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2024 DIGILAW 461 (JHR)

UCO Bank v. Shakti Kumar Agarwal

2024-04-30

ARUN KUMAR RAI, SUJIT NARAYAN PRASAD

body2024
JUDGMENT : Sujit Narayan Prasad, J. Prayer 1. The instant intra-court appeal is under Clause-10 of Letters Patent directed against the order dated 20.07.2023 passed in W.P.(C) No.5387 of 2018, whereby and whereunder, it has been observed that the Bank is no longer holder of claim of recovery through the land which has been mortgage by the borrower for the purpose of advance. Facts 2. The brief facts of the case, as per the pleading made in the writ petition, are required to be enumerated, which read as under:- 3. It is the case that the writ petitioner being the local resident of Ramgarh came across with the advertisement dated 26.05 2017 published under the authority of the Authorised Officer UCO Bank whereby the immovable properties as detailed in the said advertisement was put on e-auction sale to be conducted on 26.06.2017. 4. In the said advertisement for e-auction sale notice the details of four immovable properties which were put on e-auction sale was given out of which the petitioner expressed his intention to purchase the property mentioned at serial no.1 having RS Plot No. 399, 449 sub plot no. 399, 449/2, Khata No. 36, deed no 2635/2349/2006 dated 18.02.2006, area 6 decimal, Thana Ormanjhi, Mouza IRBA, Ranchi standing in the name of Md. Imran, son of Late Md. Sultan. 5. The reserve price for the said property was fixed for a sum of Rs.4,50,000/-and EMD for participating in the auction sale was fixed at Rs.45,000/-. 6. As per the instruction of the bank, the writ petitioner paid the entire bid amount amounting to Rs.4,60,000/-and thereafter, on acceptance of the entire money a sale certificate dated 23.08.2017 was issued under Rule 9(6) of the Security Interest (Enforcement) Rules, 2002 in favour of the petitioner wherein it has been specifically mentioned that the immovable property has been sold by UCO Bank in favour of the petitioner and also acknowledged the receipt of the sale price in full and handed over the delivery and possession of the scheduled property. 7. In the sale certificate that the sale of the scheduled property was made free from all encumbrances known to the secured creditor listed below on deposit of the money demanded by the Authorized Officer of the bank. 8. 7. In the sale certificate that the sale of the scheduled property was made free from all encumbrances known to the secured creditor listed below on deposit of the money demanded by the Authorized Officer of the bank. 8. After obtaining the sale certificate with respect to the landed property having area of 6 decimal at Block IRBA, the petitioner approached the bank for handing over the possession of the land but, the petitioner was assured that since it is a vacant land which has already been shown by the officer of the bank there is no difficulty in getting the possession of the land and further that in the meantime, the petitioner was instructed to get the registered sale deed executed in their favour. 9. In the said process of registration of the sale deed of the land purchased by the petitioner, the Registry office instructed the petitioner to update the payment of rent receipts and accordingly, as per the instruction petitioner made payment of the rent for the said land which was shown to be recorded in the name of Md. Imran and accordingly, petitioner paid up-to-date rent for the said after making payment of the rent up-to-date the rent receipt was issued with respect to the immovable property purchased by the petitioner and thereafter the purchased land was also registered in favour of the petitioner by the Authorised Officer of the UCO Bank in terms of registered sale deed dated 02 11 2017 for which the petitioner has to make payment of the huge stamp duty and also the registration fees for getting the land registered in favour of the petitioner. 10. The petitioner approached the Circle Officer Ormanjhi to get the land mutated in his favour however the application filed by the petitioner has been rejected by the Circle Officer, Ormanjhi in terms of the objection dated 16.03.2018 raised by the Circle Officer, wherein, it has been stated that Khata No 36, plot no 399. area 6 decimal has been found to be recorded in the name of Md. Imran which was mutated in terms of Mutation Case No. 280 R 27/2006-07 but, in Register-II said Raiyat has transferred the said land to Md. Sahid Parwez which has been mutated in his name vide Mutation Case No. 463. 11. area 6 decimal has been found to be recorded in the name of Md. Imran which was mutated in terms of Mutation Case No. 280 R 27/2006-07 but, in Register-II said Raiyat has transferred the said land to Md. Sahid Parwez which has been mutated in his name vide Mutation Case No. 463. 11. It has been further recorded that the petitioner has purchased the said property from UCO Bank who is not in possession of the land and accordingly, Mutation Case No 2149/2017-18 has been rejected and when no assistance was provided by the respondent bank in getting the land mutated and also getting the possession over the said land then the petitioner sent a legal notice dated 18-07-2017 through his Lawyer and the said legal notice was replied by the bank through his Advocate in terms of letter dated 06.09.2018 wherein the fact regarding auction sale and the purchase of the property has been mentioned but, only by saying that the petitioner has participated in e-auction for purchase of the property. 12. Subsequently, the writ petitioner has been continuously approaching the bank for getting the possession of the land and also for mutation of the said land purchased by him however, the bank has not shown any kind of interest and the bank has not taken any step towards handing over the possession of the immovable property purchased by the petitioner. 13. The writ petitioner filed representation before the Authorized Officer of the UCO Bank requesting therein for demarcation of land and for delivery of possession of land purchased through e-auction process under SARFAESI Act for which sale certificate dated 23.08.2017 was issued in favour of the petitioner. 14. In the said representation, the petitioner has also appraised the fact that the petitioner has already invested more than Rs.7 lakhs in getting the property by making payment of the consideration amount and registration expenses but in spite of making payment of such a huge amount, the petitioner is not getting the possession of the said land and accordingly, it was requested on behalf of the petitioner to immediately handover the actual physical possession of the property purchased by him with the help of the police force and Magistrate. 15. 15. Since, the petitioner has invested huge amount, i.e., more than Rs.7 lakhs in purchasing the property by making payment of the consideration amount and also by making investment in getting the land registered in his favour, the petitioner is entitled to get the refund of the entire consideration amount along with interest at the rate of 12% with the date of payment of the consideration amount. 16. It is evident from the factual aspect as per the pleading made in the writ petition that the property in question situated over RS Plot No.399, 449 sub plot no.399, 449/2, Khata No.36 measuring an area of 6 decimal, Thana Ormanjhi, Mouza-Irba, District-Ranchi has been kept mortgaged by way of collateral security at the time of sanction of the loan amount by the borrower, namely, Md. Imran, who has taken advance amount to the tune of Rs.4,50,000/-. 17. The said account has become Non Performing Assets (NPA) and hence subjected to SARFAESI Act, 2002. The due notices were issued under Section 13(2) of the Act, 2002 giving an opportunity to the borrower to make payment of the remaining amount for the adjustment of the said loan account, but the same having not been paid, in consequence thereof, symbolic possession was taken under Section 13(4) of the Act, 2002. 18. The property in question was put to auction. The writ petitioner, namely, Shakti Kumar Agarwal along with other participants had participated in the auction sale of the property in question. The writ petitioner has been declared to be successful in the said auction bid and has declared to be auction purchaser. The writ petitioner, in terms of the Act, 2002, has deposited the consideration amount, as per the aforesaid provision of law. But, the possession of the said property has not been given. 19. The writ petitioner, thereafter, came to know about the fact that the property in question has been sold out by the borrower. 20. The writ petitioner, in terms of the Act, 2002, has deposited the consideration amount, as per the aforesaid provision of law. But, the possession of the said property has not been given. 19. The writ petitioner, thereafter, came to know about the fact that the property in question has been sold out by the borrower. 20. When the possession of the land in question has not been handed over to the writ petitioner, then, he has approached this Court by filing writ petition being WP(C) No. 5387 of 2018 seeking therein the direction upon the bank to return the amount to the auction purchaser with 6 per cent simple interest from the date of receiving of the amount till the date of payment and also to pay the registration fee cost which has been paid by the auction purchaser, i.e., the writ petitioner. 21. The State has appeared and has filed the counter-affidavit, reason being that, in view of the provision of Section 14 of the SARFAESI Act, the physical possession which is to be taken of the property which has been mortgaged, is by the District Magistrates of the concerned districts. 22. The stand was taken by the State in the said affidavit that the aforesaid land having been transferred by the borrower in favour of the 3rd person and hence, the physical possession could not have been provided. 23. The learned Single Judge, based upon the said affidavit, has disposed of the writ petition with a direction upon the bank to return the amount to the auction purchaser with 6 per cent simple interest from the date of the receiving of the amount till the date of payment as also directed to pay the registration fee cost, which was paid by the auction purchaser. 24. The petitioner has also been directed to return the sale deed to the bank and also to give details regarding the expenditure within a month from the date of the passing of order. 25. The bank in turn was directed to return the auction amount as well as the expenditure etc. made by the petitioner within 3 months. 26. The bank has also been given liberty to take appropriate action against the borrowers in accordance with law and also at liberty to approach the appropriate forum for cancellation of the sale deed, which has been executed in favour of the auction purchaser. 27. made by the petitioner within 3 months. 26. The bank has also been given liberty to take appropriate action against the borrowers in accordance with law and also at liberty to approach the appropriate forum for cancellation of the sale deed, which has been executed in favour of the auction purchaser. 27. The bank, being aggrieved with the said order, has filed instant appeal. 28. The matter was taken by this Court on 25th April 2024 and on that date, the limitation in filing the appeal of 82 days was condoned. 29. The learned counsel for the parties, were heard. Argument of the appellant-Bank 30. Mr. P.A.S. Pati, learned counsel appearing for the appellants-bank, on instruction, has submitted that so far as the grievance of the writ petitioner based upon that the direction which was passed by the learned Single Judge, the same is not being questioned. 31. However, the observation, so made at Paragraph-11 if read with paragraph-14 of the order passed by the learned Single Judge, are contrary to each other, reason being that at paragraph-11, it has been observed by the learned Single Judge that the bank is no longer the holder of claim of recovery through the said land, while, at Paragraph-14, the bank has been given liberty to take appropriate action against the borrowers in accordance with law and also granted liberty to approach the appropriate forum for cancellation of the sale deed. 32. Therefore, the observation so made at paragraph-11 that the bank is no longer the holder of the claim of recovery through the said land has extinguished all rights to recover the money for adjustment of the loan account. 33. It has been argued that the land in question, which has been kept as collateral security by way of the mortgage itself suggests that the mortgage is also one of the way of transfer of property and once the property has been mortgaged, the right over the property in question will shift upon the concerned in whose favour the mortgage has been made. 34. 34. The observation, so made to the effect that the bank is no longer holder of claim of recovery through the said land, if allowed to be subsists, then the very right of the bank to liquidate the mortgage property for the purpose of adjustment of the loan account will be futile and ultimately, public money will be at loss. 35. Furthermore, such observation made at paragraph-11 making the observations so given by the learned Single Judge at paragraph14, is meaningless. 36. The learned counsel for the bank on the aforesaid premise, has submitted that the observation so made at paragraph-11, whereby and whereunder, the bank is no longer the holder of claim of the recovery through the said land, may be quashed in order to secure the public property by adjustment of the loan account by putting the property in question in auction sale. Argument of the respondents 37. Mr. Anish Kumar Mishra, learned counsel for the respondent no.1-writ petitioner is present and has submitted that if the aforesaid observation so made at paragraph-11, will be quashed and set aside, he is having no objection to that. 38. Mr. Jalisur Rehman, learned counsel has submitted that he has put his appearance on behalf of the 3rd purchaser of the auction property. 39. This Court has confronted the learned for the writ petitioner and Mr. Jalisur Rehman, that on what basis the appearance is being made then it has been apprised that on the basis of the issuance of the notice to the private respondents passed vide order dated 2nd January, 2024 by the coordinate bench of this Court, he has put his appearance. 40. However, there is no order of impleadment of the respondent Nos. 4, 5, 6 and 7 as party to the proceeding. 41. Be that as it may, counter-affidavit has been filed by Mr. Jalisur Rehman, learned counsel who is representing respondent No.7 has submitted that he is the 3rd purchaser. 42. However, when he has been confronted regarding the prayer which has been made on behalf by the bank for quahsing and setting aside the observation made at paragraph-11 to the effect that the bank is no longer holder of the claim of recovery through the said land, why it be not quashed and set aside being contradiction to the paragraph-14 of the order impugned. 43. 43. He has submitted that he is having the interest over the property by virtue of the purchase through the mode, as provided under the Transfer of Property Act. Analysis 44. We have heard the learned counsel for the parties and gone across the factual aspect as pleaded in the memo of appeal as also the order passed by the learned Single Judge. 45. The position of law is already settled that any person at the time of advance of the loan, as per the R.B.I. Rules prevalent and followed by the concerned bank, is to make an application for sanction of the loan amount. 46. The accountability of the concerned bank to secure the advance to the collateral security. Here, the borrower has approached the bank, the appellant for sanction of the loan amount to the tune of Rs.4,50,000/-by offering to keep the registered sale deed of the property in question as collateral security. 47. The purpose for keeping the document pertaining to the immovable property by way of collateral security is to protect the advance amount, so that, in case of the loan amount having not been adjusted by the borrower, the same can be sold out for the purpose of settlement of the loan account. 48. The law is already there by way of recovery of the debt of the bank account for the aforesaid purpose which was with the intervention of the Court, but, subsequently during the subsistence period of the1993 Act, the SARFAESI Act, 2002 has came into being. 49. The reason for the enactment of the SARFAESI Act, 2002 is that without any further delay or without any delay, the amount which has been sanctioned and taken by the borrower, is to be liquidated without any intervention of the Court proceeding. 50. Various provisions have been made therein and one of the provisions is the Section 13 (4) of the SARFAESI Act, 2002 and which is to be read out with Section 14 of the aforesaid Act. 51. The Section 13(4) of the Act, 2002 confers the power upon the bank to have the possession of the property in question, which is for the purpose of processing for the auction sale of the said property, so as to adjust the loan account. 52. 51. The Section 13(4) of the Act, 2002 confers the power upon the bank to have the possession of the property in question, which is for the purpose of processing for the auction sale of the said property, so as to adjust the loan account. 52. But, in the meanwhile, Section 14 is also to be complied by making an application before the District Magistrate of the concerned districts to have the physical possession of the said property so that after confirmation of sale, the property in question is to be handed over in the possession of the auction purchaser. 53. The underlined object of the SARFAESI Act is to protect the public money, which will only be possible by selling of the mortgaged property. 54. The bank in the aforesaid premise has sanctioned the loan in favour of the borrower but the account having become Non-performing Asset (NPA). Hence, after taking the possession, as per the provision of Section 13(4) of the Act, has put the property in auction purchase. The writ petitioner has purchased the said property on being successful in auction purchase and as per the SARFAESI Rule as required under Sections 7 to 9, the required amount was deposited but when the possession was not given, then the writ petitioner has moved to this Court for appropriate direction upon the bank. 55. The State when filed the affidavit then it was brought to the notice of this Court that the property in question, has already been sold out in favour of subsequent purchasers, one of the same is being represented by Mr. Jalisur Rehman, the respondent no. 7. 56. The question of the accountability of the bank having found to be helpless in handing over the possession of the property in question in favour of the auction purchaser, has been taken into consideration by the learned Single Judge which led the learned Single Judge to pass the following orders, for ready reference, the relevant paragraphs are being quoted hereinbelow:- “11. Having heard learned counsel for the parties and perusal of the records, it is evident that a fraud has been committed by the borrower with regard to the property. The land, in question, has been sold to different persons and several transaction has been taken place. Thus, the Bank is no longer holder of claim of recovery through the said land. The land, in question, has been sold to different persons and several transaction has been taken place. Thus, the Bank is no longer holder of claim of recovery through the said land. Thus, the auction held by the Bank is not in accordance with law and accordingly, it is hereby set aside. 12. The Bank is directed to return the amount to the auction purchaser with 6% simple interest from the date of receiving of the amount till the date of payment and also to pay the registration fee cost which has been paid by the auction purchase i.e., the present writ petitioner. 13. The petitioner is directed to return the sale deed to the Bank and also give details regarding the expenditures within a month from today and the Bank is directed to return the auction amount as well as expenditures etc., made by the petitioner within three months. 14. The Bank is at liberty to take appropriate action against the borrowers in accordance with law and also at liberty to approach the appropriate Forum for cancellation of the sale deed, which has been executed in favour of the auction purchaser.” 57. But, the question herein is how the amount which has been advanced, which is public money, is to be protected in such factual background, that is only by selling of the mortgaged property, which can only be done by the bank by making an application before the District Magistrate, as required to be filed under Section 14 of the Act, 2002 and in case of any failure, the legal remedy is to be followed by the bank for issuance of appropriate direction upon the District Magistrate, due to the reason that under Section 14 of the SARFAESI Act, 2022, the District Magistrate has statutorily been commanded to hand over the possession of the land in favour of the bank. 58. The learned Single Judge, while passing the order in favour of the writ petitioner, however, has given liberty to the bank to that effect which is in consonance with the object and intent of the SARFAESI Act by reserving liberty to the bank to take appropriate action against the borrowers in accordance with the law and also at liberty to approach the appropriate forum for cancellation of the sale deed. 59. 59. But, this Court is of the view that so far as the liberty which has been granted in favour of the bank to take appropriate action against the borrower in accordance with law to take appropriate action against the borrower in accordance with law can be said to be justified observation, in view of the provision as contained under the SARFAESI Act. 60. So far as the liberty to approach the appropriate forum for cancellation of the sale deed, which has been executed in favour of the auction purchaser is concerned, the same is also justified one, reason being that, once the sale deed has been executed, then the appropriate forum will be to cancel the aforesaid sale deed. 61. But, the question is that what will happen to the interest of the bank who is the custodian of the public money. The bank, after proper documentation, has advanced the loan amount after keeping the document pertaining to the property in question, which is the registered sale deed by mortgaging the said property. 62. The bank once has mortgaged the said property, the Bank will have every right to claim recovery through the said land by putting the said land in auction. 63. It needs to refer herein that mortgage is a type of land transferred in which the transferor exchanges the property as collateral on loan to the transferor. The transferee becomes the mortgagee and the transferor becomes the mortgager. In a mortgage, the conveyance of the property for the procurement of loans and the re-conveyance to the mortgager for settlement of the debt is for considerable significance. 64. A transfer of an interest in specific immoveable property has been mentioned under Section 58 of the Transfer of Property Act, 1882 which means that the mortgager only transfer “interest in the property to the mortgagee and not the property when securing a loan for current and potential liabilities of debts”. 65. This suggests that the mortgagee is obligated by statute to reconvey the particular interest to the mortgager and till the object of the mortgage is fulfilled. It is, thus, evident that a mortgager simply transfers interest and not the ownership of the mortgage of property. 66. But herein, the learned Single Judge had made an observation at Paragraph-11 that the bank is no longer holder of claim of recovery through the said property. 67. It is, thus, evident that a mortgager simply transfers interest and not the ownership of the mortgage of property. 66. But herein, the learned Single Judge had made an observation at Paragraph-11 that the bank is no longer holder of claim of recovery through the said property. 67. This Court, therefore, is of the view that such observation is contrary to the interest of the bank, who is yet to secure the public money. If such observation will be allowed to be there, then the question would be what will happen to the interest of the bank who led to secure the public money. 68. Further, once the property has been mortgaged, the 1st charge over the said property would be of the bank and in order to adjust the said loan account, the bank only on the basis of the said landed property, take recourse of adjustment of the loan account by putting the said land again in auction sale by taking due endeavour of getting physical possession from the Deputy Commissioner in exercise of the power conferred under Section 14 of the SARFAESI Act, 2002. 69. This Court, on the basis of the reasons aforesaid, is of the view that the observation made at paragraph-11 of the impugned order to the effect that “the bank is no longer holder of the claim of the recovery through the said land”, is required to be quashed and set aside. 70. Accordingly, the observation to the effect that “the bank is no longer holder of the claim of the recovery through the said land” is hereby quashed and set aside. 71. In consequence thereof, the instant appeal is allowed to the extent as indicated hereinabove. 72. In consequent to disposal of this appeal, pending Interlocutory Application(s), if any, also stands disposed of.