High Court noted that the civil court's jurisdiction remains when the Debts Recovery Tribunal cannot effectively address remedy.
The Madras High Court Single-Judge Bench of Ms. Justice R.N. Manjula observed that the civil court's jurisdiction is not barred by Sections 34 of the SARFAESI Act and 18 of the Recovery of Debts Act for claims involving allegations of fraud and specific performance, which fall outside the purview of the Debts Recovery Tribunal.
In the recent High Court order, an application was filed to reject the plaint on grounds of jurisdiction, arguing that the civil court's jurisdiction was barred by Section 34 of the SARFAESI Act and Section 18 of the Recovery of Debts Due to Banks and Financial Institutions Act. The application was filed by the Bank (5th defendant), claiming that the dispute should be adjudicated by the Debt Recovery Tribunal (DRT), not the civil court.
The plaint, filed by the plaintiffs (1st to 10th defendants), sought to declare a sale deed as null and void and requested directions for the execution of a new sale deed, along with other reliefs. The plaintiffs argued that the sale deed executed by the 2nd defendant in favour of the 3rd and 4th defendants was fraudulent, as it involved a property designated for common use. The Bank contested the suit's maintainability, citing that the issues were within the jurisdiction of the DRT, not the civil court.
The High Court considered various submissions, including precedents that clarified the scope of Section 34 of the SARFAESI Act and Section 18 of the Recovery of Debts Act. It noted that these provisions bar civil court jurisdiction only over matters directly within the DRT’s purview, not disputes involving specific performance or allegations of fraud not directly related to the debt recovery process. The court found that the plaintiffs' claims involved issues such as fraud and specific performance, which could not be addressed solely within the DRT framework.
“So in all possibilities, I find no reason to reject the plaint on the basis of the averments and allegations made in the plaint. The plaintiffs have established the case and there are also materials available to show that the remedy which has been sought by the plaintiffs before the civil court cannot be effectively addressed before the Debt Recovery Tribunal. So I am of the considered view that the bar under Section 34 of SARFAESI Act cannot be extended to the nature of the claim raised by the applicant/5th defendant in the present suit,” the court noted.
High Court dismissed the application to reject the plaint, concluding that the plaintiffs' claims, including allegations of fraud and specific performance, were beyond the DRT's jurisdiction and could be pursued in a civil court.
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