High Court of Karnataka Sets Aside Temporary Injunction - Civil Court lacks jurisdiction in matters that fall under the SARFAESI Act

In a significant ruling, the High Court of Karnataka has overturned a temporary injunction granted by the Trial Court in a mortgage dispute involving The Mahila Co-operative Bank Ltd. And Sri Venugopal N., among others. The High Court observed that the “Trial Court committed an error in granting an order of temporary injunction,” thereby allowing the appeal filed by the bank.

The case revolved around the jurisdictional conflict between the Civil Court and the Debt Recovery Tribunal (DRT) under the SARFAESI Act, the nature of the property in question, and the validity of a temporary injunction. The High Court clarified that the Civil Court lacks jurisdiction in matters that fall under the SARFAESI Act, stating, “Section 34 of the SARFAESI Act imposes a bar on the Civil Court to grant any relief of injunction.”

The Court also delved into the nature of the property, stating that it was not ancestral but a “separate property of the defendant No.1.” This clarification is crucial as the property was mortgaged to the bank and had turned into a Non-Performing Asset (NPA).

Addressing the issue of fraudulent claims, the Court found that mere allegations of fraud without specific instances do not suffice to establish fraud. “Mere statement that the defendant No.1 was not taking care of the family does not constitute a fraudulent act,” the Court observed.

In its final decision, the High Court allowed the appeal, thereby setting aside the impugned order dated 19.03.2022 passed by the Trial Court. The ruling has significant implications for similar cases involving jurisdictional conflicts and property disputes.

Date of Decision: 29 August 2023

THE MAHILA CO-OPERATIVE BANK LTD.  vs SRI VENUGOPAL