High Court grants ad interim injunction in property dispute involving 50% ownership rights under SARFAESI proceedings

The HC allowed the appeal against the trial court's refusal of ad interim injunction in a property dispute suit. The appellant claimed 50% ownership rights in property subject to bank recovery proceedings under SARFAESI Act. The HC held that the trial court's refusal was unjustified due to lack of reasons in the order. The court found that civil court had jurisdiction as principal reliefs fell outside DRT jurisdiction, appellant established prima facie case with balance of convenience favoring them due to potential irreparable harm from bank's coercive measures. The suit was maintainable as it was filed before SARFAESI notice was received. The bank's affidavit signatory lacked proper authorization under Order XXIX Rule 1. Application was disposed of favorably.

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ISSUES PRESENTED and CONSIDERED

The core legal questions considered in the judgment include:

1. Whether the Civil Court has jurisdiction to grant an ad interim injunction in a suit involving claims of ownership and alleged forgery of loan-related documents, especially in the context of the SARFAESI Act, 2002.

2. Whether the refusal of the ad interim injunction by the Trial Court was justified, given the absence of reasons in the impugned order.

3. Whether the appellant has established a prima facie case for the grant of ad interim injunction based on the allegations of forgery and the absence of signatures on loan documents.

4. Whether the appellant's remedy lies exclusively with the Debts Recovery Tribunal (DRT) under the SARFAESI Act, or whether the Civil Court can entertain the suit and grant the reliefs sought.

5. The competence of the signatory to the affidavit-in-opposition on behalf of the respondent bank under Order XXIX Rule 1 of the Code of Civil Procedure.

ISSUE-WISE DETAILED ANALYSIS

1. Jurisdiction of the Civil Court

The relevant legal framework involves the SARFAESI Act, 2002, specifically Sections 13(2), 13(4), and 17, which outline the procedures for enforcement of security interests and the jurisdiction of the DRT. The Court referred to the Supreme Court's decision in Central Bank of India v. Prabha Jain, which held that the jurisdiction of Civil Courts is not ousted in matters beyond the scope of the DRT, such as declarations of title and challenges to the validity of documents.

The Court interpreted that the reliefs sought by the appellant, including declarations of ownership and challenges to the authenticity of loan documents, fall outside the jurisdiction of the DRT and are within the purview of the Civil Court. The Court emphasized that Section 34 of the SARFAESI Act bars Civil Court jurisdiction only in matters that the DRT is empowered to determine.

2. Justification for Refusal of Ad Interim Injunction

The Court found that the Trial Court's refusal of the ad interim injunction was devoid of reasons, violating the principle that judicial orders must be reasoned. Under Order XXXIX Rule 3-A of the Code of Civil Procedure, reasons must be recorded for the refusal of an injunction, which the Trial Court failed to do.

3. Prima Facie Case for Ad Interim Injunction

The Court assessed whether the appellant established a prima facie case for an injunction. It noted discrepancies in the bank's claims regarding the appellant's role as a borrower or guarantor, as well as allegations of forged documents. The absence of the appellant's signature on key loan documents raised doubts about the bank's claims, supporting the appellant's prima facie case.

The Court also considered the balance of convenience and potential irreparable harm to the appellant if the injunction were not granted, concluding that these factors favored the appellant.

4. Remedy under the SARFAESI Act vs. Civil Court Jurisdiction

The Court analyzed whether the appellant's remedy lay exclusively with the DRT. It concluded that since no measures under Section 13(4) of the SARFAESI Act had been taken, the appellant could not approach the DRT under Section 17. The Court highlighted that the principal reliefs sought, such as declarations of ownership, were beyond the DRT's jurisdiction, affirming the Civil Court's competence to hear the suit.

5. Competence of the Signatory to the Affidavit-in-Opposition

The Court examined the competence of the signatory to the affidavit-in-opposition under Order XXIX Rule 1 of the Code of Civil Procedure, which requires pleadings on behalf of a corporation to be signed by its Secretary, Director, or Principal Officer. The signatory, described as a constituted attorney, did not meet these criteria, rendering the affidavit procedurally defective.

SIGNIFICANT HOLDINGS

The Court held that the refusal of the ad interim injunction by the Trial Court was unjustified due to the lack of reasons. It emphasized that "reason is the soul of any judgment and any judicial order without cogent reasons is, on the face of it, bad in law."

The Court established that the Civil Court has jurisdiction to entertain the suit and grant the reliefs sought, as the principal reliefs fall outside the DRT's jurisdiction. It concluded that the appellant had established a prima facie case for an injunction, with the balance of convenience and potential irreparable harm favoring the appellant.

The Court set aside the impugned order and granted an ad interim injunction restraining the respondent bank from dispossessing the appellant or creating third-party rights in the suit property until the disposal of the injunction application in the Trial Court. The Court clarified that its findings were for the purpose of the ad interim injunction and not conclusive for the final hearing.

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