S.34 SARFAESI Act Bars Grant Of Injunction By Civil Court For Actions Taken Under The Act: Jammu & Kashmir High Court

The Jammu and Kashmir High Court has ruled that no injunction shall be granted by any court in respect of any action taken or to be taken in pursuance of any power conferred under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

“Section 34 of the SARFAESI Act creates a bar and provides 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 this Act or under the recovery of debts due to the bank and Financial Institution Act, 1993”, a bench of Justice Wasim Sadiq Nargal observed.

The case before the court involved a plaintiff who had filed a suit challenging the validity of two mortgage deeds executed by him in favour of a bank. He sought a declaration that the mortgage deeds were null and void and not legally enforceable. However, the bank had classified his account as a non-performing asset (NPA) and initiated action under the SARFAESI Act by issuing a notice under Section 13(2) of the Act.

The plaintiff had earlier approached the court seeking a temporary injunction to restrain the bank from enforcing the mortgage deeds. However, the court below dismissed the application, and the plaintiff appealed against this decision.

In the appeal, counsel for plaintiff Parveen Kapahi argued that the mortgage deeds were invalid as the land in question had been vested upon him under Section 8 of the Agrarian Reforms Act, making it non-transferable except to the government. He contended that the court should consider the prima facie case, balance of convenience, and irreparable loss and injury in his favor, and grant the temporary injunction.

Per contra, bank'c counsel Jugal Kishore Gupta asserted that the suit was not maintainable because the plaintiff who has executed the mortgage deeds in favour of the defendants is estopped from challenging the same. It was further argued that plaintiff had concealed the fact that he had applied for permission to convert the land from agricultural to non-agricultural use, and that the account had turned NPA. He further argued that the provisions of the SARFAESI Act barred the court from granting any injunction in respect of any action taken under the Act.

Justice Nargal upheld the decision of the court below and observed that the plaintiff had not come to the court with clean hands and had suppressed material facts. It noted that the plaintiff suppressed material facts inasmuch his earlier challenges to the notice under SARFAESI Act had failed and now, he approached the court challenging the mortgage deed altogether.

Justice Nargal observed,

"It is a classic case where the plaintiff who himself is a party to the execution of the mortgage deeds has subsequently questioned the execution thereof after drawing loan facility and on the basis thereof, the plaintiff cannot absolve him of his liability under the SARFAESI Act. Plaintiff after having failed to seek any relief against the proceedings initiated under the SARFAESI Act before the court of learned Principal District Judge, Samba has very cleverly and mischievously approached the court below with unclean hands by suppressing material facts and the court below, after adjudicating upon the material facts on record, has rightly vacated the interim direction already granted vide order dated 09.02.2023 by passing detailed order which is impugned in the present appeal dated 09.05.2023. It is settled preposition of law that one who seeks equitable relief must do equity also and demonstrate bonafides and a person guilty of suppression of material facts is not entitled to relief under Order XXXIX Rules 1 and 2 of CPC."

Therefore, the court concluded that the plaintiff's appeal lacked merit, and the decision of the court below to vacate the temporary injunction was upheld. The court also directed the court below to proceed with the suit and decide it on its own merits in accordance with the law.

Case Title: Raj Kumar Gupta Vs Bank of india & Ors.

Citation: 2023 LiveLaw(JKL) 195

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