IFCI VENTURE CAPITAL FUNDS LIMITED vs SRGP CORPORATION LIMITED

* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Pronounced on: 22nd February, 2024

+ C.R.P. 115/2022 & CM APPL No. 35157/2022
IFCI VENTURE CAPITAL FUNDS LIMITED ….. Petitioner
Through: Mr. Sanjiv Kakra, Sr. Advocate with Mr. Som Raj Choudhury, Ms. Shrutee Aradhana, Advocates with Mr. Saajan Rathi, AR.
versus
SRGP CORPORATION LIMITED ….. Respondent
Through: Mr. Sanjeev Bhandari, Mr. Ravi Data and Mr. Rajesh Sharma, Advocates.

CORAM:
HON’BLE MR. JUSTICE CHANDRA DHARI SINGH

J U D G M E N T

CHANDRA DHARI SINGH, J.
1. The instant civil revision petition under Section 115 of the Code of Civil Procedure, 1908 (hereinafter “CPC”) has been filed on behalf of the petitioner seeking the following reliefs:
“(a) Call the records of C.S. No. 901/2021 titled as “SRGP Corporation VS. IFCI Venture Capital Funds Limited” is pending before the Ld. Trial Court Shri Aviral Shukla, Ld. Civil Judge, District (South-East) Saket Court, New Delhi.

(b) Set aside the impugned order dated 22.12.2021 passed by the Hon’ble Court of Shri Aviral Shukla, Ld. Civil Judge, District (South-East) Saket Court, New Delhi in C.S. No. 901/2021 titled as “SRGP Corporation Ltd. VS. IFCI Venture Capital Funds Limited”.

(c) Allow the application under Order VII Rule 11 CPC filed by the Petitioner and Suit filed by the Respondent/Plaintiff may kindly be rejected.

(d) Any other relief/ reliefs, which this Hon’ble Court may think fit and proper in the interest of justice.”

FACTUAL HISTORY
2. The petitioner, i.e., the defendant before the learned Trial Court is a public financial institution under the Ministry of Finance, Government of India, incorporated under the Companies Act, 1956 having its registered office at IFCI Tower, 61 Nehru Place, New Delhi – 110019. inter alia the petitioner entity is involved in the business of assisting the innovation and development including application and commercialization of technology and/or granting financial assistance by way of equity participation, debentures or advances.
3. The respondent, i.e., the plaintiff before the learned Trial Court is a company incorporated under the provisions of Companies Act, 2013, also registered with the Ministry of Micro, Small and Medium Enterprises, Government of India (hereinafter “MSME”) and has its registered office at Ganges Nagar, 365, Harris Ganj, Kanpur, Uttar Pradesh-208004.
4. A project was proposed by the respondent company wherein it was agreed that the petitioner shall takeover/refinance all the loans advanced by M/s Venus India Asset Finance Pvt. Ltd. to the respondent and the project also included for financing of development/finishing work of Ganges Nagar Mall (Phase I) & Ganges Nagar Plots TAT Mill (Phase II) respectively situated at 365 & 364, Harris Ganj, Kanpur, Uttar Pradesh (hereinafter “the project”).
5. The respondent company through its director namely Mr. Raghu Raj Kanudia (plaintiff no. 2 before the learned Trial Court) approached the petitioner company for financial assistance to the tune of Rs. 17.50 Crores for refinancing/taking over of all the existing four loans aggregating to Rs. 13.50 Crores of M/s Venus India Asset Finance Pvt. Ltd. and Rs. 4 Crores for development/finishing work of the above said project.
6. The petitioner agreed to finance the amount of Rs. 17.50 Crores in favour of the respondent vide Corporate Loan Agreement dated 8th August, 2017 for a period of 48 months including moratorium period of 12 months from the date of first disbursement subject to certain terms and conditions. Further, a Deed of Guarantee dated 8th August, 2017 was also executed by the Director of the respondent company namely Mr. Raghu Raj Kanudia in favour of the petitioner. An Undertaking dated 22nd August, 2017 was also executed on behalf of the respondent company by its managing director/authorized representative wherein an equitable mortgage of a property admeasuring 3695 sq. mtrs. Situated at Haris Ganj, Kanpur, Uttar Pradesh along with other conditions was created in favour of the petitioner.
7. It is stated that after a while, the respondent became irregular and negligent in repayment of its outstanding dues and failed to adhere to the terms and conditions in the above said loan agreement, therefore, defaulting in making necessary payments despite repeated reminders.
8. It is stated that the last payment received against the respondent’s loan account was in December, 2019 and no payment was received in the month of February, 2020. Subsequently, the moratorium period of six months was availed by the respondent company from 1st March, 2020 to 31st May, 2020 and 1st June, 2020 till 31st August, 2020 in terms of the various circulars issued by the Reserve Bank of India (hereinafter “RBI”) due to then prevailing COVID-19 pandemic. Further, the respondent’s loan account was already irregular by 60 days due to non-payment of the due amount even before the moratorium period of six months was availed.
9. It is stated that as soon as the moratorium period was over, the default period with regard to the said loan account continued from 1st September, 2020. It has further been stated that the loan account was in default from 1st January, 2020 to 31st January, 2020; 1st February, 2020 to 28th February, 2020 and 1st September to 30th September, 2020.
10. In the meanwhile, the respondent company, vide its letter dated 29th January, 2021 requested for restructuring of its loan account which was approved in-principle by the petitioner vide its letter dated 31st March, 2021, wherein, the respondent company was asked to accept the terms and conditions as provided in the restructuring. However, the respondent company failed to confirm with the terms of the said restructuring plan despite several reminders. Since no confirmation was given by the respondent company, the petitioner vide its letter dated 21st May, 2021 revoked the said restructuring plan.
11. As the repayment of the loan amount was due since 1st January, 2020; the petitioner issued a loan recall notice dated 8th July, 2021 and the respondent’s loan account was declared as a Non Performing Asset (hereinafter “NPA”) w.e.f. 30th September, 2020.
12. Thereafter, vide letter dated 30th July, 2021, the petitioner cancelled all the NOC’s issued to the respondent on the ground that the respondent company had registered only 3 shops and 13 plots in favour of the buyers whereas the petitioner had issued NOC for sale of 45 plots and 22 shops. It has been stated by the petitioner that as per the above said loan agreement, the respondent company were to receive the NOCs for sale of plots and shops with a condition that the same shall be registered before the concerned Sub-Registrar in favour of the buyer and in the event, the sale is cancelled, the NOCs so issued shall stand automatically revoked forthwith and that the respondent would have to apply for a fresh NOC in relation to the sale of the said units.
13. Subsequently, the petitioner issued a notice dated 23rd August, 2021 under Section 13 (2) of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (hereinafter “SARFAESI”), thereby, initiating action against the respondent for recovery of debt.
14. Meanwhile, the respondent issued several cheques to the petitioner in lieu of the loan advanced to it and the same were dishonoured for insufficient funds on 31st May, 2021, 12th July, 2021 and 1st September, 2021 which were later challenged in case bearing nos. CC 5809/2021, CC 7331/2021 and CC 8319/2021.
15. In the interim, the respondent company filed a suit for declaration along with an application before the learned Civil Judge-01, South East District, Saket Courts, New Delhi, against the present petitioner and the said suit was registered vide C.S. No. 901/2021 which is pending for adjudication. In the said suit, the respondent company sought for declaration of the respondent’s account being classified as NPA as illegal, null and void on the ground that the same is violative of RBI’s guidelines and contrary to the orders passed by the Hon’ble Supreme Court in Gajendra Sharma v. Union of India1.
16. Further, the petitioner herein filed an application under Order VII Rule 11 of the CPC, seeking rejection of the respondent’s suit along with reply to the respondent’s application under Order XXXIX Rule 1 & 2 of the CPC in the above said suit.
17. Thereafter, on 21st October, 2021, the respondent filed its preliminary objection under Section 13 (3) of the SARFAESI. Pursuant to the same, the petitioner filed its detailed reply on 5th November, 2021 under Section 13 (3A) of the SARFAESI. Further, on 30th November, 2021, the petitioner issued intimation letters to the guarantor and the respondent and accordingly, the petitioner took symbolic possession of the secured assets under Section 13 (4) of the SARFAESI.
18. Subsequently, on 1st December, 2021, the petitioner filed an original application bearing OA No. 1103/2021 under Section 19 read with Section 2 (g) of the Recovery of Debts due to Financial Institutions and Financial Institutions Act, 1993 (hereinafter “RDB Act”) against the respondent for recovery of Rs. 12,60,63,546/- before the Debt Recovery Tribunal, New Delhi (hereinafter “DRT”). The respondent also filed a securtisation application on 25th June 2022 before DRT Allahabad, under Section 17 (1) of the SARFAESI against the petitioner’s various acts such as issuance of notice under Section 13 (2) and 13 (4) and taking possession of the respondent’s assets.
19. Meanwhile, the learned Trial Court vide order dated 22nd December, 2021 dismissed the petitioner’s application filed under Order VII Rule 11 of the CPC and further granted status quo ante in the respondent’s application under Order XXXIX Rule 1 & 2 of the CPC with respect to the status of the respondent’s loan account. Thereafter, the petitioner filed an appeal against the said order in appeal bearing no. MCA DJ 4/2022, thereby, challenging the status quo ante order. The said appeal pending before the District Judge which was withdrawn in terms of the undertaking given before this Court on 22nd August, 2022 and the same was noted vide order dated 13th December, 2022 by the Predecessor Bench of this Court.
20. The petitioner has filed the instant civil revision petition challenging the impugned order by virtue of which the application filed by the petitioner under Order VII Rule 11 of the CPC was dismissed. It is pertinent to state here that in the captioned petition, the petitioner is aggrieved only by the dismissal of his application mentioned herein above.

PLEADINGS
21. The petitioner had filed the instant civil revision petition on 30th May, 2022 and submitted the below stated arguments:

“…..CIVIL COURT’S JURISDICTION OUSTED BY SARFAESI ACT

A. BECAUSE the Ld. Trial Court failed to appreciate the settled principles in law, that stipulates that the Civil Court has no jurisdiction to entertain any matter arising out of proceedings/ actions either initiated or likely to be initiated under the SARFAESI Act or / and RDDBFI Act. Section 34 of the SARFAESI Act is extracted herein below for ready reference of the Hon’ble Court:…..

***
B. BECAUSE the Ld. Trial Court did not appreciate that the jurisdiction of a civil court was expressly barred in all matters as provided under Section 34 of the Act, wherein cognizancemay be taken by DRT/DRAT. In the instant case, the appellant herein had initiated the action under SARFAESI Act by issuing a notice under Section 13(2) of the SARFAESI Act on 23.08.2021. Also, the respondent company had raised objections to the said notice in terms of Section 13(3) of the SARFAESI Act; wherein the said objections were duly considered by the appellant herein and rejected vide its reply as per the provisions under Section 13(3A) of the SARFAESI Act.

C. BECAUSE the Ld. Trial Court failed to appreciate that the Hon’ble Apex Court in Mardia Chemicals Limited vs. Union of India, (2004) 4 SCC 311, has carved out the exception to the bar of jurisdiction of the Civil Court to interfere in any case where either the SARFAESI actions have been initiated or likely to be initiated and the same are provided below:
i) In respect of an action of a secured creditor alleged to be fraudulent;
ii) When a claim of the secured creditor be so absurd and untenable which may not require any probe whatsoever;
iii) Where the scope is permissible to bring an action in Civil Court in the cases of English mortgages…..
***

F. BECAUSE the Hon’ble Supreme Court in the case of Jagdish Singh vs. Heeralal, (2014) 1 SCC 479, was of the view that the jurisdiction of the civil court is completely barred insofar as the measures of the secured creditors are concerned. The Hon’ble Court also considered Section 35 of the SARFAESI Act that overrides all other laws, if they are inconsistent with the provisions of the Act, including Section 9 of the CPC as well. (Followed in Shree Anandha kumar Mills vs. Indian Overseas Bank (2019) 14 SCC 788).

G. BECAUSE the Hon’ble Supreme Court in the matter of Authorized Officer, State Bank of India Vs. Allwyn Alloys Pvt Ltd. (2018) has held that “after having considered the rival submissions of the parties, we have no hesitation in acceding to the argument urged on behalf of the bank that the mandate of Section 13 and, in particular, Section 34 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, “the 2002 Act”), clearly bars filing of a civil suit. For, no civil court can exercise jurisdiction to entertain any suit or proceeding in respect of any matter which a DRT or DRAT is empowered by or under this Act to determine and no injunction can be granted by any Court or authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the Act”.
***

SEPARATE SUIT NOT MAINTAINABLE AS A DEFENCE TO A CLAIM OF BANK/FI(s)

J. BECAUSE the Trial Court failed to appreciate the view of Supreme Court in State Bank of India Vs. Ranjan Chemicals Ltd. and Anr, (2007) 1 SCC 97, dealing with the issue whether a separate suit was maintainable in the nature of a defence to a claim of a bank under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 held that even a claim of set off would fall under Sub-Section (6) to (11) of Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and thus, the proceedings are required to be instituted before the Debt Recovery Tribunal. In para 5 and 6, the Supreme Court held as under:-….

L. BECAUSE the Ld. Trial Court erred in law by misconstruing the fact leading to the respondent’s loan account being declared as NPA. It is stated that the loan account of the respondent was declared as NPA as per the IRAC norms issued by the RBI. The declaration of NPA, whether rightfully or wrongfully done, is completely under the purview of the Ld. DRT as per the provisions laid down under Section 17 & 18 of SARFAESI Act, for which the jurisdiction of Civil Court is ousted in view of Section 34 of the SARFAESI Act….
***

TRIAL COURT OVERLOOKED THE PROVISION ENUNCIATED UNDER SECTION 17 & 19 OF THE SARFAESI ACT

L. BECAUSE the Ld. Trial Court erred in law by misconstruing the fact leading to the respondent’s loan account beingdeclared as NPA. It is stated that the loan account of the respondent was declared as NPA as per the IRAC norms issued by the RBI. The declaration of NPA, whether rightfully or wrongfully done, is completely under the purview of the Ld. DRT as per the provisions laid down under Section 17 & 18 of SARFAESI Act, for which the jurisdiction of Civil Court is ousted in view of Section 34 of the SARFAESI Act.

M. BECAUSE the Ld. Trial Court had erred in law in relying only on Para 22.5 of the judgment of Hon’ble High Court of Bombay in ‘Bank of Baroda, through Branch Manager Vs. Gopal Shriram Panda, (2021) SCC Bom 466, wherein the Hon’ble Court has wrongly held that the SARFAESI Act does not permit the DRT to go into the classification of borrowers account as NPA. It is stated that the Hon’ble High Court in the said judgment has overlooked the provisions enunciated under section 17(3) of the SARFAESI Act.
Furthermore, the Ld. Trial Court, while selectively referring to the said judgment passed by the Bombay High Court, lost sight of the conclusions/findings in the said case by the Hon’ble High Court, the power of DRT to deal with matters in terms of Section 13 & 17 is clearly carved out and the same is extracted hereunder for reference of this Hon’ble Court:…
***

N. BECAUSE the Ld. Trial Court has transgressed in law while relying on Para 85 and 86 of Nahar Industrial Enterprises Limited vs. Hong Kong and Shanghai Banking Corporation, (2009) 8 SCC 646, wherein the Hon’ble Court has passed a specific order in context that DRT could neither pass a decree nor could a debtor seek a declaratory relief by DRT. The said judgment was passed on 29.07.2009. However, the said provision has undergone a change after introduction of Section 17 (3) Amendment dated 01.09.2016.
***

S. BECAUSE Hon’ble Supreme Court in the matter of M/S. Sree Anandha Kumar Mills Ltd. V. M/s. Indian Overseas Bank in Civil Appeal Nos. 7214-7216/2012 disposed of on 03.05.2018, has clearly held that in respect of a secured asset to a Bank or financial institution, a suit is not maintainable, either by a borrower or any other person; that the plaintiff can approach the DRT under Section 17 of SARFAESI Act and seek relief by assailing the action taken by the Bank.
***

WHEN A SUIT OF DECLARATORY NATURE IS ENTERTAINED, IT FRUSTRATES THE LEGISLATIVE INTENT OF THE ACT

Y. BECAUSE the Hon’ble High Court of Delhi in the case of Radnik Exports vs. Standard Chartered Bank, 2014 SCC OnLine Del 2404, held that the aforesaid bar of the jurisdiction of civil courts applies in suits wherein the declaration claimed is the same as the defense which could be raised by the plaintiff to a claim of the defendant Bank before the DRT. Further, the court held that the initiation of proceedings before the DRT as on date of institution of suit is irrelevant while determining the maintainability of the suit. The Hon’ble Court also observed that if the jurisdiction of the Court to grant the consequential relief of injunction is barred, the court ought to refuse to grant the relief of declaration also, which is but a discretionary relief….”

22. In response to the present petition, the respondent had filed his reply dated 9th December, 2022 wherein it has opposed the present petition by advancing the following arguments:
“…1.. That the present Petition under reply is not maintainable either in facts or in law and the same deserves to be dismissed and be dismissed with heavy and exemplary costs, being frivolous, baseless and devoid of any merits.
***

32. That in order to minimize the hardships, being faced by the entire Nation, during Lock-down period and even thereafter, Government of India, Reserve Bank of India and all the State Governments, issued various Guidelines/Notifications, from time to time, announcing various Benefits/Moratoriums/Tax Relief(s) etc. to all the Sectors particularly for companies who are registered with MSME and GST.

33. That RBI issued a Statement on Developmental and Regulatory Policies on 27.03,2020, the object of which was to inter-alia, mitigate the burden of Debt Servicing and ease the Financial Stress, caused ‘by COVID-19 Pandemic disruptions, by relaxing repayment pressures and improving access to Working Capital and further improving the functioning of markets, in view of the high volatility, experienced with the onset and spread of the Pandemic.

34. That Clauses 5-and 6 of the Statement on Developmental Regulatory Policies dated 27.03.2020, issued by RBI, deals with Moratorium on Loans. Clause 5 inter alia, reads as under :-……

35. That RBI issued detailed instructions on 27.03.2020 itself namely COVID-19 Regulatory Package, in pursuance to the Statement on Developmental and Regulatory Policies dated 27.03.2020, which further provides for Rescheduling of the Payments of Term Loans and Working Capital Facilities and other conditions. Clauses 2, 3 & 7 thereof, inter alia, read as under:-….
***

55. That the alleged classification of account of Respondent as NPA, during the period when the above order/direction of the Hon’ble Supreme Court of India was in force, is blatantly illegal. The act of the Petitioner is also illegal, arbitrary and void in view of the mandatory Guidelines, issued by RBI and narrated herein below for the ready reference of this Hon’ble Court.

56. That in view of the Master Circular, issued by The Reserve Bank of India, vide Circular bearing RBI No. 2007-2008/39, DBOD. No.BP.BC.12/21.04.048/2007-2008, dated July 02, 2007, on “Prudential Norms on Income Recognition, Asset Classification and Provisioning Pertaining to Advances” (as amended from time to time), which squarely applies on the account of Respondents also, the accounts of Respondents cannot be classified as Non-Performing Asset.
***

PARAWISE REPLY:-
6. The contents of Para 6 of the Petition under reply are wrong,
incorrect, against the law and therefore are vehemently denied. It is vehemently denied that the suit for declaration preferred by the Respondent before the Ld. Trial Court is a fit case under clauses of order 7 rule 11 CPC. It is submitted that the Ld. Trial court in its judicial wisdom and after going through the merits of the case, taking consideration of the facts and circumstances and settled law on the subject had passed a well reasoned order dated 22.12.2021. The contents of the aforesaid Preliminary submissions and objections may also be read as part and parcel of the present Para as the same are not repeated herein for the sake of brevity. Contents of para A of the Petition are incorrect to the extent that the Ld. Civil Judge while granting “status quo ante” has not appreciated the facts, circumstances or evidence available on the record. It is further submitted that the Petitioner malafidely initiated the action under SARFAESI Act after the summons of the suit were served on the Petitioner. Even: otherwise the initiation of the alleged action under the SARFAESI Act does not affect the maintainability of the suit filed by the Respondent for the reason that the reliefs prayed by the Respondent in the suit cannot be tried or granted by the DRT. The suit of the Respondent is for declaration and mandatory injunction and the said reliefs are outside the purview of the SARFAESI Act or the Recovery Act and DRT has no power or jurisdiction to grant declaratory reliefs as prayed by the Respondent herein in the suit.
***

24. The contents of Para 24 of the Petition under reply are wrong, and incorrect and therefore are vehemently denied. It is categorically denied that the Respondent willingly abstained from complying with the terms and conditions of the restructuring plan. It is, however, submitted that vide various letters the Respondent intimated to the Petitioner the unforeseen circumstances beyond the control of the Respondent; due to which, the Respondent was unable to comply/accept the restructuring of the loan offer made by the Petitioner vide letter dated 31.03.2021. It is, however, unfortunate that the Petitioner, due to malafide reasons, did not consider the genuine requests/difficulties of the Respondent and chose to unilaterally revoked the restructuring vide letter dated 29.05.2021. It is well known that during the said time the pandemic caused by Covid’19 was at its peak and the entire country was facing lockdown and the circumstances were beyond the control of the citizens. In the said prevailing situation the Petitioner chose to revoke the restructuring plan without giving adequate opportunity and/or time to the Respondent to fulfill the conditions of the offer. The contents of the aforesaid Preliminary submissions and objections may also be read as part and parcel of the present Para as the same are not repeated herein for the sake of brevity….”

23. The petitioner has also filed rejoinder dated 25th July, 2023 and advanced the following arguments in response to the above reply:
“…IV. Also, it is submitted that all the regulatory guidelines issued by the Reserve Bank of India has been duly complied with by the Petitioner in the present case. Even if there is any dispute to the said fact, the said issue with regard to regulatory compliance, the appeal to the same would lie under the Writ Jurisdiction, and therefore, the said Suit could not have been maintainable before the Ld. Court below.

V. That the suit under challenge is being hit by provisions under Section 34 of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002; No Civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debt Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and 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 Banks and Financial Institutions Act, 1993 and Section 34 of the Recovery of Debts & Bankruptcy Act, 1993_ Save as provided under sub-section (2), the provisions of this Act shall have effect notwithstanding anything inconsistence therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act, 1993.
***

8. That the contents of Para No. 17 are denied for being baseless. The averments made by the respondent therein are misleading. It is further submitted that petitioner had taken commercial decision in line with its own lending policy/ guidelines issued by both Reserve Bank of India as well as the Central Government; and not by the glory of the projects of the respondent company. The Respondent had only approached petitioner for availing the Corporate Loan of Rs. 17.50 Crore, for which the said facility was extended to the Respondent.
***

14. That the content of Para No. 24 is only admitted to the extent that they form a part of record. It is further submitted that as per the terms of sanction under Clause 1 Sub Clause I (ix), the respondent shall undertake that, in case at any time, the Respondent company approaches the Petitioner herein for issuance of NOC for release of partial mortgaged shops/space/plots or part of mortgaged inventory, the Respondent company shall pay the amount on proportionate basis i.e. the ratio of outstanding loan and Distress Sale Value (DSV) of the mortgaged property or amount advised by the Petitioner herein; subject to no dilution in security cover i.e. 2.50 times of the loan amount computed on DSV and the loan account being regular.
***

32. That the contents of Para No. 55, 56 ,57 ,58 ,59 and 60 are
denied. That after the order of the Hon’ble Supreme Court in Writ Petition (C) No 825/2020, RBI vide its notification/circular No. RBI/2021-22/17 dated 07.04.2021 had clarified at point No 5 (ii) ” that the asset classification for the period from March 1 to 31.08.2020 shall be governed in terms of circular dated 17.04.2020 read with circular dated 23.05.2020 AND; for the period commencing 01.09.2020, the asset classification of such accounts shall be as per the extent IRAC norms.”…”

24. The petitioner and the respondent have also filed their judgment compilations dated 17th August, 2023 and 12th September, 2023 respectively.

SUBMISSIONS
(submissions on behalf of the petitioner)
25. Learned senior counsel Mr. Sanjiv Kakra, appearing on behalf of the petitioner submitted that the learned Trial Court erred in passing the impugned order as it failed to take into consideration the entirety of the facts and circumstances of the instant dispute.
26. It is submitted that Order VII Rule 11 of the CPC provides that a suit shall be rejected, where the suit appears, from the statements therein, to be barred by any law. It is further submitted that in order to decide whether the suit is barred by any law, it is the statement in the suit which will have to be construed.
27. It is submitted that the respondent’s suit is barred by Section 34 of the SARFAESI as per which the Civil Courts are barred from exercising their jurisdiction in respect of any matter which a DRT or its appellate authority is empowered by or under the SARFAESI. The said provisions also states that no injunction shall be granted by any Civil Court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the RDB Act.
28. It is submitted that above said suit is barred by Section 34 of SARFAESI since the respondent has clearly prayed for relief in the suit qua the loan account being declared as NPA. It is further submitted that it is barred specifically when action has been already taken by the petitioner under Section 13 (4) of the SARFAESI.
29. It is submitted that the respondent’s loan account being declared as NPA is an admitted position in the suit. It has been stated therein that the loan account of the respondent, i.e., the plaintiff therein, was declared as NPA as per the Income Recognition and Asset Classification (hereinafter “IRAC”) norms issued by the RBI.
30. It is further submitted that the declaration of NPA, whether rightfully or wrongfully done, is completely under the purview of DRT for which the jurisdiction of Civil Court is ousted in view of Section 34 of SARFAESI.
31. It is further submitted that the reliefs sought for by the respondent in the suit itself bars the Civil Court’s jurisdiction and the learned Trial Court ought not to have entertained the same. Further, the efficacious remedy available to the respondent is an application under Section 17 of the SARFAESI.
32. It is submitted that the Hon’ble Supreme Court in the case of Jagdish Singh v. Heeralal2, held that the jurisdiction of the Civil Courts is completely barred insofar as the measures of the secure creditors are concerned.
33. It is submitted that while dealing with the issue whether a separate suit was maintainable as a defence to a bank’s claim, the Hon’ble Supreme Court in State Bank of India v. Ranjan Chemicals Ltd. & Anr.3, held that even a claim of set-off would fall under Sub-Section (6) to (11) of Section 19 of the RDB Act and thus, proceedings are required to be instituted before the DRT which is the appropriate forum in the instant matter.
34. It is submitted that the learned Trial Court overlooked the provisions enunciated under Section 17 and 19 of the SARFAESI. The learned Court below erred in law by misconstruing the fact leading to the respondent’s loan account being declared an NPA.
35. It is submitted that the learned Trial Court erred in law in relying only on paragraph 22.5 of the judgment of the High Court of Bombay in Bank of Baroda, though Branch Manager v. Gopal Shriram Panda4, wherein, the High Court has wrongly held that the SARFAESI does not permit the DRT to go into classification of borrowers account as NPA. The learned Trial Court erred in appreciating that the said judgment has overlooked the provisions enunciated under Section 17 (3) of the SARFAESI.
36. It is submitted that the learned Trial Court failed to appreciate that while entertaining a suit as that of the instant matter, wherein, the respondent has challenged the classification of its account as NPA being illegal, the legislative intent of SARFAESI is defeated. Entertaining such suit is illegal and barred by Section 9 of the CPC.
37. It is further submitted that the learned Court below failed to consider that the dispute involved in the present case is not concerned with rights of civil nature and nowhere it has been pleaded by the respondent in its suit that there is violation of its civil rights qua its loan account being declared as an NPA.
38. It is submitted that the learned Trial Court erred in not appreciating that the suit as valued by the respondent is grossly undervalued and that the impugned order could not have been passed before calling upon the respondent company to pay deficit court fees.
39. It is submitted that in case of an admitted debt, insofar as claiming the reliefs in the nature of the defenses to a claim of a Bank/Financial Institution is concerned, the borrower, i.e., the respondent herein is entitled to approach the DRT alone, and cannot approach any other Court/Forum in terms of the said defenses, which is not maintainable in terms of the provisions laid down under RDB Act and SARFAESI. It is further submitted that filing of such suit by the respondent has infringed the statutory rights of the petitioner.
40. It is submitted that the respondent company has challenged the classification of its account as an NPA being illegal, wherein, the respondent has attempted to override the bar imposed under SARFAESI. Such declaratory suit against the status of loan account as an NPA is illegal and amounts to direct interference of Civil Court which is barred by Section 9 of the CPC.
41. It is submitted that the in light of the above submissions, it is evident that the learned Court below erred in appreciating the settled law and hence, there is illegality in the impugned order making it liable to be set aside.
42. It is submitted that the reasoning given in the impugned order is perverse, arbitrary, irrational, and has no basis whatsoever in law, equity or justice.
43. Therefore, in view of the foregoing submissions, it is submitted that the instant petition may be allowed and the reliefs may be granted as prayed for.
(submissions on behalf of the respondent)
44. Per Contra, learned counsel Mr. Sanjeev Bhandari, appearing on behalf of the respondent vehemently opposed the instant petition submitting to the effect that the same is liable to be dismissed being devoid of any merit.
45. It is submitted that the present revision petition is liable to be dismissed on the grounds that the petitioner has failed to bring up any substantial question of law or any wrong exercise of the provisions of law by the learned Court below.
46. It is submitted that the learned Trial Court has taken into consideration the entire facts and circumstances and only after such due consideration, it reached to the conclusion, whereby, it dismissed the petitioner’s application under Order VII Rule 11 of the CPC.
47. It is submitted that the petitioner’s contentions are baseless due to the reason that the learned Court below has exercised its jurisdiction in accordance to the settled legal propositions and there is no infirmity in the impugned order passed by it.
48. It is submitted that the learned Trial Court has the jurisdiction to try and entertain the suit filed by the respondent and the same is not barred by the provisions of the SARFAESI and RDB Act as the reliefs claimed in the above said suit are outside the scope and jurisdiction of the DRT.
49. It is submitted that there exists sufficient cause of actions in favour of the respondent for filing the above said suit. It is further submitted that the petitioner has initiated action under SARFAESI with mala fide intentions as the application before DRT, New Delhi was filed after the summons of the suit were served on the petitioner. Even otherwise, the initiation of action under SARFAESI does not affect the maintainability of the suit filed by the respondent for the reason that the reliefs claimed by the respondent cannot be granted by DRT.
50. It is submitted that the judgment passed by the High Court of Bombay in Gopal Shriram Panda (Supra) deals with the scope of DRT under SARFAESI as well as the extent of Section 34 of the said Act as applicable to the Civil Courts.
51. It is submitted that petitioner has failed to specify as to how the act of the petitioner in declaring the account of the respondent as NPA during the operation of the interim orders passed by the Hon’ble Supreme Court in Gajendra Sharma (Supra) was in accordance with the law.
52. It is submitted that the DRT has no jurisdiction to pass a declaratory decree. The DRT also does not have jurisdiction to decide whether an account has been declared as NPA rightly or not. The DRT also does not have power to decide whether the petitioner has committed breach of the interim orders passed by the Hon’ble Supreme Court, whereby, no account was directed to be declared as NPA till further orders. Under these circumstances, when the entire reliefs as prayed by the respondent are outside the purview of the DRT, the suit of the respondent is thus, maintainable and the impugned order is in accordance with the law.
53. It is submitted that the respondent has paid adequate and appropriate court fee and has correctly valued the suit in accordance with the law. The learned Trial Court has rightly adjudicated upon this issue, after taking into consideration the entire facts and circumstances.
54. Therefore, in view of the submissions made above, it is submitted that instant petition being devoid of any merits may be dismissed.

SCHEME OF THE ACT
(Section 115 of the CPC – Revisional Powers of this Court)
55. At this stage, before delving into the technical paraphernalia of the facts of the instant matter, it is pertinent for this Court to set out the scope of Section 115 of the CPC, under which the petitioner has challenged the impugned order before this Court. The said Section has been reproduced for reference hereunder:
“115. Revision.— [(1)] The High Court may call for the record of any case which has been decided by any Court subordinate to such High Court and in which no appeal lies thereto, and if such subordinate Court appears—

(a) to have exercised a jurisdiction not vested in it by law, or
(b) to have failed to exercise a jurisdiction so vested, or
(c) to have acted in the exercise of its jurisdiction illegally or with material irregularity, the High Court may make such order in the case as it thinks fit:

[Provided that the High Court shall not, under this section, vary or reverse any order made, or any order deciding an issue, in the course of a suit or other proceeding, except where the order, if it had been made in favour of the party applying for revision would have finally disposed of the suit or other proceedings.]

[(2) The High Court shall not, under this section, vary or reverse any decree or order against which an appeal lies either to the High Court or to any Court subordinate thereto.

[(3) A revision shall not operate as a stay of suit or other proceeding before the Court except where such suit or other proceeding is stayed by the High Court.]

Explanation.— In this section, the expression “any case which has been decided” includes any order made, or any order deciding an issue in the course of a suit or other proceeding.]”

56. Section 115 of the CPC invests all High Courts with revisional jurisdiction. It declares that the High Court may call for the record of any case which has been decided by any Court subordinate to such High Court wherein no appeal lies, to satisfy itself on three aspects; (i) that the order passed by the subordinate Court is within its jurisdiction; (ii) that the case is one in which the Court has power to exercise its jurisdiction; and (iii) that in exercising jurisdiction, the Court has not acted illegally, or in breach of some provision of law, or with material irregularity by committing some error of procedure in the course of trial which is material in a way that may have affected the ultimate decision.
57. In the landmark case of Major S.S. Khanna v. Brig. F.J. Dillon5, the Hon’ble Supreme Court stated that the said Section consists of two parts, first prescribes the condition in which jurisdiction of the High Court arises, i.e., there is a case decided by the subordinate Court in which no appeal lies to the Court of higher jurisdiction, second sets out the circumstances in which the jurisdiction may be exercised by the High Court. If there is no question of jurisdiction, the concerned decision cannot be corrected by the High Court in the exercise of revisional powers. The relevant paragraphs of Major S.S. Khanna (Supra) have been reproduced herein:
“6. The jurisdiction of the High Court to set aside the order in exercise of the power under Section 115 of the Code of Civil Procedure is challenged by Khanna on three grounds:
(i) that the order did not amount to “a case which has been decided” within the meaning of Section 115 of the Code of Civil Procedure;
(ii) that the decree which may be passed in the suit being subject to appeal to the High Court; the power of the High Court was by the express terms of Section 115 excluded; and
(iii) that the order did not fall within any of the three clauses (a), (b) and (c) of Section 115.
The validity of the argument turns upon the true meaning of Section 115 of the Code of Civil Procedure, which provides:
“The High Court may call for the record of any case which has been decided by any Court subordinate to such High Court and in which no appeal lies thereto, and if such subordinate Court appears—
(a) to have exercised a jurisdiction not vested in it by law, or
(b) to have failed to exercise a jurisdiction so vested, or
(c) to have acted in the exercise of its jurisdiction illegally or with material irregularity, the High Court may make such order in the case as it thinks fit.”
The section consists of two parts, the first prescribes the conditions in which jurisdiction of the High Court arises i.e. there is a case decided by a subordinate Court in which no appeal lies to the High Court, the second sets out the circumstances in which the jurisdiction maybe exercised. But the power of the High Court is exercisable in respect of “any case which has been decided”. The expression “case” is not defined in, the Code, nor in the General Clauses Act. It is undoubtedly not restricted to a litigation in the nature of a suit in a civil court : Balakrishna Udayar v. Vasudeva Aiyar [LR 44 IA 261] ; it includes a proceeding in a civil court in which the jurisdiction of the Court is invoked for the determination of some claim or right legally enforceable. On the question whether an order of a Court which does not finally dispose of the suit or proceeding amounts to a “case which has been decided”, there has arisen a serious conflict of opinion in the High Courts in India and the question has not been directly considered by this Court. One view which is accepted by a majority of the High Courts is that the expression “case” includes an interlocutory proceeding relating to the rights and obligations of the parties, and the expression record of any case includes so much of the proceeding as relates to the order disposing of the interlocutory proceeding. The High Court has therefore power to rectify an order of a Subordinate Court at any stage of a suit or proceeding even if there be another remedy open to the party aggrieved i.e. by reserving his right to file an appeal against the ultimate decision, and making the illegality in the order a ground of that appeal. The other view is that the expression “case” does not include an issue or a part of a suit or proceeding and therefore the order on an issue or a part of a suit or proceeding is not a “case which has been decided”, and the High Court has no power in exercise of its revisional jurisdiction to correct an error in an interlocutory order.”
58. The provision thus takes within its limited jurisdiction, the irregular exercise or non-exercise of it, or the illegal assumption of it. It is not directed against conclusions of law or fact in which the question of jurisdiction is not involved. In other words, it is only in cases where the subordinate Court has exercised jurisdiction not vested in it by law, or has failed to exercise jurisdiction so vested, or has acted in the exercise of its jurisdiction illegally or with material irregularity that the jurisdiction of the High Court may be properly invoked.
59. It is a settled principle of law that the lower Courts have jurisdiction to decide the case, and in context of the provision of revision, even if the Court below decides the case wrongly, they do not exercise their jurisdiction illegally or with material irregularity.
60. Section 115 of the CPC deals with the High Court’s power of revision. Briefly stated, in a case which is not subject to appeal, the High Court is empowered to call for the records of the case decided by the Court below, and if the Court below has exercised a jurisdiction vested in it by law, or failed to exercise jurisdiction vested by law or acted with material irregularity, etc. in the exercise of its jurisdiction, the High Court may interfere.
61. The CPC, however, enables the High Court to correct, when necessary, the errors of jurisdiction committed by subordinate Courts and provides the means to an aggrieved party to obtain rectification in a non-appealable order. In other words, for the effective exercise of its superintending powers, revisional jurisdiction is conferred upon the High Court. The said principle has been reaffirmed by the Hon’ble Supreme Court in the judgment of Manick Chandra Nandy v. Debdas Nandy6. The Hon’ble Court in the said judgment had observed as follows:
“5. We are constrained to observe that the approach adopted by the High Court in dealing with the two revisional applications was one not warranted by law. The High Court treated these two applications as if they were first appeals and not applications invoking its jurisdiction under Section 115 of the Code of Civil Procedure. The nature, quality and extent of appellate jurisdiction being exercised in first appeal and of revisional jurisdiction are very different. The limits of revisional jurisdiction are prescribed and its boundaries defined by Section 115 of the Code of Civil Procedure. Under that section revisional jurisdiction is to be exercised by the High Court in a case in which no appeal lies to it from the decision of a subordinate court if it appears to it that the subordinate court has exercised a jurisdiction not vested in it by law or has failed to exercise a jurisdiction vested in it by law or has acted in the exercise of its jurisdiction illegally or with material irregularity. The exercise of revisional jurisdiction is thus confined to questions of jurisdiction. While in a first appeal the court is free to decide all questions of law and fact which arise in the case, in the exercise of its revisional jurisdiction the High Court is not entitled to reexamine or reassess the evidence on record and substitute its own findings on facts for those of the subordinate court. In the instant case, the respondents had raised a plea that the appellant’s application under Rule 13 of Order IX was barred by limitation. Now, a plea of limitation concerns the jurisdiction of the court which tries a proceeding, for a finding on this plea in favour of the party raising it would oust the jurisdiction of the court. In determining the correctness of the decision reached by the subordinate court on such a plea, the High Court may at times have to go into a jurisdictional question of law or fact, that is, it may have to decide collateral questions upon the ascertainment of which the decision as to jurisdiction depends. For the purpose of ascertaining whether the subordinate court has decided such a collateral question rightly, the High Court cannot, however, function as a court of first appeal so far as the assessment of evidence is concerned and substitute its own findings for those arrived at by the subordinate court unless any such finding is not in any way borne out by the evidence on the record or is manifestly contrary to evidence or so palpably wrong that if allowed to stand, would result in grave injustice to a party.”

(Order VII Rule 11 – Rejection of plaint)
62. In the instant case, the dispute revolves around the petitioner’s application filed under Order VII Rule 11 of the CPC which was dismissed by the learned Trial Court vide the impugned order. The petitioner had sought for rejection of the respondent’s plaint on various grounds which have been discussed in the below mentioned paragraphs. The said provision is reproduced herein for reference:
“ORDER VII
Plaint
…11. Rejection of plaint.— The plaint shall be rejected in the following cases:—

(a) where it does not disclose a cause of action;
(b) where the relief claimed is undervalued, and the plaintiff, on being required by the Court to correct the valuation within a time to be fixed by the Court, fails to do so;
(c) where the relief claimed is properly valued, but the plaint is returned upon paper insufficiently stamped, and the plaintiff, on being required by the Court to supply the requisite stamp-paper within a time to be fixed by the Court, fails to do so;
(d) where the suit appears from the statement in the plaint to be barred by any law;
[(e) where it is not filed in duplicate;]
[(f) where the plaintiff fails to comply with the provisions of rule 9:]

[Provided that the time fixed by the Court for the correction of the valuation or supplying of the requisite stamp-paper shall not be extended unless the Court, for reasons to be recorded, is satisfied that the plaintiff was prevented by any cause of an exceptional nature from correcting the valuation or supplying the requisite stamp-paper, as the case may be, within the time fixed by the Court and that refusal to extend such time would cause grave injustice to the plaintiff.]..”

63. On a bare perusal of the abovementioned provision for rejection of a plaint, it can be inferred that insofar as the application under Order VII Rule 11 of the CPC is concerned, the relevant facts which need to be looked into for deciding an application thereunder are the averments made in the plaint and the said averments are germane. The Trial Court can exercise the power under Order VII Rule 11 of the CPC at any stage of the suit – before registering the plaint or after issuing of summons to the defendant, at any time before the conclusion of the trial.
64. The provision under Order VII Rule 11 of the CPC provides for rejection of a plaint. The scope of judicial inquiry in an application under Order VII Rule 11 of the CPC is very limited to examining the statement in the plaint.
65. Under Order VII Rule 11 of the CPC, the Court has jurisdiction to reject the plaint where it does not disclose a cause of action, where the relief claimed is undervalued and the valuation is not corrected within the time as fixed by the Court, where insufficient court fee is paid and the additional court fee is not supplied within the period given by the Court, and where the suit appears from the statement in the plaint to be barred by any law. Rejection of the plaint in exercise of the powers under Order VII Rule 11 of the CPC has to be on consideration of the principles laid down under the said provision and by way of a catena of judgments.
66. The power with the Courts under Order VII Rule 11 of the CPC, is conferred in order to terminate any civil action at the threshold, provided it falls under the categories prescribed within the provision. The conditions precedent to such exercise of the power are stringent and especially when rejection of a plaint is sought on the ground of limitation. Therefore, when the plaintiff claims that he gained the knowledge of the essential facts giving rise to the cause of action only at a particular point of time, the same has to be accepted at the stage of considering the application under Order VII Rule 11 of the CPC.
67. The Hon’ble Supreme Court in one of its earlier judgments namely T. Arivandandam v. T.V. Satyapal7, set out the parameters that has to be kept in mind whilst adjudicating an application seeking rejection of a plaint and held as under:
“5. We have not the slightest hesitation in condemning the petitioner for the gross abuse of the process of the court repeatedly and unrepentently resorted to. From the statement of the facts found in the judgment of the High Court, it is perfectly plain that the suit now pending before the First Munsif’s Court, Bangalore, is a flagrant misuse of the mercies of the law in receiving plaints. The learned Munsif must remember that if on a meaningful — not formal — reading of the plaint it is manifestly vexatious, and meritless, in the sense of not disclosing a clear right to sue, he should exercise his power under Order 7, Rule 11 CPC taking care to see that the ground mentioned therein is fulfilled. And, if clever drafting has created the illusion of a cause of action, nip it in the bud at the first hearing by examining the party searchingly under Order 10, CPC. An activist Judge is the answer to irresponsible law suits. The trial courts would insist imperatively on examining the party at the first hearing so that bogus litigation can be shot down at the earliest stage. The Penal Code is also resourceful enough to meet such men, (Cr. XI) and must be triggered against them. In this case, the learned Judge to his cost realised what George Bernard Shaw remarked on the assassination of Mahatma Gandhi:
“It is dangerous to be too good…””
68. In Kamala v. K.T. Eshwara Sa8, the Hon’ble Supreme Court while reaffirming to its earlier decision made in T. Arivandandam (Supra) held as under:
“..21. Order 7 Rule 11(d) of the Code has limited application. It must be shown that the suit is barred under any law. Such a conclusion must be drawn from the averments made in the plaint. Different clauses in Order 7 Rule 11, in our opinion, should not be mixed up. Whereas in a given case, an application for rejection of the plaint may be filed on more than one ground specified in various sub-clauses thereof, a clear finding to that effect must be arrived at. What would be relevant for invoking clause (d) of Order 7 Rule 11 of the Code are the averments made in the plaint. For that purpose, there cannot be any addition or subtraction. Absence of jurisdiction on the part of a court can be invoked at different stages and under different provisions of the Code. Order 7 Rule 11 of the Code is one, Order 14 Rule 2 is another.
***
40. Order 7 Rule 11(d) of the Code serves a broad purpose as has been noted in Liverpool & London S.P. & I Assn. Ltd. v. M.V. Sea Success I [(2004) 9 SCC 512] in the following terms : (SCC p. 560, para 133)

“133. The idea underlying Order 7 Rule 11(a) is that when no cause of action is disclosed, the courts will not unnecessarily protract the hearing of a suit. Having regard to the changes in the legislative policy as adumbrated by the amendments carried out in the Code of Civil Procedure, the courts would interpret the provisions in such a manner so as to save expenses, achieve expedition and avoid the court’s resources being used up on cases which will serve no useful purpose. A litigation which in the opinion of the court is doomed to fail would not further be allowed to be used as a device to harass a litigant. (See Azhar Hussain v. Rajiv Gandhi [1986 Supp SCC 315] , SCC at pp. 324-35.)”

But therein itself, it was held : (SCC p. 562, para 139)
“139. Whether a plaint discloses a cause of action or not is essentially a question of fact. But whether it does or does not must be found out from reading the plaint itself. For the said purpose the averments made in the plaint in their entirety must be held to be correct. The test is as to whether if the averments made in the plaint are taken to be correct in their entirety, a decree would be passed.”

41. In C. Natrajan v. Ashim Bai [(2007) 14 SCC 183 : (2007) 12 Scale 163] this Court held : (SCC pp. 188-89, para 8)
“8. An application for rejection of the plaint can be filed if the allegations made in the plaint even if given face value and taken to be correct in their entirety appear to be barred by any law. The question as to whether a suit is barred by limitation or not would, therefore, depend upon the facts and circumstances of each case. For the said purpose, only the averments made in the plaint are relevant. At this stage, the court would not be entitled to consider the case of the defence. (See Popat and Kotecha Property v. SBI Staff Assn. [(2005) 7 SCC 510] )”..”

69. Upon perusal of the above, it is inferred that the Rule 11 of Order VII of the CPC lays down an independent remedy which is available to a defendant to challenge the maintainability of the suit itself, irrespective of his right to contest the same on merits. The law ostensibly does not contemplate at any stage when the objections can be raised, and also does not say in express terms about the filing of a written statement. Instead, the word ‘shall’ is used clearly implying thereby that it casts a duty on the Courts to perform its obligations in rejecting the plaint when the same is hit by any of the infirmities provided in the four clauses of Rule 11.
70. Therefore, it is clear that with reference to Order VII Rule 11 of the CPC, the relevant facts which need to be looked into for deciding an application thereunder are the averments made in the plaint and it is an obligation upon the Court dealing with such application that if on a meaningful and not formal reading of the plaint it is manifestly vexatious and meritless in the sense of not disclosing a clear right to sue, it should exercise the power under the said provision. Furthermore, if clever drafting has created the illusion of a false cause of action, it has to be nipped in the bud by examining the contents of the plaint itself. The same has also been followed by the Hon’ble Supreme Court in Surjit Kaur Gill v. Adarsh Kaur Gill9.

(Section 34 of SARFAESI – Civil Court not to have jurisdiction)
71. In order to understand the scope and principle of the Section 34 of SARFAESI, the same has been reproduced for reference herein:
“34. Civil court not to have jurisdiction
No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and 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 Banks and Financial Institutions Act, 1993 (51 of 1993).”

72. A bare reading of the aforesaid provision enunciates that the jurisdiction of a Civil Court is barred in respect of the matters which a DRT or its appellate authority is empowered to determine in respect of any action taken or to be taken in pursuance of any power conferred under SARFAESI. It also 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 the SARFAESI or under the RDB Act.  It is further to be noted that the bar of jurisdiction is in respect of a proceeding which may be taken to the DRT. Therefore, the Civil Court shall have no jurisdiction to entertain any proceedings in respect of any matter where an action may be taken even later on,. The bar of Civil Court thus applies to all such matters which may be taken cognizance of by the DRT, apart from those matters in which measures have already been taken under sub-section (4) of Section 13.
73. Adverting to the issue at hand, it has been contended by the petitioner that the Civil Court in the instant matter does not have the jurisdiction to entertain disputes pertaining to the action taken against the respondent borrower which is classification of its loan account as an NPA.
74. In regard to the above, referral to the judgment of Hon’ble Supreme Court in Mardia Chemicals Ltd. v. Union of India10 becomes important. The relevant portion of same is reproduced as under:
“40. Now coming to Section 17, it provides for filing of an appeal to the Debts Recovery Tribunal within 45 days of any action taken against the borrower under sub-section (4) of Section 13 of the Act. It reads as under:
“17. Right to appeal.—(1) Any person (including borrower) aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor or his authorized officer under this chapter, may prefer an appeal to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken.
(2) Where an appeal is preferred by a borrower, such appeal shall not be entertained by the Debts Recovery Tribunal unless the borrower has deposited with the Debts Recovery Tribunal seventy-five per cent of the amount claimed in the notice referred to in sub-section (2) of Section 13:
Provided that the Debts Recovery Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this section.
(3) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder.”
It is thus clear that an appeal under sub-section (1) of Section 17 would lie only after some measure has been taken under sub-section (4) of Section 13 and not before the stage of taking of any such measure. According to sub-section (2), the borrower has to deposit 75% of the amount claimed by the secured creditor before his appeal can be entertained.
41. So far as jurisdiction of civil court is concerned, we find that there is a bar to it as provided under Section 34 of the Act quoted below:
“34. Civil court not to have jurisdiction.—No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and 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 Banks and Financial Institutions Act, 1993 (51 of 1993).”
***

44. As a matter of fact, the Narasimham Committee also advocates for a legal framework which may clearly define the rights and liabilities of the parties to the contract and provisions for speedy resolution of disputes, which is a sine qua non for efficient trade and commerce, especially for financial intermediation. Even the guidelines of Reserve Bank of India in relation to classifying NPAs, while stressing the need of expeditious steps in taking a decision for classifying and identification of NPAs says, a system be evolved which should ensure that the doubts in asset classification are settled through specified internal channels within the time specified in the guidelines. It is thus clear that while recommending speedier steps for recovery of the debts it is envisaged by all concerned that within the legal framework, such provisions may be contained which may curtail the delays. Nonetheless, dues or disputes regarding classification of NPAs should be considered and resolved by some internal mechanism. In our view, the above position suggests the safeguards for a borrower, before a secured asset is classified as NPA. If there is any difficulty or any objection pointed out by the borrower by means of some appropriate internal mechanism it must be expeditiously resolved.

45. In the background we have indicated above, we may consider as to what forums or remedies are available to the borrower to ventilate his grievance. The purpose of serving a notice upon the borrower under sub-section (2) of Section 13 of the Act is, that a reply may be submitted by the borrower explaining the reasons as to why measures may or may not be taken under sub-section (4) of Section 13 in case of non-compliance with notice within 60 days. The creditor must apply its mind to the objections raised in reply to such notice and an internal mechanism must be particularly evolved to consider such objections raised in the reply to the notice. There may be some meaningful consideration of the objections raised rather than to ritually reject them and proceed to take drastic measures under sub-section (4) of Section 13 of the Act. Once such a duty is envisaged on the part of the creditor it would only be conducive to the principles of fairness on the part of the banks and financial institutions in dealing with their borrowers to apprise them of the reason for not accepting the objections or points raised in reply to the notice served upon them before