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2020 (1) TMI 229 - HC - Indian LawsRejection of plaint - Cancellation of agreement - outstanding loan amount - Order 7 Rule 11 CPC - HELD THAT - It has been pointed out in the application that there is a statutory bar under Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act) and that the plaintiffs have a statutory remedy under Section 17 of the SARFAESI Act to approach the Debt Recovery Tribunal (DRT). It is further stated that the plaintiffs have already availed of the remedy by filing a petition under Section 17 (1) of the SARFAESI Act before the DRT, New Delhi before filing of the present suit. Hence, it is pleaded that the suit is liable to be rejected on account of the bar contained in the SARFAESI Act. The essential dispute centres around as to whether the plaintiff executed the communication dated 22.6.2016 whereby they have allegedly agreed to disbursal of the loan in favour of defendant No.6. The plaintiff denies execution of any such document or any other document whereby defendant No.1 could disburse the loan to defendant No.5 and 6. In my opinion, the plaint essentially pleads seriously disputed questions of fact. It is quite clear that such disputed question of fact would not mean that a civil court could assume jurisdiction over such suits. This court would not have jurisdiction to entertain the present suit in view of section 34 of the SARFAESI Act. Suit dismissed.
Issues Involved:
1. Application for rejection of the plaint under Order 7 Rule 11 CPC. 2. Alleged fraud by defendants in the loan disbursement process. 3. Jurisdiction of the civil court vis-à-vis the SARFAESI Act. Issue-wise Detailed Analysis: 1. Application for rejection of the plaint under Order 7 Rule 11 CPC: The defendant No. 1 filed an application under Order 7 Rule 11 CPC for rejection of the plaint. The plaintiffs sought cancellation of a loan agreement dated 25.02.2016 and a permanent injunction for the return of property papers. The plaintiffs alleged that the loan amount was credited to unknown third parties (defendants No. 5 and 6) instead of them, despite them making several monthly instalments. The plaintiffs claimed fraud and criminal conspiracy by defendants No. 2 to 6 in connivance with officials of defendant No. 1. Defendant No. 1 argued that the suit was barred under Section 34 of the SARFAESI Act, as the plaintiffs had a statutory remedy under Section 17 of the SARFAESI Act and had already approached the Debt Recovery Tribunal (DRT). 2. Alleged fraud by defendants in the loan disbursement process: The plaintiffs contended that no loan was actually released to them, and the loan amount was fraudulently credited to the accounts of defendants No. 5 and 6. They denied signing any document authorizing such disbursement and claimed that their signatures were obtained on incomplete loan documents. The plaintiffs alleged that the defendants unlawfully obtained the original title papers and committed fraud, cheating, and criminal conspiracy. The plaintiffs relied on the Supreme Court judgment in Mardia Chemicals Ltd. v. Union of India to argue that the civil court had jurisdiction in cases of fraudulent actions by secured creditors. 3. Jurisdiction of the civil court vis-à-vis the SARFAESI Act: The court examined the statutory provisions of the SARFAESI Act, particularly Sections 13(4), 17, and 34. Section 34 bars civil courts from entertaining suits in matters that fall within the jurisdiction of the DRT. The court referred to the Supreme Court's decision in Mardia Chemicals Ltd., which carved out a limited exception for civil court jurisdiction in cases of fraudulent actions by secured creditors. The court also considered previous judgments, including Ram Prakash Mehra v. Union Bank of India and Neha Aggarwal v. PNB Housing Finance Ltd., to determine the applicability of the exception. The court concluded that the facts of the case did not warrant an exception to the jurisdictional bar under Section 34 of the SARFAESI Act. The plaintiffs admitted to applying for the loan, providing title papers as security, and making initial instalments. The primary dispute was whether the plaintiffs authorized the disbursement of the loan to defendants No. 5 and 6. The court held that such disputed questions of fact did not justify civil court jurisdiction and should be adjudicated by the DRT. Conclusion: The court allowed the application under Order 7 Rule 11 CPC, dismissing the suit for lack of jurisdiction. The plaintiffs were granted liberty to pursue their claims before the DRT.
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