The Bombay High Court has reaffirmed that a coparcener’s right to seek partition of ancestral property cannot be extinguished by a secured creditor’s enforcement action under the SARFAESI Act, even where possession has been taken. The judgment also establishes that any sale conducted in clear violation of a court-issued injunction is legally void, regardless of the buyer’s good faith.
Background & Facts
The Dispute
The dispute arose when Tourism Finance Corporation of India Limited (TFCIL), a secured creditor, initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) against Aishwarya Regency LLP, a defaulting borrower. The property subject to the security interest - Survey Nos. 1/1/A/1, 1/1/A/6, and 1/1/A/7 in Pune - housed Hotel Aishwarya Regency. The plaintiff, Aishwarya Chetan Khedkar, daughter of the borrower’s partners, claimed she was a coparcener in these properties as they were ancestral, and sought partition and injunction against their sale.
Procedural History
- 2023: Plaintiff filed RCS No. 305 of 2023 for partition and temporary injunction.
- 14 December 2023: Civil Judge, Sr. Division, Vadgaon, rejected the injunction application, holding only one of the three properties was ancestral.
- 24 January 2025: District Judge allowed the appeal, reversing the trial court’s order and granting injunction against creation of third-party interests in the plaintiff’s share.
- 28 January 2025: TFCIL sold the property to Eastman Garments Pvt. Ltd. (Respondent No. 8) via e-auction, despite the injunction.
- 16 October 2025: Eastman Garments was impleaded as a respondent.
- 24 January 2026: Bombay High Court delivered judgment on Writ Petition No. 3272 of 2025.
Relief Sought
The plaintiff sought a declaration of her undivided share in the ancestral property and an injunction restraining the secured creditor and others from creating third-party interests in her share until final disposal of the partition suit. The petitioner sought to set aside the injunction and validate the sale to Respondent No. 8.
The Legal Issue
The central question was whether the civil court’s jurisdiction to entertain a partition suit by a non-borrower coparcener is barred under Section 34 of the SARFAESI Act, and whether a sale conducted in violation of a court injunction can confer valid title on a transferee.
Arguments Presented
For the Petitioner
The petitioner argued that Section 34 of the SARFAESI Act ousts civil court jurisdiction over any matter relating to enforcement of security interest, including partition claims by family members. Relying on Jagdish Singh v. Heeralal, it contended that the plaintiff’s remedy lay exclusively with the Debts Recovery Tribunal (DRT). It further asserted that the plaintiff’s suit was collusive, designed to frustrate lawful recovery, and that the sale to Respondent No. 8 was conducted in compliance with SARFAESI procedures and upheld by the DRT.
For the Respondent
The plaintiff countered that her claim arose from her birthright as a coparcener in ancestral property, a civil right beyond the DRT’s statutory mandate under Section 17 of the SARFAESI Act. She relied on Bank of Baroda v. Gopal Shriram Panda and Central Bank of India v. Prabha Jain to establish that civil courts retain jurisdiction where non-borrowers assert proprietary rights. She further argued that the sale to Respondent No. 8 was in direct defiance of the injunction, rendering it void under established principles of contempt and lis pendens.
The Court's Analysis
The Court undertook a meticulous review of the evolving jurisprudence on civil court jurisdiction under the SARFAESI Act. It distinguished between matters concerning the validity of security interest (exclusively within DRT’s domain) and civil rights of third parties, such as coparceners, whose claims are rooted in property law.
"The jurisdiction of the Civil Court to decide all the matters of civil nature, excluding those to be tried by the Debts Recovery Tribunal under Sections 13 and 17 of the SARFAESI Act, in relation to enforcement of security interest of a secured creditor, is not barred by Section 34 of the SARFAESI Act."
The Court emphasized that partition suits cannot be adjudicated by the DRT, which lacks the power to determine title or grant decrees of partition. The plaintiff’s claim, therefore, fell squarely within the civil court’s domain.
The Court further examined the revenue records and Mutation Entry No. 134 of 1991, which showed that all three properties were allotted to the share of the plaintiff’s grandfather, Dnynoba Mali, and subsequently mutated in the names of family members - not as absolute owners but as members of a joint Hindu family. This established a prima facie case of ancestral character.
On the critical issue of the sale, the Court found that TFCIL had full knowledge of the injunction. The auction was held on the very day the judgment was uploaded, and the sale certificate was executed four months later. The Court held:
"The act done in willful disobedience of an injunction order... would also be illegal and invalid transfer. The rights of the parties cannot be jeopardised by effecting transfer of the property in teeth of an injunction order."
Citing Keshrimal Jivji Shah v. Bank of Maharashtra and Balwantbhai Somabhai Bhandari, the Court declared the sale void, rejecting Respondent No. 8’s claim of being a bona fide purchaser, as the transferor was bound by the injunction.
The Verdict
The petitioner’s writ petition was dismissed. The Court upheld the injunction granted by the District Judge, affirming that civil courts retain jurisdiction over partition claims by coparceners even when SARFAESI proceedings are pending. It further held that any transfer of property in violation of a court injunction is void ab initio, regardless of the transferee’s knowledge or consideration.
What This Means For Similar Cases
Civil Courts Retain Jurisdiction Over Coparcener Claims
- Practitioners must now argue that partition suits by coparceners are not barred under Section 34 of the SARFAESI Act, even if the property is encumbered.
- Secured creditors cannot use SARFAESI enforcement to bypass civil rights of non-borrowing family members.
- DRTs cannot adjudicate title disputes or grant partition decrees - these remain exclusively within civil court competence.
Injunction Violations Render Transfers Void
- Buyers must conduct due diligence on pending injunctions before completing property transactions.
- A transferee cannot claim protection under Section 52 of the Transfer of Property Act if the transferor violated a court injunction.
- Courts may declare such transfers non-est and direct reversal, even against innocent purchasers.
- Practitioners should immediately seek contempt proceedings against parties who sell property in defiance of injunctions.
Ancestral Character Is Determined by Origin, Not Subsequent Transfers
- Subsequent gift deeds, sale deeds, or relinquishment deeds do not alter the ancestral character of property if the original source was joint family property.
- Mutation entries and revenue records must be scrutinized to trace the origin of ownership.
- Courts will look beyond formal transfers to the underlying family structure and inheritance history.
