2025 (11) TMI 1328 - HC - Indian Laws

Civil suit to cancel sale deed maintainable, not barred by Section 34 SARFAESI Act; Order VII Rule 11 CPC misapplied

RAJIV SAREEN Versus M/s DIVYANSHU ENTERPRISES AND OTHERS

HC held that a civil suit seeking cancellation of a registered sale deed on grounds of coercion, misrepresentation, and undue influence is maintainable ... Maintainability of civil suit seeking cancellation of a registered Sale Deed before a Civil Court - express bar to the jurisdiction of Civil Courts created under Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) - HELD THAT:- It is trite law that while deciding an application under Order VII Rule 11 of the CPC, the Court must confine itself to the averments made in the plaint, which are to be read as a whole, without reference to the defence of the opposite party. The veracity or correctness of the allegations is not to be adjudicated at this preliminary stage - Failure to lodge a First Information Report (‘FIR’) or file a criminal complaint cannot be treated as a ground to reject the plaint. The Appellant has approached the Court asserting that the execution of the sale deed in favour of the Respondent No.1 was not voluntary but was induced by coercion, threats, and misrepresentation. It is alleged that the Respondent No.2 had represented to the Appellant that the document would serve only as a temporary security for a friendly loan, and had assured that it would either be cancelled or re-executed in the Appellant’s favour upon repayment of the said loan. It is true that non-payment of the entire sale consideration, by itself, may not ordinarily constitute a ground for cancellation of a sale deed. However, the Appellant’s case is that the very execution of the sale deed was vitiated by coercion, misrepresentation, and undue influence. The learned Single Judge, while rejecting the plaint, failed to consider this fundamental plea. Even though execution of a sale deed may ordinarily transfer title to the purchaser, if it is established that the execution was not the result of free consent, the document can be declared void, leading to its cancellation. This position is no longer res integra in view of the judgment of the Supreme Court in Prabha Jain [2025 (1) TMI 1669 - SUPREME COURT] wherein it was held that the DRT has no jurisdiction to entertain or adjudicate upon claims relating to cancellation of registered sale deeds. The proper forum for such relief continues to be the civil court. Consequently, the learned Single Judge fell in error in holding that the suit was barred under Section 34 of the SARFAESI Act. This Court is of the considered opinion that the reasons recorded in the Impugned Judgment are unsustainable in law - Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a civil suit seeking cancellation of a registered sale deed is maintainable before a Civil Court despite the bar on jurisdiction of Civil Courts under Section 34 of the SARFAESI enactment. 2. Whether the plaint was rightly rejected under Order VII Rule 11 CPC on the grounds that it was barred by law, deficient in particulars of fraud, and fatally affected by evidentiary bars under Sections 91 and 92 of the Indian Evidence Act. 3. Whether absence of criminal complaint (FIR) or particularized pleadings of fraud justifies rejection of a plaint alleging coercion, undue influence and misrepresentation in execution of a registered sale deed. 4. Whether non-payment (or incomplete payment) of sale consideration, or mere recital in a registered sale deed of immediate transfer of title, precludes the civil court from entertaining a suit to cancel the deed where free consent is alleged to be vitiated. 5. Scope of the competing fora: whether the Debts Recovery Tribunal (DRT) has jurisdiction to adjudicate claims for cancellation of registered conveyances arising in the context of secured creditor action under the SARFAESI enactment. ISSUE-WISE DETAILED ANALYSIS Issue 1: Maintainability of suit for cancellation of a registered sale deed despite Section 34 (jurisdictional bar) of the SARFAESI enactment Legal framework: Section 34 of the SARFAESI enactment creates an exclusionary bar on Civil Court jurisdiction insofar as measures taken by secured creditors under the statute are concerned; the Act creates a specialized remedy and forum for certain disputes. Precedent Treatment: The Court relied upon and followed the authoritative pronouncement of the Supreme Court which held that claims for cancellation of registered sale deeds do not fall within the DRT's jurisdiction and accordingly remain within the jurisdiction of Civil Courts. Interpretation and reasoning: The Court examined the relief claimed (cancellation of a registered sale deed) and concluded that such relief is outside the specialized jurisdiction entrusted to the DRT/Tribunal under the SARFAESI enactment. A claim to cancel a registered conveyance turns on civil law rights and doctrines (free consent, undue influence, coercion) which are properly adjudicable by a civil court exercising plenary jurisdiction, not by a tribunal of limited statutory scope. Ratio vs. Obiter: Ratio - where relief sought is cancellation of registered sale deed, civil court retains jurisdiction despite existence of SARFAESI remedies; obiter - observations on interplay in other factual permutations not decided. Conclusions: The civil suit for cancellation of the registered sale deed is maintainable; the learned Single Judge erred in holding the suit barred by Section 34 of the SARFAESI enactment. Issue 2: Correctness of rejection of plaint under Order VII Rule 11 CPC Legal framework: Order VII Rule 11 CPC permits rejection of plaint where it does not disclose a cause of action or where the suit appears on the face of the plaint to be barred by law. The court, while deciding such application, must confine itself to averments in the plaint and not adjudicate disputed questions of fact or the veracity of pleadings. Precedent Treatment: The Court applied settled principles that preliminary dismissal under Order VII Rule 11 requires that the plaint discloses no cause of action or is clearly barred on its face; mere weaknesses in prospects of success are not grounds for rejection. Interpretation and reasoning: The Court held that the Single Judge impermissibly went into disputed factual matters (e.g., whether the MoU was signed by a certain person, whether allegations of coercion were true) and applied evidentiary provisions (IEA Sections 91/92) prematurely. The plaint contained allegations of coercion, misrepresentation and undue influence attacking the voluntariness of consent - matters which create a prima facie cause of action and cannot be relegated to dismissal at the threshold. Ratio vs. Obiter: Ratio - plaint alleging vitiation of consent and seeking cancellation of a registered deed discloses a cause of action and cannot be rejected under Order VII Rule 11 merely because the claim may be weak or because evidentiary questions arise; obiter - specific factual inferences drawn by the Single Judge (e.g., suspicious MoU signatures) are not determinative at the threshold. Conclusions: Rejection of the plaint under Order VII Rule 11 was unsustainable; the plaint must be adjudicated on merits after trial/evidence. Issue 3: Sufficiency of fraud/particulars and impact of absence of FIR on civil pleadings alleging coercion and undue influence Legal framework: Order VI Rule 4 CPC requires particulars in pleading where material particulars are necessary to be pleaded. Criminal complaint or FIR is not a precondition for maintaining civil relief based on coercion, misrepresentation or undue influence. Free consent is governed by provisions of the Contract Act (Sections 10 & 14). Precedent Treatment: The Court followed established principle that civil remedies for vitiated consent do not depend on prior criminal prosecution, and deficiencies in particulars of fraud can be remedied and are matters for trial unless the plaint is hopeless on its face. Interpretation and reasoning: The plaint used the word 'fraud' but principally advanced coercion, misrepresentation and undue influence. The Court found that the absence of an FIR or a criminal proceeding does not negate civil allegations of coercion. Further, lack of elaborate particulars of fraud, if present, is curable and does not justify threshold rejection where the averments read as a whole disclose a cause of action. Ratio vs. Obiter: Ratio - absence of FIR/criminal complaint is not a ground for rejecting civil plaints alleging coercion/undue influence; obiter - the precise sufficiency of particulars in other contexts. Conclusions: The plaint's allegations of coercion, misrepresentation and undue influence were sufficient at the threshold; absence of a criminal complaint or detailed particulars of fraud did not justify rejection. Issue 4: Applicability of Sections 91 & 92 Indian Evidence Act as a basis for rejecting plaint Legal framework: Sections 91 and 92 IEA limit the admissibility of oral evidence to contradict or vary written documents. These are substantive rules of evidence to be applied at trial when evidence is led. Precedent Treatment: The Court reiterated that admissibility under evidence law cannot be adjudicated at the stage of considering a Rule 11 rejection; questions of what evidence can be led are for trial. Interpretation and reasoning: The Single Judge erred in treating Sections 91/92 IEA as a facial bar to maintainability. The Court observed that whether oral evidence will be admissible to impeach a registered document is a question of evidence and fact to be considered during trial, not in a preliminary rejection application confined to the plaint's averments. Ratio vs. Obiter: Ratio - evidentiary objections under IEA cannot be used to strike down plaints under Order VII Rule 11 where a cause of action is otherwise pleaded; obiter - potential strength of such evidentiary objections at trial. Conclusions: Sections 91 and 92 IEA do not justify rejection of the plaint at the threshold; applicability to the case must be determined at trial. Issue 5: Effect of non-payment of sale consideration and recitals of immediate transfer in registered sale deed Legal framework: A registered sale deed prima facie transfers title; non-payment of consideration may not ordinarily suffice to cancel a registered conveyance, but where execution was vitiated by absence of free consent (coercion, undue influence, misrepresentation), the deed may be voidable and subject to cancellation. Precedent Treatment: The Court applied established contract and conveyancing principles that a conveyance effected without free consent can be set aside by appropriate proceedings in civil court. Interpretation and reasoning: While acknowledging that non-payment alone is generally not a ground to cancel a registered sale, the Court emphasized that the present plaint alleges coercion and threats that attack the voluntariness of execution. Those allegations, if proved, would render the document voidable notwithstanding recitals. Thus the Single Judge erred in treating recitals and immediate title transfer as conclusive at the threshold. Ratio vs. Obiter: Ratio - recitals in a sale deed do not foreclose a properly pleaded claim that the deed was executed without free consent; obiter - effect of incomplete consideration in the absence of coercion. Conclusions: The plaint cannot be dismissed on the sole ground of recitals and claimed immediate transfer where vitiation of consent is alleged; such issues are for trial. Overall Disposition The Court concluded that the plaint disclosed a cause of action, that the civil court retains jurisdiction to adjudicate cancellation of registered sale deeds even in the context of secured creditor measures under the SARFAESI enactment, and that rejection of the plaint under Order VII Rule 11 CPC was unsustainable. The impugned order rejecting the plaint was set aside and the suit was restored for adjudication on merits.