Central Bank of India & Anr. vs Smt. Prabha Jain & Ors.

Case Name: Central Bank of India & Anr. vs Smt. Prabha Jain & Ors.

Case Note: Central Bank of India vs Smt. Prabha Jain on 9 January, 2025

Citation: 2025 INSC 95 

Court Name & Bench

• Court: Supreme Court of India 
• Bench: Two-judge bench
• Judges: Justice J.B. Pardiwala and Justice R. Mahadevan 
• Bench type: Civil appellate jurisdiction 

Date of Judgment: 09 January 2025

 Appellants:

• Central Bank of India (“the Bank”) 
• Another appellant (Anr.) — presumably related party or codefendant in connected appeals 

Respondents:

• Smt. Prabha Jain (original plaintiff) 
• Other respondents (“& Ors.”) — includes heirs / other interested parties in the property dispute. 

Facts of the Case

1.Inheritance and Ownership

• Smt. Prabha Jain was the original plaintiff in a civil suit. She inherited a one-third share in a plot of land after the death of her husband in 2008. 
• Along with her, other co-heirs included her brother-in-law, Sumer Chand Jain, and her mother-in-law, each inheriting a share. 

2.Illegal Sale Without Partition

• Sumer Chand Jain (her brother-in-law) divided the inherited property into plots without a formal partition. 
• He then sold one of the plots (the “subject plot”) to Parmeshwar Das Prajapati.

3.Mortgage to the Bank

• Parmeshwar Das Prajapati mortgaged the subject plot in favor of the Central Bank of India to secure a loan. 
• The Bank, upon default, took physical possession of the property under Section 13 of the SARFAESI Act, 2002 and published an auction notice. 

4. Civil Suit Filed by Prabha Jain

Prabha Jain filed a civil suit (Civil Suit No. 25A/2011) seeking:

a) A declaration that the sale deed executed by Sumer Chand Jain is null and void.

b) A declaration that the mortgage deed by Prajapati in favor of the Bank is invalid.

c) Possession of the property (her share) to be handed over back to her.

5. Bank’s Objection & Trial Court Decision

• The Bank filed a written objection under Order VII, Rule 11 of the Civil Procedure Code (CPC), arguing:
• The suit is barred by Section 34 of the SARFAESI Act (i.e., civil court has no jurisdiction). 
• The plaint (the plaintiff’s statement) was presented on insufficiently stamped paper. 
• The trial court (the 5th Additional District Judge, Bhopal) rejected the plaint on these grounds.

6. 6. High Court’s Decision

• Prabha Jain appealed to the High Court of Madhya Pradesh. 
• On 30 October 2012, the High Court allowed her appeal:
• It held that Section 34 of SARFAESI does not bar the civil court’s jurisdiction in the present case. 
• It also held that Prabha Jain had paid the correct court fee for her suit. 

7. Appeal to the Supreme Court

• The Bank appealed to the Supreme Court (Civil Appeal No. 1876 of 2016, among other linked appeals) challenging the High Court’s decision. 
• The central question before the Court was the sphere of jurisdiction between civil courts and tribunals under the SARFAESI Act, especially over title and possession issues. 

Issues Raised

In its appeal, the Bank raised key legal issues. The Supreme Court identified and addressed:

1. Jurisdiction of Civil Courts vs. DRT / Tribunal

• Whether civil courts have jurisdiction to entertain a suit relating to title / ownership / validity of sale and mortgage deeds when the Bank has taken possession under SARFAESI. 
• Specifically, whether Section 34 of the SARFAESI Act ousts the civil court’s jurisdiction entirely.

2. Maintainability of the Suit

• Whether the suit filed by Prabha Jain is barred by statutory provisions.
• Whether the civil court can grant possession to someone (Prabha Jain) who was not in possession at the time the Bank took over under SARFAESI.

       3.Proper Court Fee

• Whether Prabha Jain paid the correct court fee for her claim, given that her reliefs included declaration and possession. 

       4.Title Clearance and Bank’s Due Diligence

• Whether the Bank exercised sufficient due diligence in verifying the title of the property before granting the loan.
• Whether title clearance reports used by the Bank were adequate, and what standards should apply to such title verification.

        5.Order VII Rule 11 CPC

• Whether the civil court was correct in not rejecting the plaint (in entirety) under Order VII Rule 11(d), even though some reliefs might be statutorily barred.

 Arguments of the Parties

1. Arguments of the Appellant (Central Bank of India)
2. Statutory Bar under SARFAESI (Section 34)

• The Bank argued that once it invoked Section 13 of the SARFAESI Act and took possession, disputes relating to the secured asset must be resolved by a Debt Recovery Tribunal (DRT) or Appellate Tribunal, not by a civil court. 
• They contended that Section 34 explicitly bars civil courts from entertaining “matters” that DRT / Tribunal has jurisdiction over. 

2. Limited Role of Civil Court

• According to the Bank, the civil court’s role should be limited because SARFAESI provides a special, faster recovery mechanism, and allowing full-scale title litigation in civil courts would defeat its purpose.

3. Order VII Rule 11 (CPC) – Rejection of Plaint

• The Bank sought rejection of the plaint under Order VII Rule 11(d) (no cause of action) or (e) (barred by statute), claiming that claims for title or possession should be pursued under SARFAESI and not in civil courts.

4. Due Diligence & Title Verification

• Implicitly (or perhaps more loosely) argued that its title clearance was valid and the mortgage deed was in order, so the Bank believed it acted on valid security.

Arguments of the Respondent (Smt. Prabha Jain)

     1.Civil Court Jurisdiction for Title Disputes

•  Prabha Jain argued that her claim was about title / ownership, not just debt recovery. She contended that the civil court has jurisdiction to decide on sale deed validity, mortgage validity, and her entitlement, because these are pre-existing rights that transcend the SARFAESI takeover. 
• She said that her right to possession (as an heir) is independent and needs adjudication beyond the limited scope of a DRT under SARFAESI.

     2.Maintainability of Her Suit

• She maintained that her suit for possession is not barred — she was not in possession when the Bank took over, but she has legitimate title, and civil courts must adjudicate this. 

3. Correct Court Fee Paid

• Jain argued that she had paid the correct court fee for her claimed reliefs. Specifically, she valued her suit for possession (revenue assessment was very small) and claimed that she complied with Court Fees Act norms. 
• The High Court agreed with this, and she relied on that judgment to reinforce her case.

4. Order VII Rule 11 CPC

• She argued that the plaint could not be rejected in part under Rule 11; all her reliefs (declaration + possession) must be allowed to be heard, because there is a cause of action and it’s not fully barred by statute. 

      5.Bank’s Title Due Diligence

• • Implicitly she questioned the Bank’s title verification process: that the sale was illegal (because there was no proper partition) and thus the Bank’s security was not clean.

• She likely argued that bad title clearance or negligent verification should not override her ownership rights. 

Judgment / Final Decision

• • The Supreme Court dismissed the appeal filed by the Central Bank of India. 
  • The Court affirmed the High Court’s decision that:
    • Civil court has jurisdiction to decide on the validity of the sale and mortgage deeds, especially in relation to title, even if the Bank has taken possession under SARFAESI. 
    • Order VII Rule 11 CPC was not properly invoked by the Bank to reject the plaint in its entirety; civil courts must address all reliefs. 
  • The Court directed that the civil suit “shall now proceed further expeditiously in accordance with law.” 

• It vacated any interim orders (if any) previously granted by this Court.

 Legal Reasoning 

• Here is how the Court reasoned its decision, and what legal principles it laid down:

        1.Limited Jurisdiction of DRT under SARFAESI

• The Court held that the Debt Recovery Tribunals (DRTs) under the SARFAESI Act have limited authority: they can address measures taken under the Act (like takeover, auction), but they cannot decide on the validity of sale or mortgage deeds executed before enforcement. 
• The Court clarified that Section 13(3) (as it stood) or other statutory provisions do not empower the DRT to restore possession to someone who was never in possession prior to the Bank’s takeover. 
• Thus, issues regarding title and ownership fall outside the DRT’s domain and remain within the purview of civil courts.

2.  Section 34 of SARFAESI Does Not Completely Oust Civil Court Jurisdiction

• Although Section 34 bars civil courts from interfering with certain SARFAESI actions, the Court held the bar must be interpreted strictly. It should not be read to deny civil court jurisdiction over pre-existing rights or title disputes. 
• The Court emphasized that bar of jurisdiction is not to be readily inferred; the statutory language must be carefully construed. 
• The Court also underlined that not all matters relating to secured assets fall within the debt recovery machinery: some matters must be left to civil adjudication if they concern ownership rather than enforcement alone. 

3. Order VII Rule 11 CPC – No Partial Rejection of Plaint

• The Court held that plaint cannot be partially rejected under Order VII Rule 11 just because some reliefs may appear barred. The Bank’s invocation of this rule to eject the entire plaint was improper.    
• The Court recognized that even if some relief (like possession) could be said to be barred under certain interpretations, the cause of action for declaration and title remains valid and must be adjudicated.

4. Due Diligence in Title Verification

• A significant part of the judgment is a cautionary note to banks: they must exercise due diligence when verifying titles before sanctioning loans. 
•  The Court observed that inadequate title clearance reports, especially those obtained cheaply or from unverified sources, pose a risk to both the bank and third parties. 
•  It recommended standardized guidelines for title clearance reports, urging collaboration among the Reserve Bank of India (RBI), banks, and other stakeholders to strengthen title verification. 
• This is not just a legal point but also public policy: protecting public money, preventing fraudulent or dubious transactions, and ensuring that banks do not rely on superficial title checks.

5. Balance Between Recovery Efficiency and Fundamental Rights

• While the SARFAESI Act was enacted to expedite debt recovery, the Court pointed out that recovery mechanisms cannot override fundamental rights of property holders. 
• The judgment underscores a balance: fast recovery must be weighed against protecting the legitimate property rights of individuals who may have rightful ownership or valid claims. 

         6.Strict Interpretation of Jurisdictional Bar

• The Court re-emphasized that statutory bars (like jurisdiction) are to be strictly construed. The burden lies on the party asserting that jurisdiction is ousted. 
• This is consistent with prior jurisprudence: the Court prefers constructions that uphold civil court jurisdiction unless clearly excluded. 

Conclusion 

The Supreme Court’s decision in Central Bank of India & Anr. v. Smt. Prabha Jain & Ors. is deeply significant for several interlinked reasons. First and foremost, it provides much-needed clarity on the jurisdictional boundary between civil courts and the DRT / SARFAESI framework: the Court reaffirmed that even when a bank has taken possession under SARFAESI, civil courts still retain a “core role” in adjudicating disputes that relate to the validity of sale deeds, mortgage deeds, and title, especially where those documents pre-date the bank’s enforcement actions. This ruling ensures that mechanisms for debt recovery do not entirely swallow up the traditional, more deliberative forum of the civil court.

Another important aspect of the judgment is the protection of third-party rights, particularly in the context of inheritance. By holding that someone like Prabha Jain—who never had physical possession at the time of the bank’s takeover—can still maintain a suit for declaration and possession, the Court has bolstered safeguards for heirs and co-owners. This is a powerful affirmation that speedy recovery measures cannot override substantive property rights without proper judicial scrutiny.

The Court also sent a strong signal to banks regarding due diligence and title verification. It criticized superficial or low-quality title search reports and urged the development of standardized guidelines, suggesting that banks, in collaboration with regulators like the RBI, must improve their practices to assess property risk more reliably. This isn’t just a legal point, but a policy one — greater rigor in title verification could prevent future disputes and help protect public money.

Policy-wise, this judgment could have wide-ranging implications. By prompting discussions on regulatory reform, it may lead to more consistent norms around how title investigations are carried out, which could reduce the number of litigations arising from defective security interests. For borrowers, heirs, and litigants, this decision offers a tactical roadmap: rather than being force-funneled into DRT processes that may not adequately address ownership disputes, they can confidently approach civil courts for relief. On the other hand, banks will need to revisit their internal legal and documentation practices—improving title due diligence, re-evaluating risk assessment, and potentially bearing higher compliance costs to avoid future disputes.

Finally, in terms of precedential value, this case is likely to become a cornerstone in SARFAESI-related litigation involving title disputes. It delineates with precision what the DRT can and cannot adjudicate, and preserves for civil courts the power to deal with foundational property questions. This balancing of efficient debt recovery with the protection of fundamental property rights ensures that the SARFAESI Act remains a tool for recovery — not a blunt instrument to dispossess vulnerable or legitimate property claimants.

 Critical Reflection:

• The case shows how speedy recovery mechanisms (like under SARFAESI) must be balanced with fairness and justice: property rights are fundamental, and recovery should not trample them.
• The judgment could lead to a policy shift: if banks are forced to spend more on proper title reports, it may increase cost, but reduce future litigation / risk.
• Implementation of the Court’s guidelines (if adopted) will be key. Without strong execution, the benefits might remain theoretical.

Reference(S):

Full judgment on IndianKanoon https://indiankanoon.org/doc/119367069/?

Case commentary on Lexology: “SC Clarifies Civil Court Jurisdiction in Property Disputes Amid SARFAESI Proceedings”https://www.lexology.com/library/detail.aspx?g=75b6af3d-d519-4be8-87d2-118fe4c31907&

Additional case study summary: https://legal-wires.com/case-study/case-study-central-bank-of-india-anr-v-smt-prabha-jain-ors/?

CaseMinesummary:https://www.casemine.com/judgement/in/6571d1eaaf1b763fa24fbbac?

Article on Order VII Rule 11 CPC in the context of this case: https://mahendrabhavsar.com/order-vii-rule-11-cpc-plaint-rejection-in-cases-with-multiple-reliefs/?