Civil Court Can Entertain Partition Suit Despite SARFAESI Proceedings If DRT Cannot Grant Such Relief: Bombay HC [Read Order]

In a recent ruling, the Bombay High Court held that civil courts can entertain a partition suit even when SARFAESI proceedings are going on, if the Debts RecoveryTribunal (DRT) cannot grant the relief asked in the suit.

The case arose from a writ petition filed by Tourism Finance Corporation of India Ltd. challenging an order of the District Judge, Vadgaon-Maval which granted temporary injunction in favour of the plaintiff in a partition suit concerning the property where Hotel Aishwarya Regency is located.

The petitioner had given financial facilities to Aishwarya Regency LLP and the partners created security interest over the property. After default in repayment, the secured creditor started action under the SARFAESI Act and also took symbolic possession of the property.

The plaintiff, daughter of the borrowers, filed a civil suit seeking partition and separate possession of her share in the property and also sought injunction to restrain the defendants from creating third-party interest. The trial court rejected the request for temporary injunction. Later, the District Court allowed the appeal and restrained the defendants from creating third-party interest in the property to the extent of the plaintiff’s share until the suit is decided.

Before the High Court, the petitioner argued that the civil court has no jurisdiction because of Section 34 of the SARFAESI Act and the plaintiff should approach the Debts Recovery Tribunal under Section 17.

Justice N. J. Jamadar observed that jurisdiction of civil courts is wide and it cannot be excluded unless the statute clearly bars it. The court explained that DRT is a statutory tribunal with limited powers and it can decide only matters given under the statute.

The court observed that the bar under Section 34 applies only to matters which fall within the jurisdiction of the Tribunal under Sections 13 and 17 of the SARFAESI Act. Where civil rights of persons other than borrowers or guarantors are involved and the relief cannot be granted by the Tribunal, the civil court can still decide the dispute.

The court also observed that a partition suit involves deciding property rights between family members. The judge explained that the DRT does not have power to grant a decree of partition, so the plaintiff cannot be forced to go before the Tribunal for such relief.

The court further observed that the plaintiff had produced records showing that the suit properties were ancestral and she claimed share as a coparcener. The District Court found that she made out a prima facie case to protect her share in the property.

The court also considered the conduct of the petitioner in proceeding with auction sale even after the injunction order was passed. The court observed that the sale process continued even though there was knowledge of the court’s order restraining creation of third-party interest.

The court explained that transfer made in violation of a court injunction cannot be treated same as a transfer during pendency of a suit. If such transfers are allowed, the authority of court orders will be weakened.

The writ petition was dismissed and the injunction protecting the plaintiff’s share will continue until the suit is finally decided.

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