M.C Jain, Chairperson:— The appellant-Mr. Anil Kumar Jaggi was defendant No. 4 in O.A No. 41/2004. He has preferred this appeal against the final order dated 14.2.2006 passed in the said O.A which had been filed by respondent No. 1 herein for the recovery of Rs. 92 lakh and odd with pendente lite and future interest and costs against him and three others. The O.A came to be allowed in favour of the Bank for the recovery of Rs. 92,58,347.23 with pendente lite and future interest @10% per annum from the date of filing of O.A till realisation along with costs against all the defendants.
2. The facts, briefly stated, were these: Defendant No. 1.respondent No. 2 herein-M/s. Varun Associates was the proprietary concern of defendant No. 2.respondent No. 3 herein—Mr. Karan Chawla. He along with defendant No. 3.respondent No. 4 herein—Mr. V.K Chawla and the present appellant/defendant No. 4—Mr. Anil Kumar Jaggi were guarantors for the repayment of the credit facilities advanced to defendant No. 1 through defendant No. 2. The appellant/defendant No. 4 had also allegedly created an equitable mortgage over his immovable property bearing No. A-284, New Friends Colony, New Delhi in favour of the Bank. Fiscal discipline was not maintained in respect of the credit facilities availed of by the borrowers in respect of the Cash Credit (Hypothecation) Limit of Rs. 80 lakh and Letter of Credit Limit of Rs. 15 lakh (sanctioned on 17.5.2002). The Bank, therefore, was obliged to file O.A
3. Defendant Nos. 1 to 3 had filed a composite written statement. But, later on, they stopped appearing. The appellant/defendant No. 4 had filed a separate written statement. We are concerned with his defence only as the appeal has been filed by him. His defence was that there was no cause of action against him. He denied execution of the guarantee deed as also the creation of equitable mortgage in favour of the Bank. According to him, the original title deed of the property in question was with his father. He pleaded that the said property was actually purchased from the funds supplied by his father in June 1998. Thereafter, through a family settlement dated 7.7.1998 his indivisible share in the property was only 1/5th. Therefore, the property could not be mortgaged as alleged by the Bank. The defence of defendant No. 4 did not find favour with the Tribunal below. The Presiding Officer of DRT held that the claim of the Bank was based on documents and was well-proved.
4. I have heard Mr. S.C Singhal for the appellant and Mr. B.S Chauhan for the 1st respondent-Bank and have carefully gone through the record.
5. The argument of the learned Counsel for the appellant/defendant No. 4 is that he neither signed any guarantee deed nor deposited title deed of the property in question with the Bank. It has been urged that his signatures were obtained only when the proposal was submitted and he never visited the Bank. The other defendants/respondents (who were the beneficiaries) allegedly played a fraud on him in connivance with the officials of the Bank, regarding which he had made a complaint to the police also. It has been urged that before the Tribunal below also a plea had been taken by him that the said property was HUF property and he had only 1/5th share therein, but the same was not at all examined. The learned Counsel urged that the appellant had only signed blank papers where no figures had been mentioned and as such he was not liable for any payment. It has been pointed out that the O.A was filed on 10.6.2004 and evidence by way of affidavit of Mr. Om Prakash Sambharia, Bank Officer, was filed on 14.6.2004 The written statement was filed by the appellant/defendant No. 4 was on 8.12.2004 It has been contended that in the written statement he categorically claimed that the title deed of the property in question was still in the possession of his father. He emphatically denied the execution of any document and his clear defence was that he had been asked to sign blank papers in which no figure had been mentioned anywhere,/meaning thereby that the documents were filled up by the Bank officers to give them the shape of guarantee deed and a document in support of creation of equitable mortgage.
6. Attention has also been drawn to the documents filed with the affidavit of the appellant at the appellate stage in compliance of order dated 4.7.2008 Para 4 of the affidavit reads as under:
“That in respect of the matter of Canara Bank, the report to CBI was made by the Canara Bank officials and one Shri Nimi Chand Jain of M/s. Mahavir Impex was also arrested in the said case vide No. RC5(E)/05.CBI/EOW 11.DLI under Section 120B r/w 419, 420,468,471IPC and 13(2) r/w 13(1)(d) of PC Act, 1988 on directions of the Hon'ble Court of Smt. I.K Kochhar, Special CBI Judge and raid was also conducted at the house of the Deponent and his father bearing premises No. A-283 and A-284, New Friends Colony, New Delhi on 19.2.2007 during the period 7:00 am to 9:30 pm and the original title deeds were seized by the CBI officials vide Search Memo, photocopy enclosed, which clearly shows that the original Title Deeds remained with the Deponent or his father till 19.2.2007 and thus original title deeds are now in possession of the CBI.”
7. Paper No. 180 of the paper book of the appeal is the copy of Search List (containing details of the property seized by the CBI acting under Section 165, Cr.P.C) dated 19.2.2007 It is recorded herein that it is in pursuance to search warrant issued by Hon'ble Special Judge, Patiala House Court, New Delhi in the name of Sh. Vijai Chettiar, Inspector of Police CBI/EDW II, New Delhi and endorsed to S.L Garg, Inspector, CBI EOW-II, New Delhi. Amongst other documents, conveyance deed (original) dated 23.6.1998 of property A-284, New Friends Colony, New Delhi along with perpetual sub-lease dated 17.12.1981 and Memorandum of family settlement dated 7.7.1998 (original) had been seized from the possession of Mr. Anil Kumar Jaggi, A-283 & 284, New Friends Colony, New Delhi. The said Mr. Anil Kumar Jaggi is the appellant herein. The learned Counsel argued that till 19.2.2007 the original title deed in respect of the property in question was with him or his father and on 19.2.2007 it was seized by CBI. The same is now in possession of CBI.
8. On the other hand, the learned Counsel for the respondent No. 1-Bank submitted that actually the appellant/defendant No. 4 stood as guarantor for the repayment of the loan lent to the borrowers and also deposited title deeds of his immovable property bearing No. A-284, New Friends Colony, New Delhi creating equitable mortgage in favour of the Bank so as to secure the repayment of the loan. His contention of having signed blank papers has been refuted. It has been termed as a stark lie that he never visited the Bank. The appellant, it has been urged, has made false allegations of collusion between the Bank officials and the other respondents to escape his liability under the final order dated 14.2.2006 validly passed by the Tribunal below.
9. I have given my anxious thought to the respective arguments of the learned Counsel for the parties in the light of the material and evidence on record. It is to be taken note of that the appellant admits to have signed the papers but in blank form. Thus, it is clear that he was not a stranger to the borrowers. In fact, signing of the documents is accepted. Signing of the blank papers is the stock plea generally taken by the borrowers/guarantors to escape their liability arising from a particular transaction of loaning. So far as the guarantee deed is concerned, it is there on the record of the lower Court duly signed by the appellant/defendant No. 4. It does not suffer from any flaw or illegality. He did give continuing guarantee. The liability of a guarantor is co-extensive with that of the principal debtor as per Section 128 of the Indian Contract Act. The appellant could not escape his liability as a guarantor. His defence denying the factum of his having stood as guarantor for the repayment of the loan advanced to the borrowers was liable to be rejected and the Tribunal below rightly did so.
10. Now, I am taken to the other important question as to whether he created equitable mortgage in respect of the property bearing No. A-284, New Friends Colony, New Delhi in favour of the Bank to secure the repayment of the loan. Needless to say, the deposit of original title deed of the immovable property with the creditor with intent to create security thereon is the backbone of mortgage by deposit of title deeds as defined in Section 58(f) of the Transfer of Property Act. To say in simple words, deposit of original title deed is the most essential ingredient of the creation of the equitable mortgage. On 4.7.2008, this Appellate Tribunal passed the following order:
“On the next date, the learned Counsel for the respondent-Bank shall apprise the Court as to where the original title deed of the property in question is. An affidavit shall be filed in this regard by an officer of the Bank. The appellant shall also file an affidavit with regard to his stand in respect of the title deed. In case it is with him, he shall file the same.”
11. It has been in compliance of the said order that an affidavit came to be filed by the appellant with certain documents. One of the annexures of the affidavit of the appellant is the Search List referred to earlier. This document clearly bears out that the title deed of the property in question was seized from the possession of the appellant by CBI on 19.2.2007 From the side of the respondent-Bank the affidavit filed in compliance of the order dated 4.7.2008 is of Mr. D. Naryana Swami, Assistant General Manager. On the aspect of creation of equitable mortgage in respect of the property A-284, New Friends Colony, New Delhi, it has been so stated in paras 3 and 4 as under:
“3. That the appellant created equitable mortgage of immovable property bearing No. A 284, New Friends Colony, New Delhi by deposit of title deeds to Defence Colony. New Delhi branch of the respondent No. 1 Bank. The equitable mortgage was created to secure cash-credit facilities of Rs. 80,00,000.00 (Rupees eighty lacs only) availed by M/s. Varun Associates (Respondent No. 2) from Bank of Baroda (Respondent No. 1) from its Defence Colony, New Delhi branch on 17.5.2002
4. That on 17.5.2002 appellant also furnished an affidavit to the respondent No. 1 Bank that he is the absolute owner and in possession of the immovable property under reference and is offering this property as security by creating an equitable mortgage in favour of the Bank to secure the credit facilities sanctioned and extended by the Bank to Respondent No. 2.”
12. Obviously, the contents of the affidavit filed on behalf of the Bank do not throw any light as to the availability of the original title deed with the Bank. It has also nowhere been explained by the Bank as to how the title deed of the property in question could escape from its possession if the same had been deposited with it (Bank) by the appellant/defendant No. 4 while allegedly creating equitable mortgage in its favour. It is also not the case of the Bank that some theft took place in the premises of the Bank and certain documents including the title deed of this property in question had been stolen. The Bank never lodged any FIR regarding any such incident of losing title deed of this property in any theft or in any other manner. Thus, it goes unexplained as to how the title deed could be in the possession of the appellant/defendant No. 4 on 19.2.2007 when CBI seized it from him on search of his premises. The record shows that the O.A was filed by the Bank on 10.6.2004 In a routine manner, the affidavit of evidence was filed by the Bank officer Mr. Om Prakash Sambharia on 14.6.2004 in stereotype manner to support the allegations made in the O.A, including that with regard to the creation of equitable mortgage by the appellant/defendant No. 4 in favour of the Bank. After filing of the written statement by the appellant/defendant No. 4. on 8.12.2004, the Bank filed replication also in a routine manner denying the availability of the title deed with the appellant or his father. Had the original title deed been with the Bank, the same could have been filed at some point or the other during the pendency of the litigation. It was never done, because actually the original title deed of the property was never handed over by the appellant/defendant No. 4 to the Bank.
13. Though affidavit of the appellant/defendant No. 4-Mr. Anil Kumar Jaggi is there on the record of the lower Court in token of the alleged creation of equitable mortgage in respect of the property in question to secure the repayment of the loan to the borrower-M/s. Varun Associates, but it remained on paper only. There is no proof of the deposit of the title deed by him with the Bank. Memorandum of deposit of title deed in respect of the property is Annexure-15 on the record of the lower Court. In the end it records a note to this effect: “This Memorandum was read out to the said Mr. Anil Kumar Jaggi, this 17th day of May, 2002.” It does not contain his signatures. The signatures are of Mr. O.P Sambharia, Credit Officer of the Bank and of Chief Manager. Obviously, it remained a recital on paper only that through it the appellant Mr. Anil Kumar Jaggi had deposited the document of title with the Bank. It cannot be fathomed whether it was because of faith or understanding between him and the Bank Officer or hurry for the disbursement of loan to the borrower that the title deed was not taken by the Bank at that moment. But it is beyond doubt that it was not deposited by the appellant with the Bank and remained to be in possession of the appellant to be ultimately seized by CBI on 19.2.2007 from his premises. The title deed having not been deposited, the essential ingredient of equitable mortgage having been created in favour of the Bank in respect of the property was missing. The result is that the appellant/defendant No. 4 cannot be made liable as mortgagor, though his liability is co-extensive with that of the borrower as guarantor. Practically non-creation of equitable mortgage in respect of the property in question in favour of the Bank does not score any point for the appellant/defendant No. 4. The reason is that he is the owner of the property bearing No. A-284, New Friends Colony, New Delhi, the subsisting title being in his favour as per the conveyance deed dated 23.6.1998 executed by DDA. As guarantor, his personal property including the aforesaid is liable to be proceeded against for the recovery of the amount of R.C in question.
14. As a passing reference, mention should be made of the Benami Transactions (Prohibition) Act, 1988 which came on the statute book on 5th September, 1988. Benami transactions abused and defrauded public revenues and creditors. This Act has totally prohibited the Benami transactions and has made it an offence also, prohibiting all suits, claims and actions based upon Benami transactions. It has been provided that no suit, claim or action to enforce any right in respect of any property held Benami shall lie and no defence based on any right in respect of any property held Benami shall be allowed in any suit, claim or action.
15. To be short, it does not lie in the mouth of the appellant to say that the property in question was actually purchased from the funds supplied by his father and through family settlement he only had 1/5th share therein.
16. The Miscellaneous Application No. 354/2006 regarding pre-deposit under section 21 of the rddbfi act was decided by this Tribunal on 14.11.2006 Against the recovery certificate amount of Rs. 92,58,347.23, the appellant had deposited three Bank drafts for a total amount of Rs. 76 lakh to meet the requirement of pre-deposit of 75% amount as envisaged under section 21 of the rddbfi act. This amount of Rs. 76 lakh was ultimately deposited with the respondent-Bank on 23.11.2006 as recorded in the order dated 12.12.2006 The Bank is entitled to adjust the said amount of Rs. 76 lakh against the amount of the recovery certificate issued in consequence of the final order in question. The balance along with interest and costs in terms of the final order dated 14.2.2006 can be recovered by the Bank from the appellant/defendant No. 4 and/or from defendants 1 to 3.respondents 2 to 4 whose liability is joint and several.
17. In view of the above discussion, my final order is as follows:
The appeal of the appellant/defendant No. 4 is partly allowed in that he did not create equitable mortgage in respect of his immovable property bearing No. A-284, New Friends Colony, New Delhi in favour of respondent No. 1-Bank to secure the repayment of the loan. However, he is liable to pay the outstanding amount along with interest and costs as per the final order dated 14.2.2006 as guarantor. His liability with other defendants/respondents 2 to 4 is joint and several. The amount of Rs. 76 lakh deposited by him on 23.11.2006 with the respondent-Bank under section 21 of the rddbfi act shall be adjusted by the Bank against the recoverable amount and he would be liable to pay the balance amount along with interest and costs. His liability would be joint and several with other defendants/respondents 2 to 4. It is made clear that the property bearing No. A-284, New Friends Colony, New Delhi being the personal property of the appellant/defendant No. 4-Mr. Anil Kumar Jaggi is liable to be sold, along with his other personal properties, for the recovery of the recoverable amount.
18. Copy of this order be supplied to the parties and be also sent to the Tribunal below. The lower Court record be returned immediately.
19. Appeal partly allowed.