Civil Court Jurisdiction Barred Under Section 34 of SARFAESI Act for Protection of Mortgaged Property Possession

The respondent, Narmada Valley Chemical Industries Pvt. Ltd., obtained a credit facility of Rs. 25 Crores from the State Bank of India (SBI) by mortgaging immovable properties.

Upon default, SBI classified the account as a Non-Performing Asset (NPA) and initiated recovery under the SARFAESI Act, taking symbolic possession under Section 13(4).

The respondent challenged this via two routes: an application (SA No. 31/2013) before the Debts Recovery Tribunal (DRT) and a civil suit (Special Civil Suit No. 26 of 2015) before the Principal Senior Civil Judge, Rajpipla, seeking to protect possession of the mortgaged property.

SBI filed an application under Order 7 Rule 11 of the CPC (Exh. 121) to reject the plaint, arguing the suit was barred by Section 34 of the SARFAESI Act.

The Trial Court rejected SBI’s application on 20.02.2024, leading to this Revision Application.

1. Whether a Civil Court has jurisdiction to entertain a suit seeking to protect possession of a mortgaged property where security interest has been created under the SARFAESI Act.

2. Whether the Trial Court erred in refusing to reject the plaint under Order 7 Rule 11 of the CPC in light of the statutory bar under Section 34 of the SARFAESI Act.

The court applied Section 34 of the SARFAESI Act, which expressly bars the jurisdiction of Civil Courts to entertain any suit or proceeding in respect of any matter which a DRT or Appellate Tribunal is empowered to determine under the Act.

It further relied on Section 13(4) regarding the secured creditor's right to take possession and Section 14 regarding assistance from a Magistrate.

The court cited the precedent of *Punjab and Sind Bank v. Frontline Corporation Ltd.* [AIR 2023 SC 2786], which reiterated the Three-Judge Bench decision in *Mardia Chemicals Limited v. Union of India*, establishing that the civil court's jurisdiction is barred even for actions "to be taken" in the future, except in extremely limited cases of established fraud or absurd claims.

The High Court observed that the relief sought—protection against dispossession from mortgaged property—directly interferes with the powers granted to banks under Section 13(4) of the SARFAESI Act.

The Court reasoned that because the SARFAESI Act provides a specific mechanism for a bank to take possession without court intervention (or via Section 14 if resisted), a "suit simplicitor" for possession protection is legally maintainable.

The Court noted that the respondent's challenge before the DRT had already been rejected.

Applying the *Mardia Chemicals* standard, the Court found that the plaintiff's case did not fall within the "very limited scope" (such as fraud) where a civil suit might be permissible.

Consequently, the Trial Court’s refusal to reject the plaint was deemed a legal error.

The Court held that the suit was barred by Section 34 of the SARFAESI Act and allowed the application under Order 7 Rule 11 of the CPC.

Accordingly, Special Civil Suit No. 26 of 2015 was rejected in its entirety.

Civil Application for stay was also disposed of.