Borrower’s Unmortgaged Land Can Face DRT Recovery If Secured Assets Fall Short, Gauhati HC Upholds Injunction Refusal

The appellant filed a civil suit seeking declarations of title and that a particular property was not mortgaged to the respondent bank, together with a permanent injunction against the bank taking possession of it.

He alleged that the property was distinct from the land mortgaged to secure his loan.

His applications before the Debt Recovery Tribunal (DRT) challenging the bank’s recovery actions had been dismissed, while recovery proceedings for ₹1,61,45,292.54 remained pending before the DRT Recovery Officer.

The trial court refused temporary injunction, principally citing the purported pendency of an earlier securitisation application.

The appellant appealed under Order XLIII Rule 1(r) CPC.

Order XLIII Rule 1(r) CPC provides for an appeal from specified orders concerning injunctions, including orders under Order XXXIX Rules 1 and 2 CPC.

Section 25(aa) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 empowers the Recovery Officer to take possession of and sell property over which security interest is created, as well as other property of the debtor, and to appoint a receiver.

Section 34 of the SARFAESI Act, 2002 bars civil-court jurisdiction over matters within the DRT’s or Appellate Tribunal’s authority and prohibits injunctions concerning actions taken or to be taken under the SARFAESI Act or the 1993 Act.

Although the suit property was alleged not to be a secured asset, the Court found that recovery proceedings against the appellant remained pending before the DRT Recovery Officer.

Under Section 25(aa), the Recovery Officer could resort to the debtor’s other property if the secured assets did not satisfy the outstanding debt.

The Court therefore held that Section 34’s bar applied and that the trial court could not grant the requested injunction.

While the trial court’s stated basis referred to a securitisation application that had been dismissed, the pending recovery proceedings independently supported refusal of the injunction.

It left the appellant at liberty to approach the DRT for fair exercise of the Recovery Officer’s powers under Section 25(aa) in relation to property not mortgaged to the bank.