High Court Examines Bar of Civil Court Jurisdiction in SARFAESI Proceedings and Rejection of Plaint Under Order VII Rule 11(d) CPC. The judgment addressed whether allegations of non-issuance of Section 13(2) notice permit civil court suit despite Section 34 of SARFAESI Act, 2002, and reviewed trial court's rejection of bank's application.

Civil revision application arising from rejection of an application for rejection of plaint under Order VII Rule 11(d) CPC in a suit challenging measures under the SARFAESI Act, 2002.

The applicant/defendant-bank sought rejection of the plaint under Order VII Rule 11(d) CPC on the ground that civil court jurisdiction was barred under Section 34 of the SARFAESI Act, 2002, and before the High Court sought revision of the trial court's order rejecting that application.

The respondent/plaintiff filed Suit RCS No. 476 of 2018 alleging that the defendant-bank invoked SARFAESI measures against mortgaged property without issuing mandatory notice under Section 13(2), and challenged the bank's auction sale notice dated 30 August 2018.

The trial court, Sixth Joint Civil Judge, Junior Division, Latur, rejected the application Exh.16 for rejection of plaint, holding that the question of non-issuance of Section 13(2) notice required trial and civil court jurisdiction was not ousted. The trial court had earlier granted interim injunction restraining auction sale, and the appeal against that injunction was dismissed, as stated in the plaintiff's resistance.

Whether the civil court's jurisdiction to entertain a suit challenging measures under Section 13(4) of the SARFAESI Act, 2002 is barred under Section 34 of that Act when the plaintiff alleges non-issuance of mandatory notice under Section 13(2). Whether a suit challenging measures under Section 13(4) SARFAESI on the ground of non-compliance with Section 13(2) must be filed before the Debts Recovery Tribunal under Section 17 instead of a civil court. Whether the trial court correctly rejected the application for rejection of plaint under Order VII Rule 11(d) of the Code of Civil Procedure, 1908.

Applicant/defendant-bank contended that the civil court had no jurisdiction due to Section 34 of the SARFAESI Act, 2002, and that the Debts Recovery Tribunal under Section 17 was the proper forum; a bald assertion of non-issuance of notice under Section 13(2) did not confer jurisdiction on the civil court. Respondent/plaintiff contended that non-compliance with the mandatory notice under Section 13(2) of the SARFAESI Act was evident from pleadings and failure to produce documents despite notice, and that the civil court could entertain the suit where a clear case of non-compliance existed. Applicant relied on Jagdish Singh v. Hiralal, Authorized Officer, State Bank of India v. Allwyn Alloys Private Limited, and Bank of Baroda v. Paramount Conductors Ltd. Respondent relied on M/s. Hindon Forge Pvt. Ltd. v. State of Uttar Pradesh.

The judgment examined the principles that Section 34 of the SARFAESI Act, 2002 bars civil court jurisdiction in matters that the Debts Recovery Tribunal or Appellate Tribunal is empowered to determine, and that Section 13(2) notice is a mandatory pre-enforcement condition before taking measures under Section 13(4). The court considered whether a mere allegation of non-issuance of such notice could oust the bar under Section 34, and referred to the Supreme Court's holding in Hindon Forge that a borrower can maintain an application under Section 17 before the Debts Recovery Tribunal even before actual physical possession of secured assets is taken.

The legality, propriety and correctness of an order passed by the learned 6th Joint Civil Judge, Junior Division, Latur, on an application [Exh.16] for rejection of plaint, under Order VII Rule 11(d) of the Code of Civil Procedure, 1908 [the Code], whereby the learned Civil Judge was persuaded to reject the application preferred by the petitioner/defendant-bank, is assailed in this revision application. The learned Civil Judge was of the view that the provisions of the statute in question; Act, 2002, have not been complied as the plaintiff claimed that the defendant had not issued notice under section 13(2) of the Act, 2002 and thus the jurisdiction of the Civil Court was not ousted. A bald assertion in the plaint that notice under section 13(2) of the Act, 2002 was not issued, would not confer jurisdiction on the Civil Court, canvassed Mr. Patil.

The respondent/plaintiff availed a cash credit facility of Rs.25 lakh from the applicant/defendant-bank in 2013, enhanced by Rs.20 lakh in 2014, against mortgage of immovable property. The plaintiff defaulted in repayment, and the bank issued a sale notice by publication in a newspaper dated 30 August 2018. The plaintiff filed Suit RCS No. 476 of 2018 challenging the SARFAESI measures and alleging non-issuance of notice under Section 13(2). The defendant-bank filed an application Exh.16 under Order VII Rule 11(d) CPC for rejection of plaint, contending that Section 34 SARFAESI barred civil court jurisdiction. The trial court rejected that application, observing that the question of notice issuance required trial and civil court jurisdiction was not ousted; the trial court had earlier granted interim injunction against auction sale, which was upheld in appeal. The defendant-bank filed Civil Revision Application No. 43 of 2020 before the High Court. The High Court heard arguments and reserved judgment; the final operative order is not included in the available excerpt.

• Code of Civil Procedure, 1908: Order VII Rule 11(d)
• Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: Section 2(zf), Section 13(2), Section 13(3), Section 13(3-A), Section 13(4), Section 17, Section 17(1), Section 17-A, Section 31, Section 34
• Security Interest (Enforcement) Rules, 2002: Rule 8(1), Rule 8(2)
• Transfer of Property Act, 1882: Section 69, Section 69A