Chhattisgarh High Court rules that Section 34 of the SARFAESI Act does not bar civil courts from deciding property title and inheritance disputes.

News Citation : 2026 LN (HC) 235

April 6, 2026 : The High Court of Chhattisgarh has delivered a landmark ruling affirming that civil courts maintain the authority to decide property title disputes, even when the property in question is subject to recovery actions under the SARFAESI Act. In a decisive judgment, a division bench comprising Justice Sanjay S. Agrawal and Justice Amitendra Kishore Prasad set aside a lower court’s order that had previously rejected a lawsuit filed by heirs seeking to protect their ancestral property from a bank auction.

The case originated from a family dispute in Bilaspur involving the estate of the late Ramanand Prasad. Following his death in 2009, his widow allegedly mutated the property records into her name exclusively and sold the land to a third party without the consent of her children. The purchaser subsequently mortgaged the property to the Bank of Baroda. When the loan defaulted, the bank initiated recovery proceedings under the SARFAESI Act, prompting the children to file a civil suit to declare the sale deed null and void and claim their 75% share of the property.

Initially, the trial court dismissed the suit, agreeing with the bank’s argument that Section 34 of the SARFAESI Act bars civil courts from interfering in matters handled by the Debts Recovery Tribunal (DRT). However, the High Court disagreed, noting that the DRT is a statutory forum with limited jurisdiction. The bench emphasized that the tribunal is not equipped to adjudicate complex questions of title or the validity of civil contracts between third parties who were never part of the loan agreement.

The High Court clarified that while the SARFAESI Act provides a mechanism for banks to recover dues, it cannot be used to strip citizens of their right to seek a declaration of title in a civil court. The justices further noted that under Order VII Rule 11 of the Code of Civil Procedure, a court must only look at the facts presented in the lawsuit itself, not the defense’s arguments, when deciding whether a case should proceed. By restoring the suit, the High Court has reinforced the principle that the doors of justice remain open for those claiming independent legal rights over disputed assets.

Case Reference : Neeraj Prasad and Others v. Smt. Gauri Prasad (Died and Deleted) and Others, FA No. 79 of 2022; Counsels: Mr. Goutam Khetarpal for Petitioners, Mr. Kanwaljit Singh Saini for State, Mr. Sajal Kumar Gupta for Respondent No. 2, and Mr. Ankit Singhal for Respondents No. 3 & 4.