Civil Court Retains Jurisdiction Over Pre‑Mortgage Title and Plaint Claims; Bank’s Appeal Dismissed and Suits Restored

A bench of Justices J.B. Pardiwala and R. Mahadevan heard appeals by the Central Bank of India challenging the Madhya Pradesh High Court’s order which set aside the trial court’s rejection of a plaint under Order VII Rule 11 CPC. The central issue was whether Section 34 of the SARFAESI Act ousted civil court jurisdiction where plaintiffs sought declarations that antecedent sale and mortgage deeds were void and claimed possession of the suit land.

The Supreme Court dismissed the appeals and upheld the High Court’s view that the civil court retained jurisdiction to adjudicate declarations of invalidity of sale and mortgage deeds and consequent possession claims which did not fall within the limited remit of the DRT under Section 17 of the SARFAESI Act. The Court emphasised that the SARFAESI regime was “essentially to provide a speedy mechanism for recovery of debts by banks and financial institutions” and that the DRT’s powers under Section 17 were confined to measures taken under Section 13(4). The Court, in its reasoning, observed: “The DRT does not have the jurisdiction to grant a declaration with respect to the mortgage deed or the sale deed as sought by the Plaintiff. The jurisdiction to declare a sale deed or a mortgage deed being illegal is vested with the civil court under Section 9 of the Code of Civil Procedure.” The Court further noted the linguistic and practical distinction that the DRT’s power under Section 17(3) was to “restore” possession to the person who was in possession when the secured creditor took over, and not to “hand over” possession to a third party who had never been in possession.

Background The dispute arose from a suit filed in 2011 by Smt. Prabha Jain claiming declaration that a sale deed dated 03.07.2008 and a subsequent mortgage in favour of the Central Bank of India were null and void, a prayer for possession of the plot and mesne profit/damages. The plaintiff alleged that her late father‑in‑law purchased the land in 1967; after successive deaths, an undivided share was sold by a co‑heir without partition to Parmeshwar Das Prajapati, who mortgaged it to the Bank. The Bank applied under Order VII Rule 11 CPC to reject the plaint on the ground that the civil court had no jurisdiction in view of Section 34 of the SARFAESI Act and also on court‑fee grounds. The trial court rejected the plaint; the High Court allowed the first appeal, set aside the rejection and restored the suit, holding inter alia that “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” did not extend to questions of antecedent title and declarations of invalidity of prior sale or mortgage deeds.

On appeal to the Supreme Court, counsel for the Bank contended that Section 34 barred the suit. The Court examined the scope of Section 34 and Section 17, the latter conferring jurisdiction on the DRT to examine whether measures taken under Section 13(4) complied with the Act. The judgment explained through illustrations that disputes as to title, wills or validity of antecedent transactions are not matters that the DRT was empowered to finally determine; the DRT’s remedial power under Section 17(3) was to “restore the possession of the secured assets to the borrower” and its ambit was limited. The Court also reiterated settled law that a plaint could not be partially rejected under Order VII Rule 11 and that if any relief in a plaint survived, the plaint could not be rejected in toto on that ground. The Court referred to and distinguished earlier precedents (including Mardia, Jagdish Singh, Madhav Prasad Aggarwal and others), observed that tribunals are creatures of statute and must act within their statutory powers, and urged banks to improve title‑clearance practices. The appeals were dismissed, the interim order granted by this Court was vacated, and the civil suits were directed to proceed expeditiously in accordance with law.

Case Details: Case No.: Civil Appeal No.1876 of 2016 (Lead) Case Title: Central Bank of India & Anr. v. Smt. Prabha Jain & Ors. Appearances: For the Petitioner(s): Mr. O. P. Gaggar, AOR; Mr. Sachindra Karn, Adv. For the Respondent(s): Mr. Umesh Babu Chaurasia, Adv.; Ms. Prity Kumari, Adv.; Ms. Manjula Chaurasia, Adv.; Mr. Maneesh Pathak, Adv.; Mr. Rameshwar Prasad Goyal, AOR; Ms. Pragati Neekhra, AOR; Mr. Aditya Bhanu Neekhra, Adv.; Mr. Atul Dong, Adv.; Mr. Aniket Patel, Adv.