Order 1

Order Details: Notice of Motion
Pdf Text: Draft Notice of Motion ..1.. In Suit No.133/2021
IN THE CITY CIVIL COURT FOR GREATER BOMBAY
AT BOMBAY.
DRAFT NOTICE OF MOTION
IN
SUIT NO. 133 OF 2021
Purple Estates & Holdings Pvt. Ltd. & Anr. ...Plaintiffs.
Versus
Anand Rathi Global Finance Limited & Ors. ...Defendants.
Appearance :-
Mr. Mathew Nedumpara, Advocate for Plaintiffs.
Mr. Nikhil Rajani, Advocate for defendat No. 1.
CORAM : HIS HONOUR JUDGE
SHRI AJIT N. MARE (C.R.No.3)
DATE : 29TH JANUARY, 2021.
ORAL ORDER
The plaintiffs have sought ad-interim injunction to restrain
the defendants or anybody through them to proceed with e-Auction
scheduled on 30.01.2021, to restrain the defendants from proceeding in
furtherance of their purported powers under Section 13 sub-section (2),
Section 13 sub-section (4) and Section 14 of Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002 (hereinafter referred as, “SARFAESI Act”) and from
proceeding further under the Act.
2. In brief, the plaintiff’s case is that, the plaintiff has obtained
financial aid from defendant No.2. Defendant No. 2 kept balance of
Rs.2 Crores and paid rest of the loan amount. Due to non payment of
-- 1 of 14 --
Draft Notice of Motion ..2.. In Suit No.133/2021
Rs.2 Crores, the project undertaken by the plaintiffs could not be
completed. Defendant No. 2 then assigned plaintiffs’ debt to defendant
No. 1 which is a Asset Reconstruction Company (ARC). This was done
without hearing the plaintiff. The plaintiff demanded balance amount
from defendant No. 2 and it asked the plaintiff to approach defendant
No. 1. The plaintiff accordingly approached the defendant No. 1.
Defendant No. 1 conveyed the plaintiffs that it will release Rs.2 Crores
and also additional amount of Rs.1.5 Crores, if the plaintiffs pay
processing fees. The plaintiffs accepted the proposal and paid the
processing fees. The assignment of security interest by defendant No. 2
to defendant No. 1 is unconstitutional and void, since, the defendant
No. 2 did not discharge its full obligation towards the plaintiff. The
assignment of purported security interest is not permissible, unless
there is default on the part of the borrower. The plaintiffs are not at all
at default. Section 5 of SARFAESI Act is unconstitutional and void as it
empowers a Bank or Financial Institution to assign or transfer
borrower’s account to ARC or Non-Banking Financial Company without
notice to the borrower. Defendant No. 1 did not release promised
additional credit facility but invoked provisions of SARFAESI Act and
issued notice under Section 13 (2) of the SARFAESI Act . The notice is
bad as the plaintiffs are not in default. The notice is also bad as
defendant No. 1 cannot be judge in its own case. Defendant No. 1
further issued notice under Section 13 (4) of the SARFAESI Act. It was
not served on the plaintiffs in accordance with law. After issuance of
notice under Section 13 (2) of the SARFAESI Act, the plaintiffs entered
into supplementary agreement with defendant No. 1 and got the time
for repayment extended upto 30.09.2019. Thus, notice under Section
13 (2) sieged to be in operation, but defendant No. 1 invoked Section
-- 2 of 14 --
Draft Notice of Motion ..3.. In Suit No.133/2021
13 (4) in breach of the agreement. Defendant No. 1 moved an
application under Section 14 of the SARFAESI Act before the ACMM,
Bangalore City, who without affording an opportunity to the plaintiffs
directed to take forcible possession of the plaintiffs’ property which the
CMO ultimately took. The action of Learned ACMM to appoint CMO is
against statutory provisions. Defendant No. 1 published two notices
dated 02.11.2019 and 08.11.2019 putting the plaintiffs’ property for
auction. The e-auction is ultra vires. The notices were challenged in
present suit as well as in Writ Petition (L) No. 3513/2019.
3. Defendant No. 1 moved the Hon’ble High Court seeking
modification of order dated 11.12.2019 claiming that it intends to sell
the plaintiffs property. Thus, defendant No. 1 is trying to transfer
de
jure possession of the plaintiffs’ property by way of e-auction. The basis
of sale price fixed is unknown. The valuation of plaintiffs property is
not obtained by defendant No. 1. The sale of the property is in gross
violation of statute and principles of natural justice. The plaintiffs
challenged the sale before the Hon’ble Bombay High Court. However,
the Hon’ble High Court relegated the plaintiffs before this Court. In
view of pendency of this suit the plaintiffs’ made every effort to
approach this Court but due to objections by the Registry could not do
so and leave was also not granted when circulation was sought. The
plaintiffs therefore invoked the jurisdiction of the Hon’ble Bombay High
Court in Writ Petition (L) No. 8722/2020. The defendant has yet again
published e-auction sale notice. Defendant No. 1 has not served notice
of the sale on the plaintiff. Defendants are acting in violation of
statutory provisions. Defendants are acting in fraudulent manner.
-- 3 of 14 --
Draft Notice of Motion ..4.. In Suit No.133/2021
4. Perused. Heard Advocate for the plaintiffs and Defendant
No. 1.
5. Advocate for plaintiffs submitted that, the plaintiffs’
account is not classified as NPA, therefore the defendant could not have
invoked provisions of Section 13 of the SARFAESI Act. Defendant No. 2
did not invoke Section 13 of SARFAESI but assigned debt to defendant
No. 1 without intimating the plaintiff. No notice was given to the
plaintiff under Section 13 and so the protection granted by Section 13
of SARFAESI is denied to the plaintiff. By virtue of Section 9 of CPC this
Court can try every suit of civil nature. Provisions of Section 34 of
SARFAESI Act is not bar to entertain present suit as it seeks declaration
that various provisions of SARFAESI Act are ultra vires the constitution.
Provisions of Section 17 (1) also indicate that DRT is having limited
jurisdiction and does not take away the jurisdiction of Civil Court in all
kinds of matters. The defendants have not followed the principles of
natural justice. Equity lies in preserving the rights of the parties and
statuts of the property still disposal of the suit. The auction is
scheduled on 30.01.2021 and so ad-interim relief needs to be granted.
6. Advocate for defendant No. 1 submitted that, he has filed
notice of motion for rejection of plaint raising bar of jurisdiction and bar
of law which needs to be heard prior to considering grant of ad-interim
relief. The documents filed by defendant No. 1 reveal that, the plaintiff
was aware of assignment of his debt by the defendant No. 2 to
defendant No. 1. The suit challenges validity of the SARFAESI Act and
on that premise an injunction is sought. However, by virtue of express
provisions of Section 17 and Section 34 of the SARFAESI Act the
jurisdiction of this Court to grant injunction and to try the matters
-- 4 of 14 --
Draft Notice of Motion ..5.. In Suit No.133/2021
which can be tried by DRT is expressly barred. The notice of motion
directly challenges the measures taken by the defendant No. 1 under
the SARFAESI Act and thus no injunction can be granted in view of
Section 34. Provisions of Section 5 of the SARFAESI Act reveal that,
assignment of debt by defendant No. 2 to defendant No. 1 is legal and
permissible. The plaintiff has accepted the offer from defendant No. 1
and further monetary help by way of additional loan and has also
executed mortgage. The property in question is situated at Bangalore
and thus, this Court lacks territorial jurisdiction to try and entertain
present suit. Even otherwise the office of defendant No. 1 is at
Goregaon which falls within the territorial jurisdiction of the City Civil
Court at Dindoshi.
7. Advocate for defendant No. 1 relied on ICICI Bank Limited
V/s. Official Liquidator of APS Star Industries Limited and Others,
(2010) 10 SCC. He also relied on Authorised Officer, Kotak Mahindra
Bank Limited, Pune V/s. M/s. Brahmo Construction Pvt. Limited, Pune,
2015 (3) ABR 783 and Saraswat Co-Operative Bank Ltd., Mumbai V/s.
Madan S. Jha & Another, 2010 (2) D.R.T.C. 399 (Bom.).
8. Perusal of plaint and draft notice of motion under
consideration reveal that, plaintiffs is challenging the auction mainly on
two grounds. The first ground is that, the provisions of SARFAESI Act
are unconstitutional and are ultra vires the Constitution of India and so
the actions taken under that Act are bad in law. The second ground
raised is that the action taken by the defendants under the provisions of
the SARFAESI Act are taken without following the due procedure
permissible under the SARFAESI Act and hence the plaintiff is entitled
to the injunction.
-- 5 of 14 --
Draft Notice of Motion ..6.. In Suit No.133/2021
9. So far as the first ground raised by the plaintiffs is
concerned, at this stage of the suit this Court cannot form an opinion
that the provisions of the SARFAESI Act are ultra vires the constitution
and thus the plaintiffs will have to wait till the conclusion of the suit.
This is to be done presuming that, the suit for such purpose is
maintainable before this Court. Therefore, on the ground that, the
provisions of the SARFAESI Act are ultra vires the constitution, the
injunction as sought cannot be granted by this Court, presuming the
maintainability of the suit before this Court, till this Court declares the
provisions of SARFAESI Act as unconstitutional. Therefore, on the first
ground, the injunction cannot be granted.
10. Till the conclusion of suit i.e. till declaration as sought by
the plaintiffs is granted, the provisions of the SARFAESI Act are
enforceable. Provisions of Section 34 of the SARFAESI Act provide that,
the Civil Court cannot entertain any suit or proceeding in respect of any
matter which DRT or DRAT is empowered by the Act to determine and
no injunction shall be granted by the Court in respect of any action
taken or to be taken in pursuance of any power conferred by or under
the Act or the Recovery of Debts Due to Banks and Financial Institutions
Act, 1993. Section 17 of the SARFAESI Act provide for powers of DRT.
It provides that any person, including the borrower i.e. the plaintiffs
herein, aggrieved by any of the measures referred to in sub-section (4)
of Section 13 taken by the Secured Creditor may make an application to
DRT. Sub-section (2) further provides that whether any of the measures
referred to in sub-section (4) of Section 13 are in accordance with the
provisions of the SARFAESI Act and the Rules made thereunder shall be
considered by DRT. Sub-section (3) provides powers of the DRT to set
-- 6 of 14 --
Draft Notice of Motion ..7.. In Suit No.133/2021
aside the measures taken in the sub-section (4) of the Section 14 of
DRT.
11. The facts of this case categorically reveal that, the plaintiff
has obtained loan from defendant No. 2 which was subsequently
assigned to the defendant No. 1 by virtue of Section 5 of the SARFAESI
Act. The Hon’ble Supreme Court in ICICI Bank’s case has observed that,
“46. As stated above , an outstanding in the account of
a borrower(s) (customer) is a debt due and payable by
the borrower(s) to the bank. Secondly, the bank is the
owner of such debt. Such debt is an asset in the hands
of the bank as a secured creditor or mortgagee or
hypothecatee. The bank can always transfer its asset.
Such transfer in no manner affects any right or
interest of the borrower(s) (customer).”
Thus the assignment by defendant No. 2 to defendant No. 1
is legal and permissible.
12. In Kotak Mahindra Bank’s case, the Hon’ble Supreme Court
has observed that,
“The question therefore that arises is, whether the
Debts Recovery Tribunal can adjudicate upon the
matter under Section 17 of the Sarfaesi Act. The said
provision, especially sub-section (2) thereof confers
the jurisdiction on the Debts Recovery Tribunal to
consider, whether any of the measures referred to in
sub-section (4) of Section 13 taken by the secured
creditor for enforcement of security are in accordance
with the provisions of the said Act and Rules made
thereunder. The Debts Recovery Tribunal is therefore
vested with the jurisdiction to adjudicate whether the
-- 7 of 14 --
Draft Notice of Motion ..8.. In Suit No.133/2021
measures taken are in accordance with the Act and
Rules. Hence apart from the fact that in the light of
the averments made in the plaint of the instant suit,
they cannot be said to fall in the exception carved out
in Mardia Chemicals Ltd.’s case (AIR 2004 SC 2371)
(supra). It would also have to be held that in the
instant case the suit is not maintainable in view of the
fact that in the instant case there is no issue which
cannot be adjudicated upon by the Debts Recovery
Tribunal.”
13. The Hon’ble Bombay High in Saraswat Bank’s case, has
observed that,
“12. In the face of clear provisions of Sec. 34 of the
SRFAESI Act, 2002, jurisdiction of the Civil Court is
ousted and therefore, Civil Court could not have
entertained the suit, which questions a notice issued
under Sec. 13(4) of the SRFAESI Act, 2002 on the
specious plea that the Act itself is not applicable. If
the respondent-plaintiff did have any grievance, Sec.
17 of the Act sufficiently provides for the remedy and
any person aggrieved by action under Sec. 13 of the
SRFAESI Act, 2002 could approach the Debts Recovery
Tribunal. In view of this, it cannot be said that the
Civil Court could assume jurisdiction to decide a
question which squarely fell for the decision of the
Debts Recovery Tribunal and in respect of which the
jurisdiction of Civil Court was expressly barred under
Sec. 34 of the SRFAESI Act, 2002.”
14. In view of the observations of the Hon’ble Supreme Court
and the Hon’ble Bombay High Court in the authorities cited supra, and
the facts pleaded in the plaint by the plaintiffs in present case, the
dispute raised by the plaintiffs in the plaint, apart from the declaration
-- 8 of 14 --
Draft Notice of Motion ..9.. In Suit No.133/2021
challenging validity of the Act, is squarely in the teeth of Section 34 and
Section 17 of the SARFAESI Act and hence,
prima-facie this Court has
no jurisdiction to grant injunction to plaintiffs as sought.
15. The conduct of plaintiffs also needs to be considered. The
proceeding do indicate that, this is not the first notice for auction. It is
the plaintiffs’ case that, defendant No. 2 couldnot have assigned the
debt to the defendant No. 1 without hearing the plaintiffs. However,
the documents produced by defendant No. 1 reveal that, plaintiffs were
aware of it in the year 2017 and have accepted the sanction of credit
facility from defendant No. 1. Documents produced by defendant No. 1
further reveal that, the plaintiffs have also executed mortgage in favour
of defendant No. 1 and also an addendum to the mortgage. This
conduct of the plaintiffs reveal that, they have accepted assignment of
debt and so now they cannot claim that it was without their knowledge.
16. The documents on record further reveal that, the plaintiffs
have approached the Hon’ble High Court in respect of subject matter of
the suit in Writ Petition (L) No. 3513/2019. They have withdrawn the
Writ Petition on 13.10.2020 on the ground that they have already filed
Civil Suit and they will pursue the same. On that premise the Writ
Petition was withdrawn. The plaint in this case reveals that, it is lodged
in the Registry of this Court on 04.12.2019. Though the Hon’ble High
Court in order dated 13.10.2020 in Writ Petition (L) No. 3513/2019 has
granted protection of three weeks only, the plaintiffs have not
approached this Court within that period. This again indicates the
latches on the part of plaintiffs.
-- 9 of 14 --
Draft Notice of Motion ..10.. In Suit No.133/2021
17. Perusal of plaint reveals that, the plaintiffs themselves have
attached a copy of notice dated 05.01.2021 issued by defendant No. 1
to the plaintiffs under Section 13 (2) of the SARFAESI Act. The
plaintiffs have also attached a notice for taking symbolic possession
issued by defendant No. 1 on 13.05.2019 to the plaintiffs. The plaintiffs
have also produced on record the copy of order revealing that the Ld.
ACMM has allowed the application filed under Section 14 of SARFAESI
Act. It appears that, after such order the possession was taken and E-
auction was scheduled. Copies of notices are attached by the plaintiffs
themselves.
18. By virtue of the documents produced by the plaintiffs
themselves it is evident that, the provisions of Section 13 sub-section
(2) and sub-section (4) are
prima-facie followed in this case.
19. After pointing out these documents by the advocate for
defendant, Advocate Mr. Nedumpara for plaintiffs submits that, the
assignment of debt by defendant No. 2 to defendant No. 1 itself is
invalid and so following of procedure under Section 13 is of no
consequences.
20. Section 5 of SARFAESI Act provides for auction of rights or
interest in financial institution by the Asset Reconstruction company for
any bank or financial institution. It does not require service of notice to
the borrower. It is already held, presuming that this Court has power to
declare Section 5 of SARFAESI Act ultra vires, unless it is so declared
the provisions of Section 5 will be attracted in this case and so
prima-
facie the submission of the plaintiffs advocate is not acceptable the
-- 10 of 14 --
Draft Notice of Motion ..11.. In Suit No.133/2021
assignment of debt by defendant No. 2 to defendant No. 1 is not in
accordance with law.
21. Since, the procedure laid down under Section 13 is
followed by the defendants, by virtue of Section 17 of the SARFAESI Act
the remedy for the plaintiffs is to approach DRT which has power to
examine whether the course followed by the defendants is in
accordance with the provisions of SARFAESI Act or otherwise. Once it
is held that Section 17 of SARFAESI Act is attracted, as the consequence
thereof Section 34 of the SARFAESI Act also gets attracted and
prima-
facie the claim raised by the plaintiff in respect of injunction against
defendants would be
prima-facie beyond the jurisdiction of this Court.
22. Advocate for plaintiffs relied on Kiran Singh and Others
V/s. Chaman Paswan and Others, (1955) 1 SCR 117, wherein the
Hon’ble Supreme Court has observed that a decree passed by the Court
having no jurisdiction would be nullity and it can be challenged
whenever and where ever it is sought to be enforced or relied on even
at the stage of execution and even in collateral proceedings.
23. The observations of Hon’ble Supreme Court will not help
the plaintiffs in contending that this Court has jurisdiction to grant an
injunction in their favour as sought by present notice of motion since
the provisions of Section 17 and 34 of the SARFAESI Act were not for
consideration before the Hon’ble Supreme Court.
24. The Advocate for plaintiffs further relied on Dhulabhai
ETC. V/s. State of Madhya Pradesh and Another, (1968) 3 SCR 662, and
-- 11 of 14 --
Draft Notice of Motion ..12.. In Suit No.133/2021
submitted that the jurisdiction of this Court cannot be considered to be
excluded.
25. I have gone through the authority cited supra wherein the
Hon’ble Supreme Court has observed that, the exclusion of Civil Court is
not readily to be inferred. Where the statute gives a finality to the
orders of the Special Tribunals and Civil Courts’ jurisdiction must be
held to be excluded if there is adequate remedy to do what the Civil
Courts would normally do in a suit. However, such provision, does not
exclude those cases where provisions of the particular Act have not been
complied with or the statutory tribunal has not acted in conformity with
the fundamental principles of judicial procedure.
26. The facts and circumstances of this case do reveal that, the
defendants,
prima-facie, have complied with the provisions of SARFAESI
Act. Further the action of DRT i.e. the Tribunal is not challenged before
this Court. It also needs to be mentioned that, the settled legal position
is that, in view of provisions of Section 17 of SARFAESI Act, the actions
taken under Section 13 cannot be challenged before the Civil Court. In
view of this the authority cited supra will not help the plaintiffs.
27. Advocate for plaintiffs further relied on Nahar Industrial
Enterprises Limited V/s. Hong Kong and Shanghai Banking Corporation,
(2009) 8 SCC 646. I have gone through the authority cited supra
wherein, the aspect of jurisdiction of Civil Court in the light of
provisions of the recovery of debts due to Banks and Financial
Institutions Act, 1993 were for consideration in order to consider
whether a Civil Suit can be transferred to DRT which is a Tribunal of
-- 12 of 14 --
Draft Notice of Motion ..13.. In Suit No.133/2021
limited jurisdiction. The provisions of Section 34 and 17 of the
SARFAESI Act were not for consideration before Hon’ble Supreme
Court. Hence, the authority cited supra will not help the plaintiffs in
present case.
28. Considering the facts and circumstances of this case, and
the legal position, I hold that the plaintiffs have not made out a case for
grant of ad-interim relief as sought. Hence, following order: -
ORDER
1. Ad-interim relief as sought is refused.
2. Leave is granted to register Notice of Motion. It
is made returnable on 02.03.2021.
(AJIT N. MARE)
Judge,
Date : 29.01.2021 City Civil Court, Gr. Mumbai.
Dictated On : 29.01.2021
Transcribed on : 29 & 30.01.2021
HHJ Signed on : 01.02.2021
-- 13 of 14 --
Draft Notice of Motion ..14.. In Suit No.133/2021
“CERTIFIED TO BE TRUE AND CORRECT COPY OF THE
ORIGINAL SIGNED ORDER.”
UPLOAD DATE TIME STENOGRAPHER NAME
02.02.2021 12.46 p.m. Mahendrasing D. Patil
(Stenographer (Grade-I)
Name of the Judge H.H.J. SHRI. AJIT. N. MARE
(Court Room No.3)
Date of pronouncement of Order 29.01.2021
Order signed by P. O. on 01.02.2021
Order uploaded on 02.02.2021
-- 14 of 14 --