Sec.271 of INCOME TAX ACT = The AO has to initiate penalty proceedings when he found difference between the reported and assessed income - No separate reasons not necessary to record whether to intiate proceedings or not - but the burden lies on the assessee to give suffcient reasons for show cause notice and the burden shift on the Ao then he has to given reasons for imposing penalty = MAK Data P. Ltd. … Appellant Versus Commissioner of Income Tax-II … Respondent = http://judis.nic.in/supremecourt/filename=40925

 Sec.271 of INCOME TAX ACT = The AO has to initiate penalty proceedings when he found difference between the reported and assessed income - No separate reasons not necessary to record whether to intiate proceedings or not - but the burden lies on the assessee to give suffcient reasons for show cause notice and the burden shift on the Ao then he has to given reasons for imposing penalty =
whether the penalty proceedings be initiated or
not during the course of the assessment  proceedings  and  the  AO  is  not required to record his satisfaction in a particular  manner  or  reduce  it into writing. =

whether the  assessee  has  offered  any  explanation  for  concealment  of particulars of income  or  furnishing  inaccurate  particulars  of  income. = Explanation to Section 271(1) raises a presumption of concealment,  when  a difference is noticed by the AO, between reported and assessed income.  - The burden is then on the assessee to show otherwise, by  cogent  and  reliable
evidence.   =

The  department  initiated  penalty  proceedings  for  concealment  of
income and not furnishing true  particulars  of  its  income  under  Section
271(1)(c) of the Income Tax Act.  
During the  course  of  the  hearing,  the
assessee contended that penalty proceedings  are  not  maintainable  on  the
ground that the AO had not recorded his  satisfaction  to  the  effect  that there has been concealment of income/furnishing  of  inaccurate  particulars of  income  by  the  assessee  and  that  the  surrender  of  income  was  a
conditional surrender before any investigation in the matter.   
The  AO  did
not accept those contentions and imposed a penalty of  Rs.14,61,547/-  under Section 217(1)(c) of the Act.  

the scope of Explanation 1 to Section  271(1)(c)  of  the  Act,
which reads as follows :-
      “Explanation 1 – Where  in  respect  of  any  facts  material  to  the
      computation of the total income of any person under this Act, --


      A) Such person fails to offer an explanation or offers an  explanation
         which is  found  by  the  Assessing  Officer  or  the  Commissioner
         (Appeals) or the Commissioner to be false, or


      B) Such  person  offers  an  explanation  which  he  is  not  able  to
         substantiate and fails to prove that such explanation is bona  fide
         and that all the facts relating to the same  and  material  to  the
         computation of his total income have been disclosed  by  him,  then
         the amount added or disallowed in computing  the  total  income  of
         such person as a result thereof shall, for the purposes  of  clause
         (c) of this sub-section, be  deemed  to  represent  the  income  in
         respect of which particulars have been concealed.”



7.    The AO, in our view, shall not be carried away by  the  plea  of  the
assessee like “voluntary  disclosure”,  “buy  peace”,  “avoid  litigation”,
“amicable settlement”, etc. to explain away its conduct.  The  question  is
whether the  assessee  has  offered  any  explanation  for  concealment  of
particulars of income  or  furnishing  inaccurate  particulars  of  income.
Explanation to Section 271(1) raises a presumption of concealment,  when  a
difference is noticed by the AO, between reported and assessed income.  The
burden is then on the assessee to show otherwise, by  cogent  and  reliable
evidence.  When the initial  onus  placed  by  the  explanation,  has  been
discharged by him, the onus shifts on the Revenue to show that  the  amount
in question constituted the income and not otherwise.

Statute  does  not
recognize those types of  defences  under  the  explanation  1  to  Section
271(1)(c) of the Act.  
It is trite law that the voluntary  disclosure  does
not release the Appellant-assessee from the mischief of penal  proceedings.
The law does not provide that when an assessee makes a voluntary disclosure
of his concealed income, he had to be absolved from penalty.

It is the statutory duty of the assessee to  record  all  its
transactions in the books of account, to explain  the  source  of  payments made by it and to declare its true income in the return of income filed  by it from year to year.  
The AO, in our  view,  has  recorded  a  categorical
finding that  he  was  satisfied  that  the  assessee  had  concealed  true
particulars of income and is liable for penalty proceedings  under  Section
271 read with Section 274 of the Income Tax Act, 1961.

10.   The AO has to satisfy 
whether the penalty proceedings be initiated or
not during the course of the assessment  proceedings  and  the  AO  is  not required to record his satisfaction in a particular  manner  or  reduce  it into writing.  
The scope of Section 271(1)(c)  has  also  been  elaborately
discussed by this Court in Union of India vs. Dharmendra Textile Processors
(2008) 13 SCC 369 and CIT vs. Atul Mohan Bindal (2009) 9 SCC 589.

11.   The principle laid  down  by  this  Court,  in  our  view,  has  been
correctly followed by  the  Revenue  and  we  find  no  illegality  in  the
department  initiating  penalty  proceedings  in  the  instant  case.   
We,
therefore, fully agree with the view of the High Court.  Hence, the  appeal
lacks merit and is dismissed.  
There shall be no order as to costs.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                        CIVIL APPEAL NO. 9772 OF 2013
      (Arising out of Special Leave Petition (Civil) No.18389 of 2013)

MAK Data P. Ltd.                             … Appellant

      Versus

Commissioner of Income Tax-II                    … Respondent



                               J U D G M E N T


K.S. Radhakrishnan, J.

1.    Leave granted.

2.    The Appellant-assessee filed his return of income for  the  assessment
year 2004-05 on 27th October, 2004, declaring an  income  of  Rs.16,17,040/-
along with Tax Audit Report.  
 The  case  was  selected  for  scrutiny  and
notices were issued under Sections 143(2) and 142(1) of the Income Tax  Act.
  During the course of the assessment proceedings, 
it  was  noticed  by  the
Assessing  Officer  (AO)  that  
certain  documents   comprising   of  
 share application forms, 
bank statements, 
memorandum of association of  companies,
affidavits, copies of Income Tax Returns and  assessment  orders  and  
blank share transfer deeds duly signed had been impounded.   
These  documents  had been found in the course of survey proceedings under Section 133A  conducted
on 16.12.2003 in the case of M/s Marketing Services  (a  sister  concern  of the assessee).  
The AO then proceeded to seek information from the  assessee
and issued a show-cause notice dated 26.10.2006.
By the show-cause  notice,
the AO sought specific information regarding  the  documents  pertaining  to
share applications  found  in  the  course  of  survey,  particularly,  bank
transfer deeds signed by persons, who had applied for the shares.
Reply  to
show-cause notice was filed on 22.11.2006, in which  the  assessee  made  an offer to surrender a sum of Rs.40.74 lakhs with a view to  avoid  litigation and  buy  peace   and  to  make  an  amicable  settlement  of  the  dispute.
Following are the words used by the assessee:-
      “The offer of surrender is by way of voluntary disclosure  of  without admitting any concealment whatsoever or with any intention to  conceal  and subject to non-initiation of penalty proceedings and prosecution.”


3.    The AO after verifying the  details  and  calculations  of  the  share
application money accepted  by  the  Company  completed  the  assessment  on
29.12.2006 and a sum of Rs.40,74,000/- was brought to tax, as  “income  from other sources” and the total income was assessed at Rs.57,56,700/-.

4.    The  department  initiated  penalty  proceedings  for  concealment  of
income and not furnishing true  particulars  of  its  income  under  Section
271(1)(c) of the Income Tax Act.  
During the  course  of  the  hearing,  the
assessee contended that penalty proceedings  are  not  maintainable  on  the
ground that the AO had not recorded his  satisfaction  to  the  effect  that there has been concealment of income/furnishing  of  inaccurate  particulars of  income  by  the  assessee  and  that  the  surrender  of  income  was  a conditional surrender before any investigation in the matter.   
The  AO  did
not accept those contentions and imposed a penalty of  Rs.14,61,547/-  under Section 217(1)(c) of the Act.  
The assessee  challenged  that  order  before
the Commissioner of Income Tax (Appeals) by filing Appeal No.2/07-08,  which
was dismissed vide order dated 17.2.2010.  
The  assessee  filed  an  appeal
being ITA No.1896/Del/10 before the Income Tax  Appellate  Tribunal,  Delhi.
The Tribunal recorded the following findings :-
      “The assessee’s letter dated 22.11.2006  clearly  mentions  that  “the
      offer of the surrender is without admitting any concealment whatsoever
      or any intention to conceal.”

      The Tribunal took the view that  the  amount  of  Rs.40,74,000/-  was surrendered to settle  the  dispute  with  the  department  and  since  the assessee, for one reason or  the  other,   agreed  or  surrendered  certain amounts for assessment, the imposition of penalty solely on  the  basis  of assessee’s surrender could not  be  sustained.   The  Tribunal,  therefore,
allowed the appeal and set aside the penalty order.

5.    The Revenue took up the matter in appeal before  the  High  Court  by
filing ITA No.415 of 2012.  
The  High  Court  accepted  the  plea  of  the
Revenue that there was absolutely no explanation by the  assessee  for  the
concealed income of Rs.40,74,000/-.  
The High Court took the view  that  in
the absence of any explanation in respect of the  surrendered  income,  the
first part of clause (A) of Explanation 1 is attracted.   Holding  so,  the
judgment of the Tribunal was set aside and the appeal filed by the  Revenue
was allowed.

6.    We have heard counsel on either side.  We fully concur with the  view
of the High  Court  that  the  Tribunal  has  not  properly  understood  or
appreciated
the scope of Explanation 1 to Section  271(1)(c)  of  the  Act,
which reads as follows :-
      “Explanation 1 – Where  in  respect  of  any  facts  material  to  the
      computation of the total income of any person under this Act, --


      A) Such person fails to offer an explanation or offers an  explanation
         which is  found  by  the  Assessing  Officer  or  the  Commissioner
         (Appeals) or the Commissioner to be false, or


      B) Such  person  offers  an  explanation  which  he  is  not  able  to
         substantiate and fails to prove that such explanation is bona  fide
         and that all the facts relating to the same  and  material  to  the
         computation of his total income have been disclosed  by  him,  then
         the amount added or disallowed in computing  the  total  income  of
         such person as a result thereof shall, for the purposes  of  clause
         (c) of this sub-section, be  deemed  to  represent  the  income  in
         respect of which particulars have been concealed.”



7.    The AO, in our view, shall not be carried away by  the  plea  of  the
assessee like “voluntary  disclosure”,  “buy  peace”,  “avoid  litigation”,
“amicable settlement”, etc. to explain away its conduct.  The  question  is
whether the  assessee  has  offered  any  explanation  for  concealment  of
particulars of income  or  furnishing  inaccurate  particulars  of  income.
Explanation to Section 271(1) raises a presumption of concealment,  when  a
difference is noticed by the AO, between reported and assessed income.  The
burden is then on the assessee to show otherwise, by  cogent  and  reliable
evidence.  When the initial  onus  placed  by  the  explanation,  has  been
discharged by him, the onus shifts on the Revenue to show that  the  amount
in question constituted the income and not otherwise.

8.    Assessee has only stated that he had surrendered the  additional  sum
of Rs.40,74,000/- with a  view  to  avoid  litigation,  buy  peace  and  to
channelize the energy and resources towards productive  work  and  to  make
amicable settlement with the  income  tax  department.  
Statute  does  not
recognize those types of  defences  under  the  explanation  1  to  Section
271(1)(c) of the Act.  
It is trite law that the voluntary  disclosure  does
not release the Appellant-assessee from the mischief of penal  proceedings.
The law does not provide that when an assessee makes a voluntary disclosure
of his concealed income, he had to be absolved from penalty.

9.    We are of the view that the surrender of income in this case  is  not
voluntary in the sense that the offer of surrender  was  made  in  view  of
detection made by the AO in the search conducted in the sister  concern  of
the assessee.  In that situation, it cannot be said that the  surrender  of
income was voluntary. AO during the course of  assessment  proceedings  has
noticed that certain documents comprising of share application forms,  bank
statements, memorandum of association of companies, affidavits,  copies  of
Income Tax Returns and assessment orders and  blank  share  transfer  deeds
duly signed, have been impounded in the course of survey proceedings  under
Section 133A conducted on 16.12.2003, in the case of a  sister  concern  of
the assessee.  The survey was conducted more  than  10  months  before  the
assessee filed its return of income.  Had it  been  the  intention  of  the
assessee to make full and true disclosure of  its  income,  it  would  have
filed the return declaring an income inclusive  of  the  amount  which  was
surrendered  later  during  the  course  of  the  assessment   proceedings.
Consequently, it is clear that the assessee had no intention to declare its
true income.
It is the statutory duty of the assessee to  record  all  its
transactions in the books of account, to explain  the  source  of  payments made by it and to declare its true income in the return of income filed  by it from year to year.  
The AO, in our  view,  has  recorded  a  categorical
finding that  he  was  satisfied  that  the  assessee  had  concealed  true
particulars of income and is liable for penalty proceedings  under  Section
271 read with Section 274 of the Income Tax Act, 1961.

10.   The AO has to satisfy 
whether the penalty proceedings be initiated or
not during the course of the assessment  proceedings  and  the  AO  is  not required to record his satisfaction in a particular  manner  or  reduce  it into writing.  
The scope of Section 271(1)(c)  has  also  been  elaborately
discussed by this Court in Union of India vs. Dharmendra Textile Processors
(2008) 13 SCC 369 and CIT vs. Atul Mohan Bindal (2009) 9 SCC 589.

11.   The principle laid  down  by  this  Court,  in  our  view,  has  been
correctly followed by  the  Revenue  and  we  find  no  illegality  in  the
department  initiating  penalty  proceedings  in  the  instant  case.   
We,
therefore, fully agree with the view of the High Court.  Hence, the  appeal
lacks merit and is dismissed.  
There shall be no order as to costs.


                             ……..……………………..J.
                                        (K.S. Radhakrishnan)


                                        ……………………………J.
                                        (A.K. Sikri)
New Delhi,
October 30, 2013.

Civil court has no jurisdiction against the properties covered under Securitisation Act. = Jagdish Singh …….. Appellant Versus Heeralal and others ……. Respondents - http://judis.nic.in/supremecourt/filename=40924

Civil court  has no jurisdiction against the properties covered under Securitisation Act.=

 Section 13, as already indicated, deals with the  enforcement  of  the security interest without the intervention of the court or tribunal  but  in accordance with the provisions of the Securitisation Act.

22.   Statutory interest is being created in favour of the secured  creditor on the secured assets and when the  secured  creditor  proposes  to  proceed against the secured assets, sub-section (4) of Section 13 envisages  various measures to secure the borrower’s debt.  One of  the  measures  provided  by
the statute is to take  possession  of  secured  assets  of  the  borrowers,including the right to transfer by way of  lease,  assignment  or  realizing the secured assets.  
Any person aggrieved by any of the “measures”  referred
to in sub-section (4) of Section 13 has got a statutory right of  appeal  to the DRT under Section 17.  
The opening portion of Section 34 clearly  states
that no civil court  shall  have  jurisdiction  to  entertain  any  suit  or proceeding “in respect of any matter” which a DRT or an  Appellate  Tribunal is  empowered  by  or  under  the  Securitisation  Act  to  determine.   The
expression ‘in respect of any matter’ referred to in Section 34  would  take in the “measures” provided under  sub-section  (4)  of  Section  13  of  the Securitisation Act.  
Consequently  if  any  aggrieved  person  has  got  any
grievance against any “measures” taken by  the  borrower  under  sub-section (4) of Section 13, the remedy open to him is to  approach  the  DRT  or  the Appellate  Tribunal  and  not  the  civil  court.   
Civil  Court   in   such
circumstances has no jurisdiction to entertain any suit  or  proceedings  in respect of those matters which fall under sub-section (4) of Section  13  of
the Securitisation Act because those matters fell  within  the  jurisdiction of the DRT and the  Appellate  Tribunal.  
 Further,  Section  35  says,  the
Securitisation Act overrides other laws, if they are inconsistent  with  the provisions of that Act, which takes in Section 9 CPC as well.

“34.     Civil Court not to have  jurisdiction  -  
No  civil  court
        shall have jurisdiction to entertain  any  suit  or  proceeding  in
        respect of any matter  which  a  Debts  Recovery  Tribunal  or  the
        Appellate Tribunal is empowered by or under this Act  to  determine
        and no injunction shall be granted by any court or other  authority
        in respect of any action taken or to be taken in pursuance  of  any
        power conferred by or under this Act or under the Recovery of Debts
        Due to Banks and Financial Institutions Act, 1993 (51 of 1993).


20.   The scope of Section 34 came up for consideration  before  this  Court
in Mardia Chemicals Ltd. (supra) and this court held as follow:
         “50. 
It has also been submitted that an  appeal  is  entertainable
        before the Debts Recovery Tribunal  only  after  such  measures  as
        provided in sub-section (4) of Section 13 are taken and Section  34
        bars to entertain any proceeding in respect of a matter  which  the
        Debts Recovery Tribunal or the Appellate Tribunal is  empowered  to
        determine. 
Thus before any action or measure is  taken  under  sub-
        section (4) of Section 13, it is submitted by Mr Salve, one of  the
        counsel for the respondents that there would be no bar to  approach
        the civil court. 
Therefore, it cannot be said  that  no  remedy  is
        available to the borrowers. We, however, find that this  contention
        as advanced by Shri Salve is not correct. 
A full reading of Section
        34 shows that the jurisdiction of the  civil  court  is  barred  in
        respect of matters which a Debts Recovery Tribunal or an  Appellate
        Tribunal is empowered to determine in respect of any  action  taken
        “or to be taken in pursuance of  any  power  conferred  under  this
        Act”. 
That is to say, the prohibition covers even matters which can
        be taken cognizance of by the Debts  Recovery  Tribunal  though  no
        measure in that direction has so far been taken  under  sub-section
        (4) of Section 13. 
It is further  to  be  noted  that  the  bar  of
        jurisdiction is in respect of a  proceeding  which  matter  may  be
        taken to the Tribunal. 
Therefore, any matter in respect of which an
        action may be taken even later on, the civil court  shall  have  no
        jurisdiction to entertain any proceeding thereof. 
The bar of  civil
        court  thus  applies  to  all  such  matters  which  may  be  taken
        cognizance of by the Debts  Recovery  Tribunal,  apart  from  those
        matters in which measures have already been taken under sub-section
        (4) of Section 13.”

We are of the view that 
the civil  court  jurisdiction  is  completely
barred, so far as the “measure” taken  by  a  secured  creditor  under  sub-
section (4) of Section 13  of  the  Securitisation  Act,  against  which  an
aggrieved person has a right of appeal  before  the  DRT  or  the  Appellate
Tribunal. to determine as to whether there has been any  illegality  in  the
“measures” taken.  
The  bank,  in  the  instant  case,  has  proceeded  only
against secured assets of the borrowers on which  no  rights  of  Respondent Nos.6 to 8 have been  crystalised,  before  creating  security  interest  in respect of the secured assets.  
In such circumstances, we are  of  the  view
that the High Court was  in error in  holding  that  only  civil  court  has jurisdiction to examine as to whether the “measures” taken  by  the  secured creditor under sub-section (4) of Section 13 of the Securitisation Act  were legal or not.   
In  such  circumstances,  the  appeal  is  allowed  and  the
judgment of the High Court is set aside.   There shall be  no  order  as  to
costs.


                                                                  REPORTABLE
                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                        CIVIL APPEAL NO. 9771 OF 2013
        (Arising out of Special Leave Petition (Civil) No.18 of 2011)


Jagdish Singh                                …….. Appellant

                                   Versus

Heeralal and others                          ……. Respondents



                               J U D G M E N T


K.S. Radhakrishnan, J.

      Leave granted.


2.    The appellant herein was the  auction  purchaser,  being  the  highest
bidder for Rs.18,01,000/-, in respect of the land admeasuring  one  acre  in
Khasra Nos.104/3 and 105/2, Patwari Halka No.4, Village Segaon, Anjad  Road,
Barwani, M.P., which was brought to sale for recovery of loan amounts  under
the provisions of the Securitisation and Reconstruction of Financial  Assets
and  Enforcement  of  Security  Interest   Act,   2002   (for   short   “the
Securitisation Act”).  
The auction was confirmed by the bank  on  08.11.2005
on the appellant’s depositing Rs.2,90,250/- by 09.11.2005 and remaining  75%
within 15 days.  
The appellant was not put in possession of the property  in
question even though the auction was confirmed.

3.    The appellant – auction purchaser then came to  know  that  Respondent
Nos.1 to 5 herein have  filed  a  Civil  Suit  No.16A/07  in  the  Court  of
District Judge, Barwani District for a declaration of title,  partition  and
permanent injunction against Respondent Nos.7 to 9 and others in  which  the
appellant and the bank were also made parties.  
Following  are  the  reliefs
sought for in the said civil suit:
        “(A)     Decree may be  passed  in  favour  of  the  plaintiff  and
        against the defendants for declaration of title to this effect that
        one acre land in survey No.104/3 and 105/2 described in plaint para
        4  (a)  is  undivided  joint  family  property  of  plaintiff   and
        defendants No.1 to 4 and the defendants have no right  to  mortgage
        it or attachment and auction of the same against any loan  recovery
        by defendant No.5 and if defendants No.1 to 5  might  have  created
        any charge on  the  said  land  then  it  is  not  binding  on  the
        plaintiff.


        (B)      Decree of  partition  may  be  passed  in  favour  of  the
        plaintiffs and against the defendants for division of the suit land
        by metes and bounds and decree may be  passed  for  separating  the
        land of title of the plaintiffs and mutation  effected  in  revenue
        papers.


        (C)      Decree of permanent injunction may be passed in favour  of
        the plaintiffs against the defendant that the defendants shall not,
        directly or indirectly, transfer, auction  or  interfere  over  the
        suit land of the plaintiff in any manner.


        (D)      Costs of the suit may be awarded against the defendants.


        (E)      Other relief which the Hon’ble Court may deem  proper  may
        be granted to the plaintiff against the defendants.”

4.    Respondent Nos.7 to 9 herein, in the meanwhile, filed  an  application
before the Debt Recovery Tribunal (for  short  “the  DRT”),  Jabalpur  under
Section 17 of the Securitisation  Act  challenging  the  sale  notice  dated
08.11.2005.  The application was opposed  by  the  bank  and  the  same  was
dismissed by the DRT vide its order dated 21.07.2006.

5.    Respondent Nos.6 and  7  (the  Bank)  filed  a  preliminary  objection
before the civil court stating that in view of Section 13 read with  Section
34 of the Securitisation  Act,  the  civil  court  has  no  jurisdiction  to
entertain the suit.  
The court, therefore, framed the following issues:
        “Whether under the provisions of Section 34 &  35  of  SARFAESI  Act
        2002 this court does not have the jurisdiction to decide the suit as
        mentioned in special pleadings in para 10 of the  written  statement
        of defendant No.10 and also mentioned in  para  15  of  the  written
        statement of defendant Nos.6 & 7.”

6.    The civil court upheld the preliminary objection stating that  if  the
plaintiffs had any right, they ought to have filed an appeal  under  Section
17 of the DRT Act and not a suit in view of the specific  bar  contained  in
Section 34 of the Securitisation Act.
Civil  court,  therefore,  passed  an
order on 18.01.2008 holding that the suit is not  maintainable  and,  hence,
the application preferred by the bank under Order 7 Rule  11  of  the  Civil
Procedure Code (for short “the CPC”) was allowed.


7.    Aggrieved by the said order, Respondent Nos.1 to 5 herein filed  Civil
First Appeal No.130/08 before the High Court of Madhya  Pradesh  at  Indore.
The High Court, however, allowed the appeal.  
The operative portion  of  the judgment reads as follow:
        “I have perused the contents of the plaint from the record  of  the
        case.  
A bare perusal of the plaint indicates that  the  plaintiffs
        have raised the question of title, on  the  basis  of  Joint  Hindu
        Family property and they being  the  members  of  the  Joint  Hindu
        Family, it has been pleaded by them that the property  in  question
        had  been  acquired  through  the  earnings  of  the  joint  family
        property.  
On that basis, it has been maintained by them  that  the
        property in question was liable to be treated as Joint Hindu Family
        property, and not the exclusive property  of  the  defendants.   
In
        these circumstances, on the bare perusal of  the  contents  of  the
        plaint, it cannot be suggested at all that the civil suit, filed by
        the  plaintiffs,  is   barred   under   any   provisions   of   the
        Securitisation  and  Reconstruction   of   Financial   Assets   and
        Enforcement of Security Interest Act, 2000, or that civil court has
        no jurisdiction in the matter.”

8.    Aggrieved by the same, this appeal  has  been  preferred.   Shri  A.K.
Chitale, learned senior counsel appearing for the appellant, submitted  that
the High Court has not properly appreciated the scope of Section 34  of  the
Securitisation Act and has completely over-looked the  principle  laid  down
by this Court in various Judgments with regard to the  scope  of  Section  9
CPC vis-à-vis Section 34 of the Securitisation Act.  Reference was  made  to
the Judgments of this court in Mardia Chemicals  and  others  v.   Union  of
india and others (2004) 4 SCC 311, Central Bank of India v. State of  Kerala
and others (2009) 4 SCC 94, United Bank of India  v.  Satyavati  Tondon  and
others (2010) 8 SCC 110 and Authorised Officer,  Indian  Overseas  Bank  and
others v. Ashok  Saw  Mill   (2009)  8  SCC  366.   Learned  senior  counsel
submitted that the appellant is a bona fide  purchaser  for  value  and  the
sale was confirmed in his favour as early as  on  08.11.2005.   Further,  it
was pointed out that the application preferred  by  Respondent  Nos.7  to  9
before the DRT, challenging the  sale  notice  dated  08.11.2005,  was  also
dismissed by the DRT on 21.07.2006.  Consequently, the High  Court  was  not
justified in interfering with the order passed by the District Judge.

9.    Shri Sanjay Parikh, learned counsel appearing for the respondents,  on
the other hand, submitted that the High Court has  rightly  interfered  with
the order of the District Judge after having found that the civil court  has
got  the  jurisdiction  to  deal  with  the  rights  of  the  respondents  –
plaintiffs.  Learned counsel submitted that the  High  Court  has  correctly
appreciated the scope of Section 34 of the  Securitisation  Act.   Reference
was made to the Judgments of this  Court  in  Nahar  Industrial  Enterprises
Limited v. Hongkong Shanghai Banking Corporation (2009) 8  SCC  646,  Indian
Bank v. ABS Marine Products Pvt. Ltd. (2006)  5  SCC  72  and  also  to  the
Mardia Chemicals Ltd. (supra).  Learned  counsel  submitted  that  the  DRT,
exercising powers under Section 17 of the Securitisation Act, cannot  decide
the rights of Respondent Nos.1 to 5 vis-à-vis Respondent Nos.7  to  9  in  a
proceeding under Section 17 of the Securitisation Act  and  civil  court  is
the right forum to decide as to whether the  secured  assets  are  ancestral
properties of a Hindu Undivided Family (HUF) and they were acquired  through
the earnings out of the joint family properties.

Discussion

10.   The Bank of India had advanced a loan of Rs.25 lakhs to  M/s  Guru  Om
Automobiles,  10th  respondent  herein,  through  its  proprietor,  the  6th
respondent on 17.02.2000.  
The  loan  was  secured  by  equitable  mortgage
executed by Respondent Nos.7 to 9 in respect of land measuring one  acre  in Khasra No.104/3 and 105/2, Patwari Halka No.5, Village Seagon,  Anjad  Road, Barwani, MP.  
Respondent Nos.6 to 8 had also created equitable  mortgage  on
three houses, which were in their respective names.   
Original  title  deeds
of all the above-mentioned properties were duly deposited with the  bank  at the time of availing of the loan.  
Since  they  committed  default  in  re-
paying the  loan,  the  bank  issued  notice  under  Section  13(2)  of  the
Securitisation Act and took steps under Section 13(4) of the  Securitisation
Act in respect  of  properties  on  01.03.2004.  
Auction  notice  was  duly
published in the newspapers on 30.09.2005.
No objection was raised  by  the
plaintiffs and the suit land was auctioned on 08.11.2005, which was  settled in favour of the highest bidder – the appellant herein.  The entire  auction
price was paid by the auction purchaser and the sale in his favour was  duly
confirmed.
Respondent Nos.7 to 9 challenged the  sale  notice,  as  already
indicated, by filing an application No.19/2005  before  the  DRT,  Jabalpur, which was dismissed on 21.07.2006. 
No  appeal  was  preferred  against  that order and that order has attained finality.

11.   We notice, at this juncture, Respondent Nos.1 to 5  filed  Civil  Suit
No.16A/07  in  the  Court  of  the  District  Judge,  Barwani  against   the
appellant, as well as the bank and Respondent Nos.6 to 9, alleging that  the
family members of Respondent Nos.1  to  9  herein  being  sons/grandsons  of
deceased Premji, constituted a HUF engaged in agriculture.  
 It  was  stated
that the said properties were purchased in the names of Respondent Nos.7  to 9 out of the funds of HUF and  house  Nos.41/1,  42/3  and  42/2  were  also purchased in the names of Respondent Nos.6 to 8  respectively,  out  of  the funds of HUF and, therefore, the properties of HUF.
 But,  the  facts  would
clearly indicate that the properties referred to  above  were  purchased  by
Respondent Nos.6 to 8 in their individual names, long  after  the  death  of
Premji and that too by registered sale deeds and  no claim was ever made  at
any stage by any member of the HUF that the suit land  was  a  HUF  property
and not the individual property.  
Respondent Nos.7 to 9 had purchased  those
lands vide sale deed dated  14.09.1999  and  the  6th  respondent  had  also purchased  in  his  individual  name  House  No.42/1  on   31.03.1998   vide registered sale deed.  Similarly, Respondent No.7 had also  purchased  House No.42/3 in his individual name.  
No  claim,  whatsoever,  was  made  at  any
stage by any member of the family that those properties and  buildings  were
HUF properties and not the individual properties of Respondent  Nos.6  to  8
herein.

12.   We find that the bank had advanced  loans  on   the  strength  of  the
above-mentioned documents which stood in the names of  Respondent  Nos.6  to
9.  Due to non-repayment of the loan amount, the  Bank  can  always  proceed
against the secured assets.

13.   Security interest, within  the  meaning  of  Section  2(zf)  has  been
created in respect of the  above  mentioned  properties  which  are  secured
assets within the meaning  of  Section  2(zc),  in  favour  of  the  secured
creditor (the bank) within the meaning of Section 2(zd).  On failure to  re-
pay, the bank, secured creditor can always  enforce  its  security  interest
over the secured assets.

14.   Secured asset is defined under Section  2(zc)  of  the  Securitisation
Act to mean the property on which security interest  is  created.    Section
13(1)  of  the  Securitisation  Act  states  that  notwithstanding  anything
contained in Section 69 or 69A of the Transfer of Property  Act,  1882,  any
security  interest  created  in  favour  of  any  secured  creditor  may  be
enforced, without  the  intervention  of  the  court  or  tribunal  by  such
creditor, in accordance with  the  provisions  of  the  Act.   In  case  the
borrower fails to discharge his liability, the bank can  take  the  measures
provided in Section 13(4) of the Securitisation  Act  for  recovery  of  the
loan amount.
The “measures” available for enforcement of security  interest
is dealt with in the following provision:
        13. Enforcement of security interest –
        (1) to (3)     xxx  xxx   xxx
        (4) In case the borrower fails to discharge his liability  in  full
        within  the  period  specified  in  sub-section  (2),  the  secured
        creditor may take recourse to one or more of the following measures
        to recover his secured debt, namely:--


        (a) take possession of the secured assets of the borrower including
        the right to transfer by way  of  lease,  assignment  or  sale  for
        realising the secured asset;


        (b) take over the  management  of  the  business  of  the  borrower
        including the right to transfer by way of lease, assignment or sale
        for realising the secured asset:


              PROVIDED  that  the  right  to  transfer  by  way  of  lease,
        assignment or sale shall be exercised only  where  the  substantial
        part of the business of the borrower is held as  security  for  the
        debt:


             PROVIDED further that where the management  of  whole  of  the
        business or part of the business is severable, the secured creditor
        shall take over the management of such  business  of  the  borrower
        which is relatable to the security or the debt;


        (c) appoint any person (hereafter referred to as the  manager),  to
        manage the secured assets the possession of which  has  been  taken
        over by the secured creditor;


        (d) require at any time by notice in writing, any  person  who  has
        acquired any of the secured assets from the borrower and from  whom
        any money is due or may become due to  the  borrower,  to  pay  the
        secured creditor, so much of the money as is sufficient to pay  the
        secured debt.”


15.   Section 17 of the Securitisation Act confers a right of appeal to  any
person, including the borrower, if that person is aggrieved by  any  of  the
“measures” referred to in  sub-section  (4)  of  Section  13  taken  by  the
Secured  Creditor.  
 The  operative  portion  of  Section  17  is  extracted
hereinbelow for ready reference:
        “17. Right  to  appeal  :  (1)  Any  person  (including  borrower),
        aggrieved by any of the measures referred to in sub-section (4)  of
        section 13 taken by the secured creditor or his authorised  officer
        under this Chapter, may make an application along with such fee, as
        may  be  prescribed  to  the   Debts   Recovery   Tribunal   having
        jurisdiction in the matter within forty-five days from the date  on
        which such measure had been taken:


        PROVIDED that different fees  may  be  prescribed  for  making  the
        application by the borrower and the person other than the borrower.




        Explanation : For the removal of doubts, it is hereby declared that
        the communication of the reasons to the  borrower  by  the  secured
        creditor for not having accepted his representation or objection or
        the  likely  action  of  the  secured  creditor  at  the  stage  of
        communication of reasons to the  borrower  shall  not  entitle  the
        person (including borrower) to make an application  to  the   Debts
        Recovery Tribunal under sub-section (1) of Section 1.


        (2) The Debts Recovery Tribunal shall consider whether any  of  the
        measures referred to in sub-section (4) of section 13 taken by  the
        secured creditor for enforcement of security are in accordance with
        the provisions of this Act and the rules made thereunder.


        (3) If, the Debts Recovery Tribunal, after examining the facts  and
        circumstances of the case and evidence  produced  by  the  parties,
        comes to the conclusion that any of the measures referred to in sub-
        section (4) of section 13, taken by the secured creditor are not in
        accordance with the provisions of  this  Act  and  the  rules  made
        thereunder, and  require  restoration  of  the  management  of  the
        secured assets to the borrower or restoration of possession of  the
        secured assets to the  borrower,  it  may  by  order,  declare  the
        recourse to any  one or more measures referred  to  in  sub-section
        (4) of section 13  taken by  the  secured  assets  as  invalid  and
        restore the possession of the secured assets  to  the  borrower  or
        restore the management of the secured assets to the   borrower,  as
        the case may be, and pass such order as it may consider appropriate
        and necessary in relation to  any of  the  recourse  taken  by  the
        secured creditor under sub-section (4) of section 13.


        (4) If, the Debts Recovery Tribunal declares the recourse taken  by
        a secured creditor under sub-section  (4)  of  section  13,  is  in
        accordance with the provisions of  this  Act  and  the  rules  made
        thereunder, then, notwithstanding anything contained in  any  other
        law for the time being in force,  the  secured  creditor  shall  be
        entitled to take recourse to one or more of the measures  specified
        under sub-section (4) of section 13 to recover his secured debt.


        (5) Any application made under sub-section (1) shall be dealt  with
        by the Debts Recovery Tribunal as  expeditiously  as  possible  and
        disposed of within sixty days from the date of such application:


        PROVIDED that the Debts Recovery Tribunal may, from time  to  time,
        extend the said period for reasons to be recorded in  writing,  so,
        however, that the total period of pendency of the application  with
        the Debts Recovery Tribunal, shall not exceed four months from  the
        date of making of such application made under sub-section (1).


        (6) If the application is not disposed of  by  the  Debts  Recovery
        Tribunal within the period of four  months  as  specified  in  sub-
        section (5), any party to the application may make an  application,
        in such form as may be prescribed, to the  Appellate  Tribunal  for
        directing the Debts Recovery Tribunal for expeditious  disposal  of
        the application pending before the Debts Recovery Tribunal and  the
        Appellate Tribunal may, on such  application,  make  an  order  for
        expeditious disposal  of  the  pending  application  by  the  Debts
        Recovery Tribunal.


        (7) Save as otherwise provided in  this  Act,  the  Debts  Recovery
        Tribunal shall, as  far  as  may  be,  dispose  of  application  in
        accordance with the provisions of the  Recovery  of  Debts  Due  to
        Banks and Financial Institutions  Act,  1993  and  the  rules  made
        thereunder.”


16.   Any person aggrieved by any order made by the  DRT  under  Section  17
may also prefer an appeal to the Appellate Tribunal under Section 18 of  the Act.

17.   The expression ‘any person’ used in Section 17 is of wide  import  and
takes within its fold not only the borrower but also the  guarantor  or  any
other person who may be affected by action taken under Section 13(4) of  the
Securitisation Act.  Reference may be made to the Judgment of this Court  in
 Satyavati Tondon’s case (supra).

18.   Therefore, the expression ‘any  person’  referred  to  in  Section  17
would take in the plaintiffs in the suit as well.  
Therefore,  irrespective of the question 
whether the civil suit is maintainable  or  not,  under  the
Securitisation Act itself, a remedy is provided  to  such  persons  so  that they can invoke the provisions of Section 17 of the Securitisation  Act,  in case the bank (secured creditor) adopt any measure  including  the  sale  of the secured assets, on which the plaintiffs claim interest.

19.    Section  34  of  the  Securitisation  Act  ousts  the   civil   court
jurisdiction.  For  easy  reference,  we  may  extract  Section  34  of  the
Securitisation Act, which is as follow:
        “34.     Civil Court not to have  jurisdiction  -  
No  civil  court
        shall have jurisdiction to entertain  any  suit  or  proceeding  in
        respect of any matter  which  a  Debts  Recovery  Tribunal  or  the
        Appellate Tribunal is empowered by or under this Act  to  determine
        and no injunction shall be granted by any court or other  authority
        in respect of any action taken or to be taken in pursuance  of  any
        power conferred by or under this Act or under the Recovery of Debts
        Due to Banks and Financial Institutions Act, 1993 (51 of 1993).


20.   The scope of Section 34 came up for consideration  before  this  Court
in Mardia Chemicals Ltd. (supra) and this court held as follow:
         “50. 
It has also been submitted that an  appeal  is  entertainable
        before the Debts Recovery Tribunal  only  after  such  measures  as
        provided in sub-section (4) of Section 13 are taken and Section  34
        bars to entertain any proceeding in respect of a matter  which  the
        Debts Recovery Tribunal or the Appellate Tribunal is  empowered  to
        determine. 
Thus before any action or measure is  taken  under  sub-
        section (4) of Section 13, it is submitted by Mr Salve, one of  the
        counsel for the respondents that there would be no bar to  approach
        the civil court. 
Therefore, it cannot be said  that  no  remedy  is
        available to the borrowers. We, however, find that this  contention
        as advanced by Shri Salve is not correct. 
A full reading of Section
        34 shows that the jurisdiction of the  civil  court  is  barred  in
        respect of matters which a Debts Recovery Tribunal or an  Appellate
        Tribunal is empowered to determine in respect of any  action  taken
        “or to be taken in pursuance of  any  power  conferred  under  this
        Act”. 
That is to say, the prohibition covers even matters which can
        be taken cognizance of by the Debts  Recovery  Tribunal  though  no
        measure in that direction has so far been taken  under  sub-section
        (4) of Section 13. 
It is further  to  be  noted  that  the  bar  of
        jurisdiction is in respect of a  proceeding  which  matter  may  be
        taken to the Tribunal. 
Therefore, any matter in respect of which an
        action may be taken even later on, the civil court  shall  have  no
        jurisdiction to entertain any proceeding thereof. 
The bar of  civil
        court  thus  applies  to  all  such  matters  which  may  be  taken
        cognizance of by the Debts  Recovery  Tribunal,  apart  from  those
        matters in which measures have already been taken under sub-section
        (4) of Section 13.”

21.   Section 13, as already indicated, deals with the  enforcement  of  the
security interest without the intervention of the court or tribunal  but  in
accordance with the provisions of the Securitisation Act.

22.   Statutory interest is being created in favour of the secured  creditor
on the secured assets and when the  secured  creditor  proposes  to  proceed
against the secured assets, sub-section (4) of Section 13 envisages  various
measures to secure the borrower’s debt.  
One of  the  measures  provided  by
the statute is to take  possession  of  secured  assets  of  the  borrowers,
including the right to transfer by way of  lease,  assignment  or  realizing
the secured assets.  
Any person aggrieved by any of the “measures”  referred
to in sub-section (4) of Section 13 has got a statutory right of  appeal  to
the DRT under Section 17.  
The opening portion of Section 34 clearly  states
that no civil court  shall  have  jurisdiction  to  entertain  any  suit  or
proceeding “in respect of any matter” which a DRT or an  Appellate  Tribunal
is  empowered  by  or  under  the  Securitisation  Act  to  determine.   The
expression ‘in respect of any matter’ referred to in Section 34  would  take
in the “measures” provided under  sub-section  (4)  of  Section  13  of  the
Securitisation Act.  
Consequently  if  any  aggrieved  person  has  got  any
grievance against any “measures” taken by  the  borrower  under  sub-section
(4) of Section 13, the remedy open to him is to  approach  the  DRT  or  the
Appellate  Tribunal  and  not  the  civil  court.   
Civil  Court   in   such
circumstances has no jurisdiction to entertain any suit  or  proceedings  in
respect of those matters which fall under sub-section (4) of Section  13  of
the Securitisation Act because those matters fell  within  the  jurisdiction
of the DRT and the  Appellate  Tribunal.  
 Further,  Section  35  says,  the
Securitisation Act overrides other laws, if they are inconsistent  with  the
provisions of that Act, which takes in Section 9 CPC as well.

23.   We are of the view that
the civil  court  jurisdiction  is  completely
barred, so far as the “measure” taken  by  a  secured  creditor  under  sub-
section (4) of Section 13  of  the  Securitisation  Act,  against  which  an
aggrieved person has a right of appeal  before  the  DRT  or  the  Appellate
Tribunal. to determine as to whether there has been any  illegality  in  the
“measures” taken.
The  bank,  in  the  instant  case,  has  proceeded  only
against secured assets of the borrowers on which  no  rights  of  Respondent Nos.6 to 8 have been  crystalised,  before  creating  security  interest  in respect of the secured assets.  
In such circumstances, we are  of  the  view
that the High Court was  in error in  holding  that  only  civil  court  has jurisdiction to examine as to whether the “measures” taken  by  the  secured creditor under sub-section (4) of Section 13 of the Securitisation Act  were legal or not.   
In  such  circumstances,  the  appeal  is  allowed  and  the
judgment of the High Court is set aside.   There shall be  no  order  as  to
costs.


                 ……..……………………..J.
                                        (K.S. Radhakrishnan)



                             ……………………………J.
                                        (A.K. Sikri)
New Delhi,
October 30, 2013.