IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 06TH DAY OF NOVEMBER, 2019 BEFORE THE HON' BLE MR. JUSTICE S.G. PANDIT C.R.P. No.354/2016 BETWEEN:
1. CENTRAL BANK OF INDIA NO.10, BRIGADE ROAD BENGALURU-560 025 REP. BY ITS MANAGER.
2. THE AUTHORISED OFFICER CENTRAL BANK OF INDIA NO.10, BRIGADE ROAD BENGALURU-560 025.
BOTH 1 & 2 ARE REP. BY P SRINIVAS REDDY.
(BY SRI.Y V PARTHASARATHY, ADV.) AND:
MR. UMESH M. S. S/O. SRINIVAS NAIK M AGED ABOUT 49 YEARS RESIDING AT NO.175 7TH MAIN, 2ND CROSS NAGENDRA BLOCK BANASHANKARI 1ST STAGE BENGALURU-560 050.
...PETITIONERS …RESPONDENT (BY SRI.B TRIPURAMBA, ADV.) THIS CIVIL REVISION PETITION IS FILED UNDER SECTION 115 OF THE CODE OF CIVIL PROCEDURE, 1908, AGAINST THE ORDER DATED 01.08.2016 PASSED ON IA NO.2 IN O.S.NO.6320/2014 ON THE FILE OF THE VII ADDL.CITY CIVIL JUDGE (CCH.NO.19) AT BENGALURU, REJECTING THE IA FILED U/O 7 RULE 11(d) R/W SEC.94(e) AND 151 OF CPC.
THIS CIVIL REVISION PETITION COMING ON FOR FURTHER HEARING ADMISSION THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER Petitioner/Bank is in revision under Section 115 of the Code of Civil Procedure, 1908 (for short ‘CPC’) against the order dated 01.08.2016 passed on I.A.No.2 filed under order VII Rule 11(d) of CPC in O.S.No.6320/2014 on the file of the VII Additional City Civil Judge, Bangalore.
2. Petitioners herein are defendants No. 2 and 3 and respondent is the plaintiff. Parties to this petition would be referred to as they stand before the trial Court.
3. Plaintiff filed O.S.No.6320/2014 for the following reliefs:
(i) Restraining the 2nd and 3rd defendant, their men, or anybody claiming under them from dispossessing the plaintiff from the suit schedule property without following the due process of law.
(ii) Pass such other order or relief as this Hon’ble Court deems fit to grant under the circumstances of the above case, including the award of costs, in the interest of justice and equity.
3. The suit averments would indicate that the plaintiff is a tenant under the first defendant in respect of the residential premises by virtue of rent agreement dated 10.12.2013 entered into between the plaintiff and the first defendant. Paragraphs 2 and 3 of the plaint reads as follows:
“2. It is submitted that it appears that the 1st defendant has availed loan from the 2nd defendant-bank. Further, it appears that the 1st defendant might have become defaulter and hence the 2nd and 3rd defendant has initiated recovery proceedings against him by issuing a notice under Section 13(2) and also under Section 13(4) of the SARFAESI Act, 2002 for taking over symbolic possession of the suit schedule property from the 1st defendant.
3. It is submitted that on 11.08.2014 at about 11.00 a.m., in the morning one of the representative of the 2nd and 3rd defendant bank came near the suit schedule property and started assessing the same. When the plaintiff enquired about the same, the representative of 2nd and 3rd defendant narrated all the above said facts and threatened the plaintiff to vacate the suit schedule property immediately as they are taking physical and vacant possession of the suit schedule property. However, the plaintiff expressed his inability to vacate the suit schedule property stating that he is a bonafide tenant under the 1st defendant and he is not aware of any loan transaction and the notice issued against the 1st defendant.”
As the Bank had initiated recovery proceedings against the secured property, the plaintiff being a tenant filed the suit for the above reliefs.
4. On issuance of suit summons, the 2nd and 3rd defendants being the Manager and Authorized Officer of the Central Bank of India filed detailed written statement. Defendants No.2 and 3 also filed application under Order VII Rule 11(d) read with Section 94(e) and 151 of CPC praying to reject the plaint as having been barred under the provisions of Section 34 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘SARFAESI Act’ for short) and Section 18 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as ‘DRT Act’). In the affidavit accompanying the said application, the defendants No. 2 and 3 stated that the suit would be barred under Section 34 of SARFAESI Act and prayed to reject the plaint. The plaintiff opposed the said application by filing objections stating that the plaintiff is only a tenant and he has nothing to do with the recovery proceedings initiated by defendants No. 2 and 3 against defendant No.1 under SARFAESI Act. The learned trial Judge considering the contentions of the parties, under the impugned order rejected I.A.No.2 filed under Order VII Rule 11(d) of CPC. Defendants 2 and 3 aggrieved by the rejection of their application are before this Court in this revision petition.
5. Heard the learned counsel for the petitioners/defendants No. 2 and 3 at length on 05.11.2019 and on 06.11.2019. There was no representation for the respondent on 05-11-2019.
Today also there is no representation for the respondents.
6. Learned counsel for the petitioners/defendants 2 and 3 would submit that from a perusal of the plaint averments, particularly at paragraphs 2 and 3, it would be clear that the plaintiff claims to be a tenant under defendant No.1 in respect of suit schedule property by virtue of rent agreement dated 10.12.2013. As such the suit would not be maintainable and the same is barred under Section 34 of the SARFAESI Act. It is submitted that, when once the Bank initiates recovery proceedings under SARFAESI Act, the landlord is prohibited from creating any interest over the property either by way of sale, lease or otherwise under Section 13(13) of the SARFAESI Act. It is his submission that the Bank had initiated recovery action as back as in March 2008. Demand notice under Section 13(2) of SARFAESI Act was issued on 15.03.2008 and possession notice was issued on 22.05.2008. But from the suit averments, at paragraph 1, it is stated that the plaintiff entered into a rent agreement on 10.12.2013. Further, the learned counsel inviting attention of the Court to Section 34 of SARFAESI Act submits that the Civil Court shall have no jurisdiction to entertain any suit or proceedings in respect of the matter which the Debts Recovery Tribunal or the Appellate Tribunal is empowered under the Act, to determine and no injunction shall be granted by any court or authority in respect of any action taken under this Act. He also refers to Section 9 of CPC to contend that the Civil Court shall have jurisdiction to try all suits except the suits where it is expressly or impliedly barred. As Section 34 of the SARFAESI Act bars jurisdiction of Civil Court, the Civil Court would have no jurisdiction to entertain the suit. Learned counsel referring to provisions of Order VII Rule 11(d) of CPC submits that where the suit appears from the statement in the plaint to be barred by any law, the plaint shall be rejected. Learned counsel for the petitioners submit that the trial Court committed material irregularity and failed to exercise its jurisdiction vested in it.
7. The trial court, while rejecting the application relied on the decision reported in AIR 2016 SC 536 in the case of VISHAL N. KALSARIA v/s BANK OF INDIA, in which case, it was observed that the provisions of SARFAESI Act cannot over-ride the objectives of Rent Control Acts. But he submits that the Hon'ble Apex Court in a recent decision reported in (2019)9 SCC 94 in the case of BAJARANG SHYAMSUNDER AGARWAL v/s CENTRAL BANK OF INDIA AND ANOTHER referring to KALSARIA case (supra) has held that the benefit of Rent Act against the SARFAESI Act would be available only to a tenant who comes into possession of land by lawful title. He further relies upon a decision of the Hon'ble Apex Court reported in (2014)1 SCC 479 in the case of JAGADISH SINGH v/s HEERALAL AND OTHERS to contend that in view of Section 34 of SARFAESI Act, the suit would not be maintainable in the facts and circumstances of the present case.
8. Having heard the learned counsel for the petitioners/defendants 2 and 3 and on perusal of the material on record including the plaint, the following points would arise for consideration:
(i) Whether the trial Court committed an error in rejecting the application filed under Order VII Rule 11(d) of CPC?
(ii) Whether the plaint requires to be rejected by allowing the said application?
9. Answer to the above points would be that the application I.A.No.2 filed under Order VII Rule 11(d) of CPC requires to be allowed and the plaint is liable to rejected for the following reasons:
Order VII Rule 11(d) of CPC makes it clear that the plaint shall be rejected where the suit appears from the statement in the plaint to be barred by any law. While considering the application under Order VII Rule 11 of CPC, the Court shall look into only plaint averments and nothing else. The Hon'ble Apex Court in a decision reported in (2018) 6 SCC 422 in the case of CHHOTANBEN AND ANOTHER v/s KIRITBHAI JALKRUSHNABHAI THAKKAR AND OTHERS at paragraph 15 has held as follows:
“15. What is relevant for answering the matter in issue in the context of the application under Order 7 Rule 11(d) CPC, is to examine the averments in the plaint. The plaint is required to be read as a whole. The defence available to the defendants or the plea taken by them in the written statement or any application filed by them, cannot be the basis to decide the application under Order 7 Rule 11(d). Only the averments in the plaint are germane. ”
10. A careful reading of the above decision would abundantly make it clear that while considering the application under Order VII Rule 11 of CPC, only the plaint averments would be relevant and nothing else. In that background, if the averments in the plaint are looked into, paragraph 1 of the suit averment would indicate that the plaintiff is a tenant under the first defendant/landlord by virtue of Rent Agreement dated 10.12.2013 in respect of the suit schedule property. Paragraph 2 of the plaint discloses that the first defendant appears to have availed loan from the second defendant-Bank and the first defendant might have become defaulter and second and third defendant have initiated recovery proceedings by issuing notice under Section 13(2) and 13(4) of SARFAESI Act, 2002 for taking over symbolic possession of the suit schedule property from the first defendant.
11. The prayer sought in the plaint is to restrain the second and third defendants, officers of the Bank, their men or anybody claiming under them from dispossessing the plaintiff from the plaint schedule property without following due process of law. The plaint averment would indicate that the plaintiff was aware of the proceedings initiated by defendants 2 and 3 under SARFAESI Act against the first defendant in respect of the suit schedule property. The plaintiff has become a tenant only in the year 2013 whereas the recovery proceedings has been initiated in the year 2008 itself. Section 34 of the SARFAESI Act reads as follows:
“34. Civil Court not to have jurisdiction No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993).”
A careful reading of the above provision makes it clear that no Civil Court shall have jurisdiction to entertain any suit or proceedings in respect of any matter which a Debts Recovery Tribunal is empowered under the Act to determine and no injunction could be granted by any Court or Authority in respect of any action taken in pursuance of any power conferred under the SARFAESI Act.
12. At this stage, it is relevant to note Section 9 of CPC, which reads as follows:
9. Courts to try all civil suits unless barred— The Courts shall (subject to the provisions herein contained) have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred.
[Explanation I].—A suit in which the right to property or to an office is contested is a suit of a civil nature, notwithstanding that such right may depend entirely on the decision of questions as to religious rites or ceremonies.
[Explanation II]. For the purposes of this section, it is immaterial whether or not any fees are attached to the office referred to in Explanation I or whether or not such office is attached to a particular place.
The above provision of CPC provides that the Court shall have jurisdiction to try all suits of civil nature except suits which are expressly or impliedly barred. Reading of Section 34 of SARFAESI Act and Section 9 of CPC along with Order VII Rule 11(d) of CPC, it is clear that the suit filed by the plaintiff would not be maintainable and barred by Section 34 of the SARFAESI Act. When the suit is barred under Section 34 of SARFAESI Act, the Civil Court would not get jurisdiction to try the same in view of Section 9 of CPC.
13. Order VII Rule 11(d) of CPC empowers the Court to reject the plaint if it appears from the statement in the plaint to be barred by any law. The Hon'ble Apex Court in the case of JAGADISH SINGH (supra), at paragraphs 21 and 24 has held as follows:
21. Section 34 of the Securitisation Act ousts the civil court jurisdiction. For easy reference, we may extract Section 34 of the Securitisation Act, which is as follows:
“34. Civil Court not to have jurisdiction - No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993).
24. Statutory interest is being created in favour of the secured creditor on the secured assets and when the secured creditor proposes to proceed against the secured assets, sub-section (4) of Section 13 envisages various measures to secure the borrower’s debt. One of the measures provided by the statute is to take possession of secured assets of the borrowers, including the right to transfer by way of lease, assignment or realizing the secured assets. Any person aggrieved by any of the “measures” referred to in sub-section (4) of Section 13 has got a statutory right of appeal to the DRT under Section 17. The opening portion of Section 34 clearly states that no civil court shall have the jurisdiction to entertain any suit or proceeding “in respect of any matter” which a DRT or an Appellate Tribunal is empowered by or under the Securitisation Act to determine. The expression ‘in respect of any matter’ referred to in Section 34 would take in the “measures” provided under sub-section (4) of Section 13 of the Securitisation Act. Consequently if any aggrieved person has got any grievance against any “measures” taken by the borrower under sub-section (4) of Section 13, the remedy open to him is to approach the DRT or the Appellate Tribunal and not the civil court. Civil Court in such circumstances has no jurisdiction to entertain any suit or proceedings in respect of those matters which fall under sub-section (4) of Section 13 of the Securitisation Act because those matters fell within the jurisdiction of the DRT and the Appellate Tribunal. Further, Section 35 says, the Securitisation Act overrides other laws, if they are inconsistent with the provisions of that Act, which takes in Section 9 CPC as well.
14. The trial Court, while rejecting the application filed by the petitioners/defendants 2 and 3 at paragraph 8 of the order has relied on a decision of the Hon'ble Apex Court in VISHAL KALSARIA case, but the same would have no application to the facts of the present case, since, admittedly tenancy was created only in the year 2013 and the facts of that case are entirely different. The lease is for a period of 11 months and it is not a registered lease. In a recent decision Hon'ble Apex Court in (2019)9 SCC 94 in the case of BAJARANG SHYAMSUNDER AGRAWAL –vs- CENTRAL BANK OF INDIA AND ANOTHER, after considering VISHAL KALSARIA case (supra) at para-17, 18, 19, 24.3 and 35 has observed as follows.
17. The interplay between the SARFAESI Act and the right of the tenant was first examined by this Court in Harshad Govardhan Case. It may be noted that the present appellant was a party to the aforesaid proceedings. This Court was confronted with the question as to whether the provisions of the SARFAESI Act affect the right of a lessee to remain in possession of the secured asset during the period of the lease. After noticing the scheme of the Act, this Court held that if the lawful possession of the secured asset is not with the borrower, but with a lessee under a valid lease, the secured creditor cannot take possession of the secured asset until the lawful possession of the lessee gets determined and the lease will not get determined if the secured creditor chooses to take any of the measures specified in Section 13 of the SARFAESI Act. Accordingly, this Court concluded that the Chief Metropolitan Magistrate /District Magistrate can pass an order for delivery of possession of secured asset in favour of secured creditor only when he finds that the lease has been determined in accordance with Section 111 of the T.P. Act.
18. The Court further held that if the Chief Metropolitan Magistrate/District Magistrate is satisfied that a valid lease is created before the mortgage and the lease has not been determined in accordance with Section 111 of the T.P. Act, then he cannot pass an order for delivery of possession of the secured asset to the secured creditor. In case, he comes to the conclusion that there is no valid lease either before the creation of mortgage or after the creation of the mortgage satisfying the requirements of Section 65-A of the T.P. Act or even though there is a valid lease the same stands determined in accordance with Section 111 of the T.P. Act, he can pass an order for delivery of possession of the secured asset to the secured creditor.
19. This Court also recognized the inconsistency between Section 13(13) of the SARFAESI Act and Section 65-A of the Transfer of Property Act. While Section 13(13) of SARFAESI prohibits a borrower from leasing out any of the secured assets after receipt of a notice under Section 13(2) without the prior written consent of the secured creditor, Section 65-A of the T.P. Act enables the borrower/mortgagor to lease out the property. This inconsistency was resolved by holding that the SARFAESI Act will override the provisions of the T.P. Act.
24.3 In any case, if any of the tenants claim that he is entitled to possession of a secured asset for a term of more than a year, it has to be supported by the execution of a registered instrument. In the absence of a registered instrument, if the tenant relies on an unregistered instrument or an oral agreement accompanied by delivery of possession, the tenant is not entitled to possession of the secured asset for more than the period prescribed under Section 107 of the T.P. Act.
35. The operation of the Rent Act cannot be extended to a ‘tenant-in-sufferance’ vis a vis the SARFAESI Act, due to the operation of Section 13(2) read with Section 13(13) of the SARFAESI Act. A contrary interpretation would violate the intention of the legislature to provide for Section 13(13), which has a valuable role in making the SARFAESI Act a self-executory instrument for debts recovery. Moreover, such an interpretation would also violate the mandate of Section 35, SARFAESI Act which is couched in broad terms.
It is pertinent to note here itself that the SARFAESI Act was amended to insert sub-Section 4(A) to Section 17 of the SARFAESI Act. Section 17 of SARFAESI Act provides for an appeal by any person aggrieved by any of the measures taken by the Bank under Section 13 of the SARFAESI Act.
15. Sub-Section 4(A) to Section 17 was inserted by amendment Act 44 of 2016 by notification dated 01.09.2016. Sub-Section 4A reads as follows:
(4A) Where-
i) any person, in an application under sub-section (1), claim any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy – a) has expired or stood determined; or b) is contrary to section 65A of the Transfer of Property Act, 1882; or c) is contrary to terms of mortgage; or d) is created after the issuance of notice of default and demand by the Bank under sub-section (2) of section 13 of the Act, and ii) the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) of clause (i). then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of the Act.
By virtue of insertion of the above provision, the DRT is empowered to examine, any claim of tenancy or leasehold rights upon the secured assets. Therefore, in the facts and circumstances of the present case, as the plaintiff claims to be a tenant his remedy is to approach the Debts Recovery Tribunal. It is always open for the plaintiff to approach the DRT under Section 17 of the SARFAESI Act. Moreover, when the lower Court records are scanned through, it is seen that plaintiff has placed on record the original rental agreement dated 10.12.2013, which is for a period of 11 months from 10.12.2013 and it is not a registered document.
16. As already noticed above, from the averments made at paragraphs 1 to 3 of the plaint, it is clear that the plaintiff was aware of the action initiated by defendants 2 and 3/Bank under SARFAESI Act and as such, the plaintiff could not have maintained the suit before the Civil Court praying for permanent injunction, as the same is barred under Section 34 of the SARFAESI Act. Hence, I am of the opinion that the suit would not be maintainable and the plaint is liable to be rejected.
17. Accordingly, in the peculiar facts and circumstances of the case, the CRP is allowed and order dated 01/08/2016 passed on IA No.2 in O.S No.6320/2014 is set aside. The plaint in O.S.No.6320/2014 on the file of the VII Additional City Civil Judge at Bangalore is rejected. Defendants 2 and 3/petitioners herein shall not take any precepitative action for a period of four weeks from the date of receipt of certified copy of this order, so as to enable the plaintiff to avail alternate remedy, if so advised.
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