State Bank Of India v. Gujarmal Modi Hospital And Research Centre For Medical Sciences

S.K Mahajan, J.— This suit has been filed by the consortium of plaintiff banks for recovery of Rs. 13,81,41,611.29 paise being the loan advanced by the banks. The defendants by way of securing the aforesaid loan mortgaged their properties in favour of all the banks. Original title deeds of the properties were deposited with the plaintiff No. 1 pursuant to a Resolution passed by the Governing Body of the said defendant, creating an equitable mortgage of the properties by way of a security for repayment of the term loan granted by the plaintiff-bank. The loan was not returned and the plaintiffs, therefore, filed the present suit for recovery of the said amount. The amount was sought to be recovered by sale of the mortgaged properties mentioned in the plaint.

2. On the establishment of the Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (in short referred as “The Act”), no Court or other authority had any jurisdiction, power or authority (except the Supreme Court, and a High Court exercising jurisdiction under Articles 226 and 227 of the Constitution) in relation to the matters specified in Section 17 of the Act. Under Section 17 of the Act, it was only a Tribunal constituted under the Act which could exercise jurisdiction, power and authority to entertain and decide applications from banks and financial institutions for recovery of debts due to such banks and financial institutions and which debts were of the value of more than Rs. 10,00,000/-.

3. As this Court had ceased to have jurisdiction to decide this case on the Constitution of the Tribunal under the Act, this suit was proposed to be transferred to the Tribunal. However, learned Counsel for the defendant raised an objection that as this was not a simple suit for recovery of money but was a suit for recovery of money by sale of mortgaged properties, it was not governed by the provisions of the Act and could not be transferred.

4. Mr. Rajiv Sawhney, Sr. Advocate, appearing for the defendant, while not disputing that the amount sought to be recovered was a debt within meaning of Section 2(G) of the Act sought to justify his objection that the suit cannot be transferred to the Debt Recovery Tribunal on the ground that a special procedure has been prescribed under Order 34 of the Code of Civil Procedure for recovery of an amount which is sought to be recovered by sale of mortgaged property and the said suits are governed by Section 68 of the Transfer of Property Act. The contention is that this is not a suit for recovery of money but is a suit for sale of property. It is contended that unless an election is made by the bank that they will not recover money from the property mortgaged by the defendant, the suit cannot be transferred. According to Mr. Sawhney, in the form which has been prescribed in the rules for filing an application before the Debts Recovery Tribunal, there is no provision that recovery can be made by sale of the mortgaged property. It is, therefore, argued that this being not a simple suit for recovery of money, this Court should not transfer the same to Debts Recovery Tribunal.

5. Under Section 31 of the Act, every suit or other proceedings pending before any Court immediately before the date of establishment of the Tribunal under the Act, shall stand transferred on that date to such Tribunal.

6. A suit for recovery of money by sale of mortgaged properties is required to be filed in accordance with the procedure laid down in Order 34 of the Code of Civil Procedure. Merely because the suit has been filed for recovery of money by sale of mortgaged property, it will not cease to be a suit for recovery of money. The Court in such a case is required to first pass a preliminary decree requiring the defendant to pay into Court the amount so found due from him and it is only on the failure of the defendant to pay such amount that the plaintiff will be entitled to apply for a final decree debarring the defendant from all rights to redeem the property. The Act also gives power to the Tribunal to make recovery of the amount, which is found due from the debtor, by attachment and sale of the immovable property of the defendant. In case, the Tribunal has the powers to direct the attachment and sale of the immovable property of the defendant, a suit for recovery of money by sale of immovable property can also be filed before it. In case, such a suit can be filed before the Tribunal in the first instance, there cannot be any objection to the transfer of such a suit from this Court to the Tribunal.

7. In a recent judgment delivered on November 27, 1995 in State Bank Of India v. Samneel Engineering Company & Ors., 1995 (35) DRJ 485, R.C Lahoti, J. held:—

“It is, therefore, clear that debt is an essential ingredient of a mortgage. There may be a debt without a mortgage but there can be no mortgage without a debt. Properties are offered as security only for securing recovery of debt. If debt is repaid the mortgage ceases to be a mortgage. Even if the term debt would not have been defined in Act No. 51 of 1993 the mortgage would have been included within the meaning of debt. This is the general law and settled trend of judicial opinion. However, act 51 of 1993 incorporates the definition of debt in its interpretation clause by way of abundant caution and gives it out a very wide meaning. The quint essence of the definition is the existence of any liability founded on an allegation as due from any person; the creditor being a bank or a financial institute or a consortium of the two. The liability may be in cash or otherwise. It may be secured or unsecured. A decree or order of any civil Court or otherwise may intervene or not; the only rider being that the liability must be legally recoverable. The definition would cover all the cases where the liability is secured by a mortgage, charge, hypothecation or in any other manner known to law. An effort at carving out a mortgage away and out of the definition of debt is futile.

Therefore, a suit based on a mortgage is a suit for recovery of a debt without regard to the nature of the mortgage and the nature of the relief sought for by the plaintiff”.

8. R.C Lahoti, J. had quoted with approval the following passage from Ghose in Law on Mortgage (6th Edn. TLL at page 61):—

“A mortgage may be viewed in two aspects. In the first place it is a promise by the debtor to repay the loan and as such it is a contract which creates a personal obligation. Secondly, it is also a conveyance, since it passes to the creditor a real right in the property pledged to him. However, the right created in the land is only an accessory right, intended merely to secure the due payment of the debt”.

9. Contention of Mr. Sawhney is that the judgment in State Bank Of India v. Samneel Engineering Company & Ors. (Supra) will not apply to the facts of this case as the effect of Sections 58 and 68 of the Transfer of Property Act was not considered in that case. It is contended by Mr. Sawhney that under Section 68 of the Transfer of Property Act where a suit is brought by a mortgagee for recovery of the amount due from the mortgagor, the Court may, at its discretion, stay the suit and all proceedings therein, notwithstanding any contract to the contrary, until the mortgagee has exhausted all his available remedies against the mortgaged property. The contention is that it is only the Court which can stay the proceedings and the Tribunal does not have any power as have been provided by Section 68 of the Transfer of Property Act.

10. I fail to understand as to how Section 68 of the Transfer of Property Act will be applicable to the present case. The suit has been filed for recovery of money which was given by way of loan to the defendant and it was only by way of collateral security that the defendants had deposited the title deeds of their properties with the bank. The banks have a charge on the mortgaged property and, in case, a decree is passed in their favour, they can have the same recovered by sale of the mortgaged property. There will not be any question of the Court staying the suit and other proceedings, in case, such a suit was filed in a Court of law.

11. The present suit has been filed for repayment of the loan which had been advanced by the plaintiffs to the defendants and for repayment of which the defendants had executed certain documents and agreement. The suit for recovery of this amount by the bank on the basis of the documents executed by the defendants is, therefore, on a distinctive cause of action dependent upon the agreement of loan and deed of hypothecation. This cause of action is entirely independent of and apart from the mortgage. No doubt, an equitable mortgage carries with it a personal liability of the mortgagor to repay the mortgage money. Had it been a suit to recover money due only on the basis of the equitable mortgage created by the defendants by deposit of title deeds then the arguments made on behalf of the defendants for stay under Section 68 (2) might have prevailed. Position, however, is entirely different in the present case. The suit in this Court is not a suit where the mortgagee is suing for his mortgaged money only on the basis of equitable mortgage created by defendant but the suit is for recovery of money independently of the mortgage. In such a situation, the provision of Section 68 (2) will not come into play because Section 68 (i) (a) of the Transfer of Property Act will not be applicable to such a suit. To my mind, the arguments about Section 68 of the Transfer of Property Act are wholly misplaced.

12. As it is not disputed that the amount secured by way of loan is a debt under Section 2 (g) of the Act, in my opinion, there is no force in the argument that a suit which has been filed for recovery of money and in which it has also prayed that the amount sought to be recovered should be recovered by sale of the mortgaged property, cannot be transferred to the Debts Recovery Tribunal constituted under the Act for any of the reason argued by the defendants. I do not find any reason as to why the aforesaid judgment delivered by R.C Lahoti, J. should not be followed.

13. Mr. Uppal, appearing for defendant No. 1, submits that in case the recovery could be made by sale of mortgaged properties, the legislature ought to have made a specific provision in the Act stating that orders of the Tribunal can be executed in the same manner as decree of a Civil Court. In support of his contention he refers to Section 11 (1) of the U.P Agricultural Credit Act wherein it is stated that orders passed under the said Act can be executed in the same manner as decrees of the Civil Court. Contention of Mr. Uppal, therefore, is that said words being missing in the Act, a mortgaged suit could not be transferred to the Tribunal constituted under the Act as it has no powers to execute its order in the same manner as decrees of a Civil Court meaning thereby that it could not sell the mortgaged property. To my mind, the argument is wholly fallacious.

14. Under Section 19 of the Act, the Presiding Officer is required to issue a certificate under his signatures, on the basis of the order of the Tribunal, to the Recovery Officer for recovery of the amount of debt specified in the said certificate. On receipt of such certificate, the Recovery Officer is authorised to recover the amount specified therein by any of the modes mentioned in Section 25 of the Act. As there is a specific provision as to how recovery is to be made by the Recovery Officer and one of the mode of recovery is by attachment and sale of immovable property, in my opinion, there is no reason as to why the Tribunal cannot sell the property which has been mortgaged by the defendant to the bank by way of collateral security.

15. For the aforesaid reasons, I am of the considered opinion that suit for recovery of debt by sale of the mortgaged property can be filed before the Debt Recovery Tribunal constituted under the Act and no case has been made out as to why this suit should not be transferred to the Tribunal.

16. I, therefore, transfer this suit to the Debt Recovery Tribunal constituted under The Recovery of Debts due to Banks and Financial Institutions Act 1993, and parties are directed to appear before the Tribunal on 20th March, 1996.

Suit transferred.