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2010 DIGILAW 591 (BOM)

Pranjivan Purushottam Zaveri v. Dena Bank

2010-04-15

ALLAH RAHAM

body2010
JUDGMENT : ALLAH RAHAM, J. (Chairperson) 1. This Appeal impugns the order dated 31st July, 2007 passed by the then Presiding Officer, DRT-1, Ahmedabad, whereby Appellants' application under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short the SRFAESI Act) for setting aside measures taken by the Respondent No. 1 Bank under Section 13(4) of the SRFAESI Act was dismissed. 2. Appellant No. 1 is the husband of Appellant No. 2. The Respondent No. 1 Bank is the mortgagee while the Respondent No. 2 is the mortgagor of Residential House No. 13/A, Niketa Sattadhar Society, Sola Road, Ghatlodiya, Ahmedabad (hereinafter referred to as the disputed property). Since the Appellants wanted to purchase the aforesaid residential property they obtained Title Clearance Certificate from Advocate Mr. Vijay Patel, another Certificate was issued by Advocate Mr. Narendra Soni. In the search, the Respondent No. 2 was found to be owner of the disputed property. No encumbrance of Respondent No. 1 or any other Bank was noticed in the disputed property. The Appellants entered into an Agreement of Sale with the Respondent No. 2. Registered Sale Deed dated 22nd November, 2006 was executed by the Respondent No. 2 in favour of the Appellants. Thus, the Appellants became owner of the disputed property. The Appellants noticed that the Respondent No. 1 and some other financial institutions were asserting their claims over the disputed property being mortgagee. It was also found that the original Title Deeds of the disputed property were in the custody of one Social Co-operative Bank, Ahmedabad. The Appellants filed Special Civil Suit No. 330 of 2006 in the Court of Civil Judge (Sr. Division), Ahmedabad (Rural). The Respondent No. 1 had filed Miscellaneous Application No. 187 of 2006 before the Chief Metropolitan Magistrate Ahmedabad, under Section 14 of the SRFAESI Act, wherein the learned CMM was pleased to pass an order dated 22nd March, 2007 directing the Police to provide protection to Respondent No. 1 in taking possession of the disputed property from the Appellants or other occupants. In pursuance to the order passed by the learned CMM, the Respondent No. 1 Bank has taken actual possession of the disputed property on 25th March, 2007. In pursuance to the order passed by the learned CMM, the Respondent No. 1 Bank has taken actual possession of the disputed property on 25th March, 2007. Appellants claim to be bona fide purchasers for value without notice of any right, title or interest in the disputed property of the Respondent No. 1 or any other person. The Appellants, therefore, approached the DRT under Section 17 of the SRFAESI Act challenging the measures taken under Section 13(4) of the SRFAESI Act, being illegal and void. They also prayed for restoration of their possession over the disputed property. 3. Respondent Bank contested the application on the grounds, inter alia, that Respondent No. 2 and her husband Prahaladbhai are the Directors of Robust Cement Private Limited (hereinafter referred to as the said company). Respondent No. 1 had granted financial assistance of Rs. 49.50 lacs (approximately) to the said company for which Respondent No. 2 and her husband Prahaladbhai Ambalal along with their son Ashok Prahaladbhai Patel stood guarantor in their personal and individual capacity. Moreover on 11th September, 1996 the Respondent No. 2 also deposited original Title Deeds and documents of title of her immovable property consisting of Bungalow No. A-13 known as 'Niketa' (disputed property) and created equitable mortgage by way of First Charge over the said bungalow in favour of the Respondent No. 1 with an intent to secure due repayment of entire outstanding. The Respondent Bank had also drawn Memorandum of Entry dated 11th September, 1996, inter alia recording deposit of Title Deeds and documents of title made by the Respondent No. 2 and the said company with Dena Bank on 11th September, 1996. The Respondent Bank has also drawn Memorandum of Entry by Extension dated 18th September, 2000. Moreover, the Respondent No. 2 has also signed an Affidavit dated 6th September, 1996 in this regard, inter alia, declaring on oath that she is the sole and absolute owner and occupier of the Bungalow No. A-13 and her title is clear, marketable and free from all encumbrances and she undertakes not to transfer, convey or part with the possession of the said property during continuance of the above mortgage. In this connection, Shyam Sattadhar Co-operative Housing Society Limited has also issued Certificate dated 16th August, 1996, Letter dated 20th August, 1996 to the Respondent Bank and Certificate dated 11th November, 2000 in order to recover its dues against the Respondent No. 2 and others. Respondent No. 1 Bank filed Original Application No. 3 78 of 2001 in DRT, Ahmedabad under Section 19(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for Short the RDDBFI Act). The Respondent No. 1 Bank has obtained an order whereby Respondent No. 2 and others are restrained from selling the properties including the disputed property. Respondent No. 1 Bank also issued Notice under Section 13(2) of the SRFAESI Act on 7th August, 2006 to Respondent No. 2. Since the Notice was not responded by making payment, Respondent No. 1 Bank took symbolic possession of the disputed property under Section 13(4) of the SRFAESI Act on 27th October, 2006. Respondent No. 2 then requested Respondent No. 1 Bank to settle the dues but it did not fructify. Respondent No. 1 Bank has taken actual possession of the disputed property on 25th March, 2007 with the help of Police acting under the orders of Chief Metropolitan Magistrate. Respondent No. 1 Bank had advertised that the disputed party is for sale and also received highest bid of Rs. 33.50 lacs. Appeal filed is beyond limitation because the period has to be computed from 27th October, 2006 and not from 25th March, 2007. It is alleged that Appeal is filed by the Appellants in collusion with Respondent No. 2. Appellants, being aware of the multiple scams involving Respondent No. 2, cannot be called bona fide purchaser for value without notice. Appeal deserves to be dismissed with costs. 4. The learned Presiding Officer framed following five points for determination. The answers are noted opposite the points: 1. Whether Respondent No. 1 is a secured creditor of Respondent No. 2? : Yes 2. Whether Appellants prove that they are bona fide purchasers for value without notice? : No 3. Whether the Appeal is within limitation? : Yes 4. Whether measure taken under Section 13(4) of the SRFAESI Act by Respondent No. 1 suffers from any infirmity? : No 5. What order? : As per operative order. 5. The learned Presiding Officer held that Respondent No. 1 is a secured creditor of Respondent No. 2. : No 3. Whether the Appeal is within limitation? : Yes 4. Whether measure taken under Section 13(4) of the SRFAESI Act by Respondent No. 1 suffers from any infirmity? : No 5. What order? : As per operative order. 5. The learned Presiding Officer held that Respondent No. 1 is a secured creditor of Respondent No. 2. There is no infirmity in the measures taken under Section 13 (4) of the SRFAESI Act by the Respondent No. 1 Bank. The Appellants have failed to prove that they are bona fide purchasers for value without notice. The Tribunal, however, found that the Appeal was filed within limitation. Application under Section 17 (i.e., Appeal No. 25 of 2007) was dismissed. 6. Aggrieved against the aforesaid order the Appellants have filed this Appeal. 7. I have heard Mr. G.R. Kinkhabwala along with Mrs. Sonai Jain, Advocate For the Appellants; and Mr. S.S. Panesar along with Mr. Lalitkumar Jain, Advocate For the Respondent No. 1 and have carefully perused the record. 8. In this appeal, Appellants claim to be bona fide purchasers for value without notice of the property in question. They also question the legality and the validity of the mortgage in favour of the Respondent No. 1 Bank. The Respondent Bank on the other hand has contended that the Appellants have no locus to challenge the mortgage in its favour. O.A. No. 378 of 2001 was filed by the Respondent No. 1 Bank for recovery of money and declaration of mortgage. The Respondent No. 1 Bank had also obtained interim order in O.A. No. 378 of 2001 against the Defendants restraining them by way of ad interim injunction preventing alienation of the mortgaged immovable properties (which included the property in question). This order was passed on 31st August, 2001, DRT, Ahmedabad, has now allowed O.A. No. 378/2001 by passing judgment and order dated 15th February, 2008 and approved the said equitable mortgage. The said judgment has not challenged by the Respondent No. 2 herein who is the borrower. The judgment and order dated 15th February, 2008 have, therefore, attained finality as far as the Respondent No. 2 is concerned. Therefore, equitable mortgage created in favour of Respondent No. 1 Bank cannot be questioned by the Appellants. Learned Counsel for the Appellants, however, submits that the Appellants can challenge the equitable mortgage. The judgment and order dated 15th February, 2008 have, therefore, attained finality as far as the Respondent No. 2 is concerned. Therefore, equitable mortgage created in favour of Respondent No. 1 Bank cannot be questioned by the Appellants. Learned Counsel for the Appellants, however, submits that the Appellants can challenge the equitable mortgage. In support he relies upon a judgment of the Hon'ble High Court of Madras reported in, 239800. I have carefully gone through the judgment of the Madras High Court. This was a case for a specific performance of the contract filed by Plaintiff, who had entered into Agreement for Sale of the suit property with the Defendant No. 1 on 10th July, 1996. The sale was to be executed within 9 months by paying balance amount of Rs. 2 lacs to the Defendant No. 1. On the other hand, Defendant No. 1 executed Sale Deed in favour of Defendant No. 2 on 30th January, 1997 in respect of the same property. It was held by the Hon'ble High Court that there is nothing which would prevent the Defendant No. 2 from questioning the validity and legality of the Sale Agreement. But the fact situation in the case before us is entirely different. Here a mortgage is created by the Borrowers in favour of the Respondent No. 1 Bank. O.A. is filed for recovery of money and declaration of mortgage. The O.A. is allowed and declaration of mortgage is granted. The Appellants who claim to be bona fide purchasers for value without notice are transferees of Respondent No. 2 (the Borrower) who had been injuncted by a Competent Court from alienating the disputed property. The Sale Deed is executed in favour of the Appellants in utter defiance of the interim order of injunction issued against the Respondent No. 2. The Appellants were strangers to the proceeding in O.A. No. 378 of 2001. The ruling discussed above has, therefore, no application to the facts of the present case. Mr. Panesar, learned Counsel for the Respondent No. 1 Bank places reliance upon a judgment of the Hon'ble High Court of Gujarat reported in 717391. The Appellants were strangers to the proceeding in O.A. No. 378 of 2001. The ruling discussed above has, therefore, no application to the facts of the present case. Mr. Panesar, learned Counsel for the Respondent No. 1 Bank places reliance upon a judgment of the Hon'ble High Court of Gujarat reported in 717391. In this case the Petitioner had pleaded that they are not borrowers qua the Respondent Bank and necessary consequence thereof is that the Respondent Bank is not the secured creditor qua the Petitioner and, therefore, no action of the Bank under the provisions of the Act can be taken by the Respondent No. 1 Bank against the Petitioners. In fact, similar plea has been taken in the case before us also. The Hon'ble High Court has held in para No. 7 that: 7. The effect of the acceptance of this submission of the learned Advocate will be that the entire exercise undertaken by the Legislature of enacting this law and putting it on the statute book will vanish. If this is allowed then every person, having borrowed a loan from the Bank or any other financial institution, can get away by transferring the property to some other person, and that person who will be in possession of the property will be arguing like the present Petitioners that they are not the 'borrowers' and the financial institution is not the 'secured creditor' and, therefore, no action can be taken in the matter and let the Petitioners and for that reason all such persons be allowed to live happily. The argument of the learned Advocate for the Petitioners is not only unreasonable but against the morality. However, it does not sound unreasonable to the learned Advocate for the Petitioners because he is under an obligation to be discharged in the open Court by arguing that condition precedent for implementation of law is the relationship of 'borrower' and the 'secured creditor' between the parties. The Appellants, therefore, have no locus to challenge the mortgage in favour of the Respondent No. 1 Bank. 9. Now, we revert to the Appellants' case. Their case is that they are bona fide purchasers for value without notice of the mortgage in favour of Respondent No. 1 Bank. Mr. The Appellants, therefore, have no locus to challenge the mortgage in favour of the Respondent No. 1 Bank. 9. Now, we revert to the Appellants' case. Their case is that they are bona fide purchasers for value without notice of the mortgage in favour of Respondent No. 1 Bank. Mr. Kinkhabwala, learned Counsel for the Appellants, has submitted that the Respondent No. 2 executed Agreement of Sale on 10th October, 2006 in respect of the disputed property in favour of Appellants. The Registered Sale Deed was executed by the Respondent No. 2 in favour of the Appellants on 22nd November, 2006 for the sale consideration of Rs. 17.51 lacs. It has also been stated by the Appellants that before execution of the Sale Deed they have obtained Title Clearance Certificate from Advocate Vijay Patel on 21st June, 2006. Another Title Clearance Certificate was given by Advocate Narendra H. Soni on 20th November, 2006. Both the Advocates had advised that the title of the vendor (Respondent No. 2) in the disputed property was clear and marketable and free from charge or encumbrances and also free from reasonable doubt. The contention of Mr. Kinkhabwala is that the Appellants did everything possible to make inquiries about the clear title of the disputed property and then only they entered into the Agreement of Sale and the Sale Deed. Here we have to note that O.A. No. 378 of 2001 had been filed by the Respondent No. 1 against the Borrowers including the Respondent No. 2 herein. On 31st August, 2001 an order of injunction had been passed by the DRT, Ahmedabad in respect of the disputed property also and the Respondent No. 2 had been restrained from alienating the said property. Another important aspect of the case is that a Notice under Section 13(2) of the SRFAESI Act was issued to the Borrowers on 7th August, 2006. This Notice was not responded to by the Borrowers. Hence, the Respondent No. 1 Bank took measures under Section 13(4) of the SRFAESI Act on 27th October, 2006 by taking symbolic possession of the disputed property. Respondent Bank ultimately took physical possession of the disputed property on 25th March, 2007. This Notice was not responded to by the Borrowers. Hence, the Respondent No. 1 Bank took measures under Section 13(4) of the SRFAESI Act on 27th October, 2006 by taking symbolic possession of the disputed property. Respondent Bank ultimately took physical possession of the disputed property on 25th March, 2007. Section 13(13) of the SRFAESI Act provides that: (13) No borrower shall, after receipt of notice referred to in Sub-section (2) transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice, without prior written consent of the secured creditor. 10. Thus, Agreement of Sale and Sale Deed executed by Respondent No. 2 in favour of the Appellants are in utter disregard of the order of injunction dated 31st August, 2001 and the provisions contained in Section 13(13) of the SRFAESI Act. 11. Now, we have to see the terms of Agreement for Sale which was executed on 10th October, 2006. The Agreement was valid for four months which will mean that the Sale Deed was to be executed before 10th February, 2007. Title Clearance Certificate was to be obtained by the executant (Respondent No. 2 herein) but contrary to the terms of this Agreement the first Title Clearance Certificate issued by Advocate Vijay Patel is addressed to the Manager, The Mehsana Urban Co-op. Bank Ltd., C.G. Road, Ahmedabad. In fact this Title Clearance Certificate was issued to the Manager, The Mehsana Urban Co-op. Bank Ltd., C.G. Road, Ahmedabad, on 21st June, 2006 i.e., much before the Agreement of Sale dated 10th October, 2006 was executed. The other Title Clearance Certificate is issued to the Manager, Bank of Maharashtra, Gandhi Nagar Branch, Ahmedabad on 20th November, 2006 by Advocate Narendra H. Soni. It appears that this Certificate was issued to the Bank of Maharashtra as the Appellants were tying up loan from Bank of Maharashtra so as to purchase the disputed property. Thus, both the Title Clearance Certificates are not obtained by the executant (Respondent No. 2 herein) and the Certificate issued by Advocate Vijay Patel is issued much before the Agreement of Sale dated 10th October, 2006. Both the Certificates are not addressed to the executant (Respondent No. 2 herein). 12. There are other circumstances also which cast shadow of doubt on the genuineness of the transaction of the Appellants. Both the Certificates are not addressed to the executant (Respondent No. 2 herein). 12. There are other circumstances also which cast shadow of doubt on the genuineness of the transaction of the Appellants. The Notice under Section 13(2) of the SRFAESI Act is issued to the Respondent No. 2 on 7th August, 2006 requiring him to discharge his liabilities to the secured creditor (Respondent No. 1 Bank) within 60 days from the date of the Notice. This period of 60 days expires on 6th October, 2006. The Agreement of Sale is executed on 10th October, 2006. The symbolic possession of the disputed property is taken by the Respondent Bank on 27th October, 2006 and the Sale Deed is executed by Respondent No. 2 in favour of the Appellants on 22nd November, 2006. These dates are very relevant in this case. The Appellants utilized a Title Clearance Certificate issued by Advocate Vijay Patel-on 21st June, 2006 addressed to the Manager, The Mehsana Urban Coop. Bank Ltd., C.G. Road, Ahmedabad. 13. There is another circumstance which blunts the Appellants' claim of being bona fide purchasers for value without notice. The Appellants' claim to have purchased the disputed property for a sum of Rs. 17.51 lacs on 22nd November, 2006. The same property was put to auction sale by the Respondent No. 1 Bank on 19th June, 2007 and the said property fetched sale price of Rs. 33.50 lacs under the distress sale. Thus, within a period of about 7 months the disputed property was sold for almost double the price mentioned in the Sale Deed. This again shows that the sale consideration is not adequate. The said property was sold for inadequate consideration in view of the claim of the Respondent No. 1 Bank over the disputed property. This is a strong circumstance against the genuineness of the Sale Deed executed in favour of the Appellants. 14. Learned Counsel for the Respondent No. 1 Bank has drawn Court's attention to paras 9 and 14 of the Sale Deed dated 22nd November, 2006. In both the paras there in an undertaking to indemnify the vendees (Appellants) in case there is found any defect in the vendor's title in the disputed property or any encumbrances thereon. The contention of Mr. Panesar is that these clauses were inserted in Sale Deed keeping in view the encumbrances attached to the disputed property. In both the paras there in an undertaking to indemnify the vendees (Appellants) in case there is found any defect in the vendor's title in the disputed property or any encumbrances thereon. The contention of Mr. Panesar is that these clauses were inserted in Sale Deed keeping in view the encumbrances attached to the disputed property. On 22nd November, 2006 a Declaration was also given by the Respondent No. 2 whereby the vendee was sought to be indemnified in case the vendee suffers any cost, damages or litigation. These are the factors which go strongly against the Appellants and the Respondent No. 2. 15. Appellants have filed two affidavits of Mr. Rameshbhai Bhanjibhai Patel. The first Affidavit dated 24th June, 2008 and the second affidavit is dated 29th October, 2008. Mr. Rameshbhai Bhanjibhai Patel, the deponent in both the Affidavits is said to be Chairman of Shyam Sattadhar Co-operative Housing Society Ltd. where the disputed property is situated. Similarly, two Affidavits dated 22nd April, 2008 and 26th October, 2009 of Mr. Pranji vanbhai Pursottambhai Zaveri are sought to be filed by the Appellants. No formal application for admitting these Affidavits is filed by the Appellants. Order 41 Rule 27 of the Code of Civil Procedure provides that the parties to the appeal shall not be entitled to produce additional evidence, whether oral or documentary, in an Appellate Court. The Appellate Court may allow such evidence if (1) the Court from whose decree the appeal is preferred has refused to admit evidence which ought to have been admitted, or (2) the party seeking to produce additional evidence, establishes that notwithstanding the exercise of due diligence, such evidence was not within his knowledge or could not, after the exercise of due diligence, be produced by him at the time when the decree appealed against was passed, or (3) the Appellate Court requires any document to be produced or any witness to be examined. In the case before us there in no formal application filed by the Appellants to admit these Affidavits as part of evidence. Mr. In the case before us there in no formal application filed by the Appellants to admit these Affidavits as part of evidence. Mr. Panesar relies upon a judgment of the Hon'ble Supreme Court reported in Basaya I. 260856, wherein it has been laid down that parties to the lis are not entitled to produce additional evidence as of course or routine but must satisfy the conditioned stated in Sub-clauses (a) and (aa) of Rule 27 Order 41 of the Code of Civil Procedure. The Appellants, therefore, cannot file two Affidavits of Mr. Rameshbhai Bhanjibhai Patel and two Affidavits of Appellant No. 1 in the Appellate Court without application for permission to admit the same and without fulfilling the conditions for additional evidence as discussed hereinabove. 16. For the sake of argument we may see what is sought to be filed by the two affidavits of Mr. Rameshbhai Bhanjibhai Patel who is the Chairman of Shyam Sattadhar Co-operative Housing Society Ltd. He has filed the Share Certificate issued by the said society in favour of Respondent No. 2. We have already held that the Appellants have no locus to challenge the mortgage in favour of the Respondent. No. 1 Bank. Therefore, the issue of validity to the mortgage cannot be reopened at the behest of the Appellants who were not the parties to the transaction of mortgage. The Appellants therefore, cannot file the evidence to discredit the mortgage in favour of the Respondent No. 1 Bank. It has been noted above that O.A. No. 378 of 2001 has been allowed by the DRT, Ahmedabad and mortgage has been approved. The judgment of the Tribunal has attained finality as far as the vendor (Respondent No. 2 herein) is concerned. Therefore, the additional evidence though to be filed is of no use to the Appellants in this case. 17. There is another important circumstance which goes against the Appellants in this case. It has been submitted by the learned Counsel for the Appellants that the disputed property was also mortgaged to the Social Co-operative Bank Ltd. The loan taken from Social Co-operative Bank Ltd. is repaid by the Respondent No. 2 and the Social Co-operative Bank Ltd. in turn have returned the original Share Certificate and the same is handed over to the Appellants. If we were to take it that the original Share Certificate was lying with the Social Co-operative Bank Ltd. and the same was returned to the Respondent No. 2 who in turn passed it over to the Appellants, what does this action of Respondent No. 2 lead us to? It is a clear indication of a collusion between the Respondent No. 2 and the Appellants. The Respondent No. 2 in clear defiance of the injunction issued by the Tribunal and the provisions of Section 13(13) of the SRFAESI Act entered into an Agreement of Sale and executed Sale Deed in favour of the Appellants at a time when he was injuncted from doing so. Subsequently he, as stated by the Appellants hands over the Share Certificate to the Appellants. This clearly leads to the inference that there is a collusion between the Respondent No. 2 and the Appellants. The plea of being bona fide purchaser for value without notice is without force and was rightly rejected by the Tribunal. 18. Learned Counsel for the Appellants has also submitted that they are left with no remedy if it is held that they cannot challenge the legality and validity of the mortgage in favour of the Respondent No. 1 Bank. The contention of Mr. Kinkhabwala is that Appellants have filed application under Section 17 of the SRFAESI Act. Clause 2 of Section 17 provides that the DRT shall consider whether any of the measures referred to in Sub-section (4) of Section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder. As discussed above, the declaration of mortgage has been given by the Tribunal in a judgment of O.A. No. 378 of 2001 and the judgment of the Tribunal has become final. There are conditions in the Sale Deed and Declaration which provide for indemnifying the vendees ((Appellants) in case there is adverse effect upon their title. In such situation, purchasers (Appellants herein) can redress their grievance by filing a suit for recovery of their amounts against the borrower (Respondent No. 2 herein) and by initiating criminal proceeding, if so advised. This view was expressed by the Hon'ble High Court of Delhi in case reported in 789236. 19. No other point has been pressed before me. 20. In such situation, purchasers (Appellants herein) can redress their grievance by filing a suit for recovery of their amounts against the borrower (Respondent No. 2 herein) and by initiating criminal proceeding, if so advised. This view was expressed by the Hon'ble High Court of Delhi in case reported in 789236. 19. No other point has been pressed before me. 20. The appeal has no merit and deserves to be dismissed with the following order: ORDER The Appeal is hereby dismissed with costs. Appeal dismissed.