(Per
: HONOURABLE MR.JUSTICE J.B.PARDIWALA)
Petitioners
- husband and wife have preferred this Petition under Articles 226
and 227 of the Constitution of India praying for following reliefs:
"(B) This
Hon'ble Court may be pleased to issue writ of certiorari or any
other appropriate writ, order or direction, to quash and set aside
the impugned judgment and order of the Debts Recovery Appellate
Tribunal at Mumbai dated 15.4.2010 at Annexure-A passed in Appeal
No. 291 of 2007, confirming the judgment and order of Debts Recovery
Tribunal-I, Ahmedabad dated 31.7.2007 passed in Appeal No.25/2007
under the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 and this Hon'ble Court
may be pleased to allow the appeal of the petitioners by quashing
and setting aside the action respondent No.1 taken under Section 13
of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 in respect of the
disputed Bungalow.
(C) This
Hon'ble Court may be pleased to issue writ of mandamus or writ in
the nature of mandamus and / or any other appropriate writ, order or
direction, declaring that security interest is not legal and valid
created in favour of respondent Bo.1 Bank by respondent No.2 in
respect of the disputed property being 13-A, Shyam Sattadhar
Cooperative Housing Society Limited, Sola Road, Bhuyangdev,
Ahmedabad and further be pleased to declare that the
petitioners are owners of the said property pursuant to the
sale deed executed by respondent No.2 in favour of the petitioners
and entitled to the possession of the said Bungalow in question.
(D) This
Hon'ble Court may be pleased to issue writ of mandamus and / or any
other appropriate writ, order or direction, declaring that
respondent dispossessed the petitioners from disputed property and
further be pleased to direct respondent no.1 to restore the
possession of the said disputed property to the petitioners
forthwith.
(E) Pending
hearing and final disposal of this petition, this Hon'ble Court may
be pleased to restrain respondent No.1, its officers, servants and
agents from transferring, alienating, and / or, in any manner,
disposing of the disputed property being residential house 13-A,
Shyam Sattadhar Cooperative Housing Society Limited, Sola Road,
Bhuyangdev, Ahmedabad and / or in alternative, if sale certificate
is issued and conveyance deed is executed by respondent No.1, then
execution, operation and implementation of such share certificates
and conveyance deed be stayed and the disputed property be restored
back to the petitioners."
Facts
relevant for the purpose of deciding this petition can be summarised
as under:
2.1 Petitioner
No.1 was working with Gujarat Agricultural University at Dantiwada
as a Scientist Class-I. As on today, he has his own independent
profession and engaged in the activity of research and development
in seeds and marketing of the improved seeds and knowledge.
Petitioner No.2 is the wife
of Petitioner No.1 and she is assisting in the business of her
husband.
2.2 Petitioners
were in search of a residential premises. They read an
advertisement published in the newspaper by Respondent No.2 through
one broker for sale of residential property namely 13-A, Shyam
Sattadhar Cooperative Housing Society Limited, Sola Road,
Bhuyangdev, Ahmedabad. This advertisement was published in Gujarat
Samachar, a vernacular local newspaper, Ahmedabad edition on
10.9.2006.
2.3 Petitioners
approached the broker through whom the advertisement was published
and the broker in turn gave physical inspection of the bungalow to
the petitioners and also copy of title documents, including title
clearance report obtained by Respondent No.2, copy of original share
certificate, etc. Petitioners ultimately settled the deal and
bought the property in question for Rs.17.51 lacs. Respondent No.2
executed sale deed in favour of the petitioners dated 10.10.2006.
2.4 Petitioners
wanted to avail loan facility from the Bank for the purpose of
purchasing the said property and therefore Respondent No.2 handed
over file containing various documents, including title report of
one Advocate named Vijay A. Patel on 21.6.2006. Petitioners
approached Bank of Marharashtra, Gandhinagar Branch with a request
to grant housing loan of the
sum of Rs.12 lacs, and an application alongwith necessary documents
was submitted. Bank of Maharashtra through their panel Advocate one
Shri Narendra H. Soni obtained title report in respect of the said
property.
2.5 On
22.11.2006, Bank of Maharashtra released a cheque of Rs.12 lacs in
favour of petitioners. The balance amount out of Rs. 17.51 lacs was
paid by cheques from the accounts of the petitioners maintained with
State Bank of India.
2.6 It
appears that Respondent No.2 also gave solemn declaration declaring
that the property in question is in her name and she is the sole
owner of the property, free of all encumbrances and there is no
charge over the said property of any bank or any financial
institution. Respondent No.2 also declared that she has not availed
of any loan facility whatsoever from any bank, government or
semi-government office or institution.
2.7 After
execution of the sale deed, the possession of the property was
handed over to the petitioners and they started residing in the
premises after carrying out necessary renovations.
2.7 One
fine day, to the utter shock and dismay of the petitioners, officers
of Respondent No.1-Bank came down at the
residential house of the petitioners and informed the petitioners
that the disputed property is under mortgage with Dena
Bank executed by Respondent No.2. Petitioners were shocked upon
hearing this as they have invested their entire savings of life in
the said property, and over and above they have also availed of loan
facility of Rs.12 lacs from Bank of Maharashtra by creating
equitable mortgage on the same disputed property.
2.8 The
record reveals that the petitioners immediately filed Special Civil
Suit No.330 of 2006 in the Court of Civil Judge (SD), Ahmedabad
Rural seeking injunction against the Respondents from dispossession.
The Suit was contested by Respondent No.1-Bank on the ground that
Civil Court has no jurisdiction against the action of Respondent
No.1 - Bank under Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest, Act (54) 2002 (for
short "the SARFAESI Act"). The Civil Judge dismissed the
Suit on the threshold by rejecting the plaint under Order 7 Rule 11
of the Civil Procedure Code.
2.9 Record
further reveals that Respondent No.1 - Bank filed Miscellaneous
Civil Application No. 187 of 2006 under Section 14 of the SARFAESI
Act before the learned Chief Metropolitan Magistrate, Ahmedabad
seeking directions from the Court to take physical possession of the
disputed property and hand over the same to Respondent No.1-Bank.
Petitioners were also joined
as party Respondents in the said Application and the petitioners
resisted the Application on various grounds available. However,
Chief Metropolitan Magistrate passed an order dated 22.3.2007
allowing the Application of the Respondent No.1-Bank with direction
to the concerned police station to provide help for taking
possession of the property.
2.10 On
25.3.2007 Respondent No.1-Bank took over the possession of the
property from the petitioners.
2.11 On
7.4.2007 petitioners preferred Appeal No.25 of 2007 before the Debts
Recovery Tribunal, Ahmedabad (for short "DRT") under
section 17 of the sarfaesi act and sought various reliefs. The
Appeal before the DRT was substantially on the following grounds:
(a) Respondent
No.2 played fraud not only with the Petitioners but with Respondent
No.1 - Bank also, because the documents relating to the title of the
property produced by Respondent No.2 before Respondent No.1-Bank
while creating equitable mortgage are found to be bogus, concocted
and they are not original title deeds.
(b) Respondent
No.2 created multiple mortgages in respect of the disputed property.
Many lenders were duped by mortgaging the same property.
(c) Petitioners
are bonafide purchaser of the property for value without notice of
any right, title or interest in the disputed property by Respondent
No.1 inasmuch as petitioners approached Respondent No.2 pursuant to
the advertisement published by her through a broker and after
obtaining title clearance report issued by Respondent No.2. Not
only that, but Bank of Maharashtra also obtained title clearance
report through their Advocate at the instance of the petitioners at
the time of availing of the loan facility.
(d) It was
brought to the notice of DRT that section 13 of sarfaesi act could
get attracted only if security interest is created in favour of the
secured creditors. Secured creditor has right to exercise powers
under Section 13 of the Act only if security interest is created on
the property, meaning thereby security interest must be created
legally and validly as per Section 58 of the Transfer of Property
Act in case of equitable mortgage by deposit of original title
deeds.
(e) it
was brought to the notice of DRT that Respondent No.1-Bank created
mortgage on forged documents namely share certificate and forged
letters of society. It was brought to the notice of the Tribunal
that the original share certificate issued by the society is with
the petitioners and the forged and concocted share certificate was
produced before Respondent No.1-Bank. This was supported by
documentary evidence
produced by the Petitioners, including the affidavit of the Chairman
of the society, who clearly declared on oath that his signatures
have been forged and the documents are not issued by the society.
It appears
that all these grounds, which were urged before the DRT in Appeal
No.25 of 2007 did not weigh with the Tribunal and ultimately vide
order dated 31.7.2007 passed by the Presiding officer, the Appeal
was dismissed holding that the petitioners had purchased the
disputed property knowing fully well that Respondent No.2 had
defrauded many Banks, including Respondent No.1.
2.12 Petitioners
being aggrieved by the order passed by the DRT preferred Appeal No.
291 of 2007 before Debts Recovery Appellate Tribunal, Mumbai (for
short "DRAT"). Before the DRAT, all the grounds, which
were raised before the DRT were reiterated. However, the Appeal was
ordered to be dismissed solely on the ground that the petitioners
had no locus to challenge the mortgage in favour of Respondent No.1
- Bank by Respondent No.2. DRAT came to the conclusion that the
issue of validity of the mortgage cannot be reopened at the behest
of the petitioners, who were not parties to the transaction of
mortgage. The DRAT further held that the petitioners cannot adduce
evidence to discredit the mortgage in favour of Respondent
No.1-Bank.
2.13 Petitioners
being aggrieved by the orders passed by DRT and DRAT are here before
this Court by way of the present petition.
We have
heard learned Senior Counsel Mr. S.N.Soparkar appearing with Mr.
R.D.Dave for the petitioners and Mr. S.S.Panesar for Respondent o.1-
Dena Bank.
On
20.4.2010, this Court issued notice to the Respondents and further
passed order that during the pendency of the writ petition,
Respondent bank may proceed with the auction sale of the secured
assets but will not confirm the sale without prior permission of the
Court. It also deserves to be noted that that Respondent No.3 in
this petition is the Surendranagar District Cooperative Bank
Limited. This Bank also claims that it had sanctioned loan in
favour of Respondent No.2 and at the time of sanctioning of the
loan, the disputed property was mortgaged. Respondent No.3-Bank has
also filed its reply affidavit.
On
18.3.2011, this Court passed the following order:
"Heard
in part. Post the matter for further hearing on 22nd March 2011 at
2:30 p.m. on the top of the list.
The
Bank may produce the documents to suggest that the borrowers have
created secured interest in the property in question."
In
response to the order passed by this Court on 18.3.2011, learned
Advocate Mr. S.S.Panesar appearing for Respondent No.1-Bank made
available the documents for our perusal to suggest that Respondent
No.2 - original borrower has created security interest in the
property in question. We shall deal with this issue regarding the
nature of documents, which we have perused, at a later stage.
In the
facts and circumstances of the case as narrated above, we are
confronted with an issue as to whether the petitioners have locus to
challenge the legality and validity of the mortgage in favour of
Respondent No.1-Bank created by Respondent No.2 by playing fraud.
In this regard, the contentions on behalf of learned counsel for the
petitioners are as under:
7.1 It is
submitted that the Appellate Tribunal as well as the DRT ought to
have examined the legality and validity of creation of mortgage by
Respondent No.2 in favour of Respondent No.1-Bank inasmuch as the
fact that there are serious allegations leveled to the effect that
the documents relating to the title of the property, produced by
Respondent No.2 before Respondent No.1 while creating equitable
mortgage are found to be bogus, concocted and are not original title
deeds. It is submitted that both the lower authorities have failed
in discharging their statutory duties by not adjudicating the
dispute on this issue.
7.2 It is
submitted that the appellate tribunal erred in dismissing the Appeal
on the ground that the Tribunal cannot go into legality and validity
of the mortgage, because DRT has already allowed
Original Application No. 378 of 2001 in favour of Respondent
No.1-Bank preferred against Respondent No.2 by judgment and order
dated 15.2.2008. It is submitted that the petitioners were not
party to the said Recovery Proceedings filed under Section 19 of
Recovery of Debts Due to Banks and Financial Institutions, Act,
1993. It was also submitted that the issue of legality and validity
of mortgage was not under challenge and was not the subject matter
of adjudication under these proceedings. It is further submitted
that any decision rendered by DRT in Original Application No. 378 of
2001 will not be resjudicata while deciding specific issue about
validity of the mortgage in favour of Respondent No.1-Bank based
upon forged documents since specific dispute has been raised by the
petitioners, supported by documentary evidence and affidavit of the
chairman of the society.
7.3 It
is submitted that the Bank can proceed under Section 13 of the
SARFAESI Act only if security interest is created in favour of the
secured creditor. It is submitted that the secured creditor has
right to exercise powers under Section 13 of
the SARFAESI Act only if security interest is created on the
property, meaning thereby security interest must be created legally
and validly as per Section 58 of the Transfer of Property Act in
case of equitable mortgage by deposit of original title deeds. It
is further submitted that unless and until the original title deeds
are deposited, there is no creation of equitable mortgage over the
property by deposit of title deeds.
7.4 It is
further submitted that Respondent No.1-Bank created mortgage based
on forged documents namely share certificate and forged letters of
society. Under such circumstances, it cannot be said that there was
valid and legal security interest created upon the property so as to
entitle the Bank to invoke the provisions of Section 13 of the
SARFAESI Act. It is vehemently submitted that the petitioners have
been duped by Respondent No.2. It is submitted that not only
petitioners have been duped but even Respondent No.1-Bank has been
duped by Respondent No.2. Petitioners are bonafide purchasers of
the property for value without notice.
Per contra
it is submitted on behalf of Respondent No.1-Bank as under:
8.1 Perusal
of the two judgments would indicate that there is no error apparent
on the face of the record or any jurisdictional error committed by
DRT and DRAT in dismissing the Appeals preferred by the petitioners.
Therefore, this Court may not grant any relief in view of the
concurrent findings recorded by both the authorities below. It is
submitted that the petitioners are not bonafide purchasers of the
property in question. It is submitted that the petitioners have no
locus standi to impeach valid equitable mortgage created by
Respondent No.2 in favour of Bank and which is duly approved by the
DRT vide judgment and order dated 15.2.2008 in OA 378 of 2001, which
has attained finality.
8.2 It is
submitted that Respondent No.2 had executed an affidavit dated
6.9.1996 in favour of Respondent No.1-Bank declaring that she is the
sole and absolute owner and occupier of the bungalow and her title
in the above property is clear, marketable and free from all
encumbrances and she also gave an undertaking to the effect that she
would not transfer, convey or part with the possession of the said
property during the subsistence of the equitable mortgage.
8.3 Learned
Counsel for Respondent No.1-Bank therefore prayed that the petition
deserves to be dismissed.
8.4 Learned
Counsel for the Respondent No.1-Bank has heavily relied upon the
judgment of this High Court in the matter of Makboolhusen
Razakmiya Maniyar & Anr. v/s. bank of Baroda & Ors.,
reported in AIR 2006 Gujarat 244.
Learned Counsel relied upon paragraph 7 of this judgment, which
reads as under:
"7. ......
The effect of the acceptance of this submission of the learned
advocate will be that the entire exercise undertaken by the
Legislature of enacting this law and putting it on the statue book
will vanish. If this is allowed then every person, having borrowed
a loan from the Bank or any other financial institution, can get
away by transferring the property to some other persons, and that
person who will be in possession of the property will be arguing
like the present petitioners that they are not the 'borrowers' and
the financial institution is not the 'secured creditor' and,
therefore, no action can be taken in the matter and let the
petitioners and for that reason all such persons be allowed to live
happily. The argument of the learned advocate for the petitioners
is not only unreasonable but against the morality. However, it does
not sound unreasonable to the learned advocate for the petitioners
because he is under an obligation to be discharged in the open Court
by arguing that condition precedent for implementation of law is the
relationship of 'borrower' and the 'secured creditor' between the
parties."
Having
regard to the rival contentions of the respective parties and the
record of the case, it is apparent that the facts are quite
eloquent. We are of the view that the point which has been urged
before us deserves consideration and the petitioners cannot be
non-suited only on the ground that they have no legal right to
challenge the legality and validity of the mortgage in favour of
Respondent No.1-Bank by Respondent No.2. Before we deal with the
subject in detail, it would be appropriate to understand as to what
is 'security interest'.
'security
interest' is defined under Clause (zf) of Section 2 of the SARFAESI
Act, which reads as under:
"
'security interest' means right, title and interest of any kind
whatsoever upon property, created in favour of any secured creditor
and includes any mortgage, charge, hypothecation, assignment other
than those specified in section 31;"
In the
same manner it would also be expedient to understand as to what is
'secured asset'. 'secured asset' is defined under Clause (zc) of
Section 2 of the SARFAESI Act, which reads as under:
"
'secured asset' means the property on which security interest is
created;"
In the
same manner it would also be expedient to understand as to what is
'secured debt'. 'secured debt' is defined under Clause (ze) of
Section 2 of the SARFAESI Act, which reads as under:
"
'secured debt' means a debt which is secured by any security
interest;"
It would
also be expedient to refer to Section 58 Clause (f) of the Transfer
of Property Act. Clause (f) deals with mortgage by deposit of title
deeds. The mortgage in the present case falls within Section 58
Clause (f) of the Transfer of Property Act. Section 58 Clause (f)
is reproduced hereinbelow:
(f) Mortgage
by deposit of title-deeds. - Where
a person in any of the following towns, namely, the towns of
Calcutta, Madras and
Bombay, *** and in any other town which the State Government
concerned may, by notification in the Official Gazette, specify in
this behalf, delivers to a creditor or his agent documents of title
to immovable property, with intent to create a security thereon, the
transaction is called a mortgage by deposit of title-deeds.
This is
called in English law an equitable mortgage. It is the well
established rule of equity that mere deposit of a document of title
without writing or without word of mouth, will create in equity a
charge upon the property referred to. Requisites of a mortgage by
deposit of title deeds are as under:
(i) a
debt,
(ii) a
deposit of title deeds, and
(iii) an
intention that the deeds shall be security for the debt.
We may
quote the statement of the law as given in White and Tudor's Leading
Cases in Equity, Edn. 9, Vol.2 at 180 under the leading case of Le
Neve v. Le Neve [1747] Amb. 436 = 3 Atk. 646=1. The statement is in
these words:
""But
the Court will impute notice on the ground of fraud or gross and
wilful negligence showing that he wilfully shuts his eyes to facts,
to a person with an estate and not obtaining possession of
title-deeds, if he omits all inquiries as to them, or neglects to
call for an abstract of title, and will hold him to have notice of
those circumstances, which, had he not neglected his duty, would
have come to his knowledge."
We may
also refer to Section 78 of the Transfer of Property Act. Section
78 speaks about postponement of prior mortgagee. It reads as under:
(1) Postponement
of prior Mortgagee. - Where,
through the fraud, misrepresentation or gross neglect of a prior
mortgagee, another person has been induced to advance money on the
security of the mortgaged property, the prior mortgage shall be
postponed to the subsequent mortgagee.
We may now
go to section 13(1) of the sarfaesi act. section 13 is in Chapter
III of the SDARFAESI Act. This chapter relates to enforcement of
security interest. Section 13(1) reads as under:
13. Enforcement
of security interest. -(1) Notwithstanding anything contained
in section 69 or section 69A of the Transfer of Property Act,
1882 (4 of 1882), any security interest crated in favour of
any secured creditor may be enforced, without the intervention of
the court or tribunal, by such creditor in accordance with the
provisions of this Act.
Plain
reading of Section 13 (1) would suggest that the first requirement
is - there must be a security interest created in favour of any
secured creditor. If there is a valid security interest created in
favour of any secured creditor, then Section 13 empowers enforcement
of the same without the intervention of the court or tribunal by the
creditor in accordance with the provisions of the SARFAESI Act.
In the
same manner, we may also reproduce Section 13, Clause 4 (a) of the
SARFAESI Act, which reads as under:
"
(4) In case the borrower fails to discharge his liability in full
within the period specified in sub-section(2), the secured creditor
may take recourse to one or more of the following measures to
recover his secured debt, namely:-
(a) take
possession of the secured assets of the borrower including the right
to transfer by way of lease, assignment or sale for releasing the
secured asset:"
Plain
reading of section 13 clause 4(a) would also suggest that in the
event if the borrower fails to discharge the liability in full
within the period specified in sub Section (2), the secured creditor
may take recourse to one or more of the following measures to
recover his secured debt namely - take possession of the secured
asset of the borrower.
It is
evident that the SARFAESI Act empowers to take possession of the
secured asset for the purpose of recovering secured debt. In the
present case the crux of the contention which deserves
consideration is that, if there is no valid and legal security
interest created by Respondent No.2 in favour of Respondent
No.1-Bank, at the time of creating a mortgage because of defective
title being handed over to the Bank, then, under such circumstances,
it wold not be within the powers of the Bank as a secured creditor
to enforce such a security interest and proceed under Section 13 of
the SARFAESI Act. We are not able to understand as to why the DRT
as well as the appellate Tribunal has not thought fit to examine
this issue more particularly when it is the positive case of the
petitioners herein that Respondent No.2 has committed fraud and has
duped the Bank by producing defective title deeds and that too, to
the extent of producing a forge share certificate said to have been
issued by the society. This case of the petitioners cannot be just
brushed aside easily and it would also not be in the larger interest
of justice to say that the petitioners cannot challenge the validity
and legality of the mortgage. If there is no valid security
interest created in favour of the bank, then there is no valid
mortgage, and if there is no valid mortgage, then the petitioners,
who are the purchasers of the property, can definitely say that the
bank could not have enforced such a defective security interest.
For this
reason, we passed an order on 18.3.2011 saying that the Bank may
produce the documents to suggest that the borrowers have created
secured interest in the property in question.
In
response to this, learned Counsel for the Respondent No.1-Bank
produced the documents to convince us that a valid security interest
has been created. We took possession of the documents and asked the
registry to place them in the sealed cover. We would not like to
comment much on the documents because we want that the whole issue
be reconsidered by DRT by carefully perusing each and every document
on which the bank proposes to rely upon to make good their case that
a valid equitable mortgage was created in their favour by Respondent
No.2. All we would like to say at this stage is that even DRT in
its order dated 31.7.2007 has observed:
It
is true that multiple mortgages came to be created in respect of the
disputed property. In other words, many lenders were duped by
mortgaging the same property. As far as the lenders are concerned,
they have to work out the remedy either amicably or by litigation.
We are of
the view that having come to this conclusion, it was not just and
sufficient for DRT and DRAT to say that - as documents have been
executed and as title deeds have been deposited, they by themselves
constitute a valid equitable mortgage creating the security interest
in favour of the Respondent Bank. We cannot ignore other
documentary evidence more particularly the affidavit filed by
Chairman of the society, wherein, he has said in so many words that
his signatures have been forged, and perhaps this would lead us to
believe that the so called share certificate, which has been relied
upon by the Bank, is also a false document, because it contains
forge signature of the Chairman of the society, who has issued the
share certificate. There is no reason why the Chairman of the
society to file a false affidavit. The matter does not rests here.
The case of the petitioners and the Chairman of the society is
further fortified by Respondent No.3, who also claims that they have
created a security interest as the same property has been mortgaged
with them also by Respondent No.2 and has availed for the loan
facility.
We also
take notice of the fact that over and above Respondent No.1-Bank,
Respondent No.2 obtained loan from Social Cooperative Bank Limited,
LIC Housing Finance Limited, Surendranagar District Cooperative Bank
Limited and Indus Ind. Bank by creating equitable mortgage on the
same property by producing forge title deeds and share certificates.
As against this, shockingly, the petitioners have also produced the
share certificate in their possession, which the Chairman of the
society certifies it to be true and correct. The affidavit and the
say of the Chairman of the society has been completely brushed
aside. We can understand that in a given case, some flimsy case may
be made out by persons like petitioners to get out of the wriggles
of the fact. But that does not appear to be so in the present case
considering the material on record. It was therefore necessary for
DRT and DRAT to look into this aspect seriously and in detail.
One
another contention canvassed on behalf of Respondent No1-Bank is
that DRT and DRAT are justified in saying that they cannot go into
the legality and validity of the mortgage because DRT has already
allowed Original Application No. 378 of 2001 in favour of Respondent
No.1 filed against Respondent No.2, by judgment and order dated
15.2.2008. We are afraid even this contention cannot be accepted
because the petitioners were admittedly not party to the said
Recovery Proceedings filed under Section 19 of Recovery of Debts Due
to Banks and Financial Institutions, Act, 1993. Secondly, the issue
of legality and validity of mortgage was not under challenge and was
not the subject matter of adjudication in the said proceedings.
Therefore, any decision of DRT in OA No. 378 of 2001 will operate as
a bar to resjudicata while deciding specific issue about the
legality and validity of mortgage in favour of Respondent No.1-Bank.
Under sub
Section (1) of Section 17 of the SARFAES Act, any person aggrieved
by any of the measures referred to in sub Section (4) of Section 13
taken by the secured creditor can prefer an Appeal (Application) to
the DRT within 45 days from the date on which such measures had been
taken. In the present case there cannot be any dispute to the
effect that the petitioners are aggrieved persons. They would
definitely fall within the ambit of aggrieved person. Under
sub-section (2) of Section 17, the tribunal is bound to consider
whether any of the measures referred to in sub-section (4) of
section 13 taken by the secured creditor for enforcement of security
are in accordance with the provisions of this Act. Legality and
validity of a mortgage would be definitely one of the relevant
considerations, if genuinely raised under Section 17 of the SARFAESI
Act.
Under
sub-section (3) of section 17 of the sarfaesi act, after examining
the facts and circumstances of the case and evidence produced by the
parties, if the tribunal comes to the conclusion that any of the
measures referred to in sub-section (4) of section 13, taken by the
secured creditor are not in accordance with the provisions of this
Act and the rules made thereunder, and require restoration of the
management of the secured assets to the aggrieved person or
restoration of possession of the secured assets to the aggrieved
person, it may by order, declare the recourse to any one or more
measures referred to in-sub-section (4) of section 13 taken by the
secured assets as invalid and restore the possession of the secured
assets to the aggrieved person or restore the management of the
secured assets to the aggrieved person, as the case may be. The
provisions of section 17 must therefore receive such consideration
at the hands of the Court as to achieve its object, and in any
event, not thwarted.
It is true
that the Securitisation Act is enacted to provide a speedy and
summary remedy for recovery of thousands of crores which were due to
the Banks and Financial Institutions, but at the same time, if
primafacie there appears to be a case of fraud, then, persons like
the present petitioners also deserve some protection at the hands of
the Court and it cannot be said that by affording such protection in
the given set of evidence, the very object of the Act is defeated.
Justice cannot be done by doing injustice with someone.
In light
of the foregoing discussion, we summarize our findings as follows:
(i) In a
given case, more particularly in light of the facts and
circumstances of the present case, it is within the powers of the
DRT to adjudicate the issue of legality and validity of a mortgage
and the legality and validity of security interest created in favour
of the Bank.
(ii) All
such grounds, which rendered the action of the bank / financial
institution illegal, can be raised in the proceedings under Section
17 of the Securitisation Act before the Debt Recovery Tribunal. It
is for the Debt Recovery Tribunal to decide in each case whether the
action of the Bank / financial institution was in accordance with
the provisions of the said Act and legally sustainable. Legality
and validity of security interest created in the form of a mortgage
on the ground and allegations of fraud can definitely be looked into
and must be looked into by Debt Recovery Tribunal.
(iii) In
this view of the matter, we are of the opinion that the ends of
justice would be served if we remit the entire matter to the Debts
Recovery Tribunal to once again look into the entire issue
threadbare and give an independent finding in this regard.
(iv) We
therefore quash and set aside the order passed by Debts Recovery
Tribunal, Ahmedabad dated 31.7.2007 passed in Appeal No. 25 of 2007
and also the order passed by Debts Recovery Appellate Tribunal dated
15.4.2010 in Appeal No. 291 of 2007 and remit the matter to the
Debts Recovery Tribunal, Ahmedabad for fresh consideration on this
issue as regards the fraud which has been played upon by Respondent
No.2 and the legality and validity of the security interest created
in the form of a mortgage of the disputed property.
(v) We
direct that the Debts Recovery Tribunal shall issue notice to all
respective parties for fixing hearing within 15 days from the date
of receipt of this order and thereafter try to complete the hearing
and decide the mater afresh within a period of three months
thereafter without being influenced in any manner by the earlier
orders passed in Appeal No. 25 of 2007 and Appeal No. 291 of 2007.
The
petition is disposed of with the above directions with no order as
to costs.
[S.J.MUKHOPADHAYA,
CJ]
[J.B.PARDIWALA,
J]
Jayanti*
After the
judgment, the original documents produced by the Petitioner and
Respondent Bank are handed over to the respective Counsel in Court.
[S.J.MUKHOPADHAYA,
CJ]
[J.B.PARDIWALA,
J]
Jayanti*
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