Summary
The Court upheld rejection of a guarantor’s civil suit challenging an assignment and possession notice under SARFAESI. Merely describing the assignment as fraudulent, without specific material particulars, did not overcome the civil-jurisdiction bar. Whether the corporate debtor’s resolution discharged the guarantor, whether any debt remained and whether the assignee was a secured creditor were matters for the DRT. The guarantor could apply there within two weeks, with those merits expressly left open.
Issues
- Whether unparticularised fraud allegations made the civil suit maintainable despite Section 34.
- Which forum should decide the guarantor’s defences based on the corporate debtor’s resolution and discharge.
Provisions considered
- Sections 34 and 17, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002The civil suit concerned matters for the DRT; legally available defences could be raised in an application against the enforcement measures. (¶¶ 8, 9)
- Order VI Rule 4, Code of Civil Procedure, 1908Fraud requires precise material particulars; use of the label alone cannot circumvent a statutory bar. (¶¶ 7.2, 7.3, 8)
Held
- The plaint relied on the assertion that satisfaction of the corporate debtor’s resolution plan left nothing capable of assignment. That assertion alone did not make the assignment fraudulent. No specific particulars established a fraud pleading; drafting the claim with that label could not evade Section 34. (¶¶ 7.1, 7.2, 7.3, 7.4, 8)
- Whether an enforceable debt remained against the guarantor, whether the assignee was a secured creditor, and whether any amount was payable required determination by the DRT in the SARFAESI proceedings. The civil suit was therefore not maintainable. (¶ 8)
- The guarantor could initiate appropriate Section 17 proceedings within two weeks. Such an application was to be considered on its merits and according to law after compliance with the other filing requirements. The Court expressly left the secured-creditor and enforceable-debt issues undecided in favour of either party. (¶ 9)
Result
Appeal dismissed without costs. Rejection of the civil suit was upheld, with liberty to apply to the DRT within two weeks and the specified substantive defences left open.