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2015 (5) TMI 1245 - HC - Indian LawsMaintainability of the suit on the ground that the appropriate remedy available to the plaintiffs - Section 34 of the Act specifically bars the jurisdiction of a civil court or not - suit is nothing but an endeavour to block the process of recovery initiated by the Bank or not - forum shopping or not - whether the nature of fraud, as alleged by the plaintiffs, could form the basis of maintainability of the present suit under the exception carved out by the Supreme Court in MARDIA CHEMICALS LTD. VERSUS UNION OF INDIA 2004 (4) TMI 294 - SUPREME COURT ? HELD THAT - On a meaningful reading of the plaint as a whole, it appears that in sum and substance, the plaintiffs‟ case is that the letter dated 31.12.2012 was not issued by them and that it was fraudulently created by the Bank, hence the transfer of monies from the plaintiffs‟ account to M/s. Tulip Telecom Limited was wrong and the said amount was depleted from their account only to classify it as an NPA. This according to the plaintiffs amounts to fraud and would form the basis of the maintainability of the present suit. In the present case, the monies, i.e., Rs. 20 crores had clearly been credited from the plaintiffs‟ Term Loan Account to their Current Account. Thereafter, Rs. 19.89 crores was transferred to Tulip. By any standard of reckoning an amount of Rs.19.89 crores is not small and transfer of such amounts would send alarm bells ringing for any account holder especially like the plaintiffs, whose annual turnover is in the range of Rs.600.00 crores. Bank too are known to be especially careful about high-value accounts and the transaction made therein. This Court is of the view that if a standard classic defence, such as fraud by the Bank, is allowed to form the basis for maintaining a suit, then the provisions of the Act would become redundant, all the more so in the face of the express stipulation in Section 34 thereof - the Court cannot be oblivious to whether the allegations of fraud and misrepresentation are made only for the purpose of creating cause of action, thereby leading to the maintainability of the suit. This Court is also of the view that in the present case, the plaint does not aver any complicated facts leading to the case of fraud or how the measures adopted by the Bank are fraudulent/absurd/untenable. There is nothing in the plaint which would lead to the conclusion that the plaintiffs‟ case falls under the exception carved out by Mardia Chemicals, i.e., the plaintiffs‟ grievances ought to be determined in a suit - In the facts and circumstances of the case, this Court is of the view that the issue of fraud sought to be raised in this suit can well be agitated in proceedings under Section 17 of the Act since the plaintiffs evidently fall in the category of any person thereof. This Court is of the view that the Supreme Court in Mardia Chemicals has emphasised that only to a limited extent, the jurisdiction of civil courts can be invoked. This import of the sentence is evident from the expression that recourse to civil courts will only be to a very limited extent, i.e., only when the action of the secured creditor is alleged to be fraudulent or his claim may be so absurd and untenable which may not require any probe whatsoever. This Court is of the view that the ground of fraud raised by the plaintiff can be duly addressed in proceedings under Section 17 of the SARFAESI Act, 2002 and the said plea of fraud, in the peculiar facts and circumstances of the case, does not fall in the exception carved out in Mardia Chemicals - the suit is not maintainable and is accordingly, dismissed.
Issues Involved:
1. Maintainability of the suit challenging measures under Section 13 of the SARFAESI Act. 2. Jurisdiction of civil courts under Section 34 of the SARFAESI Act. 3. Allegations of fraud by the plaintiffs against the bank. 4. Availability and adequacy of remedies under Section 17 of the SARFAESI Act. Detailed Analysis: 1. Maintainability of the Suit: The plaintiffs challenged the Bank's measures under Section 13 of the SARFAESI Act. The Bank contested the maintainability of the suit, arguing that the appropriate remedy was under Section 17 of the Act before the Debts Recovery Tribunal (DRT). The Bank asserted that Section 34 of the Act bars civil court jurisdiction and that the plaintiffs were attempting to block the recovery process and engage in forum shopping. 2. Jurisdiction of Civil Courts: Section 34 of the SARFAESI Act bars civil courts from entertaining suits or proceedings in matters that the DRT or Appellate Tribunal is empowered to determine. However, the Supreme Court in Mardia Chemicals Ltd. v. Union of India carved out a limited exception, allowing civil court jurisdiction in cases of alleged fraud or claims that are absurd and untenable. The Court emphasized that this exception must be strictly construed. 3. Allegations of Fraud: The plaintiffs alleged that the Bank fraudulently transferred Rs. 19.89 crores from their account to M/s. Tulip Telecom Limited without their authorization. They claimed that the Bank used their signatures on blank letterheads to execute this transfer, which they argued amounted to fraud. The plaintiffs contended that this fraudulent act led to their account being classified as a Non-Performing Asset (NPA), which justified the maintainability of the suit in a civil court. 4. Availability and Adequacy of Remedies under Section 17: The Court examined whether the plaintiffs' allegations of fraud could be adequately addressed under Section 17 of the SARFAESI Act. It was noted that Section 17 provides a comprehensive remedy for aggrieved parties, allowing them to challenge measures taken under Section 13(4) of the Act before the DRT. The Court emphasized that the DRT is empowered to adjudicate on all issues, including allegations of fraud, and that the remedy under Section 17 is both expeditious and effective. Conclusion: The Court concluded that the plaintiffs' allegations of fraud did not warrant the maintainability of the suit in a civil court. The allegations were deemed to be a standard defense often raised to delay recovery proceedings. The Court held that the DRT was competent to address the plaintiffs' grievances, including the alleged fraud, under Section 17 of the SARFAESI Act. Consequently, the suit was dismissed as not maintainable, reinforcing the bar on civil court jurisdiction under Section 34 of the SARFAESI Act.
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