SARFAESI civil suit bar limited by pleaded fraud and collusion, allowing threshold scrutiny of summons.

Section 34 of the SARFAESI Act bars civil court jurisdiction over matters that the DRT or Appellate Tribunal can decide, but the Mardia Chemicals exception allows a civil suit where the secured creditor's action is pleaded as fraudulent or plainly untenable. On a demurrer reading of the plaint, allegations that the bank acted in collusion with other defendants and used fraudulently procured documents to mortgage the plaintiffs' property were sufficient to attract that limited exception. The absence of a separate Order VII Rule 11 application did not stop the court from considering threshold refusal of summons. The suit was therefore not barred at the summons stage.

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Issues: Whether the civil suit was barred by Section 34 of the SARFAESI Act, 2002 in view of the secured creditor's measures under Section 13, and whether the pleaded allegations of fraud and collusion against the bank were sufficient to permit the suit to proceed.

Analysis: Section 34 bars civil court jurisdiction in respect of matters that the Debts Recovery Tribunal or Appellate Tribunal may determine, but the exception recognised in Mardia Chemicals permits recourse to civil court where the secured creditor's action is alleged to be fraudulent or the claim is so absurd and untenable that no probe is required. The plaint was read on demurrer, and the pleadings specifically alleged that the bank acted in collusion with other defendants and used fraudulently procured documents to mortgage the plaintiffs' property. Those allegations brought the case within the limited exception to the statutory bar. The absence of a separate application under Order VII Rule 11 did not prevent the Court from examining whether summons should be declined at the threshold.

Conclusion: The suit was not barred at the stage of summons, because fraud and collusion were pleaded against the bank, and the objection to issuance of summons was rejected.

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