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2009 DIGILAW 2676 (ALL)

Punjab and Sind Bank v. Ramanand Singh

2009-07-27

J.M.MALIK

body2009
JUDGMENT : J.M. MALIK, (Chairperson) 1. The whole controversy in this second appeal centres around the question whether the subsequent buyers of the property which was already mortgaged with the Punjab and Sind Bank are protected under Section 41 of the Transfer of Property Act. The Recovery Officer passed the order in favour of the Bank but the first Appellate Court presided over by the DRT reversed his order vide judgment dated 3rd January, 2008. Aggrieved by that order the present appeal has been preferred. 2. Briefly stated the factual scenario is as follows. One Mr. Zahurul Hasan Ansari created a registered mortgage in respect of his house bearing No. 140, measuring 2502 square feet, situated at Mohalla Bagpur, Muglani alias Miyana Bazar, Gorakhpur in favour of Mr. Vasudev Shorewalaon 16th June, 1992. Vide family settlement dated 1st May, 1985 Shri Vishnu Shankar Shorewala, son of Shri Vasudev Shorewala became the owner in possession of the said mortgaged property. Shri Vishnu Shankar Shorewala after becoming the owner of the said house, converted the same into multi-storeyed shopping complex known as Krishna Complex and constructed 46 shops in the year 1986. 3. Ganesh Das Ram Gopal, a partnership firm consisting of Neeraj Kumar Shorewala and Shri Vishnu Shankar Shorewala, was granted CC Limit on 6th February, 1990 to the extent of Rs.2.00 lacs which was further enhanced to the tune of Rs.10.00 lacs on 7th September, 1994 under the name of V.S.S. Leasing owned by the above said two partners against the above said immovable property. The firm created an equitable mortgage by depositing the original registered title deed dated 16th June, 1952 in respect of the above said house as well as copy of deed of family settlement dated 1st May, 1985. 4. Mr. Neeraj Kumar Shorewala created another proprietorship firm under the name of "The Cools" and he was granted CC Limit on 16th November, 1995 against the immovable property already mortgaged with the Bank. 5. Thereafter the recovery suit was filed and the same stood decreed in favour of the Bank on 9th May, 2003. The Recovery Officer attached the disputed property vide order dated 2nd June, 2003. 6. In the meantime the respondent Nos. 1 to 15 filed objections before the Recovery Officer. 5. Thereafter the recovery suit was filed and the same stood decreed in favour of the Bank on 9th May, 2003. The Recovery Officer attached the disputed property vide order dated 2nd June, 2003. 6. In the meantime the respondent Nos. 1 to 15 filed objections before the Recovery Officer. They claimed that they had become bona fide purchasers of the various shops vide registered sale deeds, which were executed in their favour between 6th March, 1997 to 21st August, 1997. This is an indisputable fact that they were the tenants in the shops which were subsequently purchased by them. 7. While reversing the order of the Recovery Officer the learned D.R.T. gave the following reasons. Simple mortgage deed was executed in favour of the respondent Bank on 5th February, 1990. At that time it was not registered. The mortgage deed was registered on 2nd May, 1998. The construction (multi-storeyed shopping complex), made by the principal borrowers in the property covered in the registered deed dated 16th June, 1952 which was initially the residential property of them. The buyers of the shops sought "no encumbrances certificate from the appropriate authority before their purchase", Prima facie the learned Judge found that the appellants were bona fide purchasers. 8. I have heard the Counsel for the parties. The learned Counsel for the respondents has laid emphasis on the reasons given by the learned DRT. He argued that the order passed by the learned DRT is without any flaw. The learned Counsel for the appellant vehemently argued that the case of the buyers is covered by Section 41 of the Transfer of Property Act. The said provision of law along with proviso appended thereto are thereby reproduced: 41. Transfer by ostensible owner-Where, with the consent, express or implied, of the persons interested in immovable property, a person is the ostensible owner of such property and transfers the same for consideration, the transfer shall not be voidable on the ground that the transferor was not authorised to make it: Provided that the transferee, after taking reasonable care to ascertain that the transferor had power to make the transfer, has acted in good faith. 9. Instead of touching the heart of the problem, the learned DRT as well as the learned Counsel for the respondents just skirted it. 9. Instead of touching the heart of the problem, the learned DRT as well as the learned Counsel for the respondents just skirted it. It must be borne in mind that family settlement dated 1st May, 1985 and mortgage deed dated 5th February, 1990 are prior in time and carry infinite value. 10. The photocopy of the family settlements has been placed on the record. There is also mention of a Court decree which had already passed the above said order in favour of Vishnu Shankar Shorewala. In 947861 it was held: To a similar effect is the decision of a Single Judge of the Madras High Court in 192449. There also the title deed deposited mentions only the land and not the building thereon. The Madras High Court held that the title deeds though relating only to the land would clearly cover the house and their deposit could create an equitable mortgage of the entire property consisting of the ground and the super structure standing thereon. We are in entire agreement with the view expressed by the Bench of the Kerala High Court and the Single Judge of the Madras High Court and hold that even though the title deed deposited relates to land only, if at the time the deposit was made there were any structures on it, equitable mortgage would be created both with regard to the land as well as the structures thereon. Point No. 2 is answered accordingly. 11. In Mallappa Durgappa Mayannavar v. Durgavva AIR 1992 Kant. 214, it was held that the term 'partition' is used in common parlance to indicate the partition of the joint family properties by metes and bounds but, it has the other meaning also in law, namely severance of status. So far as severance of status is concerned, though it is recited in a document such a document does not require registration. It becomes admissible in evidence though not registered. 12. In 288531, it was authoritatively laid down: 19. If the mortgage by deposit of title deeds was effected on 10th May, 1947, or on 5th July, 1947, the legal position would be the same, as the mortgage deed in favour of the defendant No. 3 was executed only on 10th October, 1947. Though Ex. A-19 was registered on 22nd June, 1947, under Section 47 of the Registration Act the agreement would take effect from 5th July, 1947. Though Ex. A-19 was registered on 22nd June, 1947, under Section 47 of the Registration Act the agreement would take effect from 5th July, 1947. 13. The above said authority by the Apex Court was followed in K.R. Varadaraja lyengar (Deceased by L.Rs.) v. T. Lakhsminarayana Setty AIR 1985 Kant. 245, wherein it was observed: 16. What remains to be said is only this: the case entirely rested on the meaning to be attached to the legal fiction created by Section 47 of the Registration Act, 1908. The matter is no longer open to question in the light of the decision of the Supreme Court in the case of 288531. In fact, the facts of that case are closer to the facts of the case with which we are concerned. In the said case before the Supreme Court, the dispute was between two other mortgagees, one claiming priority over the other only on the basis of the date of registration. Certain properties involved in that case had been mortgaged by deposit of title deeds at an earlier point of time and later subject to another mortgage in favour of one of the defendants which was registered. Subsequently, the equitable mortgage by deposit of title deeds also came to be registered. Therefore, the question arose as to which of the mortgages had to have priority. Applying Section 47 of the Registration Act, the Supreme Court unequivocally ruled that the instrument creating the equitable mortgage took effect from the date of its execution though registered later and it had to have priority. It must be noted that in the above cited case the mortgagee had executed a simple mortgage in favour of the mortgagee. 14. It is surprising to note that the purchasers did not obtain or have the title deed of their seller. The bona fide and vigilant buyer always takes precautions of obtaining the title deeds of the seller before taking a plunge into such like transaction. What was proof that the seller was the owner of their property at the time of sale in the year 1997. Proviso appended to Section 41 of the Transfer of Property Act makes it amply clear that the buyer must have taken reasonable care to ascertain that the seller had power to transfer and has acted in good faith. What was proof that the seller was the owner of their property at the time of sale in the year 1997. Proviso appended to Section 41 of the Transfer of Property Act makes it amply clear that the buyer must have taken reasonable care to ascertain that the seller had power to transfer and has acted in good faith. In this case evidence in this regard is lacking, rather a question arises whether they were working in cahoots with the seller in order to pull the wool over the eyes of Bank and law? 15. Secondly, they were in possession of the premises in dispute and must have knowledge about the agreement between the Bank and their landlords, between the original owner and Mr. Vasudev Shorewala and family agreement. 16. Moreover, a film of suspicion is cast over their bona fides. Are they working hand in glove with the borrower? No FIR was lodged by the purchasers against their landlord, they have not yet given the legal notice requiring the borrower/seller to refund the money or to pay the compensation thereof. 17. In the light of the above discussion, I hereby accept the appeal, set aside the order passed by the learned DRT, restore the order of the Recovery Officer and permit the Recovery Officer to auction the case property as per law. Again, there lies no rub for the Recovery Officer to auction the other portion of property still in occupation of the borrowers. The possessory rights of the tenants be dealt with in accordance with law. No order as to costs. Copies of this judgment be furnished to the parties as per law. Another copy of the same be also dispatched to the learned DRT forthwith.