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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 ..... te Court dismissed the said appeal thereby confirming the order passed by the Commercial Court dated 2.11.2023 in Commercial Suit No. 2/2023. 5. Petitioner is the plaintiff in Commercial Suit No. 2/2023 filed before the Commercial Court at Ponda. Respondent no. 1 being defendants filed an application under Order 7 Rule 11 of CPC for rejection of the plaint. 6. Vide order dated 2.11.2023 Commercial Court rejected the plaint on observing that suit is barred by law i.e Section 34 of SARFAESI Act. Petitioner/plaintiff filed Commercial Appeal No. 6/2023 which was dismissed by the impugned order upholding the contentions of the respondents and confirming the findings 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 Bhupendar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk without following due process of law and in collusion with respondent nos. 3 and 4 sanctioned the loan and thereafter respondent nos. 3 and 4 deliberately avoided to pay instalment so that respondent no. 2 company could be shut down and taken over by the said respondents. Respondent no. 1 bank sanctioned the loan facilities of three crores without following due process and without obtaining any NOC from the concerned department and since defaults were made in repayment, loan was considered as non performing assets. Respondent no. 1 thereafter issued notice in August 2022 under Section 13 (2) of SARFAESI Act in respect of secured assets for the dues repayment of outstanding 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 Sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not come in the way of the petitioner. 16. Mr Kantak would further submit that averments in the plaint would clearly go to show that loan applied by respondent nos. 3 and 4 was sanctioned by respondent no. 1 bank without there being any resolution being passed by Board of Directors. He submits that this itself clearly demonstrates collusion and fraud to deprive the plaintiff from his shares and management of the respondent no. 2 company. Mr Kantak submit that when DRT observed that the petitioner cannot entertain any application under Section 17 (1) of the SARFAESI Act, the only remedy available to the petitioner is to file a suit and when there are specific allegations of 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 Boro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Desai placed reliance on the following decisions: 1. Garment Carft Vs Prakash Chand Goel (2022)4 SCC 181. 2. Punjab and Sind Bank Vs Frontline Corporation Ltd. 2023 SCC Online SC 470. 3. Crosscraft Private Ltd Vs Authorized Officer, Madgaum Urban Co-op Bank Ltd and others. (2019) 2 AIR Bom R 458. 25. Rival contentions fall for determination. 26. The basic contention on behalf of Mr Kantak is that the suit is filed for declaration and permanent injunction under the Specific Relief Act and the prayer therein are to declare loan facilities agreement dated 29.11.2020 and creation of mortgage is a fraud and thus illegal and void. He submits that such relief claimed by the petitioner/plaintiff is based 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so be invoked, where for example, the action of the secured creditor is alleged to be fraudulent or their claim may be so absurd and untenable which may not require any probe, whatsoever or to say precisely to the extent the scope is permissible to bring an action in the civil Court in the cases of English mortgages. 31. It is well settled proposition of law that while considering an application under Order VII Rule 11 of CPC, the Court is required to look into the averments in the plaint and documents relied and referred in the plaint. It is also equally well settled that Court cannot look into contents of the written statement/reply or documents relied therein. By a meaningful reading of the contents of the plaint, 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 averme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t then considered paragraph 11 of the plaint and quoted it and then discussed the pleadings of fraud in paragraph 16. However, in paragraph 17, the First Appellate Court observed that undisputedly, the dispute falls within four corners of SARFAESI Act thus there is expressed bar under Section 34 of the said SARFAESI Act. 36. Such finding in paragraph 17 is clearly perverse to the record as suit is filed under the Specific Relief Act and plaint clearly discloses that reliefs claimed therein are not covered under the SARFAESI Act. Thus, such finding of the learned First Appellate Court cannot be accepted. 37. Further learned First Commercial Appellate Court quoted the provisions of Section 34 of the SARFAESI Act and then 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gful acts committed by defendant nos. 3 and 4 which demonstrated the acts of operation and mismanagement resulting from the wrongful acts by defendants nos. 3 and 4. The NCLT, Mumbai appointed Administrator to take over the control and management of affairs of the defendant no. 2 company. 42. Further in paragraph 8 of the plaint, it is specifically pleaded by the plaintiff that before filing of the company petition before the NCLT, defendant no. 2 availed loan facility from defendant no. 1 by making an application dated 7.10.2020 for the purpose of business expansion and in that application defendant nos. 3 and 4 were shown as co-borrowers thereby signing such application. Defendant nos. 3 and 4 in the said application for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here are specific instances and allegations of collusion and fraud even played by bank/defendant no. 1 while sanctioning the loan and that too without any proper resolution passed by the Board of Directors of the company. Therefore, averments in the plaint are 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. Similarly observations of both the Courts on the aspect of absence of specific pleadings regarding fraud and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocument attached to the plaint would clearly go to show that even the resolution passed by the Board of respondent no. 1 company on 8.11.2022 was considered to be prejudicial to the interest of the company per se and accordingly, it was stayed. Accordingly respondent nos. 2 and 3 therein were restrained from dealing with the assets of the company pending the disposal of the said matter. 51. The above averments as well as documents would clearly show that there are specific pleadings with regard to fraud and collusion between the bank as well as defendant nos. 3 and 4 and thus for that limited purpose of claim declaring loan facility agreement dated 29.11.2020 and consequently creating of Mortgage i.e secured assets is a fraud, certainly comes within Section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s filed and that defendant no. 1 had forcefully taken the possession on 21.8.2023 from the Administrator. 59. It is the contention of Mr Kantak that when the plaintiff approached DRT Mumbai with an application under Section 17 (1) of SARFAESI Act, the same was rejected on the ground that plaintiff has no locus to approach DRT. 60. It is the contention of Mr Kantak that application under Section 17 could be filed by any person including a borrower, aggrieved by any of the measures referred to in sub-Section (4) of Section 13 taken by the secured creditor. He submits that Section 13(4) of the SARFAESI Act gives powers to the secured creditor to take necessary steps in case the borrower fails to discharge his liability in full within the specified period. 61. It 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court. It is also not the case of the defendants that for the purpose of passing of such resolution as alleged, plaintiff was also present being one of the directors. Thus such contention on behalf of the defendants cannot be looked into. 68. Mr Desai appearing for the respondent no. 5 strongly contented that there is no point in allowing such plaint to retain since it would be futile exercise and even otherwise there is finding on the part of DRT that the plaintiff is not having any locus to challenge it. He would submit that plaintiff being one of the shareholders cannot claim ownership over the company and its assets and therefore, he has no locus even to challenge loan translation. 69. It is necessary to note here that the main contention of defendant no. 1/bank in filing 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hemicals (supra) of fraud as established within the parameters laid down in A. Ayyasamy (supra) ; a claim of discharge by a guarantor under Sections 133 and 135 of the Contract Act [Mardia Chemicals (supra)]; a claim of discharge by a guarantor under Sections 139, 142 and 143 of the Contract Act; Marshaling under Section 56 of the Transfer of property Act [J. P. Builders (supra)]; the Civil Court shall have jurisdiction. (F) Examples as indicated in para 22.3, are illustrative of the Civil Court's jurisdiction. (G) The principles laid down in para 33 (i) to (ix) of Sagar Pramod Deshmukh (supra) are in accordance with what we have discussed and held above." 72. Answers recorded in the above and more specifically (C ), (D) and (E) would clearly help the petitioners in the present proceedings. 73. The 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ination under challenge is based. Supervisory jurisdiction is not to correct every error of fact or even a legal flaw when the final finding is justified or can be supported. The High Court is not to substitute its own decision on facts and conclusion. The jurisdiction exercised is in the nature of correctional jurisdiction to set right grave dereliction of duty or flagrant abuse, violation of fundamental principles of law or justice. The power under Article 227 is exercised sparingly in appropriate cases, like when there is no evidence at all to justify, or the finding is so perverse that no reasonable person can possibly come to such a conclusion that the Court or Tribunal has come to. It is axiomatic that such discretionary relief must be exercised to ensure that there is no miscarriage of justice. 80. Applying the 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 se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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