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2017 (8) TMI 1589 - HC - Indian Laws


Issues Involved:
1. Jurisdiction of the trial court to entertain the suit.
2. Applicability of Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
3. Maintainability of the suit at the stage of seeking leave under Clause 12 of the Letters Patent.
4. Judicial precedents cited without being brought to the notice of the parties.

Detailed Analysis:

Jurisdiction of the Trial Court to Entertain the Suit:
The trial court declined the appellants' prayer for leave under Clause 12 of the Letters Patent on the ground that it lacked jurisdiction to entertain the suit due to an express prohibition by statute, specifically Section 34 of the SARFAESI Act. The appellants argued that the matter of maintainability should not arise at the stage of seeking leave under Clause 12 and should only consider whether part of the cause of action arose within the court's territorial limits. The court, however, emphasized that it is obligatory for a civil court to ascertain whether the suit is maintainable at the time of receiving the plaint, especially when a statutory bar is involved.

Applicability of Section 34 of the SARFAESI Act:
Section 34 of the SARFAESI Act prohibits civil courts from entertaining any suit or proceeding in respect of any matter which a Debts Recovery Tribunal (DRT) or Debts Recovery Appellate Tribunal (DRAT) is empowered to determine. The appellants contended that this bar should only apply once measures under Section 13(4) of the Act are taken by a secured creditor. The court noted that the bar under Section 34 applies at the threshold and not after the institution of the suit. However, the court also clarified that the bar under Section 34 does not operate if no DRT or DRAT is empowered to determine the subject matter of the suit at the time of its institution.

Maintainability of the Suit at the Stage of Seeking Leave under Clause 12 of the Letters Patent:
The appellants argued that the trial court should not have assessed the maintainability of the suit at the stage of seeking leave under Clause 12 of the Letters Patent. The court held that it is the duty of the judge to assess the maintainability of the suit at the earliest stage, including whether it conforms to the pecuniary and territorial authority of the court, whether it discloses a cause of action, and whether it is ex facie barred by any law. The court concluded that the trial court's approach in assessing the maintainability at the stage of seeking leave was correct.

Judicial Precedents Cited Without Being Brought to the Notice of the Parties:
The appellants contended that the trial court referred to several judgments that were not cited or referred to during the limited argument while seeking leave under Clause 12. The court agreed that it is generally undesirable for judicial precedents to be referred to or made the basis for any finding in a judgment without first bringing them to the notice of the parties. The court noted that the trial court's reliance on a passage from Mardia Chemicals was incorrect and that the correct legal position was enunciated in Jagdish Singh, which should have been brought to the notice of the parties.

Conclusion:
The court held that the suit was maintainable at the time of its institution and when leave was sought under Clause 12 of the Letters Patent, notwithstanding Section 34 of the SARFAESI Act. The court set aside the trial court's judgment and order dated July 24, 2017, and granted leave under Clause 12 of the Letters Patent. The suit will be deemed to have been instituted on July 24, 2017, when the plaint was presented. The respondent Trust is not prevented from taking any objection in accordance with the law. There will be no order as to costs.

 

 

 

 

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