2024 (7) TMI 1389 - HC - Indian Laws

Jurisdiction of the Civil Court u/s 34 of SARFAESI Act - suit for declaration and permanent prohibitory injunction - Order VII, Rule 11 read with Section 151 of the CPC - whether there is any substantial question of law involved in this second appeal? - HELD THAT - It is a settled law that the existence of substantial question of law is the sine qua non for the exercise of jurisdiction under Section 100 of the Code. Section 100 provides that the second appeal would lie to the High Court from a decree passed in appeal by any court subordinate to the High Court if the High Court is satisfied that the case involves a substantial question of law . It further provides that the memorandum of appeal shall precisely state the substantial question of law involved in the appeal and the High Court on being satisfied that the substantial question of law is involved in a case formulate the said question. Subsection (5) provides that the appeal shall be heard on the question so formulated - It is abundantly clear from the analysis of Section 100 that if the appeal is entertained without framing the substantial questions of law, then it would be illegal and would amount to failure or abdication of the duty cast on the court. In Santosh Hazari vs. PurushottamTiwari 2001 (2) TMI 131 - SUPREME COURT , the Hon ble Supreme Court has held that ' To be a question of law involving in the case there must be first a foundation for it laid in the pleadings and the question should emerge from the sustainable findings of fact arrived at by court of facts and it must be necessary to decide that question of law for a just and proper decision of the case. An entirely new point raised for the first time before the High Court is not a question involved in the case unless it goes to the root of the matter.' The perusal of the aforesaid section shows that no civil court shall have any jurisdiction to entertain any suit or proceeding in respect of any matter, which the Debt Recovery Tribunal is empowered by or under SARFESI Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the aforesaid Act. It is clear that no civil court can exercise jurisdiction to entertain any suit or proceeding in respect of any matter which Debt Recovery Tribunal or Appellate Tribunal is empowered to determine and no injunction can be granted by any court taken in pursuance of any power conferred by or under the SARFESI Act or under the Recovery of Debts Due to Banks and Financial Institutions Act. In the instant case, except for the use of the word fraud , no particulars of the allegations of fraud have been specifically pleaded as mandated by the provisions of Order 6 Rule 4 of the Civil Procedure Code,1908. Thus, the plea of jurisdiction of the Civil Court based on the allegations of fraud cannot be countenanced. Hence in view of provisions of Section 34 of the SARFESI Act, both the learned Courts below have rightly rejected the plaint. Thus, no question of law, what to say of a substantial question of law is involved in the instant case. Accordingly, it is found that no illegality or perversity in the judgments passed by both the Courts below in rejecting the plaint under Order 7 Rule 11 CPC - appeal dismissed.

Summary

Issues Involved:
1. Jurisdiction of Civil Court under Section 34 of the SARFAESI Act.
2. Substantial Question of Law under Section 100 CPC.
3. Allegations of Fraud and their impact on jurisdiction.

Detailed Analysis:

1. Jurisdiction of Civil Court under Section 34 of the SARFAESI Act
The primary issue was whether the Civil Court had jurisdiction to entertain the suit filed by the plaintiff, challenging actions taken by the defendants under the SARFAESI Act. The defendants argued that the suit was barred by Section 34 of the SARFAESI Act, which explicitly states that no civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debt Recovery Tribunal or Appellate Tribunal is empowered to determine. The plaintiff's suit sought a declaration and permanent prohibitory injunction against the defendants' actions under the SARFAESI Act. The court upheld the defendants' contention, emphasizing that Section 34 bars the jurisdiction of Civil Courts in such matters.

2. Substantial Question of Law under Section 100 CPC
The court examined whether the second appeal involved any substantial question of law, which is a prerequisite for the High Court's jurisdiction under Section 100 CPC. The court reiterated that a substantial question of law must be debatable, not previously settled, and must have a material bearing on the decision of the case. The court cited multiple precedents, including Santosh Hazari vs. Purushottam Tiwari and Govindaraju vs. Martamman, to explain that the existence of a substantial question of law is essential for the exercise of jurisdiction under Section 100 CPC. The court concluded that the present case did not involve any substantial question of law and therefore, the appeal could not be entertained.

3. Allegations of Fraud and their Impact on Jurisdiction
The plaintiff argued that the jurisdiction of the Civil Court was not barred because the defendants' actions were fraudulent. The court acknowledged that while allegations of fraud can sometimes override jurisdictional bars, mere allegations without specific particulars are insufficient. The court referenced the judgment in Charu Kishor Mehta vs. Prakash Patel and others, which stated that particulars of fraud must be explicitly detailed as per Order VI, Rule 4 of the CPC. The court found that the plaintiff's allegations of fraud were vague and lacked the necessary particulars. Consequently, the plea of fraud could not be used to circumvent the jurisdictional bar imposed by Section 34 of the SARFAESI Act.

Conclusion:
The court upheld the decisions of the lower courts, which had rejected the plaint under Order 7, Rule 11 CPC, on the grounds that the suit was barred by Section 34 of the SARFAESI Act. The court found no substantial question of law involved in the second appeal and dismissed it accordingly. The court also dismissed the plaintiff's allegations of fraud due to the lack of specific particulars, reinforcing that the jurisdiction of the Civil Court was indeed barred in this case.