Bank Of India vs Preeti Singhal

P.K. Bhasin, J

The appellant Bank is aggrieved by the order dated 5.5.2016 of Debts Recovery Tribunal-II, Delhi ('DRT' in short) whereby the Securitisation Application No. T.S.A. 73 of 2015 filed by the respondent herein under Section 17(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act' in short) has been allowed and its measures taken under Section 13(4) of the said Act to recover possession of its secured asset from one Prem Kumar Gupta, proprietor of S.P. Enterprises, to which firm it had given a cash credit limit of Rs. 20 lacs in the year 2004 have been set aside with the consequence that it cannot recover its loan amount from the said borrower by selling the property which he had allegedly mortgaged with it while availing of the cash credit facility to secure its repayment. The impugned order gives the relevant facts of the case and so the same is reproduced hereunder:

"1. This securitization application is filed by the applicant under Section 17 of the SARFAESI Act challenging the possession notice dated 28.7.2006, issued by the respondent Bank under Section 13(4) of the SARFAESI Act and the case of the applicant as seen from the application averments is as follows:

The applicant submits that the respondent Bank dishonestly, illegally, arbitrarily and highhandedly is proceeding with sale of the property of the applicant by auction as a measure taken under Section 13(4) of the SARFAESI Act despite the applicant provided ample proof to the authorized officer of the respondent Bank that she is the owner of the property covered under Section 13(4) notice i.e. third floor (back side portion) A-15, Priyadarshini Vihar, Delhi-110092. She submitted that she had purchased the property from Sh. Hitesh Jain and the sale deed dated 24.11.2005 which was duly registered with the Registrar of Assurances vide document No. 14632 in Block No. 1 Volume No. 2066 at pages 183 to 191 and the respondent Bank fraudulently and illegally got mortgaged the said property. The applicant further submits that her vendor Sh. Hitesh Jain in turn purchased the property from Sh. Rakesh Kumar Jain and Mukesh Kumar Jain vide sale deed dated 15.4.2005, registered vide document No. 5316 in book No. 1, Volume No. 1713 at pages 144 to 151. Sh. Rakesh Kumar Jain and Mukesh Kumar Jain purchased the property from Sh. Prem Kumar Gupta vide sale deed dated 28.12.2004 duly registered vide document No. 760 in Book No. 1, Volume No. 1126 at pages 178 to 185.

The applicant further submits that Sh. Prem Kumar Gupta who sold the property to Sh. Rakesh Kumar Jain and Mukesh Kumar Jain on 28.1.2004 mortgaged the alleged property in the month of March, 2004 and the alleged mortgage is invalid and not binding on the security applicant. Since Prem Kumar Gupta left with no right, title and interest on the property in question and he should not have created mortgage in favour of the respondent Bank and mortgage if any created by Prem Kumar Gupta is honest and liable to be declared as void and it is legally not enforceable and any action taken by the respondent Bank in pursuance of alleged mortgage is also not valid.

The security applicant filed this securitization application to declare the action of the respondent Bank in taking recourse to the provisions of SARFAESI Act in respect of property of the applicant as illegal, void and quash the same including the auction proposed to be held on 3.4.2008 and hence the S.A.

The respondent Bank resisted the claim of the security applicant by filing reply contending inter alia that the application filed by the security applicant is liable to be dismissed in limine as Prem Kumar Gupta as Proprietor of M/s. S.P. Enterprises had mortgaged the property in question with the respondent Bank on 10.3.2004 and created a charge over the said property while availing a cash credit facility with a limit of Rs. 20.00 lacs and the application is liable to be dismissed in terms of order dated 6.11.2008 as Tribunal directed to implead Prem Kumar Gupta as respondent as proper and necessary party and further ordered that Flat No. 27, Sector 9 Bhagirathi Apartment, Rohini, Delhi where the said Sh. Prem Kumar Gupta is residing shall remain under attachment under the symbolic possession of the authorized officer of the respondent Bank.

The respondent Bank further submits that it filed an OA No. 34/2007 against M/s. S.P. Enterprises and one Sh. Raman Gupta was impleaded as defendant No. 3 who stood as guarantor and Prem Kumar Gupta as Proprietor of M/s. S.P. Enterprises mortgaged his property being rear portion of flat at 3rd floor of property No. A-15, American Embassy Cooperative House Building Society, Priyadarshni Vihar, Delhi-110092 with roof rights in favour of respondent Bank on 10.3.2004 for repayment of the remaining amount and the Bank on default issued notice dated 7.3.2006 under Section 13(2) of SARFAESI Act and the application filed by the security applicant is liable to be dismissed. The respondent Bank denied the contra allegation of the security applicant and the respondent Bank submits that the SA is liable to be dismissed.

During the inquiry the security applicant examined herself as AW. 1 marking AW 1/1 to AW 1/4 and against the same the respondent Bank examined RW1 marking RW1/1 to RW1/3.

On conclusion of the inquiry now the point for consideration before this Tribunal is whether the security applicant is entitled to relief as prayed for and the action of the respondent Bank taken under Section 13(4) of the SARFAESI Act against the property in question i.e. back side portion on third floor, area measuring 360 sq. yards situated in the lay out plan of American Embassy Co-operative House Building Society Ltd., Colony known as Priyadarshini Vihar, Delhi-110092 be declared as arbitrary, illegal and void?

To prove her case the security applicant herself examined as AW1/1 to AW1/4. She marked Exhibit AW1/1 which is the sale deed dated 24.11.2005 executed by Sh. Hitesh Jain in respect of the property in dispute which is the registered sale deed. She further exhibited AW. 1/2 i.e. the sole deed of her vendor Sh. Hitesh Jain who purchased this property from Prem Kumar Gupta and Rakesh Kumar Jain under the registered sale deed dated 15.4.2005. She further exhibited registered sale deed dated 28.1.2004, AW. 1/3, executed in favour of Rakesh Kumar Jain and Mukesh Kumar Jain by Sh. Prem Kumar Gupta. She further exhibited the notice of sale of the immovable property as A W. 1/4 published by the respondent Bank.

As against the evidence of security applicant the respondent Bank examined RW. 1 and marked loan documents as RW. 1/1 (colly) copies of various documents filed by the respondent Bank as applicant in OA No. 34/2007, RW. 1/2 copy of OA No. 34/2007 and RW. 1/3 (colly) the notice under Section 13(2) of the SARFAESI Act, in support of its claim.

In the present case there is no dispute as to identity of the property is concerned. Both security applicant as well as the respondent Bank claim that the property is A-15, Priyadarshni Vihar, Delhi-110092 (3rd Floor bock side portion). Further it is not in dispute that originally the property belonged to Mr. A.S. Kalra who sold the same to Sh. Prem Kumar Gupta under sale deed dated 30.6.2001, registered vide documents No. 2660 in Book No. 1, Volume No. 471 at pages 1 to 10. Further it is not seriously disputed by the respondent Bank that Sh. Prem Kumar Gupta, the borrower in OA No. 342/2007, executed registered sale deed dated 28.1.2004 under registered sale deed to Sh. Rakesh Kumar Jain and Sh. Mukesh Kumar Jain who purchased the property from Sh. Prem Kumar Gupta in turn selling the property under registered sale deed dated 24.11.2005 from Sh. Hitesh Jain. Now the crucial question for determination is whether Sh. Prem Kumar Gupta having sold the property to Sh. Rakesh Kumar Jain and Mukesh Kumar Jain by virtue of sale deed 28.1.2004 is entitled to mortgage the same to respondent No. 1 Bank.

It is a settled proposition of law that no one can convey a better title than 'what he had'. Further the maxim nemo dat quod non habet provides that Prem Kumar Gupta who sold the property to Rakesh Kumar Jain and Mukesh Kumar Jain divested all his right by executing sale deed 28.1.2004. Thereafter if any mortgage is created by Prem Kumar Gupta the same is not valid and binding on the vendor after 28.1.2004. It seems that Prem Kumar Gupta played fraud on the respondent Bank by mortgaging the property, already sold to Rakesh Kumar Jain and Mukesh Kumar Jain on 28.1.2004 on 10.3.2004. Thus, Prem Kumar Gupta played fraud on the respondent Bank and mortgaged the property already sold. Thus, Prem Kumar Gupta cannot transfer any interest in respect of the property in dispute i.e. third floor, area measuring 360 sq. yards situated in the lay out plan of American Embassy Co-operative House Building Society Ltd., Colony known as Priyadarshini Vihar, Delhi-110092, once he sold the same on 28.1.2004 and any mortgage created in favour of respondent Bank is not a valid mortgage. Thus, I am of the opinion that the mortgage created by Sh. Prem Kumar Gupta in favour of the respondent Bank is not valid and building on the successors as Prem Kumar Gupta has already sold the property on 28.1.2004.

I am of the opinion that the security applicant established the case to declare that the proceedings initiated by the respondent Bank under Section 13(2) and 13(4) of the SARFAESI Act is not valid and binding on the security applicant and accordingly the SA is allowed setting aside the proceedings initiated by the respondent Bank in respect of the property 3rd Floor (back side portion) of A-15, Priyadarshini Vihar, Delhi-110092 as by the deed of mortgage Sh. Prem Kumar Gupta has no interest in the property. Accordingly the SA is allowed setting aside the proceedings initiated by the respondent Bank in respect of the property in question i.e. 3rd Floor (back side portion) of A-15, Priyadarshini Vihar, Delhi-110092 under Sections 12(2) and 13(4) of the SARFAESI Act.

Sd/-

PRESIDING OFFICER

DRT-II, DELHI"

From this order of the DRT it becomes evident and which position was not disputed also from either side during the course of arguments that the property in dispute i.e. back side portion of third floor of property No. A-16, Priyadarshini Vihar, Delhi-110092, over which the appellant Bank is claiming right as a mortgagee and respondent is claiming right of ownership, originally was owned by one Prem Kumar Gupta, who is the borrower of the appellant Bank. As per the case of the appellant Bank the said Prem Kumar Gupta had mortgaged the said property in favour of the Bank on 10.3.2004 to secure the repayment of outstanding amount in the cash credit account of his proprietorship Firm, by deposit of title deed in his name. Since the borrower failed to repay the outstanding amount in the cash credit account despite service of notice under Section 13(2) of SARFAESI Act the Bank sought to take symbolic possession of the mortgaged property by invoking Section 13(4) of the said Act on 28.7.2006 and then in April, 2008 property was proposed to be auctioned. At that stage the respondent filed a petition under Section 17(1) of the SARFAESI Act claiming herself to be the owner of the property which was being sought to be taken over by the appellant Bank as its mortgagee. That petition has been accepted by the DRT vide impugned order notices under Section 13(2) and the possession notice have been quashed.

Learned Counsel for the appellant Bank had simply submitted before this Tribunal that since the original sale deed in favour of the mortgagor Prem Kumar Gupta was deposited with the Bank to create equitable mortgage the sale deed allegedly executed by Prem Kumar Gupta in favour of S/Sh. Rakesh Kumar Jain and Mukesh Kumar Jain on 28.1.2004 and then the subsequent sale deed allegedly executed by S/Sh. Rakesh Kumar Jain and Mukesh Kumar Jain in favour of one Sh. Hitesh Jain, from whom respondent claims to have finally purchased the property in question, cannot confer any ownership rights on these persons including the respondent. It was, however, not claimed by the Counsel for the Bank before this Tribunal or before the DRT in reply to the respondent's S.A. that the sale deeds purporting to have been executed by the borrower Prem Kumar Gupta in favour of S/Shri Rakesh Kumar Jain and Mukesh Kumar Jain and then by them in favour of Shri Hitesh Jain were forged and fabricated documents.

The learned DRT has while accepting the respondent's S.A. come to the conclusion that after the execution of sale deed by Prem Kumar Gupta, borrower, on 28.1.2004 in favour of S/Sh. Rakesh Kumar Jain and Mukesh Kumar Jain, he was left with no right or interest in the property in question and consequently he could not have created any mortgage in respect thereof in favour of the appellant Bank. In my view, no fault can be found with this conclusion arrived at by the learned Presiding Officer of DRT.

Section 54 of the Transfer of Property Act which defines 'sale' reads as under:

"54. Sale is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.

Sale how made: Such transfer, in the case of tangible immovable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument.

In the case of tangible immovable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property.

Delivery of tangible immovable property takes place when the seller places the buyer, or such person as he directs, in possession of the property.

Contract for sale: A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties.

It does not, of itself, create any interest in or charge on such property."

It is clear from a bare reading of Section 54 of the Transfer of Property Act that to bring into existence valid sale of an immovable property it is not required that the seller must handover the original title deed in his own favour to the prospective buyer. The sale becomes complete once a sale deed is executed by the owner of immovable property in favour of some buyer and that sale has to be for a consideration, either paid or even promised to be paid, by a registered sale deed in case the value of the property is more than Rs. 100/-. In case delivery of the title deed by the vendor to the prospective vendee was to be a condition for the transfer of right of ownership in favour of vendee the legislature would have stated so in Section 54 of the Transfer of Property itself but that was not so provided in the definition of 'sale'. Therefore, the learned DRT has rightly concluded that the borrower Prem Kumar Gupta was left with no right or interest in the property in question after having executed the registered sale deed on 28.1.2004 in favour of S/Shri Rakesh Kumar Jain and Mukesh Kumar Jain and, consequently, he could not have mortgaged the property in question in favour of the Bank on 10.3.2004. It was for the Bank to have carried out due diligence before advancing credit facility to the borrower to verify if he was the owner of the property proposed to be mortgaged. That does not appear to have been done since if that had been done it would have been revealed that the property in question had already been sold by the borrower. In view of the foregoing conclusion arrived at by me, this appeal deserves to be dismissed and is accordingly dismissed.