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Section 34 SARFAESI Act: General Bar On Civil Proceedings Not Applicable When Secured Creditor Accused Of Committing Fraud: Delhi High Court

[03 February 2022] The Delhi High Court has held that invocation of Section 13 of the SARFAESI Act results in a general bar to civil court proceedings, in light of Section 34 of the Act. However, this general rule is subject to the exceptions of fraud or absurd claims by the secured creditor.
Justice C. Hari Shankar, quoted the Supreme Court in Mardia Chemicals Ltd. v. UOI (2004), in the context of this invocation:
“To the statutory proscription engrafted in Section 34 of the SARFAESI Act, therefore, the Supreme Court has, in the aforeextracted passage from Mardia Chemicals, chiselled out an exception, in a case in which “for example, the action of the secured creditor is alleged to be fraudulent or his claim may be so absurd and untenable which may not require any probe whatsoever”.
The Court was hearing a plea involving claims of collusion between the Bank and the Defendant to fraudulently execute a mortgage agreement on Plaintiff’s property.
Section 34 provides that 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 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.

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