Pinnacle court says only claim of deceit without complete details not sufficient to get over bar on civil suit under section 34 SARFAESI ACT

The top court noticed that bar under Section 34 SARFAESI Act on filing civil suit is attracted if allegations of 'fraud' are made without any particulars.

Dual Judge bench comprising M. R. SHAH, SANJIV KHANNA in  CIVIL APPEAL NO.6669 OF 2021;Appellant Electrosteel Castings Limited VERSUS Respondent UV Asset Reconstruction Company Limited & Ors Observed major issues in section 34 of SARFAESI ACT.

The court clearly mentioned that as per Order VI Rule 4 in all cases in which the party pleading relies on any misrepresentation, fraud, breach of trust, wilful default, or undue influence, particulars shall be stated in the pleading.

The High Court of madras had rejected a plea and dismissed a suit on the ground that the suit is barred in view of the bar under Section 34 of SARFAESI Act. Challenging this appeal filed in the Supreme Court and the appellant-plaintiff's contention was that in the suit plaintiff had pleaded fraud. The relief sought to declare the assignment agreement null and void which cannot be granted by the DRT under the provisions of the SARFAESI Act. The other side contended that the allegations of 'fraud' are nothing but a clever drafting only with a view to bring the suit maintainable before the civil court despite the bar under Section 34 of the SARFAESI Act.

Court stated in their judgement that having considered the pleadings and averments in the suit more particularly the use of word 'fraud' even considering the case on behalf of the plaintiff, we find that 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 at all and which cannot be approved. Even otherwise it is required to be noted that it is the case on behalf of the plaintiff – appellant herein that in view of the approved resolution plan under IBC and thereafter the original corporate debtor being discharged there shall not be any debt so far as the plaintiff – appellant herein is concerned and therefore the assignment deed can be said to be 'fraudulent'. The aforesaid cannot be accepted. By that itself the assignment deed cannot be said to be 'fraudulent'.