TaxTMI 
TaxTMI 
2018 (9) TMI 189
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....ument No. 1464 of 1980. The schedule of the property in this sale deed does not mention the house number and records that what was sold was Plot No. 7 admeasuring 238 square yards in Sy. No. 194/D of Waddepally Village, Hanamkonda Mandal, Warangal District, near H. No. 2-4-964. Enugala Manjula purchased her house property under registered sale deed No. 10705 of 2004 dated 30. 10. 2004 from Donthi Devender Reddy, s/o Donthi Varada Reddy. The sale deed records that Donthi Devender Reddy, in turn, purchased it from Musuku Nagi Reddy, s/o Veera Somaiah, through registered Document No. 8610 of 2003 dated 29. 11. 2003. This sale deed also does not mention the house number and describes it as an open plot in Sy. No. 194/D of Waddepally Village, Hanamkonda Mandal, Warangal District, admeasuring 240 square yards. The southern boundary is shown as H. No. 2-4-964/1/A/1 of B. Shakuntala. Bhukya Shakuntala claims to be the owner of her house property by virtue of the registered sale deed No. 3726 of 2004 dated 10. 05. 2004, whereunder she purchased it from one Annamaneni Pushpa Leela, w/o Srinivas Rao. The sale deed records that Annamaneni Pushpa Leela, in turn, purchased the property from L.....
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....had no liability to pay any amount to it and requested it not to make any attempt to evict them or interfere with their peaceful possession and enjoyment over the house properties. It appears that the APSFC kept quiet for a couple of years thereafter but again issued individual demand notices dated 25. 01. 2016 under Section 13(2) of the SARFAESI Act. In these notices, the borrower was shown as Sudhamalla Venkat Swamy; the sureties were shown as Kusam Eshwaraiah and Kusam Ramesh; and the occupants were shown as B. Shakuntala, R. Kusuma Kumari and E. Devender Reddy. Be it noted that the name of Enugala Manjula was not shown at all and the name of Donthi Devender Reddy, her vendor, was wrongly shown as E. Devender Reddy. The total outstanding dues were shown as Rs. 6, 51, 000/- as on 31. 12. 2015. Further, the particulars of the property offered as security by Kusam Eshwaraiah and Kusam Ramesh were detailed as under: 'Residential plot admeasuring 506 square yards covered by Sy. No. 194/D (New) situated at Waddepally (V), Hanamkonda (M), Warangal District, belonging to Sri Kusam Eshwaraiah and Sri Kusam Ramesh. The property is currently occupied by constructing residential building....
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..../District Magistrate in taking possession under the provisions of Section 14 of the SARFAESI Act. The schedule appended to these notices was the same as the schedule in the earlier possession notice dated 13. 06. 2016 and the notice dated 14. 06. 2016. At this stage, the petitioners filed the present writ petitions apprehending that their physical possession over their house properties was under threat. W. P. No. 22510 of 2016 was filed by Rajanala Kusuma Kumari, W. P. No. 22547 of 2016 was filed by Enugala Manjula and W. P. No. 22884 of 2016 was filed by Bhukya Shakuntala. Therein, they challenged the notices dated 28. 06. 2016 issued by the APSFC under Section 13(4)(a) of the SARFAESI Act and sought a declaration that the action of the APSFC in initiating proceedings under the SARFAESI Act was a product of the fraud played by its officials and the borrower and was consequently illegal and unconstitutional. They also sought setting aside of all proceedings under the SARFAESI Act, including the impugned notices dated 28. 06. 2016, and a direction to the APSFC not to proceed against them or their house properties. By separate orders dated 12. 07. 2016 passed in W. P. Nos. 22510 an....
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....e APSFC under Section 13(2) of the SARFAESI Act and symbolic possession was taken under possession notice dated 13. 06. 2016. The APSFC got a notice issued on 28. 06. 2016 for obtaining physical possession. Aggrieved by the same, the three occupants filed these writ petitions. The Branch Manager asserted that the petitioners had no right, much less an enforceable right, entitling them to approach this Court or seek to resist the action initiated by the APSFC. He further stated that proceedings were initiated in accordance with law and that the petitioners could not claim any lawful right, title or interest in the property mortgaged with the APSFC. Significantly, he asserted that unless the petitioners established their title in an appropriately instituted proceeding, they were disentitled to seek relief from this Court in the context of the action of the APSFC under the SARFAESI Act. Reply affidavits were filed by the three petitioners rebutting the aforestated counter affidavit averments. Therein, they asserted that it was misleading on the part of the APSFC to allege that they were illegally occupying the subject properties, as they were the absolute owners thereof. They pointed....
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....ld be loath to undertake in a writ petition. Sri P. Mehar Srinivasa Rao, learned counsel, would place reliance on D. RAM REDDY V/s. ASSET RECONSTRUCTION CO. (INDIA) PVT. LTD. , MUMBAI 2017 (1) ALD 170 (DB), a decision delivered by a Division Bench of this Court in which one of us, SK, J, was a member. Therein, in like circumstances, where the writ petitioner claimed that he was neither a borrower nor a guarantor in respect of the loan given by the bank leading to proceedings under the SARFAESI Act, it was held that when the very status of the secured asset was in doubt and applicability of the SARFAESI Act was open to question, Section 34 of the SARFAESI Act, which ousts the jurisdiction of the civil Court, would not be attracted and it was left open to the writ petitioner therein to approach the competent civil Court for resolution of the dispute. Learned counsel would assert that if the writ petitions are to be dismissed on the ground of maintainability, his clients should be permitted to go before the competent civil Court for redressal of their grievance. Sri Y. N. Vivekananda, learned counsel, on the other hand, would argue that once measures under Section 13(4) of the SARFA....
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....d, without the intervention of a Court or Tribunal, by such creditor in accordance with the provisions of the SARFAESI Act. Section 13(2) postulates that where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of the secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as a nonperforming asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of the notice failing which the secured creditor shall be entitled to exercise all or any of the rights under Section 13(4). In turn, Section 13(4) provides that in case the borrower fails to discharge his liability in full within the period specified in Section 13(2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, viz. , amongst others, taking possession of the secured asset of the borrower, including the right to transfer by way of lease, assignment or sale for realizing the secured asset, or taking over the management of the busines....
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....recover his 'secured debt', namely, take possession of the 'secured asset' of the 'borrower', including the right to transfer by way of lease, assignment or sale for realizing the 'secured asset' or take over the management of the business of the 'borrower', including the right to transfer by way of lease, assignment or sale. The underlined terms are defined under Section 2(1) of the SARFAESI Act, as already referred to supra. Therefore, the measures taken by a secured creditor under Section 13(4) presuppose satisfaction of these definitions. However, in the event a person does not even fall within the ambit of a 'borrower' as defined under Section 2(1)(f) or if a particular property does not qualify to be categorized as a 'secured asset' under Section 2(1)(zc), owing to a defect in the 'security interest' allegedly created therein, the very foundation of the measures, purportedly initiated by such secured creditor under Section 13(4), is rendered shaky. When such fundamental lacunae, striking at the very root, are alleged against the so-called measures initiated by the secured creditor under Section 13(4), the question that arises is whether the person aggrieved, who alleges such....
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....t can be taken before the Tribunal under Section 17(1) thereof. We therefore stand strengthened in our conviction that Section 17(1) is not the remedy in a situation where the applicability of the 'measures' is itself open to doubt. Further, having made the above observations, the Supreme Court held that to a very limited extent the jurisdiction of the civil Court can also be invoked, where, for example, the action of the secured creditor was alleged to be fraudulent or his claim is so absurd and untenable that it does not require any probe whatsoever or to say precisely to the extent the scope is permissible to bring an action in the civil Court in case of an English mortgage. Section 58(e) of the Transfer of Property Act, 1882, defines an 'English mortgage' to mean a mortgage whereby the mortgagor binds himself to repay the mortgage money on a certain date and transfers the mortgaged property absolutely to the mortgagee, subject to the condition that he would retransfer it to the mortgagor upon payment of the mortgage money, as agreed. As the sale of the mortgaged property would be subject to the re-transfer that can be claimed by the mortgagor upon repayment of the loan, indep....
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....f the Court under Section 13 of the SARFAESI Act is akin to an English mortgage and its effect on the scope of the bar of jurisdiction of the civil Court. That was the reason why the concluding remarks recorded by the Supreme Court were limited to the questions framed. However, it cannot be lost sight of that the Supreme Court recorded, without demur, the concession made by the Union of India that the civil Court's jurisdiction would not be barred when a guarantor, who is a 'borrower' within the definition as set out in Section 2(1)(f) of the SARFAESI Act, claims that his guarantee stood discharged. Sri Y. N. Vivekananda, learned counsel, would place reliance on the decision of a Bench of two learned Judges of the Supreme Court in JAGDISH SINGH V/s. HEERALAL (2014) 1 SCC 479. This decision arose out of a case filed by an auction purchaser in a sale effected under the SARFAESI Act. The grievance of the auction purchaser was that he had not been delivered possession of the property sold to him. The reason therefor was the pendency of a civil suit filed for declaration of title, partition and a permanent injunction in relation to the said property. When the secured creditor raised an....
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....s that the Supreme Court found that the civil Court's jurisdiction was completely barred, so far as measures taken by the secured creditor in that case were concerned, as the aggrieved person had a remedy before the Tribunal to determine as to whether there was any illegality therein. Even going by the above observations, it is clear that the bar to the civil Court's jurisdiction was held to be in respect of 'measures taken' by the secured creditor under Section 13(4) of the SARFAESI Act. However, whether such 'measures' could have been taken at all would first depend upon the concepts of 'borrower', 'secured asset', 'secured debt' and 'security interest', as defined in Section 2 of the SARFAESI Act, being satisfied. That is the issue with which we are now concerned but it was never considered in the above judgment. Further, as already stated supra, the judgment also did not take into consideration the concession made by the Union of India as regards the civil Court's jurisdiction not being ousted in the event a controversy arises as to whether a guarantor stood discharged. The decision of the larger Bench of the Supreme Court in MARDIA CHEMICALS LTD. 2 would therefore prevail an....
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....of this inquiry into the diverse views expressed in this Court may be stated as follows: * * * (2) Where there is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court. Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case it is necessary to see if the statute creates a special right or a liability and provides for the determination of the right or liability and further lays down that all questions about the said right and liability shall be determined by the Tribunals so constituted, and whether remedies normally associated with actions in civil courts are presc....
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....NDUSTRIAL ENTERPRISES LTD. (2009) 8 SCC 646, the Supreme Court observed that the jurisdiction of a civil Court is plenary in nature and would be ousted only in respect of matters contained in Section 18 of the RDDB Act, which has a direct correlation with Section 17 thereof, that is to say, the matter must relate to a debt payable to a bank or a financial institution. It was further observed that an application before the Tribunal would lie only at the instance of the bank or the financial institution for recovery of its debt and had the jurisdiction of the civil Court been barred in respect of a counter-claim also, the statute would have said so and Sections 17 and 18 would have been amended to introduce the provision for entertainment of a counter-claim. The Supreme Court therefore held that when a person files a civil suit, his right to prosecute the same in terms of the provisions of the CPC as also his right of appeal by way of first appeal, second appeal etc. , are preserved and such rights cannot be curtailed, far less taken away, except by reason of an express provision contained in the statute. It was pointed out that this intention in the statute must be express or must b....
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....iny, the claim of the APSFC that the property in question is a secured asset, would be liable to be rejected. When these fundamental issues arise for consideration and would go to the very root of the so-called measures initiated by the APSFC under Section 13(4) of the SARFAESI Act, it would be rather too simplistic to sum up that as such measures have already been initiated, for what they are worth, the petitioners must necessarily go before the Tribunal under Section 17(1) of the SARFAESI Act. The Tribunal has not been constituted to undertake resolution of purely civil disputes involving title claims. At this stage, it may also be noticed that though Section 5 of the RDDB Act prescribes that a person shall not be qualified to be appointed as a Presiding Officer of a Tribunal unless he is, or has been, or is qualified to be, a District Judge, the recent change brought about by the Government of India allows persons with no legal background whatsoever also to be appointed as Presiding Officers. Matters of complicated civil nature, such as the cases on hand, cannot be relegated to someone who has no legal wherewithal. Another aspect that requires to be noted is that, though Sectio....