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2018 DIGILAW 1501 (GAU)

Sudip Lodh v. State Bank of India

2018-10-04

UJJAL BHUYAN

body2018
JUDGMENT : 1. Heard Mr. D. Mazumdar, learned senior counsel for the petitioner and Mr. S.S. Sarma, learned senior counsel for the State Bank of India (‘SBI’) and its officials, i.e., the respondents. 2. By filing this petition under article 226 of the Constitution of India, petitioner seeks the following reliefs: “In the premises aforesaid it is most humbly prayed that Your Lordships may be pleased to issue rule calling upon the respondents to show cause as to why a writ of mandamus should not be issued to direct the respondent to allow the petitioner to sell the land under Dag No. 3790 (New)/772 (01d)/3585 (Old), Patta No. 2866 (New)/114 (01d)/883 (Old) purchased by the petitioner vide sale deed No. 2145 dated 5.3.2005 and sale deed No. 2144 dated 5.3.2005 and return the sale deeds after completion of the payment of Asset Backed Loan so as to enable the petitioner to close the loan Account No. 00000035647397478 as prayed for by the petitioner through his application dated 30.6.2018 and cause or causes being shown upon hearing the parties make the rule absolute and be pleased to pass such other or further order as to Your Lordships may seem fit and proper.” 3. Case of the petitioner is that he had obtained an asset-backed loan from the SBI for an amount of Rs. 2 crores under Account No. 00000035647397478 for upgrading infrastructure of the coaching institute run by him, namely, Scholars Academy, Guwahati. In connection with this loan, he had mortgaged 2 title deeds standing in his name as well as that of his wife, being sale deed No. 2145 dated 5.3.2005 and sale deed No. 2144 dated 5.3.2005 for lands covered by Dag No. 3790 (New) and Patta No. 2866 (New). 4. It appears that one trust by the name of Scholars Academy Education Trust (‘Trust’), of which petitioner is the Chairman and Managing Trustee, had earlier availed loan from the SBI. It is stated that for various reasons, the Trust could not make repayment of the loan for which notice under section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (‘SARFAESI Act’) was issued. According to the petitioner, an amount of Rs. 10 crores is required to meet the demand as per notice under section 13(2) of the SARFAESI Act. According to the petitioner, an amount of Rs. 10 crores is required to meet the demand as per notice under section 13(2) of the SARFAESI Act. For repayment of the said loan as well as for repayment of the asset-backed loan petitioner wants to sell the land for which he had mortgaged the title deeds before the SBI. He has stated that he has found a borrower, who is willing to purchase the said lands as per the market price and as per assessment of the petitioner, from the sale proceeds, he will not only be in a position to repay the asset-backed loan, but also substantially repay the amount covered by the section 13(2) notice. In this connection, petitioner made a representation before the SBI authorities on 30.6.2018, seeking permission to sell the lands and upon liquidation of the loan amount of the asset-backed loan to release the mortgaged deeds. Since there was no response, present writ petition has been filed. 5. On 23.7.2018, this court had issued notice with the observation that pendency of the writ petition would not be a bar for the respondents to release the title deeds of the petitioner to enable sale of the mortgaged property to repay the loan amount. 6. An additional affidavit has been filed by the petitioner stating that SBI had informed him on 14.8.2018 that it has come out with a scheme for one-time-settlement (‘OTS’) of non-performing assets (‘NPA’) and had asked the petitioner to avail the same on the terms and conditions mentioned therein. It is in this context, petitioner has stated that permission to sell the land covered by the mortgaged deeds has become all the more necessary as otherwise he would not be in a position to repay the asset-backed loan amount as well as the NPA of the Trust. 7. SBI has filed a detailed affidavit. It is stated that Scholars’ Academy Education Trust, of which the petitioner is the managing trustee-cum-chairman, availed a loan from the SBI. Initially, the term loan was of Rs. 19 crores, which was reduced to Rs. 14 crores and, thereafter, to Rs. 12.65 crores. As the Trust failed to repay the loan, both principal and interest, from September 2016, the said loan amount was classified as nonperforming asset (NPA), whereafter, restructuring of the loan amount was carried out. Initially, the term loan was of Rs. 19 crores, which was reduced to Rs. 14 crores and, thereafter, to Rs. 12.65 crores. As the Trust failed to repay the loan, both principal and interest, from September 2016, the said loan amount was classified as nonperforming asset (NPA), whereafter, restructuring of the loan amount was carried out. Even after restructuring, the Trust failed to repay quarterly installments compelling the SBI to issue notice under section 13(2) of the SARFAESI Act. It is stated that only after issuance of notice under section 13(2) of the SARFAESI Act, petitioner has started taking steps for getting the mortgaged deeds released from the SBI, thereby averting the risk of the mortgaged lands being attached and sold off in the SARFAESI proceedings. Apprehension expressed by the SBI is that if the title deeds of the mortgaged lands are released on the assurance of the petitioner that the sale proceeds will be used for liquidation of the asset-backed loan, there will be no worthwhile saleable property available with the SBI as collateral security to recover the dues of the Trust. 8. Petitioner has filed a rejoinder affidavit to the counter-affidavit filed by the SBI, where in paragraphs 5 and 6 he has given the break-up as to how he would arrange the funds for liquidating the 2 loan amounts. In the said context, petitioner has stated that the apprehension expressed by the SBI that petitioner would pocket the sale proceeds from sale of lands is totally mis-conceived. 9. Submissions made by learned counsel for the parties have been considered. 10. During the course of hearing, it appeared that there was possibility of settlement of the dispute between the parties in an amicable manner, but for one reason or the other, the same could not be achieved. However, this aspect of the matter need not detain the proceedings. 11. From the narration of facts as above, what is seen is that there are 2 loan accounts in the SBI, one in the name of the Trust of which petitioner is the Managing Trustee and the other in the name of the petitioner. The loan in the name of the Trust has been classified as non-performing asset (NPA), for which efforts are on for settlement under the one-time settlement (OTS) scheme of SBI. The loan in the name of the Trust has been classified as non-performing asset (NPA), for which efforts are on for settlement under the one-time settlement (OTS) scheme of SBI. In so far the asset-backed loan of the petitioner is concerned, petitioner has mortgaged lands belonging to him and his wife against the 2 sale deeds as mentioned above. 12. From the stand taken by the SBI, it is seen that SBI intends to retain lien over the 2 title deeds as collateral security for the loan obtained by the Trust, which has now been classified as non-performing asset (NPA). 13. Question for consideration is whether it is permissible in law? 14. Section 171 of the Contract Act, 1872, deals with general lien of bankers, factors, wharfingers, attorneys and policy-brokers. It says that bankers, factors, wharfingers, attorneys of a High Court and policy brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them, but no other persons have a right to retain as a security for such balance goods bailed to them unless there is an express contract to that effect. Though not expressly stated, it appears that SBI is relying on the aforesaid provision to hold on to the 2 mortgaged sale deeds of the petitioner and his wife as security for the non-performing asset (NPA) of the Trust. 15. The mortgage of the petitioner with SBI is basically an equitable mortgage by deposit of title deeds. It is settled law that right of redemption of the mortgagor under a mortgage giving right to the mortgagee to sell the mortgaged property without intervention of the court is not extinguished on mere execution of such mortgage. Section 60 of the Transfer of Property Act, 1882, makes the position very clear. It deals with right of mortgagor to redeem. Since section 60 is relevant, the same is extracted hereunder: “60. Right of mortgagor to redeem. Section 60 of the Transfer of Property Act, 1882, makes the position very clear. It deals with right of mortgagor to redeem. Since section 60 is relevant, the same is extracted hereunder: “60. Right of mortgagor to redeem. - At any time after the principal money has become due, the mortgagor has a right, on payment or tender, at a proper time and place, of the mortgage-money, to require the mortgagee : (a) to deliver to the mortgagor the mortgage-deed and all documents relating to the mortgaged property which are in the possession or power of the mortgagee, (b) where the mortgagee is in possession of the mortgaged property, to deliver possession thereof to the mortgagor, and (c) at the cost of the mortgagor either to re-transfer the mortgaged property to him or to such third person as he may direct, or to execute and (where the mortgage has been effected by a registered instrument) to have registered an acknowledgement in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished: Provided that the right conferred by this section has not been extinguished by act of the parties or by decree of a court. The right conferred by this section is called a right to redeem and a suit to enforce it is called a suit for redemption. Nothing in this section shall be deemed to render invalid any provision to the effect that, if the time fixed for payment of the principal money has been allowed to pass or no such time has been fixed, the mortgagee shall be entitled to reasonable notice before payment or tender of such money.” 16. Thus, right of redemption of a mortgagor is statutorily recognized. Such a right is an incident of a subsisting mortgage and subsists so long as the mortgage subsists. Mortgage being security for debt, right of redemption continues even if mortgagor fails to pay the debt by the due date. Mortgagor's right of redemption would stand extinguished only on execution of conveyance of mortgaged property by a registered instrument or by a decree of court [please see LK Trust v. EDC Ltd., (2011) 6 SCC 780 ]. 17. High Court of Madras (Madurai Branch) was confronted with a similar situation in M. Shanthi v. Bank of Baroda, Namakkal Branch, W.P.(MD) No. 12613 of 2016 decided on dated 9.8.2017. 17. High Court of Madras (Madurai Branch) was confronted with a similar situation in M. Shanthi v. Bank of Baroda, Namakkal Branch, W.P.(MD) No. 12613 of 2016 decided on dated 9.8.2017. Madras High Court opined that a Bank cannot retain the title deeds or proceed with the properties which were offered as security in relation to an independent loan transaction. View taken was that the Bank cannot take recourse to section 171 of the Contract Act, 1872, to retain lien over title deeds mortgaged in connection with an independent loan transaction. Even in that case, the amount was not finally settled by the petitioner to get back the documents mortgaged. 18. In such circumstances and on a thorough consideration of the matter, court is of the view that there is no legal impediment to accede to the prayer of the petitioner. Accordingly, respondents are directed to allow the petitioner to sell the plots of land covered by the mortgaged title deeds for obtaining the asset-backed loan and after repayment of the said asset-backed loan to return the title deeds to the petitioner so as to enable the petitioner to hand over the same to the purchaser of the said lands. 19. At this stage, Mr. Sharma, learned senior counsel for SBI submits that petitioner is bound by the promise made by him in paragraphs 5 and 6 of the rejoinder affidavit, which will lead to settlement of the NPA account of the Trust under the one-time-settlement (OTS) scheme. If need be, parties may enter into an agreement in this regard. 20. Writ petition is accordingly allowed, but without any order as to costs.