Case Note & Summary
The case involves an appeal filed by the appellants, who are borrowers and guarantors, against an order of the Commercial Division of the Bombay High Court rejecting their notice of motion for interim relief in a civil suit. The appellants had filed Commercial Suit (L) No. 133 of 2016 seeking a declaration that the actions of the respondent, Edelweiss Asset Reconstruction Company Limited, under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) were illegal and for an injunction restraining the respondent from taking possession of the secured assets. The respondent had issued a notice under Section 13(2) of the SARFAESI Act and taken symbolic possession of the properties. The trial court dismissed the notice of motion, holding that the civil suit was not maintainable in view of the bar under Section 34 of the SARFAESI Act and that the appellants had an alternative remedy under Section 17 before the Debts Recovery Tribunal. The appellants appealed, arguing that the suit was maintainable as the SARFAESI Act did not oust the jurisdiction of the civil court for all purposes. The Division Bench of the Bombay High Court dismissed the appeal, affirming that the SARFAESI Act provides a complete code for enforcement of security interest and the civil court's jurisdiction is barred. The court held that the appellants failed to make out a prima facie case for interim relief and that the balance of convenience was in favour of the respondent. The court directed the appellants to pursue their remedy under Section 17 of the SARFAESI Act before the DRT.
Headnote
A) Civil Procedure - Maintainability of Suit - Interim Injunction - Order 39 Rules 1 and 2, Code of Civil Procedure, 1908 - The court examined whether a civil suit challenging actions under the SARFAESI Act is maintainable and whether interim relief can be granted - Held that the suit is not maintainable as the remedy lies under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal, and no prima facie case exists for interim injunction (Paras 1-15). B) Securitisation - SARFAESI Act - Alternative Remedy - Section 13, 17, 34, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - The court held that the SARFAESI Act provides a complete mechanism for enforcement of security interest and the civil court's jurisdiction is barred under Section 34 - The appellants must avail the remedy under Section 17 before the DRT instead of filing a civil suit (Paras 10-15). C) Interim Relief - Prima Facie Case - Balance of Convenience - Order 39 Rules 1 and 2, Code of Civil Procedure, 1908 - The court found that the appellants failed to establish a prima facie case or balance of convenience in their favour as the respondent had taken symbolic possession of the secured assets and the appellants had not made any payment towards the debt - Held that no interim injunction can be granted (Paras 12-15).
Issue of Consideration
Whether the civil suit filed by the appellants for declaration and injunction against the respondent's actions under the SARFAESI Act is maintainable, and whether the appellants are entitled to interim relief pending disposal of the suit.
Final Decision
The appeal is dismissed. The order of the trial court rejecting the notice of motion for interim relief is upheld. The appellants are directed to pursue their remedy under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal.
Law Points
- Maintainability of civil suit in SARFAESI Act matters
- Interim relief under Order 39 Rule 1 and 2 CPC
- Prima facie case and balance of convenience
- Doctrine of election of remedies
- Jurisdiction of civil court under Section 34 SARFAESI Act
