S.34 SARFAESI Act | Civil Court's Jurisdiction Not Ousted When Remedy Cannot Be Effectively Addressed By Tribunal: Madras High Court

Justice RN Manjula noted that the case, which involved rights relating to property could be proved only through an exhaustive trial which was possible only before the Civil court and not the tribunal.

“So in all possibilities, I find no reason to reject the plaint on the basis of the averments and allegations made in the plaint. The plaintiffs have established the case and there are also materials available to show that the remedy which has been sought by the plaintiffs before the civil court cannot be effectively addressed before the Debt Recovery Tribunal. So I am of the considered view that the bar under Section 34 of SARFAESI Act cannot be extended to the nature of the claim raised by the applicant/5th defendant in the present suit,” the court thus ordered.

The suit was filed by a group of owners of a residential apartment complex. It was their case that despite allotting an undivided land area of 161 sq.ft for a common purpose, the developer conveyed the property to other defendants who in turn created a mortgage in respect of the property in favour of Punjab National Bank for availing loan. Since the loan amount was not repaid, the bank initiated SARFAESI proceedings and took possession of the suit property.

Though the apartment owners approached the Debt Recovery Tribunal, the tribunal dismissed the plea saying that the bank had a valid mortgage. The tribunal had also observed that the flat owners were not claiming ownership but a right to use for which they could seek a remedy elsewhere and not the tribunal. Thus, the owners approached the High Court.

Though the bank had challenged the suit claiming that the court’s jurisdiction was ousted, the court noted that even the tribunal had opined that the party’s claims with respect to joint possession could be dealt by a civil court only.

The apartment owners also challenged the application submitted that the bar under Section 34 of the SARFAESI Act did not totally bar the jurisdiction of the civil court if the remedy available under the Act was not adequate. It was submitted that the reliefs claimed by the apartment owners was beyond the scope of the Act and thus the court’s jurisdiction could not be barred.

The court noted that the apartment owners had made allegations claiming that there were prima facie materials to infer collusion between the bank officials and the defendants in getting financial assistance. Further, the court noted that while the bank got a favourable order from the tribunal saying that owners could only maintain a suit, now they had taken a different stand to contend that the suit was not maintainable.

The court also noted that when fraud had been alleged against the bank itself, the remedy lied only before a civil court. Thus, the court observed that even if the mortgage was valid in the eye of law, it did not deprive the owners from claiming their undivided share and interest in the suit property which according to them has been attached to their respective residential flat in the apartment complex.

Thus, finding no reason to reject the plaint, the court dismissed the application.

Counsel for the Petitioner: Mr.M.L.Ganesh

Counsel for the Respondent: Mr.K.V.Babu for M/S.Dipthi Monoth.A

Citation: 2023 LiveLaw (Mad) 291

Case Title: Punjab National Bank v. R Lalitha and Others

Case No: Application No.3549 of 2022 in C .S.No.97 of 2022