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TMI Blog2024 (10) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... supported by document i.e order passed by NCLT would clearly go to show that prima facie there was mismanagement of the affairs of the defendant no. 2 and also obtaining of a loan thereby securing assets in favour of the bank, without following due process of law. With these averments in the plaint, contentions raised by the respondents needs to be rejected outright - it is clear from the record and more specifically the prayer, the suit is clearly maintainable as far as relief is concerned and that too when there are specific pleadings with regard to fraud and collusion between the bank and defendant nos. 3 and 4. The question of fraud and collusion and the relief claimed in the suit of declaration that the loan facility and the mortgage created in favour of defendant no. 1 is a nullity, is certainly not coming within the jurisdiction of DRT or under the SARFAESI Act. Such declaration is only permissible under the Specific Relief Act. The Court is duty bound to consider only the plaint and the documents relied therein. No document relied upon by the defendant could be looked into. The contention of Mr Kantak that the First Appellate Court in paragraph 25 relied upon the document p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the trial Court, which is challenged in the present proceedings amongst various grounds as disclosed in the Writ Petition. 7. Heard Mr S. S. Kantak, learned Senior Advocate with Mr S. Gaonkar, learned Counsel for the Petitioner, Mr S. D. Lotlikar, learned Senior Counsel with Mr A. Nayak Salatry, learned Counsel for respondent no. 1, Mr S. Desai, learned Counsel along with Mr J. Ramaiya, learned Counsel for the respondent no. 5, Mr A. D. Bhobe, learned Counsel Ms S. Shaikh, Advocate for respondent no. 6 and Mr Bhupendara Dave, learned Counsel for the Administrator. 8. Mr Kantak learned Senior Counsel appearing for the petitioner/plaintiff would submit that petitioner is one of the directors and shareholders of the company i.e. respondent no. 2. Petitioner started trading in potassium permanganate since 1988 by importing it along with certain other chemicals in his proprietory concern in the name and style as Chemiman . Somewhere in the year 1998, respondent no. 2 M/s Super Electro Manganese Chemicals was declared as bankrupt but subsequently petitioner decided to take over the assets of respondent no. 2 for the purpose of manufacturing potassium permanganate and formed a compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tstanding loan along with interest. An attempt was made by respondent no. 1 before NCLT to hand over possession of secured assets, however, the Administrator appointed by NCLT refused to hand over possession of respondent no. 2. Another application was filed by respondent no. 1 bank before NCLT Mumbai however, during the pendency of such application, respondent no. 1 approached concerned authority by filing securitisation application case under the provisions of Section 14 of SARFAESI Act before Additional Collector South Goa seeking relief of physical possession. By order dated 26.6.2023 Additional Collector allowed the said application of respondent no. 1 and directed them to take forceful possession of the secured assets i.e respondent no. 2 company. 11. Petitioner being, aggrieved by such order passed by Additional Collector, approached DRT Mumbai by filing an application under section 17 (1) of the SARFAESI Act. Vide order dated 18.8.2023 DRT Mumbai rejected the interim application and consequently disposed of application under Section 17 (1) solely on the ground that, petitioner is not having locus to file such proceedings since the petitioner is merely a shareholder. 12. Pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f fraud, Civil Court is only authorize to entertain and decide such suit. 17. In other words Mr Kantak would submit that when the plaintiff is considered as not aggrieved person under Section 17, there cannot be any bar under Section 34 of the SARFAESI Act against the petitioner. He would submit that these aspects are completely being ignored and not considered by the Courts below and thereby impugned order suffers from perversity. 18. Mr Kantak placed reliance on the following decisions:- 1 Bank of Boroda, through its BranchManager Vs Gopal Shriram Panda and another (2021)4 AIR Bom R 64., 2 Saleem Bhai and others Vs State of Maharashtra and others (2003) 1 SCC 557. 19. Mr Lotlikar, appearing for respondent no. 1 bank, would submit that remedy available to the petitioner is only before the DRT under Section 17 (1) of SARFAESI Act. He submits that petitioner initially challenged the order of DRT by filing an appeal at DRAT Mumbai, however, in the meantime plaintiff/petitioner filed this suit. Subsequently withdrawal of the appeal cannot be a ground for the petitioner to entertain the suit. 20. Mr Lotlikar would submit that the petitioner being a shareholder cannot be considered as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the specific averments in the plaint regarding collusion and fraud played on the plaintiff by the defendants including the bank. He submits that loan was sanctioned without due authorisation and resolution passed by the Board of Directors. In this respect he would submit that there are specific averments made in the plaint that the defendants played a fraud on the plaintiff by obtaining loan and that too without any resolution to that effect. 27. Mr Kantak would then submit that loan was sanctioned on 30.11.2020 whereas the agenda of the meeting was somewhere in the month of December 2020. He specifically relied upon paragraphs 12, 13 and 14 wherein specific allegations have been made regarding fraud and collusion between the defendants including the bank. He would therefore submit that such an aspect is not covered under the SARFAESI Act and Civil Court is the only authority to entertain such a suit under the Specific Relief Act. Power and jurisdiction of the Civil Court under Section 9 is therefore not ousted as far as the present plaint is concerned. 28. Perusal of the plaint would clearly go to show that there are specific pleadings with regard to collusion and fraud played ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laint, Court has to assess whether a suit filed therein is barred under any law or is not having any cause of action to institute such a claim. At this stage, only the contents in the plaint are required to be considered as germane and not written statements or other documents relied upon by the respondents. 32. In the case of Saleem Bhai (supra), the Apex Court observed that germane facts for deciding an application under Order VII Rule 11 (a) and (d) of CPC and the averment in the plaint and not the pleas taken in the written statement. The Court has to consider only the pleading in the plaint and documents referred therein. Similarly, the duty of the Court is to read such pleadings in a meaningful manner so as to observe whether the suit as framed therein is having cause of action, barred by limitation or otherwise. 33. Learned Commercial Court vide its order dated 2.11.2023, allowed the application filed by defendant no. 1 under Order VII Rule 11 of CPC and thereby rejected the plaint. Observation of the learned trial Court are found from paragraph 8 onwards which discloses relevant facts as pleaded in the plaint. As far as pleadings of fraud are concerned, the learned Commerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen observed in paragraph 19 about the contents of paragraph 11 of the plaint. It further observed that contention of the plaintiff that defendant no. 1/bank sanctioned and disbursed the loan without authorisation and lawful resolution being passed by defendant nos. 2 to 4 is incorrect. It then went to discuss the bar under Section 34 of the SARFAESI Act in paragraph 20 of the said order and observed that such bar can be dispensed with only when the plaintiff succeeds in bringing his case within the exception when there is necessarily a fraud or collusion being committed between financial institution and the other person to defraud person. However in the same breath the First Appellate Court observed that there is no pleadings against defendant no. 1 as to in what manner defendant no. 1 was responsible to defraud the plaintiff in collusion with the defendant nos. 3 and 4. 38. With these observations of the learned trial Court and that of the First Appellate Court, pleadings in the plaint are required to be once again considered. 39. As earlier observed, the suit is filed for declaration and permanent injunction claiming the main relief of grant of a declaration that loan facility a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r grant of finance/loan shown plot no. 112 having admeasuring area of 1360 sq. mts at Kundaim Industrial Estate, Kundaim as a secured assets. 43. Plaintiff then in paragraph 10 disclose that defendant no. 1/bank sanctioned loan facility of Rs. 3 crores in favour of defendant no. 2 vide sanctioned letter dated 30.11.2020. 44. Paragraphs nos. 11 to 14 of the plaint further show as to how fraud and collusion exists between defendant nos. 1, 3 and 4 with respect to such loan transaction. Plaintiff has clearly disclosed the aspect of fraud and collusion between the bank and defendant nos. 3 and 4 by disclosing that loan was sanctioned even without any resolution passed by Board of Directors to avail such loan for and on behalf of the defendant no. 2 company. Paragraph 13 of the plaint would go to show that notice dated 1.12.2020 calling for the board meeting scheduled on 8.12.2020 shows the Agenda including the one to discuss availing financial facility from the bank/financial institution/body corporate etc. Thus it is contention of the plaintiff that the loan was sanctioned on 30.11.2020 whereas the meeting of the Board of Directors was called on 8.12.2020. 45. It is the case of the pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d collusion, are clearly perverse. Record speaks otherwise and more specifically the pleadings as discussed above. Thus it is clear from the record and more specifically the prayer, the suit is clearly maintainable as far as relief is concerned and that too when there are specific pleadings with regard to fraud and collusion between the bank and defendant nos. 3 and 4. 49. Besides, the order passed by NCLT dated 24.2.2022 would show that the application was filed by the present petitioner/plaintiff claiming to be the director of the company against defendant nos. 3, 4 and 5 praying for stay of the board resolution dated 8.11.2022 and seeking an injunction restraining said defendants from either disposing of or encumbering in any manner the assets of the said company. A specific allegation was made that there is collusion between the respondents/directors who constituted another company by name Speed International India Pvt. Ltd having the same business and misappropriated large sums of money of defendant no. 2 company. Finally NCLT observed in paragraphs 25, 26 and 27 as under:- 25 The only issue which arises for consideration is whether it is necessary to restrain Respondent No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 9 of CPC and to that effect bar under Section 34 of the SARFAESI Act as discussed in the case of Mardia Chemicals Ltd (supra) would not be absolute. 52. Even otherwise declaration which is claimed in the suit as found in the prayer clause (a), cannot be agitated before any other forum except a Civil Court and that too on specific allegations of fraud and collusion between the respondent nos. 1, 3 and 4. 53. Matter could have been disposed of on the above aspect itself, however, since other aspects were also argued with regard to orders passed by DRT Mumbai under Section 17 of the SARFAESI Act on an application by the plaintiffs, it is necessary to discuss such aspects also. 54. Plaint paragraph 20 further shows that defendant no. 1 while application was pending before the NCLT, approached Additional Collector South Goa under Section 14 A of the SARFAESI Act seeking relief to take physical possession of the alleged secured assets of respondent no. 2 company. 55. Plaint paragraph 21 further shows that plaintiff upon learning of such attempts on the part of defendant no. 1, filed an intervention application before the Additional Collector which was allowed by order dated 18.5.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the contention of Mr Kantak that as per DRT, plaintiff is not an aggrieved person in respect of any action taken under Section 13(4) and therefore bar under Section 34 of the SARFAESI Act will not apply to the plaintiff. According to Mr Kantak since the plaintiff is considered as not having locus to challenge the proceedings under Section 17 of the Act, contention raised by the plaintiff is not covered under Section 13(4) and hence bar under Section 34 of the SARFAESI Act is not attracted. 62. Submission of Mr Kantak certainly requires consideration as the plaintiff approached the authority under the DRT challenging the action taken by Additional Collector on an application filed by defendant no. 1 bank under Section 14 of the SARFAESI Act. 63. Section 34 of the said Act reads thus:- Civil Court not to have jurisdiction-No Civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing an application under Order VII Rule 11 of CPC is that the suit is barred under Section 34 of the SARFAESI Act. It would go to show that only ground for rejection of the plaint is as far as Section 34 of the SARFAESI Act. Arguments were advanced before both the Courts below is about such bar under Section 34. Admittedly no application is filed on behalf of the defendant no. 5 for rejection of plaint. Only because DRT in its order observed that plaintiff is not having locus to approach said authority, it does not lie in the mouth of defendant no. 5 to claim that that plaintiff is also not having any locus to file the suit. Accordingly, such contention raised, cannot be accepted. 70. In the case of Bank of Baroda (supra), the Division Bench of this Court answered the reference made to it which reads thus:- Whether the jurisdiction of a Civil Court to decide all the matters of civil nature, excluding those to be tried by the Debts Recovery Tribunal under Section 17 of the Securitisation Act, in relation to enforcement of security interest of a secured creditor, is barred by Section 34 of the Securitisation Act? 71. After discussing the various decisions together with the object and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above observations of the Division Bench of this Court are therefore certainly binding while deciding the present matter. 74. Mr Desai while placing reliance in the case of Crosscraft Private Ltd (supra) tried to submit that there is clear bar under Section 34 of the SARFAESI Act and since the DRT has already observed that the plaintiff is not having any locus, there will be a futile exercise in allowing the present petition and asking the trial Court to decide the suit on merits. In this respect he would try to submit that the Apex Court clearly observed in paragraph 13 in the case of Crosscraft Private Ltd (supra) that the suit is not maintainable against the secured creditors and auction purchaser. 75. In the case of Crosscraft Private Ltd (supra) the challenge was to the action of Magistrate under Section 14 of the SARFAESI Act, the Division Bench of this Court observed that the action under Section 14 of the SARFAESI Act is in aid and assistance to the bank to attach and to take possession of the secured assets as provided under Section 13(4) of the SARFAESI Act, without intervention of the Court. Thus, it is clear that matter in Cross Craft Private Ltd (supra) is on a diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above proposition to the matter in hand, one thing is clear that by rejecting a plaint when there are specific pleadings regarding fraud and collusion by giving specific instances, there by applying Section 34 of the SARFAESI Act, clearly amounting to miscarriage of justice. 81. Plaintiff/petitioner was thrown out as having no locus to challenge the action of the secured creditors under Section 17 of the SARFAESI Act. Now by the impugned order plaintiff/petitioner is thrown out at the initial stage by a Civil Court thereby practically preventing the plaintiff from having any remedy available to him against the action of the secured creditors. 82. Application filed before the trial Court is only on the ground that the suit is barred by law. Once it is observed that there is a window available to the plaintiff though limited as found out in the case of Mardia Chemicals Ltd (supra), the impugned order certainly needs interference in the supervisory jurisdiction of this Court to prevent injustice being caused to a party who is having no remedy against the action of the secured creditors. 83. Secondly, the application was not filed on any other grounds. Besides both the Courts below ..... X X X X Extracts X X X X X X X X Extracts X X X X
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