CENTRAL BANK OF INDIA & ORS. v. PRABHA JAIN & ORS. (2025)

Court: Supreme Court of India

Date: 9th January 2025

Citation: (2025) 4 SCC 38

Introduction

The case of Central Bank of India & Ors. v. Prabha Jain & Ors. (2025) is an important judicial ruling construing the jurisdictional boundary of civil courts under the SARFAESI Act, 2002. The historic ruling resolved the interplay between Section 34 of the SARFAESI Act, limiting the jurisdiction of civil courts, and Section 9 of the Code of Civil Procedure, 1908 (CPC), declaring the general jurisdiction of civil courts in civil nature cases.

The Supreme Court judgment had a balance between speedy debt recovery instruments that lie with banks and the safeguarding of individual property rights. The ruling has left an indelible mark on Indian banking and property law, offering valuable guidance as to when civil courts can go in for adjudication even if SARFAESI proceedings exist.

Parties Involved

• Central Bank of India & Ors. – The appellants, a nationalized bank that filed proceedings under the SARFAESI Act against a borrower to recover dues.
• Smt. Prabha Jain & Ors. – The respondents, legal heirs of the original owner of the property, who objected to the action taken by the Bank on the basis that the property pledged was sold illegally and never validly conveyed to the borrower.

Nature of the Case

This case evolved out of a clash between the recovery proceedings of the Central Bank of India under the SARFAESI Act and the plaintiff’s civil claim to ownership and possession. The Supreme Court was required to decide if the jurisdiction of a civil court was excluded under Section 34 of the Act in a scenario where the plaintiff claimed independent rights of ownership in relation to the property.

The decision of the Court demarcated the line between the jurisdiction of Debts Recovery Tribunals (DRTs) and civil courts, and also defined the purview of Sections 17 and 34 of the SARFAESI Act.

Facts of the Case

1. The property in question was initially acquired by the father-in-law of Smt. Prabha Jain in 1967. After his death in 2005, the property fell equally upon his two sons and widow.
2. Prabha Jain came into possession of her husband’s one-third share in the property following his death. No partition, however, was made among the heirs.
3. In the absence of such partition, Sumer Chand Jain (her brother-in-law) sold part of the property to Parmeshwar Das Prajapati under a registered sale deed dated 03 July 2008.
4. The buyer then mortgaged the property with the Central Bank of India as collateral security for a loan.
5. When the borrower defaulted, the Bank invoked the possession of the property under Section 13(4) of the SARFAESI Act and initiated auction proceedings.
6. Prabha Jain instituted a civil suit (Civil Suit No. 25A/2011) before the District Court, Bhopal, praying:
7. A declaration that the sale and mortgage deeds were void ab initio;
8. Possession of the disputed property; and
9. Mesne profits for wrongful occupation.
10. The Bank opposed the maintainability of the suit, contending that civil jurisdiction was excluded under Section 34 of the SARFAESI Act.
11. The Trial Court sustained the objection of the Bank and dismissed the plaint under Order VII Rule 11 CPC.
12. In appeal, the High Court of Madhya Pradesh set aside the Trial Court’s ruling, holding that ownership and title disputes fell beyond the purview of DRT jurisdiction.
13. Indignant on this verdict, the Bank approached the Supreme Court of India in appeal.

Legal Issues

1. Whether jurisdiction of civil courts is excluded under Section 34 of SARFAESI Act, 2002, where title and ownership of the mortgaged property are disputed?
2. Whether the DRT, as per Section 17, can decide upon ownership disputes as well as disputes regarding validity of sale or mortgage deeds which were executed before the SARFAESI proceedings?
3. Whether a plaint can be partially dismissed under Order VII Rule 11 CPC if one or more reliefs seem to be prohibited by the SARFAESI Act?
4. Whether the plaintiff, being an independent owner, is entitled to seek possession and declaration through a civil court even when SARFAESI proceedings have commenced?

Arguments

Petitioner’s (Appellant’s) Arguments – Central Bank of India & Ors.

• The appellants argued that the civil court lacked jurisdiction under Section 34, as the reliefs sought directly interfered with SARFAESI measures under Section 13(4).
• It was argued that the DRT is the appropriate forum under Section 17 for “any person” who suffers prejudice due to SARFAESI action.
• Reliance on Jagdish Singh v. Heeralal (2014) 1 SCC 479 and State Bank of Patiala v. Mukesh Jain (2017) 1 SCC 53, which ruled that after taking possession under Section 13(4), civil courts cannot step in.
• The Bank contended that permitting the civil court to entertain such grievances would vitiate the expeditious recovery mechanism contemplated under the SARFAESI Act.

Arguments of Respondents – Smt. Prabha Jain & Ors.

• The respondents contended that the dispute was not between the borrower and the bank, but one relating to independent ownership and title over the property, which existed even before the mortgage.
• The jurisdiction of the DRT under Section 17(3) is limited to “restoring possession” to borrowers and not handing over possession” to third parties with a claim to ownership.
• It was argued that only civil courts have jurisdiction to pass orders on the validity of sale and mortgage deeds which have been executed before enforcement.
• The respondents asserted that the SARFAESI Act could not prohibit the civil court from deciding ownership disputes, since they fall outside the DRT’s statutory jurisdiction.

Analysis of the Court

On the Bar of Civil Jurisdiction (Section 34 of SARFAESI Act)

• The Supreme Court noted that Section 34 precludes civil court jurisdiction only with regard to issues within which the DRT or DRAT is authorized to adjudicate. Drawing on Mardia Chemicals Ltd. v. Union of India (2004) 4 SCC 311, the Court stressed that the preclusion is not absolute.
• The DRT cannot adjudicate disputes pertaining to ownership, inheritance, or title between the borrower and third parties. Thus, where such issues are raised, the jurisdiction of the civil courts is not affected.

On the Scope of DRT’s Power (Section 17 of the Act)

• The Court had a textual interpretation of Section 17(3) (pre-amendment) and made it clear that the DRT can at best “restore possession” to a borrower and not “grant possession” to third parties who never were in possession.
• As Prabha Jain was neither a borrower nor a guarantor, her case was beyond the jurisdiction of the DRT. Her only option therefore was before the civil court.

On Partial Rejection of the Plaint

• The Court held that a plaint cannot be partly rejected under Order VII Rule 11 CPC. Referring to Madhav Prasad Aggarwal v. Axis Bank Ltd. (2019) 7 SCC 158), it once again held that even if certain reliefs are barred by law, if there is one relief that survives, the plaint has to be considered as a whole and it cannot be rejected partially.

Decision

The Supreme Court rendered the following holdings:

• Jurisdiction of Civil Courts: The civil court’s jurisdiction was not barred under Section 34, as the dispute pertained to ownership and title, which the DRT cannot determine.
• Scope of DRT Powers: The DRT’s powers under Section 17 are limited to examining SARFAESI measures and cannot extend to deciding property ownership.
• Partial Rejection of Plaint: A plaint cannot be rejected in part; where even one relief is maintainable, the entire suit proceeds.
• Result: The Central Bank of India’s appeal was rejected, and the decision of the High Court affirming the jurisdiction of the civil court was upheld.

Result

• Right to Sue: Civil courts still retain jurisdiction where property ownership or title is disputed, even if SARFAESI actions are underway.
• Limitation of DRT: DRTs are not able to pass judgment regarding property ownership or validity of the sale deed, which is not specifically related to the debt of the borrower.
• Partial Rejection: Order VII Rule 11 CPC cannot be used to reject the plaint partially.
• Balance Between Rights and Recovery: The judgment reiterates that statutory recovery mechanisms cannot be over and above private property rights or deny access to justice.

Significance

Impact on Jurisprudence

The ruling in Central Bank of India v. Prabha Jain has emerged as a key precedent on Section 34 of the SARFAESI Act’s scope. It reconfirmed that the jurisdiction of the civil courts is the general rule and exclusion the exception.

Clarification of DRT’s Powers

The decision made it clear that DRTs are expert recovery bodies and not alternatives to civil courts. Their authority is limited to enforcement of security interests, not determination of ownership rights.

Protection of Third-Party Rights

The decision protects independent property owners from the loss of property due to wrong bank action, ensuring their right to access civil remedies.

Balancing Financial Efficiency and Justice

The Court balanced speedy debt recovery with fairness and due process, ensuring that procedural convenience does not override substantive rights.

Conclusion

 The Supreme Court’s ruling in Central Bank of India & Ors. v. Prabha Jain & Ors. (2025) is a milestone decision that aligns banking legislation with the doctrines of civil law. By upholding the jurisdiction of the civil court in matters of ownership and restricting the DRT’s jurisdiction to recovery suits, the Court preserved the constitutional right to access justice.

This judgment is an assurance that the SARFAESI Act, in facilitating efficiency in asset recovery, does not act to the prejudice of legal owners or sacrifice natural justice. The ruling continues to advise courts and practitioners on jurisdictional disputes arising out of bank recovery proceedings and property litigations in India.

References

1. Central Bank of India v Prabha Jain (2025) 4 SCC 38.
2. Mardia Chemicals Ltd v Union of India (2004) 4 SCC 311.
3. Jagdish Singh v Heeralal (2014) 1 SCC 479.
4. State Bank of Patiala v Mukesh Jain (2017) 1 SCC 53.
5. Madhav Prasad Aggarwal v Axis Bank Ltd (2019) 7 SCC 158.
6. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002, ss 13, 17, and 34.
7. Code of Civil Procedure 1908, s 9 and Or VII r 11.