Bank of Baroda vs M/s. Shalimar Exhibitors

Ashok Menon, Chairperson

The Appellant Bank of Baroda (formerly Dena Bank) is in appeal aggrieved by the interlocutory order dated 29.01.2019 in Interlocutory Application (I.A.) No. 112 of 2019 (Exhibit 7) in Securitisation Application (S.A.) No. 43 of 2019 on the files of the Debts Recovery Tribunal-II (D.R.T.).

The facts as required for the disposal of this appeal in brief can be summarised thus:

The Respondent is a firm represented by its partner and had filed the aforesaid S.A. challenging the Sarfaesi action taken by the Appellant for recovery of debt due under the provisions of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (“SARFAESI Act”, for short).

M/s Hanjer Biotech Energies Private Limited (in liquidation) had borrowed money from the Appellant bank as per the sanction letter dated 04.06.2012 for ₹100 crores. To secure the said loan, the Applicant/Respondent had allegedly created a mortgage concerning the subject property consisting of 28 rooms including 23 guest rooms, a linen room, a storeroom, the waiting lounge, the reception area, the entrance lobby totally measuring 5500 ft² and two shops measuring 36.42 m² and 26.53 m² respectively situated at Shalimar House, Grant Road, Mumbai, and a registered simple mortgage deed was allegedly executed on 27.06.2012.

The borrower defaulted repayment of the loan resulting in the account being classified as a non-performing asset (NPA) with effect from 31.10.2013. A demand notice was issued under section 13 (2) of the SARFAESI Act on 16.12.2014. There was no response and the authorised officer of the bank took symbolic possession of the secured assets on 04.03.2015.

The Appellant thereafter obtained an order under section 14 of the SARFAESI Act to take physical possession of the secured asset from the court of the Chief Metropolitan Magistrate on 06.06.2015. The Respondent filed a Writ Petition (L) No. 862 of 2016 before the High Court of Bombay challenging the order of the Chief Metropolitan Magistrate (CMM). The Hon’ble High Court dismissed the said Writ Petition vide order dated 13.10.2016.

The Respondent challenged the Sarfaesi action by filing the aforesaid S.A. No. 43 of 2019 before the D.R.T. raising various challenges against the measures taken by the Appellant bank under the provisions of the SARFAESI Act.

Pending consideration of the aforesaid S.A., the Applicant filed Interlocutory Application (I.A.) No. 112 of 2019 seeking interim measures as follows:

i. That  this  Hon’ble  Tribunal  be  pleased  to  restrain Respondent bank and Advocate Commissioner, its officers, servants, agents, assigns and successors in office from in any manner taking steps towards taking physical possession of the said property or any part thereof without following due process of law, pending the hearing and final disposal of the present Securitisation Application;

ii. That, pending final hearing and disposal of present S.A. Respondent bank be directed to restore physical possession of 5 guest rooms forthwith which are over and above 23 guest rooms;

iii. That, this Hon’ble Tribunal may direct Respondent its officers, servants, agents, assigns and successors in office to maintain the status quo in respect of said property till disposal of the present Securitisation Application;

iv. That, pending the hearing and final disposal of the present S.A. this Hon’ble Tribunal may be pleased to appoint a panel Valuer or Architect to do measurement of the ground floor and verify how much area Respondent bank has sealed and also filed a report to that effect before this Hon’ble Tribunal;

v. For ad interim reliefs in terms of prayers (a) to (d) above;

vi. For such further and other reliefs as this Hon’ble Tribunal may deem fit and proper to the facts and circumstances of the present case.

After hearing both sides, vide the impugned order, the I.A. was allowed on an altogether different ground. It was argued by the counsel appearing for the Applicant that the mortgage itself is invalid and illegal for non-compliance with the mandatory provisions under section 59 of the Transfer of Property Act. It was urged that the registered deed of simple mortgage dated 27.06.2012 relied upon by the bank was executed without two attesting witnesses. Hence, I.A. 112 of 2019 was disposed of with a direction to the Respondent bank to rectify the registered mortgagor deed within 45 days from the date of order. The Appellant is aggrieved and hence in appeal.

The most important point that arises for consideration in this appeal is that there are no pleadings challenging the mortgage in favour of the bank. Rather, the existence of a mortgage is admitted. The main contention that was raised in the S.A. and also in I.A. 112 of 2019 was that the Respondent bank is claiming more extent of property than what is mortgaged. The specific prayer in the I.A. was also to restrain the bank from taking possession of the excess property. The rooms which have been taken possession of were sought to be reclaimed and restored.

It is surprising that the Ld. Presiding Officer has granted relief which was never sought for, and that too at an interlocutory stage. The Ld. Counsel appearing for the Respondent would contend that the validity of a mortgage is a question of law and hence can be argued even without specific pleadings.

The history of the events in this case is interesting and intriguing. One Mr Abdulla Hassan Aboo alias M A Abdulla claiming to be a tenant in possession had filed a Writ Petition (L) No. 1834 of 2015 before the Bombay High Court challenging the order of the CMM under Sec. 14 of the SARFAESI Act ordering the taking over of physical possession of the property by the bank. Though no objection was raised concerning the mortgage, he claims to have possession of a part of the property which was allegedly mortgaged, since 19.12.2003 and therefore, sought protection of his possession over the property. The writ petition was disposed of vide order dated 08.09.2015. The said person approached the Hon’ble Supreme Court, which also proved futile.

Thereafter, one Nazim Mohammed A Furniturewala claiming to be one of the partners of the Respondent firm filed S.A. No. 115 of 2015 before Debts Recovery Tribunal-III, Mumbai for protection against the Sarfaesi action contending that he as partner had not consented to the creation of the mortgage. The interim relief sought was rejected vide order dated 22.03.2016. Nazim filed Writ Petition (L) No. 9038 of 2016 before the Bombay High Court challenging the aforesaid order. The Hon’ble High Court disposed of the writ directing the DRAT to consider the appeal on merits. Nazim’s Misc. Appeal No. 320 of 2016 before this Tribunal was dismissed vide order dated 12.09.2016. He filed Writ Petition No. 13123 of 2016 before the Bombay High Court which too was dismissed on 28.04.2017.

The Respondent firm represented by Imran Furniturewala as the managing partner approached the Hon’ble High Court of Bombay seeking to quash the Sarfaesi action taken by the bank as also the order of the CMM under Sec. 14. Finding that the writ petition is a gross abuse of the process of the court by the mortgagor, it was dismissed on 13.10.2016.

Abdulla Hassan filed RAD Suit No. 135 of 2016 before the Court of Small Causes at Bombay to declare his tenancy right on the premises and sought a temporary injunction against the Respondent as well as the bank to restrain his dispossession from the premises. The application was rejected by the Small Causes Court on 21.03.2016. Abdulla filed an appeal as Misc. Appeal No. 435 of 2016 challenging the order of the trial court in futility. The appeal was dismissed with costs.

The Respondent firm thereafter filed the present S.A. No. 43 of 2019 and also the I.A. referred to above. The impugned order was passed by the Ld. Presiding Officer in the I.A., though there was no such relief sought.

A reading of the S.A. filed by the Respondent as well as I.A. No.112 of 2019 indicates that there is not a scintilla of pleadings challenging the validity of the simple mortgage deed admittedly executed by the Respondent firm in favour of the bank. The Ld. Presiding Officer has neither considered nor granted any reliefs sought in the I.A. The finding of the Ld. Presiding Officer was completely extraneous to the pleading or the relief sought. The Ld. Counsel appearing for the Respondent Mr Dinesh Purandare has fervently argued that the validity of the mortgage is essential for the maintainability of the measures taken under the SARFAESI Act. Hence, it is a question of law which could be addressed even without any specific pleadings.

In all the proceedings referred to above, the Respondent firm admits the creation of the mortgage. The firm was made a party to all the litigations referred to. The only objection concerning the action taken by the bank was about an excess property being proceeded against. Mr Purandare has relied on a catena of decisions in support of his argument regarding the validity of the mortgage. I am afraid that this is not the opportune time to find the infirmity of the mortgage deed. The decisions are not therefore relevant.

The Respondent has attempted to thwart the Sarfaesi measures taken by the bank for the recovery of the debt. A person named Abdulla was the first to challenge the Sarfaesi action by claiming that he was a tenant. But when he failed to get any favourable orders, one of the partners of the Respondent firm namely Nazim Furtinurewala came forward to challenge the action taken by the bank. He too failed and presently the Respondent represented by Imran Furniturewala is attempting to scuttle the recovery proceedings.

The SARFAESI Act was implemented for a speedy recovery of public money due to the banks and financial institutions. In the instant case, the Appellant has been striving to recover the amount for more than a decade. The Ld. Presiding Officer was completely misled in passing the impugned order.

As a result, the appeal is allowed and the impugned order is set aside. The Ld. Presiding Officer is directed to expedite the disposal of the S.A. on its merits.