2005 (11) TMI 260 - HC - Companies Law

Issues Involved:
1. Effect of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the Act).
2. Entitlement of plaintiffs/respondents to temporary injunction.
3. Relief to be granted.

Issue-wise Detailed Analysis:

Point No. 1: Effect of the Act

The court examined the scope of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, emphasizing key provisions. Section 34 bars civil courts from entertaining suits or proceedings related to matters under the jurisdiction of the Debts Recovery Tribunal (DRT) or the Appellate Tribunal and prohibits injunctions against actions taken under the Act. Section 13 allows secured creditors to enforce security interests without court intervention. Section 17 provides a right to appeal to the DRT for aggrieved persons, including borrowers. The court highlighted the legislative intent to expedite debt recovery for financial institutions, supported by the Supreme Court's observations in Mardia Chemicals Ltd. v. Union of India, which upheld the Act's constitutionality. The court concluded that the civil court's jurisdiction is expressly barred for matters covered by the Act, including granting injunctions against secured creditors.

Point No. 2: Entitlement to Temporary Injunction

The court noted that the State Bank of India (defendants 5 and 6) had initiated proceedings under Section 13(4) of the Act and taken possession of the property before the impugned order was passed. The plaintiffs did not disclose material facts, such as the mortgage of the property by defendants 1 to 4 as guarantors, and the relationship between the borrower and the guarantors. The court found that the plaintiffs suppressed these facts and failed to make a prima facie case for temporary injunction. The court emphasized that the plaintiffs must establish that the property is joint family property and they have a share in it, which they failed to do. The court held that the order of temporary injunction was contrary to the statutory prohibition under Section 34 of the Act.

Point No. 3: Relief

The court observed that in a suit for partition, all parties must be included in all proceedings. The plaintiffs did not include defendants 1 to 4 as respondents in the interlocutory application, despite making allegations against them in the suit. The court found this conduct reprehensible and noted that the plaintiffs did not refute the bank's stand that the property was self-acquired by defendants 1 to 4. The court concluded that the plaintiffs failed to make out a prima facie case for temporary injunction and that the suppression of material facts warranted rejection of their relief.

Conclusion:

The appeal was allowed, the impugned order was set aside, and the interlocutory application for temporary injunction was dismissed. The court vacated the injunction granted by the lower court and emphasized that its observations were prima facie and should not influence the final decision on the merits of the suit.

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