The Supreme Court held that the DRT could not restore possession of the secured asset to a person who was neither the borrower nor the possessor, clarifying the civil court jurisdiction and the DRT’s powers under the SARFAESI Act.
The Supreme Court Bench of Justice J.B. Pardiwala and Justice R. Mahadevan reviewed multiple appeals and observed that under Section 17(3) of the SARFAESI Act, the DRT's jurisdiction is limited to restoring possession to the person in possession at the time of the bank's action, and civil court jurisdiction is not barred for claims extending beyond the DRT's statutory powers. The Court reaffirmed that a plaint could not be partially rejected under Order VII Rule 11 of the CPC.
Section 17(3) of the SARFAESI Act empowers the DRT to restore possession only to the person in possession at the time of the secured creditor's action and does not extend to granting possession to a third party. Civil court jurisdiction is not barred where reliefs sought extend beyond the statutory powers of the DRT. The decision affirms the principle that statutory ouster of jurisdiction should be interpreted strictly, ensuring that litigants retain access to civil courts for matters beyond the scope of specialized tribunals like the DRT. The appeals were accordingly disposed of, with the Supreme Court clarifying the legal position on the jurisdictional limits of the SARFAESI Act.
The Supreme Court, in a common judgment and order, disposed of a series of appeals analogously, treating Civil Appeal No. 1876 of 2016 as the lead matter. These appeals arose from the judgment dated 30.10.2012, passed by the High Court of Madhya Pradesh at Jabalpur, which had reversed the order of the 5th Additional District Judge, Bhopal. The trial court had earlier rejected the plaint under Order VII Rule 11 of the Code of Civil Procedure, 1908 (CPC), on the grounds of lack of jurisdiction in light of Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
The plaintiff, Smt. Prabha Jain had sought reliefs including a declaration that certain sale and mortgage deeds were null and void, possession of the disputed property, damages, and mesne profits. She contended that the suit land was inherited by her husband and his elder brother, and without partition, the latter illegally sold portions of the land, which were subsequently mortgaged to the Central Bank of India. The bank, after default, initiated proceedings under the SARFAESI Act, leading to possession and an auction advertisement. The High Court, in appeal, held that the Debts Recovery Tribunal (DRT) lacked jurisdiction to decide questions of title and allowed the suit to proceed.
The Supreme Court examined whether the civil court had jurisdiction to entertain the suit in light of Section 34 of the SARFAESI Act. The Court analyzed the scope of Section 17(3) of the SARFAESI Act, which provides for the restoration of possession, and interpreted the term "restore" in its literal sense. The Court concluded that the DRT could only restore possession to the person who was in possession at the time of the bank's action and could not grant possession to a third party. Consequently, the civil suit seeking possession was not barred by Section 34 of the SARFAESI Act as the plaintiff's claims extended beyond the jurisdiction of the DRT.
In its reasoning, the Supreme Court emphasized that the statutory language limited the DRT's power to restore possession and not hand it over to a third party. The Court relied on precedents such as Mardia Chemicals Limited Etc. Etc. v. Union of India and Others Etc. Etc., REEDLAW 2004 SC 04201 and Jagdish Singh v. Heeralal and Others, REEDLAW 2013 SC 10201, to clarify that civil court jurisdiction is barred only when the DRT has the power to decide the matter in question. Further, the Court reiterated that if one relief in the plaint survived, the plaint could not be partially rejected under Order VII Rule 11 of the CPC.
The Supreme Court also examined the broader jurisprudence surrounding the jurisdiction of civil courts vis-à-vis the DRT, referencing cases such as Bank of Baroda v. Gopal Shriram Panda, REEDLAW 2021 Bom 03238 and State Bank of Patiala v. Mukesh Jain, REEDLAW 2016 SC 8102. These precedents reinforced the principle that the DRT's powers are limited to matters explicitly covered under the SARFAESI Act and do not extend to adjudication of title disputes or partition claims.
Ultimately, the Supreme Court held that the civil suit was maintainable for claims beyond the jurisdiction of the DRT and set aside the High Court's order to that extent. The Court reiterated that a plaint cannot be rejected in part and that the suit should proceed in the civil court for adjudication of claims not covered under the SARFAESI Act.
Mr. O. P. Gaggar, AOR and Mr. Sachindra Karn, Advocate represented the Appellants.
Mr. Umesh Babu Chaurasia, Ms. Prity Kumari, Ms. Manjula Chaurasia, Adv., Mr. Maneesh Pathak, Advocates, Mr. Rameshwar Prasad Goyal, Ms. Pragati Neekhra, AORs, Mr. Aditya Bhanu Neekhra, Mr. Atul Dong and Mr. Aniket Patel, Advocates appeared for the Respondents.
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