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2019 DIGILAW 186 (AP)

M. Chandra Sekhara Babu v. Kamineni Dasaradha Ramaiah

2019-08-13

J.UMA DEVI, M.SEETHARAMA MURTI

body2019
JUDGMENT : M. Seetharama Murti, J. 1. This Civil Miscellaneous Appeal under Order XLIII Rule 1 of the Code of Civil Procedure, 1908, is filed by the unsuccessful petitioner/plaintiff assailing the order, dated 20.12.2018, of the learned Principal District Judge, Nellore, passed in I.A. No. 527 of 2018 in O.S. No. 91 of 2018. 2. We have heard the submissions of Sri Karanam Ramesh, learned counsel appearing for the appellant/plaintiff ('plaintiff, for brevity); of Ms. Akumarthi Pushpa Leela, learned counsel appearing for the 1st respondent; and, of Sri V. Raghu, learned counsel appearing for the 3rd respondent. The notice sent to the 2nd respondent was returned un-served with an endorsement 'door locked'. We have perused the material record. The parties in this appeal shall hereinafter be referred to as arraigned in the suit. 3. The introductory facts, in brief, are as follows: 'The plaintiff filed the suit against the defendants requesting to pass a preliminary decree on the basis of a mortgage transaction and for other reliefs. The relief is sought only against the 1st defendant in the suit and no relief is claimed against the defendants 2 and 3. In the said suit, the plaintiff filed the subject interlocutory application under Order XXXIX Rule 1 read with Section 94(e) and Section 151 of the Code of Civil Procedure, 1908, requesting to direct the 3rd defendant, who is the officer of the Bank, to deposit the sale proceeds to the credit of the suit. The said application was resisted by the 1st defendant and the 3rd defendant. The 2nd defendant remained ex parte. On merits and by the order impugned in this revision, the trial Court dismissed the application of the plaintiff. Hence, the plaintiff is before this Court.' 4. The case of the plaintiff, in support of the said request, in brief, is this: The 1st defendant and his wife approached the plaintiff for financial assistance of Rs. 1 Crore and offered to mortgage several of their properties. The plaintiff lent Rs. 1 Crore to the 1st defendant and his wife, vide registered mortgage deed, dated 21.11.2013. The 1st defendant and his wife discharged part of the amount in respect of three items out of seven items of mortgaged properties. Later, the 1st defendant and his wife did not clear the balance amount due to the plaintiff. The plaintiff lent Rs. 1 Crore to the 1st defendant and his wife, vide registered mortgage deed, dated 21.11.2013. The 1st defendant and his wife discharged part of the amount in respect of three items out of seven items of mortgaged properties. Later, the 1st defendant and his wife did not clear the balance amount due to the plaintiff. The plaintiff got issued a legal notice, dated 25.04.2018, to the 1st defendant and his wife. The 1st defendant alone gave reply, dated 02.05.2018, stating that item No. 3 of the mortgaged property was sold to the 2nd defendant under registered sale deed, dated 03.07.2014, and that his wife has nothing to do with the remaining mortgaged properties. The suit is filed only in respect of item No. 3 out of the mortgaged properties. The sale deed executed by the 1st defendant in favour of the 2nd defendant is a sham, nominal, void and without consideration. The 2nd defendant has knowledge about the mortgage in favour of the plaintiff. The 2nd defendant colluded with the bank and obtained a loan by mortgaging the property to the Andhra Bank ('Bank', for brevity). The Bank, which has proper mechanism to verify the earlier encumbrances and obtain proper legal opinion, did not follow the proper procedure. The plaintiff is a protected lender under Section 48 of the Transfer of Property Act, 1882. His prior interest cannot be ignored. The subsequent transactions are subject to the prior mortgage. The Bank cannot acquire any valid mortgage, detrimental to the interests of the plaintiff. The Bank cannot exercise any rights by initiating any recovery proceedings. Through a publication, dated 13.05.2018, in Sakshi Telugu Daily Newspaper, the plaintiff came to know that the property is under process for auction under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act', for brevity) Hence, the defendants 2 & 3 are impleaded in the suit as necessary parties. The plaintiff has got prima facie case and balance of convenience in his favour. If no injunction is granted, he would be put to irreparable loss. Hence, the 3rd defendant, who is the officer of the Andhra Bank, may be directed to deposit the sale proceeds to the credit of the suit in view of the suit mortgage transaction, dated 21.11.2013. 5. If no injunction is granted, he would be put to irreparable loss. Hence, the 3rd defendant, who is the officer of the Andhra Bank, may be directed to deposit the sale proceeds to the credit of the suit in view of the suit mortgage transaction, dated 21.11.2013. 5. The 1st defendant filed a counter with the following averments: 'It is true that the 1st defendant and his wife borrowed Rs. 1 Crore under the suit registered mortgage deed from the plaintiff, on 21.11.2013. It is true that he discharged the debt in respect of three items out of seven items. The contention that he did not come forward to clear the loan is not true. It is true that notices are exchanged. It is true that in the reply notice, this defendant stated that he sold away item No. 3 out of the mortgaged properties to the 2nd defendant, under registered sale deed, dated 03.07.2014. Out of the properties mortgaged, this 1st defendant redeemed three items. He was in need of money. Hence, he approached one G. Prasad. He asked this 1st defendant to execute a sale deed in favour of the 2nd defendant with a promise to re-execute regular reconveyance deed in favour of the 1st defendant. Hence, registered sale deed, dated 03.07.2014, was executed in favour of the 2nd defendant. In the said sale deed, it was mentioned that the buyer deposited Rs. 40,00,000/- towards the loan account of Syndicate Bank and paid cash of Rs. 20,70,000/-. But, in fact, no such things were done. This 1st defendant felt cheated. He came to know that the 3rd defendant and other officials of the bank visited item No. 3, the mortgaged property. Then, he realized that the 2nd defendant mortgaged the property with the bank and availed loan. It is a collusive transaction between the Bank and the 2nd defendant/borrower. Hence, this 1st defendant filed O.S. No. 97 of 2018 to cancel the sale deed, dated 03.07.2014. The said suit is pending. 6. The case of the 3rd defendant, in brief, is this: The 2nd defendant approached the Bank for overdraft facility to a tune of Rs. 1 Crore for construction activity under the name and style of M/s. Pratyusha Constructions. The bank agreed and granted the said facility. The said suit is pending. 6. The case of the 3rd defendant, in brief, is this: The 2nd defendant approached the Bank for overdraft facility to a tune of Rs. 1 Crore for construction activity under the name and style of M/s. Pratyusha Constructions. The bank agreed and granted the said facility. The 2nd defendant deposited the original registered sale deed, dated 03.07.2014, and all link documents, with an intention to create an equitable mortgage relating to the plaint schedule property. Before creation of equitable mortgage by the 2nd defendant, the 3rd defendant Bank obtained from one of its panel advocates, legal opinion with regard to the title to the plaint schedule property and further obtained two encumbrance certificates, which only revealed the mortgage with the Syndicate Bank. The said certificates do not reflect the mortgage in the name of the plaintiff/The Bank made proper enquiries before entering into the mortgage transaction with the 2nd defendant. The issue of the 1st defendant creating a mortgage with the plaintiff does not arise, as by then the original link documents were with Syndicate Bank. The sale deed, dated 03.07.2014, discloses that an amount of Rs. 40,00,000/- was credited to the Syndicate bank to clear off the loan and the rest of the amount was paid to the 1st defendant in cash. There is valid mortgage in favour of Andhra Bank. The allegations in the reply, dated 02.05.2018, are all false. The Bank made necessary reasonable enquiry before entering into the mortgage transaction. Admittedly, according to the mortgage deed of the plaintiff, seven properties were mortgaged. The plaintiff ought to have filed a suit against rest of the four properties, if they wanted to recover the money. The present suit is filed in respect of the plaint schedule property, which is item No. 3 in the mortgage deed. Leaving the rest of the properties and filing of the suit in respect of the present item No. 3 of the mortgaged properties shows the mala fide intention of the plaintiff. The plaintiff is not proceeding against the other properties is fatal to his case. Though the wife of the 1st defendant is one of the mortgagers, she is not added as a party to the suit. The present suit is not maintainable in view of the bar contained in Section 34 of the SARFAESI Act. The remedy of the plaintiff, if any, lies elsewhere. Though the wife of the 1st defendant is one of the mortgagers, she is not added as a party to the suit. The present suit is not maintainable in view of the bar contained in Section 34 of the SARFAESI Act. The remedy of the plaintiff, if any, lies elsewhere. This 3rd defendant, who is an officer of the bank, is shown as a proforma party without seeking any relief in the suit against him or the bank. When no relief is sought against the 3rd defendant, the prayer in the interlocutory application cannot be granted. The interlocutory application seeking mandatory injunction against this defendant is not maintainable. Hence, the petition is liable to be dismissed. 7. At the time of enquiry before the trial Court, exhibits A1 to A6 were marked on the side of the plaintiff. Exhibits B1 to B7 were marked on the side of the 3rd defendant. No documents were marked on the side of the 1st defendant. Exhibit A1 is the registered mortgage deed, dated 21.11.2013; exhibit A2 is the Encumbrance certificate, dated 18.05.2018, obtained by the Authorized person of the plaintiff from 01.10.2007 to 17.05.2018; exhibit A3 is the office copy of legal notice, dated 25.04.2018; exhibit A4 is the reply notice, dated 02.05.2018; exhibit A5 is the Sakshi Daily Newspaper, dated 13.05.2018; and, exhibit A6 is the certified copy of registered sale deed, dated 03.07.2014. Exhibits B1 to B6 are registered sale deeds, dated 03.07.2014, 15.04.2014, 15.02.1989, 22.02.1989, 07.04.1989, 07.04.1989; and 07.04.1989 respectively. Exhibit B7 is the original payment receipt, dated 01.07.2014; exhibit B8 is the Encumbrance certificate, dated 04.07.2014, from 01.01.1985 to 03.07.2014; exhibit B9 is the Encumbrance certificate, dated 05.07.2014 from 01.10.2007 to 03.07.2014; exhibit B10 is the Memorandum of deposit of title deeds, dated 07.07.2014; exhibit B11 is the statement of account of Pratyusha Constructions, in Andhra Bank; exhibit B12 is the notice issued under Section 13(2) of SARFAESI Act; exhibit B13 is the possession notice under Rule 8(1) of the SARFAESI Act; exhibit B14 is the publication notice in the New Sunday Express English, dated 13.05.2018; exhibit B15 is the publication in Saakshi Telugu Daily, dated 13.05.2018; exhibit B16 is the certified copy of petition filed under Section 14 of the SARFAESI Act, along with Commissioner warrant; and, exhibit B17 is the copy of order in W.P. No. 21078 of 2018, dated 09.08.2018. 8. 8. Learned counsel appearing for the plaintiff and the 3rd defendant Bank advanced arguments in line with the respective pleadings of the parties, which are extracted supra. 9. The points for determination are: Whether the plaintiff made out valid and sufficient grounds for granting the temporary injunction prayed for? And, if so, whether the decree and order of the Court below, which are impugned are liable to be set aside? 10. To begin with it is to be noted that the plaint averments and the submissions made reflect the following aspects: "The 1st defendant and his wife entered into a mortgage transaction with the plaintiff and mortgaged seven of their properties and executed exhibit A1, the registered mortgage deed, dated 21.11.2013, and obtained a loan of Rs. 1 Crore from the plaintiff. The 1st defendant already redeemed three properties out of the said seven mortgaged properties and three items out of seven mortgaged properties were released, as according to the plaintiff, a part of the mortgage debt is discharged. The wife of the 1st defendant, who is a co-mortgagor is not added as a party to the suit. Even according to the plaint averments, the plaintiff has right to proceed against remaining four properties mortgaged under exhibit A1, for realization of the mortgage debt. However, the present suit is filed for recovery of the entire mortgage debt against item No. 3 of the mortgaged properties leaving out the remaining properties, though it is the specific case of the plaintiff that the 1st defendant had already alienated the said 3rd item of property to the 2nd defendant under exhibit B1, registered sale deed, dated 03.07.2014. Further, admittedly, after obtaining exhibit B1 sale deed, the 2nd defendant mortgaged the said subject property with the Bank (Andhra bank) by depositing her original title deed," dated 03.07.2014, and also all the link documents. The original antecedent title deeds admittedly were initially with another bank, i.e., the Syndicate bank in respect of a prior loan transaction at the time of purchase of the subject property by the 2nd defendant from the 1st defendant under exhibit B1, sale deed. From out of the sale consideration that was payable by the 2nd defendant to the 1st defendant under her exhibit B1, sale deed, dated 03.07.2014, she paid Rs. From out of the sale consideration that was payable by the 2nd defendant to the 1st defendant under her exhibit B1, sale deed, dated 03.07.2014, she paid Rs. 40 lakhs to the Syndicate Bank and cleared that earlier loan as per the recitals in her sale deed, dated 03.07.2014. Hence, having obtained the original link documents from the said Bank, the 2nd defendant deposited the said documents also with the Andhra Bank. Therefore, by the time of the suit mortgage transaction under the registered mortgage deed, dated 21.11.2013 (exhibit A1), the original documents related to item No. 3 of the plaint schedule properties were with Syndicate Bank. They were later deposited by the 2nd defendant with the Andhra Bank while obtaining loan from the Bank pursuant to the exhibit B1 sale deed, dated 03.07.2014, executed in her favour by the 1st defendant. It appears that the Bank initiated proceedings under the SARFAESI Act and the present suit schedule property, that is, item No. 3 of the mortgaged properties, was sold and the Bank realized the auction sale proceeds. Now, the plaintiff seeks a direction to the Bank to deposit the said sale proceeds to the credit of the present suit. 11. In view of the timeline of events & the facts mentioned above and for the reasons assigned infra, it is clear that the plaintiff is lacking bona fides. Now, the plaintiff seeks a direction to the Bank to deposit the said sale proceeds to the credit of the present suit. 11. In view of the timeline of events & the facts mentioned above and for the reasons assigned infra, it is clear that the plaintiff is lacking bona fides. FIRSTLY: Admittedly, when the bank initiated proceedings under the SARFAESI Act, the 1st defendant filed W.P. No. 21078 of 2018 on the file of the High Court of Judicature (For the State of Telangana and the State of Andhra Pradesh), at Hyderabad, with the following prayer: 'to issue a writ, order or direction more particularly in the nature of writ of certiorari, call for the records pertaining to order, dated 01.06.2018, passed by the Chief Judicial Magistrate-cum-Principal Senior Civil Judge, Nellore, in Crl.M.P. No. 100 of 2018, in connection with petition filed by the 3rd respondent Bank under Section 14 of SARFAESI Act along with vague affidavit without containing anything mandatory required under Section 14(1)(i)(ii)(ix) as mandatorily required on which seized property covered under Crl.M.P. No. 100 of 2018 is illegal, is in violation of law and procedure and Section 14 of SARFAESI Act and beyond the jurisdiction and power limits and also various rulings of the Apex Court as well as this High Court passed in W.P. No. 3674 of 2018 and consequently quash the order, dated 01.06.2018 passed in Crl.M.P. No. 100 of 2018 in the interests of justice and to pass..' [Reproduced verbatim] The said writ petition was opposed by the [Andhra] Bank. The said writ petition was dismissed by the said composite Court, by an order, dated 09.08.2018. A perusal of the said order shows that the said writ petition was filed by the 1st defendant herein challenging the order, dated 01.06.2018, passed by the learned Chief Judicial Magistrate, Nellore, in Crl.M.P. No. 100 of 2018 in exercise of powers under Section 14 of the SARFAESI Act. While passing the order in the said writ petition, the Division Bench noted the following aspects: 'The secured asset being claimed by the Andhra Bank is admittedly sold by the 1st defendant herein under registered sale deed, dated 03.07.2014, in favour of the 2nd defendant herein, who is the 6th respondent therein. While passing the order in the said writ petition, the Division Bench noted the following aspects: 'The secured asset being claimed by the Andhra Bank is admittedly sold by the 1st defendant herein under registered sale deed, dated 03.07.2014, in favour of the 2nd defendant herein, who is the 6th respondent therein. Thereupon, the 2nd defendant herein created a security interest over the said property in favour of the Andhra Bank, on 07.07.2014, in relation to her loan account with the said Bank and that it appears that the 1st defendant herein filed O.S. No. 97 of 2018 against the 2nd defendant herein seeking cancellation of registered sale deed, dated 03.07.2014.'The composite High Court in the said writ order dealt with the contentions of the 1st defendant which are as follows: "That the sale deed (exhibit B1) executed by the 1st defendant in favour of the 2nd defendant herein is not supported by consideration and that thought was mentioned that the buyer deposited Rs. 40,00,000/- towards the loan account of Syndicate Bank and paid cash of Rs. 20,70,000/- and that in fact, no such things were done'. Nonetheless, the Division Bench of the said High Court noted that exhibit B1 sale deed, dated 03.07.2014, executed by the 1st defendant in favour of the 2nd defendant records that the entire sale consideration of Rs. 60,70,000/- was duly paid, that is, by making payment of Rs. 40 lakhs towards the loan, which the 1st defendant herein was owing to the Syndicate Bank and by paying Rs. 20,70,000/- in cash and that possession was also delivered and observed in the writ order that the 1st defendant waited for a period of four years to seek cancellation of the sale deed and that no explanation lis offered as to why the 1st defendant waited for such a long period, in the event, the 2nd defendant did not abide by the terms and conditions of the sale deed. The Division Bench also observed that the said writ petition, has been filed only after the Bank initiated proceedings under the SARFAESI Act, and that therefore, the 1st defendant herein seems to be in collusion with the 2nd defendant herein and is aiding her in defeating the proceedings initiated by the Bank and that the 1st defendant lacked bona fides and is not entitled to maintain this writ petition. Secondly: Admittedly, in the present suit filed for realization of the mortgage debt, the plaintiff is not proceeding against all the mortgaged properties for realization of the mortgage debt. After omitting all the other mortgaged properties, the suit claim is made against one of the mortgaged properties, which is the secured asset against which the Bank is proceeding under the provisions of the SARFAESI Act. Therefore, in the said circumstances, the learned Judge of the trial Court also observed that the plaintiff did so obviously with a view to put the 3rd respondent Bank in a precarious position. Admittedly seven properties were mortgaged; it appears that on payment of part of the debt due, the plaintiff released three properties. Remaining properties that are subjected to mortgage are four. Out of them three properties are said to be free from any other encumbrances. Leaving such properties, the suit claim is confined to the single property, which is the secured asset against which the bank is proceeding under the provisions of the SARFAESI Act. No reasons are forthcoming for leaving other mortgaged properties and confining the suit to only one property, which is secured asset against which the bank is proceeding under the provisions of the SARFAESI Act. Thirdly: The wife of the 1st defendant who is co-mortgagor is not added as a party defendant to the suit. Fourthly: In the suit, no relief is claimed against the Bank obviously in view of the provisions of Section 34 of the SARFAESI Act. Nevertheless, in the subject interlocutory application, a relief is claimed to direct the bank to deposit to the credit of the suit, the sale proceeds realized from the auction sale of the secured asset. Thus, the plaintiff is virtually seeking a temporary mandatory injunction against the Bank without impleading the Bank as a party defendant and without seeking any relief against the bank in the main suit. As per the provision of the above said section of law, a civil Court has no jurisdiction to entertain any suit or proceeding in respect of any matter, which a Debt Recovery Tribunal or the Appellate Tribunal is empowered to determine and no injunction shall be granted by any Court in respect of any action taken in pursuance of any powers exercised under the said Act. Further, since only an officer of the bank is impleaded as a party and as the bank is not impleaded as a party and as no relief is claimed in the original suit against the Bank, no interlocutory order in the nature of mandatory injunction also can be granted against the Bank or the 3rd respondent/3rd defendant, who is the officer of the Bank. To sum up, the modus operandi adopted by the 1st defendant in filing the writ petition questioning the proceedings initiated by the bank under the SARFAESI Act: and, in filing the suit against the 2nd defendant after four years for cancellation of the sale deed executed in her favour by the 1st defendant and the further modus operandi adopted by the plaintiff in bringing the present suit without impleading the wife of the 1st defendant, who is co-mortgagor, and by confining the claim to one of the mortgaged properties, which is the secured asset, by leaving the other mortgaged properties for no reason cumulatively lead to a prima facie conclusions that the contention of the bank that the suit is filed by the plaintiff in collusion with the other defendants is substantial and that the plaintiff is lacking bona fides and that his conduct does not satisfy the principle enshrined in the maxims that he who seeks equity must do equity and he who comes to equity must come with clean hands. It is well settled that a Court of equity will not assist a person in extricating himself from the circumstances that he has created and that equity will not grant relief from a self-created hardship. 12. For all the aforesaid reasons, this Court finds that the plaintiff has no prima facie case and that the balance of convenience is also not in favour of the plaintiff in view of the fact that the plaintiff lacks bona fides and holds that the plaintiff is not entitled to the equitable relief of mandatory injunction. Hence, this Court further finds that the order of the Court below does not brook interference. 13. In the result, the Civil Miscellaneous Appeal is dismissed with costs. Pending miscellaneous petitions, if any, shall stand closed.