Specific performance claim over secured property not barred by SARFAESI where settlement and promissory estoppel applied.

A suit for specific performance of a settlement and lease arrangement concerning secured property was held not barred by Section 34 of SARFAESI because the claim was contractual and did not directly challenge measures under Section 13(4). The Court held that civil jurisdiction remained available to adjudicate enforcement of the settlement and the parties' obligations. On the facts, the bank had acted upon the arrangement, and promissory estoppel and the equities of the settlement justified restraint against proceeding with sale of the property. The earlier interim protection was restored and continued pending disposal of the suit.

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Issues: (i) Whether a suit for specific performance of a settlement and lease arrangement concerning the subject property was barred by Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. (ii) Whether, in the facts of the case, the bank was entitled to proceed against the subject property under the SARFAESI Act after acting upon the settlement, and whether the interim restraint on sale ought to have been continued.

Issue (i): Whether a suit for specific performance of a settlement and lease arrangement concerning the subject property was barred by Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Analysis: Section 34 bars civil court jurisdiction only in respect of matters that can be adjudicated under the SARFAESI mechanism, particularly measures taken under Section 13(4). A suit seeking specific performance of a settlement and lease deed does not, by itself, challenge the statutory measures under the Act. The dispute concerning enforcement of the contractual arrangement and the parties' obligations under the settlement was outside the Tribunal's competence in the manner urged before the Court.

Conclusion: The suit was not barred by Section 34, and civil court jurisdiction to entertain the claim for specific performance was not excluded.

Issue (ii): Whether, in the facts of the case, the bank was entitled to proceed against the subject property under the SARFAESI Act after acting upon the settlement, and whether the interim restraint on sale ought to have been continued.

Analysis: The bank had acted upon the settlement by shifting from the property and accepting the benefits flowing from the arrangement. The subject property was involved in a subsisting contractual arrangement for reconstruction and relocation, and the Court held that the bank's conduct required consideration before allowing it to proceed as a secured creditor against that property. The doctrine of promissory estoppel was attracted on the facts, and the vacation of interim protection would have deprived the appellant of effective enforcement of the asserted contractual rights and of proving readiness and willingness in the suit.

Conclusion: The bank was restrained from selling the property, and the interim order was directed to revive and continue till disposal of the suit.

Final Conclusion: The impugned order vacating interim protection was set aside, the earlier restraint order was restored, and the appellant obtained continuation of interim protection pending adjudication of the suit.

Ratio Decidendi: A civil suit for specific performance based on a settlement affecting the subject property is not barred by the SARFAESI Act where the dispute is contractual in nature and outside the Tribunal's adjudicatory scope, and a secured creditor that has acted upon the settlement may be restrained from proceeding against the property on the basis of promissory estoppel and the equities of the arrangement.

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