# In the matter of Electrosteel Castings Limited Vs. UV Asset Reconstruction Company Limited & Ors. CIVIL APPEAL NO.6669 OF 2021

> SC judgment dated 2021-11-26. Citation: TCN-2021-SC-00006. The case involves an appeal against a High Court judgment that dismissed an appeal by the original…

- **Court:** SC
- **Order date:** 26 Nov 2021
- **Citation:** TCN-2021-SC-00006
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/supreme-court-of-india/electrosteel-castings-limited-vs-uv-asset-reconstruction-company-limited-ors-civ-2fe5b2c1

## Summary

### Background

The case involves an appeal against a High Court judgment that dismissed an appeal by the original plaintiff (Electrosteel Castings Limited). The High Court had upheld the rejection of the plaintiff's suit, citing Section 34 of the SARFAESI Act as a bar to the civil court's jurisdiction. The plaintiff's suit challenged an assignment agreement and related actions under the SARFAESI Act, arguing that the assignment was fraudulent due to the prior discharge of the corporate debtor (original defendant No. 3) under an approved resolution plan under the Insolvency and Bankruptcy Code (IBC). The appellant argued that the suit was maintainable because it alleged fraud, which would make Section 34 of the SARFAESI Act inapplicable.

## Facts

Electrosteel Castings Limited (the appellant) stood as a guarantor for a loan facility availed by original defendant No.3 from SREI Infrastructure Finance Limited (defendant No.2). The loan agreement was dated 26.07.2011, and the financial assistance extended to Rs.500 crores. A mortgage was created on the appellant's factory land in Evalur, Tamil Nadu. Original defendant No.3 defaulted on the loan, leading to the initiation of proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC). An application under Section 7 of the IBC was filed by the State Bank of India against original defendant No.3. The default amount was INR 923,75,00,000/-. A resolution plan was approved by the Adjudicating Authority on 17.04.2018. As per the resolution plan, INR 241,71,84,839.18

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## Issues and analysis

### Issue 1: Whether the High Court was correct in dismissing the suit based on Section 34 of the SARFAESI Act, …

**Ratio:** Section 34 of the SARFAESI Act bars civil courts from entertaining disputes that fall

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**Reasoning:** The court reasoned that the allegations of fraud were not pleaded with sufficient

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**Interpretation:** The court interpreted Section 34 of the SARFAESI Act strictly, emphasizing the

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**Application:** The court applied the ratio to the facts by examining the pleadings and finding

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## Parties

- **Judges:** M.R.…; SANJIV K…
- **Appellants:** Electrosteel…
- **Respondents:** UV Asset Reconstru…

## Timeline

- **2011-07-26 — Loan Agre…**: Rupee Loan Agreement between defendant No.2 and…
- **2018-04-17 — Resolution Plan…**: Adjudicating Authority…

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