DRT Cannot Cancel Registered Sale Deeds—SARFAESI Does Not Bar Civil Suit Alleging Coercion and Misrepresentation: Delhi High Court

"Even if there’s no FIR or criminal complaint, the claim of coercion and threat must be tested in trial — Civil Court jurisdiction not barred under Section 34 SARFAESI", Delhi High Court held that a civil suit seeking cancellation of a registered sale deed on grounds of coercion and misrepresentation is maintainable, and the bar under Section 34 of the SARFAESI Act does not apply to such reliefs. A Division Bench comprising Justice Anil Kshetrapal and Justice Harish Vaidyanathan Shankar set aside the trial court’s order rejecting the plaint under Order VII Rule 11 of CPC, and restored the suit for trial.

The Court firmly reiterated:

“The jurisdiction to cancel or set aside a registered conveyance is not vested in the DRT, which is a statutory forum of limited jurisdiction.”

In doing so, the Bench applied the ratio of the Supreme Court’s judgment in Central Bank of India & Anr. v. Smt. Prabha Jain, and clarified that DRT proceedings under SARFAESI cannot oust the jurisdiction of civil courts in matters concerning the validity of sale deeds grounded on coercion or fraud.

“Absence of FIR or Detailed Fraud Particulars Not Fatal—Allegations of Threat and Misrepresentation Must Be Tried on Evidence”

In a sharp rebuke to the approach of the learned Single Judge who had earlier dismissed the suit at the threshold, the Division Bench held that allegations of coercion, undue influence, and misrepresentation strike at the root of consent and go to the validity of the sale deed, and thus must be adjudicated at trial, not dismissed summarily.

The Court observed:

“Failure to lodge an FIR or criminal complaint cannot be treated as a ground to reject the plaint. Whether coercion or misrepresentation occurred is a matter of trial, not threshold scrutiny.”

The appellant, Rajiv Sareen, had filed a civil suit for cancellation of a registered sale deed dated 03.04.2018, alleging that he had executed the deed under threat of harm to his children, and had only received Rs. 28 lakhs of the Rs. 2.5 crore consideration claimed in the document. The learned Single Judge had rejected the plaint, primarily citing absence of criminal proceedings and purported lack of specific particulars of fraud.

The appellate court emphatically disagreed:

“The Appellant’s case is not one of fraud simpliciter, but of coercion and undue influence coupled with misrepresentation. The deficiency in pleading particulars, if any, is curable and not fatal at the stage of Order VII Rule 11.”

“Contract Executed Under Threat Is No Contract at All—Free Consent is Foundational, and Cannot Be Presumed”

Delving into contract law, the Court invoked Sections 10 and 14 of the Indian Contract Act, 1872, to hold that free consent is a sine qua non for a valid agreement, and that the absence thereof renders the transaction voidable at the instance of the aggrieved party.

The Court held:

“The plaintiff’s assertion that the sale deed was executed under threat of kidnapping of his children, if proved, would nullify any claim of free consent. These are serious allegations that must be evaluated on evidence.”

The plaint had disclosed coercion, non-payment of consideration, and a fraudulent design masked as a loan arrangement, all of which the Court held were sufficient to constitute a triable issue. The Court cautioned against judicial impatience at the preliminary stage, reiterating that the plaint must be read as a whole, and not subjected to a microscopic scrutiny intended to prematurely disbelieve the plaintiff.

“SARFAESI’s Section 34 Cannot Override Civil Jurisdiction in Matters of Registered Conveyances”

One of the pivotal legal conclusions of the judgment relates to the jurisdictional bar under Section 34 of the SARFAESI Act. The Court categorically held that a suit for cancellation of a sale deed is not within the jurisdiction of the DRT, and therefore cannot be barred by SARFAESI’s exclusive remedies.

The judgment states:

“The DRT has no jurisdiction to adjudicate upon claims relating to cancellation of registered sale deeds. The proper forum for such relief continues to be the civil court.”

It was further clarified that although the sale deed had been used to obtain a loan from Punjab National Bank (PNB), which later initiated SARFAESI proceedings upon the account turning into an NPA, that fact did not alter the civil court’s jurisdiction to entertain a challenge to the very sale deed forming the basis of that security.

The Single Judge had misapplied Section 34, equating the suit with an interference in secured creditor actions. The appellate court corrected that position:

“Since the relief sought was for cancellation of the sale deed itself—an action outside the jurisdictional domain of DRT—the bar under Section 34 is inapplicable.”

“Sections 91 & 92 of Evidence Act Cannot Be Invoked at Pleadings Stage—Oral Evidence May Still Be Relevant If Consent Is Disputed”

The respondents had contended that the suit was barred by Sections 91 and 92 of the Indian Evidence Act, which restrict oral evidence against written documents. The Court rejected this, holding that such evidentiary issues cannot be decided at the stage of Order VII Rule 11.

It observed:

“Sections 91 and 92 deal with the admissibility of evidence, and the bar therein arises only when evidence is led. At the pleading stage, it cannot justify rejection of the plaint.”

Further, the claim that the sale deed was executed involuntarily meant that even oral evidence challenging its validity might be admissible during trial, as the validity of the written instrument itself was in question.

“Likelihood of Success Is Not Relevant—Cause of Action Exists, and Suit Must Proceed”

Refusing to prejudge the case on merits, the Court reiterated the settled principle that plaints cannot be rejected simply because the claim appears unlikely to succeed. So long as the plaint discloses a cause of action and is not barred on its face, trial must be allowed to proceed.

“Even if the Court is of the opinion that the likelihood of success in the suit is remote or minimal, such a view cannot justify rejection of the plaint.”

Accordingly, the Division Bench directed that the suit be restored and that the matter proceed before the Roster Bench without being influenced by any observations made in the appellate order.

Civil Suit Restored — SARFAESI Cannot Be a Shield Against Claims of Coerced Transactions

In conclusion, the Delhi High Court has reinforced vital legal principles: coercion and misrepresentation are factual matters fit for trial, civil courts retain jurisdiction over challenges to registered documents, and Order VII Rule 11 CPC is not a tool to weed out factually contentious suits at inception.

The judgment serves as a timely caution to lower courts against overstepping the bounds of preliminary scrutiny and improperly invoking procedural bars to shut the door on substantive claims of fraud and coercion.

Date of Decision: 13 November 2025