TaxTMI 
TaxTMI 
TaxTMI 
In RAJIV SAREEN Versus M/s DIVYANSHU ENTERPRISES AND OTHERS - 2025 (11) TMI 1328 - DELHI HIGH COURT, the appellant, in this case and his father purchased a property at New Delhi on 06.02.2006. The appellant filed a loan application before the United Bank of India. There was a delay in sanction of the loan. The appellant and Mr. Pankaj Sharma, respondent No. 2 in this case were close friends. The second respondent was ready to extend a loan to the appellant a sum of Rs.65 lakhs repayable with interest @ 2.25% per month. A Memorandum of Understanding was entered into between the appellant and the respondent No.2. In the Memorandum of Understanding it was undertaken by the appellant that the original documents would be handed over the respondent No.2 by the appellant on the receipt of the loan amount. The father of the appellant was also shown in the Memorandum of Understanding but he did not sign the same.
On 01.08.2017 the second respondent paid a sum of Rs.25 lakhs. The appellant deposited the original documents with the second respondent. The father of the appellant was expired on 12.01.2018. The mother and sisters executed a relinquishment deed on 18.01.2018 relinquishing their respective shares in the said suit property in favour of the appellant by which the appellant became the sole and absolute owner of the said property.
The second respondent paid another sum of Rs.25 lakhs to the appellant on 02.03.2018. The situation now turned into a new one. The second respondent coerced the appellant to pay a sum of Rs.10 lakhs to the credit of the account of Ravi Enterprises a firm owned by the respondent no. 2. The appellant was against put under duress to pay a sum of further sum of Rs.12 lakhs in the account of his firm on 23.03.2018. The contention of the appellant is that he has received only Rs.28 lakhs instead of Rs.65 lakhs offered by the second respondent by means of loan.
The second respondent, on 03.04.2018 forced the appellant with the aid of his associate to the Registrar office to execute sale deed for the sale of the properties of the appellant for a consideration of Rs.2.50 crores. Further the second respondent threatened the appellant that his son and daughter would be kidnapped if he refused to execute the sale deed as directed by the second respondent.
In the meantime, the appellant received an e-auction notice from the Oriental Bank of Commerce (now ‘Punjab National Bank’). The appellant came to know that the respondent No. 2, after getting the original documents from the appellant, has availed a loan from the bank by giving security of the deeds of the appellant. Since the second respondent did not repay the dues, the loan was declared as Non-Performing Asset. The appellant contacted the respondent Nos. 1 and 2 and enquired about e-auction. It was informed to him that the outstanding amount would be paid to the Bank. But the bank initiated proceedings under SARFAESI Act.
The bank, on 05.11.2020 issued a fresh e-auction in respect of the suit property. The appellant was shocked on this and suffered a heart attack on 22.11.2020 and was hospitalised.
The appellant, then, filed a civil suit with the prayer to cancel the sale deed and declaring the said sale deed in respect of his property as null and void, illegal and unenforceable. It was also prayed that a decree of Permanent and Mandatory Injunction be passed in favour of Plaintiff and against the defendant no.3, thereby directing the defendant no.3, its agents, executers etc to stop/restrain the auction proceedings being initiated against the sale of property.
The Appellant also filed a Securitization Application before Debts Recovery Tribunal-III, Delhi wherein no interim relief was granted. A Writ Petition was thereafter filed before this Court, which was subsequently withdrawn.
The third respondent, the bank, opposed the plaint filed by the appellant. The third respondent filed an application before the Court for the rejection of the plaint filed by the appellant. The Court allowed the application on the following grounds-
- No complaint was lodged by the appellant against respondent Nos.1 and 2 despite allegations of threat, coercion and undue influence.
- The particulars of fraud were not specifically pleaded by the appellant and mere clever drafting cannot be permitted to circumvent the statutory bar under Section 34 of the SARFAESI Act.
- Although the appellant’s father was shown as a party to the Memorandum of Undertaking, he did not sign the same, rendering the document suspect and apparently created subsequently.
- The appellant’s plea of non-payment of sale consideration is barred by Sections 91 and 92 of the Indian Evidence Act, 1872.
- Since no oral evidence can be led contrary to the recitals of the Sale Deed.
- Non-payment of the entire sale consideration does not constitute a valid ground for cancellation of a registered sale deed.
- Under the recitals of the Sale Deed, the title in the suit property stood transferred immediately to Respondent No.1.
The appellant submitted the following before the High Court-
- The Single Judge erred in holding the suit to be barred under Section 34 of the SARFAESI Act.
- The Debt Recovery Tribunal has no jurisdiction to entertain or adjudicate upon a claim for cancellation of a registered Sale Deed.
- Such a relief falls outside the scope of the SARFAESI Act, the civil suit instituted by the Appellant was maintainable before the Civil Court.
The Respondent No. 3 submitted the following before the High Court-
- The jurisdiction of the Civil Court stands expressly barred under Section 34 of the SARFAESI Act.
- The reliefs sought by the Appellant are directly connected with the measures taken by the secured creditor in exercise of powers conferred under the said enactment.
- The Single Judge has rightly rejected the plaint as being barred by law.
The High Court considered the submissions of the parties to the appeal and also perused the documents on record. The High Court also analysed the provisions of Order VII, Rule 11 of the Civil Procedure Code.
The High Court observed that it is trite law that while deciding an application under Order VII Rule 11 of the CPC, the Court must confine itself to the averments made in the plaint, which are to be read as a whole, without reference to the defence of the opposite party. The veracity or correctness of the allegations is not to be adjudicated at this preliminary stage.
The High Court further observed that failure to lodge a First Information Report or file a criminal complaint cannot be treated as a ground to reject the plaint. The execution of sale deed by the appellant is not voluntary one and done by means of coercion of the respondents and without his free consent. It is alleged that the Respondent No.2 had represented to the Appellant that the document would serve only as a temporary security for a friendly loan, and had assured that it would either be cancelled or re-executed in the appellant’s favour upon repayment of the said loan. The High Court further observed that the Single Judge appears to have been influenced by the observation that the appellant’s father, though described as a party to the Memorandum of Understanding, had not signed the same. If it is established that the execution was not the result of free consent, the document can be declared void, leading to its cancellation. The plaint can be rejected only if it does not disclose a cause of action or is clearly barred by any law on its face, not merely because the claim may ultimately fail. The conclusion of the Single Judge that the civil suit is barred under Section 34 of the SARFAESI Act cannot be sustained. The jurisdiction to cancel or set aside a registered conveyance is not vested in the DRT, which is a statutory forum of limited jurisdiction.
The High Court was of the opinion that the reasons recorded in the Impugned Judgment are unsustainable in law. The High Court allowed the appeal and set aside the impugned order. The High Court restored the suit to its original number and directed the Court to proceed in accordance with law.