2018 (12) TMI 1543 - HC - Indian Laws

Suits against Axis Bank dismissed under Sec. 34 of Securitisation Act; Fraud allegations deemed insufficient

The court held that the suits against Axis Bank were barred under Section 34 of the Securitisation Act. The plaintiffs failed to establish valid claims ... Whether the plaints against the appellant/defendant-Axis Bank Limited are required to be rejected under the provisions of Order 7 Rule 11(d) of the Code of Civil Procedure, in view of the bar created by section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002? Held that:- Considering the expediency, prudence and wisdom of the banking business and when in the facts of the case the dealings between the bank and Orbit purely pertain to a banking business, the consequence of the bank being dragged into this litigation is definitely not warranted. In fact this would adversely affect the banks commercial interest to recover the debts due and payable to it by adhering to the procedure as prescribed by law, namely under the Securitisation Act. In the facts of the present case it would definitely meet the ends of justice that the plaint against the bank although it is one of the defendant needs to rejected. It is permissible for the Court to reject the entire plaint so far as the bank is concerned which is one of the defendants. The learned Single Judge was in an error in holding that the plaints against the bank were not barred under Section 34 of the Securitisation Act and consequently in rejecting the notices of motion and holding that the suits were not barred against the bank - impugned order set aside - notices of motion allowed. Issues Involved:1. Whether the plaints against Axis Bank Limited should be rejected under Order 7 Rule 11(d) of the Code of Civil Procedure due to the bar created by Section 34 of the Securitisation Act.2. Whether the plaintiffs have valid claims under the Maharashtra Ownership Flats Act (MOFA) against the bank.3. Whether allegations of fraud against the bank can sustain the suits in civil court.Detailed Analysis:1. Bar under Section 34 of the Securitisation ActThe primary issue was whether the civil court had jurisdiction to entertain the suits against Axis Bank given the bar under Section 34 of the Securitisation Act. The court examined the provisions of the Securitisation Act, particularly Sections 13, 17, and 34, which empower the Debts Recovery Tribunal (DRT) to adjudicate matters related to measures taken by secured creditors under Section 13(4). The court referred to the Supreme Court's decision in Mardia Chemicals Ltd. v. Union of India, which held that the jurisdiction of civil courts is barred in respect of matters that the DRT is empowered to determine. The court concluded that the plaintiffs should have approached the DRT under Section 17 of the Securitisation Act to challenge the measures taken by the bank.2. Claims under MOFAThe plaintiffs argued that they had valuable rights under the MOFA, which should protect their interests against the bank's mortgage. However, the court noted that the plaintiffs did not have registered agreements for the sale of flats, as required under Section 4 of MOFA. The court emphasized that without registered agreements, the plaintiffs could not claim protection under MOFA. The court also observed that the plaintiffs' transactions with the developer did not comply with the mandatory provisions of MOFA, which weakened their claims against the bank.3. Allegations of FraudThe plaintiffs alleged that the bank had committed fraud by colluding with the developer to mortgage the project without due diligence. The court examined the allegations of fraud and found them to be vague and unsubstantiated. The court reiterated that allegations of fraud must be specific and detailed as per Order VI Rule 4 of the CPC. The court concluded that the plaintiffs had not made out a case of fraud that would fall within the limited exceptions to the bar on civil court jurisdiction as outlined in Mardia Chemicals Ltd..Conclusion:The court held that the suits against Axis Bank were barred under Section 34 of the Securitisation Act and that the plaintiffs had not established valid claims under MOFA due to the lack of registered agreements. The allegations of fraud were found to be insufficient to sustain the suits in civil court. Consequently, the court set aside the impugned order and allowed the notices of motion, rejecting the plaints against the bank.