R.K. Gupta, J.:— This is an Appeal preferred under section 18 of the SRFAESI Act, 2002 challenging the order passed by the D.R.T. on 30th March, 2010 by which the Appeal filed by the respondent No. 1-Bank under section 17 (1) of the SRFAESI Act, 2002 has been allowed. The relevant facts for the purpose of deciding the present Appeal are that the respondent No. 3 being the borrower applied for grant of loan with the appel lant-Bank. The same was sanctioned. The respondent No. 3 purchased the said property in the auction sale and the sale-deed was registered in his favour on 13th August, 1997. Since the sale was registered in relation to the property mortgaged with the appellant-Bank, therefore, on the date when the mort gage was created on 3rd October, 2001, he was valid owner of the property. The respondent No. 3 in relation to the same property applied for the loan with the respondent No. 1 -Bank also and created the mortgage on the same property on 6th April, 2002. 2. On the basis of the aforesaid fact, it is clear that the first charge on the property mortgaged was created by the borrower i.e., respondent No. 3 with the appellant-Bank and by mortgaging the same property, the second charge was created by the respondent No. 3 in fa vour of the respondent No. 1-Bank on 6th April, 2002. 3. The dispute between two Banks is that the respondent-Bank alleges that the title deed which was deposited by the respondent No. 3 with the appellant-Bank was a fake, therefore, by deposit ing the fake title deed, there could not be any valid mortgage on the property and in absence of any valid mortgage, there is no valid charge created by the respondent No. 3 in favour of the appel lant-Bank.
It is submitted that so far as the State Bank of India, respondent No. 1 is concerned, there was the first charge created by the respondent No. 3 on 6lh April, 2002 by depositing the title deed and on this basis, it is submitted that there was a valid mortgage with the re spondent No. 1 bank by the respondent No. 3, therefore, the State Bank of India has the first charge over the property since the first charge is created validly in favour of the respondent No. 1 by the respondent No. 3, therefore, the appel lant-bank could not have proceeded to sell the property and has no right to sell the same. 4. It is contended on behalf of the appellant that for the purpose of creat ing the valid mortgage, deposit of title deed is not necessary and what is neces sary to be seen is the intention of the parties to create the mortgage. To sub stantiate the same, the learned Counsel for the appellant-Bank relied upon the letter of indent which is placed on re cord at page No. 35 of the paper book. From the reading of the same it is clear that the respondent No. 3 has shown his intention to create the mortgage on the same property and even assuming that no valid title deed is deposited but there was an intention of the respondent No. 3 to create the mortgage on the property for the purpose of taking the loan from the appellant-Bank. 5. The next question which has been raised in the present case is that the necessary facts with regard to the auction and confirmation of the auction sale were already available before the D.R.T. that the property has already been sold in the auction and the sale certificate has been issued on 25"' January 2007. Yet, the respondent No. 1 who was the applicant, filed the Securitisation Application before the D.R.T. under section 17 (1) of the SRFAESI Act, 2002, but no attempt was made by the re spondent No. 1 to amend its application to implead the auction purchaser also as one of the respondents. 6. The Securitisation Application by the respondent No. 1 was filed on 7h December, 2004 i.e., the date when the first auction notice was published to auction the same property.
6. The Securitisation Application by the respondent No. 1 was filed on 7h December, 2004 i.e., the date when the first auction notice was published to auction the same property. Thereafter, objection was raised on behalf of the respondent No. 1 that the appellant-Bank has no right to auction the prop erty. The same was replied by the appel lant-Bank. However, the fact remains that respondent No. 1 was aware of the fact before the D.R.T. that there was a sale of the property in the auction and such sale has also been confirmed on 25th January, 2007, because of the auc tion and issuance of sale certificate, the right is created in favour of the auction purchaser. He was necessary party, be cause the question which was raised by the respondent No. 1 with regard to the right of the appellant-Bank to auction the property was having the effect of setting aside the auction, therefore, it was necessary for the respondent No. 1 to have impleaded the auction pur chaser also as one of the respondents, but in spite of the fact that it was known to the respondent No. 1 that there has been auction of the property and auc tion has also been confirmed, yet, no attempt was made by the respondent No. 1 to amend its application preferred by them under section 17 (1) of the SRFAESI Act, 2002 and therefore, even otherwise in the absence of the auction purchaser as respondent in the proceed ings, the Tribunal even otherwise could not have set aside the auction. In this reference, the judgment passed by the Allahabad High Court (Lucknow Bench) in L.C.L. jewellery Ltd. v. Debts Recovery Tribunal, 2011(89) ALR 22 is relevant and para No. 55 of the said judgment is relevant, which is reads as under: "55.As regards to the right of auc tion-purchaser, in my opinion, the Tribunal has committed no error as it is an established principle of law that the auction-purchaser's interest in the auctioned property continues to be protected. Respondent Nos. 5 and 6 herein are the auction purchasers and they can be termed as "agreed person" on account of interim order having been passed by the Tribunal as due to operation of the interim order, their rights were adversely af fected." Therefore, even otherwise the Tri bunal could not have -set aside the auc tion. 7.
Respondent Nos. 5 and 6 herein are the auction purchasers and they can be termed as "agreed person" on account of interim order having been passed by the Tribunal as due to operation of the interim order, their rights were adversely af fected." Therefore, even otherwise the Tri bunal could not have -set aside the auc tion. 7. This is also to be that this Tri bunal in Appeal No. R-1146/2009 (Chandraketu Yadav v. Union Bank of In dia,) decided on 13th September,.2011 has already decided that for the purpose of creating the charge by way of mortgage, it is not necessary to deposit the title deed. In the said judgment the earlier judgment passed by this Tribunal in Appeal No. R-937/09 (The Authorized Officer, Punjab National Bank v. Smt. Aneeta Gupta,) decided on 15th February, 2011 was considered and it was held that the deposit of title deed is not a condition precedent for the purpose of creating a valid mortgage, but what necessary is to ascertain the intention of creating the mortgage over the property for securing the loan, the relevant para graphs of the judgment passed in Au thorized Officer, Punjab National Bank v. Smt. Anneeta Gupta, (supra) are as un der :— "12. Question is also to be an swered in reference to the fact that in the present case there is no dispute that the present respondent who was applicant before the Debts Recovery Tribunal, purchased the property through a sale-deed executed in' her favour on 27th November, 2003 by Smt. Prem Lata Gupta and Smt. Prem Lata Gupta purchased the property from Shri Om Nath Mehrotra on 30th June, 2003. Thus, the pre sent respondent subsequent pur chaser of the mortgage created on the same property by the original owner Shri Om Nath Mehrotra and thus, any subsequent purchaser to the property already mortgaged nei ther would be covered by section 59-A of the Transfer of Property Act nor by section 45 of the Transfer of Prop erty Act. For the purpose of conven ience, both the sections are repro duced as under; "59-A. References to mortgagors and mortgagees to include persons deriv ing title from them.—Unless otherwise expressly provided, references in this Chapter to mortgagors and mort gagees shall be deemed to include references to persons deriving title from them respectively". 45.
For the purpose of conven ience, both the sections are repro duced as under; "59-A. References to mortgagors and mortgagees to include persons deriv ing title from them.—Unless otherwise expressly provided, references in this Chapter to mortgagors and mort gagees shall be deemed to include references to persons deriving title from them respectively". 45. Joint Transfer of considera tion.—Where immovable property is transferred for consideration to two or more persons and such considera tion is paid out of a fund belonging to them in common, they are, in the absence of a contract to the contrary, respectively entitled to interests in such property identically, as nearly as may be, with the interest to which they were respectively entitled in the fund; and, where such consideration is paid out of separate funds belong ing to them respectively, they are, in the absence of a contract to the con trary, respectively entitled to interest in such property in proportion to the shares of the consideration which they respectively and advanced. In the absence of evidence as to the interests in the fund to which they were respectively entitled, or as to the shares which they respectively advanced, such person shall be pre sumed to be equally interested in the property. 13. And thus they will have no right to object to the recovery against the borrower/original owner of the debts by selling of the secured assets. Thus, the subsequent purchaser will have no priority over the earlier mortgage. In this reference, judg ment passed by the Hon'ble Delhi Court in Ishwar Dass Malhotra v. Dhanwant Singh, AIR 1985 Delhi 83 is relevant. Thus judgment is also relevant to the ques tion that there is no need to get the equitable mortgage registered under the Registration Act. Paragraphs 12, 13, 14, 15, 16 are relevant which are being reproduced here is under : "12. The expression 'equitable mortgage does not find mention in the Transfer of Property Act, 1882. Section 58 (f) of the Act describes mortgage by deposit of title deeds. It is as good as any other mode of cre ating a legal mortgage whereunder there will be transfer of interest in the property mortgaged to mort gagees. The expression 'equitable mortgage' which is known in the English Law in loosely used to mean a mortgage by deposit of title deeds.
It is as good as any other mode of cre ating a legal mortgage whereunder there will be transfer of interest in the property mortgaged to mort gagees. The expression 'equitable mortgage' which is known in the English Law in loosely used to mean a mortgage by deposit of title deeds. Rather it can be said that in India a mortgage by deposit of title deeds is commonly known as an equitable mortgage but its incidents are not the same as that of an equitable mort gage under the English Law. In K. J. Nathan v. S. V. Maruthi Rao, AIR 1965 SC 430 distinc tion between an equitable mortgage, as understood in the English Law, and the mortgage, by deposit of title deeds has been brought out by the Supreme Court. Subha Rao J., (as his Lordship then was) speaking for the Court, observed as under : "Under this definition (referring to section 58 (f) of the Transfer of Property Act) the essential requisites of mortgage by deposit of title deeds are, (i) debt), (deposit of title deeds, and (iii) an intention that the deeds shall be security for the debt. Though such a mortgage is often described as an equitable mortgage, there is an es sential distraction between and equi table mortgage as understood in English Law and the mortgage by deposit of title deeds recognized un der the Transfer of Property Act in India. In England and equitable mortgage can be created either, (1) by actual deposit of title deeds, in which case parole evidence is admis sible to show the meaning of the de posit and the extent of the security created, or (2) if there be no deposit of title deeds, then by a memoran dum in writing, purporting to create a security for money advanced; See White and Tudor's Leading Case in Equity, 9th Edition, Vol. II, at p. 77. In either case it does not operate as an actual conveyance though it is en forceable in equity; whereas under the Transfer of Property Act a mort gage by deposit of title deeds is one of the modes of creating a legal mortgage whereunder there will be transfer of interest in the property mortgaged to the mortgagee. This distinction will have to be bone in mind in appreciating the scope of the English decisions cited at the Bar.
This distinction will have to be bone in mind in appreciating the scope of the English decisions cited at the Bar. This distinction is also the basis for the view that for the purpose of pri ority it stood on the same footing as a mortgage by deed." 13. It will thus be seen that a mortgage by deposit of title deeds is like any other mortgage and there is a transfer of interest in the property mortgaged to the mortgagee. The question, therefore, of the subse quent purchaser having bought the property subject to a mortgage by deposit of title deeds bona fide, with or without notice, is of no relevance. The subsequent purchasers cannot avoid the mortgage by leading evi dence to show that he made all rea sonable inquiries to find out, if the property was subject to a mortgage by deposit of title deeds or not. Sec tion 48 of the Transfer of Property Act does not admit of any such ex ception. According to this section, when a person purports to create, by transfer at different times, right is in or over the same immovable prop erty, and such rights cannot all exist or be exercised to their full extent to gether; each later created right shall, in the absence of a special contract or reservation binding the earlier trans ferees, be subject to the rights previ ously created. Further, proviso to section 48 of the Registration Act en acts that a mortgage by deposit of ti tle deeds shall take effect as against any mortgage deed subsequently executed and registered relating to the same property. Thus, a subse quent sale cannot have priority over a mortgage by deposit of title deeds created before the sale. In my view, therefore, the Trial Court fell in an error in holding that Harjeet Singh Dhanjal, the subsequent purchaser of the mortgaged property, was not li able on the ground that he took all reasonable care and acted in good faith. 14. Before us the argument pro ceeded on a different line. It was ar gued by Mr. C.B. Thanai, learned Counsel for Harjeet Singh Dhanjal that the memorandum (Ext. P-2) was compulsorily registrable under sec tion 17 of the Registration Act and as the same was not registered, it was inadmissible in evidence and any oral evidence was barred under sec tion 91 of the Evidence Act.
It was ar gued by Mr. C.B. Thanai, learned Counsel for Harjeet Singh Dhanjal that the memorandum (Ext. P-2) was compulsorily registrable under sec tion 17 of the Registration Act and as the same was not registered, it was inadmissible in evidence and any oral evidence was barred under sec tion 91 of the Evidence Act. At the time when Ext. P-2 was put in evi dence it was objected to on the ground of admissibility. The Trial Court has not touched this point in its judgment. It is a legal point, and a vexed one. The law relating to regis tration of a document, like in the in stant case, is to be found in section 59 cf the Transfer of Property Act and sections 17 (b), 48 and 49 of the Reg istration Act. 15. Three have been quite a number of cases in the High Courts all over the country, some of which reached the Privy Council and the Supreme Court, in which a mortgage, alleged to have been effected by deposit of title deeds, has been accompanied by a written document, and in which a question has arisen as to whether that document was of such a character as to require regis tration. The decision in each case has turned upon the nature of the docu ment in question. It is therefore, un necessary to multiply the authorities, and it would be sufficient if reference is made to some of the cases decided by the Privy Council and the Su preme Court and also to one decision of this Court. 16. In M. Siibramannian and an other v. M.L.R.M. Lutchman, AIR 1923 PC 50 it was held that if the memorandum was of such a nature that it could be treated as the contract for the mortgage which the parties considered to be the only repository and appropriate evidence of their agreement, it would be the instrument by which equitable mortgage was created and would come within section 17 of the Registration Act. Lord Carson, speaking for the Board, observed : "turning to the document itself, one is led to the same conclusion. "We hand you herewith title deeds, etc....This please hold as security, etc.
Lord Carson, speaking for the Board, observed : "turning to the document itself, one is led to the same conclusion. "We hand you herewith title deeds, etc....This please hold as security, etc. Please also hold this as further secu rity." Their Lordships have no doubt therefore that the memorandum in question was the bargain between the parties, and that without its pro duction in evidence the plaintiff could establish no claim, as it was unregistered it ought to have been rejected." In Rachpa Mahraj v. Bhagwanda Daruka, AIR 1950 SC 272 the Supreme Court dealt with the question of registration of the memo-randun given alongwith the title deeds. Patanjali Sastri, J., (as his Lordship their was) who spoke for the Court, stated the law as under: ".........When the debtor deposits with the creditor the title deeds of his property with intent to create a secu rity, the law implies a contract be tween the parties to create a mort gage, and no registered instrument is required under section 59 as in other forms of mortgage. But if the parties choose to reduce the contract to writ ing, the implication is excluded by their express bargain, and the docu ment will be the sole evidence of its terms. In such a case the deposit and the document both form integral parts of the transaction and are es sential ingredients in creating the mortgage. As the deposit alone is not intended to create the charge and the document, which constitutes the bargain regarding the security is also necessary and operates to create the charge in conjunction with the de posit, it requires registration under section 17 of the Registration Act, 1908, as a non-testamentary instru ment creating an interest in immov able property, where the value of such property is one hundred rupees and upwards. The time factor is not decisive. The document may be handed over to the creditor along-with the title deeds and yet may not be regisierable....." In Sumdardchariar v. Narayan Ayyar, AIR 1931 PC 36 dealing with a memorandum which consisted of a list of the title deeds and contained a recital that as agreed upon in person, I have deliv ered to you the under mentioned document., is security', the Privy Council held that it recorded particu lars of documents which, it stated, had been delivered as security in pursuance of an agreement reached in person.
It did not state what were the terms of the agreement nor did it indicate the nature of the matter for which the deeds were deposited as security. Since the memorandum in question did not embody the terms of the agreement between the par ties, it was held, that it did not re quire registration. In Hari Shankar v. Kedar Nath, AIR 1939 PC 167 the Board was of the opinion that: "...........Where, as here, the partita professing to create a mortgage by deposit of title deeds contemporane ously enter into a contractual agree ment, in writing, which is made an integral part of the transaction and is itself an operative instrument and not merely evidential, such a docu ment must under the statute be regis tered," In United Bank of India v. Lakharam S. and Co, AIR 1965 SC 159 the Supreme Court ex amined the question as to whether the memorandum required registra tion. It held that: "applying the principle to the present case, we consider that the let ter at Ext. 7 (a) was not meant to be an integral part of the transaction be tween the parties. The letter does not mention what was the principal amount borrowed or to be borrowed. Neither does it refer to rate of inter est for the loan. It is important to no tice that the letter does not mention details of title deeds which are to be deposited with the Plaintiff Bank. We are, therefore, of the opinion that the view of the High Court with re garded to the construction of Ext. 7 (a) is erroneous and the document was not intended to be an integral part of the transaction and did not, by itself, operate to create an interest in the immovable property. It fol lows, therefore, the document-Ext. 7 (a) did not require registration under section 17 of the Indian Registration Act." In V. C. Rao v. Andhra Bank AIR 1971 SCI 613 Hegde, J., while dealing with the law relating to the nature of a memorandum given alongwith the deposit of title deeds or one filed thereafter, held as under : "therefore, the crucial question is. Did the parties intend to reduce their bargain regarding the deposit of the title deeds to the fork of a document?
Did the parties intend to reduce their bargain regarding the deposit of the title deeds to the fork of a document? If so the document requires registra tion If on the other hand, its proper construction and the surrounding circumstances lead to the conclusion that the parties did not intend to do so, then, there being no express bar gain, the contract to create the mort gage arises by implication of the law from the deposit itself with the req uisite intention, and the document being merely evidential does not re quire registration." In Parkash Dev v. New Bank of India, AIR 1968 Delhi 244 a Division Bench of this Court held that where the memorandum itself consti tutes the bargain, registration is neces sary." 14. The same view has also been taken by Madras High Court in P. Seshayya v. L.I.C. of India, Chennai, 2010 (1) DRTC 405 (Mad) Paragraphs 12 and 13 are relevant which are quoted herein below: "12. The next contention of the learned Counsel appearing for the appellants is that Ext. A-4 Memoran dum of deposit of title deeds re quires stamp duty and registration to create any security over the plaint schedule property as the loan and handing over the documents are si multaneous and in praesenti and both the transactions took place on 21st February, 1994 itself and in the ab sence of the requirement, no valid equitable mortgage had been cre ated. Per contra, the learned Counsel for the respondent submits that the acceptance to the office was made on 12th January, 1994 and on that day it self a concluded contract has come into being and money was advanced on 21st February, 1994 and thereafter, the deposit of title deeds was made by the defendants with a view to create an equitable mortgage and the recitals in the memorandum of de posit of title deeds show the same and in support of his submission, he relies on the judgment of the Supreme Court in Deb Dutt Seal v. Raman Lal Phumra AIR 1970 SC 659 . 13. It is true that the Suit loan was disbursed on 21" February, 1994 and on the same day, "Ext. A-4 Memorandum of Deposit of Title Deeds was executed by the defen dants. The recitals in Ext.
13. It is true that the Suit loan was disbursed on 21" February, 1994 and on the same day, "Ext. A-4 Memorandum of Deposit of Title Deeds was executed by the defen dants. The recitals in Ext. A-4 Memo randum are extracted below for letter appreciation: "MEMORANDUM OF DEPOSIT OF TITLE DEEDS We, (1) P. Seshayya son of Late Subbarayudu, aged 60 years (2) P. Ethiraj son of P. Seshayya aged 32 vears and (3) P. Ramagopal son of P Seshayya aged 28 years all residing at N. 139, Gill Nagar II Extension, Choolaimedu, Madras-600 094, at tended the Zonal Office of the Life Insurance Corporation of India, a corporation established under the Life Insurance Corporation Act, 1956 at L.I.C. Buildings Anna Salai, Ma-dras-2 on 21" February, 1994 and have delivered to and deposited with the said Life Insurance Corporation of India at the said office, the title deeds enumerated in such. I here of in respect of my property at Plot No. 139, Gill Nagar Extension II. Puliyur-Kodambakkam, Madras, more fully described in Sch. II hereof with in tents to create thereon for a loan of Rs. 4,00,000/-(Rupees Four lacs) only advanced/agreed to be advanced to be by the said Life Insurance Corpo ration of India." 1.Sd/- 2.Sd/- In the facts of Deb Dutt Seal's case, referred to supra, money was ad vanced and Memorandum of deposit of title deeds was executed on the same day and the contention raised by the defendants was that the Memorandum required registration was inadmissible in evidence. The majority view of the Supreme Court in the said decision was that the words "DELIVERED TO AND DEPOSITED" occurring in the recitals of the Memorandum show that the transaction had already been con cluded and the document does not require registration because it is not an operative instrument and what is registrable under the Indian Regis tration Act is a document and not a transaction. In the present case also the words "delivered to and depos ited" occur in the recitals of Ext. A-4 Memorandum and in the light of the ratio laid down in the above deci sion, Ext. A-4 Memorandum does not require registration because it is not an operative instrument. Hence, the contention of the learned Coun sel appearing for the appellants can not be accepted. The conclusion of the Trial Court that the plaintiff-Corporation had proved the Suit claim of Rs.
A-4 Memorandum does not require registration because it is not an operative instrument. Hence, the contention of the learned Coun sel appearing for the appellants can not be accepted. The conclusion of the Trial Court that the plaintiff-Corporation had proved the Suit claim of Rs. 7,89,220/- against the de fendants is based on proper appre ciation of oral and documentary evi dence and it does not call for any in terference by this Court. The points are answered accordingly." 15. The Debts Recovery Tribunal had given more importance to the non-encumbrance certificate issued by the competent authority in favour of the present respondent. This is to be seen that at the first instance the said non-encumbrance certificate has no effect to arrest the applicability of section 45 and section 49-A of the Transfer of Property Act and such a certificate cannot be said to be valid to hold that un the basis of the issu ance of the non-encumbrance certifi cate, the Bank has no right to pro ceed against the subsequent pur chaser." 8. On the basis of the aforesaid two judgments, this has to be held in the present case that since there was inten tion of the respondent No. 3 borrower to create the mortgage even though no valid title deed has been deposited, the mortgage cannot be said to be invalid and inoperative, therefore, submission so made on behalf of the respondent-Bank cannot be accepted that there was not valid mortgage in favour of the ap pellant-Bank. 9. The next question arises in the present case that if there had been first charge already created, then the appel lant-Bank who is admittedly holding the first charge over the property because of the fact that there was first mortgage of the same property with the appellant-Bank and therefore, the appellant-Bank would have every right to proceed to ; recover its dues and the first charge holder would have the better right. In this reference, the earlier judgment passed by this Tribunal in Appeal No. R-1088/09 (Indian Bank v. Bank of Baroda,) decided on 18th.July, 2011 is relevant. The relevant para Nos. 5 to 7 of the said judgment are relevant, which are reproduced hereinbelow : "5.
In this reference, the earlier judgment passed by this Tribunal in Appeal No. R-1088/09 (Indian Bank v. Bank of Baroda,) decided on 18th.July, 2011 is relevant. The relevant para Nos. 5 to 7 of the said judgment are relevant, which are reproduced hereinbelow : "5. On the basis of the aforesaid facts, there is no dispute that in rela tion to the same property and the same respondent No. 2 created the first charge by depositing the sale-deed in favour of the appellant-Bank on 24th May, 2006 prior to the charge created in favour of the respondent-Bank. There is also no dispute to the proposition that the first charge holder would have better right than the person holding the second charge over the property in dispute. But the question which arises in the present case is that if the first charge is cre ated without depositing the valid papers then whether such a mort gage can be construed to be valid mortgage? Whether such mortgage will have effect of wiping away the earlier first charge? 6. In this reference, the judgment passed in Himala Hoseiry Manufactur ing Dyeing and Printing Mills (P) Ltd. v. Oriental Bank of Commerce, II (2011) BC 11 (DRAT) Delhi is rele vant wherein it is stated in para 28 of its judgment that it is now well-settled that deposit of the original ti tle deed is not a condition precedent for execution of the equitable mort gage, it is now also well-settled that intention of the party is to be seen. Evidence regarding intention of the party can be culled out from the fact and surrounding circumstances of a particular case. In this reference, the judgment passed by Calcutta High Court in the case of Surendra Mohan Rai Choudhury v. Mohendra Nath Banerjee, AIR 1932 Cal. 589 wherein the same preposi tion has been laid down is also rele vant. The judgment passed by the DRAT, Allahabad has taken note to the effect that the intention of the parties is to be seen. The respondent No. 2 had an intention to create an equitable mortgage in relation to the same property which was purchased by him of which he became owner on 3rd April, 2006 i.e. before the date of creation of equitable mortgage in favour of the appellant-Bank.
The respondent No. 2 had an intention to create an equitable mortgage in relation to the same property which was purchased by him of which he became owner on 3rd April, 2006 i.e. before the date of creation of equitable mortgage in favour of the appellant-Bank. The re spondent No. 2 did not come for ward to deny that no equitable mortgage was created in favour of the appellant-Bank. Though, the mortgage was created by submitting forged and fake sale-deed dated 9 May, 2006, but the fact remains that the property which was mortgaged with the appellant-Bank, the respon dent No. 2 became valid owner when the sale-deed was executed in his favour on 3rd April, 2006. It cannot be said that there was no intention of the respondent No. 2 to create an eq uitable mortgage with the appellant-Bank as equitable mortgage was cre ated on 24th May, 2006 thus, even though he has submitted a forged and fake sale-deed but it does not mean that he had no intention to cre ate a charge of the appellant-Bank and further he had also not submit ted that no mortgage was created on 24th May, 2006 in relation to the same property for which the second charge was created with the respon dent-Bank. 7. On the basis of the aforesaid conclusion, the first charge was cre ated in favour of the appellant-Bank and by virtue of Section 48 of the Transfer of Property Act the rights created by transfer will apply and there will be priority of the first charge which was created in favour of the appellant-Bank". 8. In the aforesaid two cases, this Tribunal has placed its reliance on a judgment passed the Hon'ble Calcutta High Court which is as Surendra Mohan Rai Chondhury v. Mohendra Nath Banerjee, AIR 1932 Cal. 589 and also the judgment passed by Delhi High Court in Ishwar Das Melhotra v. Dhamvant Singh AIR 1985 Delhi 83. 9. On the basis of the aforesaid reasoning, the submission so made on behalf of the respondent-Bank that there was first charge in favour of the respondent No. 1-Bank, cannot be accepted. 10.
589 and also the judgment passed by Delhi High Court in Ishwar Das Melhotra v. Dhamvant Singh AIR 1985 Delhi 83. 9. On the basis of the aforesaid reasoning, the submission so made on behalf of the respondent-Bank that there was first charge in favour of the respondent No. 1-Bank, cannot be accepted. 10. The next question in the present case was raised on behalf of the respon dent that in absence of proper security, the proceedings could not have been initiated by the appellant-Bank by tak ing recourse to the provisions as con tained in the SRFAESI Act, 2002. 11. The learned Counsel appearing for the respondent submitted that in this regard the definition of the "secured asset", "secured creditor" and "security interest" are necessary for the purpose of adjudicating the question; whether the appellant-Bank was entitled to pro ceed with the auction of the property by taking recourse to the SRFAESI Act, 2002. 12. It is to be seen that the defini tion of words "secured asset" as defined in the SRFAESI Act, 2002 means the property on which security interest in created. "Secured creditor" means and Bank or Financial Institution or any con sortium or group of Banks or Financial Institutions and includes— (i) debenture trustee appointed by any Bank or Financial Institution; (ii) Securitisation Company or Reconstruction Company,- whether acting as such or managing a trust set up by such Securitisation Com pany or Reconstruction Company for the securitisation or reconstruction, as the case may be; or (iii) any other trustee holding se curities on behalf of a Bank or Finan cial Institution, in whose favour se curity interest is created for due re payment by any borrower of any fi nancial assistance. The words "security interest" mean right, title and interest of any kind whatsoever upon property, created in favour of any secured creditor and in cludes any mortgage, charge, hypothe cation, assignment other than those specified in section 31. 13.
The words "security interest" mean right, title and interest of any kind whatsoever upon property, created in favour of any secured creditor and in cludes any mortgage, charge, hypothe cation, assignment other than those specified in section 31. 13. On the basis of the aforesaid definitions, on which the heavy reliance was placed, the learned Counsel for the appellant Bank submitted that it is no where prescribed that a valid security interest could be created only by depos iting the title deed, but the mortgage has to be created, as I have already held that in the present case, there was intention of respondent No. 3 to create mortgage with regard to the property of which he was the owner through the sale-deed, which was registered in his favour on 13'11 August, 1997 and mortgage was created. 14. In the present case, the respon dent No. 3 was also impleaded as one of the respondents before the Tribunal be low. He has not denied the mortgage in favour of the appellant Bank by him. On the basis of this, there was every inten tion of the respondent No. 3 to create the mortgage in favour of the appellant-Bank and the first charge by way of mortgage in favour of the appellant since admittedly was created prior to the mortgage with the respondent No. 1 Bank, therefore, there will be the first charge of the appellant-Bank. There was no privity of contract between the Ap pellant and the respondent No. 1. Priv ity of contract is between the appellant and the respondent No. 3. The respon dent No. 3 has never denied the privity of contract between the appellant-Bank and him. Therefore, even otherwise, it cannot be held that the charge which was created in favour of the appellant-Bank by the respondent No. 3 was inva lid. 15. On the basis of my aforesaid discussions, the present Appeal is al lowed and the order impugned passed by the DRT is set aside. Appeal Allowed. _____________