The Supreme Court bench comprising Justices B.R. Gavai and Aravind Kumar was recently hearing an appeal on the SARFAESI Act proceeding and held that the jurisdiction of civil court is limited in respect of matters in which a DRT or DRAT is empowered.
In the present case, the property in question in respect of which the suit is filed has been mortgaged with the appellant-Bank. As observed by the Single Judge, the suit as well as the application for interim relief has been cleverly drafted. It could thus be seen that a blanket injunction restraining the respondent, i.e. the appellant herein in any manner dealing with and/or disposing of and/or encumbering any part or portion of the suit property has been sought. By an ad-interim order dated 15th July 2013, the Single Judge, though permitted the steps to be taken for selling the premises in question, directed that the final orders of sale could not be passed for a period of 6 weeks. The said ad-interim order came to be continued from time to time. As such, the appellant was constrained to file G.A. No. 2352 of 2014 for vacating the said interim order. The same was ultimately vacated by the Single Judge vide order dated 2nd November 2016.
It would be relevant to note that the Single Judge has specifically referred to Section 34 of the SARFAESI Act while vacating the interim relief granted to the respondent. The issue as to the exclusion of the jurisdiction of a civil court is no more res integra. The provisions of Section 34 of the SARFAESI Act have been considered by a Bench of three Judges of the Supreme Court in the case of Mardia Chemicals Limited and Others v. Union of India and Others, 2004(1) Bank CLR 641 (SC).
The Division Bench, vide the impugned judgment observed that, since the Bank has taken steps in terms of the purported settlement, it could not repudiate its obligations under the settlement. The Division Bench relied on the Doctrine of Promissory Estoppel for finding it necessary to restrain the Bank from selling the suit property until the determination of the rights of the parties.
The Supreme Court has held that the jurisdiction of the civil court is barred in respect of matters which a DRT or an Appellate Tribunal is empowered to determine in respect of any action taken “or to be taken in pursuance of any power conferred under this Act”. The Court has held that the prohibition covers even matters which may be taken cognizance of by the DRT though no measure in that direction has so far been taken under subsection (4) of Section 13 of the SARFAESI Act. It has been held that the bar of jurisdiction is in respect of a proceeding in which matter may be taken to the Tribunal. It has categorically been held that in any matter in respect of which an action may be taken even later on, the civil court shall have no jurisdiction to entertain any proceeding thereof. The Court held that the bar of the civil court thus applies to all such matters which may be taken cognizance of by the DRT, apart from those matters in which measures have already been taken under sub-section (4) of Section 13 of the SARFAESI Act.
The Apex Court has further held that to a very limited extent, the jurisdiction of the civil court can also be invoked, where for example, the action of the secured creditor is alleged to be fraudulent or his 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. In the present case, it cannot be said that the action of the secured creditor, i.e. the appellant is either fraudulent or that its claim is so absurd or untenable it may not require any probe whatsoever. It is further to be noted that the SARFAESI Act itself provides remedies to an aggrieved party in view of the provisions of Sections 17 and 18.
The Supreme Court bench found that the present appeal deserves to be allowed on another ground also. Undisputedly, the jurisdiction which was exercised by the Division Bench was analogous to the one exercised under Order XLIII Rule 1 of the CPC.
17. The Supreme Court held that the Appellate Court would not interfere with the exercise of discretion of the court of first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. It has been held that an appeal against the exercise of discretion is said to be an appeal on principle. It has further been held that the Appellate Court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by that court was reasonably possible on the material. It has been held that if the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court's exercise of discretion.
The Supreme Court bench was of the considered view that the Division Bench has grossly erred in interfering with the discretion exercised by the Single Judge. Undisputedly, in the present case, while vacating the interim relief granted vide order dated 15th July 2013, the Single Judge had held that the relief claimed by the plaintiff could not have been granted in view of the provisions of Section 34 of the SARFAESI Act. As such, the Single Judge had passed the said order on the basis of a statutory bar. As observed earlier, the scope in which a civil suit is maintainable as determined by this Court in the case of Mardia Chemicals Limited and Others v. Union of India and Others, 2004(1) Bank CLR 641 (SC) is very limited. The case of the respondent/plaintiff would not come within the said limited scope.
The Appeal was allowed. The judgment and order dated 30th January 2017 passed by the Division Bench of the High Court is quashed and set aside and the judgment and order passed by the learned Single Judge was upheld.
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