Section 34 SARFAESI Does Not Bar Suit to Cancel Sale Deed

The Hon’ble High Court of Delhi, in the case of Rajiv Sareen v. Divyanshu Enterprises & Others, (2025 SCC OnLine Del 8354), dated November 13, 2025, held that Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, does not bar a civil suit seeking cancellation of a registered sale deed, as the Debts Recovery Tribunal (DRT) lacks jurisdiction to adjudicate upon the validity of registered conveyances.

The appeal arose from the rejection of a plaint under Order VII Rule 11 of the Code of Civil Procedure (CPC), 1908, wherein the learned Single Judge held that the suit was barred by Section 34 of the SARFAESI Act and lacked sufficient particulars of fraud. The appellant alleged that the sale deed dated April 3, 2018, had been executed under coercion and threats after only part of a friendly loan had been advanced, and that the respondents thereafter used the original title documents to obtain a loan which subsequently became a Non-Performing Asset, resulting in SARFAESI measures including auction notices.

The Division Bench held that Section 34 bars civil court jurisdiction only in respect of matters which the DRT is empowered to decide under the SARFAESI Act. Since the Tribunal cannot cancel or set aside a registered sale deed, the civil court retains jurisdiction to entertain such a suit. The Court relied on Central Bank of India v. Prabha Jain [(2025) 4 SCC 38], dated Janaury 9, 2025, reiterating that the validity of a registered conveyance falls exclusively within the domain of civil courts and cannot be adjudicated by the Tribunal.

The Court further observed that the absence of an First Information Report (FIR) or criminal complaint regarding coercion could not be treated as conclusive, as allegations affecting free consent under the Indian Contract Act, 1872, require evidence and cannot be dismissed without trial. It also held that alleged deficiencies in pleading fraud or discrepancies in execution of documents could be clarified through amendment or evidence, and that a plaint cannot be rejected merely because the outcome of the suit may appear doubtful.

This judgment reaffirmed that SARFAESI proceedings do not oust the jurisdiction of civil courts in matters involving cancellation of registered sale deeds, as the DRT lacks authority to adjudicate upon the validity of such conveyances.