Case Note & Summary
The case involves a civil suit filed by Sagar and Saurabh Deshmukh (original plaintiffs) against their father Pramod Deshmukh, mother Vrunda Deshmukh, and the State Bank of India (defendant No.3). The plaintiffs sought a declaration that the possession notice issued by the bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) was illegal and void, and for permanent injunction restraining the bank from taking possession of the suit property. The bank filed an application under Order 7 Rule 11 of the Code of Civil Procedure, 1908 (CPC) for rejection of the plaint on the ground that the suit was barred by Section 34 of the SARFAESI Act. The trial court rejected the application and also granted interim relief in favor of the plaintiffs. The bank challenged both orders by way of Civil Revision Application No.33 of 2010 and Appeal against Order No.38 of 2010. The High Court held that the suit was clearly barred by Section 34 of the SARFAESI Act, as the Act provides a complete mechanism for redressal of grievances, including the remedy of appeal before the Debts Recovery Tribunal under Section 17. The court observed that once a secured creditor takes action under the Act for enforcement of security interest, the civil court has no jurisdiction to entertain a suit challenging such action. The court allowed both the revision and the appeal, set aside the orders of the trial court, and rejected the plaint under Order 7 Rule 11 CPC.
Headnote
A) Civil Procedure - Rejection of Plaint - Order 7 Rule 11 CPC - Bar of Suit under Section 34 of SARFAESI Act - The suit challenging possession notice under SARFAESI Act is barred by Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, as the Act provides a complete mechanism for redressal of grievances. The civil court has no jurisdiction to entertain such suit. The application for rejection of plaint under Order 7 Rule 11 CPC was wrongly rejected by the trial court. (Paras 2-10) B) Securitisation - Jurisdiction of Civil Court - Section 34 SARFAESI Act - Ouster of Civil Court's Jurisdiction - Section 34 of the SARFAESI Act, 2002 bars the jurisdiction of civil court in respect of any matter which a Debts Recovery Tribunal or Appellate Tribunal is empowered to determine. Once a secured creditor takes action under the Act for enforcement of security interest, the civil suit is not maintainable. (Paras 5-10) C) Securitisation - Possession Notice - Challenge in Civil Suit - Maintainability - A suit challenging the possession notice issued under Section 13(4) of the SARFAESI Act, 2002 is not maintainable in civil court. The remedy lies before the Debts Recovery Tribunal under Section 17 of the Act. The trial court erred in granting interim relief and refusing to reject the plaint. (Paras 6-10)
Issue of Consideration
Whether the civil suit filed by the plaintiffs challenging the possession notice issued under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is barred under Section 34 of the said Act, and whether the plaint is liable to be rejected under Order 7 Rule 11 of the Code of Civil Procedure, 1908.
Final Decision
The High Court allowed both the Civil Revision Application and the Appeal against Order, set aside the orders of the trial court dated 23-2-2010 and the order below Exhibit 5, and rejected the plaint in Special Civil Suit No.52 of 2010 under Order 7 Rule 11 CPC.
Law Points
- Bar of civil suit under Section 34 of SARFAESI Act
- 2002
- Jurisdiction of civil court ousted when action under SARFAESI Act
- Order 7 Rule 11 CPC for rejection of plaint
- Maintainability of suit challenging possession notice under SARFAESI Act
