ELECTROSTEEL CASTINGS LIMITED versus UV ASSET RECONSTRUCTION COMPANY LIMITED & ORS.

Citation: [2021] 7 S.C.R. 532 · Decided: 26-11-2021 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Dismissed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2021] 7 S.C.R.
ELECTROSTEEL CASTINGS LIMITED
v.
UV ASSET RECONSTRUCTION COMPANY LIMITED & ORS.
(Civil Appeal No. 6669 of 2021)
NOVEMBER 26, 2021
[M. R. SHAH AND SANJIV KHANNA, JJ.]
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002: s.34 – Civil court not to
have jurisdiction – On facts, suit filed by the appellant-Guarantor
seeking declaration that the Assignee acquired no rights against
the applicant under the Assignment Deed and that the Assignee is
not a secured creditor vis-à-vis the applicant – Appellant’s case
that in view of the approved resolution plan under IBC, the original
corporate debtor being discharged, there shall not be any debt so
far as the appellant-guarantor is concerned and thus, the assignment
deed assigning all the rights, title and interest in all the financial
assistance granted by financial creditor from time to time to corporate
debtor in favour of assignee, was ‘fraudulent’ – Maintainability of
the suit – Held: Mere allegations of fraud without material
particulars not sufficient to get over bar on civil suit u/s.34 – A
pleading/using the word ‘fraud’/‘fraudulent’ without any material
particulars would not tantamount to pleading of ‘fraud’ – On facts,
allegations of ‘fraud’ made without any particulars and clever draft
prepared to bring the suit maintainable despite the bar u/s. 34, is
not permissible and cannot be approved – It cannot be said that the
assignment deed is ‘fraudulent’ – In any case, whether there shall
be legally enforceable debt so far as the appellant is concerned
even after the approved resolution plan against the corporate debtor,
and/or the assignee can be said to be secured creditor, such questions
required to be dealt with by the DRT in the proceedings initiated
under SARFAESI Act – Assignee has already initiated the proceedings
u/s.13 which can be challenged by the appellant – Thus, the High
Court justified in rejecting plaint/dismissing the suit in view of bar
u/s.34 of the Act.
[2021] 7 S.C.R. 532
532
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Dismissing the appeal, the Court
HELD: 1.1 It is the case on behalf of the plaintiff-appellant
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. However, it
is required to be noted that except the words used ‘fraud’/
’fraudulent’ there are no specific particulars pleaded with respect
to the ‘fraud’. It appears that by a clever drafting and using the
words ‘fraud’/’fraudulent’ without any specific particulars with
respect to the ‘fraud’, the plaintiff-appellant intends to get out of
the bar under Section 34 of the SARFAESI Act and wants the
suit to be maintainable. 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’.
[Paras 7.1 and 7.2][543-D-H]
1.2 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, it is found 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 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 is concerned and therefore the assignment deed
can be said to be ‘fraudulent’. The said cannot be accepted. By
that itself the assignment deed cannot be said to be ‘fraudulent’.
In any case, whether there shall be legally enforceable debt so
far as the plaintiff-appellant is concerned even after the approved
resolution plan against the corporate debtor still there shall be
the liability of the plaintiff and/or the assignee can be said to be
secured creditor and/or whether any amount is due and payable
by the plaintiff, are all questions which are requ

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