Fraud-based cancellation of a SARFAESI sale certificate falls outside DRT jurisdiction.

The respondent-plaintiff participated in an e-auction conducted by the applicant-bank under the SARFAESI Act and purchased the subject property for ₹7 crore. A sale certificate dated 7 April 2016 was issued in his favour. Subsequently, upon approaching the Navi Mumbai Municipal Corporation for permission to renovate and use the property commercially, he allegedly discovered that the building had been sanctioned for residential rather than commercial use. He therefore alleged that the bank and other defendants had misrepresented the nature and permissible use of the property by relying on forged or fabricated documents, thereby inducing him to participate in the auction and purchase the property

The plaintiff instituted Civil Suit No. 295 of 2017 seeking cancellation of the sale certificate, refund/recovery of ₹8 crore with interest, and consequential reliefs. The bank and its officers filed an application under Order VII Rule 11(d) of the Code of Civil Procedure, 1908, contending that the suit was barred by Section 34 of the SARFAESI Act and that the dispute fell within the jurisdiction of the Debts Recovery Tribunal under Section 17. After an earlier remand by the High Court, the Trial Court again rejected the application on 3 August 2022. The bank thereafter filed the present civil revision application

Whether the plaint was liable to be rejected under Order VII Rule 11(d) CPC on the ground that the civil suit was barred by Section 34 of the SARFAESI Act?

Whether a suit by an auction purchaser seeking cancellation of a sale certificate and refund of consideration on the ground of fraud and misrepresentation falls within the jurisdiction of the Debts Recovery Tribunal under Section 17 of the SARFAESI Act?

Whether the Trial Court committed any illegality, perversity, or material irregularity warranting interference under Section 115 CPC?

The Court applied Order VII Rule 11(d) CPC, under which a plaint must be rejected where the suit appears from the statements in the plaint to be barred by law. Section 34 of the SARFAESI Act bars the jurisdiction of civil courts in matters which the Debts Recovery Tribunal or Appellate Tribunal is empowered to determine, while Section 17 provides a remedy to an aggrieved person against measures taken under the SARFAESI Act.

The Court relied on Mardia Chemicals Ltd. v. Union of India, which explains the scope of the civil-court bar under Section 34; Jagdish Singh v. Heeralal, concerning the scope of Section 17; and Charu Kishor Mehta v. Prakash Patel, which holds that a mere allegation of fraud, without material particulars as required by Order VI Rule 4 CPC, may be insufficient. It also applied the principle that, while deciding an Order VII Rule 11 application, the court must examine the plaint and documents relied upon by the plaintiff, without conducting a trial on disputed facts. Revisional interference under Section 115 CPC is warranted only where the subordinate court has acted illegally, perversely, or with material irregularity.

The Court held that the plaint contained specific particulars of the alleged fraud and misrepresentation: the bank allegedly represented that the property was suitable for commercial use, withheld or relied upon fabricated documents, and thereby induced the plaintiff to participate in the auction. The plaintiff was neither the borrower nor the guarantor, and he did not challenge the measures taken by the bank against the borrowers under the SARFAESI Act. Instead, his grievance concerned the alleged fraudulent inducement resulting in issuance of the sale certificate and the consequential claim for cancellation and refund.

The Court therefore found that the reliefs claimed were not matters which the Debts Recovery Tribunal was empowered to grant under the SARFAESI Act. Whether the documents were supplied, whether the plaintiff knew the property was residential, and whether the purchase price reflected commercial use were disputed evidentiary questions unsuitable for determination under Order VII Rule 11 CPC. Since the plaint pleaded fraud with sufficient particulars, the decision in Charu Kishor Mehta did not assist the bank. The Trial Court had properly considered the pleadings and Section 34, and its order disclosed no illegality or perversity warranting revisional interference.

The Trial Court’s rejection of the application under Order VII Rule 11(d) CPC was upheld. The Civil Revision Application was accordingly rejected, with no order as to costs.