Whether disputed facts on fraud can be decided by Debt Recovery Tribunal?

Now, the next question arises as to whether such disputed
facts on fraud can be decided by Debt Recovery Tribunal (for short,
‘DRT’). Can a DRT pass decree holding that there is fraud even if
best of the evidence is adduced in support of the specific pleadings of
fraud under order VI rule 4 of the Code of Civil Procedure? Can it
pass anything more than issuing a recovery certificate? All these
questions came up for considerations before the Hon’ble Supreme
Court in the case of Nahar Industrial Enterprises Ltd. Vs. Hong Kong
and Shanghai banking Corporation reported in (2009) 8 SCC 646 and it
is held that DRT is a tribunal constituted for a specific purpose and
no independent issue can be initiated before it by a debtor. It cannot
pass a decree. It can only pass recovery certificates. In the present
case there shall be oral and documentary evidence by both sides to
prove and disprove respective allegations on fraud going much
beyond the books of accounts and banking notes and this would
warrant interrogatories as well as examinations and cross
examinations of witnesses. Considering the nature, scope, power and
jurisdiction of the DRT as revealed in the discussions of the case of
Nahar Industrial Enterprises Ltd. (supra), it does not appear that
allegations of the nature mentioned in the plaint under question, can
be decided by a DRT. It can be done by the Civil Court only.
IN THE GAUHATI HIGH COURT
( THE HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND
ARUNACHAL PRADESH )
CRP No. 257 of 2014
Sri Bhopal Thapa,

-Versus-
Sri Girijesh Tiwari,

BEFORE
HON’BLE MR. JUSTICE N. CHAUDHURY


Date of Judgment : 01.09.2014
Citation; AIR 2015 Gauhati 10

In this application under Section 115 of the Code of Civil
Procedure read with Section 151 of the Code of Civil Procedure read
with Article 227 of the Constitution of India, the petitioner, namely,
Sri Bhopal Thapa who is defendant No.8 in Title Suit no. 343 of 2011
has challenged the order dated 02.07.2014 rejecting the prayer for
holding the suit as not maintainable.
[2]
To understand the case it is necessary to state the essential
facts. The plaintiff Sri Girijesh Tiwari instituted Title Suit No. 343 of
2011 in which one Deepak Kumar Jain was arraigned as defendant
No.1. Central Bank of India was impleaded as Defendant No.2 where
CRP No.257 of 2014
Page 2 of 20
as the defendants No.3 & 8 are private opposite parties. It is the case
of the plaintiff that one Smt Charu Prabha Baruah became owner of a
plot of land measuring 1 Bigha covered by Dag No. 351 of K.P. Patta
No. 87 in Revenue Village Jyotikuchi in Beltola Mouza, Kamrup,
Guwahati, by purchasing the same from its original owner Guna
Ram Mikir vide registered deed dated 04.06.1967. This Guna Ram
Mikir was the father of the defendant No.3 in the present case. The
seller handed over the possession of the land to Charu Prabha Baruah
following execution of sale deed and thereafter, she obtained
mutation in her favour in the records of rights in place of Guna Ram
Mikir. She also had been paying land revenue regularly in respect of
the land described in Schedule-B to the plaint and being in the
peaceful possession and enjoyment thereof sold 1 Katha 10 Lechas
out of the said suit land to the plaintiff on 09.03.2007 by executing a
registered sale deed No. 3053 of 2007 with due and prior permission
of the concerned authorities. Plaintiff was handed over possession of
the land by Charu Prabha Baruah and he also obtained mutation in
the records of right with respect to the same land. While the plaintiff
was in continuous and peaceful possession of the Schedule-A land
which is a part of land described in Schedule-B of the plaint, he was
dispossessed by the police personnel on 29.08.2011 forcefully. Upon
enquiry he discovered that her dispossession was done consequent to
a decree passed by Debts Recovery Tribunal, Guwahati at the
instance of defendant No.2, Central Bank. The plaintiff came to know
on enquiry that defendant No.1 had mortgaged Schedule-A land in
favour of the defendant no.2 Central Bank while standing Guarantee
for loan granted to defendants No.4, 5 & 6. The plaintiff thereafter
obtained certified copies of the orders and found that the aforesaid
orders were passed in O.A. 25 of 2011 by the Debt Recovery
Tribunal, Guwahati. The records reveal that the defendant No.1
claimed to have purchased the same land on 16.07.1983 from the
defendant No. 3 who is none other than the son of Guna Ram Mikir
i.e. the person who had sold the whole of the land described in
Schedule-B including the Schedule-A land to Charu Prabha Baruah,
CRP No.257 of 2014
Page 3 of 20
the vendor of the plaintiff, on 16.07.1983.
The plaintiff was
astonished to find that when father of the defendant No. 3 had
exhausted his title by sale of the Schedule-B land to Smt. Charu
Prabha Baruah on 04.06.1967, the defendant No. 3 could not have
been left with any title to Schedule-A land which is only a part of
Schedule-B land and thus, fraud was perpetrated by showing a sale of
the Schedule-A land in favour of the defendant No.1, who on turn
mortgaged the land in favour of defendant No.2. Neither the
defendant No.1 had ever any possession over the land in question nor
had he acquired any title to the suit land and so purported sale in
favour of defendant No.1 followed by his mortgage of the same with
defendant No.2 in securing financial assistance to defendants No. 4 to
6 was a fraudulent and collusive act and thus, purchase of defendant
No.1 and subsequent mortgage in favour of the defendant No.2 are
vitiated by fraud. With these basic facts, plaintiff approached the
learned Civil Court with a prayer for decree declaring that sale deed
dated 16.07.1983 executed by defendant No.3 in favour of the
defendant No.1 and mortgaged by defendant No.1 in favour of
defendant No.2 vide deed dated 06.10.1994 and the consequent
certificate issued by Debts Recovery Tribunal, Guwahati on
08.04.2003 and 28.04.2003 in O.A. No. 25 of 2001 are all fraudulent,
null and void ab initio etc.
[3]
Defendant No.8 submitted a written statement in the
aforesaid suit denying the case of the plaintiff and stated that he
purchased the suit land by way of auction sale pursuant to order
passed in O.A. No. 25 of 2001 of the Debts Recovery Tribunal,
Guwahati. He being the bonafide purchaser cannot be deprived from
the fruit of the auction sale. Along with the written statement the
defendant No.8 submitted as many as 5 draft issues and at the foot of
the same he made a prayer that the application be admitted and the
suit be dismissed as not maintainable. It is not shown under which
provision of law the application was filed. Although the defendant
No.8 claimed that the same was a preliminary objection but it does
CRP No.257 of 2014
Page 4 of 20
not appear that the same was filed in appropriate time for framing
preliminary issue under Order XLI Rule 2(2) of the Code of Civil
Procedure. It also does not appear that this is an application under
Order VII Rule 11 of the Code of Civil Procedure. Be that as it may,
the learned trial court heard both sides on this application containing
5 draft issues and held that the case involved disputed question of
fact which needs a fullfledged trial. In the result, the preliminary
objection was rejected.
[4]
I have heard Mr. H. Das, learned counsel for the petitioner
who has placed reliance on following Judgments:
(2000) 4 SCC 406
(2000) 7 SCC 357
(2001) 6 SCC 569
[5]
Allahabad Bank vs. Canara Bank
United Bank of India vs. Abhijit Tea Co.(P) Ltd.
Punjab National Bank. Vs. O.C. Krishnan
Mr. Das submits that under Section 20 of the Recovery of
Debts Due to Banks and Financial Institution Act, 1993 (herein after
referred to as RDB), the plaintiff was at liberty to prefer an appeal
before the appellate tribunal and certainly the suit is not
maintainable in view of specific bar under the RDB Act.
[6]
First of all, it is necessary to understand as to what was the
nature and character of the application filed by the defendant No.2 on
21.05.2012 leading to which the learned trial court heard parties and
passed impugned order on 02.07.2014. The Defendant No.8 in the
meantime had filed the written statement denying the averments
made by the plaintiff on facts. While it is the case of the plaintiff that
fraud has been perpetrated on her by the defendants, more
particularly defendants No.1 & 3 and the defendants No.4, 5 & 6, the
defendant No.8 is definitely not in a position to answer the questions
raised by the plaintiff as against other defendants. Defendant No.8
came into the picture only after order was passed by the Debt
Recovery Tribunal at the instance of the defendant No.2 and
CRP No.257 of 2014
Page 5 of 20
thereafter, issued certificate for auction sale of mortgaged property.
The defendant No.8 came into the picture only after the property
was to be sold and he had no occasion to answer in regard to the
events that had taken place on the prior dates. The defendant no.8,
however, by filing written statement has denied all the averments
made in the plaint including allegation of fraud perpetrated on the
plaintiff.
[7]
When there is assertion of facts by one side and denial by the
other side, the trial court is under obligation to frame issues under
Order XIV Rule 1 of the Code of Civil Procedure. Issues are always
of two kinds. While issues of facts are to be decided on the basis of
evidence led by the parties, the issues of law are capable of being
decided either on the basis of the pleadings or in some cases on the
basis of the pleadings as well as proof. Thus, issues on law which
relates to jurisdiction of the Court or on bar to the suit created by
any law for the time being in force, they can be taken as primary
issues under Provision of Order XIV Rule 2(2) of the Code of Civil
procedure. Here in this case, the suit has not passed on to the date of
first hearing and issues have not yet been framed. The stage for
framing preliminary issues, therefore, is yet to come. However, the
defendant or defendants are at liberty to file an application under
Order VII Rule 11 of the Code of Civil Procedure for rejection of the
plaint. If application filed by the defendant on 21.05.2012 which is
available at Anneuxre-5 of this revision petition, is to be considered
to be one under Order VII Rule 11 of the Code of Civil Procedure
praying for rejection of plaint, in that event the draft issues
mentioned therein have to be read in a manner to mean that the suit
of the plaintiff is not maintainable under Sections 17, 18 & 20 of the
RDB Act. This is because, from a perusal of the impugned order it
appears that at the time of hearing of the application, learned counsel
for the petitioner in the suit did not rely on the 5 draft issues
mentioned in the application but made submissions on the
maintainability of the suit by referring to Sections 17, 18 & 20 of the
RDB Act. These sections, therefore, are quoted below in seriatum:
CRP No.257 of 2014
Page 6 of 20
(17) Jurisdiction, powers and authority of Tribunals – (1) A
Tribunal shall exercise, on and from the appointed day, the jurisdiction,
powers and authority to entertain and decide applications from the banks
and financial institutions for recovery of debts due to such banks and
financial institutions.
(2) An Appellate Tribunal shall exercise, on and from the
appointed day, the jurisdiction, powers and authority to entertain appeals
against any order made, or deemed to have been made, by a Tribunal under
this Act.
[17A. Power of Chairperson of Appellate Tribunal-(1) The Chairperson of
an Appellate Tribunal shall exercise general power of superintendence and
control over the Tribunals under his jurisdiction including the power of
appraising the work and recording the annual confidential reports of
Presiding Officers.
(2) The Chairperson of an Appellate Tribunal having jurisdiction over the
Tribunals may, on the application of any of the p arties or on his own
motion after notice to the parties and after hearing them, transfer any case
from one Tribunal for disposal to any other Tribunal.]
(18) Bar of Jurisdiction – On and from the appointed day, no Court
or other authority shall have, or be entitled to exercise, any jurisdiction,
powers or authority (except the Supreme Court, and a High Court
exercising jurisdiction under Articles 226 & 227 of the Constitution) in
relation to the matters specified in Section 17.
[Provided that any proceedings in relation to the recovery of debts due to
any multi-State co-operative bank pending before the date of commencement
of the Enforcement of Security Interest and Recovery of Debts Laws
(Amendment) Act, 2012 under the Multi-State Co-operative Societies Act,
2002 (39 of 2002) shall be continued and nothing contained in this Section
shall, after such commencement, apply to such proceedings.]
(20) Appeal to the Appellate Tribunal – (1) Save as provided in
such-section (2), any person aggrieved by an order made, or deemed to have
CRP No.257 of 2014
Page 7 of 20
been made, by a Tribunal under this Act, may prefer an appeal to an
Appellate Tribunal having jurisdiction in the matter.
(2) No appeal shall lie to the Appellate Tribunal from an order made
by a Tribunal with the consent of the parties.
(3) Every appeal under sub-section (1) shall be filed within a period of
forty-five days from the date on which a copy of the order made, or deemed
to have been made, by the Tribunal is received by him and it shall be in such
form and be accompanied by such fee as may be prescribed:
Provided that the Appellate Tribunal may entertain an appeal after the
expiry of the said period of forty-five days if it is satisfied that there was
sufficient cause for not filing it with in that period.
(4) On receipt of an appeal under sub-section (1), The Appellate
Tribunal may, after giving the parties to the appeal, an opportunity of being
heard, pass such orders thereon as it thinks fit, confirming, modifying or
setting aside the order appealed against.
(5) The Appellate Tribunal shall send a copy of every order made by it
to the parties to the appeal and to the concerned Tribunal.
(6) The appeal filed before the Appellate Tribunal under sub-section
(1) shall be dealt with by it as expeditiously as possible and endeavour shall
be made by it to dispose of the appeal finally within six months from the date
of receipt of the appeal.
[7]
Section 17 deals with jurisdiction, powers and authority of
Tribunals constituted under RDB Act, 1993 and so it has nothing to
do with the case in hand. Section 18 of course deals with ouster of
Civil Court’s jurisdiction. It shows that on and from the appointed
day, no Court or other authority except Supreme Court or a High
Court shall have jurisdiction to exercise any power in regard to
authority in relation to the matters specified in Section 17. This
means that Civil Court also will have no jurisdiction or power to
adjudicate a matter over which Tribunal constitute under the RDB
Act of jurisdiction. Section 20, on the other hand, provides that any
CRP No.257 of 2014
Page 8 of 20
person who is aggrieved by an order passed by Tribunal constituted
under the Act shall be entitled to prefer an appeal.
[8]
It is the case of Mr. Das, learned counsel for the petitioner
that if the opposite party/ plaintiff is in any way aggrieved at the
order passed in O.A. No.25 of 2001 by the DRT, he would have
preferred an appeal under Section 20 of the RDB Act, 1993. The suit,
therefore, is not maintainable for two reasons. First, because the
subject matter falls within the jurisdiction of the DRT under Section
17 of the RDB Act, 1993 and secondly, because an appeal lies against
the order passed by the DRT under Section 20 of the RDB Act
before National Tribunal.
[9]
Now let us see as to whether judgments relied on by the
learned counsel for the petitioner along with the submissions made
as aforesaid in the preceding paragraphs entitle the revision
petitioner, to an order under Order VII Rule 11 of the Code of Civil
Procedure for setting aside the impugned order dated 02.07.2014
passed by the learned Civil judge, Kamrup. The Alahabad Bank vs.
Canara Bank reported in (2000) 4 SSC 406 is the judgment delivered
by the Hon’ble two judges of the Supreme Court, wherein Allahabad
Bank had obtained a decree from DRT at Delhi against the debts.
Canara Bank also claimed money against same debtors and when
Allahabad Bank filed O.A. on 109 of 1995 before DRT Delhi under
Section 19 of the RDB Act, a simple money decree was passed on
13.01.1998 with interest @ 18%. Recovery case was filed by the
Allahabad Bank before Recovery Officer and debtor company filed
appeal their against being appeal No. 270 of 1998 before the appellate
tribunal. In the meantime, Canara Bank filed O.A. No.784 of 1996
against the same debtor company before DRT Delhi. The O.A. filed
by Canara Bank was pending before DRT Delhi. While recovery
appeal was continuing before the appellate tribunal against the
decree obtained by Allahabad Bank, at this stage Canara Bank filed
interlocutory application before the Recovery Officer for being
CRP No.257 of 2014
Page 9 of 20
impleaded as party seeking pro-rata distribution of the sale proceeds
from auction of the debtor company’s properties which was strictly
rejected by the Allahabad Bank. The application was dismissed
holding it to be pre-mature. Thereafter, property of Debtor Company
was sold on 08.01.1999 & 16.02.1999 by the Recovery Officer.
Another property was sold on 15.01.1999 but the Recovery Officer
declined to confirm the same and issued order for fresh action against
which Allahabad Bank filed writ petition under Article 226 & 227.
Thereafter, Canara Bank also filed applications in DRT under
Section 22 of the RDB Act seeking stay of recovery proceedings
initiated by the Allahabad Bank. They were heard on 25.02.1999 and
thereafter adjourned. In the meantime, Canara Bank informed the
Recovery Officer that it had filed company petition under Sections
442/ 537 of the Companies Act for stay of the recovery case initiated
by Allahabad Bank. The Company judge passed order on 09.03.1999
staying further sale of assets of the company in recovery case and
restrained disbursement of the money already released in other sales.
This order dated 09.03.1999 was brought under challenge before the
Hon’ble Supreme Court, wherein one of the questions arose as to
whether the provisions of RBD Act and over ride the provision of
Sections 442, 537 & 446 of the Companies Act. The Hon’ble Supreme
Court having considered the nature and character of the RBD Act
held, inter alia, the money released under the RDB Act has to be dealt
only by the tribunal and not by the company Court and thus, the
RDB Act was given precedence over the Companies Act although
both the Acts are Special Acts operating in two different fields. The
facts of this case and law laid down, prima facie, does not appear to
have laid down any precedent governing the present case in question
where as point arising for determination in the present case is
whether the plaint is to be rejected under Order VII Rule 11 of the
Code of Civil Procedure because of the provisions of Section 18 & 20
of the RDB Act. This judgment, therefore, is of no help in the present
case.
CRP No.257 of 2014
Page 10 of 20
[10]
The next case relied on by Mr. Das is the judgment of
the Bench of the Hon’ble Supreme court consisting of two Hon’ble
judges in the case of United Bank of India, Calcutta vs. Abhijit Tea
Company Private Ltd. & Others reported in (2002) 7 SCC 357. In
that case plaintiff was United Bank of India, Calcutta which claimed
about Rs.31.18 Crores from the respondent Abhijit Tea Company
and initially a compromise decree was passed by a Single Bench of
the Hon’ble Calcutta High Court in its original side on 29.03.1994
and as the Bank challenged the same before the Division Bench of the
High Court, the initial judgment passed on 29.03.1994 was set aside
on 11.08.1998 with cost of Rs.75,000/-. The suit of the appellant
Bank, therefore, stood restored before the Single Judge again and in
the meantime RDB Act, 1993 came into force. The Debtors Company
at this stage filed an application with prayer that suit to be retained
in the original side of the Calcutta High Court and not be transferred
to the tribunal under the Act as the same was not pending on
27.04.1994 but only the appeal was pending before the Division
Bench. The Act came into force on 27.04.1994 in West Bengal and so
it was contended that the suit was not “immediately pending” on the
original side of the High Court before 27.04.1994 as required under
Section 31 of the Act and so Section 31 was not applicable. The
learned Single Judge allowed the prayer on 03.09.1999 and suit of
the appellant Bank was directed to be tried by the original side of the
High Court of Calcutta. This order was challenged by the Bank
before the Hon’ble Supreme Court leading to delivery of the
judgment under reference. The point for determination before the
Hon’ble Supreme Court in this case was whether Title Suit No.410 of
1985 instituted at the original side of the Calcutta High Court was
covered by the clause “immediately pending” on the original side of the
High Court before 27.04.1994 within the meaning of Section 31 of
the Act and consequently, whether the suit was liable to be
transferred to the Tribunal under the RDB Act. Considering the
provision of Section18 of the RDB Act, the Hon’ble Supreme Court
held that the order passed by the Hon’ble Single Judge directing the
CRP No.257 of 2014
Page 11 of 20
trial of the Title Suit in the original side of the High Court Calcutta
was not maintainable and that it was the Tribunal to which the suit
should be transferred for adjudication. Thus, in this judgment, the
simple money suit filed by United Bank of India was found to be
covered by Section 17 of the RDB Act and consequently, the Hon’ble
Supreme Court held that because of operation of Section 18 of the
Act, the matter needed to be transferred to DRT Kolkata. The point
for determination and the spectrum of facts involved in this reported
case, therefore, does not have any resemblance or identity with the
case in hand. Here is a suit based on the allegations of fraud and not a
simple money suit warranting trial before the Tribunal. This case,
therefore, does not appear to be of any help for adjudication of the
case in hand.
[11]
The last judgment relied on by Mr. Das is the case of
Punjab National Bank vs. OC Krishnan and others reported in (2001) 6
SCC 569. The judgments given by a Bench consisting of two Hon’ble
Judges were confronted with a question regarding sale of mortgage
property. A suit was filed by Punjab National Bank for recovery of
money from the Principal debtor as well as guarantors on being
transferred to DRT Calcutta. The suit was decreed on 17.05.1996
against the Principal debtor as well the guarantors along with
interest with direction to the Recovery Officer to proceed to realise
the amount by sale of hypotheticated plant and machinery and
mortgaged
property
belonging
to
respondent
No.5
&
4.
Consequently, certificate was issued and recovery proceeding started
at this stage. The guarantor who is stated to have mortgaged his
property, approached the Calcutta High Court under Article 227 of
the Constitution of India and the High Court allowed the petition by
observing that mortgaged property was constituted in Chennai and
so, DRT at Calcutta had no jurisdiction in respect of the same. The
Punjab National Bank challenged the order of the High Court to the
Hon’ble Supreme Court referring to Section 20 of the RDB Act. The
Hon’ble Supreme Court held that in view of the appeal provision, the
CRP No.257 of 2014
Page 12 of 20
application under Article 227 of the Constitution should not have
been entertained by the High Court. Consequently, the order of the
High court was set aside. The facts involved in this case are
conspicuously divergent from the nature by the one under
consideration of this court. Here is a case involving allegation of
fraud by the plaintiff. We are required to see as to whether on the
basis of the pleadings of such nature, a plaint is required to be
rejected at the threshold without allowing a full fledged trial.
[12]
There is no denying the fact that vexatious and useless
litigations take considerable part of judicial time and in the process
the bonafide litigants suffer. Kepping in view, this aspect of the
matter the law makers thought of a device to shoot down undesired
litigations by rejecting the plaint at the threshold. Order VII Rule 11
of the Code of Civil Procedure is the instrument by which Court has
been empowered to shed off the avoidable litigations. Initially there
were only four clauses under Order VII Rule 11 of the Code of Civil
Procedure. By Section 17 of the CPC Amendment Act, 1999, the fifth
Clause under (e) & by CPC Amendment Act of 2002 the sixth clause,
namely, Clause (f) was added to this provision.
[13]
The original provisions warranting rejection of plaint
were prescribed under Clauses (a), (b), (c) and (d) of Rule 11 of Order
VII. Rule 11(a) provides that where plaint does not disclose a cause
of action, the plaint shall be rejected. In so doing court is required to
peruse the plaint in entirety and to find whether on a liberal view of
the matter, the material facts disclosed in a plaint constitute any
cause of action. It is not necessary to look into the averments made in
the written statement or any other materials other than plaint. In the
case of Bhau Ram vs. Janak Singh reported in (2012) 8 SCC 701, the
Hon’ble Supreme Court held that only averments made in the plaint
can be looked into while deciding application for rejection of plaint.
(also see, Abdulla vs. Golappa : AIR 1985 SC 577 ). The power to reject
plaint under this clause can be exercised only if the Court arrives at
CRP No.257 of 2014
Page 13 of 20
objective satisfaction that even if all averments made in plaint are
proved, the plaintiff would not be entitled to any relief. In such case,
even before issuance of summons court can reject a plaint. But at the
same time, mere formal reading of the plaint would not be sufficient.
Reading must be meaningful. (See, Arivandandam vs. Satyapal : AIR
1977 SC 2421 at p. 2423 ).Plea taken by the defendant in the written
statement is not at all relevant for the purpose of deciding as to
whether plaint is to be rejected or not. Court cannot presume that
any averment made in the plaint is not likely to be established in
course of trial or that the stand taken by the plaintiff in its plaint is
not factually correct. At the same time in the case of ITC Limited vs.
Debts Recovery Appellate Tribunal reported in (1998) 2 SCC 70, the
Hon’ble Supreme Court has cautioned that Court has to ascertain as
to whether plaint created an illusion of cause of action by clever
drafting.
[14]
It is thus settled law that in case of exercise of power
under Order VII Rule 11 of the Code of Civil Procedure only
averments made in the plaint can be taken into consideration and
nothing from written statement or other material which is
extraneous to the plaint can be considered at this stage. If upon
appraisal of the statement made in the plaint it falls within the
mischief of any bar under any law or that it does not disclose any
cause of action, in that event recourse can be taken under Provision
of Order VII Rule 11 of the Code of Civil Procedure. So, there is no
doubt that apart from the materials in the plaint, Court cannot rely
on any other materials for the purpose of deciding an application
under Order VII Rule 11 of the Code of Civil Procedure. Once it is
found that accepting the pleadings of the plaint at face value a cause
of action has been made out and that there is no illusion of cause of
action by clever drafting, a plaint cannot be thrown out under VII
Rule 11 of the Code of Civil Procedure at such initial stage.
CRP No.257 of 2014
Page 14 of 20
[15]
Keeping in view, the law relating to exercise of power
under Order VII Rule 11 of the Code of Civil Procedure, it is to be
seen as to whether the plaint in question is liable to be rejected. In
view of bar under Section 18 of the RDB Act, 1993, or due to
existence of appellate remedy under Section 20 of the RDB Act, the
question as to maintainability of civil suit visa-a-vis proceeding
before Debt Recovery Tribunal came for consideration before the
Hon’ble Supreme Court in the case of Mardia Chemicals Limited vs.
Union of India reported in (2004) 4 SCC 311. In paragraph 50 of the
said judgment the Hon’ble Supreme Court held that jurisdiction of
Civil Court is ousted because of Section 34 of the SARFAESI Act,
2002 but in the following paragraph Hon’ble Supreme Court held in
the same breadth that the position would be different if there is prima
facie materials as to allegation by fraud against the plaintiff.
[16]
Paragraphs 50 & 51 of the judgment in Mardia Chemicals
(Supra) are quoted below:
“50. It has also been submitted that an appeal is
entertainable before the Debt Recovery Tribunal only after such
measures as provided in sub-section (4) of section 13 are taken and
section 34 bars to entertain any proceeding in respect of a matter
which the Debt Recovery Tribunal or the appellate Tribunal is
empowered to determine. Thus before any action or measure is
taken under sub-section (4) of section 13, it is submitted by Mr.
Salve one of the counsel for respondents that there would be no bar
to approach the civil court. Therefore, it cannot be said no remedy is
available to the borrowers. We, however, find that this contention as
advanced by Shri Salve is not correct. A full reading of section 34
shows that the jurisdiction of the civil court is barred in respect of
matters which a Debt Recovery Tribunal or appellate Tribunal is
empowered to determine in respect of any action taken "or to be
taken in pursuance of any power conferred under this Act". That is
to say the prohibition covers even matters which can be taken
cognizance of by the Debt Recovery Tribunal though no measure in
that direction has so far been taken under sub-section (4) of section
CRP No.257 of 2014
Page 15 of 20
13. It is further to be noted that the bar of jurisdiction is in respect of
a proceeding which matter may be taken to the Tribunal. Therefore,
any matter in respect of which an action may be taken even later on,
the civil court shall have no jurisdiction to entertain any proceeding
thereof. The bar of civil court thus applies to all such matters which
may be taken cognizance of by the Debt Recovery Tribunal, apart
from those matters in which measures have already been taken
under sub-section (4) of section 13.”
51. However, to a very limited extent jurisdiction of the civil court
can also be invoked, where for example, the action of the secured
creditor is alleged to be fraudulent or their claim may be so absurd
and untenable which may not require any probe, whatsoever or to
say precisely to the extent the scope is permissible to bring an action
in the civil court in the cases of English mortgages. We find such a
scope having been recognized in the two decisions of the Madras
High Court which have been relied upon heavily by the learned
Attorney General as well appearing for the Union of India, namely V.
Narasimhachariars case (supra) a judgment of the learned Single
Judge where it is observed as follows in.
"22. The remedies of a mortgagor against the mortgagee who is
acting in violation of the rights, duties and obligations are two fold in
character. The mortgagor can come to the court before sale with an
injunction for staying the sale if there are materials to show that the
power of sale is being exercised in a fraudulent or improper manner
contrary to the terms of the mortgage. But the pleadings in an action
for restraining a sale by mortgagee must clearly disclose a fraud or
irregularity on the basis of which relief is sought : Adams v. Scott
(1859) 7 WR (Eng) 213 (249). I need not point out that this restraint
on the exercise of the power of sale will be exercised by Courts only
under the limited circumstances mentioned above because otherwise
to grant such an injunction would be to cancel one of the clauses of
the deed to which both the parties had agreed and annul one of the
chief securities on which persons advancing moneys on mortgages
rely. (See Rashbehary Ghose Law of Mortgages, Vol. II, Fourth Edn.,
page 784) (p. 143).”
CRP No.257 of 2014
Page 16 of 20
[17]
It is established fact that fraud vitiates all. If existence of
fraudulent act can over ride the bar imposed under Section 34 of the
SARFAESI Act, 2002, there is no reason as to why the same cannot
be applicable to bar under Section 18 of the RDB Act as well.
Recapitulating the facts mentioned in the preceding paragraphs of
this judgment that Charu Prabha Bruah purchased the land from
Guno Ram Mikir on 04.06.1967, the defendant No.1 does not dispute
that original owner of Schedule-B land was Guno Rann Mikir. It is
not in dispute that suit land described in Schedule-A is included in
Schedule-B to the plaint which was owned by Guno Ram Mikir and
sold to Charu Prabha Baruah on 04.06.1967. This Charu Prabha
Baruah came into possession of the land, paid land revenue
continuously, got her name muted in the records of rights and being
in physical possession thereof sold the same to the plaintiff by
registered deed dated 09.03.2007 and handed over possession to him.
The plaintiff thus prima facie appears to have acquired valid title to
the land in question but the defendant No.1 purported to have
purchased the same on 16.07.1983 from son of Guno Ram Mikir. If
Guno Ram Mikir had exhausted his title for sale on 04.06.1967 in
favour of Charu Prabha Baruah then defendant No.1 did not acquire
any title to the land by purported purchase on 16.07.1983. If the
plaintiff is to be believed, the defendant No.1 was never in the
vicinity of the suit land and it is the plaintiff’s vendor who continued
in possession since her purchase on 04.09.1967 till her sale in favour
of the plaintiff on 09.03.2007. It is on this set of facts, the plaintiff has
alleged fraud against the defendants No.1, 3, 4, 5, 6 & 7. The
defendants No.4 to 7 availed financial assistance from the defendant
No.2 Bank and this financial assistance was purportedly secured by
the defendant No.1 as a guarantor by allegedly creating mortgage of
Schedule-B property. On the pleadings made by the plaintiff, a prima
facie case of fraud has been made out by plaintiff against such
purported mortgage by defendant No.1 in favour of defendant No.2.
This being the position applying the law laid down in paragraph 51
CRP No.257 of 2014
Page 17 of 20
of Mardia Chemical (Supra) the suit filed by the plaintiff in the present
case cannot be said to be barred under Section 18 of the RDB Act.
[18]
Section 9 of the Code of Civil Procedure is general and
wide. It is an enforcement of the maxim Ubi jus ibi remedium. A
litigant thus having a grievance of civil nature has a right to institute
a civil suit in a competent Civil Court unless its cognizance is either
expressly or impliedly barred. It is established law that even in the
case of express or implied ouster of jurisdiction of Civil Court, a suit
may lie if it is made out by appropriate pleadings that the
fundamental principle of judicial procedure has been violated and/ or
that the provisions of Act which bars jurisdiction of the Civil Court
have not been strictly followed. The aforesaid view expressed by the
Privy Council in the case of Secretary of State vs. Mask & Co. AIR
1940 PC 105 has been subsequently adopted by the Hon’ble Supreme
Court in various judgments. A Full Bench Judgment of this court in
Daulat Ram Lakhani vs. State of Assam & others reported in (1989)1
GLR 131 contains all the previous references in this regard. Apart
from violation of the principles of natural justice and/ or violation of
the provision of the Act, there is yet another exigency when a Civil
Court alone can have the jurisdiction to decide a lis. This is the
allegation of fraud.
[19]
Chief Justice Edward Coke of England observed about three
centuries ago “Fraud avoids all judicial acts, ecclesiastical or
temporal.” In the case S P. Chengalvarya Naidu vs. Jagannath reported
in (1994)1 SCC 1, Hon’ble Supreme Court took note of this view and
held “A fraud is an act of deliberate deception with the design of securing
something by taking unfair advantage of another. It is deception in order to
gain by another’s loss. It is a cheating intended to get an advantage.” What
have been pleaded in the plaint in question are material facts of such
a deliberate act of deception in concert among all defendants. These
allegations ultimately may succeed or may not succeed. But on the
face of the allegations, a prima facie case has been made out to claim
CRP No.257 of 2014
Page 18 of 20
that fraud has been perpetrated on the plaintiffs. At this stage neither
trial court nor this court exercising revisional jurisdiction can
venture to decide correctness or otherwise of the statements. That
shall be task of the Civil Court during trial. For limited purpose of
decision within scope of order VII Rule 11 (d) of the Code of Civil
Procedure, the pleaded facts are sufficient to make out case of prima
facie fraud.
[20]
Now, the next question arises as to whether such disputed
facts on fraud can be decided by Debt Recovery Tribunal (for short,
‘DRT’). Can a DRT pass decree holding that there is fraud even if
best of the evidence is adduced in support of the specific pleadings of
fraud under order VI rule 4 of the Code of Civil Procedure? Can it
pass anything more than issuing a recovery certificate? All these
questions came up for considerations before the Hon’ble Supreme
Court in the case of Nahar Industrial Enterprises Ltd. Vs. Hong Kong
and Shanghai banking Corporation reported in (2009) 8 SCC 646 and it
is held that DRT is a tribunal constituted for a specific purpose and
no independent issue can be initiated before it by a debtor. It cannot
pass a decree. It can only pass recovery certificates. In the present
case there shall be oral and documentary evidence by both sides to
prove and disprove respective allegations on fraud going much
beyond the books of accounts and banking notes and this would
warrant interrogatories as well as examinations and cross
examinations of witnesses. Considering the nature, scope, power and
jurisdiction of the DRT as revealed in the discussions of the case of
Nahar Industrial Enterprises Ltd. (supra), it does not appear that
allegations of the nature mentioned in the plaint under question, can
be decided by a DRT. It can be done by the Civil Court only.
[21]
Now, coming to the fact of this case, there is no question of
preferring an appeal by the plaintiff against the judgment and decree
passed by the DRT in this case because the plaintiff was not made a
party to the proceeding by the defendant No.2, Central Bank. The

facts stated in the plaint nowhere were brought on record in the
proceeding before the DRT Act, Guwahati. The plaintiff has an
independent case of fraud for which he has made his own pleadings
and obviously, it could not have been decided by DRT and so, the
question of deciding the same by the appellate tribunal also does not
arise. On anxious consideration given to the totality of the facts and
circumstances referred to above and upon perusal of the order
impugned in this revision petition, it appears that the learned trial
court has not committed any jurisdictional error warranting
interference.
[19]
Be that as it may, by revisional or supervisory jurisdiction,
this application, therefore, is devoid of any merit. It is accordingly
dismissed. No order as to cost.

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