Civil Court Jurisdiction Not Barred by SARFAESI: Delhi High Court Restores Suit Challenging Sale Deed

The Delhi High Court has held that a civil suit seeking cancellation of a registered sale deed is maintainable and not barred by Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The Bench of Justice Anil Kshetrapal and Justice Harish Vaidyanathan Shankar allowed the appeal filed by Rajiv Sareen and set aside the order of the Single Judge dated February 2, 2022, which had rejected the plaint under Order VII Rule 11 of the Code of Civil Procedure, 1908 (CPC). The appellant had instituted a civil suit seeking cancellation of a sale deed dated April 3, 2018, in respect of a residential property situated at Sainik Vihar, Pitampura, New Delhi. He alleged that the sale deed had been executed under coercion, threats, and misrepresentation at the hands of Respondent No. 2, with whom he had entered into a Memorandum of Understanding (MoU) for a friendly loan of ₹65 lakh. According to the appellant, despite partial disbursement of funds, he was pressured into executing the sale deed, which recorded a sale consideration of ₹2.5 crore. He claimed that the document was never intended to transfer ownership permanently but was executed as security for the loan. Subsequently, the purchasers mortgaged the property with the bank, which initiated recovery proceedings under the SARFAESI Act after the loan account was classified as a Non-Performing Asset (NPA). When e-auction notices were issued, the appellant approached the civil court seeking declaration that the sale deed was null and void; cancellation of the registered instrument; and injunction restraining the bank from proceeding with auction. The Single Judge had allowed an application under Order VII Rule 11 CPC filed by the bank and rejected the plaint, primarily on the ground that the suit was barred under Section 34 of the SARFAESI Act; allegations of fraud and coercion lacked specific particulars; no criminal complaint had been lodged despite serious allegations; and non-payment of full sale consideration could not invalidate a registered sale deed. The court also relied on Sections 91 and 92 of the Indian Evidence Act, 1872, holding that oral evidence could not contradict the recitals of a written document. The Division Bench reversed these findings, emphasizing the settled principles governing rejection of plaints under Order VII Rule 11 CPC. The Court reiterated that at the stage of considering an application under Order VII Rule 11, the court must confine itself strictly to the averments made in the plaint. The truth or otherwise of the allegations cannot be examined at this preliminary stage. It held that failure to lodge an FIR cannot be a ground to reject a civil suit alleging coercion or misrepresentation. Allegations relating to lack of free consent under Sections 10 and 14 of the Indian Contract Act, 1872 raise triable issues. Questions regarding admissibility of oral evidence under Sections 91 and 92 of the Evidence Act arise at the stage of trial, not at the stage of rejection of a plaint. Even if the plaintiff’s chances of success appear weak, that is not a valid ground for rejecting the plaint. On the central issue of jurisdiction, the Bench held that a Debts Recovery Tribunal (DRT), being a statutory forum of limited jurisdiction, does not have the power to cancel or set aside a registered sale deed. Relying on the Supreme Court’s judgment in Central Bank of India v. Smt. Prabha Jain, the Court observed that claims relating to cancellation of registered conveyances fall outside the scope of the DRT’s powers under the SARFAESI Act. Therefore, the bar under Section 34 of the Act would not apply to such reliefs. The Bench concluded that the Single Judge had erred in treating the suit as barred by law and in rejecting the plaint at the threshold. The Court clarified that the Single Judge would decide the matter on merits, uninfluenced by any observations made 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: Reassessment Invalid If No Addition Made on Recorded Reasons’; S. 68 Can’t Apply to Genuine Share Sale Proceeds: ITAT

Civil Court Jurisdiction Not Barred by SARFAESI: Delhi High Court Restores Suit Challenging Sale Deed

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