SCA/1362/2005 1/47 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 1362 of 2005 For Approval and Signature: HONOURABLE MR.JUSTICE K.A.PUJ ================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================= ORIENTAL BANK OF COMMERCE - Petitioner(s) Versus NARESH KHUSHALDAS GANGTANI - Respondent(s) ================================================= Appearance : MR KM PARIKH for Petitioner(s) : 1, MR MEHUL S SHAH for Respondent(s) : 1, SCA/1362/2005 2/47 JUDGMENT MR SURESH M SHAH for Respondent(s) : 1, ================================================= CORAM : HONOURABLE MR.JUSTICE K.A.PUJ Date : 15/06/2007 ORAL JUDGMENT 1. The petitioner – original defendant i.e. Oriental Bank of Commerce has filed this petition under Articles-226 and 227 of the Constitution of India, praying for quashing and setting aside the order dated 4.1.2005 passed by the learned 5th Jt. Civil Judge (S.D.) at Jamnagar, dismissing the preliminary objection / application below Ex.12 filed by the petitioner Bank – original defendant in Regular Civil Suit No.647 of 2004. The petitioner Bank has also prayed for declaration that the learned 5th Jt. Civil Judge (S.D.) at Jamnagar has no power, authority and/or jurisdiction to try, entertain and dispose of the Civil Suit of the nature filed by the present respondent – SCA/1362/2005 3/47 JUDGMENT original plaintiff. 2. This Court has issued notice on 4.2.2005 and by way of interim relief this Court has restrained the trial Court from deciding the matter till this petition is heard by this Court. This Court has thereafter issued rule on 22.3.2005 and interim relief granted by this Court earlier was ordered to be continued. 3. It is the case of the petitioner – Bank that the petitioner – Bank is the original defendant, against whom the respondent has filed the suit being Regular Civil Suit No.647 of 2004 in the Court of learned 5th Jt. Civil Judge (S.D.) at Jamnagar, which is pending for hearing and final disposal in the said Court. 4.The petitioner – Bank, original defendant has granted and sanctioned credit facilities to SCA/1362/2005 4/47 JUDGMENT the tune of Rs.4.90 lacs by way of Term Loan as well as Rs.2.50 lacs by way of Cash Credit (against hypothecation) carrying interest at the rate of 15.24% per annum with monthly interest, to one Shri Khushaldas Bhagwandas Gangtani (hereinafter referred to as 'the borrower') sole proprietor of M/s.Laxmi Beverages carrying on his business activities at No.44 GIDC, Phase-II Dared, Jamnagar. The petitioner Bank granted the various credit facilities to the said borrower, the father of the respondent, on various terms and conditions contained in letter of sanction issued by the petitioner Bank – original defendant to the said borrower. It was one of the stipulations of the sanctioned terms of the said advances that the said borrower was required to create equitable mortgage/charge over the immovable property belonging to the said borrower being lying and situated at Plot No.60 Digvijay Plot on the Land of Survey No.433/H/4 paiki part “B” SCA/1362/2005 5/47 JUDGMENT paiki on the ground floor having New Sheet No.379 of Survey No.2858 admeasuring approximately 690 Sq.feet belonging to the said borrower. Under the guise of being a tenant of the suit property, the respondent has filed Regular Civil Suit No.647 of 2004 in the Court of learned Civil Judge (S.D.) at Jamnagar and the petitioner Bank filed preliminary objection / application below Ex.12 in the said suit, which came to be dismissed by an order dated 4.1.2005 passed by the learned 5th Jt. Civil Judge (S.D.) at Jamnagar, which is under challenge in the present petition. 5. Mr.K.M.Parikh, learned advocate appearing for the petitioner Bank has submitted that the borrower has executed an agreement on 15.2.2000 and deposited the original title deed in respect of immovable property and thereby created first and exclusive equitable mortgage/charge in favour of the petitioner SCA/1362/2005 6/47 JUDGMENT Bank so as to secure repayment of various credit facilities granted by the petitioner Bank to the borrower. He has further submitted that the said borrower was not paying regular installment and interest to the petitioner Bank and, therefore, the petitioner was constrained to issue various notices to the borrower and he was called upon to regularize the two accounts to the satisfaction of the petitioner Bank. Despite this fact, the borrower failed and neglected to do so and had also failed and neglected to regularize the two accounts with the petitioner Bank. The petitioner Bank was therefore left with no other alternative except to initiate the appropriate proceedings available under the provisions of law. The petitioner Bank thereafter issued the legal notice under the provisions of Section-13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 SCA/1362/2005 7/47 JUDGMENT (hereinafter referred to as 'the Act') and called upon the borrower as well as the guarantor to repay the outstanding dues in both the accounts to the petitioner Bank within a period of 60 days from the date of receipt of the said notice issued under the provisions of the Act. The petitioner Bank thereafter issued a public notice in local daily in Gujarati edition, namely, 'Naubat' dated 1.5.2004 and informed the public at large that the property in question belonging to the borrower has already been mortgaged by him in favour of the petitioner Bank and, therefore, informed the public at large not to deal with the transfer, alienate and entertain any transaction with the said borrower in respect of immovable property in question. The petitioner Bank had also issued public notice in local daily in Gujarati 'Aaj Kaal' in its edition dated 1.5.2004 and informed the public at large about the same thing. SCA/1362/2005 8/47 JUDGMENT 6. Mr.Parikh has further submitted that all these facts were well within the knowledge of the said borrower as well as the present respondent – original plaintiff. Inspite of having knowledge of the above mentioned facts on record, the present respondent has filed a suit being Regular Civil Suit No.647 of 2004 for declaration and permanent injunction against the present petitioner Bank and prayed for various relief in the said suit. An injunction order against the present petitioner Bank was passed. The petitioner, therefore, moved an application Ex.12 on 4.1.2005 raising preliminary issue for rejection of plaint. The learned Jt. Civil Judge has rejected the said application vide his order under challenge. 7. Mr.Parikh has further submitted that even after the expiry of the period of 60 days SCA/1362/2005 9/47 JUDGMENT from the date of receipt of the notice under Section-13(2) of the Act the borrower has not requested for settlement nor made any payment towards the outstanding dues as mentioned in the said notices. The petitioner Bank therefore, invoked the provisions of Section- 13(4) of the Act and issued a possession notice dated 21.9.2004 to the borrower and also called upon him and gave caution not to deal with the said property and also restrained him from dealing with the said property in any manner whatsoever. He has further submitted that the said possession notice was also affixed on conspicuous and prime location of the mortgaged property of the borrower in presence of two panchas and panchnama was also made in respect of the said property on 21.9.2004 and accordingly symbolic possession of the said immovable property was taken by the petitioner Bank. 8. Mr.Parikh has further submitted that the SCA/1362/2005 10/47 JUDGMENT order passed by the learned Civil Judge is absolutely bad in law, illegal and contrary to law, facts and evidence on record and, therefore, the same deserves to be quashed and set aside. He has further submitted that the learned Jt. Civil Judge has no jurisdiction to try and entertain the suit of the nature filed by the respondent. He has further submitted that it is an admitted fact that in respect of the said property, the father of the present respondent – original plaintiff had already created first, foremost and exclusive equitable mortgage/charge in favour of the petitioner Bank, as far back on 15.2.2000 by way of deposit of original title deeds and thus, admittedly, the petitioner Bank is having its first and exclusive charge as a mortgage of the said immovable property belonging to the borrower and hence no relief can ever be granted by the learned Jt. Civil Judge against the enforcement of the security interest created by the borrower in favour of SCA/1362/2005 11/47 JUDGMENT the petitioner Bank to recover the public money in accordance with the provisions of law. 9. Mr.Parikh has further submitted that as provided under the provisions of Section-34 of the Act no Civil Court shall have any jurisdiction to try and entertain any suit and/or proceedings in respect of any matter of whatsoever nature for which the DRT or the Appellate Tribunal is empowered by or under the said Act to determine and no injunction shall ever be granted by any Court and/or authority in respect of any action taken or to be taken in pursuance to the powers conferred by or under the said Act. He has further submitted that exercise of powers by the petitioner Bank – original defendant is under the provisions of Section-13(2) of the Act and accordingly as per Section-34 of the Act, Civil Court much less the learned 5th Jt. Civil Judge (S.D.) at Jamnagar has no SCA/1362/2005 12/47 JUDGMENT jurisdiction, power and/or authority to try, entertain and deal with the said suit and he has no authority jurisdiction or power to grant any injunction against the petitioner Bank. 10. Mr.Parikh has further submitted that the learned Jt. Civil Judge has not properly appreciated the provisions of the Act as the said provision shall have overriding effect with regard to the subject matter of the suit being Regular Civil Suit No.647 of 2004 as well as preliminary objection / application below Ex.12 preferred by the petitioner Bank in the said suit. It is an admitted position that the suit property came to be allegedly rented out / let out by the borrower after creation of charge of equitable mortgage by him in favour of his son and hence charge of the petitioner Bank would prevails over the so called tenancy right of the present respondent and hence in any case the present SCA/1362/2005 13/47 JUDGMENT respondent had no legal and/or better right, title and/or interest over the petitioner Bank, so long as the petitioner Bank realises its entire outstanding dues from the borrower either by attachment/sale/disposal of the said mortgaged immovable property belonging to the borrower under the provision of law. He has, therefore, submitted that the present respondent had no better right, title or interest as tenant over the admitted right, title or interest of the petitioner Bank as a mortgagee. He has, therefore, submitted that the Regular Civil Suit No.647 of 2004 preferred by the respondent deserves to be dismissed with cost and consequently the application below Ex.12 filed by the petitioner Bank is required to be allowed in toto. 11.Mr.Parikh has further submitted that the petitioner – Bank has already taken the symbolic possession of the said mortgaged SCA/1362/2005 14/47 JUDGMENT immovable property as far back on 21.9.2004 and on the said ground also no injunction against the petitioner – Bank can ever be granted under the provision of Code of Civil Procedure. Mr.Parikh has, therefore, submitted that the petition deserves to be allowed in toto with costs. 12. Mr.S.M.Shah, learned advocate appearing for the respondent, on the other hand has seriously objected to granting of any relief in this petition. He has submitted that though the petition is filed under Articles- 226 and 227 of the Constitution of India, it is neither maintainable under Article-226 nor 227 of the Constitution of India. If the petition is treated under Article-226, the petitioner – Bank has not joined the adjudicating authority i.e. Jt. Civil Judge (S.D.), Jamnagar as party respondent and hence no writ can ever be issued against him. If the petition is treated under Article-227 SCA/1362/2005 15/47 JUDGMENT of the Constitution of India the petitioner has annexed certain documents which are not forming part of the record of the Civil Suit, which is filed by the respondent and hence those documents cannot be looked into by this Court while exercising its powers under Article-227 of the Constitution of India. He has further submitted that the application Ex.12 preferred by the petitioner – Bank for rejection of the plaint has rightly been rejected by the learned Jt. Civil Judge as it is nowhere mentioned as to under which provision it is filed. For the purpose of rejection of the plaint one has to see the provision contained under Order-7 Rule-11 of the Civil Procedure Code. If it is the case of the petitioner that the application is filed under Order-7 Rule-11(d) on the ground that the suit is not maintainable by virtue of the provision of Securitization Act, in that case one has to see the plaint itself and there is nothing in the plaint which SCA/1362/2005 16/47 JUDGMENT suggest that the suit is barred. He has further submitted that the Court has not to see beyond the plaint and hence all these documents which are made with regard to creation of charge, publication of advertisement, affixation of summons etc, are not relevant for the purpose of deciding the present petition filed for quashing and setting aside of order passed below Ex.12. Mr.Shah has further submitted that it is settled position that before filing written statement, no preliminary objections can be raised nor it can be entertained by the Court. Here the present petitioner has not filed written statement before the trial Court and straightway moved an application Ex.12. He has therefore submitted that the said application has rightly been rejected by the learned Jt. Civil Judge. 13. In support of his submission he cited various authorities. SCA/1362/2005 17/47 JUDGMENT 14. Mr.Shah has relied on the decision of the Privy Council Vs. National Bank of India Ltd., reported in 1918 Indian Law Reports Vol.XL 598, wherein it is held that “the question raised by this appeal is therefore a pure point of law. Both the District Judge and the Chief Court have clearly stated that the decisions which they have given are based on the allegations in the plaint, and that for the purposes of such decisions these allegations must be taken to be true in fact. This is a necessary consequence of the nature of the plea, and the same understanding must apply to the present judgment. In asking the Court to decide an issue like the present ( which is essentially a demurrer, by whatever name it may be called) the defendants must be taken to admit for the sake of argument that the allegations of the plaintiff in his plaint are true modo et forma. In so doing they reserve to SCA/1362/2005 18/47 JUDGMENT themselves the right to show that these allegations are wholly or partially false in the further stages of the action, should the preliminary point be overruled, but so far as the decision on the preliminary point is concerned everything contained in the plaint must be taken to be true as stated”. The Privy Council further held that, “that being so, it is only necessary to look at the plaint to see that according to English law the contention of the defendants is unsustainable”. 15. Mr.Shah further relied on the decision of Nagpur High Court in the case of Fatehchand Ganeshram Agarwal Vs. Wasudeo Shrawan Dalal, reported in AIR (35) 1948 Nagur 334, wherein it is held that where the defendants ask the Court to decide an issue, such as a preliminary point as to limitation, on the very allegations of the plaintiff, they must be taken to admit for the sake of argument SCA/1362/2005 19/47 JUDGMENT that the allegations of the plaintiff in his plaint are true reserving to themselves the right to show that these allegations are wholly or partially false in the further stage of the action, should the preliminary point be overruled. Hence for the purpose of deciding such point the statement of the defendants has to be ignored. 16. Mr.Shah has further relied on the decision of Allahbad High Court in the case of Smt. Indra Vs. Raj Bali Tiwari, reported in AIR 1966 Allahbad 559, wherein it is held that jurisdiction of a Court or maintainability of a suit is determined on the allegation made in the plaint as has been held in Ananti vs. Chhannu, 1930 All LJ 256: (AIR 1930 All 193) (FB) and D.N.Rege Vs. Muhammad Haider, AIR 1946 All 379 (FB). Allegations or assertions made in the written statement cannot oust the jurisdiction or affect the maintainability of the suit. If after going into the merits of SCA/1362/2005 20/47 JUDGMENT the case of the plaintiff it is found to be false and the defence contention is upheld then in that case the suit has to be dismissed as held in 1930 All LJ 256: (AIR 1930 All 193) (FB). 17. Mr.Shah has further relied on the decision of Hon'ble Supreme Court in the case of Abdul Waheed Khan Vs. Bhawani and others, reported in AIR 1966 SC 1718, wherein it is held that under Section-9 of the Code of Civil Procedure, a civil Court can entertain a suit of a civil nature except a suit of which its cognizance is either expressly or impliedly barred. It is settled principle that it is for the party who seeks to oust the jurisdiction of a civil Court to establish his contention. It is also equally well settled that a statute ousting the jurisdiction of a civil Court must be strictly construed. SCA/1362/2005 21/47 JUDGMENT 18. Mr.Shah in support of his submission that the jurisdiction of the High Court under Article-227 of the Constitution is a supervisory jurisdiction and its scope is very limited, has relied on the decision of the Hon'ble Supreme Court in the case of Mohd. Yunus vs. Mohd. Mustaqim and others, reported in AIR 1984 SC 38, wherein it is held that a mere wrong decision without any thing more is not enough to attract the jurisdiction of the High Court under Art.227. The supervisory jurisdiction conferred on the High Courts under Art.227 of the Constitution is limited “to seeing that an inferior Court or Tribunal functions within the limits of its authority” and not to correct an error apparent on the face of the record, much less an error of law. In exercising the supervisory power under Art.227, the High Court does not act as an Appellate Court or Tribunal. It will not review or re-weigh the evidence upon which the determination of the SCA/1362/2005 22/47 JUDGMENT inferior court or tribunal purports to be based or to correct errors of law in the decision. 19. Mr.Shah, in support of his submission that while considering an application raising preliminary issue filed under Order-14 Rule-2 of the C.P.C., the Court normally decides all the issues together, has relied on the decision of Narendra Ray vs. Kunjabehari Ray and another, reported in AIR 1992 Orissa 217. While deciding an application under Order-14 Rule-2 of the C.P.C. the first question for determination by the trial Court is whether an acceptable case has been made out for taking up the issue in question as a preliminary issue. The Court has to bear in mind that the general rule is to take up all the issues together and piecemeal trial of the issue is to be avoided. It is only in certain exceptional circumstances as provided under O.14 R.2 C.P.C., that the Court should SCA/1362/2005 23/47 JUDGMENT accede to the prayer for taking up one or more of the issues as preliminary issues. If the trial Court decides to allow the prayer of the applicant to take up the issue in question as preliminary issue, then the parties should be called upon to produce evidence in support of their respective cases relating to that issue and on consideration of the materials, if any, produced by the parties, the Court should decide the issue and the suit. 20. Mr.Shah has further relied on the decision of the Rajasthan High Court in the case of M/s.Lakhara and Co. Vs. Shivakaran Bhanwar Lal Kila, reported in AIR 1995 Rajasthan 17, wherein it is held that the question regarding jurisdiction is a mixed question of fact and law and that can only be decided after the parties have adduced their evidence. SCA/1362/2005 24/47 JUDGMENT 21. Mr.Shah has also relied on the decision of this Court in the case of Kaushiklal Nanalal Parikh Vs. Mafatlal Industries Ltd. & Ors, reported in 1995(1) GLR 557, wherein the Court has held that it is settled principle of law that all the issues be decided together. In this connection, the Court has made the reference of a decision of this Court in the case of Saurashtra Cement & Chemical Industries Ltd., Vs. Esma Industries reported in 1989 (2) GLR 1263 and quoted a passage therefrom which is as under:- "After the amendment in this provision in 1976, it becomes clear that the legislature has frowned upon trial of suits piece-meal. The reason is obvious. If on a preliminary issue, the suit is tried and if the issue is decided one way or the other, it would lead to further proceedings by way, of appeal or revision. Number of years would lapse and ultimately when the highest Court which is approached in heirarchy decides the matter SCA/1362/2005 25/47 JUDGMENT one way or the other a stage may be reached where the suit has to be tried further and that would involve lot of delay and the parties would be tried further and that would involve lot of delay and the parties would get completely exhausted and exasperated by passage of time underlying such piece-meal trial of suits. With a view to avoiding such delay and exasperation to the litigating public, this provision of Order 14, Rule 2 in the amended form has been brought in the statute book. Consequently, underlying principle of this provision is laudable and beneficial one. As per this provision, it is indicated by the legislature that suit must be tried as a whole in all issues." 22. Mr.Shah further relied on the decision of the Madras High Court in the case of Major Ramchandran & Anr, Vs. Mrs.Rema Jayarajan, reported in III (1999) CLT 96 (DB), wherein it is held that a preliminary issue had to be SCA/1362/2005 26/47 JUDGMENT decided on the basis of the pleadings, documents and oral evidence, as it is mixed question of law and facts along with other issues as well. 23. Mr.Shah in support of his submission that without filing written statement the defendant cannot raise an objection to jurisdiction and raise a preliminary issue to that effect, has relied on the decision of the Bombay High Court in the case of B.S.I.Ltd., Vs. “CRISTIAN-C” and others, reported in AIR 1999 Bombay 320, When the stage of filing written statement has been reached, then the only option available to the defendants is to file their written statement raising therein their objection regarding jurisdiction. There is no other stage which gives a right to defendants to take out notice of motion taking objection to jurisdiction. If and when the defendants files written statement and raise an SCA/1362/2005 27/47 JUDGMENT objection to jurisdiction then the issue will have to be framed on that point. The defendants will have to convince the Court that the said issue has to be decided as a preliminary issue and if that is done by the Court, then only the objection to jurisdiction can be decided. There is no intermediary stage for