Electrosteel Castings Limited Vs. UV Asset Reconstruction Company Limited & Ors. - (Supreme Court) (26 Nov 2021)

Mere mentioning and using the word ‘fraud’/’fraudulent’ is not sufficient to satisfy the test of ‘fraud’

MANU/SC/1150/2021

Commercial

The original plaintiff has preferred the present appeal against the judgment passed by the High Court, by which the Division Bench of the High Court has dismissed the said appeal preferred by the original Plaintiff rejecting the plaint/suit filed by the Appellant herein – original Plaintiff on the ground that the suit is barred by Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002).

It is the case on behalf of the Plaintiff – Appellant herein that, the suit in which there are allegations of ‘fraud’ with respect to the assignment deed shall be maintainable and the bar under Section 34 of SARFAESI Act shall not be applicable.

As per the settled preposition of law, mere mentioning and using the word ‘fraud’/’fraudulent’ is not sufficient to satisfy the test of ‘fraud’. As per the settled preposition of law such a pleading/using the word ‘fraud’/ ‘fraudulent’ without any material particulars would not tantamount to pleading of ‘fraud’. The allegations of ‘fraud’ are made without any particulars and only with a view to get out of the bar under Section 34 of the SARFAESI Act and by such a clever drafting the Plaintiff intends to bring the suit maintainable despite the bar under Section 34 of the SARFAESI Act, which is not permissible and which cannot be approved.

In the present case, the assignee has already initiated the proceedings under Section 13 which can be challenged by the Plaintiff – appellant herein by way of application under Section 17 of the SARFAESI Act before the DRT on whatever the legally available defences which may be available to it. It will be open for the Appellant herein to initiate appropriate proceedings before the DRT under Section 17 of the SARFAESI Act against the initiation of the proceedings by the assignee – respondent No.1 herein under Section 13 of the SARFAESI Act. The suit filed by the plaintiff – Appellant herein was absolutely not maintainable in view of the bar contained under Section 34 of the SARFAESI Act. Therefore, the courts below have not committed any error in rejecting the plaint/dismissing the suit in view of the bar under Section 34 of the SARFAESI Act. Appeal dismissed.

Tags : SUIT PROVISION BAR