SC:Civil Suit not Maintainable where Proceedings u/SARFAESI Act has been Initiated

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May 07, 2018

Case name: M/s Shree Anandhkumar Mills v. M/s Indian Overseas Bank & ors.

Date of order: May 03, 2018

One of the intrinsic question taken up by the Two-Judge Bench of the Supreme Court in the case was maintainability of the suit by the second respondent – Nandini seeking partition wherein the order of injunction was passed? Here it would be relevant to mention that in the case the proceedings under Section 34 of the SARFAESI Act, 2002 had been initiated.

In the case, the High Court took the view that as the said suit was for partition, Section 34 of the SARFAESI Act, 2002 would not bar the same.

Section 34 of the SARFAESI Act, 2002 states bars institution of any suit in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered under the Act.

Bench’s Verdict

In view of the facts and circumstances of the case, the Two-Judge bench of the Supreme Court made reference to the case of Jagdish Singh vs. Heeralal and others to hold that the suit filed by the second respondent is not maintainable. In Jagdish Singh case, the Apex Court had held that a suit for partition would not be maintainable in a situation where proceedings under the SARFAESI Act had been initiated. It was also held that the remedy of any person aggrieved by the initiation of proceedings under the SARFAESI Act lies under Section 17 of SARFAESI Act which provides for an efficacious and adequate remedy to a party aggrieved.

In view of the aforesaid, the Supreme Court in the case at hand set aside High Court’s order.

The order of the High Court is set aside subject to above conditions and the appeals are allowed.

The Supreme Court’s order can be accessed here.