Safiya Malik

The High Court of Delhi Division Bench of Justice Anil Kshetrapal and Justice Harish Vaidyanathan Shankar held that a civil suit seeking cancellation of a registered sale deed remains maintainable before a civil court, even when the property is simultaneously involved in proceedings under the SARFAESI Act, 2002 . Clarifying the scope of the bar under Section 34, the Court held that questions relating to the validity or cancellation of registered conveyances fall outside the jurisdiction of DRTs and continue to vest exclusively in civil courts. Allowing the appeal, the Bench set aside the single judge’s order rejecting the plaint under Order VII Rule 11 CPC. The dispute centres on allegations that the impugned sale deed was procured through coercion and misrepresentation during financial dealings involving the secured creditor.

The matter arose from a dispute concerning a registered sale deed executed in respect of a residential property located at Sainik Vihar, Pitampura, New Delhi. The appellant and his father had purchased the property in 2006. The appellant later sought a loan from a bank, but due to delays, he entered into a financial arrangement with the second respondent, who agreed to extend a friendly loan. A Memorandum of Understanding was executed, under which the original title documents were handed over after part-payment of the loan.

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The father of the appellant passed away, after which the appellant became the absolute owner of the property through a relinquishment deed executed by other family members. Further monetary transfers were made by the second respondent, but the appellant alleged that he was compelled to transfer certain amounts back to a firm owned by the second respondent. The appellant claimed that he effectively received only part of the agreed loan, and that the second respondent and associates issued threats, including threats to kidnap his children, if he failed to execute a sale deed.

On 03.04.2018, the appellant was allegedly taken forcibly to the Sub-Registrar’s office where a sale deed reciting a consideration of Rs. 2.50 crores were executed. Later, in 2019, the appellant received an e-auction notice from a bank, where he learnt that the title documents had been deposited by respondents to secure a loan that was subsequently declared a Non-Performing Asset, initiating SARFAESI proceedings. Further auction notices were issued in 2020, following which the appellant suffered a heart attack. He instituted a civil suit seeking cancellation of the sale deed and injunctive reliefs.

The respondent bank filed an application under Order VII Rule 11 CPC seeking rejection of the plaint, arguing that the suit was barred by Section 34 of the SARFAESI Act. The Single Judge accepted the bank’s contention and rejected the plaint. The appellant challenged this decision, asserting that only a civil court could cancel a registered sale deed and that the allegations of coercion and misrepresentation required adjudication on evidence.

The Court recorded that, while examining an application under Order VII Rule 11 CPC, “the Court must confine itself to the averments made in the plaint, which are to be read as a whole, without reference to the defence of the opposite party.” It stated that the absence of a criminal complaint was not determinative, noting that the appellant had asserted that execution of the sale deed was “induced by coercion, threats, and misrepresentation.”

The Court observed that the appellant pleaded that he was subjected to threats, including threats to kidnap his children, to compel execution of the deed. It stated that such allegations, “if true, would strike at the very root of ‘free consent’, which is a sine qua non for a valid contract.”

It recorded that these issues were factual and “can only be examined on the basis of evidence at trial, not at the threshold stage of rejecting the plaint.”

Regarding fraud, the Court noted that the appellant had used the expression in conjunction with coercion and misrepresentation, observing that the case was “not one of fraud simpliciter, but of coercion and undue influence coupled with misrepresentation.” The Court held that absence of detailed particulars did not justify rejection because “such a deficiency can always be cured by amendment or clarified during evidence.”

On the MoU and the non-signing by the appellant’s father, the Court recorded that such factual disputes “cannot be made the basis to non-suit the plaintiff at the inception.”

With respect to Sections 91 and 92 of the Evidence Act, the Court stated that they “do not furnish any basis for rejection of the plaint” because questions of admissibility arise only at the stage of evidence.

It observed that while non-payment of consideration alone may not justify cancellation, the appellant’s contention was that execution itself was vitiated. It stated that a sale deed may be declared void if not executed with free consent.

On jurisdiction under SARFAESI, the Court noted that the relief sought was cancellation of a registered sale deed and recorded that “the jurisdiction to cancel or set aside a registered conveyance is not vested in the DRT.” It referred to Supreme Court precedent holding that the DRT cannot adjudicate upon cancellation of registered deeds. Consequently, it observed that the finding of the Single Judge on Section 34 was “unsustainable in law.”

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The Court stated: “Accordingly, the present Appeal is allowed.” It further recorded: “The Impugned Judgment is set aside. The suit filed by the Appellant is restored to its original number and shall proceed in accordance with law. The parties, along with their respective counsel, are directed to appear before the learned Single Judge (Roster Bench) on 19.11.2025. Needless to observe that the learned Single Judge shall adjudicate the suit uninfluenced by any observations made in this judgment. The present Appeal, along with all pending applications, stands disposed of.”

Advocates Representing the Parties

For the Appellant: Mr. Manish Makhija and Ms. Simran Makhija, Advocates
For the Respondents: Mr. O. P. Pahuja, Advocate for PNB

Case Title: Rajiv Sareen v. Divyanshu Enterprises and Others

Neutral Citation: 2025: DHC:9916-DB

Case Number: RFA(OS) 7/2022

Bench: Justice Anil Kshetrapal and Justice Harish Vaidyanathan Shankar