2015 (3) TMI 239 - HC - Indian Laws

Bank's actions challenge dismissed by Court under SARFAESI Act Section 34.

MANGALAM FISCAL SERVICES PVT. LTD. Versus STATE BANK OF INDIA

The Court held that the plaintiff's suit challenging the bank's actions was not maintainable in the Civil Court due to Section 34 of the SARFAESI Act, ... Applicability of Section 34 of SARFAESI Act - Civil court not to have jurisdiction in those cases which are pending with Debt recovery tribunal - Held that:- We are of the view that the Civil Court jurisdiction is completely barred, so far as the “measures” 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.” A perusal of the plaintiff shows that in the suit the plaintiff is seeking to challenge measures that had already been taken by the bank. The respondent bank refer case law Jagdish Singh [2014 (3) TMI 73 - SUPREME COURT] in support of his contention that the suit is barred under section 34 of SARFAESI Act. The plaintiff is not remediless. In fact, the plaintiff has filed an appeal under Section 17 of the SARFAESI Act. The said appeal is pending. In view thereof, the suit is barred by law and stands dismissed. - Decided against the appellant. Issues:1. Suit barred under Section 34 of SARFAESI Act.Analysis:The plaintiff filed a suit seeking a declaration that the classification of their account as a non-performing asset by the defendant bank was invalid. The defendant bank argued that the suit is barred under Section 34 of the SARFAESI Act, which ousts the jurisdiction of the Civil Court. This section prohibits the Civil Court from entertaining any suit or proceeding in matters within the purview of the Debts Recovery Tribunal or the Appellate Tribunal under the SARFAESI Act. The defendant had taken measures under Section 13(4) of the SARFAESI Act, including issuing possession notices, which led the plaintiff to file an appeal under Section 17 of the SARFAESI Act. The defendant contended that the plaintiff's remedy lies in the appeal filed under Section 17, and hence, the suit is not maintainable.The Hon'ble Supreme Court's decisions in Mardia Chemicals, Jagdish Singh, and Standard Chartered Bank were referred to in analyzing the scope of Section 34 of the SARFAESI Act. The Court highlighted three scenarios for secured creditors to take possession of assets, emphasizing that any aggrieved person must approach the Debts Recovery Tribunal or the Appellate Tribunal for grievances related to measures taken under Section 13(4) of the Act. The Court reiterated that the Civil Court's jurisdiction is completely barred concerning such matters, as the SARFAESI Act overrides other laws in case of inconsistency. Therefore, the plaintiff's challenge to the measures taken by the bank falls within the jurisdiction of the Debts Recovery Tribunal, and the plaintiff's appeal under Section 17 is the appropriate remedy.In conclusion, the Court found that the plaintiff's suit challenging the measures already taken by the bank is not maintainable in the Civil Court due to the provisions of Section 34 of the SARFAESI Act. Since the plaintiff had already filed an appeal under Section 17, the suit was deemed barred by law and dismissed. The judgment clarified that the plaintiff is not without a remedy as the appeal under Section 17 is pending. The Court directed the issuance of an urgent certified copy of the judgment to the parties upon request.