Mere Allegation of fraud without particulars not sufficient to get over bar on Civil Suit under Section 34 of SARFAESI

In the matter of Electrosteel Castings Limited vs UV Asset Reconstruction Company Limited (CA 6669 OF 2021) decided by the Hon’ble Supreme Court on 28.11.2021.

FACTS: In this case, the High Court had rejected a plaint and dismissed a suit on the ground that the suit is barred in view of the bar under Section 34 of SARFAESI Act. Challenging this, the appellant-plaintiff’s contention was that in the suit plaintiff had pleaded the fraud. That the relief was sought to declare the assignment agreement null and void which cannot be granted by the DRT under the provisions of the SARFAESI Act. The other side contended that the allegations of ‘fraud’ are nothing but a clever drafting only with a view to bring the suit maintainable before the civil court despite the bar under Section 34 of the SARFAESI Act.

OBSERVATIONS: Relying on Order VI Rule 4, the Hon’ble Supreme Court held that in all cases in which the party pleading relies on any misrepresentation, fraud, breach of trust, wilful default, or undue influence, particulars shall be stated in the pleadings. Further, as per the settled preposition of law such a pleading/using the word ‘fraud’/ ‘fraudulent’ without any material particulars would not tantamount to pleading fraud. Specific averments/ allegations have to be stated on the pleadings.

In the present case it was observed that the allegations of ‘fraud’ are made without any particulars and only with a view to get out of the bar under Section 34 of the SARFAESI Act and by clever drafting the plaintiff intends to bring the suit maintainable despite the bar under Section 34 of the SARFAESI Act.

The bench therefore held that the High Court has not committed any error in rejecting the plaint/dismissing the suit in view of the bar under Section 34 of the SARFAESI Act.