In the High Court of Delhi at New Delhi
(Before Suresh Kumar Kait and Saurabh Banerjee, JJ.)
Punjab National Bank … Appellant;
Versus
Subhash Aggarwal and Others … Respondents.
2022 SCC OnLine Del 3874
Decided on: November 18, 2022, [Reserved on: November 03, 2022]
Advocates who appeared in this case:
Mr. Hashmat Nabi with Mr. Mohit Nagpal, Advocates.
Mr. Nitin Mittal, Advocate.
The Judgment of the Court was delivered by
Saurabh Banerjee, J.:
FACTS OF THE CASE
1. In an appeal filed against the judgement dated 18.02.2021 by the appellant-bank
(original defendant no. 1), the Trial Court heard a suit for declaration brought by
respondent no. 1, 2, and 3 (original plaintiffs) against the appellant-bank and Union of
India (respondent no. 4). The application was denied under Order VII rule 11 of the
Civil Procedure Code, 1908. A declaration and other remedy pertaining to a property
mortgaged with the appellant-bank were sought in the suit.
2. The initial borrower, Mr. Ajay Gupta, mortgaged a piece of property to get a loan
from the appellant-bank. The debtor failed to make loan repayments on time. After
seizing control, the bank announced a public auction. For Rs. 6,10,05,000/-, the
respondents purchased the property, and they also deposited 25% of the bid price plus
TDS.
3. Its sale was confirmed, and within 15 days of the transaction's confirmation date, the
remaining consideration had to be paid. After responders deposited the remaining sale
consideration, the bank credited the loan amount to them.
4. The property was given to the respondents, and they also received a Sale Certificate in
their favour. To prevent the bank from acquiring any third-party interest in the
property, the original borrower sued the bank in front of the Debt Recovery Tribunal
(DRT). The bank completed a Sale Deed in the respondents' favour and revalidated
the Sale Certificate.
5. The respondents filed a lawsuit in trial court, requesting a declaration against the bank
on the grounds that the bank was barred from obtaining any interest from them until
the property's title was registered in their favour.
ISSUES
1. Whether the suit filed by the respondents before the Civil Court is maintainable?
2. Whether the jurisdiction of the Civil Court is ousted under Section 34 of the
SARFAESI Act?
ARGUMENTS BY PETITIONER
1. The respondents initiated legal proceedings seeking reliefs beyond the purview of
the SARFAESI Act and RDDBFI Act. The relief sought pertains to the non-
issuance of a Sale Deed and the waiver of wrongful imposition of interest. Since
these reliefs fall outside the scope of the mentioned Act, it is argued that only a
Civil Court has the jurisdiction to grant such reliefs.
2. Despite stating an intention to initiate proceedings under the SARFAESI Act and
the RDDBFI Act to protect its interests, the appellant-bank has not taken any
action to date. This failure to initiate proceedings within the allotted time frame as
per Section 36 of the SARFAESI Act indicates that the appellant-bank cannot be
allowed to pursue a case beyond the scope of the statutes or outside the prescribed
time limits. By failing to initiate proceedings within the statutory timeframe, the
bank has forfeited its opportunity to exercise its remedy under the law.
ARGUMENTS BY RESPONDENT
1. Respondents said they had exhausted all other options and turned to the Civil
Court for assistance.
2. The appellant-bank sanctioned a loan to the respondents and issued a Sale
Certificate in their favour, subsequently handing over possession of the property.
However, the bank failed to inform the Debt Recovery Tribunal (DRT) about these
developments. Despite being restrained from creating any third-party interest in
the property by the DRT, the bank did not disclose the issuance of the Sale
Certificate or the auction of the property in favour of the respondents. This
omission deprived the DRT of crucial information that could have influenced its
decision-making process regarding the property in question.
3. The appellant-bank contests the judgment pronounced against it under Order XII
Rule 6 of the Code of Civil Procedure. The rejection of its application under Order
VII Rule 11, CPC, by the Trial Court signifies a significant procedural issue. The
bank asserts that the rejection of its application and the subsequent judgment
against it were not in accordance with the procedural requirements or the
principles of natural justice. Therefore, the bank seeks to challenge the validity of
the judgment and asserts its right to fair procedural treatment in the legal
proceedings.
CONCERNED LAWS
Sections 34 of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (SARFAESI Act).
Civil Procedure Code, 1908 (CPC).
DESCISION OF THE COURT
The Court noted that Section 34 of the SARFAESI Act only prohibits Civil Court
jurisdiction in cases where the Debt Recovery Tribunal (DRT) or Appellate
Tribunal has exclusive jurisdiction over the subject.
The appellant-bank was seen by the court to have not filed any lawsuits against
the respondents under the SARFAESI Act. Consequently, the SARFAESI Act's
Section 34 bar was not applicable.
The Court noted that the respondent’s suit sought redress that was only available
in a civil court and that was outside the purview of the SARFAESI Act or the
RDDBFI Act.
The Court dismissed the appeal, affirming the Trial Court's decision that the suit
filed by the respondents before the Civil Court was maintainable.
The appellant-bank was reminded that it was not permitted to contest the
maintainability of the litigation by failing to start proceedings under the
SARFAESI Act within the allotted limitation period.
The Court made it clear that while the SARFAESI Act is a helpful piece of
legislation to support financial institutions, it does not take away people's natural
right to file lawsuits in civil courts unless a statute expressly prohibits them from
doing so.
The appellant-bank's reliance on previous judgments was deemed misplaced as
they were not applicable to the present case. (Mardia Chemicals Ltd. v. Union of
India,1 Agarwal Tracom (P) Ltd. v. Punjab National Bank,2 and Radnik Exports v.
Standard Chartered Bank.3)
Ultimately, the Court upheld the Trial Court's decision, concluding that the
respondents had rightly exercised their remedy by filing the suit before the Civil
Court.
1
AIRONLINE 2004 SC 948.
2
AIR 2017 SUPREME COURT 5562
3
(2014) SCC Online Del 3404.
