THE AUTHORISED OFFICER, STATE BANK OF INDIA versus M/S ALLWYN ALLOYS PVT. LTD. AND ORS. on 17 May 2018

[2018] 4 S.C.R. 477

THE AUTHORISED OFFICER,STATE BANK OF INDIA

v.

M/S ALLWYN ALLOYS PVT. LTD. AND ORS.

(Civil Appeal No. 5248 of 2018)

MAY 17, 2018

[DIPAK MISRA, CJI, A. M. KHANWILKAR ANDDR. D.Y. CHANDRACHUD, JJ.]

Securitisation and Reconstruction of Financial Assets andEnforcement of Security Interest Act, 2002 – s.34 – Equitablemortgage created by respondent Nos. 2 to 4 in respect of the subjectflat in favour of appellant-bank – Failure to repay the loan amount– Claim for title over the subject flat by respondent no.5 and 6 (writpetitioners) – DRT and DRAT held that document “MOU” reliedupon by respondents no.5 and 6 was created after the equitablemortgage and it was unregistered document which would not conferany right, title and interest in their favour in the said flat and onthat basis rejected the relief claimed by respondent no.5 and 6 torestrain the bank from proceeding with the auction of the flat –High Court held that issue involved disputed facts and directedrespondent no.5 and 6 to contest the matter before proper forum –On Bank’s appeal, held: The mandate of s.13 and in particulars.34 of 2002 Act clearly bars filing of civil suit – For, no civil courtcan exercise jurisdiction to entertain any suit or proceeding inrespect of any matter which a DRT or DRAT is empowered by orunder this Act to determine and no injunction can be granted byany Court or authority in respect of any action taken or to be takenin pursuance of any power conferred by or under the Act – Thefact that the stated flat is the subject matter of a registered saledeed executed by the respondent Nos. 5 and 6 in favour ofrespondent Nos. 2 to 4 and sale deed has been deposited with theBank along with the share certificate and other documents forcreating an equitable mortgage and the Bank has initiated actionin that behalf under the 2002 Act, is indisputable – It is also notdisputed that respondent no.5 is in physical possession of the subjectflat – If so, the question of permitting the respondent nos.5 and 6 to

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Aapproach any other forum for adjudication of issues raised by themconcerning the right, title and interest in relation to the said property,cannot be countenanced – High Court did not analyse the efficacyof the concurrent finding of fact recorded by the DRT and DRATbut opined that the same involved factual issues warrantingproduction of evidence and a full-fledged trial – The approach ofBHigh Court is not tenable in law – Bank/Banking.

Allowing the appeal, the Court

HELD: 1. The mandate of Section 13 and, in particular,Section 34 of the Securitisation and Reconstruction of FinancialCAssets and Enforcement of Security Interest Act, 2002 clearlybars filing of a civil suit. For, no civil court can exercise jurisdictionto entertain any suit or proceeding in respect of any matter whicha DRT or DRAT is empowered by or under this Act to determineand no injunction can be granted by any Court or authority inrespect of any action taken or to be taken in pursuance of anyDpower conferred by or under the Act. The fact that the stated flatis the subject matter of a registered sale deed executed by therespondent Nos. 5 and 6 (writ petitioners) in favour of respondentNos. 2 to 4 and which sale deed has been deposited with theBank along with the share certificate and other documents forEcreating an equitable mortgage and the Bank has initiated actionin that behalf under the 2002 Act, is indisputable. If so, thequestion of permitting the respondent Nos.5 and 6 (writpetitioners) to approach any other forum for adjudication of issuesraised by them concerning the right, title and interest in relationto the said property, cannot be countenanced. The High CourtFhas not analysed the efficacy of the concurrent finding of factrecorded by the DRT and DRAT but opined that the same involvedfactual issues warranting production of evidence and a full-fledgedtrial. [Para 6][481-G-H; 482-A-C]

2. The High Court could not have directed the Bank toGdeposit Rs.25 Lacs in an interest earning deposit and the profitsof the said deposit to enure to the benefit of the successful party.Such a direction was wholly uncalled for. [Para 8][482-F-G]

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CIVIL APPELLATE JURISDICTION: Civil Appeal No.5248of 2018.

From the Judgment and Order dated 30.08.2016 of the High Courtof Judicature at Bombay in WP No.7480/2014.

Vikas Singh, Sr. Adv., Sanjay Kapur, Ms. Megha Karnwal,Ms. Mansi Kapur, Advs. for the Appellant.

Gaurav Agrawal, Haresh Gantra, C. George Thomas, V. AsimSiddiqui, Anurag Gharote, Advs. for the Respondents.

The Judgment of the Court was delivered by

A. M. KHANWILKAR, J. 1. The judgment and order dated30[th] August, 2016 of the Division Bench of the High Court of Judicatureat Bombay in Writ Petition No.7480 of 2014, is assailed in this appeal,whereby the High Court without formally setting aside the order passedby the Debts Recovery Appellate Tribunal, Mumbai dated 20[th] November,2013 in Appeal No.273 of 2013 connected with M.A. No.886 of 2013,disposed of the writ petition with liberty to respondent Nos.5 & 6 (writpetitioners) to approach the competent forum for adjudication of theirright, title and interest in respect of a flat/apartment, i.e. Flat No.C-203on the Second Floor of Blue Heaven Apartment, C-Wing, Rebellow Road,Bandra (West), Mumbai, which was mortgaged to the appellant Bankby the directors of respondent No.1 Company by way of an equitablemortgage.

2. The Debts Recovery Tribunal (“DRT”) as well as the DebtsRecovery Appellate Tribunal (“DRAT”) after examining the plea takenby respondent Nos.5 and 6 came to hold that the document styled asMemorandum of Understanding dated 13[th] March, 2011, relied upon byrespondent Nos.5 and 6, was subsequently created after the equitablemortgage and moreso it was an unregistered document which would notconfer any right, title and interest in their favour in the said flat. Further,the share certificate of the said flat has already been transferred by theSociety in the name of the directors of respondent No.1 Company i.e.Mrs. Zahoor K. Dhanani, Mr. Karim K. Dhanani and Mrs. Habika K.Dhanani (respondent Nos.2, 3 and 4 herein). It is also held that theSociety has contemporaneously recorded the factum of mortgage createdby the said respondents in respect of the subject flat in favour of theBank; and that the said respondents were not coming forward to deny

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Athe stated mortgage. On the basis of the documentary evidence, DRTas well as the DRAT concurrently held that it is well established that thesaid respondents had legitimately created an equitable mortgage in respectof the said flat in favour of the Bank, which has had security interestupon the said flat. On the other hand, respondent Nos.5 and 6 (writpetitioners) have failed to file any documentary evidence to establishBtheir subsisting title over the subject flat. On that basis, the relief claimedby respondent Nos.5 and 6 (writ petitioners) to restrain the Bank fromproceeding with the auction of the subject flat stood rejected.

3. This decision of the DRAT dated 20[th] November, 2013 wasassailed by respondent Nos.5 and 6 (writ petitioners) by way of WritCPetition No.7480 of 2014. The Division Bench of the High Court notedthe plea of the writ petitioners and opined that the question regarding theright, title and interest or marketable title of the writ petitioners or anyinterest that could have been parted by respondent Nos.2 to 4 under theso called mortgage, involved disputed facts and would require evidenceDand a full-fledged trial. After so noting, the High Court went on to observethat with a view to give full opportunity to the parties to bring on recordthe relevant facts in terms of the pleadings and for full and completeadjudication of the matters in issue, it is apposite to give liberty to thewrit petitioners to contest the matter before a proper forum where allthe issues could be agitated. For, indisputably, respondent No.5 (writEpetitioner No.1) is in physical possession of the stated flat. The HighCourt proceeded to pass the following operative order in the said writpetition:

“6] Accordingly, we dispose of the writ petition with thefollowing directions:F

a] Period of 8 weeks is granted for the writ petitioners toapproach proper forum to get adjudication of the rights ofthe writ petitioners as contended in the writ petition and withinthe said period of 8 weeks, they shall file and seek properinterim relief in their favour. Till expiry of 8 weeks, the 1[st]Grespondent bank shall not proceed with the matter in terms ofthe order obtained by them before Debts Recovery Tribunalso far as the property in question; b] Amount of Rs.25 Lacs shall be deposited in an interestearning deposit, by the respondent No.1 bank and profits of H

the said deposit shall enure to the benefits of the parties, whobecome successful in the litigation; and c] No order as to costs.”

4. The Bank has assailed the aforesaid decision of the High Courtprimarily on the ground that all issues concerning the mortgaged/securedproperty are required to be decided only by the DRT; and not in any civilproceedings as has been observed by the High Court in the impugnedjudgment. For, filing of a civil suit in respect of secured assets is barredby law. Secondly, the DRT as well as DRAT have examined the meritsof the controversy and justly answered the same against the writpetitioners. The concurrent finding of fact recorded by the said Tribunalsis that the writ petitioners have failed to establish any right, title or interestin the subject flat. That finding has neither been disturbed nor is itassailable. According to the Bank, the High Court judgment under appealis untenable and deserves to be set aside.

5. The contesting respondent Nos.5 and 6 (writ petitioners),however, supported the view taken by the High Court and would contendthat it is indisputable that respondent No.5 (writ petitioner No.1) is inphysical possession of the subject flat and was entitled to pursue hisclaim about the right, title and interest in the subject flat in view of theMemorandum of Understanding dated 13[th] March, 2011, executedbetween the writ petitioners and respondent Nos.2 to 4 regarding re-sale of the subject flat in their (writ petitioners) favour. The respondentNos.5 and 6 would also contend that the original share certificate andfew receipts of payments made to the Society were still in their possessionand that the entries effected in the Society’s record to transfer theshare certificate in favour of respondent Nos. 2 to 4 are fabricated.

6. After having considered the rival submissions of the parities,we have no hesitation in acceding to the argument urged on behalf ofthe Bank that the mandate of Section 13 and, in particular, Section 34 ofthe Securitisation and Reconstruction of Financial Assets andEnforcement of Security Interest Act, 2002 (for short, “the 2002 Act”),clearly bars filing of a civil suit. For, no civil court can exercise jurisdictionto entertain any suit or proceeding in respect of any matter which aDRT or DRAT is empowered by or under this Act to determine and noinjunction can be granted by any Court or authority in respect of anyaction taken or to be taken in pursuance of any power conferred by or A

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Aunder the Act. The fact that the stated flat is the subject matter of aregistered sale deed executed by the respondent Nos. 5 and 6 (writpetitioners) in favour of respondent Nos. 2 to 4 and which sale deed hasbeen deposited with the Bank along with the share certificate and otherdocuments for creating an equitable mortgage and the Bank has initiatedaction in that behalf under the 2002 Act, is indisputable. If so, the questionBof permitting the respondent Nos.5 and 6 (writ petitioners) to approachany other forum for adjudication of issues raised by them concerning theright, title and interest in relation to the said property, cannot becountenanced. The High Court has not analysed the efficacy of theconcurrent finding of fact recorded by the DRT and DRAT but opinedCthat the same involved factual issues warranting production of evidenceand a full-fledged trial. The approach of the High Court as already notedhitherto is completely fallacious and untenable in law.

7. The learned counsel appearing on behalf of the Bank persuadedus to decide the merits of the controversy between the parties but asDnoted earlier, the High Court has not analysed the same at all but choseto dispose of the writ petition by giving liberty to the writ petitioners topursue their remedy before a proper forum. The respondent Nos.5 and6 (writ petitioners) would, however, contend that crucial aspects havebeen glossed over by the DRT and DRAT including the effect of admittedposition that respondent No.5 (writ petitioner No.1) is in possession ofEthe subject property and also having custody of the original sharecertificate and few receipts issued by the Society. In these circumstances,we deem it appropriate to relegate the parties before the High Court bysetting aside the impugned judgment and leaving all questions open, tobe decided by the High Court on its own merits and in accordance withFlaw.

8. We find force in the submission made on behalf of the Bankthat the High Court could not have directed the Bank to deposit Rs.25Lacs in an interest earning deposit and the profits of the said deposit toenure to the benefit of the successful party. Such a direction, in ourGview, was wholly uncalled for.

9. Be that as it may, since we are setting aside the impugnedjudgment of the High Court, we direct that Writ Petition No.7480 of2014 shall stand restored to the file of the High Court to its originalnumber for being decided on its own merits and in accordance with law.

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THE AUTHORISED OFFICER, S.B.I. v. M/S ALLWYN ALLOYSPVT. LTD. AND ORS. [A. M. KHANWILKAR, J.]

As the proceeding for recovery is pending since 2010, concerning theequitable mortgage created by respondent Nos. 2 to 4 in respect of thesubject flat and having failed to repay the loan amount, which is quitesubstantial, we request the High Court to dispose of the writ petitionexpeditiously, preferably by the end of July, 2018.

10. The appeal is allowed on the above terms, with no order as tocosts.

Devika Gujral

Appeal allowed.

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