Civil Suit Not Maintainable After SARFAESI Proceedings Are Initiated: SC [Read Order]

The Supreme Court, in Sree Anandhakumar Mills Vs. Indian Overseas Bank, has reiterated that a civil suit would not be maintainable when proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement Of Security Interest (SARFAESI) Act, 2002, are already initiated.

A bench of Justice Ranjan Gogoi and Justice R Banumathi was considering an appeal against a Madras High Court judgment of 2010 that held that the civil court's jurisdiction is not totally ousted by Section 34 of the SARFAESI Act and the power to grant interim injunction in such suits which are maintainable is also not taken away by Section 34 of the SARFAESI Act. It had also held that the civil court jurisdiction is barred only in regard to the applications filed by a bank/financial institutions for recovery of debts and that hat a partition suit filed by a person who is not a borrower or guarantor is maintainable in a civil court.

The bench said: “The matter need not engage the Court in any great detail as in view of the law laid down by this Court in Jagdish Singh vs. Heeralal and others it would clear and evident that the suit filed by the second respondent is not maintainable.”

In the referred case, the apex court had held a suit for partition would not be maintainable in a situation where proceedings under the SARFAESI Act had been initiated and the remedy of any person aggrieved by the initiation of proceedings under the SARFAESI Act lies under Section 17 which provides for an efficacious and adequate remedy to a party aggrieved.

Closing the said suits filed, the bench observed that the respondent (who filed the suit) has an adequate and efficacious remedy under the provisions of Sections 17 and 18 of the SARFAESI Act.