9911796707
TMI Blog2022 (1) TMI 1460X X X X Extracts X X X X X X X X Extracts X X X X ..... e accorded. Whether the allegation is right or wrong, substantial or merely chimerical, or merely a puff in the air, is not relevant while examining the applicability of para 51 of the report in Mardia Chemicals [ 2004 (4) TMI 294 - SUPREME COURT] . Once the allegation exists, it exists, for better or for worse. Once fraud, on the part of the secured creditor, is alleged, recourse to ordinary civil remedies cannot be denied to the plaintiffs. Objection of defendants rejected. - HON'BLE MR. JUSTICE C.HARI SHANKAR J U D G M E N T For the Plaintiffs: Mr. Anupam Lal Das, Sr. Advocate with Mr. Abhey Narula, Adv; Mr. Sanjiv Kakra, Sr. Adv. (Amicus Curiae) For the Defendants: Mr. Ravi Gupta, Sr. Advocate with Mr. Mahip Datta, Ms. Sanya Lamba, Mr. Sachin Jain and Mr. Himansh Yadav, Advs The Background 1. Mr. Ravi Gupta, learned Senior Counsel for Defendant 3, the Kotak Mahindra Bank ( the Bank , here in after) vehemently opposed the issuance of summons in this suit and submitted that, even without any pleadings being invited by the Court or being placed on record by his client, he desired to advance submissions, orally, as would persuade this Court to dismiss the suit in limine in ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought to an end in limine without issuance of summons in these two select instances; in all other cases, as Mr. Das contended, issuance of summons was a matter of right. As the court to decline to issue summons on the suit, were a case under Order VII Rule 10 or Order VII Rule 11 to be successfully made out, the defendant could not be denied an opportunity of an audience in that regard. The objection of Mr. Das, to the Court entertaining Mr. Gupta at this stage, even before summons were issued in the suit was, therefore, rejected. 7. In choosing, however, to oppose issuance of summons in the suit even without placing pleadings on record, Mr. Gupta has allowed the averments in the suit to, for the purposes of consideration of his challenge, be regarded as correct on the principle of demurrer and has, there by, taken a calculated risk. As the discussion hereinafter would reveal, this risk has not, in the present case, paid off. 8. Before appreciating the challenge laid by Mr. Gupta to the issuance of summons in the suit, a brief understanding of the case set up by the plaintiffs, in the suit, as pleaded, is necessary. 9. Case set up by the plaintiffs in the suit 9.1 Plaintiff 2 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bank to the plaintiffs and Defendant 1 on 13th August, 2019. On the plaintiffs and Defendant 1 failing to respond with in the period stipulated under Section 13 of the SARFAESI Act 3 , the Bank, on 24th and 27th November, 2020, proceeded to take possession of the mortgaged suit property, under Section 13(4). 9.4 Subsequently, on 27th November, 2020, the Bank also filed an Original Application before the learned Debt Recovery Tribunal (DRT) under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ( the 1993 Act ). 10. According to the plaintiffs, Defendant 1 informed the plaintiffs of the documents, signed by the plaintiffs, and the title deeds of the suit property, handed over by the plaintiffs to Defendant 1, having been used by him to obtain a loan from the Bank by mortgaging the suit property, only in 2019. The plaintiffs, in the circumstances, filed a Police Complaint, and also addressed a letter to the Chief Manager of the Bank. Averments to this effect are contained in paras 26 and 27 of the plaint, which read thus: 26. In view of this act of blatant fraud played upon them by the Defendant No. 1, the Plaintiffs filed a Police Complaint whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under this Act to determine and no injunction shall be granted by any court or authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993). Section 34, in the submission of Mr. Ravi Gupta, embodies a clear proscription against entertainment, and, consequently, issuance of summons, in a case such as this. He relies, for this purpose, on the judgment of the Supreme Court in Mardia Chemicals Ltd v. U.O.I. 4 A suit would lie, in his submission, only where the plaintiffs allege fraud against the Bank. No such allegation as Mr. Gupta would submit is contained in the plaint and, accordingly, the suit is not maintainable. This submission has also been reduced into writing, in the following passage, contained in written submissions filed by the Bank under an index dated 3rd May, 2021: That in case of Mardia Chemicals Ltd. vs. Union of India (AIR 2004 SC 2371) the Hon ble Apex Court while holding the validity of SARFAESI Act held that the jurisdiction of the Civil court can be invoked only to a very limited extent where the action of the secured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present dispute, it is not necessary to enter further into that aspect. 19. One of the issues which was discussed in the judgment, and with which alone we are concerned in the present case, was whether the borrower could seek recourse to a civil court, once Section 13 was invoked by the secured creditor. Inter alia, it was sought to be contended before the Supreme Court that, perhaps, recourse to the civil court was permissible before the secured creditor took possession of the properties of the borrowers/guarantors under Section 13(4), but not after action under Section 13(4) had been taken. The Supreme Court, however, negatived the contention, holding that, once Section 13 stood invoked by the secured creditor, recourse to the civil court stood statutorily barred, even before the matter proceeded to the Section 13(4) stage. Mr. Gupta places especial reliance on the observations of the Supreme Court in that regard, which are to be found in para 50 of the report: 50. It has also been submitted that an appeal is entertainable before the Debts Recovery Tribunal only after such measures as provided in sub-section (4) of Section 13 are taken and Section 34 bars to entertain any proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The remedies of a mortgagor against the mortgagee who is acting in violation of the rights, duties and obligations are twofold in character. The mortgagor can come to the court before sale with an injunction for staying the sale if there are materials to show that the power of sale is being exercised in a fraudulent or improper manner contrary to the terms of the mortgage. But the pleadings in an action for restraining a sale by mortgagee must clearly disclose a fraud or irregularity on the basis of which relief is sought : Adams v. Scott [(1859) 7 WR 213, 249] . I need not point out that this restraint on the exercise of the power of sale will be exercised by courts only under the limited circumstances mentioned above because otherwise to grant such an injunction would be to cancel one of the clauses of the deed to which both the parties had agreed and annul one of the chief securities on which persons advancing moneys on mortgages rely. (See Ghose, Rashbehary : Law of Mortgages, Vol. II, 4th Edn., p. 784.) (Emphasis supplied) 21. To the statutory proscription engrafted in Section 34 of the SARFAESI Act, therefore, the Supreme Court has, in the afore- extracted passage from Mardia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , where the elements of fraud are pleaded, as in the present case. 25. The plaintiffs have specifically alleged collusion against the officials of the Bank. Collusion, as a tort, partakes fundamentally of the character of fraud. The Supreme Court, in State of Goa v. Colfax Laboratories Ltd (2004) 9 SCC 83, defined collusion thus: Collusion means a secret agreement for a fraudulent purpose or a secret or dishonest arrangement in fraud of the rights of another. It is a deceitful arrangement between two or more persons for some evil purpose, such as to defraud a third person of his rights. (Emphasis supplied) Collusion, if alleged, therefore, partakes, in its essence, of the character of fraud. Particularly in the case of a Bank, which enjoys a fiduciary relationship with the public, an expansive interpretation to the expression fraud has to be accorded. Whether the allegation is right or wrong, substantial or merely chimerical, or merely a puff in the air, is not relevant while examining the applicability of para 51 of the report in Mardia Chemicals 4 . Once the allegation exists, it exists, for better or for worse. Once fraud, on the part of the secured creditor, is alleged, recours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower. (3A) If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within fifteen days of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower: Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under Section 17 or the Court of District Judge under Section 17-A. (4) In case the borrower fails to discharge his liability in full with in the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely: (a) take possession of the secured assets of the borrower including the right to tra ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
