of the security interest without the intervention
of the court or tribunal but in accordance with the provisions
of the Securitisation Act.
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-
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19 section (4) of Section 13 envisages various measures to
secure the borrower’s debt. One of the measures provided
by the statute is to take 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 statutory 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 Securitisation 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 Securitisation Act. Consequently if any aggrieved
person has got any grievance against any “measures” taken
by the borrower under sub-section (4) of Section 13, 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
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20 proceedings in respect of those matters which fall under sub-
section (4) of Section 13 of the Securitisation Act because
those matters fell within the jurisdiction of the DRT and the
Appellate Tribunal. Further, Section 35 says, the
Securitisation Act overrides other laws, 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 sub-section (4) of Section 13 of the
Securitisation 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
crystalised, 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
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21 court has jurisdiction to examine as to whether the
“measures” taken by the secured creditor under sub-section
(4) of Section 13 of the Securitisation Act were legal or not.
In such circumstances, the appeal is allowed and the
judgment of the High Court is set aside. There shall be no
order as to costs.
……..……………………..J. (K.S. Radhakrishnan)
……………………………J. (A.K. Sikri)
New Delhi, October 30, 2013.