186292022161136164order22 Jun 2022 423599
186292022161136164order22 Jun 2022 423599
186292022161136164order22 Jun 2022 423599
ORDER
dismissing the Appeal with a cost of Rs. 5 lakhs. The petitioner is the
appellant before the Bombay High Court and filed a suit before the Trial
Court in which the defendant had moved application under Order VII, Rule
11 of the Code of Civil Procedure, 1973 for rejection of the plaint. The
application was allowed and the suit was dismissed by Order dated
25.05.2022 by the Trial Court. This was the order challenged in the first
2. All the same, before we come down to the order passed in the first
appeal, we must narrate the facts of the case which have a crucial bearing
on the case. The petitioner had availed credit facility from the Oriental Bank
Digitally signed by
before Debts Recovery Tribunal (‘DRT’ for short) for recovery of its dues from
Rajni Mukhi
Date: 2022.06.25
18:55:18 IST
Reason:
the present petitioner and others. This original application was allowed by the
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DRT, Mumbai on 24.07.2006 and consequently recovery certificate was
issued and the borrowers and guarantors were directed to repay the
outstanding dues. The order dated 24.07.2006 was challenged before the
Debts Recovery Appellate Tribunal (‘DRAT’ for short) and so were several
other orders and measures which were subsequently taken by the Bank for
the recovery of the amount under the provisions of the Securitisation and
2002 (‘SARFAESI Act’ for short). On 30.09.2013, the Bank had assigned the
favour of M/s. Phoenix A.R.C. Pvt. Ltd., which we will now refer to as the
petitioner i.e., the plaintiff and the appellant before the court below and M/s.
Phoenix A.R.C. Pvt. Ltd. and a settlement deed was signed between the
also agreed to handover the possession of the secured asset being Flat No.
37 on the 18th Floor of the building known as “Usha Kiran” along with the
Garage no. 17 and open parking space which shall now be referred to as
“the Suit Premises” to M/s. Phoenix A.R.C. Pvt. Ltd. The petitioner also gave
3. All the same, the petitioner failed to repay the amount or even
handover the possession of the secured asset to M/s. Phoenix A.R.C. Pvt.
Ltd. Not only this, in clear breach of the consent terms and the settlement
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dated 01.10.2013, attempts were being made by the petitioner in obstructing
before the authorities under the SARFAESI Act as well as before the
4. It would then be a long list of cases filed by the petitioner before the
DRT and the District Court as well as the Bombay High Court. We may refer
to some of them. Petitioner initially filed a Writ Petition No. 1766 of 2017 and
1767 of 2017 challenging the Order passed by the DRT which were handing
over the possession of the suit premises. These petitions were dismissed by
and was granted 8 weeks of extension by the Court. The petitioner once
again filed a Notice of Motion before the Division Bench of Bombay High
(referred in the above paragraph). The Notice of Motion was rejected and it
was ultimately challenged before the Supreme Court. The Supreme Court
by an order dated 30.08.2017, dismissed the SLP but granted time to the
to the undertaking given by the petitioner that he would vacate the premises
taken over from the petitioner and handed over to the DRT receiver on
31.10.2017. The flat was thereafter put to auction following due process. But
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5. The Petitioner then filed two separate Applications before DRT-I,
Mumbai seeking discharge of liability alleging that the liability of the petitioner
was only to the extent of Rs. 5 Crores with interest. These applications were
dismissed by the DRT with costs. The order of the DRT was again put to
challenge in Writ Petition (Writ Petition No. 9785 of 2021) before the Bombay
High Court which was then withdrawn in order to file alternate remedy of
filing appeal. The Plaintiff thereafter filed an appeal before the DRT, in which
prayer for waiver was rejected and since the mandatory deposit under
Section 30 (A) of SARFAESI Act was not deposited, the appeal was
dismissed. The challenge to the said order of dismissal was also dismissed
by Division Bench of Bombay High Court with a cost of Rs. 50,000/-. The
said order was again put to challenge in SLP No. 8946 of 2021 which was
11.02.2022 of the Bombay High Court which was against the interest of the
present petitioner was challenged by the petitioner in SLP (C) Nos. 2594-
Ltd. i.e., Defendant no. 4 before the Bombay High Court submitted its bid on
this stage that the present petitioner filed a suit before the Trial Court on
auction and against the participation of the Defendants in the auction who
No. 3 which was the housing society. Following relief was sought in the suit:
(i) Declaration that the Defendant Nos. 1 and 2 are not entitled to
participate in the auction proceedings conducted by DRT in
respect of the suit premises.
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(ii) To restrain Defendant Nos. 1 and 2 from participating in the
auction proceedings.
6. It was here that the Defendants filed a Notice of Motion under Order
VII, Rule 11 of CPC seeking rejection of the plaint in view of the specific bar
“34. Civil court not to have jurisdiction- No civil court shall have
jurisdiction to entertain any suit or proceedings in respect of any matter
which a Debts Recovery Tribunal or the Appellate Tribunal is
empowered by our 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)”
under Order VII, Rule 11 on grounds that the secured creditor i.e., M/s.
not a party to the suit nor any order of the DRT or of auction sale are being
put to challenge in the suit. The relief sought by the Plaintiff, it was argued, is
only against Defendant Nos.1 and 2 who are not parties before the DRT and
Defendant No.2 is the Secretary of the society i.e., Defendant No.3 who has
misused his position in collusion and connivance with the secured creditor
and other Defendants and has played fraud upon the Plaintiff and the bar
term of the decision in the case of Marida Chemicals Ltd. & Ors. Vs Union
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8. The Trial Court after hearing all the concerned parties allowed the
application under Order VII, Rule 11, rejected the plaint on the ground that
the plaintiff had approached the DRT as well as the Deputy Registrar, Co-
the subsequent transfer of the suit premises in favour of Defendant No.4 i.e.,
the successful bidder and the suit being filed before the Court is now only to
nullify the effect and operation of the auction proceedings conducted by the
Recovery Officers, DRT under the provisions of the SARFAESI Act. It was
also held by the Trial Court that there is a clear bar under Section 34 of the
SARFAESI Act, and therefore, the Civil Court has no jurisdiction to try the
suit against the order allowing the application under Order VII, Rule 11,
thereby rejecting the Plaintiff’s case. The Petitioner filed an appeal before the
Bombay High Court which was dismissed by the High Court on 13.06.2022.
9. We have already narrated the long list of dates and the number of
cases which have been filed by the Petitioner. We have also been apprised
by Mr. Kavin Gulati, learned senior counsel, appearing for Respondent Nos.
1 and 2 herein and Mr. Huzefa Ahmadi, learned senior counsel appearing for
the Respondent No.4 herein that the total number of SLPs which have been
(i) SLP (Civil) No. 19599/2017 which challenged the order for handing
over of possession in terms of the Consent Term - WITHDRAWN;
(ii) SLP (Civil) No. 22635/2017 which was preferred for grant of time till
31st October, 2017 with regard to vacation of the suit premises -
DISMISSED;
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(iii)SLP (Civil) No. 27326/2017 which challenged the handing over of
the possession of the suit premises on the ground that the debt qua
the Petitioner is only to the extent of Rs. 5 Crores and amount
already paid - DISMISSED ;
(v) SLP (Crl.) No. 4177/2022 which was preferred by the Petitioner
against order dated 26th April, 2022 - DISMISSED ;
(vii) SLP (Crl.) No. 4361/2022 which was preferred by the
Petitioner challenging the refusal of Interim Reliefs in terms of
the stay on possession in Interim Application seeking
Impleadment – WITHDRAWN and
(viii) SLP (Civil) No. 10753/2022 preferred by the Petitioner
challenging the order 25 th May, 2022 in W.P. No. 6252/2022
seeking stay of Recovery Proceedings – WITHDRAWN.
the plea of fraud and collusion at the hands of Respondent Nos. 1, 2 and 4 with
the secured creditor was raised and then the petitions were consequently
cannot be permitted to raise the same plea again by filing the present petition.
All the same, the same plea has been taken now in the present case as well.
What is most regrettable is that the Petitioner has not mentioned the filing of most
10. In fact, in SLP (C) No. 10753 of 2022 this was dismissed as withdrawn,
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11. In other words, the only liberty which was granted to the Petitioner was to
approach the authority so that they may collect their household items from the
Petitioner of the earlier SLPs filed by the Petitioner, which as we have noted
either stood dismissed or were withdrawn by the Petitioner. We, therefore, have
no hesitation to say the petitioner has not approached this Court with clean
hands. To the contrary there has been a consistent effort to abuse the process of
12. So much for the conduct of the Petitioner, but before, we come down to
the other relevant aspects of the matter, let us examine the pure merits of the
13. The learned counsel would argue that the suit was maintainable before
the Trial Court and was not liable to be dismissed on an application under Order
VII, Rule 11 for the simple reason that there was no bar under Section 34 of the
Respondent Nos. 1, 2 and 4 who were in connivance with the secured creditor.
Indeed, though Section 34 removes the jurisdiction of Civil Court for entertaining
the matter which is subject of the SARFAESI Act, an exception has been carved
out in the case of fraud, by the Apex Court, in the case of Mardia Chemicals Ltd.
(supra), wherein reference to Section 34 of the SARFAESI Act, Apex Court held
in para 50 & 51, which is relevant for our purpose is being reproduced below:
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pursuance of any power conferred under this Act.” That is to say,
the prohibition covers even matters which can be taken
cognizance of by the Debts Recovery Tribunal though no measure
in that direction has so far been taken under sub-section (4) of
Section 13. It is further to be noted that the bar of jurisdiction is in
respect of a proceeding which matter may be taken to the
Tribunal. Therefore, 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 bar of civil court thus
applies to all such matters which may be takn cognizance of by
the Debts Recovery Tribunal, apart from those matters in which
measures have already been taken under sub-section (4) of
Section 13.
51. However, to a very limited extent 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.”
14. A mere recital of fraud, however is not enough. Once fraud is alleged by a
party, like the one that has been done by the Petitioner in reply to the objection
under Order VII, Rule 11 of the Civil Procedure Code, then the allegation of fraud
has to be tested in terms of Order VI, Rule 4 of the Civil Procedure Code, which
reads as under:
15. Apart from making a bald statement of collusion between Defendant Nos.
1, 2 & 4 and the secured creditor, i.e., M/s. Phoenix A.R.C. Pvt. Ltd. there is
nothing substantial as to how and as to what precise fraud has been committed.
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The only case of the Petitioner for creating a case of fraud is that the Petitioner’s
name was not registered as a member of the society and the reason for not
registering the name of the Petitioner as a member of the society was that the
society, i.e., Defendant No.3 was in collusion with the secured creditor as well as
with the Defendant Nos.1, 2 and 4. The fact of the matter is that even if the name
of the Petitioner would have been registered as a member of the society, it would
have hardly given any benefit to the Petitioner in the present case. Being
registered as a member of the society would have only meant that the petitioner
Moreover, and most importantly, not only is this just a bald allegation but the
necessary party against whom fraud was alleged i.e., M/s. Phoenix A.R.C. Pvt.
Ltd. was never made a party in the suit proceedings before the Civil Court.
16. At this stage, it was placed on record that the suit premises have been sold
in favour of Defendant No.4 i.e., Acrynova Industries Pvt. Ltd. The challenge to
the auction and sale, which was made at the hands of none other than the
present petitioner before the Bombay High Court and as well as this Court has
been dismissed and that as far as the sale auction in favour of the Defendant
No.4 is concerned, that has attained a finality. Paragraph No.4 of the order dated
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from the defaulter and the guarantors. In order to prevent such
counter productive things in the form of indulgence in the
functioning of DRT and in order to achieve the object of the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (for short, 'the
SARFAESI Act'), Section 34 has been incorporated in the
SARFAESI Act. Accordingly, civil courts are barred from
entertaining the proceeding in respect of any matter which is DRT
or the Appellate Tribunal is empowered to determine. It is
specifically provided in Section 34 of the SARFAESI Act that 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 the SARFAESI Act or under the
Recovery of Debts Due to Banks and Financial Institutions Act,
1993.”
17. The observations of the Bombay High Court on this aspect are as under:
“33. It is true that the Plaintiff has not challenged the validity of the
auction proceedings or the orders passed by the authorities under
the SARFAESI Act. The Plaintiff has also not sought any
substantive relief against Defendant No.4, who is the highest
bidder. However, a plain reading of the averments and the prayers
in the plaint would indicate that the Plaintiff, under the guise of
raising a membership dispute with the Defendant No.3 - Society,
has in fact once again attempted to stall the auction proceedings
conducted by the Recovery Officer under the provisions of
SARFAESI Act. Though the Plaintiff has alleged fraud, the
pleadings in this regard are vague, ambiguous and do not meet the
requirement of Order VI Rule 4 of CPC and/or do not satisfy the
test of fraud. The allegations of fraud and collusion is nothing but
clever and ingenious drafting to get over the bar of Section 34 of
the SARFAESI Act and to prevent the auction and the auction
having been concluded, to prevent the Defendant No.4-auction
purchaser from taking possession of the suit premises. The
learned Judge was therefore perfectly justified in rejecting the
plaint under Order VII Rule 11 of CPC.”
18. We are totally in agreement with the above observations of the two courts
and the order passed by the trial court allowing the application under Order VII,
Rule 11 of the CPC the Bombay High Court dated 13.06.2022 and upholding that
order and dismissing the appeal of the present Petitioner. Under the facts and
circumstances of the case, the Bombay High Court was absolutely justified in
imposing the cost of Rs. 5 lakh, on the Petitioner. It is not only the proceedings
before the Civil Court initiated by the Petitioner in the year 2022 which was on
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abuse of the law, but the entire conduct of the petitioner is a clear reflection of the
fact that the petitioner has been doing so repeatedly, after being a signatory to
19. The Supreme Court in Dalip Singh Vs. State of Uttar Pradesh and Others,
reported in (2010) 2 SCC 114 has this to say for methods adopted at the hands
below:
20. We may record here that we were initially persuaded in this case, to initiate
contempt proceedings against the Petitioner, considering that there has been a
before this Court. We are not doing so purely due to the age of the Petitioner as
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she is a lady of 78 years of age. The present petition is no doubt an abuse of the
process of law and has caused harm to the other parties to the litigation, some of
whom may have been needlessly drawn into the litigation. We may refer here an
observation given in the case of Subrata Roy Sahara Vs Union of India (2014) 8
SCC 470:
...…………………………..J.
[C.T. RAVIKUMAR]
...…………………………..J.
[SUDHANSHU DHULIA]
NEW DELHI;
JUNE 22, 2022
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ITEM NO.11/1 COURT NO.16 SECTION IX
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
SPECIAL LEAVE PETITION (CIVIL) Diary No. 18629/2022
(Arising out of impugned final judgment and order dated 13-06-2022
in FA No. 531/2022 passed by the High Court of Judicature at
Bombay)
CORAM :
HON'BLE MR. JUSTICE C.T. RAVIKUMAR
HON'BLE MR. JUSTICE SUDHANSHU DHULIA
(VACATION BENCH)
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ITEM NO.11 COURT NO.16 SECTION IX
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
CORAM :
HON'BLE MR. JUSTICE C.T. RAVIKUMAR
HON'BLE MR. JUSTICE SUDHANSHU DHULIA
(VACATION BENCH)
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