Whether jurisdiction of civil court is ousted in dispute relating Securitisation Act?

In view of above, the sum and substance of the decision is that :

(i) The jurisdiction of the Civil Court to entertain, try and decide any suit or proceeding in respect of the property, which is the subject matter of security interest created in favour of a secured creditor, is barred only to the extent of the matters, which the Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under the Act to determine.

(Para 18)

(ii) The jurisdiction of the Civil Court in respect of the matters, which do not fall within the jurisdiction of the Debts Recovery Tribunal or its Appellate Tribunal under Sections 17 and 18 of the said Act, is not ousted or barred under the provision of Section 34 of the said Act and the Civil Court continues to exercise such jurisdiction. (Para 18)

(iii) In order to decide the question as to whether the jurisdiction of the Civil Court under Section 9 of the Civil Procedure Code is ousted or not, the real test would be to find out whether the Debts Recovery Tribunal under Section 17, is empowered to hold an enquiry on a particular question and to grant relief in respect thereof. The extent of jurisdiction of the Debts Recovery Tribunal under Section 17 shall decide the extent of exclusion of jurisdiction of Civil Court to decide the dispute in respect of the suit property. (Para 18)

(iv) The jurisdiction of the Civil Court to entertain, try and decide a civil suit challenging the action of the defendant no.3-Bank to take possession of the suit property and to sell the same to recover its debts by enforcing security interest in the suit property in accordance with the provisions of Section 13 of the said Act, is completely barred by Section 34 of the said Act. (Paras 19, 20 and 23)

(v) The jurisdiction of the Civil Court to entertain, try and decide the suit for partition and separate possession of the property in respect of which security interest is created in favour of secured creditor, is not barred under Section 34 of the Act.

(Para 21)

(vi) The jurisdiction of Civil Court to entertain, try and decide the Civil Suit claiming relief of declaration that the action of the secured creditor to take possession of the property and to sell the same, is fraudulent and void, as has been held by the Apex Court in Mardia Chemical's case, is not barred by Section 34 of the said Act. (Para 23)

(vii) The jurisdiction of the Civil Court to entertain, try and decide Civil Suit simpliciter for permanent injunction to permanently restrain the defendant No.3-Bank from taking possession of the suit property and selling the same or to create any third-party interest without any substantive relief of declaration that the creation of security interest in favour of a secured creditor was fraudulent and void ab initio, is completely barred under the second part of Section 34 and hence consequentially, the jurisdiction of Civil Court to pass an order of temporary injunction in such suit, restraining the defendant No.3-Bank from alienating the suit property or creating any third-party interest therein, is also barred. (Para 25)

(viii) Once it is held that the jurisdiction of Civil Court is not ousted under Section 34, to grant substantive relief of declaration that creation of security interest in favour of a secured creditor, was fraudulent and void, its jurisdiction to grant consequential relief of permanent injunction and the relief of temporary injunction in such suit, is not ousted. (Para 26)

(ix) Once it is held that the jurisdiction of the Civil Court to entertain, try and decide the civil suit for partition and separate possession of the suit property is not barred by Section 34 of the said Act, then it follows that the jurisdiction of the Civil Court to grant permanent and temporary injunction restraining the defendants from dealing with the suit property or creating third party interest therein is also not ousted by Section 34 of the said Act.

(x) It is open for the plaintiffs or any other person having any right, title, share or interest in the suit property to lodge their/his objection under Section 17 of the said Act before the Debts Recovery Tribunal, which is competent to deal with it in accordance with law and to pass such orders as are necessary to protect the interest of the plaintiffs/such person vis-a-vis the suit property and also to balance the equities. (Para 30)

(xi) The question as to what shall be the effect of a decree passed in the suit for partition and separate possession of the suit property or for declaration that the action of secured creditor is fraudulent and void ab initio by the Civil Court, on the enforcement of security interest by the defendant No.3-Bank, i.e. the secured creditor, can be determined only after culmination of both the proceedings and not before.

Bombay High Court

state bank of india  vs Shri Sagar pramod deshmukh on 11 February, 2011

Bench: Ravi K. Deshpande

Citation;2011 (2) ALLMR520

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Whether e-Auction are permissible under Securitisation Act?

It is further noted that the e-auction sale procedures are user friendly in nature. It is also noted that the intending purchasers could utilize the services of technically qualified persons or agencies, in making their bids. We are conscious of the fact that e-auction sale procedures, being followed by the respondent banks, have not been challenged by the purchasers, in the present batch of writ petitions. Further, nothing has been shown on behalf of the petitioners to substantiate their claims that the intending purchasers would suffer certain impediments in making their bids, for the properties in question, due to their illiteracy. While so, it would not be open to the petitioners to claim, without furnishing sufficient materials before this Court, to show that the persons who had availed the financial facilities, including those who had been the guarantors and those who had created the mortgages or pledges, in respect of the properties in question, would be at a disadvantage due to the use of the e-auction sale procedures, which involves the use of digital technology. On the contrary, we are convinced that the e-auction sale procedures followed by the respondent banks and the authorities concerned would go a long way in reducing the unhealthy practices being followed by the cartels and the syndicates, in the public auction sales of the secured assets. Further, there is no specific prohibition, either in the provisions of the the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, or in the Security Interest (Enforcement) Rules, 2002, prohibiting the conducting of e-auction sales of the secured assets.

Madras High Court

4 S.Anandaraj vs State Bank Of India on 20 February, 2014

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Whether bonafide tenant has right to approach DRT under securitisation Act?

  Bearing in mind

the decision in Harshad Govardhan Sondagar (supra), in a case where the

aggrieved person claims to be or is a bona fide lessee or a tenant from whom

possession is yet to be taken over but a sale notice has been issued involving the

leasehold or tenanted property, different considerations would apply and even

without losing possession or handing over of possession of the portion of the

secured asset under lease or tenancy to the secured creditor, the lessee or the

tenant, as the case may be, being a non-borrower would have the right to

approach the tribunal no sooner the sale notice is issued in terms of the provisions

of Rule 8(6) of the Rules, and notwithstanding the decisions in V. Noble Kumar

(supra) and Mercury (supra). This, I hold, because V. Noble Kumar (supra) did not

have the occasion to deal with a grievance espoused by a person who claimed

himself to be a bona fide lessee or tenant and any observation made therein may

not apply to a non-borrower. If this right of the non-borrower is not recognized, he

shall be without a remedy.

 Consequently, I hold that the relevant tribunal having jurisdiction under Section 17

of the Act on being approached has a duty to consider the status of the party

approaching it to arrive at a considered opinion as to whether the application should be entertained or not. 

Kolkata High Court (Appellete Side)

S. Vision Comptech Integrators ... vs State Bank Of India on 20 June, 2014

Author: Dipankar Datta

Citation; AIR 2014 Calcutta 161

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