2014 (3) TMI 73 - SC - Indian Laws

Supreme Court clarifies jurisdiction on Securitisation Act: Civil court lacks authority.

Jagdish Singh Versus Heeralal And Others

The Supreme Court held that the civil court lacked jurisdiction to entertain the suit under Section 34 of the Securitisation Act. It clarified that ... Jurisdiction of Debt Recovery Tribunal (DRT) or Civil Court to determine whether there has been any illegality in the “measures” taken by a secured creditor under sub-section (4) of Section 13 of the Securitisation Act - appellant herein was the auction purchaser - The appellant was not put in possession of the property in question even though the auction was confirmed. - Held 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. - Order of High Court set aside - Decided in favor of appellant. Issues Involved:1. Jurisdiction of Civil Court under Section 34 of the Securitisation Act.2. Validity of the auction sale conducted under the Securitisation Act.3. Rights of the auction purchaser.4. Claims of the property being Joint Hindu Family (HUF) property.5. Applicability of Section 17 of the Securitisation Act for appeals.Issue-wise Detailed Analysis:1. Jurisdiction of Civil Court under Section 34 of the Securitisation Act:The primary issue was whether the civil court had jurisdiction to entertain the suit filed by Respondent Nos.1 to 5. The civil court initially upheld the preliminary objection raised by the bank, stating that the civil court had no jurisdiction due to the specific bar contained in Section 34 of the Securitisation Act. The High Court, however, allowed the appeal, holding that the civil court had jurisdiction to deal with the rights of the respondents, as the suit involved questions of title based on Joint Hindu Family property. The Supreme Court, referencing the Mardia Chemicals case, clarified that Section 34 bars civil court jurisdiction in matters that the Debts Recovery Tribunal (DRT) or Appellate Tribunal is empowered to determine. The Supreme Court concluded that the High Court erred in holding that the civil court had jurisdiction, as the DRT was the appropriate forum to challenge the measures taken under the Securitisation Act.2. Validity of the auction sale conducted under the Securitisation Act:The auction sale was conducted for the recovery of loan amounts under the provisions of the Securitisation Act. The appellant was the highest bidder, and the sale was confirmed by the bank. The Supreme Court noted that the auction was conducted following due process, and no objections were raised by the plaintiffs at the time of the auction. The sale was challenged by Respondent Nos.7 to 9 before the DRT, which dismissed their application, and no appeal was preferred against that order, making it final.3. Rights of the auction purchaser:The appellant, being the highest bidder and having paid the entire auction price, was confirmed as the auction purchaser. The Supreme Court emphasized that the appellant was a bona fide purchaser for value, and the sale in his favor was duly confirmed. The court noted that the bank had advanced loans based on the documents that stood in the names of Respondent Nos.6 to 9, and due to non-repayment, the bank had the right to proceed against the secured assets.4. Claims of the property being Joint Hindu Family (HUF) property:Respondent Nos.1 to 5 claimed that the property was part of a Joint Hindu Family and was acquired through the earnings of the joint family property. However, the Supreme Court found that the properties were purchased by Respondent Nos.6 to 8 in their individual names through registered sale deeds, long after the death of Premji, and no claim was made at any stage that the properties were HUF properties. The court concluded that the properties were not HUF properties but individual properties of Respondent Nos.6 to 8.5. Applicability of Section 17 of the Securitisation Act for appeals:The Supreme Court highlighted that Section 17 of the Securitisation Act provides a right of appeal to any person aggrieved by the measures taken under Section 13(4) of the Act. The expression 'any person' includes the plaintiffs in the suit, who could have invoked the provisions of Section 17 to challenge the measures taken by the bank. The court reiterated that the remedy for any grievance against the measures taken by the secured creditor lies with the DRT or the Appellate Tribunal, not the civil court.Conclusion:The Supreme Court allowed the appeal, set aside the judgment of the High Court, and held that the civil court had no jurisdiction to entertain the suit in light of Section 34 of the Securitisation Act. The court affirmed that the appropriate forum for challenging the measures taken under the Securitisation Act is the DRT or the Appellate Tribunal. There was no order as to costs.