Mere Allegation Of Fraud Without Particulars Not Sufficient To Get Over Bar On Civil Suit Under Section 34 SARFAESI : Supreme Court

The Supreme Court observed that bar under Section 34 SARFAESI Act on filing civil suit is attracted if allegations of 'fraud' are made without any particulars.

In this case, the High Court had rejected a plaint and dismissed a suit on the ground that the suit is barred in view of the bar under Section 34 of SARFAESI Act. Challenging this, the appellant-plaintiff's contention was that in the suit plaintiff had pleaded the fraud. That the relief was sought to declare the assignment agreement null and void which cannot be granted by the DRT under the provisions of the SARFAESI Act. The other side contended that the allegations of 'fraud' are nothing but a clever drafting only with a view to bring the suit maintainable before the civil court despite the bar under Section 34 of the SARFAESI Act.

Perusing the plaint, the bench comprising Justices noted that except the words used 'fraud'/'fraudulent' there are no specific particulars pleaded with respect to the 'fraud'.

"It appears that by a clever drafting and using the words 'fraud'/'fraudulent' without any specific particulars with respect to the 'fraud', the plaintiff – appellant herein intends to get out of the bar under Section 34 of the SARFAESI Act and wants the suit to be maintainable. As per the settled preposition of law mere mentioning and using the word 'fraud'/'fraudulent' is not sufficient to satisfy the test of 'fraud'. As per the settled preposition of law such a pleading/using the word 'fraud'/ 'fraudulent' without any material particulars would not tantamount to pleading of 'fraud'"

The court said that as per Order VI Rule 4 in all cases in which the party pleading relies on any misrepresentation, fraud, breach of trust, wilful default, or undue influence, particulars shall be stated in the pleading. While allowing the appeal, the court further observed:

8. Having considered the pleadings and averments in the suit more particularly the use of word 'fraud' even considering the case on behalf of the plaintiff, we find that the allegations of 'fraud' are made without any particulars and only with a view to get out of the bar under Section 34 of the SARFAESI Act and by such a clever drafting the plaintiff intends to bring the suit maintainable despite the bar under Section 34 of the SARFAESI Act, which is not permissible at all and which cannot be approved. Even otherwise it is required to be noted that it is the case on behalf of the plaintiff – appellant herein that in view of the approved resolution plan under IBC and thereafter the original corporate debtor being discharged there shall not be any debt so far as the plaintiff – appellant herein is concerned and therefore the assignment deed can be said to be 'fraudulent'. The aforesaid cannot be accepted. By that itself the assignment deed cannot be said to be 'fraudulent'.

The bench therefore held that the High Court has not committed any error in rejecting the plaint/dismissing the suit in view of the bar under Section 34 of the SARFAESI Act.

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