M.C Jain, Chairperson:— This is a second appeal filed by the auction purchaser against the order dated 10.4.2007 passed by the Presiding Officer of DRT-I,. Chandigarh in Appeal No. 16/2006 that had been filed before him under section 30 of the rddbfi act. Before the DRT, the auction purchaser had challenged the order dated 22.2.2005 passed by the Recovery Officer in R.C No. 1198/2002 whereby he (Recovery Officer) had directed for the possession of the property in question to be delivered to respondent No. 10 herein. By the impugned order, the Tribunal below dismissed the appeal of the auction purchaser and directed the Court Receiver to hand over the possession of the property in question to respondent No. 10. However, it was left open to the appellant/auction purchaser to move necessary application seeking possession of the property in question in accordance with law. The respondent No. 1 is Punjab National Bank-CH. Respondent Nos. 2 to 9 are the CDs whereas respondent No. 10.third party claims to be a tenant in the property in question.
2. The relevant facts may be stated briefly: Respondent No. 2-M/s. Weld Wood (P) Ltd. created an equitable mortgage over the property No. 38/4, KM, Jakhoda, Near Bahadurgarh, Delhi-Rohtak Road, Haryana in favour of respondent No. 1 in respect of loan and credit facilities availed of by it and its directors (respondents 2 to 9). The equitable mortgage was created on 25.6.1988, in respect of which acknowledgement letter dated 26.6.1988 was issued. The borrowers/guarantors (mortgagors) did not maintain financial discipline of repayment schedule. Resultantly, respondent No. 1 filed O.A 738/2000 for the recovery of Rs. 1 crore and odd from respondents 2 to 9. The O.A was allowed and R.C was issued. Recovery proceedings were initiated by the Recovery Officer and the mortgaged property in question was auctioned. The reserve price was fixed at Rs. 55 lakh. Auction was held on 28.8.2004 and the appellant offered the highest bid for Rs…. 55,00,100/-. It was accepted and the sale was confirmed on 29.10.2004, as the auction did not suffer from any irregularity. After confirmation of sale, sale certificate was also issued to the auction purchaser-appellant. On an application dated 24.1.1.2004 made by the auction purchaser-appellant, warrant of possession was issued and physical possession of the property in question was handed over to the auction purchaser in the presence of SHO Sadar, Bahadurgarh and two witnesses on 11.12.2004 Then, respondent No. 10 moved an application for restoration of possession. Its case was that it was a company under the name and style of GECO Engg. Works Ltd. and since 1995 was in possession of the property in question as tenant. The application was opposed by the appellant/auction purchaser on diverse pleas. After hearing the Counsel for the parties, the Recovery Officer passed the order dated 22.2.2005 directing restoration of possession to respondent No. 10 and holding the auction purchaser to be entitled to symbolic possession. The same was challenged before the DRT by the auction purchaser under section 30 of the rddbfi act by means of an appeal. The Presiding Officer of the DRT, by an interim order, stayed the operation of the order dated 22.2.2005 passed by the Recovery Officer. Pursuant thereto, the appellant/auction purchaser retook the physical possession of the property in question. However, by another interim order dated 10.11.2006 on I.A 16/2006 made by the respondent No. 10, the DRT appointed a Receiver to take over the physical possession of the property in question. The possession was with the Receiver, Mr. S.R Kapoor, Advocate when the impugned order dated 10.4.2007 came to be passed by the Tribunal below.
3. The present appeal was filed on 17.4.2007 Earlier thereto, i.e on 10.4.2007, respondent No. 10, the so-called tenant, filed Caveat. Notice was issued to the Caveator as well as to other respondents under order dated 13.7.2007 Mr. R.K Trakru put in appearance for respondent No. 1, i.e Punjab National Bank - CH. Respondent Nos. 2 to 10 could be served by publication. Only two of them, respondents 2A and 6 put in appearance through Counsel Mr. Avadh Pratap Singh, but they, too, did not file any reply. No reply came to be filed by respondent No. 1 either. In spite of having initially filed Caveat, respondent No. 10, the so-called tenant, dragged on. It was not represented by any lawyer when the matter came to be heard on 2.5.2008 The appeal was reserved for orders. But, on 9.5.2008,. Counsel for respondent No. 10 made an application that the appellant be directed to supply copy of the paper book and he be granted six weeks' time to file reply Since the Court is always interested in imparting substantial justice to the parties, it was directed by order dated 14.5.2008 that the respondent No. 10 could obtain necessary papers after inspecting the record and in case of its filing reply and the written arguments by 25.5.2008 with copy to the Counsel for the appellant, the same would be considered. Still another application was made through Diary No. 738/2008 for seeking more time. Another indulgence was granted to respondent No. 10 under order dated 27.5.2008 giving 10 more days' time. The matter came up on 5.6.2008 and still respondent No. 10 did not file reply/written arguments. At long last, the written submissions came to be filed by respondent No. 10 on 9.6.2008 An affidavit also came to be filed by Mr. Arun Nandragoj for respondent No. 10 on 11.6.2008 swearing that the copy of the written submissions had been served on Mr. Arvind Kumar Gupta, Counsel for the appellant/auction purchaser. The final order having not been passed till the filing of the written submissions (on 9.6.2008) and the affidavit aforesaid (on 11.6.2008), I have thought it proper in the interest of justice to consider the defence put forth by respondent No. 10 against this appeal through its written submissions referred to above to set at rest the controversy effectively and finally.
4. Counsel for the respondent No. 1 or respondent Nos. 2A and 6, who were present on 2.5.2008, made no arguments in opposition of the appeal, but oral arguments of the Counsel for the appellant Mr. Arvind Kumar Gupta were heard. He filed written submissions also.
5. The argument of the learned Counsel for the appellant-auction purchaser is that the appeal before the Tribunal below involved a legal issue as to whether respondent No. 10 was entitled to any protection on the basis of alleged tenancy set up by it in respect of the property in question and the Presiding Officer ought to have decided it, instead of remanding the matter back to the Recovery Officer for another round of litigation. According to the learned Counsel, while availing of the loan facilities from respondent No. 1-Bank, respondent Nos. 2 to 9 principal borrowers/guarantors had executed a loan agreement dated 25.6.1988 (pages 142 to 149 of the paper book of the appeal). He invited my attention to Clause 10(k) of the said agreement which provides as under:
“Borrowers agree not to………borrow or obtain credit facilities of any description from any other Bank or credit agency or money-lenders or enter into any hire purchase or lease arrangement during the currency of the loan.”
6. It would be relevant to state here that the said agreement was filed before the Tribunal below, and the Presiding Officer made it a ground for the remand of the matter to the Recovery Officer for examining the matter from the angle of the said document.
7. The learned Counsel for the appellant also pointed out that through letter dated 26.6.1988 (page 150 of the paper book of the appeal) the borrowers had acknowledged the creation of equitable mortgage in respect of property in question (detailed in Schedule III of the loan agreement dated 25.6.1988) by deposit of title deed on 25.6.1988 in favour of respondent No. 1 to secure the credit facilities allowed to them. The learned Counsel for the appellant urged that all the ingredients of creation of equitable mortgage as per Section 58(f) of the Transfer of Property Act were there, i.e existence of debt, deposit of title deed in respect of immovable property and the intention that the title deed would be security for the repayment of the debt. The factum of collateral security by creation of equitable mortgage in respect of the property in question is also recited in the loan agreement dated 25.6.1988 According to the argument of the learned Counsel for the appellant, the borrower-respondent Nos. 2 to 9 and the respondent No. 10 were in collusion and it was the result of their collusive combination that the respondent No. 10 had been set up with mala fide intention to stake its claim of possession over the property in question as tenant. He urged that the alleged tenancy was in contravention of Section 65A of the Transfer of Property Act. He pointed out that no lease deed was ever placed on record either before the Recovery Officer or before the Presiding Officer of the DRT.
8. It is significant to note that the respondent No. 10 claimed himself to be the tenant of the borrower Company-respondent No. 2 since March 1995, paying rent @ Rs. 5,000/- per month. The relevant part of the reply filed before the Tribunal below by respondent No. 10 may be extracted below:
“The respondent No. 10 is a tenant of the borrower company i.e respondent No. 2 since March, 1995 paying rent @ Rs. 5,000/- p.m excluding water and electricity charges and a written Rent Agreement was executed in this regard. At the time of taking the premises on rent, respondent No. 10 also paid a sum of Rs. 5.00 lacs as refundable security to the landlord-respondent No. 2 vide cheque No. 549117 dated 29.3.1995, a copy whereof is annexed herewith as Annexure R-10/1. Further as respondent No. 10 wanted the factory premises as per its need and requirement for manufacturing of PVC pipes, compounds, machines and trading of PVC raw material and in this regard wanted substantial additions, alterations and improvement in the tenanted premises, hence, respondent No. 10 further paid a sum of Rs. 2.00 lacs vide cheque No. 097245 and Rs. 1.00 lac vide cheque No. 097247 dated 19.5.1995 and Rs. 50,000/- vide cheque No. 462988 dated 27.5.1995 to landlord respondent No. 2. The aforesaid payment was made for making substantial additions, alterations and improvements in the tenanted premises and it was agreed that the rent of Rs. 5,000/- p.m would be adjusted from the said payment and the balance would carry interest @ 18% p.a (compounded). The letter of respondent No. 2 in this regard is also annexed herewith as Annexure R-10/2.”
“At this stage, respondent No. 10 is unable to produce the copy of rent agreement, rent receipts and other tenancy-related documents as they are lying in the tenanted premises, which is in illegal occupation of the appellant. However, the certificate from the Bankers of respondent No. 10 certifying the payments made to respondent No. 2 vide various cheques towards security deposit, advance payment of rent, etc. shall be filed on the next date as being old record is under process of the Bank.”
9. The Tribunal below mentioned in para No. 21 of the impugned order that the case of the respondent No. 10 was that the rent agreement had lost during its forcible dispossession from the property in question. In any case, the case put forth by the respondent No. 10 is a clear indicator that the tenancy agreement was not a registered document. Had it been otherwise, respondent No. 10 could have easily obtained a certified copy of the same from the registration office and filed it.
10. Obviously, the central question for decision in appeal is as to whether the alleged tenancy of respondent No. 10 in respect of the disputed property is entitled to be protected and it has a right to maintain its possession as ordered by the Tribunal below.
11. I have carefully perused the written submissions put forth by the learned Counsel for respondent No. 10, though belatedly. The respondent has conveniently side tracked the principal question aforesaid which awaits adjudication. Instead, it has harped on the side story that though it was a tenant in the said property, it was forcibly dispossessed on 11.12.2004; no inventory was prepared; the Recovery Officer recorded finding in its favour under order dated 22.2.2005; it has every right to maintain its possession; it was delivered back the possession of the property under orders of the Recovery Officer on 24.2.2005, but the auction purchaser again trespassed on 25.2.2005; the DRT was pleased to pass an order to appoint a Court Receiver on 10.11.2006 to take over the possession of the property in question and after passing of the impugned order dated 10.4.2007, it has again been put back into possession on 25.4.2007 and since then it is in possession of the property in question in terms of the direction of the DRT.
12. I have given my anxious consideration to the respective contentions of the appellant and the so-called tenant-respondent No. 10. The record has been carefully perused. Doubtless it is that the fate of the appeal depends on the answer to the crucial question as to whether the alleged tenancy of respondent No. 10 deserves to be protected as per the law of the land and it has right to maintain possession over the property in question in such alleged capacity of tenant. It is apt to observe that the RDDBFI Act is a special statute providing summary procedure for the recovery of debts due to Banks and financial institutions and for related matters. The scheme provided under the Act is efficient, effective, sound and significant. The remand of a matter by an appellate Court should be avoided unless it is inevitable as per the command of justice. I am firmly of the view that before the DRT the question involved was of a legal nature which could well be decided by the Tribunal below and there was no need to remand the case to the lowest rung of statutory mechanism of adjudication contained in the RDDBFI Act, i.e at the level of Recovery Officer and then first appeal before the DRT, second appeal before the DRAT, etc. In other words, a fresh round of the litigation from the lowest rung upwards was not at all necessary. The succeeding discussion would render the picture crystal clear exposing the hollowness of the claim of the respondent No. 10.
13. It has been the case of the respondent No. 10 before the Tribunal below (vide para 10 of the impugned order) that it was not challenging the sale proceedings. It was simply claiming the possession as tenant in the property in question since 1995. It is a ground reality that no lease deed has come forth from the side of the respondent No. 10. Rather, the factum that certified copy of the lease deed could not be filed after obtaining it from the registration office shows that the lease deed, if any, was an unregistered document. The creation of an equitable mortgage by the borrower-respondents 2 to 9 in favour of respondent No. 1 is an undisputed fact. Such equitable mortgage was created by respondent Nos. 2 to 9 in favour of respondent No. 1 by deposit of title deed in respect of the property in question on 25.6.1988
14. Section 58(0 of the Transfer of Property Act deals with mortgage by deposit of title deeds. Section 65A of the Transfer of Property Act deals with the mortgagor's power to lease. It reads as under:
“65A. Mortgagor's power to lease.—(1) Subject to the provisions of Subsection (2), a mortgagor, while lawfully in possession of the mortgaged property, shall have power to make leases thereof which shall be binding on the mortgagee.
(2)(a) Every such lease shall be such as would be made in the ordinary course of management of the property concerned, and in accordance with any local law, custom or usage.
(b) Every such lease shall reserve the best rent that can reasonably be obtained, and no premium shall be paid or promised and no rent shall be payable in advance.
(c) No such lease shall contain a covenant for renewal.
(d) Every such lease shall take effect from a date not later than six months from the date on which it is made.
(e) In the case of lease of buildings, whether leased with or without the land on which they stand, the duration of the lease shall in no case exceed three years, and the lease shall contain a covenant for payment of the rent and a condition of re-entry on the rent not being paid within a time therein specified.
(3) The provisions of Sub-section (1) apply only if and as far as a contrary intention is not expressed in the mortgage-deed; and the provisions of Sub-section (2) may be varied or extended by the mortgage-deed and, as so varied and extended, shall, as far as may be, operate in like manner and with all like incidents, effects and consequences, as if such variations or extensions were contained in that sub-section.”
15. It would be noted that while lawfully in possession of the mortgaged property, the mortgagor, has power to make lease which would be binding on the mortgagee, but the same is subject to certain conditions. Some of the conditions, as mentioned in Sub-clause (2) of Section 65A of the Transfer of Property Act reproduced above, are that no such lease shall contain covenant for renewal. In case of lease of building, whether leased with or without the land on which they stand, the duration of the lease shall in no case exceed three years. Of course, the conditions may be varied and extended by the mortgage deed. In the case at hand, no mortgage deed was executed and the mortgage was simply an equitable mortgage created by deposit of title deed. Therefore, the question of varying any condition as contained in Section 65A of the Transfer of Property Act did not arise at all.
16. The Hon'ble Apex Court has held as under in the case of United Bank of India Ltd. v. Lekharam Sonaram and Co., AIR 1965 SC 1591 (V 52 C 272):
“When the debtor deposits with the creditor title deeds of his property with an intent to create a security the law implies a contract between the parties to create a mortgage and no registered instrument is required under Section 59 as in other classes of mortgage. It is essential to bear in mind that the essence of a mortgage by deposit of title deeds is the actual handing over by a borrower to the lender of documents of title to immovable property with the intention that those documents shall constitute a security which will enable the creditor ultimately to recover the money which he has lent. But if the parties choose to reduce the contract to writing, this implication of law is excluded by their express bargain, and the document will be the sole evidence of its terms. In such a case the deposit and the document both form integral parts of the transaction and are essential ingredients in the creation of the mortgage. It follows that in such a case the document which constitutes the bargain regarding security requires registration under Section 17 of the Indian Registration Act, 1908, as a non-testamentary instrument creating an interest in immovable property, where the value of such property is one hundred rupees and upwards. If a document of this character is not registered it cannot be used in evidence at all and the transaction itself cannot be proved by oral evidence either.”
17. In the present case, Clause 10(k) of the loan agreement dated 25.6.1988 (pages 142 to 149 of the paper book of the appeal) that came to be filed before the Tribunal below could not be relied upon by the appellant in support of the contention that the borrowers had agreed not to enter into any lease arrangement during the currency of loan. This document was liable to be ignored and the matter deserved and deserves to be examined de hors of it. The reason is that it is not a registered document. It could be relevant between the creditor and the debtor as to the other terms of loan, but its term No. 10(k) could not be pressed into service to say that the borrowers had agreed not to lease out the mortgaged property without the written consent of the Bank (creditor). Therefore, there could be no question of this document being examined by the Recovery Officer. It is not a memorandum about the borrowers having delivered and deposited the title deed with the respondent No. 1 with intent to create security by way of equitable mortgage. The memorandum of acknowledgement of creation of equitable mortgage actually was the letter dated 26.6.1988 issued by the borrowers to the Bank. Thereby the creation of equitable mortgage on 25.6.1988 in favour of the Bank in respect of the property in question to secure the credit facilities taken by them was acknowledged.
18. It is a fact that the equitable mortgage by deposit of title deeds was created by respondents 2 to 9 in favour of the respondent No. 1 on 25.6.1988 The case of the respondent No. 10 is that it came in legal possession of the property as tenant of the borrower in March 1995. It may be stated at the risk of repetition that no lease deed came to be filed and it is abundantly clear that the lease deed, if any, was not a registered document. A lease of immovable property from year-to-year, or for any term exceeding one year, or reserving a yearly rent has to be compulsorily registered as per Section 17(1)(d) of the Registration Act. The respondent No. 10 did not say that its alleged lease was for any definite period, meaning thereby that its alleged lease was for an indefinite period. The outer limit of duration of lease of the mortgaged property as per Section 65A of the Transfer of Property Act could be three years. The so-called lease by the borrowers in favour of respondent No. 10 for an indefinite period had not been registered and it could not be accepted to be a valid lease keeping in view the provisions of Section 65A(2)(e) of the Transfer of Property Act as also Section 17(1)(d) of the Registration Act. The alleged lease or tenancy in favour of respondent No. 10 had no legal sanctity at all. When a lease is executed in contravention of Section 65A of the Transfer of Property Act and Section 17(1)(d) of the Registration Act, it has to be held to be invalid.
19. The Hon'ble Delhi High Court in the case of Sanjeev Bansal… v. Oman International Bank Saog & Anr.…, 131 (2006) DLT 729 (DB), held that Section 65A of the Transfer of Property Act deals with the power of the mortgagor to lease-the mortgaged property. This power of mortgagor is not unfettered but has been conditioned under Sub-sections 1, 2 and 3 of Section 65A of the Transfer of Property Act. Dealing with the case under decision, the Hon'ble High Court ruled as under:
“Manifestly the said unregistered lease was created for the alleged unlimited period through unregistered lease deed in complete contravention of Section 65A of the Transfer of Property Act. As per the said provision of section 65a, the lessee can enjoy the protection if the lease is created by the mortgagor in conformity with the mandate of requirements laid down in section 65a of tp act and not otherwise. Neither the mortgagor nor the lessee can defeat the right of mortgagee and no lessee can claim any protection unless his tenancy is as per the requirements of Section 65A of Transfer of Property Act. The present petition is devoid of any merits. We would not like to interfere in the orders passed by the DRAT.”
20. It should be stated for clarity that the petitioner Sanjeev Bansal had filed the writ petition aforesaid against an order of this Tribunal, dated 25.7.2006, in Miscellaneous Appeal No. 169/2005. The principal contention raised by the petitioner was that he being a tenant and in physical possession of the entire first floor of the property in question by virtue of a lease deed dated 15.5.2001, duly executed by the principal borrower and mortgagor of the property, was fully protected under the provisions of Delhi Rent Control Act and could not be dispossessed without taking recourse to the provisions of the Delhi Rent Control Act. The principal borrower had availed of some loans from Oman International Bank after mortgaging the flat in question in favour of the Bank by executing a memorandum of mortgage dated 4.2.1999 On the failure of the borrower to pay back the loan, the Bank had resorted to recovery proceedings and the petitioner claimed to be a tenant of the entire first floor by virtue of lease deed executed by the principal borrower and mortgagor for an indefinite period, which was an unregistered document.
21. Had the respondent No. 10 claimed tenancy through a registered lease deed as envisaged by Section 17(1)(d) of the Registration Act, the life of the lease could not go beyond three years reckoned from March 1995 when the tenancy allegedly started. It is beyond comprehension as to how the respondent No. 10, on the basis of alleged tenancy starting in March 1995 could claim protection as tenant and the right to possess the property in question even in 2004 when the appellant/auction purchaser purchased the property in public auction.
22. At times, imagination is the mother of truth. In the present case, respondent Nos. 2 to 9 borrowers/mortgagors did not come forward at all. There is strong possibility that they and respondent No. 10 are in collusion and respondent No. 10 is their stooge set up to create unnecessary complication and to deprive the appellant from the enjoyment of the property purchased by it in public auction investing considerable amount of Rs. 55,00,100/-. On threadbare analysis, the stand of the respondent No. 10 claiming protection of its alleged tenancy docs not hold the ground at all. Its claim is wholly unfounded. It has no right to remain in possession of the property. The Tribunal below failed to make in-depth analysis of the matter and reached a faulty conclusion of remanding the matter to the Recovery Officer and directing the restoration of the possession from the Court Receiver to the respondent No. 10. The possession over the property in question must be restored back to the appellant/auction purchaser through an Advocate Commissioner.
23. In net conclusion, the appeal filed by the appellant/auction purchaser is hereby allowed. The impugned order dated 10.4.2007 passed by the Tribunal below is reversed, meaning thereby that the order dated 22.2.2005 passed by the Recovery Officer is set aside. It is held that the respondent No. 10 has no right whatsoever in respect of the property in question (No. 38/4, KM, Jakhoda, Near Bahadurgarh, Delhi-Rohtak Road, Haryana). The delivery of possession over this property by the Court Receiver to the respondent No. 10 is found to be illegal. It is directed that possession over the said property shall be delivered back to the appellant/auction purchaser through an Advocate Commissioner. The matter shall be listed before the Recovery Officer concerned on 1.8.2008 for immediately causing the possession over the property in question to be delivered to the appellant/auction purchaser through an Advocate Commissioner who shall be authorized to take police aid, if necessary. The Recovery Officer shall fix reasonable fee and travelling expenses to be paid to the Advocate Commissioner which shall be borne by the appellant/auction purchaser.
24. Copy of this order be supplied to the parties and be also sent to the Tribunal below.
Appeal allowed.