Summary
A borrower whose mortgaged property had been taken into possession under Section 13(4) of the SARFAESI Act sued for specific performance of a purported settlement and obtained an interim order restraining the bank from passing final orders of sale. A Single Judge vacated it in view of Section 34, but the Division Bench restored it, treating the bar as not absolute and the bank as estopped. The Supreme Court restored the Single Judge's order: under Mardia Chemicals the civil court's jurisdiction is barred for all matters the Debts Recovery Tribunal may determine, save the limited case of fraud or an absurd claim not made out here, and an appellate court cannot substitute its discretion for a reasoned refusal of interim relief founded on a statutory bar.
Issues
- Whether a civil court can injunct a secured creditor from selling a mortgaged property in a suit for specific performance of a settlement agreement, having regard to the bar in Section 34 of the SARFAESI Act.
- Whether a Division Bench in an intra-court appeal could interfere with a Single Judge's discretionary order vacating interim relief on the ground of a statutory bar.
Provisions considered
- Section 34, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002Bars civil court jurisdiction in respect of any matter the Debts Recovery Tribunal or Appellate Tribunal is empowered to determine, including action to be taken in future; the only exception, for fraudulent action or an absurd and untenable claim, did not apply. (¶¶ 10, 12, 13, 14, 15, 18)
- Sections 13(2), 13(4), 17 and 18, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002The bank had issued demand and possession notices; the Act itself provides remedies to an aggrieved borrower before the Tribunal and Appellate Tribunal, which the respondent had in fact invoked. (¶¶ 3.4, 3.5, 15)
- Order XXXIX Rules 1 and 2; Order XLIII Rule 1, Code of Civil Procedure, 1908Following Wander Ltd. v. Antox India, an appellate court will not interfere with the trial court's discretion on interlocutory injunction unless it was exercised arbitrarily, capriciously or perversely or ignored settled principles; the Single Judge's refusal rested on a statutory bar. (¶¶ 5, 16, 17, 18)
Held
- As held by the three-Judge Bench in Mardia Chemicals, the bar in Section 34 covers all matters that may be taken cognizance of by the Debts Recovery Tribunal, even where no measure under Section 13(4) has yet been taken, and the civil court's jurisdiction survives only to the very limited extent of fraudulent action by the secured creditor or a claim so absurd as to need no probe; the bank's action here was neither, and the Act itself provides remedies under Sections 17 and 18. (¶¶ 12, 13, 14, 15)
- The Division Bench, exercising a jurisdiction analogous to Order XLIII Rule 1 CPC, grossly erred in interfering with the Single Judge's discretion, which was exercised on the basis of the statutory bar and a finding that the suit was cleverly drafted to obtain a blanket injunction over mortgaged property; the respondent's case did not fall within the limited scope for a civil suit recognised in Mardia Chemicals. (¶¶ 7, 8, 16, 17, 18)
Result
Appeal allowed; Division Bench judgment dated 30 January 2017 quashed and set aside; order of the Single Judge dated 2 November 2016 vacating the interim injunction upheld; pending applications disposed of.