Research › Search › Judgment

Madras High Court · body

2014 DIGILAW 1797 (MAD)

Petitioner v. Respondent

2014-06-30

R.S.RAMANATHAN

body2014
JUDGMENT R.S. Ramanathan, J. 1. The fourth defendant in the above suit has filed the present Application to reject the plaint. 2. The respondent / plaintiff filed the suit C.S.No.712 of 2013 praying this Court for the following relief:- (i) to declare the loan agreements in Reference Nos.HECHN11025 and HECHN11030 both dated 29.11.2006, Loan Sanction Letters dated Nil and the declaration forms dated 11.09.2006 as null and void, non-est in the eye of law and not binding insofar as the plaintiff is concerned; (ii) to declare that the equitable mortgage created by defendants 1 to 3 before the fourth defendant by means of loan agreement dated 29.11.2006 in Reference No.HECHN11030 involving the suit property as null and void, non-est and not binding on the plaintiff; (iii) to grant a mandatory injunction directing the fourth defendant to hand over the original documents pertaining to the suit property to the plaintiff; and (iv) to direct the defendants 1 to 4 to pay the cost of the suit. 3. The case of the respondent/plaintiff in brief is as follows:- (a) The plaintiff is the owner of the suit property and she has been living permanently in USA with her husband since 2005. She executed a Power of Attorney dated 17.02.2009 in favour of her father-in-law to take care of the suit property. The first defendant in the suit is her cousin brother, namely, father's brother's son. The second defendant is the wife of the first defendant and the third defendant is a Company promoted by the first defendant and the first defendant is its Managing Director. The first defendant is a Chartered Accountant and had taken care of the financial affairs of the entire family and confidence was reposed on him by the plaintiff and by all of the family members. Considering the close family relationship with the first defendant and on account of the faith and confidence reposed on him and the fact that he is a qualified Chartered Accountant and the plaintiff has been living abroad, the plaintiff entrusted the original documents of the suit property to the first defendant with the fond hope that he would keep them in safe custody. (b) While so, in June 2009, a Court summons was served upon her father-in-law/power of attorney by DRT – 1, Chennai and power of attorney of the plaintiff came to know that the defendants 1 to 3 filed S.A.No.131/2009 before the Debts Recovery Tribunal, Chennai challenging the possession notice dated 19.12.2008 issued by the applicant /fourth defendant under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, “SARFAESI ACT”). The respondent / plaintiff, thereafter, took steps to procure relevant papers from the first defendant but the first defendant and the defendants 2 and 3 did not co-operate. Therefore, the plaintiff got certified copy of all the documents filed before the DRT, Chennai, by filing an application and on perusal of the documents, the plaintiff was shocked and surprised to note that the first defendant played huge fraud by committing impersonation, forgery and cheating and obtained loan from the fourth defendant/applicant herein by creating an equitable mortgage by depositing the title deeds of the suit property belonging to the plaintiff as if the plaintiff is the co-applicant and stood as guarantor for the loan taken by him. It is seen from the documents that the plaintiff along with the defendants 2 and 3 availed loan of Rs.74,00,000/- in LAN No.HECHMN11025 and another loan of Rs.76,00,000/- in LAN No.HECHMN11030 during December 2006 from the fourth defendant. For that purpose, the first defendant entered into two separate loan agreements both dated 29.11.2006 with the fourth defendant/applicant herein and the plaintiff's signature was forged in the aforesaid documents. Even in the loan sanction letter, the plaintiff's signature was forged. Thus, the first defendant managed to show the name of the plaintiff as co-applicant in both the loan applications and with the active connivance of the fourth defendant, the signature of the plaintiff was forged in all the documents. As such, the property belonging to the plaintiff was given as security for the loan availed by the defendants 1 to 3. In November and December, 2006 when the first defendant availed the loan, the plaintiff was not in India and her passport endorsement would prove the same. Therefore, the applicant was hand in glove in the entire conspiracy and by committing fraud and without the presence of the plaintiff during the relevant period of time, huge loan was sanctioned to the first defendant. Therefore, the applicant was hand in glove in the entire conspiracy and by committing fraud and without the presence of the plaintiff during the relevant period of time, huge loan was sanctioned to the first defendant. Since the plaintiff was shown as co-applicant and guarantor for the settlement of the said loan, the applicant/fourth defendant issued demand notice under Section 13 (2) of the SARFAESI Act dated 30.10.2007 and 27.11.2007, for both the loans, separately, wherein the address of the plaintiff was shown as – (1) No.3-B, Door No.258, 2 Block, 6th Street, Annanagar, Chennai – 600040; (2) Plot No.490, K Block, K-81, 1st Floor, 14th Street, Anna Nagar East, II Main Road, Chennai – 600 102; and (3) X-41, Sivaganga Complex, 2nd Avenue, Anna Nagar, Chennai – 600040. Notice issued under Section 13 (2) of the SARFAESI Act was received and managed by the second defendant on behalf of the plaintiff in connivance with first defendant and fourth defendant. The plaintiff is living abroad and in the first address mentioned above, the plaintiff's father was living and the second address is the residential address of the first and second defendants and third address is the address of the company. These facts would clearly show that the fourth defendant in connivance of the defendants 2 and 3 manoeuvred to send Section 13(2) Notice to the plaintiff by giving address of the defendants 1 to 3 and all these facts would prove that not only during the time of sanction of loan but also at the time of issuing Notice under Section 13(2) of the SARFAESI Act, fraud was committed. (c) On coming to know of the same, the plaintiff's power of attorney lodged a criminal complaint before the Commissioner of Police on 14.12.2009 against the defendants 1 to 4 and requested him to take action against the defendants 1 to 4 for having committed the offence of cheating, impersonation, criminal breach of trust, forgery and abetment of the said offences and FIR was registered against the defendants 1 to 4 for offences punishable under Section 120(B), 419, 420, 465, 467, 467 r/w 471 IPC and the same is under investigation and the first defendant was arrested. (d) The plaintiff also filed a detailed counter in S.A.No.131 of 2009 filed by the defendants 1 to 3 stating that the entire facts and also filed I.A.Nos.118 and 119 of 2010 in S.A.No.131 of 2009 before the Debts Recovery Tribunal, Chennai praying for the discharge of the mortgage created by the defendants 1 to 3 fraudulently and for return of the original title deeds. The fourth defendant / applicant herein filed a counter in I.A.Nos.118 and 119 of 2010 stating that the plaintiff signed those documents. The first defendant in his counter has stated that the original title deeds were handed over to the fourth defendant, namely, the applicant herein by the plaintiff through her power of attorney and her father. The Applications filed by the plaintiff in I.A.Nos.118 and 119 of 2010 were dismissed by the Debts Recovery Tribunal and the Tribunal did not go into the allegation of fraud and held that the Tribunal could not go into the question whether the plaintiff was a guarantor and whether she signed the documents and created equitable mortgage. The applications were dismissed on the ground that the applications were not maintainable. As fraud has been committed by the defendants 1 to 4, the plaintiff filed the suit for the aforesaid relief. 4. Applicant filed Application No.5409 of 2013 under Order 7, Rule 11 of CPC to reject the plaint on the ground that the suit was barred by limitation, res judicata and also barred by the provisions of the SARFAESI Act, 2002. The plaintiff in C.S.No.712 of 2013 is the sole respondent in that Application. It is submitted by the learned counsel for the plaintiff that the plaint may be read as counter for the application. 5. Mr.J.Sivanandaraaj, learned counsel for the applicant / fourth defendant, filed written submissions and contended that the very same relief that was sought for by the respondent/plaintiff in I.A.Nos.118 and 119 of 2010 before the Debts Recovery Tribunal, Chennai, was once again sought in the plaint and those applications were dismissed and the respondent/plaintiff having submitted to the jurisdiction of the Tribunal and failed in her attempt, again filed a fresh suit for the same relief, and therefore, the order passed in I.A.No.118 and 119 of 2010 in S.A.No.131 of 2009 will operate as res judicata, and on that ground, the suit is liable to be dismissed. 6. 6. The learned counsel further submitted that the suit is also barred by limitation and according to the plaintiff, forgery was committed and as per Article 56 of the Limitation Act, when a suit is filed to declare the forgery of an instrument, the suit ought to have been filed within 3 years when the issue or registration was known to the plaintiff and even according to the admission made by the plaintiff in the suit that on 14.12.2009, a criminal complaint was lodged by the plaintiff's power of attorney alleging forgery, fraud, cheating and therefore, the plaintiff must have come to know about the forgery on 14.12.2009 though the plaintiff knew about the alleged forgery even much earlier, and therefore, the suit ought to have been filed on or before 14.12.2012 and admittedly, the suit was filed only on 22.10.2013 and therefore, the first relief is barred by limitation and therefore, the prayer sought in respect of the first relief deserves to be rejected. He also submitted that the second relief is also clearly barred by limitation. The second relief is entirely dependent upon the first relief. He, therefore, submitted that as the first relief is barred by limitation, the second relief also fails. He also contended that the second relief is also barred under Article 58 of the Limitation Act and admittedly, starting point for limitation was 14.12.2009 when the complaint was filed by the power of attorney of the plaintiff and therefore, the suit is barred in respect of the second relief. The third relief for mandatory injunction is also barred under Article 69 of the Limitation Act. 7. The learned counsel for the applicant/fourth defendant also submitted that the plaintiff cannot resort to Section 14 of the Limitation Act and relied upon the Judgments reported in 1959 SCR 564 [Madhavrao Narayanrao Patwardhan v. Ram Krishna Govind Bhanu and others], [Krishan Kumar Vs. Sanjay Kumar and Others]. 7. The learned counsel for the applicant/fourth defendant also submitted that the plaintiff cannot resort to Section 14 of the Limitation Act and relied upon the Judgments reported in 1959 SCR 564 [Madhavrao Narayanrao Patwardhan v. Ram Krishna Govind Bhanu and others], [Krishan Kumar Vs. Sanjay Kumar and Others]. He also submitted that the plaintiff cannot also maintain the suit by alleging fraud without making substantial allegations to prove the allegation of fraud and the Hon'ble Supreme Court in the judgment reported in 2004 SCC 311 [Mardia Chemicals Ltd. v. Union of India] (SC) and in the Judgment reported in (2008) 5 MLJ 1113 [S.Murugan v. Karur Vysya Bank Ltd], nowhere laid down that by making allegation of fraud, DRT will not claim exclusive jurisdiction and submitted that in those judgments, it was only held that Civil Court would also retain jurisdiction if a strong prima facie case of fraud is made out. He also submitted that the plaintiff is indulging in forum shopping and such action cannot be entertained or encouraged and relied upon the judgment reported in (1998) 4 Supreme Court Cases 577 [Chetak Construction Ltd., v. Om Prakash and others]. He also relied upon the judgment rendered in Swadeshi Cement Ltd and others v. Union of India (UOI) and others. 8. He also submitted that as per Section 34 of the SARFAESI Act, 2002, Civil Court has no jurisdiction to entertain the suit or proceedings in respect of any matter in which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under that Act to determine, and therefore, the suit filed by the plaintiff/respondent is not maintainable and relied upon the judgment rendered in State Bank of India Vs. Chinigepalli Lathangi and Others. He also relied upon the judgment reported in HDFC Bank Limited Vs. M/s.Gee Kay International and others reported in wherein it is held when there is no prima facie case of fraud made out against the bank, Section 34 of the SARFAESI Act applies and the application filed under Order 7 Rule 11 CPC has to be allowed. He therefore submitted that the plaint is liable to be rejected. 9. M/s.Gee Kay International and others reported in wherein it is held when there is no prima facie case of fraud made out against the bank, Section 34 of the SARFAESI Act applies and the application filed under Order 7 Rule 11 CPC has to be allowed. He therefore submitted that the plaint is liable to be rejected. 9. On the other hand, learned Senior Counsel, Mr.T.R.Rajagopalan, appearing for the respondent/plaintiff submitted that a reading of the plaint would prove that a strong prima facie case has been made out against the applicant and the defendants 1 to 3 and even according to the applicant, the plaintiff signed the loan agreement and her signature was compared with admitted signatures of the plaintiff and the fourth defendant/applicant did not state that the respondent/plaintiff came in person and signed the loan agreements and they only contended that the signatures of the plaintiff found in loan agreement were compared with the admitted signature of the plaintiff. Admittedly, the plaintiff was living abroad during November and December, 2006 when loan agreements were alleged to have been executed by the plaintiff and the third defendant's addresses were given for the plaintiff and all these would prove that the plaintiff could not have been present at the time of execution of the loan agreements and a strong case of fraud has been made out in the plaint as well as through the documents filed along with plaint and therefore, when fraud has been alleged and substantiated, Civil Court has got jurisdiction to entertain the said suit and disputed the bar under Section 34 of the SARFAESI Act and relied upon the judgments reported in 2004 (2) CTC 759 [Mardia Chemicals Ltd., v. Union of India] (SC) and (2008) 5 MLJ 1113 [S.Murugan v. Karur Vysya Bank Ltd.]. He further submitted that the suit is also not barred by limitation and the respondent/plaintiff is entitled to the benefits under Section 14 of the Limitation Act and admittedly, the respondent/plaintiff filed Application Nos.118 and 119 of 2010 before the Debts Recovery Tribunal in March, 2010 and order was passed in that applications only on 12.7.2013 and therefore, the time taken for prosecuting I.A.Nos.118 and 119 of 2010 from March, 2010 to July, 2013 the date of passing of orders in I.A.Nos.118 and 119 of 2010, has to be excluded and if done so, the suit is not barred by limitation. 10. The learned Senior Counsel further submitted that when the allegation of fraud was made out, there is no question of limitation and when the plaintiff was able to prove fraud, the entire loan transaction becomes void and therefore, the applicant cannot plead limitation when allegations of fraud are made out. 11. The learned Senior Counsel also submitted that the suit is also not barred by res judicata as no order on merits was passed in I.A.Nos.118 and 119 of 2010 and the Tribunal dismissed those applications as not maintainable without giving any reason and therefore, it cannot be conte4nded that the suit is barred by res judicata. 12. The learned Senior Counsel also submitted that the contention of the applicant that the suit is barred under Articles 56, 58 and 69 of the Limitation Act cannot be accepted having regard to the plea taken by the plaintiff that fraud has been committed by the applicant with the connivance of the defendants 1 to 3 and fraud vitiates the entire transactions and hence, there is no question of limitation for filing the suit when the allegations of fraud are made out in the plaint. The learned Senior Counsel therefore submitted that the suit cannot be rejected at this stage as the plaintiff has substantiated prima facie case of fraud. 13. A reading of the plaint would make it clear that the plaintiff alleged fraud on the part of the defendants 1 to 3 and also against the fourth defendant/applicant herein. The learned Senior Counsel therefore submitted that the suit cannot be rejected at this stage as the plaintiff has substantiated prima facie case of fraud. 13. A reading of the plaint would make it clear that the plaintiff alleged fraud on the part of the defendants 1 to 3 and also against the fourth defendant/applicant herein. In Paragraph 7, it is stated that the first defendant played huge fraud by committing impersonation, forgery and cheating and obtained loan from the fourth defendant/applicant by creating an equitable mortgage by depositing the title deeds of the suit property belonging to the plaintiff as if the plaintiff was a co-applicant and stood as guarantor for the loan taken by them. In Paragraph 8, it is stated that the first defendant with the active connivance and conspiracy of the fourth defendant forged the signature of the plaintiff in all the loan documents and during November and December, 2006 when the loan was availed and the documents were executed, the plaintiff was not in India and her passport endorsement would prove the same. In Paragraph 9, she has stated that Section 13(2) Notice dated 30.10.2007 and 27.11.2007 were issued separately by the fourth defendant/applicant herein to 3 different addresses and that would also prove the fraud committed by the fourth defendant/applicant herein. Further, on the complaint given by the power of attorney of the plaintiff, a case was registered in Crime No.49/2010 for offences punishable u/s.120(B), 419, 420, 465,467 r/w 471 IPC and the same is under investigation. 14. According to me, sufficient allegations are made out in the plaint regarding fraud alleged to have been committed by the defendants 1 to 4. 15. In the judgment reported in 2004 (2) CTC 759, cited supra, the Supreme Court held that where the action of the executor is alleged to be fraudulent, the jurisdiction of Civil Court can be invoked. In the judgment reported in (2008) 5 MLJ 1113 cited supra, learned single Judge of this Court also considered Mardia Chemicals Ltd's case and held that when fraud has been alleged substantially, the suit is not barred under the provisions of SARFAESI Act. In the judgment reported in (2008) 5 MLJ 1113 cited supra, learned single Judge of this Court also considered Mardia Chemicals Ltd's case and held that when fraud has been alleged substantially, the suit is not barred under the provisions of SARFAESI Act. In the judgment of Mardia Chemicals Ltd.'s case, the Hon'ble Supreme Court in Paragraph 80(5) held as follows:- “As discussed earlier in this judgment, we find that it will be open to maintain a civil suit in civil court, within the narrow scope and on the limited grounds on which they are permissible, in the matters relating to an English mortgage enforceable without intervention of the Court.” 16. The Hon'ble Supreme Court in Mardia Chemical Ltd.'s case held that there must be allegation of fraud and when such allegations are made out, Civil Court's jurisdiction is not excluded. 17. As stated supra, the respondent/plaintiff filed a copy of the passport which would prove that she had not visited India during November and December, 2006 when the loan documents alleged to have been executed by her and also the other letters alleged to have been written by the plaintiff during the relevant period and the applicant also did not state specifically that the plaintiff was present while executing the loan agreement and only contended that the signature was compared with her admitted signatures and loan was sanctioned. 18. Therefore, according to me, prima facie, a case of fraud has been made out by the respondent/plaintiff and therefore, the Civil Court's jurisdiction is not barred by virtue of Section 37 of the SARFAESI Act and on that ground, the suit cannot be rejected. 19. It is also held by the Hon'ble Supreme Court and other High Courts that the fraud vitiates the entire transaction and once the respondent/plaintiff is able to prove fraud, the entire transaction becomes void and it goes to the very root of the case of the fourth defendant/applicant herein and therefore, when the allegations of fraud are made out, the transaction becomes void and to set aside the void transaction, there is no period of limitation. Hence, the contention of the applicant that the suit is barred under Articles 56, 58 and 69 of the Limitation Act cannot be accepted. 20. The suit is also not barred by res judicata by reason of the orders passed in I.A.Nos.118 and 119 of 2010. Hence, the contention of the applicant that the suit is barred under Articles 56, 58 and 69 of the Limitation Act cannot be accepted. 20. The suit is also not barred by res judicata by reason of the orders passed in I.A.Nos.118 and 119 of 2010. Admittedly, in those applications, no order was passed on merits and the Debts Recovery Tribunal simply dismissed the applications as not maintainable without giving any reasons. Hence, the suit is not barred by res judicata. 21. In the light of the above discussions, the Application is dismissed.