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TMI Blog2022 (1) TMI 1460X X X X Extracts X X X X X X X X Extracts X X X X ..... ns any pleadings, the submissions in the plaint have, for the purposes of this application, to be treated as admitted, at least for the present and for the purpose of consideration of the objections raised by Mr. Gupta. The Court, therefore, proceeds on demurrer. 3. On the principles of law, on which he seeks to base his oral prayer for dismissal of the suit without issuance of summons, Mr. Gupta has placed on record written submissions, along with copies of judgments on which he seeks to place reliance. Mr. Anupam Lal Das, learned Senior Counsel for the plaintiffs, has done likewise. 4. Learned Senior Counsel have been heard at exhaustive length. 5. Mr. Das had initially objected to grant of an audience to Mr. Gupta at this stage, contending that summons had, of necessity, to be issued in any suit validly instituted and that the right of the defendant to an audience would enure only by way of response to the summons. Any objection to the maintainability of the suit, Mr. Das had sought to submit, would have, at that stage, to be raised by the defendant by moving an appropriate application under Order VII Rule 11 of the CPC. Mr. Das had sought to contend that the defendant could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 24th July, 2015, Plaintiff 1 leased the basement of the suit property to Defendant 2, through Defendant 1. The plaintiffs alleges that, there after, Defendant 1 misled the plaintiffs into believing that he was financially secure and that the affairs of Defendant 2 were sound and, thereby, coaxed the plaintiffs into reposing trust in him. Misusing the trust thus reposed by the plaintiffs, the plaint alleges that Defendant 1 convinced the plaintiffs to part with possession of the title deeds of the suit property and to sign certain documents, the contents of which were not disclosed to the plaintiffs, and of which they remained unaware, though they were informed that the documents would be needed to secure a loan from the Bank (Defendant 3). Defendant 1, it is alleged, fraudulently used the documents signed by the plaintiffs, and the title deeds of the suit property handed over by the plaintiffs, to mortgage the suit property with the Bank (Defendant 3), on the basis of which loan was availed by Defendant 2. Against the advancing of loan to Defendant 2, the plaintiffs (through the documents allegedly surreptitiously got signed from them by Defendant 1), Defendant 1 and certain o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting inter alia that they had been defrauded by the Defendant No. 1 with the collusion of some Bank officials of Defendant No. 3. A Copy of the Letter dated 23.1.2019 is filed along with the present Suit." (Emphasis supplied) 11. The "Subject" in the Police Complaint lodged by the plaintiffs on 19th December, 2018, reads "Complaint against Accused Persons, namely (1) Mr. Vinay Vishal Sharma, Director of M/s Affinity Beauty Salon Pvt Ltd, (2) M/s. Affinity Beauty Salon Pvt Ltd, a Company having registered office at C-25 Green Park Ext. New Delhi, 110016, and other unknown accused persons in the employment of Kotak Mahindra Bank Ltd, Nehru Place Branch for committing the offences of conspiracy, cheating and breach of trust punishable under Sections 420/406/120B of the Indian Penal Code, 1860". Para 9 of the Police Complaint specifically alleges that Plaintiff 2 was made to sign papers, without disclosing their parentage, by Defendant 1 "along with a couple of representatives stating to be from the Bank". The concluding para 18 of the Complaint also alleges, specifically, that the plaintiffs had "been cheated out of their property by the Accused Persons and the other unknown Bank Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Directors/Guarantors of Principal borrower being Defendant No. 2 and no allegations have been made against the Defendant No. 3 Bank, therefore, the exception which has been mentioned in the judgement passed by the Hon'ble Supreme Court does not apply in the present case and the present suit is liable to be dismissed." (Emphasis supplied) In a similar vein, it is contended, in the written submissions tendered by the Bank on 7th December, 2021, after orders were reserved, that "there is no plea of fraud much less legal and valid plea of fraud against the Defendant No. 3 Bank, as has been raised in the plaint". 14. Where the secured creditor has initiated proceedings under Section 13 of the SARFAESI Act, resort to the civil court, submits Mr. Gupta, stands completely foreclosed by virtue of Section 34 thereof, except where fraud is pleaded against the secured creditor. In the present case, Mr. Gupta submits that the plaintiffs have pleaded fraud only against Defendants 1 and 2 and not against the Defendant 3-Bank. The suit is, therefore, not maintainable. Discussion and Findings 15. No detailed analysis is, in my opinion, necessary, as the submission of Mr. Gupta is obviously c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alve, 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 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 there of. 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 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... probe whatsoever". 22. The words used by the Supreme Court indicate that the exception to availability of the ordinary civil remedy, by the borrower, where the secured creditor has proceeded to take action under Section 13 of the SARFAESI Act, is not couched in exhaustive terms. The Supreme Court starts by using the expression "for example". This, even by itself, indicates that the categories of cases envisaged in the succeeding part of the sentence merely exemplify those cases in which recourse to the civil court is permissible, and are not exhaustive in that regard. 23. The first category of such cases, as envisaged by the Supreme Court, is "where the action of the secured creditor is alleged to be fraudulent". All that is required is, therefore, an allegation. Once there is, in the pleadings of the plaintiff before the civil court, an allegation that the act of the secured creditor is fraudulent, the proscription against recourse to the ordinary civil remedy, in Section 13, ceases to apply. 24. The expression "fraud", of which "fraudulent" is merely a derivative, is of wide amplitude, and one need search no farther, to appreciate its scope, than the following definition in K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e defendant in the written submissions, in para 13 supra reveals, the submission of Mr. Ravi Gupta has proceeded, all throughout, on the premise that the plaintiffs have not alleged fraud on the part of the Defendant 3-Bank. This, as it is clear, is not the case. 27. Fraud and collusion, on the part of the Bank have been specifically pleaded by the plaintiffs, I am unable to concur with Mr. Ravi Gupta that the plaintiff is disentitled to issuance of summons in the suit. Mardia Chemicals4 holds otherwise. 28. The objection of Mr. Gupta is, therefore, rejected. 29. Orders in the suit and in the pending applications would be pronounced separately. NOTE :- 3"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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 for the debt;]
(c) appoint any person (here after 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." X X X X Extracts X X X X X X X X Extracts X X X X
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