Case Note & Summary
The appellant, Kingfisher Airlines Limited, a company registered under the Companies Act, 1956, had availed various credit facilities from a consortium of banks including State Bank of India, Axis Bank, Bank of Baroda, Bank of India, Central Bank of India, Corporation Bank, The Federal Bank Limited, IDBI Bank Limited, Indian Overseas Bank, and Jammu & Kashmir Bank Limited. The appellant committed default in repayment of the loans, and the banks classified the appellant's account as a non-performing asset (NPA). Consequently, the banks issued a possession notice under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) on 12.12.2013, taking symbolic possession of the secured assets. Aggrieved by the possession notice, the appellant filed a civil suit (O.S. No. 1/2014) before the Principal City Civil and Sessions Judge, Bangalore, seeking a declaration that the possession notice was illegal and void, and for a permanent injunction restraining the banks from taking any further action under the SARFAESI Act. The trial court, by order dated 20.01.2014, rejected the plaint under Order VII Rule 11 of the Code of Civil Procedure, 1908 (CPC), holding that the civil suit was barred under Section 34 of the SARFAESI Act, which ousts the jurisdiction of civil courts in matters where the Debt Recovery Tribunal (DRT) has jurisdiction. The appellant challenged this order by way of an original side appeal (O.S.A. No. 1/2014) before the High Court of Karnataka. The High Court, after hearing the parties, dismissed the appeal, affirming the trial court's order. The court held that the civil suit was not maintainable as the appellant had an alternative efficacious remedy under Section 17 of the SARFAESI Act before the DRT. The court further observed that the bar under Section 34 of the Act is clear and unambiguous, and the civil court cannot entertain a suit in respect of matters falling within the jurisdiction of the DRT or the Appellate Tribunal under the Act. The court also noted that the appellant had acknowledged the debt and default, and the possession notice was issued in accordance with law. The appeal was dismissed with no order as to costs.
Headnote
A) Banking Law - SARFAESI Act - Maintainability of Civil Suit - Section 34 SARFAESI Act - Bar on Civil Court Jurisdiction - The appellant, a corporate debtor, filed a civil suit challenging the possession notice issued by respondent banks under Section 13(4) of the SARFAESI Act. The High Court held that the civil suit was not maintainable in view of the express bar under Section 34 of the Act, which ousts the jurisdiction of civil courts in matters where the Debt Recovery Tribunal (DRT) has jurisdiction. The court further held that the appellant had an alternative efficacious remedy under Section 17 of the Act before the DRT. (Paras 1-10) B) Banking Law - SARFAESI Act - Alternative Remedy - Section 17 SARFAESI Act - Appeal to DRT - The court observed that the appellant, being a corporate debtor, could have filed an application under Section 17 of the SARFAESI Act before the DRT challenging the possession notice. The existence of an alternative remedy is a ground for refusing to entertain a civil suit. The court dismissed the appeal, upholding the trial court's order rejecting the plaint. (Paras 5-10)
Issue of Consideration
Whether the civil suit filed by the appellant challenging the possession notice issued under Section 13(4) of the SARFAESI Act is maintainable in view of the bar under Section 34 of the Act, and whether the appellant had an alternative efficacious remedy under Section 17 of the Act.
Final Decision
The High Court dismissed the appeal, affirming the trial court's order rejecting the plaint. The court held that the civil suit was not maintainable due to the bar under Section 34 of the SARFAESI Act and the availability of an alternative remedy under Section 17 before the DRT.
Law Points
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act
- 2002 (SARFAESI Act)
- Section 13(4)
- Section 17
- Section 34
- maintainability of civil suit
- jurisdiction of civil court
- alternative remedy
- possession notice
- secured debt
- default
- corporate debtor
