Civil Court Jurisdiction in SARFAESI Disputes Involving Third‑Party Purchasers: Commentary on UCO Bank & Anr v. Manjana Verma Sahni & Anr

1. Introduction

The judgment of the Himachal Pradesh High Court in UCO Bank and another v. Smt. Manjana Verma Sahni and another (CMPMO No. 294 of 2022, decided on 11.11.2025, citation 2025 HHC 37811) addresses a recurring and practically important question in Indian banking and property law:

To what extent is the jurisdiction of the civil courts ousted when a secured creditor proceeds under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act” or “the 2002 Act”)?

More specifically, this case concerns a third‑party purchaser (neither borrower nor guarantor) who claims to be the true owner of the mortgaged property and alleges fraud in the chain of title leading up to the bank’s security interest. The bank invoked the statutory bar under Sections 17, 34 and 35 of the SARFAESI Act and sought rejection of the civil suit under Order VII Rule 11 of the Code of Civil Procedure, 1908 (“CPC”).

The High Court, affirming the trial court’s order, held that in such circumstances the civil court’s jurisdiction is not barred and that the plaint cannot be rejected at the threshold under Order VII Rule 11 CPC. The judgment thus reinforces and refines the legal position on:

The scope of the civil court’s jurisdiction vis‑à‑vis the SARFAESI Act, especially for third‑party claimants; and
The correct use of Order VII Rule 11 CPC when jurisdictional objections are raised.

This commentary examines the decision in depth, the precedents relied upon, the court’s reasoning, and its implications for banking and property disputes.

2. Factual and Procedural Background

2.1 Parties

Petitioners: UCO Bank and another (secured creditor and its officer).
Respondent No. 1: Smt. Manjana Verma Sahni (plaintiff before the trial court).
Respondent No. 2: Originally impleaded but later deleted by order dated 10.09.2025.
Defendant No. 3 in the suit: Amandeep Singh (alleged donee and mortgagor; not a party to this revision, but central to the factual matrix).

2.2 Property and Chain of Transactions

The dispute centers around a residential flat:

Flat No. 1, Ground Floor, Block 18, Phase II, Housing Board Colony, Saproon, Solan, Himachal Pradesh.

The chain as pleaded by the plaintiff is:

Original allottee: HIMUDA (Himachal Pradesh Housing and Urban Development Authority) allotted the property to Smt. Anuradha Mehrotra.
Anuradha Mehrotra transferred the property to Manjeet Singh with due permission from HIMUDA.
Manjeet Singh then sold the property to the plaintiff (respondent No. 1) under a registered sale deed dated 11.12.2019 (Registration No. 2471).

The plaintiff asserts she:

Acquired lawful ownership and possession through this sale; and
Cleared an earlier charge of ICICI Bank, believing the property to be otherwise free from encumbrances.

However, the bank (UCO Bank) claimed rights under a mortgage allegedly created by Amandeep Singh on the strength of:

A gift deed (Registration No. 558/2008) purportedly executed in favour of Amandeep Singh by the General Power of Attorney holder of Manjeet Singh; and
A mortgage deed (Registration No. 661/2015) executed by Amandeep Singh in favour of UCO Bank (defendants No. 1 and 2 in the suit).

The plaintiff’s core allegation is that these instruments (gift and mortgage) are false, fictitious, void ab initio, and the result of fraud committed by the bank and Amandeep Singh in connivance with each other.

2.3 Reliefs Sought in the Civil Suit

The plaintiff instituted a civil suit for:

Declaration: That
- The gift deed in favour of Amandeep Singh (Regn. No. 558/2008), and
- The subsequent mortgage deed in favour of UCO Bank (Regn. No. 661/2015)
are:
- Void ab initio;
- False and fictitious;
- Result of fraud by defendants 1 to 3 in connivance; and
- Not binding on the plaintiff’s rights, title and interest under her 2019 sale deed.
Permanent prohibitory injunction: To restrain UCO Bank (defendants No. 1 and 2) from:
- Misusing legal process to take possession of the suit property; and
- Creating any charge or encumbrance over it.
Other consequential reliefs as deemed fit.

2.4 Defence, Counter‑Claim and Application under Order VII Rule 11 CPC

The bank filed:

A written statement resisting the suit; and
A counter‑claim before the trial court (details not fully set out in the High Court judgment, but important as it shows the bank too invoked the civil court’s jurisdiction for its own purposes).

Simultaneously, the bank moved an application under Order VII Rule 11 CPC seeking rejection of the plaint on two principal grounds:

Bar of jurisdiction: The suit is barred by law in view of Sections 17, 34, and 35 of the SARFAESI Act, 2002, which allegedly confer exclusive jurisdiction on the Debts Recovery Tribunal (“DRT”).
No cause of action: The plaint discloses no enforceable cause of action against the bank.

The Civil Judge, Court No. 1, Solan, by order dated 06.04.2022, dismissed the application under Order VII Rule 11 CPC.

2.5 Petition under Article 227 of the Constitution

Aggrieved, the bank filed the present petition (CMPMO No. 294 of 2022) before the High Court under Article 227 of the Constitution of India, challenging the trial court’s refusal to reject the plaint.

3. Summary of the High Court’s Decision

The High Court, per Ajay Mohan Goel J., dismissed the bank’s petition and upheld the trial court’s order. The key conclusions are:

The relief of declaration sought by the plaintiff, namely that the earlier gift deed and mortgage deed are void ab initio and fraudulent, cannot be granted by the DRT under Section 17 of the SARFAESI Act.
The only appropriate forum to adjudicate such issues of title and fraud and to grant declaratory relief is the civil court.
The bar under Section 34 of the SARFAESI Act does not extend to such a suit by a stranger to the loan transaction (a third‑party purchaser) who is claiming independent title and alleging fraud in the very foundation of the bank’s security.
The plaintiff has a clear cause of action against the bank, as the bank is taking coercive steps (SARFAESI measures) against property which the plaintiff claims to own.
Use of Order VII Rule 11 CPC to reject such a plaint at the threshold, in the face of complex allegations of fraud and title, would be “very-very dangerous” and would unjustifiably deprive the plaintiff of an opportunity to establish her case at trial.
No error or perversity in the trial court’s order was shown so as to justify interference under Article 227, which is supervisory and not appellate.

Accordingly, the petition was dismissed, and all pending miscellaneous applications were disposed of.

4. Statutory Framework

4.1 SARFAESI Act Provisions

Section 13(4): Empowers the secured creditor to take certain “measures” for enforcement of security interest, such as taking possession of the secured asset, taking over management, appointing a manager, etc.

Section 17: Provides for an application to the DRT by “any person (including borrower)” aggrieved by any measure taken under Section 13(4). Key points:

Complaint lies after measures are taken by the secured creditor.
The DRT’s jurisdiction is confined to examining the legality of those measures.

Section 34: Express bar on civil court jurisdiction in respect of matters which the DRT or Appellate Tribunal is empowered to determine under the Act, and a bar on courts issuing injunctions in respect of actions under the Act.

Section 35: Non obstante clause conferring overriding effect on the provisions of the SARFAESI Act over any inconsistent law or instrument.

4.2 Order VII Rule 11 CPC

This rule provides for rejection of plaint in specific situations. Relevant clauses are:

Clause (a): Where the plaint does not disclose a cause of action.
Clause (d): Where the suit appears from the statements in the plaint to be barred by any law.

Crucially, the court must determine these questions on the basis of the plaint and its annexures alone, without reference to the written statement or evidence.

4.3 Article 227 of the Constitution

Article 227 confers on High Courts the superintendence over all courts and tribunals within their jurisdiction. The power is:

Supervisory, not appellate;
Intended to correct jurisdictional errors, perversity, or grave injustice;
Not meant for routine reassessment of evidence or re‑appreciation of discretionary orders.

5. Precedents and Their Influence

5.1 Central Bank of India & Anr v. Prabha Jain & Ors, (2025) 4 SCC 38

The High Court places primary reliance on the Supreme Court’s decision in Central Bank of India v. Prabha Jain, which is described as dealing with “somewhat similar circumstances”.

Key takeaways from how the High Court reads and applies Prabha Jain:

The DRT is a creature of statute (the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 – “RDB Act”) and is also conferred powers under the SARFAESI Act.
Being a statutory tribunal, the DRT’s powers are limited to those conferred by Parliament; it cannot assume regular civil court jurisdiction.
The Supreme Court, referring to Dwarka Prasad Agarwal v. Ramesh Chander Agarwal, (2003) 6 SCC 220, reiterated that:
- Exclusion of civil court jurisdiction is not to be readily inferred;
- Any such exclusionary provision must be strictly construed;
- Court should lean towards an interpretation that preserves civil court jurisdiction unless clearly barred.
The Supreme Court also emphasised the public interest aspect of protecting public money and urged the RBI and stakeholders to develop a standardized system for title search reports and for fixing responsibility of bank officers who sanction loans without proper verification.

The High Court uses this precedent to support two critical propositions:

The DRT’s jurisdiction, though substantial under SARFAESI, is not all‑encompassing and does not extend to all civil disputes touching secured assets; and
The bar under Section 34 must be narrowly construed, particularly where fundamental questions of title, fraud, and validity of instruments are involved, and the plaintiff is a third party to the loan transaction.

5.2 Dwarka Prasad Agarwal v. Ramesh Chander Agarwal, (2003) 6 SCC 220

This case laid down a general but powerful principle: the bar of jurisdiction of a civil court is not to be readily inferred, and such a bar must be clearly expressed or arises by necessary implication. Any ambiguity should normally be resolved in favour of retaining civil court jurisdiction.

The High Court, echoing this, notes that:

Exclusion clauses (like Section 34 SARFAESI) must be strictly interpreted;
Civil courts, as courts of plenary jurisdiction, remain the default forum unless clearly ousted.

5.3 Kanaiyalal Lalchand Sachdev & Ors v. State of Maharashtra & Ors, (2011) 2 SCC 782

The bank relied on this Supreme Court decision to argue that once SARFAESI proceedings are initiated, the remedy of an aggrieved party lies exclusively under Section 17 before the DRT, and civil suits are barred under Section 34.

While Kanaiyalal emphasized that borrowers and guarantors must approach the DRT for grievances against SARFAESI measures, the High Court here notes that this line of authority does not assist the bank due to the “peculiar facts” of the present case:

The plaintiff is not a borrower or guarantor;
Her complaint is not merely against the measures taken under Section 13(4), but against the very foundation of the bank’s security – the alleged fraudulent gift and mortgage;
Such issues of fraud and title go beyond the DRT’s statutory remit.

5.4 Jagdish Singh v. Heeralal & Ors, (2014) 1 SCC 479

The bank also invoked Jagdish Singh, where the Supreme Court held that a civil suit to challenge SARFAESI proceedings was barred and that the proper forum for redress was the DRT under Section 17.

Again, the High Court distinguishes this case on facts, holding that:

Jagdish Singh dealt primarily with challenges to SARFAESI actions themselves, not with allegations that the mortgage was rooted in fraud and void instruments executed by someone with no title;
Here, the plaintiff is a distinct third party claiming a separate and subsequent title through a registered sale deed from the original owner’s transferee (Manjeet Singh).

Thus, while Kanaiyalal and Jagdish Singh remain good law for borrowers/guarantors challenging SARFAESI measures, the High Court finds them inapplicable to a suit of the present nature.

6. Court’s Legal Reasoning

6.1 Nature of the Plaintiff’s Status: A Stranger to the Bank’s Loan

The Court underscores a fundamental factual feature: the plaintiff is an absolute stranger to the bank’s loan and security transaction.

She never borrowed from the bank.
She is not a guarantor.
She claims independent title under a subsequent registered sale deed from Manjeet Singh, who traceably obtained the property from the original allottee with HIMUDA’s permission.

This status is critical because most of the Supreme Court judgments barring civil suits under Section 34 involve borrowers, guarantors, or parties directly connected to the debt and security.

6.2 Nature of the Reliefs: Declaration of Fraud and Voidness of Deeds

The Court identifies the first relief of declaration as the linchpin of the suit:

The plaintiff asks the court to declare:
- The gift deed in favour of Amandeep Singh (2008) and
- The mortgage deed in favour of UCO Bank (2015)
as void ab initio, false, fictitious and fraudulent.
This is not a mere challenge to the bank’s exercise of power under Section 13(4), but to the very legal existence and validity of the instruments creating the security interest.

The Court then observes:

“The first relief which has been prayed for by the petitioners by no stretch of imagination can be granted under Section 17 of the 2002 Act and for the grant of that relief obviously the Fora is the Civil Court.”

In other words, the DRT under Section 17:

Can examine whether the measures taken under Section 13(4) conform to the Act and rules;
But is not competent to grant comprehensive civil law remedies such as:
- Declaration of voidness of registered instruments (gift deeds, sale deeds, etc.);
- Adjudication of fraud in property transactions inter se private parties; and
- Restructuring of title chains and ownership rights beyond what is necessary for enforcement.

6.3 Retention of Civil Court Jurisdiction Despite SARFAESI

Relying on Prabha Jain and Dwarka Prasad Agarwal, the High Court stresses:

Section 34’s bar must be strictly construed.
Courts must lean in favour of an interpretation that retains civil court jurisdiction where the DRT’s powers do not clearly extend.
Since the DRT cannot grant the foundational declaration sought in this suit, it cannot be said that the matter is one which the DRT is “empowered to determine” within the meaning of Section 34.

Thus, the jurisdictional bar argument fails at the threshold.

6.4 Existence of Cause of Action Against the Bank

The bank contended that the plaint discloses no enforceable cause of action against it. The Court rejects this:

The bank is taking coercive steps under the SARFAESI Act to take possession of the property.
The plaintiff claims to be the true owner under a registered sale deed.
The bank’s reliance on an allegedly fraudulent gift and mortgage directly affects the plaintiff’s rights.

On these pleadings alone, without examining their truth or otherwise, the Court finds that:

A robust cause of action against the bank is disclosed; and
It would be premature and unjust to reject the plaint under Order VII Rule 11(a).

6.5 Inappropriateness of Order VII Rule 11 in Complex Fraud/Title Disputes

The Court strongly cautions against using Order VII Rule 11 CPC to “short‑circuit” complex disputes at the threshold, especially where:

Serious allegations of fraud, collusion, and fabrication of documents are made;
There are competing claims to title based on different registered instruments; and
Resolution requires framing of issues, leading of evidence and a full trial.

The Court remarks that dismissing the plaint at this initial stage would be “very-very dangerous” as it would:

Deprive the plaintiff of her right to have a full adjudication of her claims before the proper forum; and
Leave unanswered serious allegations of fraud and irregularities in property transactions affecting not only private rights but the integrity of the land registration system.

The appropriate course, the Court holds, is to:

Allow the suit to proceed;
Let the bank contest the suit and raise all legal and factual defences, including maintainability, in the normal trial process;
Decide these questions after evidence, not summarily at the Order VII Rule 11 stage.

6.6 Limited Role of High Court under Article 227

The High Court further notes that:

The trial court’s reasoning is in line with settled principles and is neither perverse nor jurisdictionally flawed.
Under Article 227, interference is warranted only where:
- There is a patent lack of jurisdiction;
- A grave miscarriage of justice; or
- Perversity or gross illegality in the order.

Since none of these conditions are met, the High Court “sees no reason to interfere” and simply concurs with the trial court’s view.

7. Impact and Implications

7.1 Clarification of Civil Court Jurisdiction vis‑à‑vis SARFAESI

The judgment fortifies an important line of authority: the SARFAESI Act does not oust the civil court’s jurisdiction in every case involving a secured asset. Its impact is strongest in the following types of disputes:

Where the plaintiff is a non‑borrower, non‑guarantor;
Where the plaintiff claims an independent title based on a registered transfer unrelated to the loan;
Where the plaintiff alleges that the bank’s security is founded on fraudulent or void instruments executed by someone having no title; and
Where comprehensive reliefs like declaration of voidness of deeds and resolutions of complex title disputes are necessary.

In such situations, the DRT’s jurisdiction under Section 17 is insufficient, and civil court jurisdiction remains intact.

7.2 Enhanced Protection for Bona Fide Purchasers and Third Parties

The ruling provides considerable comfort to bona fide purchasers and third parties dealing with properties which may, unbeknownst to them, be entangled in dubious transactions forming the basis of bank mortgages.

They can:

Approach the civil court to seek:
- Declarations as to title;
- Cancellation/voidness of fraudulent instruments; and
- Injunctive relief against banks’ coercive measures based on such instruments.
Do so without being told that their only remedy lies before the DRT under Section 17, where the forum may lack power to grant the very reliefs they need.

7.3 Implications for Banks and Lending Practices

Linked with the Supreme Court’s emphasis in Prabha Jain, the judgment indirectly:

Encourages banks to undertake rigorous title due diligence before accepting property as security;
Highlights the potential liability of banks if their officers rely on questionable instruments or fail to conduct appropriate verification;
Signals that the judiciary will not allow banks to rely on fraudulent or defective chains of title and then shield themselves behind the jurisdictional bar of Section 34.

While the SARFAESI Act aims at swift recovery of public dues, this judgment underlines that speed cannot override legality and due process where third‑party rights and allegations of fraud are involved.

7.4 Procedural Discipline in Use of Order VII Rule 11 CPC

The judgment also serves as a reminder to trial courts and litigants:

Order VII Rule 11 is a narrow and exceptional power used only where, on the face of the plaint, the suit is unsustainable.
It is not a tool to:
- Pre‑empt complex fact‑finding processes;
- Decide disputed questions of law and fact involving interpretative nuances and evidentiary analysis; or
- Short‑circuit serious allegations of fraud or intricate title disputes.

In fraud‑based property disputes intersecting with SARFAESI measures, rejection of plaint at the threshold should be the rare exception, not the norm.

8. Simplifying Key Legal Concepts

8.1 “Void ab initio”

“Void ab initio” means void from the very beginning. A transaction that is void ab initio is treated in law as if it never existed. Therefore:

No rights are created under it;
No one can derive legal benefit by relying on it; and
Subsequent transactions founded on it may also fall.

8.2 Fraud in Property Transactions

Fraud typically involves:

Deception or misrepresentation;
With intent to induce another to act to their prejudice; and
Often includes fabrication of documents, misuse of powers of attorney, or impersonation of owners.

When a plaintiff alleges fraud in a property transaction, courts usually require:

Detailed pleadings; and
Strict proof through evidence at trial.

8.3 SARFAESI Act and DRT

The SARFAESI Act, 2002 allows banks (secured creditors) to:

Enforce their security interests (like mortgages) without first filing a civil suit;
Take possession of the secured asset, sell it, etc., after following due procedure under Section 13.

The Debts Recovery Tribunal (DRT) is a specialized tribunal that:

Hears challenges to banks’ actions under Section 13(4) via Section 17 applications;
Also adjudicates recovery suits by banks under the RDB Act of 1993.

However, the DRT is not a general civil court. It cannot:

Decide all types of disputes relating to property, title, or fraud;
Grant all remedies available under the Civil Procedure Code (like full declaratory relief over complex title chains), unless such power is clearly given by statute.

8.4 Section 34 – Bar of Civil Court Jurisdiction

Section 34 of the SARFAESI Act states that:

Civil courts shall not entertain any suit or proceeding “in respect of any matter which a DRT or Appellate Tribunal is empowered to determine” under the Act; and
Courts cannot grant injunctions in respect of actions taken under the Act.

But as interpreted by the Supreme Court and applied here:

This bar is not absolute;
It does not apply where:
- The dispute is of a kind the DRT has no power to adjudicate (e.g., complex title disputes, fraud in prior transactions); or
- The plaintiff is a third party whose rights exist independently of the loan and security.

8.5 Order VII Rule 11 CPC – Rejection of Plaint

Order VII Rule 11 allows the court to reject a plaint at the outset if:

It does not disclose a cause of action; or
The suit appears from the plaint itself to be barred by any law;
Among other technical defects (valuation, court‑fee, etc.).

Crucially:

The court looks only at the plaint, not at the defence or evidence;
If there is even a triable issue or some arguable cause of action, rejection is inappropriate;
Issues of fraud, title, and complex legal questions are generally not decided at this stage.

9. Conclusion: Key Takeaways and Broader Significance

The decision in UCO Bank & Anr v. Manjana Verma Sahni & Anr makes an important and carefully calibrated contribution to the evolving jurisprudence at the interface of civil court jurisdiction and the SARFAESI regime.

9.1 Core Legal Principle

The central principle emerging from this judgment can be summarized as follows:

Where a non‑borrower, non‑guarantor third‑party purchaser alleges that the bank’s mortgage is founded on fraudulent and void instruments and seeks a declaration of voidness of such instruments and protection of her independent title, the civil court’s jurisdiction is not ousted by Sections 17, 34 and 35 of the SARFAESI Act. The DRT cannot grant such declaratory relief, and a plaint in such a suit cannot be rejected under Order VII Rule 11 CPC on grounds of bar of jurisdiction or absence of cause of action.

9.2 Broader Significance

The judgment reaffirms that civil courts remain the primary guardians of property and contract law, even after the advent of special recovery statutes like the SARFAESI Act.
It provides doctrinal clarity and practical protection to third‑party purchasers caught in the crossfire of recovery actions based on legally dubious security documents.
It reinforces the message that banks must exercise diligence in verifying titles and that they cannot hide behind jurisdictional bars when serious fraud or defects in title are alleged.
Procedurally, it cautions courts and litigants against over‑use of Order VII Rule 11 in complex cases, preserving the plaintiff’s right to a full trial where warranted.

In the broader legal landscape, this decision aligns with Supreme Court authority stressing the strict construction of exclusionary clauses and the limited reach of tribunal jurisdiction in comparison with civil courts. For future disputes involving SARFAESI actions and third‑party rights, this judgment will likely serve as an influential precedent, especially within Himachal Pradesh, and a persuasive authority elsewhere.