Case Note & Summary
The appeal arose from a dispute concerning the enforcement of security interest by the Jalgaon Merchant Co-operative Bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The appellant Smt. Laxmibai alleged that she had stood as a guarantor for loans advanced by the bank to her relatives but that the loans were renewed after 31.10.2002 without her consent or signature, amounting to novation under Section 62 of the Indian Contract Act, 1872. When the bank initiated proceedings under Section 13(4) of the SARFAESI Act and took steps to sell her property, she filed Dispute No.1057 of 2007 under Section 91 of the Maharashtra Cooperative Societies Act, 1960 (MCS Act) before the Cooperative Court, Jalgaon, seeking an injunction. The Cooperative Court, on 11.8.2008, restrained the bank from selling the property. The bank’s appeal was dismissed by the Maharashtra State Cooperative Appellate Court on 15.11.2008. Meanwhile, the appellant also approached the Debt Recovery Tribunal (DRT) on 2.11.2007, and her appeal before the Debt Recovery Appellate Tribunal (DRAT) remained pending. The bank then filed Writ Petition No.2337 of 2010 under Article 227 of the Constitution before the Bombay High Court, which was allowed by a learned Single Judge on 18.10.2010, setting aside both cooperative court orders on the ground that the Cooperative Court lacked jurisdiction due to the bar under Section 34 of the SARFAESI Act. In the appeal, the appellant contended that the DRT could not adjudicate allegations of fraud and that the Cooperative Court alone had jurisdiction under Section 91 of the MCS Act. The Division Bench, while noting the issue of maintainability of the Letters Patent Appeal against an Article 227 order, proceeded to examine the merits. It held that Section 17 of the SARFAESI Act confers wide powers on the DRT to address all grievances, including fraud, and that the appellant having already invoked the DRT’s jurisdiction must pursue that remedy to its conclusion. The Court emphasized that Section 34 places an absolute bar on the jurisdiction of any civil court or authority over matters that the DRT or DRAT can determine, and Section 35 gives overriding effect to the SARFAESI Act over other laws. Consequently, the Cooperative Court’s proceedings and the injunction were without jurisdiction. The appeal was dismissed, affirming the Single Judge’s order, and no costs were ordered.
Headnote
A) Civil Procedure - Maintainability of Letters Patent Appeal - Questionable Maintainability - Constitution of India, Article 227 - The Division Bench noted that the writ petition was filed under Article 227, and there was substance in the respondent's contention that an LPA may not lie; however, the court decided the matter on merits. (Para 15)
B) Banking - Securitisation Act - Scope of DRT Jurisdiction - Comprehensive Adjudication - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 17 - The DRT is empowered to examine all grievances of any person aggrieved by measures under Section 13(4), including allegations of fraud and fabrication; the appellant had already approached the DRT and had an appeal pending before the DRAT, thus her remedy lay exclusively before that forum. (Para 16)
C) Banking - Securitisation Act - Bar on Civil Court Jurisdiction - Absolute Bar - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 34 - Section 34 clearly prohibits any civil court or authority from entertaining any suit or proceeding in respect of matters determinable by the DRT or DRAT, and no injunction can be granted; this bar applies to the Cooperative Court under Section 91 of the Maharashtra Cooperative Societies Act, 1960. (Paras 17-18)
D) Banking - Securitisation Act - Overriding Effect - Precedence over Inconsistent Laws - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 35 - Section 35 stipulates that the SARFAESI Act overrides other laws; thus, when the Act applies, the Cooperative Court's jurisdiction is ousted. (Para 18)
E) Banking - Securitisation Act - Doctrine of Election - Exclusive Remedy - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 34 r/w Section 17 - Having approached the DRT and filed an appeal before the DRAT, the appellant was required to pursue that remedy to its logical end and could not simultaneously agitate her grievances before the Cooperative Court; the law of election prevents such multiplicity. (Paras 12-13, 16)
Issue of Consideration
(1) Whether the Letters Patent Appeal was maintainable against the order of a Single Judge passed under Article 227 of the Constitution; (2) Whether the Cooperative Court's jurisdiction under Section 91 of the Maharashtra Cooperative Societies Act, 1960 was barred by Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 in light of pending DRT proceedings; (3) Whether the Debt Recovery Tribunal under Section 17 of the SARFAESI Act could adjudicate allegations of fraud and fabrication concerning loan documents; (4) Whether the appellant could simultaneously pursue remedies before the DRT and the Cooperative Court.
Final Decision
Letters Patent Appeal dismissed. The impugned order of the Single Judge dated 18.10.2010 was affirmed. The Cooperative Court’s order of injunction and the Appellate Court’s confirmatory order were held to be without jurisdiction, ousted by Sections 34 and 35 of the SARFAESI Act. No order as to costs.
Law Points
- Legal points not extracted
- DRT has jurisdiction under Section 17 of SARFAESI Act to examine all grievances including fraud and fabrication
- Section 34 of SARFAESI Act imposes an absolute bar on civil courts including Cooperative Court under Section 91 MCS Act
- SARFAESI Act overrides other laws
- election of remedies requires pursuing DRT remedy exclusively
- LPA against Article 227 order may not be maintainable
Case Details
2026 LawText (BOM) (06) 124
Letters Patent Appeal No. 333 of 2010 with Civil Application No. 18209 of 2010 in Writ Petition No. 2337 of 2010
Naresh H. Patil, Shrihari P. Davare
Shri Dhananjay B. Thoke (for appellant); Shri V.D. Sapkal holding for Shri D.D. Pokhrankar (for respondents 1 and 4)
Smt. Laxmibai w/o Laxminarayan Zawar
01. The Jalgaon Merchant Co-operative Bank Ltd., through its Manager Sunil s/o Laxminiwas Baheti; 02. Sou. Kiran Ashok Zawar; 03. Shri Ashok Laxminarayan Zawar; 04. Shri Sunil Laxminarayan Baheti; 05. Shri Narendra Narayandas Rathi; 06. Shri Sudhirchandra Laxminarayan Baheti
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Nature of Litigation
Letters Patent Appeal against order of Single Judge allowing bank’s writ petition and quashing Cooperative Court’s injunction restraining sale of property under SARFAESI Act.
Remedy Sought
Appellant sought to set aside the Single Judge’s order and restore the Cooperative Court’s injunction, contending that the Cooperative Court had jurisdiction under Section 91 of the Maharashtra Cooperative Societies Act, 1960 and that the Debt Recovery Tribunal could not adjudicate allegations of fraud.
Filing Reason
Appellant alleged that the bank fabricated documents and committed fraud by renewing the loan without her consent, and that the Cooperative Court should adjudicate these disputed facts; she also argued that the bar under Section 34 of SARFAESI Act was not absolute and did not oust the Cooperative Court’s jurisdiction.
Previous Decisions
Cooperative Court, Jalgaon, by order dated 11.8.2008 granted injunction restraining sale; Maharashtra State Cooperative Appellate Court confirmed the order on 15.11.2008; both orders were set aside by Single Judge of Bombay High Court on 18.10.2010 in Writ Petition No.2337 of 2010, holding that the Cooperative Court lacked jurisdiction due to Section 34 of SARFAESI Act and pendency of DRT proceedings.
Issues
Whether Letters Patent Appeal was maintainable against an order passed under Article 227 of the Constitution
Whether the Cooperative Court had jurisdiction to entertain the dispute under Section 91 of MCS Act when the bank had initiated SARFAESI proceedings and the DRT was seised of the matter
Whether the DRT under Section 17 of SARFAESI Act had adequate jurisdiction to examine allegations of fraud, fabrication, and novation
Whether the appellant could simultaneously pursue remedies before the Cooperative Court and the DRT
Submissions/Arguments
Appellant contended that she did not stand as guarantor for the renewed loans, amounting to novation under Section 62 of the Indian Contract Act, and that DRT lacked jurisdiction to try fraud allegations; Cooperative Court alone could conduct full trial.
Appellant argued that Section 34 bar is not absolute and applies only to matters under Section 13 of SARFAESI Act; relied on Mardia Chemicals v. Union of India, AIR 2004 SC 2371 and other precedents.
Respondent bank argued that LPA is not maintainable as the writ was under Article 227; the appellant had already approached DRT and must pursue that remedy exclusively; SARFAESI Act is a complete code and Section 34 bars Cooperative Court jurisdiction.
Respondent placed reliance on National Insurance Company Ltd. v. Mastan, 2005 AIR (SCW) 6305 on the principle of election of remedies and insisted that the DRT/DRAT proceedings being pending, the dispute under Section 91 MCS Act was unwarranted.
Ratio Decidendi
The jurisdiction of the Cooperative Court under Section 91 of the Maharashtra Cooperative Societies Act, 1960 is completely barred by Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, when the matter is one that the Debt Recovery Tribunal or Appellate Tribunal is empowered to determine. Section 17 of the SARFAESI Act provides a comprehensive remedy, including examination of allegations of fraud and fabrication. Once a party invokes the DRT’s jurisdiction, they must pursue that exclusive remedy and cannot simultaneously litigate before the Cooperative Court.
Judgment Excerpts
there is substance in the submission advanced by learned Counsel for Respondent No.1 in respect of maintainability of the present Letters Patent Appeal.
it is explicitly clear from the very language of Section 17 of the Securitization Act that any person (including borrower) aggrieved by any of the measures referred to in subsection (4) of section 13 ... is entitled to approach the Debt Recovery Tribunal
the appellant has to pursue the said adopted remedy to its logical end and she has no scope to advert and agitate the alleged grievances before the Cooperative Court.
there is clear embargo of Section 34 of the Securitization Act
Section 34 provides that no civil court shall have jurisdiction to entertain any suit or proceedings in respect of any matter which a DRT or Debt Recovery Appellate Tribunal is empowered ... to determine and no injunction shall be granted by any court or any other authority in respect of any action taken or to be taken in pursuance of the powers conferred by or under the said legislation
Procedural History
Appellant Smt. Laxmibai, alleged guarantor, filed Dispute No.1057 of 2007 under Section 91 of the Maharashtra Cooperative Societies Act, 1960 before the Cooperative Court, Jalgaon, seeking to restrain the respondent bank from selling her property in enforcement of security interest under the SARFAESI Act. The Cooperative Court, on 11.8.2008, granted interim injunction. The bank’s appeal to the Maharashtra State Cooperative Appellate Court was dismissed on 15.11.2008. Meanwhile, the appellant also approached the Debt Recovery Tribunal on 2.11.2007, and her appeal before the Debt Recovery Appellate Tribunal remained pending. The bank challenged the cooperative courts’ orders by filing Writ Petition No.2337 of 2010 under Article 227 before the Bombay High Court, Aurangabad Bench. A Single Judge, by order dated 18.10.2010, allowed the writ petition, quashed the injunction, and held that the Cooperative Court lacked jurisdiction due to the bar under Section 34 of the SARFAESI Act. Aggrieved, the appellant filed the present Letters Patent Appeal No.333 of 2010. The Division Bench heard the appeal and dismissed it on 20.12.2010, affirming the Single Judge’s order.
Acts & Sections
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: Section 13(4), Section 17, Section 34, Section 35
- Maharashtra Cooperative Societies Act, 1960: Section 91
- Indian Contract Act, 1872: Section 62
- Constitution of India: Article 227
- Recovery of Debts Due to Banks and Financial Institutions Act, 1993: Referred to in Section 34 of SARFAESI Act
