VENUS PROCON PVT.LTD ( MODIFIED AS PER O/D DATED 03/02/2026 )versusSTATE BANK OF INDIA

  C/AO/209/2025                                    CAV JUDGMENT DATED: 09/01/2026




                                                  Reserved On   : 19/12/2025
                                                  Pronounced On : 09/01/2026

           IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                    R/APPEAL FROM ORDER NO. 209 of 2025
                                     With
                  CIVIL APPLICATION (FOR STAY) NO. 1 of 2025
                   In R/APPEAL FROM ORDER NO. 209 of 2025

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE NIRAL R. MEHTA
==========================================================

           Approved for Reporting                   Yes           No

==========================================================
                         VARUN PROCON PVT LTD & ORS.
                                   Versus
                          STATE BANK OF INDIA & ORS.
==========================================================
Appearance:
MR IH SYED, SR. ADVOCATE WITH MR.ADITYA J PANDYA(6991) for the
Appellant(s) No. 1,2,3
MR PC KAVINA, SR. ADVOCATE WITH MS. BHAVNA D ACHARYA(6406)
for the Respondent(s) No. 1
==========================================================
  CORAM:HONOURABLE MR. JUSTICE NIRAL R. MEHTA


                               CAV JUDGMENT

1.                The present Appeal from Order, at the
instance of original plaintiffs under Order XLIII
Rule 1(r) of the Code of Civil Procedure, 1908,
is directed against order dated 29th September,
2025 passed by learned City Civil Court No.23,
Ahmedabad           in    Civil    Suit      No.778       of    2016       below
Exh.7.       By      the    said   order,         learned       City       Civil
Court        was         pleased    to        dismiss        the       interim


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application under Order XXXIX Rules 1 and 2 of
the Code, 1908.

Case of the Appellants (Original Plaintiffs)

2.               Plaintiff No.1 is a company engaged in
the       business        of        real            estate       development,
construction            and     allied          activities.           Plaintiff
Nos.2      and      3    were       appointed          as      Directors           of
Plaintiff          No.1       on     05.09.2014            and       07.03.2016
respectively. Defendant No.5, who is the nephew
of    Plaintiff         Nos.2       and     3,      was    appointed          as       a
Director of Plaintiff No.1 on 31.10.2014.

2.1              Ms. Avani Dharmesh Patel, who claims to
be    a   Director        of       Plaintiff         No.1,      was      only      an
Additional Director and was never appointed as a
Director          in    the        Annual           General        Meeting         of
Plaintiff No.1.

2.2              It is the case of the plaintiffs that,
taking      advantage          of     the       strained         relationship
between Plaintiff No.2 and his wife, Defendant
No.5,     in      collusion         with       the     other       defendants,
removed all original documents such as sale deeds
and other title documents relating to the suit
property from the residence of Plaintiff No.2. At
the relevant time, Plaintiff No.2 was detained at
Navrangpura            Police       Station          and     was     restrained
from entering the Navrangpura area pursuant to an


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order passed by this Court.

2.3              It    is     further       alleged        that       Defendant
No.1 Bank accepted the suit property as security
without verifying the title of the property or
the    authority              of     the      person        executing            the
mortgage          deed      and     without         obtaining         any     title
clearance             report.      According         to    the     plaintiffs,
the Bank officials were in collusion with the
other defendants.

2.4              Plaintiff No.2 came to know about the
alleged          fraudulent          mortgage         deed       executed          by
Defendant No.5 only when a complaint came to be
lodged at Navrangpura Police Station.

2.5              Consequently,             the         plaintiffs               were
constrained to file Civil Suit No.778 of 2016
before the learned City Civil Court, Ahmedabad,
seeking          a     declaration         that      the     mortgage           deed
dated 12.01.2015 is illegal, that the defendants
have    no       right,       title      or     interest         in    the      suit
property, and for permanent injunction.

2.6              Defendant No.1 Bank appeared in the said
suit and filed its written statement, denying the
averments made in the plaint. The Bank primarily
contended              that        the     Civil          Court         had        no
jurisdiction             in       view     of       the     initiation             of


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proceedings under the SARFAESI Act, and that the
mortgage was validly created.

2.7              After filing of the suit, the matter was
transferred from one court to another and, for a
substantial            period    from        June          2016      to      December
2020,      it      remained          before          a     vacant         court        on
account of administrative reasons.

2.8              Thereafter, Defendant No.1 Bank obtained
an      order           dated         18.07.2025                  in         Criminal
Miscellaneous Application No.5169 of 2025 under
Section          14    of     the      SARFAESI              Act       for      taking
physical           possession           of          the        suit       property.
According to the plaintiffs, the said order was
obtained on the basis of a fraudulent mortgage
deed, which is the subject matter of challenge in
the civil suit.

2.9              The    learned        City          Civil         Court,         after
considering             the     pleadings                 and        submissions,
dismissed the injunction application at Exh.7 by
order dated 29.09.2025.

Case of Respondent No.1 - Bank

3.               On 05.01.2015, the State Bank of India,
Bareja Branch, Ahmedabad, sanctioned a loan of
Rs.16.50          crores        in     favour             of       M/s.       Satsang
Infrabuild Private Limited, consisting of a cash


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credit limit of Rs.15.00 crores and a term loan
of Rs.1.50 crores. Respondent Nos.3 and 4, namely
Mr.    Ritesh         D.    Kotak     and       Mr.       Nilesh        D.     Kotak,
stood as personal guarantors. Plaintiff No.1 –
M/s. Venus Procon Private Limited – and Astha
Organisers            Private       Limited         stood         as     corporate
guarantors.

3.1              At the time of sanction of the loan, Mr.
Ritesh Kotak and Mr. Nilesh Kotak were Directors
of    the        borrower      company.            Mr.     Krunal         H.     Patel
(Respondent            No.5)    and       Ms.       Avni       D.      Patel       were
Directors of Plaintiff No.1.

3.2              Mr. Krunal Patel and Ms. Darshana Patel
were      Directors            of    Astha          Organisers               Private
Limited at the relevant time.

3.3              On    10.01.2015,          a       corporate            guarantee
agreement             was    executed              by      Plaintiff             No.1,
followed by execution of a registered mortgage
deed dated 12.01.2015, bearing Serial No.343 of
2015 before the Sub-Registrar.

3.4              On    24.12.2015,              the        borrower’s              loan
account was classified as a Non-Performing Asset
(NPA).

3.5              Thereafter,         on      28.12.2015,                 a     demand
notice under Section 13(2) of the SARFAESI Act


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was issued to the borrower and guarantors, though
effective service could not be completed.

3.6              On    08.01.2016,       Respondent            No.1        Bank
filed     Original        Application          No.8    of     2016       under
Section 19 of the Recovery of Debts Due to Banks
and Financial Institutions Act, 1993 before the
learned Debt Recovery Tribunal.

3.7              On 12.01.2016, the learned Debt Recovery
Tribunal passed an order in favour of the Bank in
terms of paragraph 7(c) thereof. The said order
has not been challenged by the appellants.

3.8              On 11.04.2016, the appellants filed the
present Civil Suit No.778 of 2016 along with an
injunction application at Exh.7 against the Bank
and others, without disclosing the pendency of
the     proceedings           before           the     Debt        Recovery
Tribunal. The Bank filed its written statement in
the suit on 31.12.2016.

3.9              On 03.01.2025, the Bank initiated fresh
proceedings under the SARFAESI Act by issuing a
notice under Section 13(2) to the borrower and
corporate             guarantors,      which         was      served          on
08.01.2025.

3.10             On 15.03.2025, Appellant No.2 replied to
the said notice through his advocate. The Bank,


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by communication dated 20.03.2025, conveyed its
reasons for not accepting the objections raised.

3.11             On 04.04.2025, when the Bank attempted
to     affix       the     possession             notice      on      the      suit
property, its authorised officer was obstructed.

3.12             Consequently,          on    14.05.2025,             the      Bank
filed Criminal Miscellaneous Application No.5169
of 2025 under Section 14 of the SARFAESI Act for
enforcement of its security interest. The said
application              was      allowed           by        order          dated
18.07.2025.              The     said        order       has        not        been
challenged by the appellants in accordance with
law. The injunction application at Exh.7, which
had been pending since 2016, was pressed only in
the     year            2025     after        the        Bank         initiated
proceedings under Section 14 of the SARFAESI Act.

Under Challenge

4.               Being    aggrieved          and     dissatisfied              with
the order dated 29.09.2025 passed by the learned
City Civil Court No.23, Ahmedabad in Civil Suit
No.778 of 2016 below Exh.7, the appellants, who
are the original plaintiffs, have preferred the
present Appeal From Order before this Court.

5.               This     Court    has       heard         learned          Senior
Advocate          Mr.     I.H.     Syed           assisted       by      learned


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Advocate Mr. Aditya Pandya for the appellants,
and   learned           Senior     Advocate             Mr.      Percy        Kavina
assisted by learned Advocate Ms. Bhavna Acharya
for respondent No.1 Bank, who appeared on caveat.

5.1              Considering that the issue involved in
the present Appeal From Order is within a limited
scope,       and       with     the     consent            of      the      learned
advocates             appearing        for        the      main        contesting
parties, the Appeal From Order is taken up for
hearing at the stage of admission.

6.               Learned Senior Advocate Mr.Syed for the
appellants, while assailing the impugned order,
has made following submissions:

6.1              It is submitted that the impugned order
passed      by        the    learned     City       Civil         Court        is    ex
facie     illegal,           arbitrary            and     contrary          to      the
settled          provisions       of    law        and,       therefore,            the
same deserves to be quashed and set aside.

6.2              At    the    outset,        it     is       contended            that
there was no resolution of Plaintiff No.1–company
authorising creation of a mortgage or empowering
any person to execute such mortgage. In view of
Section 179 of the Companies Act, creation of a
mortgage requires a specific resolution of the
company.          In    absence        of     such         resolution,              the



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mortgage          is    void    and    non        est       in   law.       It    is,
therefore, submitted that the learned trial court
ought to have granted injunction in favour of the
appellants.

6.3              It is further submitted that no valid
resolution was placed on record before the trial
court. The so-called resolution produced across
the bar before this Court bears the signature of
a person who was not a Director at the relevant
time.      Hence,         the     said       resolution              cannot         be
treated as a valid resolution in compliance with
Section 179 of the Companies Act.

6.4              It is also submitted that the learned
trial court failed to appreciate that the Bank
had      not           exercised         due           diligence             before
sanctioning and disbursing the loan and before
accepting the suit property as security. Had the
Bank verified the records properly, it would have
noticed          that     there       was         no    valid         resolution
authorising creation of the mortgage in respect
of the company’s property for a loan granted to a
third party. In these circumstances, the balance
of    convenience          was     clearly             in    favour        of     the
appellants, and the trial court ought to have
granted injunction.

6.5              It is contended that the finding of the


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learned          trial       court       that        a      Director,             being
treated          as    a    50%    owner      of     the       company,           could
validly deal with 50% of the company’s assets, is
wholly erroneous and contrary to the provisions
of the Companies Act. Such a finding is legally
unsustainable and deserves to be set aside, and
consequently the application at Exh.7 ought to
have been allowed.

6.6              It     is        further         submitted             that        the
principal             challenge       in       the        suit       is      to     the
mortgage          deed       allegedly         executed           by      Defendant
No.5 in respect of a loan granted to Defendant
No.2, on the grounds of fraud and collusion. The
Civil Court, being competent to adjudicate upon
such issues, ought to have protected the suit
property by granting injunction. It is submitted
that if the measures initiated by the Bank under
the SARFAESI Act are permitted to proceed and the
property is not protected, the suit itself would
become infructuous. Therefore, in the interest of
justice, the learned trial court ought to have
granted          the       injunction        as      prayed         for      by     the
appellants.

6.7              To strengthen the aforesaid submission,
heavy reliance is placed on the decision in case
of Central Bank of India v. Prabha Jain [(2025) 4
SCC 38].

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6.8              By     making      above            submissions,           Learned
Senior Advocate for the appellants, has prayed to
allow the Appeal From Order.

7.               Learned Senior Advocate Mr.Kavina, while
supporting the impugned order, has made following
submissions:

7.1              At the outset, learned Senior Advocate
for    respondent             No.1       Bank         contended         that       the
learned trial court ought to have rejected the
application at Exh.7 on the ground of lack of
jurisdiction.             It       was     submitted            that        in     the
written          statement,           the        Bank        had       raised            a
preliminary objection regarding the competence of
the Civil Court to entertain the suit. According
to the Bank, the Debt Recovery Tribunal alone has
jurisdiction to adjudicate the grievances raised
by the appellants and the suit itself is liable
to be rejected under Order VII Rule 11(d) of the
Code of Civil Procedure, 1908. It was further
submitted that although the learned trial court
rejected Exh.7 on different grounds, it ought to
have     decided          the       issue        of      jurisdiction              and
rejected          the    application            on     that       basis.         Since
jurisdiction             is    a    pure       question          of      law,      the
ultimate rejection of Exh.7 cannot be faulted.

7.2              Learned           Senior             Advocate              further


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submitted that prior to filing of the civil suit,
the      Bank          had        already               initiated           recovery
proceedings before the learned DRT under the RDDB
Act,    wherein             an    interim           order       was      passed        in
favour           of     the        Bank           against          the        present
appellants.             It        was        pointed          out        that        the
appellants            neither       appeared             before       the     learned
DRT    nor        challenged             the       interim         order        passed
therein. According to the Bank, filing of the
civil suit without pursuing the remedy before the
DRT amounts to an abuse of process of law and is
intended only to delay the recovery proceedings.

7.3              It     was        also            submitted            that         the
appellants have not approached the Civil Court
with clean hands. There has been a deliberate
suppression            of    material            facts       inasmuch          as    the
pendency of proceedings before the learned DRT
was not disclosed in the plaint. This conduct,
according to the Bank, ought to have been taken
into    consideration               by       the        learned       trial       court
while rejecting the application at Exh.7.

7.4              Learned         Senior        Advocate         submitted           that
considering the limited scope of the Civil Court
in matters of this nature, the impugned order
rejecting Exh.7 does not call for interference.
It was further submitted that since the issue of



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jurisdiction is purely a question of law, this
Court,      while        deciding          the        present      Appeal         From
Order,      may        substitute          its        own     reasoning         while
maintaining the operative part of the impugned
order.

7.5              It was contended that, in substance, the
appellants have challenged the validity of the
mortgage and creation of security, which squarely
falls within the jurisdiction of the learned DRT
under       Section          17    of       the        SARFAESI         Act.       The
appellants,             being      corporate                guarantors,           fall
within the definition of “borrower” under Section
2(f)       of     the     Act,        2002.           Once    measures          under
Section          13     of      the        Act        are     initiated,           any
grievance             against     such       measures          can     be     raised
before the DRT, which has ample power to examine
even       the        validity        of     the        security        interest.
Therefore, it was prayed that the Appeal From
Order be dismissed even if this Court finds fault
with the reasoning adopted by the learned trial
court, as the rejection of Exh.7 is otherwise
justified.

7.6              To       substantiate                       the        aforesaid
submissions,              learned             Senior           Advocate            for
respondent No.1 Bank placed reliance on Section
34    of    the         SARFAESI        Act,          contending         that      the



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jurisdiction            of    the     Civil          Court     is     expressly
barred in respect of matters which the DRT or the
Appellate             Tribunal      is     empowered           to     determine
under the Act. It was submitted that the suit
itself is barred under Section 34 and, on this
ground also, the application at Exh.7 was liable
to be rejected.

7.7              It     was    further              submitted         that       the
learned trial court has misapplied the decision
of    the        Hon’ble      Supreme        Court       in     the      case      of
Prabha Jain (supra). According to the Bank, the
facts of the said case were entirely different,
as possession of the property had already been
taken and the principal relief before the Civil
Court related to the validity of a sale deed. In
the present case, by way of Exh.7, the appellants
seek     injunction           against          measures          taken        under
Section 14 of the Act, 2002, and possession has
not yet been taken by the Bank. Therefore, the
Civil Court ought to have accepted the objection
regarding lack of jurisdiction.

7.8              It was also pointed out that although
the suit and the application at Exh.7 under Order
XXXIX Rules 1 and 2 of the Code were filed in the
year 2016, the application was not effectively
pressed until the year 2025. Only after the Bank
obtained an order under Section 14 of the Act,

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2002,     the         appellants        sought         to     activate          Exh.7
with a view to frustrate the said order. It was
submitted             that    once     SARFAESI           proceedings             have
been initiated and statutory measures are taken,
the Civil Court is barred under Section 34 from
granting          any       injunction        against         such      measures.
Hence, the learned trial court was justified in
rejecting the application.

7.9              Lastly, it was submitted that though the
appellants have challenged the mortgage deed in
the     civil          suit,       they      have        not      disputed           or
challenged             the     corporate             guarantee          agreement
executed by Plaintiff No.1. Thus, the status of
the     appellants              as      corporate             guarantors             is
admitted. The challenge to the mortgage on the
ground of non-compliance with Section 179 of the
Companies             Act    is,     therefore,             nothing         but      an
attempt to obstruct and delay the lawful recovery
proceedings initiated by the Bank.

7.10             By     making       above           submissions,           Learned
Senior      Advocate           for     respondent             No.1      requested
this Court to dismiss the Appeal From Order.

8.               Points for determination:

(i)              Whether      the     learned          trial       court        could
have    granted             injunction        which        would       amount        to
granting stay against the measures taken under

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Section 14 of the SARFAESI Act, 2002?

(ii)             Whether under Section 17 of the SARFAESI
Act, 2002 learned DRT has jurisdiction to decide
the validity of a deed/document by which security
interest is created?

9.               To decide the aforesaid questions, this
Court feels necessary to refer certain relevant
provisions of the Act, 2002.

2(f) “borrower” means any person who, or a pooled
investment vehicle as defined in clause (da) of
section    2   of    the   Securities   Contracts
(Regulation) Act, 1956 which has been granted
financial assistance by any bank or financial
institution or who has given any guarantee or
created any mortgage or pledge as security for
the financial assistance granted by any bank or
financial institution and includes a person who,
or a pooled investment vehicle which becomes
borrower of a asset reconstruction company
consequent upon acquisition by it of any rights
or interest of any bank or financial institution
in relation to such financial assistance or who
has   raised   funds   through   issue  of   debt
securities;

13.   Enforcement   of   security   interest.—(1)
Notwithstanding anything contained in section 69
or section 69A of the Transfer of Property Act,
1882, any security interest created in favour of
any secured creditor may be enforced, without the
intervention of court or tribunal, by such
creditor in accordance with the provisions of
this Act.

(2) Where any borrower, who is under a liability


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to a secured creditor under a security agreement,
makes any default in repayment of secured debt or
any installment thereof, and his account in
respect of such debt is classified by the secured
creditor as non-performing asset, then, the
secured creditor may require the borrower by
notice in writing to discharge in full his
liabilities to the secured creditor within sixty
days from the date of notice failing which the
secured creditor shall be entitled to exercise
all or any of the rights under sub-section (4).

     Provided that—

                 (i) the requirement of classification of
                 secured debt as non-performing asset
                 under this sub-section shall not apply
                 to a borrower who has raised funds
                 through issue of debt securities; and

                 (ii) in the event of default, the
                 debenture trustee shall be entitled to
                 enforce security interest in the same
                 manner as provided under this section
                 with   such  modifications  as may   be
                 necessary and in accordance with the
                 terms    and  conditions   of  security
                 documents executed in favour of the
                 debenture trustee.

(3) The notice referred to in sub-section (2)
shall give details of the amount payable by the
borrower and the secured assets intended to be
enforced by the secured creditor in the event of
non-payment of secured debts by the borrower.

(3A) If, on receipt of the notice under sub-
section    (2),   the    borrower   makes  any
representation or raises any objection, the
secured    creditor    shall    consider  such
representation or objection and if the secured
creditor comes to the conclusion that such


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representation or objection is not acceptable or
tenable, he shall communicate within fifteen days
of receipt of such representation or objection
the   reasons    for   non-acceptance    of   the
representation or objection to the borrower:

    Provided that the reasons so communicated or
the likely action of the secured creditor at the
stage of communication of reasons shall not
confer any right upon the borrower to prefer an
application to the Debts Recovery Tribunal under
section 17 or the Court of District Judge under
section 17A.

(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
     realising 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 realising 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 for the debt;


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     (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.

(5) Any payment made by any person referred to in
clause (d) of sub-section (4) to the secured
creditor shall give such person a valid discharge
as if he has made payment to the borrower.

(5A) Where the sale of an immovable property, for
which a reserve price has been specified, has
been postponed for want of a bid of an amount not
less than such reserve price, it shall be lawful
for any officer of the secured creditor, if so
authorised by the secured creditor in this
behalf, to bid for the immovable property on
behalf of the secured creditor at any subsequent
sale.

(5B) Where the secured creditor, referred to in
sub-section (5A), is declared to be the purchaser
of the immovable property at any subsequent sale,
the amount of the purchase price shall be
adjusted towards the amount of the claim of the
secured creditor for which the auction of
enforcement of security interest is taken by the
secured creditor, under sub-section (4) of
section 13.

(5C) The provisions of section 9 of the Banking
Regulation Act, 1949 shall, as far as may be,
apply to the immovable property acquired by
secured creditor under sub-section (5A).


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(6) Any transfer of secured asset after taking
possession thereof or take over of management
under sub-section (4), by the secured creditor or
by the manager on behalf of the secured creditor
shall vest in the transferee all rights in, or in
relation to, the secured asset transferred as if
the transfer had been made by the owner of such
secured asset.

(7) Where any action has been taken against a
borrower under the provisions of sub-section (4),
all costs, charges and expenses which, in the
opinion of the secured creditor, have been
properly   incurred  by   him  or   any  expenses
incidental thereto, shall be recoverable from the
borrower and the money which is received by the
secured creditor shall, in the absence of any
contract to the contrary, be held by him in
trust, to be applied, firstly, in payment of such
costs, charges and expenses and secondly, in
discharge of the dues of the secured creditor and
the residue of the money so received shall be
paid to the person entitled thereto in accordance
with his rights and interests.

(8) Where the amount of dues of the secured
creditor together with all costs, charges and
expenses incurred by him is tendered to the
secured creditor at any time before the date of
publication of notice for public auction or
inviting quotations or tender from public or
private treaty for transfer by way of lease,
assignment or sale of the secured assets,—

       (i)   the  secured   assets  shall not be
       transferred by way of lease assignment or
       sale by the secured creditor; and

       (ii)   in case, any step has been taken by
       the secured creditor for transfer by way of
       lease or assignment or sale of the assets
       before tendering of such amount under this


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       sub-section, no further step shall be taken
       by such secured creditor for transfer by way
       of lease or assignment or sale of such
       secured assets.

(9) Subject to the provisions of the Insolvency
and Bankruptcy Code, 2016, in the case of]
financing of a financial asset by more than one
secured creditors or joint financing of a
financial asset by secured creditors, no secured
creditor shall be entitled to exercise any or all
of the rights conferred on him under or pursuant
to sub-section (4) unless exercise of such right
is   agreed  upon   by   the  secured   creditors
representing not less than sixty per cent in
value of the amount outstanding as on a record
date and such action shall be binding on all the
secured creditors:

    Provided that in the case of a company in
liquidation, the amount realised from the sale of
secured assets shall be distributed in accordance
with the provisions of section 529A of the
Companies Act, 1956:

    Provided further that in the case of a
company   being  wound   up  on   or  after   the
commencement of this Act, the secured creditor of
such company, who opts to realise his security
instead of relinquishing his security and proving
his debt under proviso to sub-section (1) of
section 529 of the Companies Act, 1956, may
retain the sale proceeds of his secured assets
after depositing the workmen's dues with the
liquidator in accordance with the provisions of
section 529A of that Act:

    Provided also that liquidator referred to in
the second proviso shall intimate the secured
creditor the workmen's dues in accordance with
the provisions of section 529A of the Companies
Act, 1956 and in case such workmen's dues cannot


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be ascertained, the liquidator shall intimate the
estimated amount of workmen's dues under that
section to the secured creditor and in such case
the secured creditor may retain the sale proceeds
of the secured assets after depositing the amount
of such estimate dues with the liquidator:

    Provided also that in case the secured
creditor   deposits  the   estimated   amount  of
workmen's dues, such creditor shall be liable to
pay the balance of the workmen's dues or entitled
to receive the excess amount, if any, deposited
by the secured creditor with the liquidator:

    Provided also that the secured creditor shall
furnish an undertaking to the liquidator to pay
the balance of the workmen's dues, if any.

(10) Where dues of the secured creditor are not
fully satisfied with the sale proceeds of the
secured assets, the secured creditor may file an
application in the form and manner as may be
prescribed to the Debts Recovery Tribunal having
jurisdiction or a competent court, as the case
may be, for recovery of the balance amount from
the borrower.

(11) Without prejudice to the rights conferred on
the secured creditor under or by this section,
the secured creditor shall be entitled to proceed
against the guarantors or sell the pledged assets
without   first  taking   any  of   the  measured
specifies in clauses (a) to (d) of sub-section
(4) in relation to the secured assets under this
Act.

(12) The rights of a secured creditor under this
Act may be exercised by one or more of his
officers authorised in this behalf in such manner
as may be prescribed.

(13) No borrower shall, after receipt of notice


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referred to in sub-section (2), transfer by way
of sale, lease or otherwise (other than in the
ordinary course of his business) any of his
secured assets referred to in the notice, without
prior written consent of the secured creditor.

17. Application against measures to recover
secured    debts.—(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 authorised
officer   under   this  Chapter,   may  make   an
application along with such fee, as may be
prescribed, to the Debts Recovery Tribunal having
jurisdiction in the matter within forty five days
from the date on which such measure had been
taken:

    Provided   that   different   fees   may   be
prescribed for making the application by the
borrower and the person other than the borrower.

(1A) An application under sub-section (1) shall
be filed before the Debts Recovery Tribunal
within the local limits of whose jurisdiction—

     (a) the cause of action, wholly or in part,
     arises;

     (b) where the secured asset is located; or

     (c) the branch or any other office of a bank
     or financial institution is maintaining an
     account in which debt claimed is outstanding
     for the time being.

(2) The Debts Recovery Tribunal shall consider
whether any of the measures referred to in sub-
section (4) of section 13 taken by the secured
creditor for enforcement of security are in
accordance with the provisions of this Act and
the rules made thereunder.


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(3) If, the Debts Recovery Tribunal, after
examining the facts and circumstances of the case
and evidence produced by the parties, comes to
the conclusion that any of the measures referred
to in sub-section (4) of section 13, taken by the
secured creditor are not in accordance with the
provisions of this Act and the rules made
thereunder, and require restoration of the
management or restoration of possession, of the
secured assets to the borrower or other aggrieved
person, it may, by order,—

     (a) declare the recourse to any one or more
     measures referred to in sub-section (4) of
     section 13 taken by the secured creditor as
     invalid; and

     (b) restore the possession of secured assets
     or management of secured assets to the
     borrower or such other aggrieved person, who
     has made an application under sub-section
     (1), as the case may be; and

     (c) pass such other direction as it may
     consider    appropriate and   necessary   in
     relation to any of the recourse taken by the
     secured creditor under sub-section (4) of
     section 13.

(4) If, the Debts Recovery Tribunal declares the
recourse taken by a secured creditor under sub-
section (4) of section 13, is in accordance with
the provisions of this Act and the rules made
thereunder,   then,    notwithstanding  anything
contained in any other law for the time being in
force, the secured creditor shall be entitled to
take recourse to one or more of the measures
specified under sub-section (4) of section 13 to
recover his secured debt.

(4A) Where—



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(i) any person, in an application under sub-
section (1), claims any tenancy or leasehold
rights upon the secured asset, the Debt Recovery
Tribunal, after examining the facts of the case
and evidence produced by the parties in relation
to such claims shall, for the purposes of
enforcement of security interest, have the
jurisdiction to examine whether lease or tenancy,
—

     (a) has expired or stood determined; or

     (b) is contrary to section 65A                       of     the
     Transfer of Property Act, 1882; or

     (c) is contrary to terms of mortgage; or

     (d) is created after the issuance of notice
     of default and demand by the Bank under sub-
     section (2) of section 13 of the Act; and

(ii) the Debt Recovery Tribunal is satisfied that
tenancy right or leasehold rights claimed in
secured asset falls under the sub-clause (a) or
sub-clause (b) or sub-clause (c) or sub-clause
(d) of clause (i), then notwithstanding anything
to the contrary contained in any other law for
the time being in force, the Debt Recovery
Tribunal may pass such order as it deems fit in
accordance with the provisions of this Act.

(5) Any application made under sub-section (1)
shall be dealt with by the Debts Recovery
Tribunal   as  expeditiously as   possible and
disposed of within sixty days from the date of
such application:

    Provided that the Debts Recovery Tribunal
may, from time to time, extend the said period
for reasons to be recorded in writing, so,
however, that the total period of pendency of the
application with the Debts Recovery Tribunal,


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shall not exceed four months from the date of
making of such application made under sub-section
(1).

(6) If the application is not disposed of by the
Debts Recovery Tribunal within the period of four
months as specified in sub-section (5), any part
to the application may make an application, in
such form as may be prescribed, to the Appellate
Tribunal   for  directing    the   Debts Recovery
Tribunal   for   expeditious    disposal of   the
application pending before the Debts Recovery
Tribunal and the Appellate Tribunal may, on such
application, make an order for expeditious
disposal of the pending application by the Debts
Recovery Tribunal.

(7) Save as otherwise provided in this Act, the
Debts Recovery Tribunal shall, as far as may be,
dispose of the application in accordance with the
provisions of the Recovery of Debts Due to Banks
and Financial Institutions Act, 1993 and the
rules made thereunder.

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.

Analysis of the Statutory Provisions:

10.              A plain reading of Section 2(f) of the
SARFAESI Act clarifies the meaning of the term
“borrower”. The provision makes it clear that not


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only the principal debtor, but also any person
who    has        given       a    guarantee             or        has      created           a
mortgage          or    pledge         as      security             for      financial
assistance             granted         by       a       bank          or     financial
institution,            falls       within             the      definition           of       a
borrower.

10.1             Section 13 of the Act empowers banks and
financial          institutions              to        enforce         the     security
interest          created         in     their          favour          without         the
intervention of any court or tribunal. However,
the     exercise             of    such           power          is        subject        to
compliance              with           the          mandatory                procedure
prescribed under the Act. Under Section 13(2), a
statutory demand notice is required to be issued
to the borrower, calling upon him to discharge
his liability in full within a period of sixty
days.

10.1.1           Section 13(3A) further provides that if,
upon receipt of such notice, the borrower makes
any representation or raises any objection, the
secured creditor is duty-bound to consider the
same.       If         the        secured           creditor               finds        the
representation or objection to be unacceptable,
reasons for such non-acceptance are required to
be     communicated               to     the        borrower               within       the
stipulated period.



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10.1.2      Upon      completion       of      the    above       process,
Section 13(4) authorises the secured creditor to
take    recourse       to    one   or     more       of   the     measures
specified therein for enforcement of the security
interest.

10.2             Section 17 provides a statutory remedy
to any person, including the borrower, who is
aggrieved by any of the measures taken by the
secured creditor under Section 13(4). Such person
is entitled to approach the learned Debt Recovery
Tribunal          having    jurisdiction         within        forty-five
days from the date on which such measures are
taken.

10.2.1           As per Section 17(2), the learned DRT is
required to examine whether the measures taken by
the secured creditor under Section 13(4) are in
accordance with the provisions of the Act and the
Rules framed thereunder. Further, under Section
17(3), if the learned DRT, upon consideration of
the facts, circumstances and evidence on record,
comes to the conclusion that the measures taken
are not in conformity with the provisions of the
Act, it is empowered to declare such measures
invalid and to restore possession of the secured
asset or management thereof, as the case may be.

10.3             Section 34 of the Act expressly bars the


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jurisdiction of the Civil Court in respect of any
matter which the learned DRT or the Appellate
Tribunal is empowered to determine under the Act.
The provision further mandates that no injunction
shall be granted by any court or authority in
respect of any action taken or proposed to be
taken under the powers conferred by the SARFAESI
Act, 2002 or under the RDDB Act.

11.              For        the     purpose          of       answering             the
aforesaid              questions,          this       Court                deems     it
appropriate                to     note       certain           relevant             and
undisputed facts of the case, which are as under:

(i)              The       appellant–plaintiff                is       a   corporate
guarantor             of     M/s.    Satsang         Infrabuild              Private
Limited,          to       whom   the    State       Bank          of      India    has
extended              financial         assistance             amounting             to
Rs.16.50 crores.

(ii)             In        its      capacity          as           a       corporate
guarantor,             the       appellant–plaintiff                    executed       a
corporate guarantee agreement in favour of the
Bank    and           thereafter        executed          a    mortgage            deed
creating a security interest over its properties.
It is an admitted position that in Civil Suit
No.778 of 2016, the plaintiff has challenged only
the mortgage deed and has neither disputed nor
challenged the corporate guarantee.


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(iii)            The    Bank    instituted         proceedings             under
Section 19 of the RDDB Act before the learned
Debt Recovery Tribunal for recovery of its dues,
wherein the learned DRT passed an interim order
dated 12.01.2016 against the appellant–plaintiff.
The said order has not been challenged by the
appellant–plaintiff.

(iv)             On    11.04.2016,       the     appellant–plaintiff
instituted Civil Suit No.778 of 2016 along with
an application for injunction against the Bank
and others. Significantly, the plaint does not
disclose the pendency of the proceedings under
Section 19 of the RDDB Act.

(v)              On     31.12.2016,        the      Bank         filed        its
written statement in the suit as well as in the
injunction             application,       raising         a     preliminary
objection regarding maintainability of the suit
in view of Sections 34 and 17 of the SARFAESI
Act, 2002. Thereafter, for a continuous period of
about nine years, the appellant–plaintiff did not
effectively            pursue    the      injunction            application
under Order XXXIX Rules 1 and 2 of the Code of
Civil Procedure, 1908, and allowed the same to
remain pending.

(vi)             On     03.01.2025,          the       Bank        initiated
proceedings under the SARFAESI Act by issuing a


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notice under Section 13(2) to the borrower and
the corporate guarantor. On 15.03.2025, Plaintiff
No.2 responded to the said notice. The Bank, by
its communication dated 20.03.2025, conveyed the
reasons for not accepting the objections raised.
Thereafter,             on   14.05.2025,            the    Bank       filed       an
application under Section 14 of the SARFAESI Act,
being Criminal Miscellaneous Application No.5169
of 2025, seeking assistance for enforcement of
the security interest. The competent Court, by
order dated 18.07.2025, allowed the application
and    permitted             the   Bank,        inter      alia,       to      take
possession of the secured assets.

(vii)            Pursuant to the said order, the Court
Commissioner issued notice for taking possession
of the secured assets, whereupon the appellant–
plaintiff             pressed      into        service         the       pending
injunction application in the civil suit.

12.              In     view       of     the        aforesaid           factual
background, this Court now proceeds to decide the
points for determination framed hereinabove.

12.1             With regard to Point for Determination
No.(i), on a careful examination of the record,
it clearly emerges that the appellant–plaintiff
is a corporate guarantor by virtue of a corporate
guarantee             agreement,        which       has    admittedly           not


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been disputed or challenged. In light of Section
2(f) of the SARFAESI Act, the appellant squarely
falls within the definition of a “borrower”. Once
the       appellant        is    treated           as     a    borrower,           any
grievance relating to the measures taken under
the SARFAESI Act, 2002 is ordinarily required to
be     adjudicated          by     the      learned            Debt       Recovery
Tribunal.

12.1.1           A perusal of the plaint shows that the
principal challenge is to the mortgage deed by
which      the      security       interest             has     been      created.
Therefore,          while        considering              the       prayer         for
interim relief under Order XXXIX Rules 1 and 2 of
the Code of Civil Procedure, the foremost issue
that requires consideration is whether the Civil
Court has jurisdiction to grant such relief, as
the question of jurisdiction goes to the very
root of the matter.

12.1.2         In    the        present        case,          the       issue        of
jurisdiction was raised before the learned trial
court and was dealt with by placing reliance on
the decision of the Hon’ble Supreme Court in the
case      of     Prabha     Jain      (supra).             This      Court        has,
therefore, examined the said decision in detail.
On    a    careful     reading,           it       is     evident          that      in
Prabha Jain (supra), the principal relief sought



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was for setting aside a sale deed alleged to be
fraudulent. The subsequent prayers related to the
mortgage          created       thereafter               and      recovery           of
possession.          In     that       factual             background,             the
Hon’ble          Supreme    Court       held        that         the      dispute,
being primarily one of civil rights arising out
of an alleged fraudulent sale, fell within the
jurisdiction of the Civil Court. Significantly,
in that case, possession had already been taken
and     transferred         to     a     third           party        under        the
SARFAESI          proceedings,         and        there         was     no    direct
challenge to the statutory measures taken under
the SARFAESI Act.

12.1.3 The facts of the present case stand on an
entirely different footing. Here, the appellant
himself is a borrower and is facing proceedings
not only under the RDDB Act but also under the
SARFAESI          Act.     Statutory         notice             under        Section
13(2)      has      been     served,         objections               have        been
considered          and    rejected,              and      an      order        under
Section 14 of the SARFAESI Act has already been
passed against the appellant. Pursuant thereto,
the Bank is entitled to take possession of the
secured          asset    for    enforcement               of     its     security
interest.

12.1.4 Though allegations of fraud and collusion



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have been pleaded, the substance of the suit is a
challenge to the mortgage deed and the security
interest created in favour of the Bank. Grant of
injunction           in     such           circumstances              would,         in
effect,          amount        to     staying         the      operation           and
implementation of the order passed under Section
14 of the SARFAESI Act. Such an injunction would
directly          run       contrary            to      the       express          bar
contained         in      Section          34    of   the       SARFAESI          Act,
which       prohibits           Civil           Courts        from        granting
injunctions in respect of actions taken or to be
taken under the Act.

12.1.5 To further strengthen this conclusion, it
is   pertinent            to        note     that       the      SARFAESI          Act
provides         a    complete          and       efficacious           statutory
remedy under Section 17 before the learned DRT,
where even the validity of the security interest
and the measures adopted by the secured creditor
can be examined. Permitting parallel proceedings
before the Civil Court at the interim stage would
defeat      the        legislative              intent      and      render        the
statutory bar under Section 34 otiose.

12.1.6      In       view      of    the        above     discussion,             this
Court     is      of      the       considered          opinion          that      the
learned trial court could not have granted an
injunction           which          would        effectively            stay       the



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measures taken under Section 14 of the SARFAESI
Act, 2002.

                    I answer the question accordingly.

12.2                With regard to Point for Determination
No.(ii), a reading of Section 17 of the SARFAESI
Act, 2002 makes it clear that the learned Debt
Recovery Tribunal is vested with full authority
to adjudicate any grievance raised by a person,
including a borrower, who is aggrieved by any of
the      measures               adopted      by      the       secured       creditor
under the Act. The provisions of Sections 17(2)
and 17(3) further reinforce that the learned DRT
has ample jurisdiction to examine the validity
and       propriety              of    the      measures          taken        by     the
secured creditor.

12.2.1              In        particular,         while        considering            the
challenge                to    any     measure,          the    learned        DRT      is
competent to examine the validity of the security
interest itself. This includes assessing whether
the deed creating the security interest, such as
a     mortgage                 deed,    was        validly         executed           and
enforceable. In the present case, the appellants’
main contention is that the mortgage deed was
executed without a statutory resolution of the
company             as    required        under          Section       179     of     the
Companies Act. Such a challenge directly goes to


                                         Page 35 of 41
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the validity of the security interest and falls
squarely within the jurisdiction of the learned
DRT under Section 17. The DRT has full power to
declare whether the security interest is legally
enforceable            or    otherwise         for     the      purposes          of
recovery under SARFAESI proceedings.

12.2.2           At this stage, it is important to note
the explicit bar contained in Section 34 of the
Act,    which          clearly     stipulates            that       the      Civil
Court has no jurisdiction to entertain any suit
or proceedings in respect of matters which the
learned          DRT        or   the      Appellate            Tribunal           is
empowered to determine. Section 34 also prohibits
the    Civil          Court      from    granting          any      injunction
against actions taken, or proposed to be taken,
under the powers conferred by the SARFAESI Act or
the RDDB Act.

12.2.3           In   the     present      case,       once       proceedings
under     the         SARFAESI     Act      were      initiated           and     an
order under Section 14 was passed permitting the
Bank to take possession of the secured property,
any attempt to seek an injunction in the Civil
Court would effectively frustrate the statutory
proceedings            and       would      run      contrary           to      the
purpose, scope, and intent of the Act.

12.2.4 In my considered view, the learned DRT has


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full power to examine all questions that touch
upon the validity of the mortgage deed and the
security interest. While exercising powers under
Section 17, the DRT can scrutinize, inter alia:

       whether            the     mortgage           deed          was        legally
        executed;

       whether the borrower or corporate guarantor
        had         the    necessary      authority              to    create        the
        security;

       whether the deed is void or non est in law
        due to lack of statutory compliance;

       whether the property in question is exempted
        from being mortgaged;

       whether            registration              of       the        deed        was
        mandatory            and   has      been          properly          complied
        with; and

       generally, whether the security interest is
        valid,            enforceable,        and         capable         of       being
        recovered under SARFAESI proceedings.

12.2.5          All       these    aspects           are       incidental            and
necessary             to     determine         the         legality           of     the
SARFAESI action, and the learned DRT is fully
empowered to decide such matters. Civil Courts


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cannot,          under    Section        34,        assume          jurisdiction
over such disputes.

                 I answer the question accordingly.

Observations on Contentions of the Appellant:

13.              With regard to the contention that there
was no resolution of the company authorising the
creation of the mortgage or empowering any person
to    execute       the     same       under        Section           179     of    the
Companies Act, it is observed that this issue
primarily goes to the validity and enforceability
of    the    security        interest          itself.             As    discussed
hereinabove,             such     a     question              falls         squarely
within the jurisdiction of the learned DRT under
Section 17 of the SARFAESI Act, 2002. Once the
appellant is treated as a borrower under Section
2(f)        of     the      Act,        he         cannot           invoke          the
jurisdiction of the Civil Court in a manner which
would directly or indirectly interfere with the
statutory proceedings under the RDDB Act or the
SARFAESI Act. Any dispute regarding the validity
of    the        mortgage       deed    or         the     creation          of     the
security          interest       can    and         ought        to     be     raised
before the learned DRT under Section 17, which
has     exclusive           competence              to       adjudicate             the
matter.




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13.1             With respect to the contention regarding
the finding of the learned trial court that a
Director          is     the       owner       of    the       company          and
competent to deal with its assets, it is noted
that although the reasoning adopted by the trial
court may be erroneous, the final conclusion that
the    Civil        Court       cannot         grant      relief         in     the
present circumstances, however, is correct. It is
a well-settled principle of law that where the
reasoning is flawed but the ultimate conclusion
is correct, an appellate court can substitute its
own reasoning to sustain the decision by applying
the     principle             of     “right         conclusion,               wrong
reasoning”. In the present case, while the trial
court’s          findings       regarding           the     ownership           and
competence of the Director are legally incorrect,
a holistic examination of the record shows that,
in view of Section 34 of the SARFAESI Act, the
Civil Court prima facie lacks jurisdiction. This
Court, therefore, upholds the final outcome of
the trial court’s order while disapproving the
erroneous reasoning and findings.

13.2             Regarding         the        contention            that        the
mortgage          deed    was      executed         fraudulently           or     in
collusion, and that therefore the Civil Court has
jurisdiction             to    adjudicate           the     dispute,           this
contention is not acceptable in the facts of the


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present case. The appellant, being a corporate
guarantor          within    the      definition          of      “borrower”,
chose not to appear before the learned DRT in the
proceedings          under    the         RDDB      Act,       nor      did      he
challenge          the   interim           order       passed         therein.
Furthermore,          the     civil          suit      along        with       the
interim injunction application was filed in 2016
but was allowed to remain dormant for nearly nine
years, and was pressed into service only after
the Bank initiated proceedings under the SARFAESI
Act and obtained an order under Section 14.

13.2.1 Once the possession order under Section 14
has been passed, any injunction granted by the
Civil Court would, in effect, amount to staying
the statutory proceedings under the SARFAESI Act,
which      is      expressly        barred         under       Section         34.
Allowing the Civil Court to entertain such a suit
under      the      guise    of       allegations            of      fraud       or
collusion would open the door for unscrupulous
borrowers to evade recovery proceedings through
clever           drafting     and         manipulation             of       legal
pleadings.

13.2.2 In the circumstances, mere allegations of
fraud or collusion cannot confer jurisdiction on
the Civil Court to interfere with the statutory
measures undertaken by the secured creditor under



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     C/AO/209/2025                                                         CAV JUDGMENT DATED: 09/01/2026




the SARFAESI Act. The proper forum for raising
such challenges is the learned DRT, which has
comprehensive powers under Section 17 to examine
the legality, validity, and enforceability of the
security                   interest,                     including                     any            alleged
irregularities in the execution of the mortgage
deed.

14.                  For the foregoing reasons, the present
Appeal From Order is devoid of any merits and
thereby deserves to be dismissed and is dismissed
accordingly                    with          no       order           as       to       costs.             Civil
Application also stands disposed of accordingly.



                                                                            (NIRAL R. MEHTA,J)
ANUP
Original copy of this order has been signed by the Hon'ble Judge.
Digitally signed by: ANUP VYOMESH PARIKH(HC00956), PRINCIPAL PRIVATE SECRETARY, at High Court of Gujarat on 12/01/2026 13:20:24




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