Icici Bank Ltd vs Pramod Kumar Garg And Anr on 30 November, 2017

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT
JAIPUR
S.B. Civil Revision No. 127 / 2017
ICICI Bank Limited through its Authorized Signatory Mohit Diwan,
having its Branch Office at: New Mandi, Bharatpur.
—-Petitioner
Versus
1. Pramod Kumar Garg, S/o Tikaram, R/o Plot No.2, Gita Colony
Bharatpur.
2. Smt. Sudha Garg, W/o Pramod Kumar Garg, R/o Plot No.2, Gita
Colony Bharatpur.
—-Respondents

__
For Petitioner(s) : Mr. Pankaj Gupta
For Respondent(s) : Mr. G. C. Goel
__
HON’BLE MR. JUSTICE PRAKASH GUPTA
Judgment
30/11/2017

1. This revision petition has been filed by the petitioner against

the order dated 23.05.2017 passed by the learned District Judge,

Bharatpur rejecting an application under Order 7 Rule 11 CPC,

filed by the petitioner in the civil suit No.34/2017.

2. Brief facts giving rise to this revision petition are that the

petitioner-Bank issued a notice under Section 13 (2) of The

Securitisation and Reconstruction of Financial Assets and

Enforcement Of Security interest Act, 2002 (for short “SARFAESI

Act”) to enforce its security interest against the three properties

specified in the notice which as per the petitioner Bank were

mortgaged by the non-petitioners with the petitioner to secure the

cash credit facility extended by the petitioner to a partnership firm
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[CR-127/2017]

in the name and style of M/s. Tikaram Industries in which non-

petitioners are partners. On receipt of the notice, non-petitioners

filed a civil suit No.34/2017 before the learned District Judge,

Bharatpur for a decree of declaration to the effect that the

mortgage interest of the bank in the non-petitioners’ property may

be declared unenforceable under the “SARFAESI Act” without

interference of the civil court and for a perpetual injunction to the

effect that the petitioner must be restrained from enforcing its

mortgage interest under Section 13 (2) of the “SARFAESI Act” as

it is barred under Section 31 (1) of the said act. In the suit, the

petitioner filed an application under Order 7 Rule 11 CPC, claiming

that the suit was barred by section 34 of the “SARFAESI Act”. The

learned District Judge, Bharatpur having heard both the parties,

rejected the application with the liberty to the petitioner bank that

it may raise the issue in its reply to the suit.

Hence, the revision petition.

3. I have heard learned counsel for the parties and perused the

record.

4. The main submission of the learned counsel for the petitioner

Shri Pankaj Gupta is that the suit is barred by section 34 of the

“SARFAESI Act” and the learned court below has committed

jurisdictional and legal error in rejecting the application filed by

the petitioner under Order 7 Rule 11 CPC. In this regard, it is

submitted by him that the learned trial court has not rightly

interpreted “security interest” as defined in Section 2 (ZF) of the

“SARFAESI Act”. The petitioner has a right to enforce its security
(3 of 9)
[CR-127/2017]

interest over the properties mortgaged by way of equitable

mortgage by the respondents in favour of the petitioner. The

learned court below has misinterpreted section 31 of the

“SARFAESI Act”. Section 31 of the “SARFAESI Act” as well as

Sections 125 to 127 of the Indian Contract Act have no application

in the present matter. The finding of the court below is erroneous

that jurisdiction of DRT is ousted in the present matter. It is an

admitted case of the parties that properties had been equitably

mortgaged in favour of the petitioner. The petitioner issued a valid

notice under Section 13 (2) of the “SARFAESI Act” and thereafter,

proceedings of attachment etc. were duly initiated. In view of

section 69 of the Transfer of Property Act, security interest can be

enforced without intervention of the court in view of section 69 of

Transfer of Property Act, has overridden to the “SARFAESI Act”.

5. Learned counsel for the petitioner has placed reliance upon

the judgments of the Hon’ble Supreme Court in the cases of

Mardia Chemicals Vs. Union Of Inida, AIR 2004 SC 2371,

Branch Manager, State Bank of India Vs. Chinigepalli

Lathangi Ors., III (2007) BC 35 ( AP), Yuth Development

Co-operative Bank Ltd. Kolhapur, Vs. Balasaheb Dinkarrao

Salokhe Ors, AIR 2008 Bombay High Court 167, Bank of

India Vs. B. Sundari, IV (2008) BC 309 Madras High Court,

Nahar Industrial Enterprises Ltd. Vs. Hong Kong

Shanghai Banking Corporation, (2009) 8 SCC 646,

Sunayana Malhotra Vs. ICICI Bank, 163 (2009) DLT 602,

Mahesh Kumar Sharma Vs. Bheru Lal Ors.,
(4 of 9)
[CR-127/2017]

Manu/RH/0852/2011, KHDFC Bank Ltd. Vs. Prestige

Educational Trust, AIR 2015 Ker 272.

6. On the other hand, learned counsel for the non-petitioners

inter-alia contends that the debt was not directly and concurrently

secured by the non-petitioners by mortgage of their properties but

it was secured by their personal guarantee and in turn, properties

were mortgaged to secure the guarantee obligation. A guarantee

is a security which is given under Section 126 of the Indian

Contract Act. Therefore, the secured creditor having lien on such

security, cannot enforce the same under “SARFAESI Act” as the

same is prohibited under clause (a) of Section 31 and ancillary

linked security i.e. the property mortgaged to secure the

guarantee obligation cannot be enforced directly without there

being an adjudication by a civil court about the liability of the

guarantor in case of his failure to meet/fulfill his obligation. It is

further submitted that section 34 of the “SARFAESI Act” applies

only when the matter is such in which the Debt Recovery Tribunal

(for short ‘DRT’) or the Appellate Tribunal has jurisdiction. In this

matter, the kind of right that the petitioner has in the property in

question is disputed, which is not within the jurisdiction of the said

tribunals. Hence, the suit is not barred by section 34 of the

“SARFAESI Act”. In short, he disputes applicability of section 34 of

the “SARFAESI Act” to the suit in question. He placed reliance

upon the judgment of the Hon’ble Supreme Court in the case of

Robust Hotels Pvt. Ltd. Ors. Vs. E.I.H Limited Ors., 1

(2017) BC 116 (SC), KHDFC Bank Ltd., Mumbai Ors., Vs.

Prestige Educational Trust, 1 (2016) BC 739 (Ker.), Indian
(5 of 9)
[CR-127/2017]

Renewable Energy Development Agency Vs. Official

Liquidator, High Court, Madras Ors., III (2011)BC 588, P.

Abdu Vs. Federal Bank Ltd., I (2017) BC 713 (Ker.), Bank of

Baroda Vs. Ranjan Chetia Ors., III (2015) BC 721 (Gau.),

Om Prakash Choudhary Vs. Dr. Kailash Garg Ors., 2012

(3) DNJ (Raj.) 1180, Shree Hanuti Hanuman Ji Mandir Trust

Vs. Shri Hanuti Hanuman Sevak Samiti Bavari Koshlya Das

Ors., 2017 (1) DNJ (Raj.) 505, Nahar Industrial

Enterprises Ltd. Ors. Vs. Hong Kong Shanghai Banking

Corporation Ors., III (2009) BC 539 (SC).

7. I have considered the rival submissions made by the learned

counsel for the parties.

8. The following issues appear to be germane for the decision

of the present petition:-

(i) whether in the facts and circumstances of the
case, the suit is barred by section 34 of the
“SARFAESI Act”; and

(ii) whether the learned court below has committed
any jurisdictional or legal error in rejecting the
application of the petitioner filed under Order 7 Rule
11 CPC?

Section 34 of the “SARFAESI 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
(6 of 9)
[CR-127/2017]

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).

9. In para 32 of the judgment in Robust Hotel’s case (supra),

the Hon’ble Supreme Court while analysing the provisions of

Section 34, observed as under:-

“32. A perusal of Section 34 indicates that there is
express bar of jurisdiction of the Civil Court to the
following effect:

(i) Any suit or proceeding in respect of any matter in
which Debt Recovery Tribunal or Appellate Tribunal is
empowered by or under this Act to determine.

(ii) Further, 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.” Thus
the bar of jurisdiction of Civil Court has to correlate to
the above mentioned conditions. For purposes of this
case, we are of the view that this Court need not
express any opinion as to whether suits filed by EIH
were barred by Section 34 or not, since the issue are
yet to be decided on merits and the appeal by Robust
Hotels have been filed only against an interim order.”

10. Thus, the bar of jurisdiction of civil suit has to correlate to

the above mentioned conditions.

In Mardia Chemicals case (supra), the Hon’ble

Supreme Court in para 50 of the judgment held that the

jurisdiction of the civil suit is barred in respect of the matters

which the DRT or the Appellate Tribunal is empowered to deal
(7 of 9)
[CR-127/2017]

with, in respect of any action taken “or to be taken in pursuance

of any power conferred under this Act”. The jurisdiction of civil

court is barred for such matters which are to be dealt with

cognizance by the DRT. Apart from all those matters in which

measures have already been taken under Sub-section 4 of Section

13.

11. From the above provisions of Section 34 as interpreted by

the Hon’ble Supreme Court, it is clear that the jurisdiction of civil

suit is barred only with respect to such matters which DRT or

Appellate Tribunal is empowered to determine. It is well settled

that while deciding an application under Order 7 Rule 11 CPC, the

averments made in the plaint and documents annexed thereto are

to be taken into consideration and I need not to delve into the

various authorities in this regard.

12. The perusal of the plaint filed by the plaintiff shows that the

questions raised before the learned court below are:-

(i) whether the property in question was directly or
concurrently mortgaged to secure the disputed loan,

(ii) whether the loan was secured by personal
guarantee and the property was mortgaged to
secure the personal obligation of the plaintiff,

(iii) whether the loan was a secured loan and the
property in question is secured assets.

13. Section 17 and 18 of the “SARFAESI Act” provide for the

matters which are to be determined by the DRT and the Appellate

Tribunal. Section 17 provides that any person aggrieved by any of
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[CR-127/2017]

the measures referred to in sub-section (4) of section 13 taken by

the secured creditor, may apply to the DRT. Section 18 provides

that any person aggrieved by an order made by the DRT under

Section 17 may file an appeal to the Appellate Tribunal. Thus, DRT

and Appellate Tribunal are empowered to determine the actions

taken or to be taken under Section 13 (4) of the “SARFAESI Act”.

Section 13 (4) of the “SARFAESI Act” reads as under:-

(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 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.

(9 of 9)
[CR-127/2017]

14. A perusal of the provisions of above sub-section 4 of section

13 of the “SARFAESI Act” shows that none of the actions that may

be taken under this sub-section by the secured creditor were in

question before the learned District Judge, Bharatpur and none of

the issues required to be determined in the aforesaid suit are

covered by the aforesaid provision. Therefore, the bar of Section

34 of the “SARFAESI Act” does not operate against the suit filed

before the learned District Judge, Bharatpur.

15. In view of the above, the learned court below has committed

no jurisdictional or legal error in rejecting the application under

Order 7 Rule 11 CPC filed by the petitioner-Bank.

16. In the result, the revision petition is dismissed, no order as

to costs.

(PRAKASH GUPTA) J.

Sanjay Gaur/78

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