On January 09, 2025, the Supreme Court of India (“Supreme Court”) in the case Central Bank of India v. Smt. Prabha Jain, Civil Appeal No.1876 of 2016 held that a plaint containing multiple reliefs cannot be rejected in its entirety solely on the grounds that one of the reliefs is untenable in law, provided that the remaining reliefs are maintainable, with special emphasis on the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”).

Facts:

1. The Respondent No. 1 inherited a one-third share in a plot of land originally purchased by her father-in-law, following the demise of her husband. Subsequently, the Respondent’s elder brother-in-law, without effecting a legal partition among the heirs, unilaterally executed a sale deed transferring a portion of the property to a third party. The purchaser, thereafter, mortgaged the subject property to the Central Bank of India (“Bank”) as collateral for securing a loan. Upon default in the loan repayment, the bank, in exercise under Section 13(4) of the SARFAESI Act, took possession of the property and initiated auction proceedings.
2. Aggrieved by these transactions, the Respondent No. 1 instituted a civil suit seeking, inter alia, (i) a declaration that the sale deed executed by her elder brother-in-law was void and illegal, (ii) a declaration that the mortgage deed executed by the purchaser in favour of the Bank was illegal and (iii) the possession of the property be handed over to the Respondent.
3. The Bank, in response, filed an Application under Order VII Rule 11 of the Code of Civil Procedure, 1908 (“CPC”), contending inter alia, that the suit was barred under Section 34 of the SARFAESI Act, as matters concerning possession and mortgage disputes fell within the exclusive jurisdiction of the Debt Recovery Tribunal (“DRT”).
4. The Civil Court, concurring with the Bank’s submissions, allowed the Application filed by the Bank under Order VII Rule 11, CPC and rejected the Plaint, holding that Section 34 of the SARFAESI Act ousted the jurisdiction of civil courts in matters falling within the scope of the Act. The court concluded that since the relief sought by the Respondent No. 1 pertained to possession and mortgage rights, the appropriate adjudicatory forum was the DRT, thereby rendering the suit non-maintainable under the law.
5. The Respondents preferred an appeal against the aforementioned Order of the Civil Court before the High Court of Madhya Pradesh (“High Court”) at Jabalpur, and the High Court allowed the Appeal filed by the Respondents and set aside the Order of the Civil Court rejecting the Plaint. The High Court held that the DRT had no jurisdiction to decide the question whether the persons other than the mortgagor had title to the property and/or the validity of the Sale Deed mortgaged with the Bank. The High Court further opined that absence of a provision to enable the DRT for holding an enquiry on a particular question is indicative that jurisdiction of civil courts is not excluded.
6. The Bank preferred a Civil Appeal before the Supreme Court. 

Relevant Provisions:

Order VII Rule 11, CPC: 

11. Rejection of plaint.— The plaint shall be rejected in the following cases:— 

(a) where it does not disclose a cause of action;

(b) where the relief claimed is undervalued, and the plaintiff, on being required by the Court to correct the valuation within a time to be fixed by the Court, fails to do so;

(c) where the relief claimed is properly valued, but the plaint is returned upon paper insufficiently stamped, and the plaintiff, on being required by the Court to supply the requisite stamp-paper within a time to be fixed by the Court, fails to do so;

(d) where the suit appears from the statement in the plaint to be barred by any law;

(e) where it is not filed in duplicate;

(f) where the plaintiff fails to comply with the provisions of rule 9:

Provided that the time fixed by the Court for the correction of the valuation or supplying of the requisite stamp-paper shall not be extended unless the Court, for reasons to be recorded, is satisfied that the plaintiff was prevented by any cause of an exceptional nature from correcting the valuation or supplying the requisite stamp-paper, as the case may be, within the time fixed by the Court and that refusal to extend such time would cause grave injustice to the plaintiff. (Emphasis supplied)

Section 34 of SARFAESI Act: 

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.

Section 17 of SARFAESI Act (as it stood prior to the amendment in 2016):

17. Right to appeal.- (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.

Explanation. - For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section.

(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in subsection (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.

(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 subsection (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 of the business to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to in sub-section (4) of Section 13 taken by the secured creditors as invalid and restore the possession of the secured assets to the borrower or restore the management of the business to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under subsection (4) of Section 13.

….” (Emphasis supplied)

Observations:

1. While the unamended Section 17(1) of the SARFAESI Act uses the words “any person (including the borrower) aggrieved, Section 17(3) of the SARFAESI Act does not explicitly empower the DRT to restore possession to anyone other than the borrower. If the borrower has put someone else in possession, then perhaps, it could be contended that under Section 17(3), the DRT’s power to restore possession to the “borrower” would include the power to restore possession to the person who was holding it on behalf of the borrower or claiming through the borrower. However, it cannot be said that under Section 17(3) the SARFAESI Act, the DRT can hand over possession to someone whose claim is adverse to that of the borrower.
2. The unamended Section 17(3) the SARFAESI Act, the word used is “restore” and not “hand over”. DRT only has power to “restore” possession and has no power to “hand over” possession to a person who was never in possession when the bank took over possession.
3. The Respondent No. 1 could not have the relief of possession from the DRT as the Respondent No. 1 was neither a borrower nor a person claiming under/through the borrower and has a claim independent of and adverse to the borrower. Further, the Respondent No. 1 was not in possession and hence, the question of DRT “restoring” possession to the Respondent No. 1 did not arise.
4. Under the last phase of Section 13(3) of the SARFAESI Act, the civil court has the power to pass other orders as it may consider appropriate and necessary “in relation to any of the measures taken by the secured creditor under sub-section (4) of Section 13”.
5. The measures taken by the secured creditor are of taking possession from the borrower and not from the Respondent No. 1 and hence, the prayer of the Respondent No. 1 to hand over possession is not at all “in relation to any of the measures taken by…”. Even hundred the last phrase of Section 13(3), the DRT has no power to pass an order directing the secured creditor to hand over possession to the Respondent No. 1 and thus, the Respondent No. 1 could not have claimed such a relief from the DRT.
6. The DRT lacks jurisdiction to grant declaratory relief concerning the legality of a sale deed or mortgage deed, as such matters fall within the purview of the civil court under Section 9 of the CPC.
7. Even if one of the reliefs is barred by Section 17(3) of the SARFAESI Act, still the Plaint must survive because there cannot be a partial rejection of Plaint under Order VII Rule 11, CPC.
8. If the civil court is of the view that one relief is not barred by law but is of the view that the other relief is barred by law, the civil court must not make any observations to the effect that the other relief is barred by law and must leave that issue undecided in an Application under Order VII Rule 11, CPC. If the civil court cannot reject a plaint partially, then it ought not to make any adverse observations against the relief it thinks is barred by law.

Decision:

The Supreme Court dismissed the Appeal preferred by the Bank and upheld the Order passed by the High Court, holding that the civil court ought not to have rejected the plaint in its entirety, solely on the ground that some of the reliefs prayed for by the Respondent were barred by law.

Author’s View:

The present judgment is relevant as it has clearly laid down that an entire plaint, containing multiple reliefs, cannot be rejected in a summary manner, solely on the grounds that one of the reliefs is untenable, so long as the remaining reliefs are maintainable under the law. In most disputes involving banks, the most common defence of banks is under Section 34 of the SARFAESI Act stating that the civil court has no jurisdiction over the dispute. The Court clarified that the jurisdiction of the DRT under the SARFAESI Act is limited to adjudicating disputes between secured creditors and borrowers. The DRT does not possess the authority to grant declarations regarding the validity of mortgage deeds or sale deeds, nor can it confer possession to third parties asserting independent claims. Consequently, matters concerning the legality of title documents and ownership disputes fall within the exclusive jurisdiction of the civil court under Section 9 of the CPC.

Additionally, the judgment underscores the necessity of maintaining procedural integrity in judicial proceedings. The Supreme Court emphasized that permitting partial rejection of a plaint would result in fragmented litigation, procedural inconsistencies, and the risk of contradictory rulings. By affirming that a plaint must be allowed to proceed if any of the reliefs sought remain legally maintainable, the Supreme Court reinforced the foundational principles of justice, judicial efficiency, and the need for comprehensive adjudication in civil disputes.

Please find a copy of the judgment, here.

This update has been contributed by Namitha Mathews (Partner) and Poorva Pant (Principal Associate).

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