Holding

Section 13 and Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 bar civil courts from entertaining suits or granting injunctions in matters that fall within the jurisdiction of the DRT/DRAT, rendering the High Court’s order untenable.

Summary

The bank created an equitable mortgage over a flat by taking a loan from the directors of Allwyn Alloys. When the loan defaulted, the DRT and DRAT upheld the bank’s security and rejected the claim of the flat’s occupants (respondents 5 and 6) who relied on a later unregistered MOU. The High Court, however, set aside the tribunal orders, allowed the occupants to approach another forum and directed the bank to deposit Rs 25 lakh in an interest‑earning account. The bank appealed, contending that under Section 13 and Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, civil courts are barred from entertaining any suit or injunction concerning matters within the jurisdiction of DRT/DRAT. The Supreme Court held that the statutory mandate indeed precludes civil proceedings and that the High Court’s directions were untenable. Consequently, the appeal was allowed, the High Court order was set aside and the writ petition was restored for determination by the High Court in accordance with the Act.

Issues considered

Whether a civil court can entertain a suit or grant an injunction concerning a secured asset that falls within the jurisdiction of the DRT/DRAT under the Securitisation Act.
Whether the High Court can set aside the findings of the DRT/DRAT and direct the bank to deposit money pending adjudication.
Whether the post‑mortgage MOU confers any right, title or interest in the flat.

Legislation cited

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002s. 13, s. 34

Subjects

Securitisation Actequitable mortgageDRTDRATcivil jurisdictioninjunctionauctionhigh courtappealdeposit order

Judgment

[2018] 4 S.C.R. 477 477

THE AUTHORISED OFFICER, A
STATE BANK OF INDIA
v.
M/S ALLWYN ALLOYS PVT. LTD. AND ORS.
(Civil Appeal No. 5248 of 2018)
B
MAY 17, 2018
[DIPAK MISRA, CJI, A. M. KHANWILKAR AND
DR. D.Y. CHANDRACHUD, JJ.]
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 – s.34 – Equitable C
mortgage created by respondent Nos. 2 to 4 in respect of the subject
flat in favour of appellant-bank – Failure to repay the loan amount
– Claim for title over the subject flat by respondent no.5 and 6 (writ
petitioners) – DRT and DRAT held that document “MOU” relied
upon by respondents no.5 and 6 was created after the equitable D
mortgage and it was unregistered document which would not confer
any right, title and interest in their favour in the said flat and on
that basis rejected the relief claimed by respondent no.5 and 6 to
restrain the bank from proceeding with the auction of the flat –
High Court held that issue involved disputed facts and directed
respondent no.5 and 6 to contest the matter before proper forum – E
On Bank’s appeal, held: The mandate of s.13 and in particular
s.34 of 2002 Act clearly bars filing of 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 F
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 – The
fact that the stated flat is the subject matter of a registered sale
deed executed by the respondent Nos. 5 and 6 in favour of
respondent Nos. 2 to 4 and sale deed has been deposited with the
Bank along with the share certificate and other documents for G
creating an equitable mortgage and the Bank has initiated action
in that behalf under the 2002 Act, is indisputable – It is also not
disputed that respondent no.5 is in physical possession of the subject
flat – If so, the question of permitting the respondent nos.5 and 6 to
H
477
478 SUPREME COURT REPORTS [2018] 4 S.C.R.

A approach any other forum for adjudication of issues raised by them
concerning the right, title and interest in relation to the said property,
cannot be countenanced – High Court did not analyse the efficacy
of the concurrent finding of fact recorded by the DRT and DRAT
but opined that the same involved factual issues warranting
production of evidence and a full-fledged trial – The approach of
B
High Court is not tenable in law – Bank/Banking.
Allowing the appeal, the Court
HELD: 1. The mandate of Section 13 and, in particular,
Section 34 of the Securitisation and Reconstruction of Financial
C Assets and Enforcement of Security Interest Act, 2002 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
D power conferred by or under the Act. The fact that the stated flat
is the subject matter of a registered sale deed executed by the
respondent Nos. 5 and 6 (writ petitioners) in favour of respondent
Nos. 2 to 4 and which sale deed has been deposited with the
Bank along with the share certificate and other documents for
E creating an equitable mortgage and the Bank has initiated action
in that behalf under the 2002 Act, is indisputable. If so, the
question of permitting the respondent Nos.5 and 6 (writ
petitioners) to approach any other forum for adjudication of issues
raised by them concerning the right, title and interest in relation
to the said property, cannot be countenanced. The High Court
F has not analysed the efficacy of the concurrent finding of fact
recorded by the DRT and DRAT but opined that the same involved
factual issues warranting production of evidence and a full-fledged
trial. [Para 6][481-G-H; 482-A-C]
2. The High Court could not have directed the Bank to
G deposit Rs.25 Lacs in an interest earning deposit and the profits
of the said deposit to enure to the benefit of the successful party.
Such a direction was wholly uncalled for. [Para 8][482-F-G]

H
THE AUTHORISED OFFICER, S.B.I. v. M/S ALLWYN ALLOYS 479
PVT. LTD. AND ORS.

CIVIL APPELLATE JURISDICTION: Civil Appeal No.5248 A
of 2018.
From the Judgment and Order dated 30.08.2016 of the High Court
of Judicature at Bombay in WP No.7480/2014.
Vikas Singh, Sr. Adv., Sanjay Kapur, Ms. Megha Karnwal,
Ms. Mansi Kapur, Advs. for the Appellant. B

Gaurav Agrawal, Haresh Gantra, C. George Thomas, V. Asim
Siddiqui, Anurag Gharote, Advs. for the Respondents.
The Judgment of the Court was delivered by
A. M. KHANWILKAR, J. 1. The judgment and order dated C
th
30 August, 2016 of the Division Bench of the High Court of Judicature
at Bombay in Writ Petition No.7480 of 2014, is assailed in this appeal,
whereby the High Court without formally setting aside the order passed
by the Debts Recovery Appellate Tribunal, Mumbai dated 20th November,
2013 in Appeal No.273 of 2013 connected with M.A. No.886 of 2013, D
disposed of the writ petition with liberty to respondent Nos.5 & 6 (writ
petitioners) to approach the competent forum for adjudication of their
right, title and interest in respect of a flat/apartment, i.e. Flat No.C-203
on the Second Floor of Blue Heaven Apartment, C-Wing, Rebellow Road,
Bandra (West), Mumbai, which was mortgaged to the appellant Bank
by the directors of respondent No.1 Company by way of an equitable E
mortgage.
2. The Debts Recovery Tribunal (“DRT”) as well as the Debts
Recovery Appellate Tribunal (“DRAT”) after examining the plea taken
by respondent Nos.5 and 6 came to hold that the document styled as
Memorandum of Understanding dated 13th March, 2011, relied upon by F
respondent Nos.5 and 6, was subsequently created after the equitable
mortgage and moreso it was an unregistered document which would not
confer any right, title and interest in their favour in the said flat. Further,
the share certificate of the said flat has already been transferred by the
Society in the name of the directors of respondent No.1 Company i.e.
G
Mrs. Zahoor K. Dhanani, Mr. Karim K. Dhanani and Mrs. Habika K.
Dhanani (respondent Nos.2, 3 and 4 herein). It is also held that the
Society has contemporaneously recorded the factum of mortgage created
by the said respondents in respect of the subject flat in favour of the
Bank; and that the said respondents were not coming forward to deny
H
480 SUPREME COURT REPORTS [2018] 4 S.C.R.

A the stated mortgage. On the basis of the documentary evidence, DRT
as well as the DRAT concurrently held that it is well established that the
said respondents had legitimately created an equitable mortgage in respect
of the said flat in favour of the Bank, which has had security interest
upon the said flat. On the other hand, respondent Nos.5 and 6 (writ
petitioners) have failed to file any documentary evidence to establish
B
their subsisting title over the subject flat. On that basis, the relief claimed
by respondent Nos.5 and 6 (writ petitioners) to restrain the Bank from
proceeding with the auction of the subject flat stood rejected.
3. This decision of the DRAT dated 20th November, 2013 was
assailed by respondent Nos.5 and 6 (writ petitioners) by way of Writ
C Petition No.7480 of 2014. The Division Bench of the High Court noted
the plea of the writ petitioners and opined that the question regarding the
right, title and interest or marketable title of the writ petitioners or any
interest that could have been parted by respondent Nos.2 to 4 under the
so called mortgage, involved disputed facts and would require evidence
D and a full-fledged trial. After so noting, the High Court went on to observe
that with a view to give full opportunity to the parties to bring on record
the relevant facts in terms of the pleadings and for full and complete
adjudication of the matters in issue, it is apposite to give liberty to the
writ petitioners to contest the matter before a proper forum where all
the issues could be agitated. For, indisputably, respondent No.5 (writ
E petitioner No.1) is in physical possession of the stated flat. The High
Court proceeded to pass the following operative order in the said writ
petition:
“6] Accordingly, we dispose of the writ petition with the
following directions:
F
a] Period of 8 weeks is granted for the writ petitioners to
approach proper forum to get adjudication of the rights of
the writ petitioners as contended in the writ petition and within
the said period of 8 weeks, they shall file and seek proper
interim relief in their favour. Till expiry of 8 weeks, the 1st
G respondent bank shall not proceed with the matter in terms of
the order obtained by them before Debts Recovery Tribunal
so far as the property in question;
b] Amount of Rs.25 Lacs shall be deposited in an interest
earning deposit, by the respondent No.1 bank and profits of
H
THE AUTHORISED OFFICER, S.B.I. v. M/S ALLWYN ALLOYS 481
PVT. LTD. AND ORS. [A. M. KHANWILKAR, J.]

the said deposit shall enure to the benefits of the parties, who A
become successful in the litigation; and
c] No order as to costs.”
4. The Bank has assailed the aforesaid decision of the High Court
primarily on the ground that all issues concerning the mortgaged/secured
property are required to be decided only by the DRT; and not in any civil B
proceedings as has been observed by the High Court in the impugned
judgment. For, filing of a civil suit in respect of secured assets is barred
by law. Secondly, the DRT as well as DRAT have examined the merits
of the controversy and justly answered the same against the writ
petitioners. The concurrent finding of fact recorded by the said Tribunals C
is that the writ petitioners have failed to establish any right, title or interest
in the subject flat. That finding has neither been disturbed nor is it
assailable. According to the Bank, the High Court judgment under appeal
is untenable and deserves to be set aside.
5. The contesting respondent Nos.5 and 6 (writ petitioners), D
however, supported the view taken by the High Court and would contend
that it is indisputable that respondent No.5 (writ petitioner No.1) is in
physical possession of the subject flat and was entitled to pursue his
claim about the right, title and interest in the subject flat in view of the
Memorandum of Understanding dated 13th March, 2011, executed
between the writ petitioners and respondent Nos.2 to 4 regarding re- E
sale of the subject flat in their (writ petitioners) favour. The respondent
Nos.5 and 6 would also contend that the original share certificate and
few receipts of payments made to the Society were still in their possession
and that the entries effected in the Society’s record to transfer the
share certificate in favour of respondent Nos. 2 to 4 are fabricated. F
6. After having considered the rival submissions of the parities,
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”), G
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
H
482 SUPREME COURT REPORTS [2018] 4 S.C.R.

A under the Act. The fact that the stated flat is the subject matter of a
registered sale deed executed by the respondent Nos. 5 and 6 (writ
petitioners) in favour of respondent Nos. 2 to 4 and which sale deed has
been deposited with the Bank along with the share certificate and other
documents for creating an equitable mortgage and the Bank has initiated
action in that behalf under the 2002 Act, is indisputable. If so, the question
B
of permitting the respondent Nos.5 and 6 (writ petitioners) to approach
any other forum for adjudication of issues raised by them concerning the
right, title and interest in relation to the said property, cannot be
countenanced. The High Court has not analysed the efficacy of the
concurrent finding of fact recorded by the DRT and DRAT but opined
C that the same involved factual issues warranting production of evidence
and a full-fledged trial. The approach of the High Court as already noted
hitherto is completely fallacious and untenable in law.
7. The learned counsel appearing on behalf of the Bank persuaded
us to decide the merits of the controversy between the parties but as
D noted earlier, the High Court has not analysed the same at all but chose
to dispose of the writ petition by giving liberty to the writ petitioners to
pursue their remedy before a proper forum. The respondent Nos.5 and
6 (writ petitioners) would, however, contend that crucial aspects have
been glossed over by the DRT and DRAT including the effect of admitted
position that respondent No.5 (writ petitioner No.1) is in possession of
E the subject property and also having custody of the original share
certificate and few receipts issued by the Society. In these circumstances,
we deem it appropriate to relegate the parties before the High Court by
setting aside the impugned judgment and leaving all questions open, to
be decided by the High Court on its own merits and in accordance with
F law.
8. We find force in the submission made on behalf of the Bank
that the High Court could not have directed the Bank to deposit Rs.25
Lacs in an interest earning deposit and the profits of the said deposit to
enure to the benefit of the successful party. Such a direction, in our
G view, was wholly uncalled for.
9. Be that as it may, since we are setting aside the impugned
judgment of the High Court, we direct that Writ Petition No.7480 of
2014 shall stand restored to the file of the High Court to its original
number for being decided on its own merits and in accordance with law.
H
THE AUTHORISED OFFICER, S.B.I. v. M/S ALLWYN ALLOYS 483
PVT. LTD. AND ORS. [A. M. KHANWILKAR, J.]

As the proceeding for recovery is pending since 2010, concerning the A
equitable mortgage created by respondent Nos. 2 to 4 in respect of the
subject flat and having failed to repay the loan amount, which is quite
substantial, we request the High Court to dispose of the writ petition
expeditiously, preferably by the end of July, 2018.
10. The appeal is allowed on the above terms, with no order as to B
costs.

Devika Gujral Appeal allowed.

C

D

E

F

G

H