The Bombay High Court has clarified that a civil court’s jurisdiction to entertain a suit for partition and injunction is not ousted by Section 34 of the SARFAESI Act, 2002, when the suit is filed by a third party (such as a coparcener who is not a borrower or guarantor) asserting an independent civil right in the secured property, as the relief of partition is beyond the statutory jurisdiction of the Debt Recovery Tribunal.
The Court held that a transfer of immovable property conducted in wilful violation of a prohibitory or injunction order passed by a court is illegal, invalid, and non-est in the eyes of the law. Such a transaction confers no right, title, or interest upon the transferee, regardless of whether the transferee was a party to the proceedings in which the injunction was granted.
Essentially, the Court explained that in a suit for partition of ancestral property, a coparcener who has a prima facie, pre-existing right by birth is entitled to an interim injunction to protect their undivided share from being alienated by a secured creditor, even if other co-sharers (who are the borrowers) have engaged in misconduct. The legitimate rights of one party cannot be defeated by the unlawful conduct of another.
A Single Judge Bench of Justice N.J. Jamadar observed that the jurisdiction of a civil court is plenary and its exclusion cannot be readily inferred. A Tribunal, being a creature of statute, has limited jurisdiction and cannot transgress its statutory limits. The Bench rejected the Petitioner’s argument that Section 34 of the SARFAESI Act ousts the civil court’s jurisdiction.
The Single Judge explained that the jurisdiction of the Civil Court is not barred where the civil rights of persons other than the borrower or guarantor are involved, especially when the relief claimed (such as partition) is incapable of being decided by the Debt Recovery Tribunal (DRT). The Bench affirmed that a suit for partition and injunction by a coparcener falls squarely within the jurisdiction of the civil court.
The Bench found that the trial court had committed a manifest error by holding that only one of the three suit properties was ancestral, while the other two were self-acquired. The Bench, upon examining Mutation Entry No. 134, observed that it was prima facie evident that all three properties were allotted to the share of the Plaintiff’s grandfather in a partition, thereby making them ancestral. The subsequent transfers, such as a Gift Deed and a Release Deed in favour of the Plaintiff’s father, did not detract from the ancestral character of the properties or impinge upon the Plaintiff’s right as a coparcener by birth.
The Bench took serious note of the Petitioner’s conduct in alienating the suit property to Respondent No. 8 after the District Judge had passed the injunction order. The Bench observed that the e-auction was held on the very day the judgment was uploaded, and the transaction was completed months later, which betrayed an intent to act in defiance of the court’s order. The Bench stated that while transfers lis pendens are not void, a transfer made in disobedience of an injunction order stands on a different footing. Such an act is considered illegal, invalid, and non-est in the eyes of the law, and it confers no right, title, or interest on the transferee.
While acknowledging the high-handed and unlawful actions of the borrowers (the Plaintiff’s parents) in trying to dispossess the secured creditor, the Bench held that the Plaintiff’s legitimate civil rights cannot be defeated by the conduct of other co-sharers. The Bench opined that when it is confronted with the question of the Plaintiff’s prima facie evident civil rights, the conduct of her parents cannot be used to deny her an otherwise legitimate claim for relief.
Briefly, the Petitioner had extended financial facilities to Aishwarya Regency LLP. The partners of the LLP, who were also the guarantors for the loan, defaulted on their repayment obligations. Consequently, the Petitioner, as a secured creditor, initiated measures under the SARFAESI Act. After taking symbolic possession of the secured asset (the suit property), the Petitioner obtained an order from the District Magistrate for taking physical possession under Section 14 of the SARFAESI Act.
Respondent No. 1, who is the daughter of the guarantors, instituted a civil suit seeking partition and separate possession of her share in the suit property, claiming it to be ancestral property. In this suit, she filed an application for a temporary injunction to restrain the Petitioner from creating any third-party interest. The trial court rejected this application.
However, on appeal, the District Judge reversed the trial court’s order and granted an injunction restraining the Petitioner from creating third-party interests in the property to the extent of the Plaintiff’s share, without due process of law, until the final disposal of the suit. Subsequent to the District Judge’s order, the Petitioner proceeded to sell the suit property via an e-auction to Respondent No. 8.
Appearances:
Senior Advocate Naushad Engineer, along with Advocates Siddharth Samantaray, Vinod Kothari, and Kshitij Parekh, for the Petitioner
Senior Advocate R.V. Pai, along with Advocates Renuka Anturkar, Siddhi Bhosale, and Prajakta Shringapure, for the Applicant
Senior Advocate Surel Shah, along with Advocates Sagar Kasar, Rishabh Tiwari, Amol Wagh, V.V. Krishnan, and Hamid Mulla, for the Respondent
