2018 (5) TMI 2183 - SC - Indian Laws

Maintainability of suit - Justification of injunction granted by the learned trial Court - invalidation of sale transaction that had taken place in favour of the Appellant - Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - HELD THAT - Under the provisions of Section 17 of the SARFAESI Act and thereafter Under Section 18 of the SARFAESI Act the Respondent No. 2 has an adequate and efficacious remedy and it is essential to permit the Respondent No. 2 to have recourse to the said remedies and agitate before the learned Debts Recovery Tribunal all issues that may be open in law. All objections as may be available to the Appellant may also be raised before the learned Debts Recovery Tribunal. The learned Debts Recovery Tribunal and thereafter the learned Debts Recovery Appellate Tribunal, if required to be approached by the Respondent No. 2, will decide the matter with utmost expedition. Untill the aforesaid proceedings are complete while confirming the auction sale in favour of the Appellant we direct the Appellant not to encumber the property in question or to transfer it to any third party. The order of the High Court is set aside subject to fulfilment of conditions imposed and the appeals are allowed.

Summary

Issues:
Challenge to High Court order on maintainability of suit under SARFAESI Act

Analysis:
The Appellant challenged the High Court of Madras order declaring the suit maintainable despite the SARFAESI Act provisions. The core issue was the maintainability of the suit for partition filed by the second Respondent. The High Court held that Section 34 of the SARFAESI Act does not bar a partition suit. However, referring to the precedent set in Jagdish Singh v. Heeralal, the Supreme Court clarified that suits like O.S. No. 106 of 2009 are not maintainable under the SARFAESI Act. The Court emphasized that Section 17 provides an adequate remedy for parties aggrieved by SARFAESI Act proceedings, and civil courts lack jurisdiction in such matters.

The Supreme Court invalidated the sale transaction in favor of the Appellant, which occurred during the stay of the injunction order by the High Court. The Court highlighted the statutory rights and remedies available under the SARFAESI Act, emphasizing the jurisdiction of Debt Recovery Tribunals and Appellate Tribunals in matters related to the Act. The Court directed the second Respondent to pursue remedies under Sections 17 and 18 of the SARFAESI Act before the Debt Recovery Tribunal, allowing both parties to raise objections and present their case expeditiously.

The Court directed the Appellant not to encumber or transfer the property until the Debt Recovery Tribunal proceedings are completed. It set a timeline for the second Respondent to approach the Tribunal and clarified that the Court had not expressed any opinion on the merits of the parties' contentions, leaving them for adjudication by the Tribunal. The Court closed the suits filed by the second Respondent with liberty to pursue remedies under the SARFAESI Act, setting aside the High Court's order subject to specified conditions. The Court ordered the return of the deposited amount to the second Respondent and disposed of all pending appeals and applications in line with the judgment.