Allowed

Mr. Sriram Chitturi v. Mrs. D Indrani

Karnataka HC28 Oct 2024RFA/2024/2018

Case brief

AI extract

What is this about?

Appeal against rejection of plaintiff's plaint seeking specific performance of a private treaty sale agreement with an asset reconstruction company, refund and damages, on grounds of SARFAESI jurisdictional bar. The High Court held a plaint cannot be rejected in part since the alternative compensation prayer is not barred by Section 34, restored the suit.

What did the court decide?

Trial Court's plaint-rejection order set aside; suit OS No.3496/2018 restored; interim order continues pending Trial Court review; R3 to be impleaded in suit; respondent No.1's IA closed with liberty

Mr. Sriram Chitturi Vs Mrs. D Indrani — Specific Performance | Karnataka HC (2024)

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RFA No.2024 of 2018

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 28^TH DAY OF OCTOBER, 2024

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PRESENT

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THE HON'BLE MR JUSTICE V KAMESWAR RAO

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AND

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THE HON'BLE MR JUSTICE C M JOSHI

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RFA NO. 2024 OF 2018

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BETWEEN:

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MR. SRIRAM CHITTURI, AGED ABOUT 42 YEARS, S/O. MR. CH.B.SUBRAHMANYAM, RESIDING AT NO.2, 9^TH CROSS, WILSON GARDEN, BANGALORE - 560 027.

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…APPELLANTS

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(BY SRI. JAI PRAKASH RAO, ADVOCATE)

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AND:

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MRS. D. INDRANI. AGED ABOUT 51 YEARS, W/O. MR. E. MADHAV, RESIDING AT NO.421,

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3^RD CROSS, WILSON GARDEN, BANGALORE - 560 027.

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EDELWELSS ASSET

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RECONSTRUCTION COMPANY LTD.,

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RFA No.2024 of 2018

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OFFICE AT CST ROAD, KALINA, MUMBAI - 400 098, REPRESENTED BY THE VICE PRESIDENT MR. SHIVANGI VARMA.

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MR. SANJAY BHANSALI, MAJOR, FATHER’S NAME NOT KNOWN, NO.38, 9^TH ‘B’ CROSS, WILSON GARDEN, BANGALORE - 560 027.

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…RESPONDENTS

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(BY SRI. A. RAVISHANKAR FOR C/R1, SMT. ANUPARNA BORDOLOI, ADVOCATE FOR R2, SRI. GAJENDRA.S, ADVOCATE FOR R3)

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THIS RFA IS FILED UNDER SECTION 96 OF CPC AGAINST THE ORDER DATED 07.09.2018 PASSED ON IA NO.III IN OS NO.3496/2018 ON THE FILE OF THE LIX ADDL. CITY CIVIL AND SESSIONS JUDGE, BANGALORE ALLOWING THE IA NO.III FILED BY RESPONDENT NO.2 UNDER ORDER VII RULE 11 READ WITH SECTION 151 OF CPC FOR REJECTION OF PLAINT, ETC.

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THIS RFA HAVING BEEN RESERVED FOR JUDGMENT ON 26.07.2024, COMING ON FOR PRONOUNCEMENT THIS DAY, V KAMESWAR RAO J., DELIVERED THE FOLLOWING:

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CORAM: THE HON'BLE MR JUSTICE V KAMESWAR RAO AND THE HON'BLE MR JUSTICE C M JOSHI

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RFA No.2024 of 2018

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CAV JUDGMENT

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(PER: THE HON'BLE MR JUSTICE V KAMESWAR RAO)

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This regular first appeal (RFA) arises from the order dated 07.09.2018 passed by the LIX Addl. City Civil and Sessions Judge, Bengaluru City (henceforth called as ‘Trial Court’) on an application being IA No.III in OS No.3496/2018, which is an application filed by the respondent No.2 herein under Order VII Rule 11 read with Section 151 of CPC for rejection of the plaint filed by the appellant herein, whereby the application is allowed and the plaint has been rejected.

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Some of the facts which are required to be noted for the purpose of deciding this appeal are, that one M/s Dasappa had on 13.03.2006 availed a term loan facility from Lakshmi Vilas Bank for a sum of Rs.15,00,00,000/-. On 07.04.2006, M/s Dasappa deposited the title deeds of property bearing No.27, situated at 9^th ‘B’ Cross, Park Area, Wilson Garden, Bengaluru - 560027 with the Lakshmi Vilas Bank. On 31.03.2007, the loan account of M/s Dasappa was classified as Non-Performing Asset

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(NPA). On 25.02.2008, a lease deed was entered into between the respondent No.1 herein and Bagadia Estates Developers represented by the appellant who was inducted as a tenant. On 29.03.2010, Lakshmi Vilas Bank issued a demand notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’ for short) demanding payment of Rs.34,27,57,065/-. On 30.04.2010 after receipt of the demand notice, the partners of M/s Dasappa sent their objections to the demand notice through their Advocate under Section 13(3A) of SARFAESI Act. On 11.02.2011, Lakshmi Vilas Bank assigned the account dues of M/s Dasappa to Edelweiss Asset Reconstruction Company Ltd. (respondent No.2 herein) by way of assignment agreement. On 22.12.2012, the Court concerned passed an order in C.Misc.No.9117/2011 under Section 14 of the SARFAESI Act to take physical possession of the schedule property. It is the case of the appellant that a letter of offer was issued by him to respondent No.2 to purchase the schedule property for a sum of Rs.2,25,00,000/- and

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offered to pay Rs.50,00,000/- upfront and attached a cheque for a sum of Rs.50,00,000/-. On 01.02.2014, the letter of acceptance, confirming sale of schedule property, was issued by respondent No.2 to the appellant on paying Rs.50,00,000/- and on a condition that the remaining amount of Rs.1,75,00,000/- to be paid within 15 days i.e., on or before 15.02.2014. On 14.02.2014, the appellant claims to have sent an e-mail stating he is ready with the balance amount of Rs.1,75,00,000/- and is ready to do the registration of the property on 29.05.2014. Respondent No.1 filed SA No.31/2014 against respondent No.2 before the DRT challenging the sale of the schedule property and the same was dismissed. On 30.01.2018, an order has been passed in C.Misc. No.3564/2018 under Section 14 of the SARFAESI Act. On 28.02.2018, order was passed in the C.Misc. to appoint a Court Commissioner to take physical possession of the schedule property. On 09.03.2018, notice was issued by the Court Commissioner to hand over the vacant possession of the schedule property. On 14.10.2020, respondent No.2-Office issued public auction notice in respect of the schedule property

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and the same was published in newspapers both vernacular and English. On 15.10.2020, the auction sale notice was issued by respondent No.2 to respondent No.1 with respect to the schedule property. In the said auction, one Sanjay Bhansali i.e., respondent No.3 herein became the highest bidder for the property and in that regard, respondent No.2 had, on 19.11.2020, issued a letter confirming the payment made by Sanjay Bhansali. On 23.11.2020, the appellant’s Advocate communicated regarding the stay order passed in RFA No.2024/2018 on 13.08.2020. Respondent No.2 filed an application in the suit being IA No.1/2024 under Section 151 of CPC for vacating the stay. A reply to the same has been filed by the appellant.

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Submissions :

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The submission of Sri. N.Jai Prakash Rao, learned

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counsel for the appellant is, the appellant is neither a borrower nor a guarantor of the loan sanctioned by Lakshmi Vilas Bank to the consortium. The appellant was a tenant of the schedule property inducted by the

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respondent No.1 on 25.02.2008. He has been regularly paying the monthly rent to respondent No.1. He was not made aware of the fact that respondent No.1 had offered the schedule property as security to the loan sanctioned by Lakshmi Vilas Bank. He was also not aware of the loan sanctioned by Lakshmi Vilas Bank has been declared NPA. Respondent No.2 served the possession notice of the schedule property which was in possession of the appellant as a tenant.

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According to him, at the time of service of possession notice, the Authorized Officer of respondent No.2 offered to sell the schedule property to the appellant since the appellant was in possession of the Schedule property and the sale consideration was finalized at Rs.2,25,00,000/- and the Authorized Officer executed a private treaty agreement dated 01.02.2014 and the appellant had paid Rs.50,00,000/- advance by way of a demand draft dated 01.02.2014 and the said demand draft had been encashed, which has resulted in a concluded contract between the appellant and respondent No.2 in

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respect of Schedule property and the sale has been confirmed. In fact, it is his submission that the appellant had addressed an e-mail dated 10.02.2014 intimating the respondent No.2 that the appellant is ready with the balance payment of Rs.1,75,00,000/- and to share the draft sale deed and confirm the registration. He lay stress on the fact that the possession of the Schedule property continued with the appellant after signing of the private treaty. Thereafter, no communication or any acknowledgment of the e-mail dated 10.02.2014 was received. Later it transpired that respondent No.1 had filed SA No.131/2014 before the Debt Recovery Tribunal, Bengaluru (‘DRT’ for short) regarding the sale of schedule property, which was dismissed on 29.05.2014 and subsequently, SA No.168/2017 was filed by M/s Inbev India International Ltd. which was dismissed on 19.06.2017. He also submits that even the appellant had filed SA No.69/2018 before the DRT against the possession notice, wherein respondent No.2 had filed a counter-affidavit. The prayer in SA No.69/2018 was primarily to quash the notice dated 09.03.2018 issued by

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respondent No.2 and to restrain respondent No.2 from taking possession of the schedule property. He do concede to the fact that the DRT has dismissed SA No.69/2018 vide order dated 23.04.2018. He concedes to the fact that no appeal has been filed by the appellant challenging the said order passed by the DRT. His submission is that the DRT’s observation that the appellant has not chosen to initiate any action and apparently allowed his claim for any refund from the respondent to be barred by law of limitation is uncalled for, as by holding so, the DRT has exceeded its jurisdiction in recording any observation regarding either Civil Court’s jurisdiction or on the question of limitation. According to him, the application before the DRT was neither for specific performance nor for refund of the amount, but the application was filed under Section 17 of the SARFAESI Act against the possession notice. He lay stress on the fact that respondent No.2 had in its counter-affidavit, taken a stand that, the appellant can only assert on the basis of such letter, a right for specific performance had accrued and admittedly, the appellant had not filed any

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proceedings for specific performance. According to him, the respondent No.2 has also stated in its counter-affidavit that the appellant had not claimed any refund. He stated that in view of the stand taken by respondent No.2 and the limited prayer before the DRT under Section 17 of the SARFAESI Act and the application is against the possession notice, the appellant had rightly filed the aforesaid suit before the Trial Court. He stated that the appellant has rightly invoked the jurisdiction of the Civil Court as the DRT do not have the jurisdiction nor such prayers were made before the DRT as have been made in the suit. In that sense, all matters of civil nature exclusively those to be tried by the DRT under Section 17, shall be barred under Section 34 of the SARFAESI Act. In fact, when the civil rights of a person other than the borrower or guarantor are involved, the Civil Court has the jurisdiction. He also submits that allowing the application filed by respondent No.2 is clearly erroneous. In fact, the Trial Court has grossly misapplied the law regarding the original jurisdiction of the Civil Court and misinterpreted the provisions of Section 17 read with Section 34 of the

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SARFAESI Act which is a special enactment and the preamble of the SARFAESI Act is very clear that the said Act is enacted where the jurisdiction of Civil Court is barred only in matter which the DRT or the Appellate Tribunal are empowered to determine and not a blanket statement for the Civil Court not to entertain those matters coming squarely under Civil jurisdiction. In support of his submissions, he has relied upon the judgment of this Court in R. Venkatapathy -Vs.- Bank of India, Zonal Office, Bangalore and Others [AIR 2014 KAR 33] , judgments of Calcutta High Court in Frontline Corporation Ltd. -Vs.- Punjab and Sind Bank [AIR 2017 CALCUTTA 172] , Delta International Limited and Others -Vs.- Smt. Nupur Mitra and Others [AIR 2018 CALCUTTA 8] and ICICI Bank Ltd. - Vs.- Coventry Coil-O-Matic (Haryana) [(2005) 2 CALLT 77 HC] , judgments of the Bombay High Court in Mr. Alex Kuruvilla -Vs.- Oriental Bank of Commerce and Others [Suit No.1910/2009 , decided on 31.01.2013 ] and Bank of Baroda -Vs.- Gopal Shriram Panda and Another [CRA No.29/2011 & connected

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cases, decided on 25.03.2021 ] and judgment of the Supreme Court in Dahiben -Vs.- Arvindbhai Kalyanji Bhanusali (Gajra) and Others [(2020) 7 SCC 366] . He also opposes the application filed by respondent No.1 to release the schedule property on payment of Rs.3,55,00,000/- as the application SA No.13/2014 filed by respondent No.1 has been dismissed.

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On the other hand, Sri. A.Ravishankar, learned counsel for respondent No.1 would submit that respondent No.1 is the owner of the schedule property which is situated at No.27, 9^th ‘B’ Cross road, Park Area, Wilson Garden, Bengaluru - 560027, which was offered as collateral security by the Partnership Firm M/s. D.Dasappa to the creditor Lakshmi Vilas Bank for the loan availed by the said Partnership Firm. There were several immovable properties offered as security for the loan, in addition to other guarantees for the availment of the said loan. The loan availed became sticky and was classified as NPA pursuant to which the creditor Lakshmi Vilas Bank assigned their debt in favour of the respondent No.2. He

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stated that pursuant to the assignment, recovery actions were initiated. The schedule property was also brought for sale by respondent No.2 without the consent of respondent No.1 and a private treaty was entered into by respondent No.2 with the appellant. The schedule property was proposed to be purchased by the appellant as claimed by him, from the Asset Reconstruction Company for a consideration of Rs.2,25,00,000/- and paid a sum of Rs.50,00,000/-, as claimed by him in his communication; however, consent or concurrence of respondent No.1 was not taken for the alleged transaction. Respondent No.2 again brought the property for a private sale, wherein it appears that the respondent No.3 has paid Rs.87,00,000/- towards sale of the house belonging to respondent No.1. According to him, none of these transactions were completed as balance amounts were not deposited. No permission was sought before this Court to deposit the balance sale consideration by any of the proposed purchasers. He refers to the suit filed by the appellant for specific performance, contending that he entered into an agreement with respondent No.2 on

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01.02.2014 and that they should sell the property to him. He also stated that upon suggestion by this Court for an out of Court settlement, respondent No.1 moved the respondent No.2 and a detailed letter from them dated 30.01.2023 was received by respondent No.1 indicating that they would give up their claim over the schedule property, provided respondent No.1 is ready to pay a sum of Rs.3,55,00,000/-. The respondent No.1 has filed an application before this Court on 04.03.2023 requesting the Court to permit her to deposit the said money.

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He stated that the letter of the respondent No.2 said to have been written to the appellant is not a concluded contract and therefore, the appellant does not get any right to enforce the said letter. He also stated that the respondent No.2 has already communicated to the respondent No.1 on 30.01.2023 informing that they are ready to receive Rs.3,55,00,000/- and consequently, the claim of the appellant and the respondent No.3 cannot be sustained as there is no concluded contract with either

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of them.

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Sri. Ravishankar has also stated that the

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communication of the respondent No.2 dated 30.01.2023 would clearly indicate that they are prepared to issue ‘no dues letter’ with respect to the schedule property upon receipt of Rs.3,55,00,000/- from respondent No.1 as per clause-10(xii) of the said communication. Therefore, any amount to be repaid either to the appellant or to the respondent No.3 herein will have to be borne by the respondent No.2 alone, as they are the beneficiaries of the said receipt of money. According to him, to have a complete disposal of the dispute between the parties and to reach a logical conclusion, it is necessary that this Court direct the respondent No.2 to receive money from the 1^st respondent, as stated above, and thereafter to return the money to the appellant and the respondent No.3 and release the property in favour of the 1^st respondent, in the ends of equity and justice. He has relied upon the judgment of the Supreme Court in the case of Cellular

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Operators Association of India and Others -Vs.Union of India and Others [(2003) 3 SCC 186] to contend that if the decision is made other than what the

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statute contemplates, the same would be in excess of its jurisdiction. For similar proposition, he has also relied upon the judgment of the Supreme Court in the case of

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Union of India -Vs.- Tarachand Gupta and Bros.

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[1971 (1) SCC 486] . He has also relied upon the judgment of House of Lords in the case of Anisminic Ltd. -Vs.Foreign Compensation Commission and

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Another to contend that the Courts or Tribunals cannot exceed their jurisdiction beyond permissible limits under the statutes.

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According to him, in the instant case, the order of the DRT so far relating to limitation and the correctness or otherwise of the agreements are outside the scope of Section 34 of the SARFAESI Act, as the statute permits the DRTs to adjudicate regarding measures taken by the creditors under Section 13 of the SARFAESI Act only. Therefore, there is an error of jurisdiction amounting to transgression of civil rights.

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Sri. Abhinav.R, learned counsel appearing for respondent No.2 would justify the order passed by the

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Trial Court in as much as, as per Section 34 of the SARFAESI Act, there is an express bar to the jurisdiction of the Civil Court, making it clear that no Civil Court will have jurisdiction to entertain any suit or proceedings in respect of any matter which a DRT or the Appellate Tribunal is empowered by or under the Act to determine. The expression ‘in respect of any matter’ includes ‘measures’ taken under Section 13(4) of the SARFAESI Act. In this regard, he has relied upon the judgment of the Supreme Court in the case of Sree Anandhakumar Mills Limited -Vs.- Indian Overseas Bank and Others and connected appeal [(2019) 14 SCC 788] , more specifically paragraphs No.26 and 28 thereof.

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That apart, Sri. Abhinav has also stated that Section 35 of the SARFAESI Act makes a provision whereby the provisions of the Act shall have effect notwithstanding anything inconsistent contained in any other law for the time being in force or any instrument having effect by virtue of any such law. It was his submission that Section 17 of the SARFAESI Act provides a

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remedy whereby any person aggrieved by any measures taken by the secured creditor under Chapter-III may make an application to the DRT. Section 17(4) specifies that if the DRT declares the recourse taken by any secured creditor under Section 13(4) is in accordance with the provisions of the Act/Rules, no interference is called for. The expression ‘any person’ includes the appellant in the present appeal. This according to him, is in view of the judgment of the Supreme Court in the case of Jagdish Singh -Vs.- Heeralal and Others [(2014) 1 SCC 479] .

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Sri. Abhinav further stated that the action of forfeiting the part amount paid by the defaulting purchaser under Rule 9(5) of the SARFAESI Act constitutes a measure under Section 13(4). The grievance of any person in relation to such measure has to be adjudicated by DRT which has been rightly done. According to him, such grievance cannot be addressed or brought before the Civil Court. In this regard, he has relied upon the judgment of the Supreme Court in the case of Agarwal Tracom Private Limited -Vs.- Punjab National Bank

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and Others [(2018) 1 SCC 626] . Additionally, he stated that if any such amount is required to be forfeited, the same cannot be scrutinized wearing the glasses of misplaced sympathy. In this regard, he has relied upon the judgment of the Supreme Court in the case of State Bank of India -Vs.- C. Natarajan and Another [2023 SCC OnLine SC 510] . That apart, it is his submission that Section 18 of the SARFAESI Act provides for an appeal to the Appellate Tribunal which can be preferred by any person aggrieved by any order of the DRT under Section 17. Admittedly, the appellant herein has not challenged the order passed on the application filed by him under Section 17 of the SARFAESI Act before the DRAT.

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The related submission of Sri. Abhinav is in view of the above, the jurisdiction of the Civil Court in respect of suit filed by the appellant for specific performance to enforce the sale agreement, is without jurisdiction. According to him, if the sale agreement/sale transaction is prior to the seller/owner offering the property in question as a security interest in relation to any loan transaction or

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financial facility, then the jurisdiction of the Civil Court is not barred to consider the claim for enforcement of such sale agreement. He also stated that if the subject matter of the sale transaction had been offered as a security interest within the meaning of Section 2(zf) of the SARFAESI Act, then the sale transaction is subject to the rights of the secured creditor [as defined under Section 2(zd)] and therefore, in relation to such properties, the jurisdiction of the Civil Court would be barred once the secured creditor initiates action under Chapter-III/Section 13 of the SARFAESI Act. This would also be necessary to protect the interest of the secured creditor and to preserve the purpose and objectives behind the SARFAESI Act.

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Sri. Abhinav has also justified the impugned order passed by the Trial Court, wherein it is stated that (i) the appellant has clearly admitted in the plaint that he had approached the DRT when he came to know about the refusal of the 2^nd defendant to conclude the sale transaction when the notice under Section 13(4) of the SARFAESI Act was affixed on the property; (ii) the

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appellant has further stated in the plaint that he had filed SA No.69/2018 before the DRT which was rejected by an order dated 23.04.2018.

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Similar submission was made by Sri. Abhinav to contend that the appellant has admitted that respondent No.2 has taken over the possession of the schedule property. It was also his submission that the cause of action according to the appellant, arose on 01.02.2014 and as such, the prayer (c) to direct the defendants to deliver possession of the schedule property is barred by limitation. That apart, he has also relied upon the following observations made by the DRT while rejecting the application of the appellant:

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(i) The agreement is non-est in the eyes of law;

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(ii) The period of limitation prescribed for enforcement of the agreement or the refund is barred by the law of limitation;

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(iii) That the respondent has forfeited the advance amount and cancelled the agreement as the

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appellant has failed to pay the balance sale consideration.

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Thus, according to him, in the absence of any challenge to the order of the DRT, the order dated 23.04.2018 has attained finality. As such, the matter once adjudicated, is not maintainable before a Civil Court and is liable to be dismissed. In this regard, he has relied upon the judgment of the Supreme Court in the case of Charu Kishor Mehta -Vs.- Prakash Patel and Others [2022 SCC OnLine SC 1962] .

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He has also stated that the suit is undoubtedly barred under the provisions of the SARFAESI Act in the present context on the ground: (a) schedule property has been offered as a security interest on the basis of which the respondent No.2/secured creditor has extended loan/financial facility; (b) the proposal to sell the schedule property is in furtherance of the measures initiated by respondent No.2 pursuant to Section 13(4) of the SARFAESI Act and Rule 8(5) of the SARFAESI Rules; (c) the appellant having put forward his claim as prospective

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buyer and his possession in part performance, the same was rejected by the DRT which had attained finality; (d) the prayers sought in the suit are nothing but a second round of litigation after having faced the ignominy of rejection of his claim before the DRT; (e) the prayers sought for, interfere with the rights of the secured creditor to proceed against the schedule property (security interest) and the respondent No.2 would be required to deliver back possession of the schedule property which is secured under Sections 13 and 14 of the SARFAESI Act; and (f) the claim of the appellant has been found to be barred by law.

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He stated, Article 54 of the Limitation Act deals with limitation in relation to action for specific performance. The said Section comprises of two parts and the limitation begins to run either from the date fixed for specific performance or the date on which the plaintiff has notice of the defendant’s refusal to perform as per the contract. In the instant case, admittedly, the sale was required to be concluded on 15.02.2014. Therefore, the

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first limb of Article 54 would kick in as period of limitation would commence from 16.02.2014. The claim for specific performance or alternative reliefs such as refund/damages as envisaged under the Specific Relief Act, 1963 were required to be initiated on or before 15.02.2017. Therefore, the Trial Court was absolutely right in holding that the prayers for specific performance and other alternative/consequential prayers such as refund, damages, possession, etc., are all barred by limitation. In the end, he stated, it is well settled law that the right to choose forum for redressal of grievance does not permit choice of two forums for the same reliefs. He also stated that the judgments relied upon by Sri. Rao have no applicability in the facts of this case. He stated that clever drafting creating illusions of cause of action are not permitted in law and frivolous litigation is required to be immediately terminated/put to an end. In this regard, he has relied upon the judgment of the Supreme Court in the case of T. Arivandandam -Vs.- T.V. Satyapal and Another [(1977) 4 SCC 467] . He seeks dismissal of the appeal.

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The respondent No.3, who has been impleaded, has also filed his written submissions through his counsel viz., Sri. S.Gajendra. According to the counsel, pursuant to respondent No.2 issuing a public notice for e-auction of the sale of schedule property during the month of October 2020, respondent No.3 had participated in the same. The respondent No.2 had confirmed that the respondent No.3 is the highest bidder for the sale of secured assets mortgaged by the 1^st respondent for the financial assistance availed by M/s. Dasappa under the provisions of the SARFAESI Act read with Security Interest (Enforcement) Rules, 2002 (‘Enforcement Rules’ for short) at a price of Rs.3,55,00,000/-. The respondent No.3 paid a sum of Rs.35,00,000/- to the respondent No.2 as earnest money deposit (EMD) to participate in the e-auction. Respondent No.3 had also deposited Rs.53,75,000/- with the respondent No.2 on 18.11.2020, in total Rs.88,75,000/- which is 25% of the bid amount in terms of the bid document. Respondent No.2 has issued the receipt dated 19.11.2020 for the same and also directed to arrange for the balance amount of

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Rs.2,66,25,000/- on or before 04.12.2020 so as to complete the transaction. The respondent No.2 had not informed the disputes between the 1^st and the respondent No.2 and also the pendency of the present appeal till March 2021. The schedule property is the adjacent property of the respondent No.3. Hence, the respondent No.3 had decided to participate in the auction. After confirmation that the respondent No.3 is the highest bidder, he sold an industrial land situated at Kumbalagodu Village, Kengeri Hobli, Bengaluru South Taluk, Bengaluru District for lesser value in order to purchase the schedule property. The respondent No.3 had deposited a sum of Rs.1,60,00,000/- as capital gains in the bank account. A reference is also made in the written submissions that the respondent No.3 had sold the equity shares for an amount of Rs.48,33,955/against the market value of Rs.1,62,00,000/-. Since the adjacent property of the schedule property belongs to the respondent No.3, he had decided to demolish the existing structure and planned to construct office-cum-residence in the schedule property as well as the neighbouring property belonging to him. The

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respondent No.3 had insisted for the registration of the schedule property with the respondent No.2 from December 2020 to March 2021, but the respondent No.2 had not informed about the pendency of RFA before this Court to the respondent No.3. He would state that the respondent No.3 being a bonafide purchaser in the auction sale, has to be treated differently than a decree holder purchasing such properties. In this regard, he has relied upon the judgment of the Supreme Court in the case of

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Ashwin S.Mehta and Another -Vs.- Custodian and Others [(2006) 2 SCC 385] , more specifically paragraph No.70 thereof. He stated that the respondent No.3 has also got vacated the tenants in his existing building as he has plans to construct new building along with the schedule property. His submission is, in view of the above, the rights of the respondent No.3 as a successful bidder in an auction, should be protected and also respondent No.2 should be directed to issue sale certificate in respect of the schedule property in favour of the respondent No.3. He seeks dismissal of the appeal with costs.

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Analysis:

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Having heard the learned counsel for the parties and perused the record, the short issue which arises for consideration is, whether the Trial Court is right in allowing the application filed by respondent No.2 herein under Order VII Rule 11 read with Section 151 of CPC, thereby rejecting the plaint filed by the appellant herein?

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The application filed by respondent No.2 was primarily on two grounds:

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(i) that the suit is barred in law in view of Section 34 of

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the SARFAESI Act;

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(ii) it is barred by law of limitation.

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The plea of respondent No.1 in the application in respect of (i) above was accepted by the Trial Court and answered in the affirmative. Whereas ground No.(ii) is concerned, the same was answered in negative i.e., against the applicant/respondent No.2 as it has held that, the prayers made are within limitation.

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The law in respect of scope of application filed under Order VII Rule 11 of CPC is well settled. The Trial Court has rightly captured the legal position that the averments made in the plaint are only required to be looked into while deciding the application Order VII Rule 11 of CPC.

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It may be stated, the remedy under Order VII Rule 11, CPC is an independent and special remedy wherein the Court is within its power to dismiss a suit at the threshold without proceeding to hold trial, on the basis of the evidence adduced, if it is satisfied that the action should be terminated on any of the ground contained in the said provision.

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It is also settled position that such power conferred on the Court leading to termination of a civil action, has to be strictly adhered to.

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In the case in hand, the Trial Court has accepted the plea of respondent No.2 herein by interalia holding that the suit is barred under Section 34 of the SARFAESI Act. In other words, the plaint has been rejected under

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Order VII Rule 11(d), CPC and not under any other provisions of Order VII Rule 11 of CPC.

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At this stage, it need to be stated here that it is settled law that a plaint cannot be rejected in part (Ref: Geetha and Others -Vs.- Nanjundaswamy and Others reported in 2023 SCC OnLine 1407 ). It follows, for allowing an application under Order VII Rule 11 of CPC, it must be held that all the prayers sought in the suit are barred by law.

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Having said that, it is necessary to reproduce the prayers made by the appellant in the plaint:

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a) To grant a decree of Specific Performance of the suit agreement dated 01.02.2014 by directing the defendants jointly to execute the sale deed within the time to be stipulated by this Court in favour of the plaintiff against the receipt of the balance sale consideration by the 2^nd defendant; for and on behalf of the 1^st defendant after allowing lawful expenses incurred by the plaintiff.

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b) That in the event of the failure on the part of the defendants to execute the sale deed within the time to be stipulated by this court against the payment of the balance sale consideration after defraying lawful expenses and court costs, this

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court be pleased to permit the plaintiff to deposit the balance sale consideration in Court and to execute the sale deed on behalf of the defendants in terms of the suit agreement contract dated 01.02.2014 Urough the Court Commissioner,

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c) To direct the defendants to deliver possession of the schedule property to the plaintiff within the time to be stipulated by this court, failing which the court be pleased to appoint a Court Commissioner to take possession of the schedule property by the plaintiff.

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d) That if for any reason this court were to come to the conclusion that not withstanding that the plaintiff has established the case of Specific Performance, but in terms of equities, the plaintiff is not entitled for obtaining the Specific Performance of the suit agreement dated 01.02.2014, this court be pleased to grant a decree against the defendant No.2 for a sum of Rs.50,00,000/- (Rupees fifty lakhs only) being the advance amount paid under the suit agreement and further to grant a compensation of Rs.1,50,00,000/- (Rupees one Crore fifty lakhs only) against the 2^nd defendant; and to award interest at the rate of 24% on the amount so awarded from the date of the suit till the date of realization on the amount awarded.

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e) Then the event of this court were to grant anу mоnеу decree, this court be pleased to order

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charge on the schedule property under Section 100 of the Transfer of Property Act until the due discharge of the decreetal amount.

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f) To grant such other relief/s

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g) To award costs of the above suit.”

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The prayers above, reveals that the suit has been filed for specific performance of agreement dated 01.02.2014; for execution of the sale deed; possession; recovery of advance amount and further grant of compensation of Rs.1,50,00,000/-.

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The appellant had approached the DRT by filing an application being SA No.69/2018 under Section 17(1) of the SARFAESI Act challenging the possession notice dated 09.03.2018. The appellant had not challenged either the measures taken by respondent No.2 for auctioning the property nor he has sought amendment of the prayers in the application seeking/challenging sale transaction, forfeiture of amount. On a reading of Section 17 of SARFAESI Act, which we reproduce as under, it is clear that it provides for a remedy to “any person” also who is aggrieved by the measures taken by the secured

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creditor under Section 13(4)/enforcement rules in relation to the secured assets of the borrower. These measures include the issuance of demand notice, sale of immovable property, confirmation of sale, issuance of sale certificate, delivery of possession and also forfeiting the deposit:

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“ 17. Application against measures to recover secured debts . — (1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter,1 [may make an application along with such fee, as may be prescribed,] to the Debts Recovery Tribunal having jurisdiction in the matter within fortyfive days from the date on which such measure had been taken

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Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.

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Explanation.—For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section.

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(1A) An application under sub-section (1) shall be filed before the Debts Recovery Tribunal within the local limits of whose jurisdiction—

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(a) the cause of action, wholly or in part, arises;

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(b) where the secured asset is located; or

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(c) the branch or any other office of a bank or financial institution is maintaining an account in which debt claimed is outstanding for the time being.

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(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in subsection (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.

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(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management or restoration of possession, of the secured assets to the borrower or other aggrieved person, it may, by order,—

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(a) declare the recourse to any one or more measures referred to in sub-section (4) of section 13 taken by the secured creditor as invalid; and

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(b) restore the possession of secured assets or management of secured assets to the borrower or such other aggrieved person, who has made an application under subsection (1), as the case may be; and

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(c) pass such other direction as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of section 13.

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(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under subsection (4) of section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub-section (4) of section 13 to recover his secured debt.

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(4A) Where—

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(i) any person, in an application under subsection (1), claims any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy,—

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(a) has expired or stood determined; or

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(b) is contrary to section 65A of the Transfer of Property Act, 1882 (4 of 1882); or

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(c) is contrary to terms of mortgage; or

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(d) is created after the issuance of notice of default and demand by the Bank under subsection (2) of section 13 of the Act; and

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(ii) the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) of clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act.

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(5) Any application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application:

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Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1).

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(6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub-section (5), any part to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for

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expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal.

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(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder.”

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The Section 34 of the SARFAESI Act, which we

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reproduce as under, contemplates no Civil Court can hear any suit or proceedings related to matters that DRT or the Appellate Tribunal is empowered to decide:

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“ 34. Civil court not to have jurisdiction .—

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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 this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993).”

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The issue before the Trial Court was whether the

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appellant should have approached the DRT for the prayers made in the suit.

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Sri. Abhinav’s submission is that the prayer for specific performance is primarily made to enforce a sale agreement dated 01.02.2014. According to him, in the absence of challenge to the sale transaction/forfeiture of the amount and even to the order in SA No.69/2018 filed by the appellant challenging the notice dated 09.03.2018, the same having attained finality, the prayer for specific performance cannot be entertained by the Civil Court as the sale of property is a measure contemplated under Section 13(4)/enforcement rules. It was his submission that, forfeiture of advance for which a prayer for refund has been made by the appellant in the suit would also be the subject matter before the DRT and as such, the said prayer is also hit by Section 34 of the SARFAESI Act. The submissions of Sri. Abhinav though are appealing on a first blush, but on a deeper consideration it is noted, not all the prayers as have been made by the appellant in the suit

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would be hit by Section 34 of the SARFAESI Act. This we say so because, the appellant has, in the alternative to the prayer for specific performance, sought compensation [prayer (d)], which is a prayer akin to damages. It is not the submission of Sri. Abhinav, that if the appellant had challenged the sale transaction/forfeiture of advance, he could have also sought compensation/damages before the DRT. In other words, the prayer for compensation/ damages could not have been sought before the DRT. It follows, the claim for compensation in alternative, could only be sought before the Civil Court, even if other prayers for specific performance, possession, refund could be claimed before DRT. In that sense, the Trial Court could not have rejected the suit by invoking Order VII Rule 11(d) of CPC as it is well settled law that a Court while considering an application under Order VII Rule 11 of CPC, cannot reject a plaint in part even if some of the prayers made by the plaintiff are hit by the provisions of law. In this regard, we refer to the following paragraph of the judgment of the Supreme Court in the case of Geetha and Others (supra):

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“12. There is yet another reason why the judgment of the High Court is not sustainable. In an application under Order VII Rule 11, CPC a plaint cannot be rejected in part. This principle is well established and has been continuously followed since the 1936 decision in Maqsud Ahmad v. Mathra Datt & Co. [AIR 1936 Lah 1021]. This principle is also explained in a recent decision of this Court in Sejal Glass Ltd. v. Navilan Merchants (P) Ltd. [(2018) 11 SCC 780], which was again followed in Madhav Prasad Aggarwal v. Axis Bank Ltd. [(2019) 7 SCC 158]. The relevant portion of Madhav Prasad (supra) is extracted hereinunder:

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“10. We do not deem it necessary to elaborate on all other arguments as we are inclined to accept the objection of the appellant(s) that the relief of rejection of plaint in exercise of powers under Order 7 Rule 11(d) CPC cannot be pursued only in respect of one of the defendant(s). In other words, the plaint has to be rejected as a whole or not at all, in exercise of power under Order 7 Rule 11(d) CPC. Indeed, the learned Single Judge rejected this objection raised by the appellant(s) by relying on the decision of the Division Bench of the same High Court. However, we find that the decision of this Court in Sejal Glass Ltd. [Sejal Glass Ltd. v. Navilan Merchants (P) Ltd., (2018) 11 SCC 780 : (2018) 5 SCC (Civ) 256] is directly on the point. In that case, an application was filed by the defendant(s) under Order 7 Rule 11(d) CPC stating that the plaint disclosed no cause of action. The civil court held that the plaint is to be bifurcated as it did not disclose any cause of action against the Director's Defendant(s) 2 to 4 therein. On that basis,

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the High Court had opined that the suit can continue against Defendant 1 company alone. The question considered by this Court was whether such a course is open to the civil court in exercise of powers under Order 7 Rule 11(d) CPC. The Court answered the said question in the negative by adverting to several decisions on the point which had consistently held that the plaint can either be rejected as a whole or not at all. The Court held that it is not permissible to reject plaint qua any particular portion of a plaint including against some of the defendant(s) and continue the same against the others. In no uncertain terms the Court has held that if the plaint survives against certain defendant(s) and/or properties, Order 7 Rule 11(d) CPC will have no application at all, and the suit as a whole must then proceed to trial.

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12. Indubitably, the plaint can and must be rejected in exercise of powers under Order 7 Rule 11(d) CPC on account of non-compliance with mandatory requirements or being replete with any institutional deficiency at the time of presentation of the plaint, ascribable to clauses (a) to (f) of Rule 11 of Order 7 CPC. In other words, the plaint as presented must proceed as a whole or can be rejected as a whole but not in part…”

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(emphasis supplied) ”

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The only way forward is, the issues need to be framed,

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including the issue of maintainability, which shall be a preliminary issue. In fact, the reliance placed by

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Sri. Abhinav on the judgment of the Supreme Court in the case of Jagdish Singh (supra) is a case, where the order impugned for before the Supreme Court was an order of possession granted by the Court below under Order VII Rule 11, but on a finding on preliminary objection, after framing of the issues including that the suit is barred under the provisions of law i.e., Order VII Rule 11(d). It is not to say that respondent No.2 cannot plead in the facts, the appellant shall not be entitled to compensation/damages, but such a plea is only available while rendering the decision in the suit and not on an application under order VII Rule 11, CPC in view of the above position of law.

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The issue can be looked from another angle i.e., if the appellant had filed a suit claiming damages without the prayers for specific performance, refund of money or possession, the suit would have been maintainable as a claim for compensation/damages shall not lie before the DRT being not a measure contemplated under Section

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13(4) of the SARFAESI Act or under the enforcement rules.

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Though Sri. Abhinav had also made submissions that the prayers sought are beyond limitation, suffice to say on that the Trial Court has held that, the prayers including that of compensation are within limitation. The said finding is not under challenge by the respondent No.2 and as such, need to be rejected.

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Insofar as the judgments relied upon by Sri.

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Abhinav are concerned, in the case of Sree Anandhakumar Mills Limited (supra), the Supreme Court was concerned with facts wherein respondent No.2 has filed a suit for partition. It was held that the bar under Section 34 of the SARFAESI Act shall affect the maintainability of the suit. The Supreme Court followed its earlier judgment in the case of Jagdish Singh (supra) and set aside the order of the High Court by granting liberty to respondent No.2 to approach the DRT. The said judgment has no applicability to the facts of this case and also in view of our findings above.

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In the case of Agarwal Tracom Private

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Limited (supra), the issue was on the maintainability of the writ petition filed by the appellant challenging the auction procedure and forfeiture of appellant’s deposit money. The writ petition was dismissed by the Single Judge, which order was confirmed in an intra-court appeal. The Supreme Court has dismissed the appeal by granting liberty to the appellant to approach the DRT. Suffice to state that, the judgment has no applicability to the issue which arises for consideration in this appeal and also in view of our findings above.

¶239

In the case of Charu Kishor Mehta (supra), the

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SLP was filed by the petitioner challenging the order dated 13.06.2022 passed by the High Court in first appeal. The appeal was against the order passed on an application filed by the defendant/respondent under Order VII Rule 11, CPC which application was accepted and the plaint was rejected. Suffice to state that the suit was filed by the petitioner with the following prayers:

¶241

“(i) Declaration that the Defendant Nos. 1 and 2 are not entitled to participate in the auction

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proceedings conducted by DRT in respect of the suit premises.

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(ii) To restrain Defendant Nos. 1 and 2 from participating in the auction proceedings.

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(iii) To restrain Defendant Nos. 1 and 2 from executing any documents from transfer of the suit premises in favour of their nominee or acquire any interest or right in the suit premises.

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(iv) … ... … .”

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The application was allowed on the ground that the petitioner had approached the DRT and Deputy Registrar, Co-operative Societies raising objection to the auction proceedings as well as to the subsequent transfer of the suit premises in favour of the successful bidder and the suit is only for nullifying the effectiveness and operation of the auction proceedings. The Trial Court held that bar under Section 34 of the SARFAESI Act shall be applicable. The Supreme Court while dismissing the SLP, has granted liberty to the petitioner to approach the DRT. The said judgment is not applicable to the facts of this case, moreso in view of our findings above.

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In view of our above discussion/conclusion, the

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appeal filed by the appellant is allowed with the following directions:

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i) We set aside the order dated 07.09.2018 passed by the Court of LIX Addl. City Civil and Sessions Judge, Bengaluru City on IA No.III in OS No.3496/2018;

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ii) The suit OS No.3496/2018 is restored on the file of LIX Addl. City Civil and Sessions Judge, Bengaluru City; the Court shall proceed with the suit in accordance with law;

¶255

iii)The interim order dated 13.08.2020 passed by this Court shall continue till the parties appear before the Trial Court on 19.11.2024 , when the Trial Court shall hear the counsel for the parties on the continuance of the interim order and pass appropriate orders in respect of the same in accordance with law;

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iv) Respondent No.3, who was impleaded in these proceedings, shall be impleaded by the appellant/plaintiff in the suit by amending the memo of parties in the suit and also by filing a fresh memo of parties in the suit;

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v) The IA No.1/2023 filed by respondent No.1 in this appeal is closed, granting liberty to the respondent No.1 to file similar application for the consideration of the Trial Court;

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vi) Liberty is also granted to the parties to file such application with such prayers as deem appropriate for the consideration of the Trial Court and it goes without saying the Trial Court shall decide the same in accordance with law;

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