Central Bank of India, Regional Office, Madurai Represented through its Regional Manager, Madurai Town and Another Vs. Gomathiammal - Court Judgment

(Prayer: Civil Revision petition is filed under Article 227 of the Constitution of India, to set aside the fair and ex-orders dated 28.03.2011 passed in I.A.No.739/2010 in O.S.No.14/2010 on the file of the Additional District Munsif Court, Ambasamuthram.)

Order:

1. The civil revision petition arises against the fair and ex-orders dated 28.03.2011 passed in I.A.No.739/2010 in O.S.No.14/2010 on the file of the Additional District Munsif Court, Ambasamuthram.

2. The revision petitioners being the Central Bank of India, who are the Creditors, are the defendants in the suit. The respondent herein filed the suit in O.S.No.14 of 2010 before the learned Additional District Munsif, Ambasamudram, to declare the sale proceedings of the Bank as null and void. The respondent herein stood as a guarantor for the loan availed by the borrower M/s.Marvellous Marketting and she mortgaged her property. Since the borrower has not repaid the loan, the bank issued demand notice dated 23.07.2007 under Section 13(2) of SARFAESI Act. Even then, the borrower has not repaid the loan amount of Rs.2,90,000/-. Therefore, the Bank has taken symbolic possession of the property and issued possession notice dated 28.02.2008. Even after the said possession notice, the borrower has not repaid the loan amount and hence, the bank has issued sale notice which was published in the newspaper on 01.11.2008, by fixing the sale on 09.12.2008.

3. After issuance of the sale notice, the respondent herein has filed a suit in O.S.No.260 of 2008 before the learned District Munsif, Ambasamudram, to declare the loan borrowed by the borrower will not bind the respondent herein and for permanent injunction restraining the bank not to conduct the sale on 09.12.2008 on the ground that there are various alleged procedural irregularities. The bank has filed the written statement denying all the allegations in the plaint and by stating interalia that the suit is not maintainable as per Section 34 of the SARFAESI Act. In the said suit, the bank filed a petition in I.A.No.281 of 2009, under Order 7 Rule 11 of C.P.C., to reject the plaint. The Court below has rejected the plaint on 27.11.2009 on the ground that the suit is not maintainable as per Section 34 of the SARFAESI Act. Against the said order, no appeal has been preferred by the respondent herein and the said order has become final.

4. Pursuant to the said order, the bank has proceeded with the sale proceedings and the sale was conducted and issued sale certificate on 21.01.2009 in favour of one Chella Thangam. Thereafter, the respondent herein filed another suit in O.S.No.14 of 2010 before the Additional District Munsif, Ambasamudram, to declare the sale conducted by the bank and the sale certificate issued by the bank are null and void on the ground that there are various alleged procedural irregularities and it amounts to fraud. In the above suit also, the revision petitioners/bank filed written statement denying all the allegations and by stating interalia that the suit is not maintainable as per Section 34 of the SARFAESI Act. Thereafter, the petitioner bank filed a petition in I.A.No.739 of 2010, under Order 7 Rule 11 of C.P.C., to reject the plaint. However, the Court below has dismissed the said application on 28.03.2011, by rejecting the contention of the petitioner that the suit is not maintainable on the ground that there is a different in the extent of suit property between the sale notice and the sale certificate, which amount to fraud. Against the said order, the bank has filed the present revision petition.

5. According to the learned counsel for the respondent, the Court below has rightly dismissed the said application and the maintainability of the suit will be decided at the time of trial and hence, there is no warrant to interfere with the order of the Court below.

6. Heard the learned counsel for the petitioners and the learned counsel for the respondent and perused the materials available on records.

7. The revision petitioners/bank has issued notice under Section 13(2) of SARFAESI Act on 23.07.2007 and issued possession notice on 28.02.2008 and issued sale notice dated 01.11.2008 by fixing the sale on 09.12.2008. Assailing the said notice, the respondent herein filed O.S.No.260 of 2008 before the learned Additional District Munsif, Ambasamudram, to declare that the loan borrowed by the borrower will not bind the respondent herein and for permanent injunction against the petitioiners not to conduct the sale on 09.12.2008. Therefore, the bank has filed I.A.No.281 of 2009 in O.S.No.260 of 2008 to reject the plaint under Order 7 Rule 11 of C.P.C and the said application was allowed.

8. It is an admitted fact that pursuant to the said dismissal of the plaint in O.S.No.260 of 2008, the bank has conducted the sale and issued sale certificate in favour of one Chella Thangam, who is the successful auction purchaser in the sale conducted by the bank. At that stage, the respondent herein filed the suit in O.S.No.14 of 2010, before the learned Additional District Munsif, challenging the sale certificate issued by the bank, by alleging that there is a different in the extent of suit property as found in the sale notice and the sale certificate issued by the petitioners' bank and the said difference amounts to fraud played on the part of the bank. However, the respondent bank filed application in I.A.No.739 of 2010, to reject the plaint under Order 7 Rule 11 of C.P.C. The said application was dismissed by accepting the contention of the respondent herein/plaintiff.

9. The petitioners have brought to the notice of this Court that the possession notice issued by the bank in the earlier proceedings initiated under Section 13(2) and 13(4) of SARFAESI Act, the extent of the suit property was mentioned as 1039.85 sq.ft. However, before issuing the sale notice, the bank appointed a valuer and a report has been filed by the approved valuer and in the said report, the valuer has stated that the total extent of the property is 903.71 sq.ft. Therefore, on the basis of the valuation report submitted by the valuer, the sale notice was issued in respect of 903.71 sq. ft. only. The said property was sold in the public auction and one Chella Thangam was the auction purchaser in the public auction and hence, the bank issued sale certificate dated 21.01.2009 in favour of the said Chella Thangam.

10. Further, it is submitted that the petitioners have issued demand notice on the basis of the documents submitted by the respondent herein at the time of execution of the mortgage deed. The revision petitioners came to know the said difference of the extent of property only at the time of valuation report submitted by the approved valuer. Therefore, the contention of the respondent cannot be countenanced. It is useful to extract Section 34 of SARFAESI Act, which 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).

11. In the decision in Radnik Exports V. Standard Chartered Bank reported inIV (2014) BC 232 (Del.), the Hon'ble Supreme Court has held as follows:

34. I have wondered that if the jurisdiction of this Court to grant the consequential relief of injunction is barred, can this Court have jurisdiction to grant the relief of declaration and / or should this Court grant the relief of declaration, which, without the consequential relief of injunction, would be a toothless declaration, incapable of saving the plaintiff from the claim of the defendant Bank if the DRT was to conclude otherwise and thus, but a mere scrap of paper. I am, (without foraying into the aspect of whether the jurisdiction to grant declaration would also be barred) of the view that in these circumstances this Court ought to refuse to grant the relief of declaration also, which is but a discretionary relief. It cannot be forgotten that grant of every injunction entails declaration of rights and no injunction can be granted without adjudicating conflicting rights of the parties. Thus, where grant of injunction is prohibited, such prohibition cannot be circumvented by instead granting declaration. This follows from Section 34 of the Specific Relief Act also which bars making of such a declaration where the plaintiff, able to seek further relief, omits to do so. The only difference here is that though the plaintiff has claimed further relief, such further relief is barred by Section 34 of the SARFAESI Act.

35. I would be failing in my duty if do not record that I have in Sunayana Malhotra supra taken a view that a Civil Court will have jurisdiction, if no proceeding before DRT is initiated. However, the same cannot be said to be good law in view of the subsequent dicta of the Supreme Court in Jagdish Singh supra. In the same vein, reference may also be made to Richa Industries Ltd. Vs. ICICI Bank Ltd. 190 (2012) DLT 500 where another single Judge, though held the suit for declaration, injunction and damages to be maintainable, refused interim relief. However I do not consider myself bound thereby because the suit was so held maintainable on a prima facie view of the matter and also because FAO(OS) No.577/ 2011 preferred thereagainst was disposed off as compromised on 28th February, 2013.

36. The suit is thus found to be not maintainable. The amendment claimed to the plaint does not affect its maintainability. Thus, the suit is dismissed and resultantly the pending applications are infructuous. The plaintiff is also burdened with costs of the suit. Counsels fee assessed at Rs.20,000/-

12. In the decision in Jagdish Singh V. Heeralal and Others reported in IV (2013) BC 744 (SC), the Hon'ble Supreme Court has held as follows:

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 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. ........

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-section (4) of Section 13 envisages various measures to secure the borrowers 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 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 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 Curt is set aside. There shall be no order as to costs.

13. In the decision in V.Thulasi V. Indian Overseal Bank reported in 2011-3 L.W. 457, a Division Bench of this Court has held as follows:

28. Notice under SARFAESI Act was issued on 7.2.2006 and the plaint came to be filed on 27.3.2006. The declaration sought for by the plaintiffs is to declare the creation of guarantee in respect of loan granted to the 1st defendant is null and void. The Bank has proceeded under SARFAESI Act in respect of the property offered as guarantee by the plaintiff. In view of the specific bar under Section 34 of the Act, the action initiated by the Bank under the provisions of SARFAESI Act cannot be the subject matter of the suit in the Civil Court. In so far as the second limb of prayer to grant injunction restraining the defendants from in any manner proceeding against the plaintiffs or the plaint schedule property for the purpose of realisation of the loan amount is barred under Section 34 of SARFAESI Act. Section 34 imposes a specific bar to grant any relief of injunction in respect of any action taken by the Bank under the provisions of SARFAESI Act.

29. By clever and astute drafting, the plaintiff might create an illusion of cause of action by trying to bring civil suit within the parameters laid down by the Supreme Court in Mardia Chemicals case, (2004) 4 SCC 311. Pointing that Court has duty to see if such allegations of fraud are thrown just for the purpose of maintaining a suit, in PUNJAB NATIONAL BANK VS. J.SAMSATH BEEVI, ((2010(3) CTC 310)), Justice V.Ramasubramanian held as under:

"8. But at the same time, the Court has a duty to see, if such allegations of fraud are thrown, just for the purpose of maintaining a suit and ousting the jurisdiction of the Tribunal and to keep the Banks and Financial Institutions at bay. If by clever drafting, the plaintiff creates an illusion of a cause of action, the Court is duty bound to nip it in the bud. To find out if it is just a case of clever drafting, the Court has to read the plaint, not formally, but in a meaningful manner. So is the dictum of the Apex Court in T.Arivandandam vs. T.V.Satyapal [1977 (4) SCC 467]. It was again reiterated by the Court in I.T.C. Ltd vs. Debts Recovery Appellate Tribunal [1998 (2) SCC 70], by holding that clever drafting, creating illusions of cause of action are not permitted in law. The ritual of repeating a word or creation of an illusion in the plaint can certainly be unravelled and exposed by the Court while dealing with an application under Order VII, Rule 11(a).

9. A Court is obliged to see if the allegations of fraud and collusion made in the plaint, are themselves a product of "fraud and collusion" between the family members of the borrowers, so as to escape liability and save the secured assets, somehow or the other. In the recent past, there is a sudden spurt in the number of civil cases filed against the actions initiated 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, by a clever drafting of the Plaint, thereby creating an illusion of fraud, collusion, misrepresentation and the like. Today, with the advancement of technology, the creation of an illusion and the creation of a virtual world are both possible. The moment the Civil Suit is taken on file, the proceedings before the Debts Recovery Tribunal or under the SARFAESI Act, 2002 gets slowed down. This results in two consequences viz., (i) out of frustration, the Banks agree for one time settlements, or (ii) third party rights get created by taking advantage of the situation. Therefore, the Courts have a greater responsibility to scan the pleadings and see if the allegations of fraud and collusion made in the Plaint are actually a product of fraud and collusion between the borrowers and those making such claims."

We fully endorse the above views of the learned single Judge.

30. In the present case, plaintiffs seek for a declaration that the alleged guarantee created in the plaintiff's name for the loan advanced to the 1st defendant is null and void and seeks for permanent injunction restraining the defendants from proceeding against the plaintiff or the plaint schedule property. The plaintiff has brought out the averments in the plaint to bring the suit within the purview of the exception carved out by the Supreme Court in Mardia Chemicals Ltd. v. Union of India,(2004) 4 SCC 311. In determining whether such a plea has to be accepted, the plaint as a whole has to be read. In Popat and Kotecha Vs. State Bank of India Staff Association, ((2005) 7 SCC 510), the Supreme Court held that plaint averments cannot be compartmentalised or dissected, nor can the averments be read in isolation. As pointed out earlier, the limited exception, which is carved out by the Supreme Court, is whether the action of the secured creditor is so absurd and untenable that it would not require any probe, what so ever.

14. Furthermore, this Court in the decision in Bank of India V. Manickam reported in (2006) 4 MLJ 914, has held as follows:

3 (9) It has been clarified by the Honourable Apex Court in a case reported in 2005(3) CTC 545 (N.V.Srinivasa Murthy Vs. Mariyamma (dead) by Proposed LRs) , wherein it has been held as follows:

"This is a fit case not only for rejecting the plaint but imposing exemplary costs on the appellant on the observations of this Court in the case of T.ARvindam Vs. T.V.Satyapal,1997(4) SCC 467:

The trail court must remember that if on a meaningful no formal reading of the plaint it is manifestly vexatious and meritless in the sense of not disclosing a clear right to sue, it should exercise its power under Order 7, Rule 11, CPC, taking care to see that the ground mentioned therein fulfilled. If clever drafting has created the illusion of a cause of action, the Court must nip it in the bud at the first hearing by examining the party searchingly under Order 10, CPC. An activist judge is the answer to irresponsible law suits. The trail Courts would insist imperatively on examining the party at the first hearing so that bogus litigation can be shot down at the earliest stage. The Penal Code is also resourceful enough to meet such men (Ch. XI) and must be triggered against them."

In another dictum reported in AIR 2004 SUPREME COURT 2371 (Mardia Chemicals Limited Vs.Union of India), it has been held as follows:

"It has also been submitted that an appeal is entertainable before the Debt 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 Debt 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 respondents that there would be no bar to approach the Civil Court. Therefore, it cannot be said 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 Debt Recovery Tribunal or 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 Debt 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 mater 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 maters which may be taken cognizance of by the Debt Recovery Tribunal,apart from those matters in which measures have already been taken under sub-section (4) of Section 13.

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 their 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."

15. In the present case is concerned, in the light of the aforesaid decisions of the Hon'ble Supreme Court and this Court, I am of the view that the suit filed by the respondent/plaintiff is not maintainable and the impugned order is liable to be set aside.

16. In view of the aforesaid facts and circumstances of the case, I am inclined to pass the following order:

(i) This civil revision petition is allowed and the order dated 28.03.2011 passed in I.A.No.739/2010 in O.S.No.14/2010 on the file of the Additional District Munsif Court, Ambasamuthram, is hereby set aside and accordingly, the plaint in O.S.No.14 of 2010 is struck off.

(i) This order will not be a stand on the way of the respondent/plaintiff to file an appeal before the appropriate forum as contemplated under the provisio of the Act, if she is so advised, subject to the limitation.

No costs. Consequently, connected miscellaneous petition is closed.