2019 (2) TMI 2115 - HC - Indian Laws

Plaint rejection upheld under Order 7 Rule 11(d) CPC as civil jurisdiction barred under Section 34 SARFAESI Act

The MP HC dismissed a second appeal challenging rejection of plaint under Order 7 Rule 11(d) CPC. The trial court correctly rejected the plaint based on ... Summary rejection of plaint under Order 7 Rule 11(d) CPC - pleadings-only consideration at the Order 7 Rule 11 stage - jurisdiction of civil court barred by Section 34 of the SARFASI Act - remedy by appeal under Section 17 of the SARFASI Act - nip in the budSummary rejection of plaint under Order 7 Rule 11(d) CPC - pleadings-only consideration at the Order 7 Rule 11 stage - Whether the plaint was rightly rejected at the threshold under Order 7 Rule 11(d) CPC by reference to the plaint averments alone. - HELD THAT: - The Court examined whether the trial court confined itself to the averments in the plaint when adjudicating the defendant bank's application under Order 7 Rule 11(d) CPC. The trial court's order, reproduced in the record, proceeds from the plaint's own averments that the disputed property was represented as part of khasra No.260 for securing a loan, while the plaintiff asserted title/possession in relation to khasra No.1039. The High Court held that the trial court correctly applied the settled principle that, at the Order 7 Rule 11 stage, the court must take the plaint averments as they stand and not go into contested factual controversies. On that basis the trial court rejected the plaint after treating the plaint averments as establishing that the subject land had been mortgaged to the bank as part of the security and proceedings under the Act had been initiated against that security. [Paras 5, 6]The trial court did not err in applying the pleadings-only rule and in rejecting the plaint under Order 7 Rule 11(d) CPC.Jurisdiction of civil court barred by Section 34 of the SARFASI Act - remedy by appeal under Section 17 of the SARFASI Act - nip in the bud - Whether the civil court had jurisdiction to entertain the suit or whether jurisdiction was ousted by Section 34 of the SARFASI Act, thereby rendering the plaint liable to rejection and conferring the appellant an alternative remedy under Section 17. - HELD THAT: - The High Court analysed the plaint averments which, according to the trial court, showed that the disputed portion of land had been treated as security and proceedings under the SARFASI Act had been initiated by the bank. Relying on Section 34 of the SARFASI Act (which bars civil courts from entertaining matters which the Debts Recovery Tribunal or the Appellate Tribunal is empowered to determine), the trial court found that the civil court's jurisdiction was excluded. The High Court endorsed that conclusion, noting that the trial court applied the principle of 'nip in the bud' to reject the plaint and that the plaintiff has the statutory remedy of appeal under Section 17 of the SARFASI Act. The Court found no jurisdictional error, illegality or perversity in the concurrent orders and observed that the authorities relied upon (including the Supreme Court decision referred to by the courts below) were considered. [Paras 6, 7]The civil court was correctly held to be without jurisdiction under Section 34 of the SARFASI Act; the plaint was rightly rejected and the appellant's remedy is by appeal under Section 17 of the SARFASI Act.Final Conclusion: The High Court dismissed the second appeal, holding that the trial court correctly evaluated the plaint averments at the Order 7 Rule 11(d) stage and correctly concluded that Section 34 of the SARFASI Act ousted civil court jurisdiction; the appellant's remedy is an appeal under Section 17 of the SARFASI Act. Issues Involved:1. Whether the trial court correctly rejected the plaint under Order 7 Rule 11(d) of the Code of Civil Procedure (CPC).2. Applicability of Section 34 of the SARFAESI Act, 2002, concerning the jurisdiction of civil courts.3. Availability of an alternative remedy under Section 17 of the SARFAESI Act, 2002.Issue-wise Detailed Analysis:1. Rejection of the Plaint under Order 7 Rule 11(d) CPC:The appellant challenged the trial court's decision, which rejected the plaint based on Order 7 Rule 11(d) CPC. The appellant argued that the trial court should have only considered the plaint's averments and not the factual defenses of the respondent bank. The appellant claimed ownership of a property situated at a different khasra number (1039) and contended that the bank's actions were related to a property at khasra number 260. The trial court, however, found that the plaint itself indicated the property in question was part of khasra number 260, which was the basis for the bank's loan, thus justifying the rejection of the plaint. The court emphasized that the decision was made solely on the plaint's averments, without delving into the factual defenses of the bank.2. Applicability of Section 34 of the SARFAESI Act, 2002:The trial court's rejection of the plaint was heavily influenced by Section 34 of the SARFAESI Act, which bars civil courts from entertaining suits or proceedings related to matters that fall under the jurisdiction of the Debts Recovery Tribunal or the Appellate Tribunal. The court determined that since the issue involved the enforcement of security interest under the SARFAESI Act, the civil court lacked jurisdiction. The trial court's decision was consistent with the precedent set by the Supreme Court in Jagdish Singh vs. Heeralal and others, which was considered by both the trial and appellate courts.3. Availability of an Alternative Remedy under Section 17 of the SARFAESI Act, 2002:The judgment highlighted that the appellant had an alternative remedy available under Section 17 of the SARFAESI Act, which provides for an appeal to the Debts Recovery Tribunal. The court noted that the appellant could pursue this remedy if he wished to challenge the actions taken by the bank. The availability of this alternative remedy further supported the trial court's decision to reject the plaint based on the jurisdictional bar under Section 34 of the SARFAESI Act.Conclusion:The High Court upheld the decisions of the lower courts, concluding that there was no error of law or jurisdictional mistake in rejecting the plaint under Order 7 Rule 11(d) CPC. The court affirmed that the civil court's jurisdiction was barred by Section 34 of the SARFAESI Act, and the appellant had the option to seek redress under Section 17 of the same Act. Consequently, the appeal was dismissed, and no substantial question of law was found to warrant further consideration.