SARFAESI Act Bar Does Not Apply On Civil Suit Seeking Cancellation of Sale Deed: Delhi High Court

The Delhi High Court has held that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) bar does not apply on civil suit seeking cancellation of sale deed. The bench of Justice Anil Kshetarpal and Justice Harish Vaidyanathan Shankar has set aside a Single Judge’s order that had rejected a civil suit seeking cancellation of a registered sale deed pertaining to a Pitampura property. The Division Bench held that the suit was not barred under Section 34 of the SARFAESI Act and must be adjudicated on merits by the civil court. A Bench while allowing the appeal, restored the suit filed by the appellant who alleged that the 2018 sale deed was obtained through coercion, threats, misrepresentation and wrongful pressure exerted by Respondent and his associates. The property was later mortgaged to a bank, which initiated auction proceedings under the SARFAESI Act. According to the pleadings, the appellant and his father had purchased the property at Sainik Vihar, Pitampura in 2006. When the appellant faced delays in availing a business loan from United Bank of India, he entered into a Memorandum of Understanding (MoU) in 2017 with Respondent No.2 for a friendly loan of ₹65 lakh at 2.25% monthly interest. Under the arrangement, the appellant handed over original title documents after receiving ₹25 lakh. Later, further transactions took place, including alleged coercion to transfer funds into a firm owned by Respondent No.2. The appellant claimed he ultimately received only ₹28 lakh while being pressurised to execute documents. The appellant alleged that he was forcibly taken to the Sub-Registrar’s office on April 3, 2018, where a sale deed was executed showing consideration of ₹2.50 crore. Respondent Nos.1 and 2 subsequently deposited the title documents with Oriental Bank of Commerce (now PNB) to avail a loan, which later turned into an NPA, triggering SARFAESI proceedings. In 2022, the Single Judge dismissed the suit under Order VII Rule 11 CPC, holding that the plaintiff had not filed any FIR despite alleging threats; particulars of fraud were insufficient; MoU appeared suspicious; non-payment of consideration cannot lead to cancellation of a sale deed; civil court jurisdiction was barred by Section 34 of the SARFAESI Act. The plaintiff appealed against this rejection. Overturning the order, the Division Bench held that the plaint disclosed a valid cause of action and raised serious questions requiring trial. The Court held that whether the sale deed was executed under threats and coercion is a question of fact requiring evidence, and cannot be brushed aside merely because no FIR was lodged. The Bench noted that the case involved allegations of coercion, undue influence and misrepresentation. Even if particulars of fraud were not elaborate, this could not justify rejection of the plaint at the threshold. Whether the MoU was valid or whether Sections 91–92 of the Evidence Act apply are matters for trial, not for a preliminary rejection. Crucially, the Bench held that cancellation of a registered sale deed is a remedy exclusively within the domain of civil courts, not the DRT. The Bench relied on Central Bank of India v. Prabha Jain (2025) to reaffirm that the DRT cannot adjudicate disputes seeking annulment of sale deeds. Therefore, the suit was not barred under Section 34 SARFAESI. Setting aside the 2022 rejection, the Division Bench restored the civil suit to its original number. The parties have been directed to appear before the Roster Bench on November 19, 2025. The Court clarified that the Single Judge should decide the matter independently, uninfluenced by observations in the appellate judgment. Case Details Case Title: Rajiv Sareen Versus M/S Divyanshu Enterprises And Others Case No.: RFA(OS) 7/2022, CM APPL. 7480/2023, CM APPL. 7481/2023, CM APPL. 7482/2023, CM APPL. 7483/2023, CM APPL. 57284/2023 and CM APPL. 15708/2025 Date: 13.11.2025 Counsel For Petitioner: Manish Makhija Counsel For Respondent: O. P. Pahuja Click Here To Read Order Read More: Builder To Pay 12% Interest On Refund For Giving Delayed Flat Possession To Homebuyer: Delhi Consumer Commission

SARFAESI Act Bar Does Not Apply On Civil Suit Seeking Cancellation of Sale Deed: Delhi High Court

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