Himachal Pradesh High Court Affirms Civil Court Jurisdiction in Property Dispute Involving Alleged Mortgage Fraud

Court rules that issues raised in the property declaration and injunction suit cannot be resolved under SARFAESI Act, 2002, allowing the civil suit to proceed.

The Himachal Pradesh High Court, in a significant ruling, has upheld the jurisdiction of a Civil Court to adjudicate a suit for declaration and injunction concerning property rights, where the issues raised cannot be addressed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The judgment was delivered by Mr. Ajay Mohan Goel, J., in the case of UCO Bank and another v. Smt. Manjana Verma Sahni, dismissing the petition filed by UCO Bank challenging the order of the Civil Judge, Solan.

The case revolves around a dispute where the plaintiff, Smt. Manjana Verma Sahni, sought a declaration that certain property documents were void due to alleged fraud and sought an injunction to prevent UCO Bank from taking possession of her property. The property in question, a flat in Solan, was claimed by the plaintiff to be lawfully hers through a purchase from Manjeet Singh, despite UCO Bank's claims based on a mortgage executed by a third party, Amandeep Singh.

UCO Bank had contended that the Civil Court lacked jurisdiction in light of the SARFAESI Act provisions, particularly Sections 17, 34, and 35, which restrict Civil Court jurisdiction in matters determinable by the Debts Recovery Tribunal. However, the High Court concluded that the Civil Court is competent to adjudicate on the issues at hand since the relief sought by the plaintiff could not be granted under Section 17 of the SARFAESI Act.

The High Court emphasized that the bar on Civil Court jurisdiction should not be easily inferred and requires strict interpretation. It reaffirmed that a Civil Court retains jurisdiction in cases where the issues cannot be resolved under the SARFAESI Act, aligning with the Supreme Court's stance in similar cases.

The decision underscores the importance of Civil Courts in handling complex property disputes involving allegations of fraud, where the SARFAESI Act's framework does not provide adequate remedies. This ruling allows the civil suit to proceed, enabling a full trial to examine the claims and defenses thoroughly.

Bottom Line:

Civil Court has the jurisdiction to entertain a suit for declaration and injunction where the plaintiff seeks relief on grounds that cannot be addressed under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Statutory provision(s): Civil Procedure Code, 1908 Order VII, Rule 11, SARFAESI Act, 2002 Sections 17, 34, 35

UCO Bank v. Smt. Manjana Verma Sahni, (Himachal Pradesh) : Law Finder Doc Id # 2813591