Civil courts cannot restrain SARFAESI measures falling within DRT’s exclusive Section 17 jurisdiction.

The plaintiff had availed financial facilities from the defendant bank, secured by three immovable properties allegedly mortgaged as collateral security.

Upon alleged default, the account was classified as a non-performing asset with effect from 7 February 2017, and the Bank initiated measures under Sections 13 and 14 of the SARFAESI Act, including issuance of demand and sale notices.

The plaintiff challenged the SARFAESI measures before the Debt Recovery Tribunal under Section 17 of the SARFAESI Act in SA/115/2018, which remained pending.

The plaintiff’s civil suit, subsequently transferred to the Commercial Division, alleged that the mortgage documents were fraudulently executed or manipulated, that the properties were incorrectly described in the sale notices, and that the NPA classification was unlawful.

By IA No. GA-COM/14/2026, the plaintiff sought to restrain the Bank from proceeding with e-auction or creating third-party interests in the properties.

By the hearing date, two properties had already been sold and sale certificates had been issued; the sale notice concerning another property had failed for want of offers, although the Bank stated that it proposed to take further steps regarding that property.

Whether the Civil Court could grant an injunction restraining the Bank from proceeding with or giving effect to SARFAESI sale notices when the validity of the SARFAESI measures was already pending before the DRT under Section 17 of the SARFAESI Act.

Whether an injunction could be granted against sale notices that had either already been acted upon or had become infructuous.

Whether the plaintiff’s allegations of fraud in the creation of the mortgage and the Bank’s measures justified interim protection by the Civil Court.

The Court applied Sections 13 and 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, concerning enforcement of security interests by a secured creditor, and Section 17, which provides the aggrieved party’s remedy before the DRT against measures taken under Section 13(4).

It further relied on Section 34 of the SARFAESI Act, which bars the jurisdiction of a Civil Court in matters that the DRT or Appellate Tribunal is empowered to determine and in respect of which the Act provides a statutory remedy.

Rule 8(1) of the Security Interest (Enforcement) Rules, 2002 was also relevant to the enforcement and sale process.

The Court held that the pending Section 17 proceedings were the appropriate forum for determining the validity or illegality of the SARFAESI measures, while any independent claim for loss or damages could be considered in the civil suit at trial.

The Court noted that the plaintiff did not deny availing the Bank’s financial facilities or receiving the loan funds, although it disputed the quantum and alleged irregularities in the mortgage documentation, NPA classification, and sale process.

Since the plaintiff’s challenge to the SARFAESI measures was already pending before the DRT under Section 17, the validity of those measures fell within the DRT’s statutory domain, subject to the jurisdictional bar under Section 34.

The first sale notice had already culminated in completed sales and issuance of sale certificates, making an injunction incapable of undoing that completed process at the interlocutory stage.

The second sale notice had become infructuous because no sale had taken place pursuant to it.

The allegations of fraud were not adjudicated on merits in the injunction application; the Court expressly left them open for determination in accordance with law in the pending civil suit.

Consequently, no prima facie basis existed for restraining the Bank from taking future steps in accordance with law.

It refused to grant an injunction against the completed sale, the infructuous sale notice, or any future e-auction notice.

The Court clarified that the DRT would determine the validity of the SARFAESI measures in the pending Section 17 proceedings, while the plaintiff’s allegations of fraud and any claim for damages remained open for adjudication in the civil suit.