TMI Blog2015 (5) TMI 1245X X X X Extracts X X X X X X X X Extracts X X X X ..... e present suit. In the present case, the monies, i.e., Rs. 20 crores had clearly been credited from the plaintiffs‟ Term Loan Account to their Current Account. Thereafter, Rs. 19.89 crores was transferred to Tulip. By any standard of reckoning an amount of Rs.19.89 crores is not small and transfer of such amounts would send alarm bells ringing for any account holder especially like the plaintiffs, whose annual turnover is in the range of Rs.600.00 crores. Bank too are known to be especially careful about high-value accounts and the transaction made therein. This Court is of the view that if a standard classic defence, such as fraud by the Bank, is allowed to form the basis for maintaining a suit, then the provisions of the Act would become redundant, all the more so in the face of the express stipulation in Section 34 thereof - the Court cannot be oblivious to whether the allegations of fraud and misrepresentation are made only for the purpose of creating cause of action, thereby leading to the maintainability of the suit. This Court is also of the view that in the present case, the plaint does not aver any complicated facts leading to the case of fraud or how the me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproached the Debts Recovery Tribunal (for short DRT‟) concerned for the reliefs sought in the present suit. Accordingly, the learned counsel for the parties were heard on the issue of maintainability of the suit. Contentions 3. Mr. Ashwini Mata, the learned Senior Advocate for the Bank submits that the suit is not maintainable since: (i) Section 34 of the Act specifically bars the jurisdiction of a civil court, (ii) the appropriate remedy is to file an application before the DRT under Section 17 of the Act, (iii) the suit is nothing but an endeavour to block the process of recovery initiated by the Bank under the Act; (iv) that OA No.46/2015 before the DRT is already pending between the parties and the plaintiffs defences against the defendants action can be adequately dealt with in those proceedings and (v) this suit is nothing but forum shopping by the plaintiffs since they have initiated multiple proceedings and are creating complications in the recovery of debts due to the Bank. 4. He submits that the plaintiffs had first pursued a frivolous litigation by filing a writ petition before the Bombay High Court wherein they had challenged the orders dated 12.09. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary to the understanding between the parties; that this is a standard/classic defence and proceedings Section 17 of the Act being original in nature, this ground too can well be agitated and tried before the DRT. It is further submitted that this defence has been taken only to block and delay the recovery proceedings initiated by the Bank; that if the mere allegation of forgery is allowed to form the basis of the maintainability of the suit, then it would defeat the very purpose of promulgation of the Act and Section 34 thereof would be totally frustrated, making the DRT‟s functioning absolutely redundant. It is submitted that there is nothing in the present case apropos the alleged fraud which cannot be examined by the DRT; that the expression any person used in Section 17(1) of the Act is of wide import since it takes within its fold, not only the borrower but also any other person who may be aggrieved by the measures taken under Section 13(4) of the Act; that the Tribunal as well as the Appellate Tribunal are empowered to pass interim orders under Sections 17 and 18 of the Act and are required to decide the matters within a fixed time schedule. Lastly, it is submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter had expressed its desire to occupy extra space in the building which would be constructed and rentals therefrom were to be repaid to the defendants; that the loan amount carried a moratorium of twelve (12) months; that in the meanwhile, Rs.1,16,41,510/- (Rs.1.16 crores) was transferred by the Bank into its own Debt-Service Reserve Account (for short DSRA‟) as margin towards future repayments. 10. He further submits that as per the continued practice of plaintiff No.1, the aforesaid transaction bore the signature of plaintiff No.2, i.e., Mrs. Sandeep Sagar only as that was the arrangement by virtue of the Board Resolution dated 20.9.2012; that plaintiff No.1 having repaid the borrowed amount of Rs.27.00 crores to Tulip, owed nothing further; and that the remaining Rs.20.00 crores was to be used exclusively for the project for which the loan had been obtained. 11. He also submits that a request letter dated 28.9.2012, seeking disbursement of balance amount of Rs.20.00 crores was honoured by the bank and was credited into plaintiff No.1‟s account, however, the same was debited back; that on 23.11.2012, plaintiff No.1 once again sought release of the balance Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts can be determined only in a suit and not by the DRT in a proceeding under Section 17 of the Act; hence the suit is maintainable. 14. It is further submitted that the Bank‟s letter dated 11.12.2013 is evidence of fraud played upon the plaintiffs insofar as it claims that: In addition to the above, you No.2 executed Deed of Guarantee‟ thereby guaranteeing the due repayment of the credit facility along with interest and other charges payable by you No.1. The aforesaid securities are Secured Assets within the meaning of Section2(1)(zc) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 (hereinafter referred to as the Act ). The aforesaid Secured Assets are fully owned by you No.1, the addressee above named who is Borrower within the meaning of Section 2(1)(f) of the Act. We state that despite having availed the aforesaid credit facility, you No.1 have committed various defaults in repayment of interest and principal amounts as per due dates. The said credit facility/your account is classified by the Bank as a Non-Performing Asset (NPA) on 29.8.2013, in accordance with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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. 51. 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 probe 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , bring a suit of one's choice. It is no answer to a suit, howsoever frivolous to claim, that the law confers no such right to sue. A suit for its maintainability requires no authority of law and it is enough that no statute bars the suit. But the position in regard to appeals is quite the opposite. The right of appeal inheres in no one and therefore an appeal for its maintainability must have the clear authority of law. That explains why the right of appeal is described as a creature of statute. 16. The learned Senior Advocate for the plaintiffs then contends that in Nahar Industrial Enterprises Ltd. (supra), the Supreme Court held that in terms of Mardia Chemicals Ltd. Ors. (supra), the jurisdiction of civil courts can be invoked on the ground of fraud and misrepresentation since several other issues of complicated nature may arise. He further relies upon a judgment of this Court in Sadanand Properties Pvt. Ltd. Ors. (supra), which held that: 27. In fact, It was at the prima facie level itself the case of fraud set by the plaintiff was found to be apparent. Trial is over and final arguments have also been concluded. The Tribunal (before whom OA 16/2009 is pendin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiffs, could form the basis of maintainability of the present suit under the exception carved out by the Supreme Court in Mardia Chemicals (supra). In effect, it has to be determined whether this suit would be maintainable against measures taken under Section 13 of the Act. 20. Under Section 34 of the SARFAESI Act, jurisdiction of civil courts is barred. It 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 Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993). 21. It is evident that the bar of jurisdiction is twofold. Firstly, civil courts shall not entertain any suit or proceeding in respect of any matter which a DRT or the Appellate Tribunal is empowered by or under the Act. Secondly, no injunction shall be granted by any court or other authority in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Banks and Financial Institutions, either under the 1993 Act or under the SARFAESI Act, 2002. All these cases fall under 3 or 4 categories viz.- (i) Cases filed by strangers claiming that their properties are brought to sale on the basis of forged documents or certified copies of documents submitted by borrowers to Banks (ii) Cases filed by guarantors claiming that they never signed letters of guarantee or offered their properties as securities (iii) cases filed by close relatives of borrowers such as spouses, children, brothers and sisters, claiming that they have a share in the properties mortgaged by the borrowers and that they were never aware of and they never gave consent to the properties being offered as securities, and (iv) cases filed by third parties claiming that the properties were sold to them by the borrowers or guarantors by suppressing the creation of the mortgage and that they are bona fide purchasers for value without notice of the encumbrances. 10. It is not very difficult for a seasoned litigant or an intelligent lawyer to draft the Plaint in such a manner as to make a secured asset, come within anyone of the above 4 categories, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank; (vii) The First Defendant had no security interest and no secured assets and, therefore, was not entitled to invoke the provisions of Sub-section (4) of Section 13 against the right claimed by the HUF; (viii) A 'systematic fraud' was played by the First Defendant to pressurise the Plaintiffs; and (ix) There was an absence of legal necessity which would vitiate the mortgage alleged to have been created by the Second Defendant as Karta of the HUF. The reliefs which are sought in the suit have already been adverted to earlier. These averments, when construed in their entirety, would reveal that the grievance which the Plaintiffs have in the suit is in respect of the validity of the mortgage which is alleged to have been executed by the Second Defendant as Karta of the HUF and of the tenability of the action adopted by the Bank under the Securitization Act, so as to meet the interest of the HUF claimed in the residential flat. The Plaintiffs as third parties have sufficient recourse to challenge the lawfulness of the action of the Bank by invoking their remedies under Section 17. Thus, clearly within the meaning of Section 34, a suit in respect of any matter which the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court. 27. In the present case, the monies, i.e., Rs. 20 crores had clearly been credited from the plaintiffs‟ Term Loan Account to their Current Account. Thereafter, Rs. 19.89 crores was transferred to Tulip. By any standard of reckoning an amount of Rs.19.89 crores is not small and transfer of such amounts would send alarm bells ringing for any account holder especially like the plaintiffs, whose annual turnover is in the range of Rs.600.00 crores. Bank too are known to be especially careful about high-value accounts and the transaction made therein. It is the plaintiffs‟ own case that they detected the act of fraud, as alleged, about five (5) months later. In fact, it is rather odd and indeed unbelievable that the plaintiffs were not aware of such a large sum of money having been debited from their account without their knowledge and that too for a few months thereafter. The learned counsel for the plaintiffs refers to pages 85 to 90 (in Part III) that the first payment of Rs.30.00 crores was received on 25.9.2012, therefore, the moratorium would extend till October, 2013. An amount of Rs.1,16,41,510/- was available in the DSRA of the plaintiffs as is reflec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present suit does not fall within the exception carved out by Mardia Chemicals (supra). Indeed, the Court cannot be oblivious to whether the allegations of fraud and misrepresentation are made only for the purpose of creating cause of action, thereby leading to the maintainability of the suit. 29. This Court is also of the view that in the present case, the plaint does not aver any complicated facts leading to the case of fraud or how the measures adopted by the Bank are fraudulent/absurd/untenable. There is nothing in the plaint which would lead to the conclusion that the plaintiffs‟ case falls under the exception carved out by Mardia Chemicals (supra), i.e., the plaintiffs‟ grievances ought to be determined in a suit. At this stage, it would be apposite to rely upon the judgment in Authorised Officer, Kotak Mahindra Bank v. Brahmo Construction Pvt. Ltd., CRA No. 34/2015, decided on 16.04.2015, wherein a learned Single Judge of the Bombay High Court held as under: 14. In the instant case, as indicated above, the relevant averments in the plaint are in Paragraphs 6 11 and 12. The allegations in the said paragraphs have been made on the basis that the Defendant i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sised that only to a limited extent, the jurisdiction of civil courts can be invoked. This import of the sentence is evident from the expression that recourse to civil courts will only be to a very limited extent, i.e., only when 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 probe whatsoever. 33. The learned Senior Advocate for the plaintiffs had relied upon a number of judgments in support of the maintainability of the suit. However, in this Court‟s opinion, they are distinguishable on facts and cannot be relied upon. In Chandru v. K. Nagarajan, (2012) 3 CTC 785, a Division Bench of the Madras High Court, in the context of Section 34 of the Act, held that Courts have a duty to see whether genuine grounds have been made out to attract the jurisdiction of the Civil Court. No generalisation could be made as to when a Civil Suit is maintainable or when the jurisdiction of the Civil Court is ousted. In the facts and circumstances of each case, it is to be examined whether there is genuine grievance to be redressed in the Civil Court. 34. In Sadanand Properties (supra), the suit was held ..... X X X X Extracts X X X X X X X X Extracts X X X X
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