Civil court bar under SARFAESI: auction-related grievances over alleged non-disclosure must be pursued before the Debts Recovery Tribunal.

A civil suit seeking to restrain re-auction of secured property was stated to be barred by section 34 of the SARFAESI Act where the grievance concerned alleged non-disclosure of an Income Tax attachment during the auction process. The text explains that measures under section 13(4) are challengeable before the Debts Recovery Tribunal under section 17, including whether the secured creditor complied with the Act and Rules. It also notes that the narrow civil court exception for fraud applies only where the plaint clearly discloses substantive fraud or an absurd, untenable claim. On that reasoning, the civil court was said to lack jurisdiction and the remedy lay before the Tribunal.

---

---

Issues: Whether a civil suit seeking injunction against re-auction of secured property, based on alleged non-disclosure of an Income Tax attachment in the auction process under the SARFAESI Act, is barred by section 34 of the SARFAESI Act and maintainable before the Civil Court.

Analysis: The suit arose from measures taken by the secured creditor under section 13(4) of the SARFAESI Act after the auction purchaser failed to pay the balance consideration. The plaint alleged suppression of the Income Tax attachment and pleaded fraud. The governing scheme of sections 13, 17 and 34 shows that measures taken under section 13(4) are amenable to challenge before the Debts Recovery Tribunal, and section 34 bars Civil Court jurisdiction in respect of matters the Tribunal is empowered to determine. Rule 8(f) of the Security Interest (Enforcement) Rules, 2002 requires disclosure of material matters for a purchaser to know, and any non-disclosure of attachment at the highest amounts to a breach of the sale procedure. The limited civil court exception recognised in Mardia Chemicals applies only where the secured creditor's action is shown to be fraudulent or so absurd and untenable that no probe is required. Reading the plaint as a whole, the allegations here did not disclose the kind of substantive fraud that would attract that narrow exception. The grievance was one that could be examined under section 17, including whether the measures were in accordance with the Act and the Rules. The relied-upon precedent permitting civil court intervention was distinguished on facts, as the present pleadings did not involve comparable issues of title, mortgage validity, or complex fraud.

Conclusion: The Civil Court had no jurisdiction to entertain the suit. The revision was allowed, the impugned order was set aside, and the suit was held not maintainable, leaving the plaintiff to pursue remedy under section 17 of the SARFAESI Act.

Ratio Decidendi: A suit challenging SARFAESI measures is barred by section 34 where the grievance concerns matters that can be determined by the Debts Recovery Tribunal under section 17, and the narrow civil court exception for fraud applies only when the plaint, read as a whole, clearly discloses substantive fraud or an absurd and untenable claim.

---