Partition suit against SARFAESI enforcement rejected under Section 34 by Karnataka HC

Tyger Capital Limited Vs Lalita (Karnataka High Court)

Partition Suit Cannot Be Used as a Disguise to Stop SARFAESI Action: Karnataka High Court Rejects Plaint Challenging Mortgage

The Karnataka High Court has explained the fine distinction between a genuine partition suit filed by a non-borrowing coparcener to protect an independent share in a family property and a partition suit which is, in substance, intended to obstruct the enforcement of a mortgage under the SARFAESI Act. The Court held that merely describing a proceeding as a suit for partition would not confer jurisdiction upon the Civil Court where the real and dominant relief is to declare the mortgage illegal and restrain the secured creditor from enforcing its security interest.

Tyger Capital Limited, formerly known as Adani Capital Pvt. Ltd., had challenged the order of the Trial Court rejecting its application under Order VII Rule 11(d) of the Code of Civil Procedure read with Section 34 of the SARFAESI Act. The underlying civil suit had been instituted by certain family members claiming a share in the mortgaged property. They sought partition and separate possession, but also sought declarations that the relinquishment deed, mutation entry and mortgage transaction were illegal, null and void. A permanent injunction was also sought restraining the secured creditor from interfering with the property.