Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: s.34 – Civil court not to have jurisdiction – On facts, suit filed by the appellant-Guarantor seeking declaration that the Assignee acquired no rights against the applicant under the Assignment Deed and that the Assignee is not a secured creditor vis-à-vis the applicant – Appellant’s case that in view of the approved resolution plan under IBC, the original corporate debtor being discharged, there shall not be any debt so far as the appellant-guarantor is concerned and thus, the assignment deed assigning all the rights, title and interest in all the financial assistance granted by financial creditor from time to time to corporate debtor in favour of assignee, was ‘fraudulent’ – Maintainability of the suit – Held: Mere allegations of fraud without material particulars not sufficient to get over bar on civil suit u/s.34 – A pleading/using the word ‘fraud’/‘fraudulent’ without any material particulars would not tantamount to pleading of ‘fraud’ – On facts, allegations of ‘fraud’ made without any particulars and clever draft prepared to bring the suit maintainable despite the bar u/s. 34, is not permissible and cannot be approved – It cannot be said that the assignment deed is ‘fraudulent’ – In any case, whether there shall be legally enforceable debt so far as the appellant is concerned even after the approved resolution plan against the corporate debtor, and/or the assignee can be said to be secured creditor, such questions required to be dealt with by the DRT in the proceedings initiated under SARFAESI Act – Assignee has already initiated the proceedings u/s.13 which can be challenged by the appellant – Thus, the High Court justified in rejecting plaint/dismissing the suit in view of bar u/s.34 of the Act.
Dismissing the appeal, the Court
HELD: 1.1 It is the case on behalf of the plaintiff-appellant that the suit in which there are allegations of ‘fraud’ with respect to the assignment deed shall be maintainable and the bar under Section 34 of SARFAESI Act shall not be applicable. However, it is required to be 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 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’. [Paras 7.1 and 7.2][543-D-H]
1.2 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, it is found 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 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 is concerned and therefore the assignment deed can be said to be ‘fraudulent’. The said cannot be accepted. By that itself the assignment deed cannot be said to be ‘fraudulent’. In any case, whether there shall be legally enforceable debt so far as the plaintiff-appellant is concerned even after the approved resolution plan against the corporate debtor still there shall be the liability of the plaintiff and/or the assignee can be said to be secured creditor and/or whether any amount is due and payable by the plaintiff, are all questions which are required to be dealt with and considered by the DRT in the proceedings initiated under the SARFAESI Act. As such in the instant case the assignee has already initiated the proceedings under Section 13 which can be challenged by the plaintiff-appellant by way of application under Section 17 of the SARFAESI Act before the DRT on whatever the legally available defences which may be available to it. The suit filed by the plaintiff-appellant was absolutely not maintainable in view of the bar contained under Section 34 of the SARFAESI Act. Therefore, as such the courts below have not committed any error in rejecting the plaint/dismissing the suit in view of the bar under Section 34 of the SARFAESI Act. However, it will be open for the appellant to initiate appropriate proceedings before the DRT under Section 17 of the SARFAESI Act against the initiation of the proceedings by the assignee-respondent No.1 under Section 13 of the SARFAESI Act. [Paras 8, 9][545-C-H; 546-A; B-C]
Bishundeo Narain & Anr. v. Seogeni Rai & Jagernath [1951] SCR 548; Ladli Parshad Jaiswal v. The Karnal Distillery Co. Ltd. Karnal & Ors. [1964] 1 SCR 270; Canara Bank v. P. Selathal & Ors. (2020) 13 SCC 143 : [2020] 2 SCR 944; H.S Goutham v. Rama Murthy & Anr. (2021) 5 SCC 241; Ram Singh v. Gram Panchayat Mehal Kalan & Ors. (1986) 4 SCC 364 : [1986] 3 SCR 831; Union of India & Anr. v. K.C Sharma & Company & Ors. (2020) 15 SCC 209; Bharat Dharma Syndicate v. Harish Chandra 64 IA 146; T. Arivandandam v. T.V. Satyapal & Anr. (1977) 4 SCC 467 : [1978] 1 SCR
742 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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