TaxTMI 
TaxTMI 
2020 (2) TMI 1766
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....ities by the plaintiff, the defendant issued a notice under Section 13 (2) of the Act of 2002 on August 27, 2018. The plaintiff filed the present suit on August 20, 2018 and presented the plaint on September 5, 2018. The suit is therefore to be considered to be instituted as on September 5, 2018. The defendant having invoked the provisions of the Act of 2002 by the issuance of the notice under Section 13(2) of the Act of 2002, prior to the institution of the suit, the instant suit therefore is barred under Section 34 of the Act of 2002. Moreover, the defendant filed a proceeding under Section 19 of the Act of 1993. Consequently, by virtue of the provisions of Section 18 of the Act of 1993, the instant suit is also barred. 3. Learned Advocate appearing for the defendant has submitted that, Section 9 of the Code of Civil Procedure, 1908 recognises that, the jurisdiction of the Civil Court is ousted if there is an express or implied bar imposed by a statute in filing a suit. In the present case, there is a bar under Section 34of the Act of 2002 and a bar under Section 18 of the Act of 1993 in the Civil Court deciding the suit. 4. In support of the contention that the instant sui....
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....sation thereof; c) Attachment before Judgment; d) Injunction; e) Receiver; f) Costs; g) Such further or other reliefs;" 8. Paragraph 35 of the plaint is as follows:- "35. Due to the aforesaid acts and conduct of the defendant, the plaintiff has suffered damages to the tune of Rs. 9.39 crores, particulars whereof are as follows: a) 4.14 Crore - Total deficit of 23 crore in the projected sales figure. Plaintiff suffered a loss of 4.14 Crore. b) 5 Crore - Due to SME 1 & SME O Plaintiff had lost all the reputation and goodwill in all financial sector, even in local market. For which Plaintiff had to pay more rates to purchase the raw material to run his factory. c) Around Rs. 25 Lakhs - Total amount illegally debited by the defendant in the loan account of the plaintiff." 9. According to the plaintiff, it availed of a cash credit facility from the defendant of a limit of Rs. 9.5 crores against collateral security. The plaintiff applied for enhancement of the cash credit limit to Rs. 15 crores in June 2016. The defendant issued a sanction letter dated September 29, 2016 enhancing the cash credit facil....
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.... against the plaintiff. 12. Section 9 of the Code of Civil Procedure, 1908 allows suits of civil nature to be filed before the Civil Court unless the same is expressly or by necessary implication barred. 13. The defendant has relied upon Section 34 of the Act of 2002 and Section 18 of the Act of 1993 as the bar on the Civil Courts to receive the suit filed by the plaintiff. 14. Section 34 of the Act of 2002 is as follows:- "34. Civil court not to have jurisdiction.- No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993)" Section 18 of the Act of 1993 is as follows:- "18. Bar of jurisdiction. - On and from the appointed day, no court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Suprem....
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.... of Section 13." 16. The Division Bench of the Calcutta High Court in Kaaiser Oils Pvt. Ltd. (supra) has considered the provisions of Section 13 and 34 of the Act of 2002 in relation to a suit already filed. In the facts of that case, the borrower initially filed a writ petition assailing the conduct of the secured creditor with regard to the disbursement of the credit facilities. Such writ petition was disposed of by permitting the borrower to pursue his remedies in accordance with law before the appropriate forum. An appeal was carried from such order. Such appeal was disposed of by upholding the order impugned. However the appeal Court permitted the borrower to approach any forum that he thinks fit and proper to avail of his remedies. A notice under Section 13(2) of the Act of 2002 was issued. Measures under Section 13(4) of the Act of 2002 were also taken. The borrower approached the Debts Recovery Tribunal under Section 17 of the Act of 2002. In such proceeding, the secured creditor claimed that the Tribunal did not have jurisdiction to consider the issues raised by the borrower and that, the Civil Court would be the appropriate forum. The Tribunal held that, the reliefs cl....
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.... 17. In Housing Development Finance Corporation Limited (HDFC Ltd.) & Anr. (supra) the High Court has dismissed an appeal against an order rejecting an application under Order VII Rule 11 of the Code of Civil Procedure, 1908 filed in a suit of the borrower seeking declaration and injunction. The High Court has found that, the suit was filed before any measure under Section 13(4) of the Act of 2002 was taken and that, the plaintiff had set up a plea of fraud in the plaint. It has held as follows:- "22. What could be culled out from the ratio laid down in the above noted reports are that the expression "any person" is a wide import and amplitude and includes within its ambit a person other than the borrower or the guarantor who may be effected by any action taken under the SARFAESI Act. A person who is neither a borrower or the guarantor has a right of an appeal under Section 17 of the said Act before the Debt Recovery Tribunal assailing any measures taken under Section 13 (4) of the Act. The right of appeal is not restricted only to the measures taken under Section 13 (4) but is further available if recourse is made to Section 14 of the said Act and even on mere apprehen....
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....of Section 13 of the Securitisation Act. Consequently if any aggrieved person has got any grievance against any "measures" taken by the borrower under sub-section (4) of Section 13, the remedy open to him is to approach the DRT or the Appellate Tribunal and not the civil court. Civil Court in such circumstances has no jurisdiction to entertain any suit or proceedings in respect of those matters which fall under sub-section (4) of Section 13 of the Securitisation Act because those matters fell within the jurisdiction of the DRT and the Appellate Tribunal. Further, Section 35 says, the Securitisation Act overrides other laws, if they are inconsistent with the provisions of that Act, which takes in Section 9 CPC as well. 25. We are of the view that the civil court jurisdiction is completely barred, so far as the "measure" taken by a secured creditor under sub- section (4) of Section 13 of the Securitisation Act, against which an aggrieved person has a right of appeal before the DRT or the Appellate Tribunal. to determine as to whether there has been any illegality in the "measures" taken. The bank, in the instant case, has proceeded only against secured assets of the borrower....
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.... recovery of rent or possession of any premises and to decide any application made under the Act and the applications which are to be decided by the State Government or an officer authorised by it or the competent authority". The question of law that we have to consider is whether the appellants as tenants of premises in the State of Maharashtra including Mumbai will have any remedy to move these courts having jurisdiction under Section 33 of the Maharashtra Rent Control Act and obtain the relief of injunction against the secured creditor taking possession of the secured asset from the appellants. The answer to this question is in Section 34 of the SARFAESI Act, which is extracted hereinbelow: "34. Civil Court not to have jurisdiction.- No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institution....
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.... of 2002, as the case may be. 24. The second part of Section 34 of the Act of 2002 is an embargo on the Civil Court or any authority from granting any injunction in respect of any action taken by the secured creditor in pursuance to the powers conferred on the secured creditor under the Act of 2002 and the Act of 1993. The third part of Section 34 of the Act of 2002 is the bar on the Civil Court and any authority from granting any injunction in respect of any action to be taken by the secured as conferred upon the secured creditor under the Act of 2002 and the Act of 1993. 25. Ouster of Civil Court's jurisdiction is to be strictly construed. On such principle of construction of Section 34 of the Act of 2002, the ouster of jurisdiction of Civil Courts as enshrined therein is of limited impact. It is limited to the arena which a Debts Recovery Tribunal has jurisdiction under Section 17 of the Act of 2002 to decide. Section 34 of the Act of 2002 ousts jurisdiction of Civil Courts when a measure taken by secured creditor under the Act of 2002 against a secured asset or a measure which is capable of being taken by a secured creditor against a secured asset is challenged. The s....
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....ubject matter also applies. 27. In an application under Section 17 of the Act of 2002, the Debts Recovery Tribunal may in a given case be faced with the issue as to whether, the secured creditor could have invoked the provisions of the Act of 2002 at all since, the account could not have been classified as a non-performing asset. In a given case, if the Debts Recovery Tribunal is called upon to decide such an issue then, the Debts Recovery Tribunal would be required to proceed on the basis of the statement of account maintained by the secured creditor in respect of the transactions concerned. It is on the basis of such statement of accounts of the transactions that, the Debts Recovery Tribunal has to return a finding as to whether, the account could have been classified as a non-performing asset for the secured creditor to invoke the provisions of the Act of 2002 or not. In considering the statement of accounts maintained by the secured creditor in respect of the transactions concerned, a Debts Recovery Tribunal, in my view is not called upon to decide or adjudicate a claim for damages. In a given case, a borrower may claim that it suffered damages and therefore, in the event th....
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.... of the Debts Recovery Tribunal under Section 17 of the Act of 2002 and therefore, the embargo under Section 34 of the Act of 2002 is not attracted. The suit therefore cannot be dismissed as being barred under Section 34 of the Act of 2002. The first issue is therefore answered in the negative, in favour of the plaintiff and against the defendant. 30. The Division Bench in VCK Shares and Stock Broking Services Ltd. (supra), while considering the bar under the Act of 1993 has held that, the trial Court acted in error in directing return of the plaint since, it was not permissible to present the plaint before the Debts Recovery Tribunal. Consequent upon the Division Bench setting aside the order for return of the plaint, the suit remained with the Civil Court. The Division Bench directed the Civil Court to decide the issues raised, in accordance with law. 31. Bank of Rajasthan Ltd. (supra) is the pronouncement of the Supreme Court on appeal from VCK Shares and Stock Broking Services Ltd. (supra). It has noted the difference of opinion between coordinate Benches of the Supreme Court rendered in 2000 Volume 7 Supreme Court Cases page 357 (United Bank of India v. Abhijit Tea Compa....
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....ted by the order impugned before it to be incorrect. The Division Bench in VCK Shares and Stock Broking Services Ltd. (supra) has held that, since Nahar Industrial Enterprises Ltd. (supra) was later in point of time and that, the same having considered the earlier three pronouncements of the Supreme Court being Abhijit Tea Company Pvt. Ltd. (supra), Ranjan Chemicals Ltd. & Ors. (supra) and ABS Marine Products (P) Ltd. & Ors. (supra) the Division Bench was bound by the decision in the case of Nahar Industrial Enterprises Ltd. (supra). Today however, there is a reference to the Larger Bench with regard to the issue of law involved in the four Supreme Court decisions. 34. Section 18 of the Act of 1993 bars a Court or any other authority from exercising any jurisdiction, power or authority in relation to matters specified in Section 17 of the Act of 1993. Section 17(1) of the Act of 1993 vest the jurisdiction, power and authority on the Debts Recovery Tribunal to entertain and decide applications from banks and financial institutions for recovery of debts due to banks and financial institutions. Section 19 of the Act of 1993 lays down that, where a bank or a financial institution ha....
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....rrower has to await the institution of a proceeding under Section 19 of the Act of 1993 by a bank or a financial institution to make its claim for set off or counter claim. In a given case, this wait can be fatal to the claims of the borrower on the anvil of the laws of limitation. When, the bank or the financial institution concerned do not file a proceeding under Section 19 of the Act of 1993, the borrower has no option than to approach the regular Civil Court for its relief. As the scheme of the Act of 1993 obtains as on date, there is no scope for a borrower to invoke the jurisdiction of the Debts Recovery Tribunal without the bank or the financial institution first applying under Section 19 of the Act of 1993. The right of the borrower to approach the Debts Recovery Tribunal for its set of or counter-claim, as the case may be, arises only if the bank or the financial institution concerned approaches the Debts Recovery Tribunal under Section 19 of the Act of 1993. As noted above, in a given case, the bank or a financial institution may approach the Debts Recovery Tribunal on the last date of the limitation. In the event, the borrower did not file any proceeding with regard to i....
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....ect matter of the suit of the borrower against the bank is inextricably connected in the sense that, the decision in one would effect the decision of the other, and when the parties to the suit filed by the borrower agree that such suit be considered as a counter claim in the application under Section 19 of the Act of 1993. In Ranjan Chemicals Ltd. & Ors. (supra), the Supreme Court has held that, consent of the parties to transfer the suit to the Debts Recovery Tribunal was not necessary as has been held in ABS Marine Products (P) Ltd. & Ors. (supra). In Nahar Industrial Enterprises Ltd. (supra), the Supreme Court has considered Abhijit Tea Company Pvt. Ltd. (supra), ABS Marine Products (P) Ltd. & Ors. (supra) and Ranjan Chemicals Ltd. & Ors. (supra) and held that, the view expressed in ABS Marine Products (P) Ltd. & Ors. (supra) that, the consent of the parties to the suit pending before the Civil Court was required for transfer of such suit to the Debts Recovery Tribunal for final disposal, was correct. 40. ABS Marine Products (P) Ltd. & Ors. (supra) and Nahar Industrial Enterprises Ltd. (supra) have held that, the claims of the borrower in an independent suit can be transferr....