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Judgment
Sushil Kukreja, J
The present regular second appeal has been maintained by appellant, who was the plaintiff before the learned Trial Court (hereinafter referred to as “the plaintiff”) under Section 100 CPC against the judgment passed by the learned District Judge, Mandi, District Mandi, H.P., in Civil Appeal No. 18/2023, dated 18.05.2023, whereby the appeal filed by the plaintiff was dismissed and order dated 06.03.2023, passed by the learned Civil Judge, Court No. 2, Mandi, District Mandi, H.P., was upheld, whereby application under Order 7, Rule 11 of CPC filed by the defendants (respondents herein) was allowed, with a prayer to accept the appeal and set aside the impugned judgment with costs throughout and to decide the suit filed by the plaintiff on merits.
The key facts of the case can tersely be summarized as under:
2(a). The defendants (Punjab National Bank and Punjab Batiohal Bank, defendants No. 1 and 2, respectively) maintained an application before the learned Trial Court under Order VII, Rule 11 read with Section 151 of the CPC for rejection of plaint filed by the plaintiff. As per the applicants/defendants the non-applicant/plaintiff filed a suit for declaration and permanent prohibitory injunction against the action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “SARFAESI Act”) taken by the applicants/defendants. It was further averred that the plaint filed by the non-applicant/plaintiff is liable to be rejected under the provisions of Order VII, Rule 11(d) CPC, as the suit appears from the statement in the plaint to be barred by law. It was also averred that in the application that the question of rejection of the plaint has to be ascertained in accordance with the provisions of Order VII, Rule 11(d) of CPC, which provides the plaint shall be rejected, if the suit appears from the statement in the plaint to be barred by any law as Section 34 of SARFAESI Act bars the jurisdiction of the Civil Court to entertain any suit or proceedings in respect of any matter, which a Debt Recovery Tribunal or Appellate Tribunal is empowered.
2(b). As per the applicants/defendants, Section 17 of the SARFAESI Act, mandates that 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 the Chapter may make an application alongwith such fee as may be prescribed to the Debt Recovery Tribunal having jurisdiction in the matter. The applicants/defendants submitted that the plaint of the suit in question is liable to be rejected on the same ground, as the jurisdiction of the Civil Court is barred by the provisions of SARFESI Act.
2(c). Conversely, non-applicant/plaintiff by filing reply to the application took preliminary objection of maintainability and on merits it was submitted that the analogy of the provision of Order 7, Rule 11(d) of CPC, Section 34 of the SARFAESI Act is not applicable in the suit, as the applicants/defendants have initiated wrong proceedings against the non-applicant/plaintiff under the SARFAESI Act, which are illegal and fraudulent with intent to deceive the respondent by active concealment of facts of contract and law. The non-applicant/plaintiff further averred that he availed CC limit and term loan from applicants/defendants, which are both totally different in nature and obtained on different dates, months and year, but the applicants/defendants have illegally and wrongly clubbed them and issued wrong, illegal and have fraudulently combined recall/recovery notice, dated 21.03.2021, against the non-applicant/plaintiff and fraudulently declared the accounts, i.e., CC limit and term loan of non-applicant/plaintiff as “non-performing assets” (NPA) on 08. 03.2022. It was also submitted that applicants/defendants have mentioned the recall amount of Rs.40,85,663/- for CC Limit amount of Rs. 40,00,000/- and have also mentioned the recall amount of Rs.6,21,542/- for term loan account of Rs.5,87,749/-. The non-applicant/plaintiff replied to the recall notices, dated 21.03.2022 and 02.04.2022, by submitting that on the one side the applicants/defendants have recalled the entire amount of the CC limit and the term loan and on the other hand, they had asked the non-applicant/plaintiff to regularize the said account, which is against the law and natural principles of justice.
2(d). As per the non-applicant/plaintiff, the proceedings were started under the SARFAESI Act wrongly, illegally and fraudulently against him by issuing notice under Section 13(2) of the SARFASI Act, on 05.04.2022, and in the said notice the NPA and recall amount are different from the earlier notice, dated 21.03.2022, i.e., 09.03.2022 is NPA date and recall amounts are Rs.41,34,2161/- and Rs.6,27,848.00/-. Thereafter, the non-applicant/plaintiff filed reply on 06.06.2022 for notice under Section 13(2) of SARFASI Act on email ID of the PNB Branch Sundernagar, and also to Circle Sastra Center at their email ID and on receiving the reply/objection under Section 13(3A) of SARFASI Act, by the applicants/defendants, it was obligatory for the applicants/defendants to communicate with the respondent within fifteen days from the receipt of the reply/objections by making rejoinder regarding tenability of the reply of the non-applicant/plaintiff, but despite resorting to this procedure, the applicants/defendants directly opted to proceed under Section 13(4) of the SARFASI Act. Lastly, dismissal of the application was prayed.
After hearing the learned counsel for the applicants/defendants and non-applicant/plaintiff, the learned Trial Court allowed the application and rejected the plaint of the plaintiff.
Feeling aggrieved and dissatisfied, the plaintiff approached the learned District Judge Mandi, by filing an appeal under Section 96 of CPC read with Section 21 of the H.P. Courts Act, but the same was also dismissed, hence the instant appeal.
Having heard the learned counsel appearing for the appellant and having gone through the material on record, the only question that requires consideration is whether there is any substantial question of law involved in this second appeal.
It is a settled law that the existence of substantial question of law is the sine qua non for the exercise of jurisdiction under Section 100 of the Code. Section 100 provides that the second appeal would lie to the High Court from a decree passed in appeal by any court subordinate to the High Court if the High Court is satisfied that the case "involves a substantial question of law". It further provides that the memorandum of appeal shall precisely state the substantial question of law involved in the appeal and the High Court on being satisfied that the substantial question of law is involved in a case formulate the said question. Sub-section (5) provides that the "appeal shall be heard on the question so formulated". It reserves the liberty with the respondent against whom the appeal was admitted ex-parte and the questions of law had been framed in his absence to argue that the case did not involve the questions of law framed. Proviso to sub-section (5) states that the questions of law framed at the time of admission would not take away or abridge the power of the court to frame any other substantial question of law which was not formulated earlier, if the court is satisfied that the case involved such additional questions after recording reasons for doing so. It is abundantly clear from the analysis of Section 100 that if the appeal is entertained without framing the substantial questions of law, then it would be illegal and would amount to failure or abdication of the duty cast on the court.
In Santosh Hazari vs. PurushottamTiwari, (2001) 3 Supreme Court Cases 179, the Hon’ble Supreme Court has held as under:
“14. A point of law which admits of no two opinions may be a proposition of law but cannot be a substantial question of law. To be “substantial” a question of law must be debatable, not previously settled by law of the land or a binding precedent, and must have a material bearing on the decision of the case, if answered either way, insofar as the rights of the parties before it are concerned. To be a question of law “involving in the case” there must be first a foundation for it laid in the pleadings and the question should emerge from the sustainable findings of fact arrived at by court of facts and it must be necessary to decide that question of law for a just and proper decision of the case. An entirely new point raised for the first time before the High Court is not a question involved in the case unless it goes to the root of the matter. It will, therefore, depend on the facts and circumstances of each case whether a question of law is a substantial one and involved in the case, or not; the paramount overall consideration being the need for striking a judicious balance between the indispensable obligation to do justice at all stages and impelling necessity of avoiding prolongation in the life of any lis.”
In Govindaraju vs. Martamman, AIR 2005 SC 1008, the Hon’ble Supreme Court explained the true purport and scope of section 100 of the CPC. The relevant portion of the aforesaid judgment reads as under:
"11. A perusal of Section 100 of the Code makes it clear that the High Court cannot proceed to hear a Second Appeal without formulating the substantial questions of law involved in the appeal. It reads :-
"100. Second Appeal (1) Save as otherwise expressly provided in the body of this Code or by any other law for the time being in force, an appeal shall lie to the High Court from every decree passed in appeal by any court subordinate to the High Court, if the High Court is satisfied that the case involves a substantial question of law.
(2) An appeal may lie under this section from an appellate decree passed ex-parte.
(3) In an appeal under this section, the memorandum of appeal shall precisely state the substantial question of law involved in the appeal.
(4) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.
(5) The appeal shall be heard on the question so formulated and the respondent shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question:
Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law, not formulated by it, if it is satisfied that the case involves such question.
Section 100 provides that the second appeal would lie to the High Court from a decree passed in appeal by any court subordinate to the High Court if the High Court is satisfied that the case “involves a substantial question of law”. It further provides that the memorandum of appeal shall precisely state the substantial question of law involved in the appeal and the High Court on being satisfied that the substantial question of law is involved in a case formulate the said question. Sub-section (5) provides that the “appeal shall be heard on the question so formulated.” It reserves the liberty with the respondent against whom the appeal was admitted ex parte and the questions of law had been framed in his absence to argue that the case did not involve the questions of law framed. Proviso to sub-section (5) states that the questions of law framed at the time of admission would not take away or abridge the power of the court to frame any other substantial question of law which was not formulated earlier, if the court is satisfied that the case involved such additional questions after recording reasons for doing so. It is abundantly clear from the analysis of Section 100 that if the appeal is entertained without framing the substantial questions of law, then it would be illegal and would amount to failure or abdication of the duty cast on the court. The existence of substantial questions of law is the sine qua non for the exercise of jurisdiction under Section 100 of the Code. (Refer to Kshitish Chandra Purkait v. Santosh Kumar Purkait & others (1997) 5 SCC 438); Panchugopal Barua v. Umesh Chandra Goswami (1997) 4 SCC 413); Kondiba Dagadu Kadam v. Savitribai Sopan Gujar (1999) 3 SCC 722). ”
In Vijay Kumar Talwar v. Commissioner of Income Tax, New Delhi, (2011) 1 SCC 673, the Hon’ble Apex Court has held as under:
"21. Similarly, in Satosh Hazari v. Purushottam Tiwari, a three-Judge Bench of this Court observed that:
“14. A point of law which admits of no two opinions may be a proposition of law but cannot be a substantial question of law. To be ‘substantial’ a question of law must be debatable, not previously settled by law of the land or a binding precedent, and must have a material bearing on the decision of the case, if answered either way, insofar as the rights of the parties before it are concerned. To be a question of law ‘involving in the case’ there must be first a foundation for it laid in the pleadings and the question should emerge from the sustainable findings of fact arrived at by court of facts and it must be necessary to decide that question of law for a just and proper decision of the case. An entirely new point raised for the first time before the High Court is not a question involved in the case unless it goes to the root of the matter.
It will, therefore, depend on the facts and circumstances of each case whether a question of law is a substantial one and involved in the case, or not; the paramount overall consideration being the need for striking a judicious balance between the indispensable obligation to do justice at all stages and impelling necessity of avoiding prolongation in the life of any lis.”
Therefore, the existence of a substantial question of law is a sine-qua-non for the exercise of jurisdiction under the provisions of Section 100 CPC. The second appeal does not lie on the ground of erroneous findings of facts based on appreciation of the relevant evidence.
In Syeda Rahimunnisa vs. Malan Bi (Dead) by Legal Representatives & Anr., 2016 (10) SCC 315, the Supreme Court has reiterated the scope of section 100 of the CPC and the principles of law, governing the second appeal, has been explained in detail. The relevant portion of the aforesaid judgment reads as under:
"24. The scope of Section 100 of CPC while deciding the second appeal by the High Court has been the subject-matter of several decisions of this Court and thus remains no more res integra. A reference to the two cases on this question would suffice.
A three-Judge Bench of this Court in Santosh Hazari v. Purushottam Tiwari speaking through R.C. Lahoti, J. (as his Lordship then was) examined the scope of Section 100 CPC in detail and laid down the following propositions in paras 9, 10, 12 and 14 as under: (SCC pp. 185-88)
“9. The High Court cannot proceed to hear a second appeal without formulating the substantial question of law involved in the appeal and if does so it acts illegally and in abnegation or abdication of the duty cast on Court. The existence of substantial question of law in the sine qua non for the exercise of the jurisdiction under the amended Section 100 of the Code.”
The present suit has been filed by the plaintiff for declaration that the proceedings initiated by the defendants against him under the SARFAESI Act regarding the hypothecation of stocks and mortgage of the land and building comprised in Khata Khatauni No. 131 min/180 Khasra No. 705/595, measuring 00-18-18 bighas situated at Mohal Bahot/25, Tehsil Sundernagar, District Mandi, H.P., are based upon fraud with the consequential decree of a permanent prohibitory injunction for restraining the defendants from selling the stocks and the suit land or taking over the physical possession of the suit land. However, Section 34 of the SARFAESI Act bars the jurisdiction of the Civil Court 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. At this stage, it would be apt to reproduce Section 34 of the SARFAESI Act, which reads as under:
“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).”
Thus the perusal of the aforesaid section shows that no civil court shall have any jurisdiction to entertain any suit or proceeding in respect of any matter, which the Debt Recovery Tribunal is empowered by or under SARFESI 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 the aforesaid Act.
In Jagdish Singh vs. Heera Lal and others, (2014) 1 SCC 479, it has been held as under:
“21. Section 34 of the Securitisation Act ousts the civil court jurisdiction. For easy reference we may extract Section 34 of the Securitisation Act, which is as follows:
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).”
Further in Authorized Officer, State Bank of India vs. Allwyn Alloys Private Limited and others, 2018 (8) SCC 120, it has been held as under:
“8. 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 Securitisation 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.”
Thus, it is clear that no civil court can exercise jurisdiction to entertain any suit or proceeding in respect of any matter which Debt Recovery Tribunal or Appellate Tribunal is empowered to determine and no injunction can be granted by any court taken in pursuance of any power conferred by or under the SARFESI Act or under the Recovery of Debts Due to Banks and Financial Institutions Act.
The plaintiff had also sought the relief to restrain the defendants from selling the hypothecated stock or the mortgaged land. However, Section 13(4) of the SARFAESI Act empowers the secured creditor to take possession of the assets of the borrowers, including the right of transfer by way of lease, assignment or sale and to take over the management of the business of the borrowers and to appoint any person to manage the secured assets. At this stage, it would be relevant to reproduce Section 13(4) of the SARFAESI Act, which reads as under:
“13. Enforcement of security interest.-
… … … … … …
(4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-
(a) Take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset;
(b) Take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset:
Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt:
Provided further that where the management of whole, of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security or the debt;]
(c) Appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;
(d) Require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.”
Thus, from the perusal of the material on record, it is clear that the defendants are acting under Section 13(4)(a) of the SARFAESI Act. Since the plaintiff is aggrieved by the action of the defendants taken under Section 13(4)(a) of the Act, therefore, he has a right to approach the Debt Recovery Tribunal for the redressal of any of his grievances.
The learned counsel for the plaintiff next contended that when the plea of the fraud has been taken in the plaint, the jurisdiction of the civil court is not barred, even in the matters falling in the ambit of the SARFAESI Act. In this respect he has placed reliance upon the judgment of the Hon’ble Supreme Court in Mardia Chemical Ltd., Etc. vs. Union of India and others Etc. (2004) 4 SCC 311.
There is no quarrel regarding the proposition that the jurisdiction of the civil court would not be absolutely barred where the action of the secured creditor is alleged to be fraudulent or his claim may be so absurd and untenable which may not require any probe whatsoever. However, it has been further laid down by the Hon’ble Supreme Court in Charu Kishor Mehta vs. Prakash Patel and others, 2022 SCC online SC 1967, that mere allegation of fraud is not sufficient and the particulars of the fraud have to be given. The relevant portion of the judgment reads as under:
“15. A mere recital of fraud, however, is not enough. Once fraud is alleged by a party, like the one that has been done by the Petitioner in reply to the objection under Order VII, Rule 11 of the Civil Procedure Code, then the allegation of fraud has to be tested in terms of Order VI, Rule 4 of the Civil Procedure Code, which reads as under:
‘4. Particulars to be given where necessary.
In all cases in which the party pleading relies on any misrepresentation, fraud, breach of trust, willful default, or undue influence, and in all other cases in which particulars may be necessary beyond such as are exemplified in the forms aforesaid, particulars (with dates and items if necessary) shall be stated in the pleading.’
Apart from making a bald statement of collusion between Defendant Nos. 1, 2 & 4 and the secured creditor, i.e., M/s. Phoenix A.R.C. Pvt. Ltd. there is nothing substantial as to how and as to what precise fraud has been committed. The only case of the Petitioner for creating a case of fraud is that the Petitioner’s name was not registered as a member of the society and the reason for not registering the name of the Petitioner as a member of the society was that the society, i.e., defendant No. 3 was in collusion with the secured creditor as well as with the defendant Nos. 1, 2 and 4. The fact of the matter is that even if the name of the petitioner would have been registered as a member of the society, it would have hardly given any benefit to the petitioner in the present case. Being registered as a member of the society would have only meant that the petitioner is a member of the society. It would not create ownership rights on a property. Moreover, and most importantly, not only is this just a bald allegation but the necessary party against whom the fraud was alleged i.e., M/s. Phoenix A.R.C. Pvt. Ltd. was never made a party in the suit proceedings before the Civil Court.”
In a recent judgment of Hon’ble Supreme Court rendered in Electrosteel Castings Limited vs. Uv Asset Reconstruction Company Limited & Ors. (2022) 2 SCC 573, it has been held as under:
“7.… … … … … …
7.1 It is the case on behalf of the plaintiff- appellant herein that in the plaint there are allegations of “fraud” with respect to the assignment agreement dated 30- 06-2018 and it is the case on behalf of the plaintiff-appellant herein that assignment agreement is “fraudulent” inasmuch as after the full payment as per the approved resolution plan under IBC and the original corporate debtor is discharged, there shall not be any debt by the plaintiff-appellant herein as a guarantor and therefore assignment deed is fraudulent. Therefore, it is the case on behalf of the plaintiff-appellant herein 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 the SARFAESI Act shall not be applicable.
7.2 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 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 proposition of law mere mentioning and using the word “fraud”/”fraudulent” is not sufficient to satisfy the test of “fraud”. As per the settled proposition of law such a pleading/using the word “fraud”/”fraudulent” without any material particulars would not tantamount to pleading of “fraud”.”
In the instant case, except for the use of the word “fraud”, no particulars of the allegations of fraud have been specifically pleaded as mandated by the provisions of Order 6 Rule 4 of the Civil Procedure Code,1908. Thus, the plea of jurisdiction of the Civil Court based on the allegations of fraud cannot be countenanced. Hence in view of provisions of Section 34 of the SARFESI Act, both the learned Courts below have rightly rejected the plaint.
Therefore, no question of law, what to say of a substantial question of law is involved in the instant case. Accordingly, I find no illegality or perversity in the judgments passed by both the Courts below in rejecting the plaint under Order 7 Rule 11 CPC.
In view of what has been discussed hereinabove, the appeal, which sans merits, deserves dismissal and is accordingly dismissed.