Central Bank Of India vs Raj Kumar Arora And Ors

The appellant Bank has filed this appeal against the final order dated 6th January, 2018 passed by the learned DRT in the Original Application(O.A.) filed by Union Bank of India, respondent no.5herein, under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act,1993. The appellant was not a party in that O.A. of Union Bank of India. Vide impugned order dated 6th January,2018 the learned DRT had issued a Recovery Certificate for a sum of Rs.21,66,900/- with interest against the defendants in the O.A. who are respondents 1 to 4 herein. It was also ordered that in case of default in payment of the decretal amount by these defendants the same could be recovered by selling mortgaged property no.being Flat No. B-8/SL-6, Second Floor with roof rights, Dilshad Garden-I Dilshad Colony in the area of village JhilmilTahirpur, IllaqaShahadara, Delhi-110095(hereinafter to be referred as 'the property in question'). The appellant's grievance is that the said property in question was mortgaged in its favour by its borrower while taking loan from it and, therefore, the same cannot be sold in execution of the recovery certificate issued by the DRT in the O.A. of Union Bank of India(O.A.No. 547/2013) since the appellant Bank was the prior mortgagee of the property in question as it had extended loan to its borrower in the year 2011 while the Union Bank of India claimed to have extended loan to its borrower in the year 2012 repayment of which loan was secured by its borrower by mortgage of the aforesaid property in question which was equitably mortgaged in favour of the appellant Bank in the year 2011.

Order dated06.01.2018 passed by the Tribunal below against which this appeal has been preferred is re-produced below:-

"1. This original application has been filed by the applicant bank, on 05.04.2013 Mr. Roop Chand Raghav, Manager Duly Constituted General Attorney of the applicant bank, under Section 19 of the Recovery of Debts Due to Banks and Financial Institution Act, 1993 against the defendants for recovery of a sum of Rs.21,66,900/-(Rupees Twenty-One Lacs Sixty-Six Thousand and Nine Hundred Only) together with cost, charges and future interest at the rate of 11.5% from date of filing of this O.A. till the realization in full.

The brief facts of the case are that the defendant Nos.1 & 2 have approached the Applicant for grant of housing loan. Defendant Nos.1 & 2 agreed to join the loan documents as a Co-Obligant and at the request of the defendants the applicant bank sanctioned, on 29. 02.2012, House loan of Rs.19,76,000/- and the said loan was repayable in 240 equated monthly instalments of Rs.21,277/- and in order to avail the said loan facility the defendants executed loaning documents such as SD-11 Housing loan agreement, SD-01 Letter of Guarantee, SD-01 Letter of Guarantee, SD-21 Promissory Note I, Declaration and affidavit dated 29.02.2012.

The Defendant nos.1 & 2 also mortgaged his property namely entire Flat No.B-8.SL-6, on second floor with roof rights, built on plot no.B-8, out of Khasra No.1076/5/2/264, Dilshad Extension No.-I, colony known as Dilshad Colony, in the area of village JhilmilTahirpur, IllaqaShahdara, Delhi-110095 in favour of the applicant bank and deposited the original title deed of the property.

That after availing the aforesaid loan facilities from the applicant bank the defendants have failed to comply with the terms and conditions and despite of several requests and reminders, the defendants did not bother and neglected to regularise the loan account in spite of repeated assurances and promises made by the defendants and account has been classified as NPA on 30.09.2012. Thereafter, the applicant bank has issued the Recall notice dated 9. 02.2013 to defendants recalling the entire loan amount but no positive response was received from the defendants and ultimately the applicant bank has left with no alternative but to approach this Tribunal for recovery of the dues.

Notices of this O.A. were issued to the defendants and despite service even through publication the defendants have chosen to remain absent from the proceedings and proceeded ex-parte by this Tribunal.

The applicant bank lead its ex-parte evidence by filling the affidavit of evidence of ShriRajveer Singh, Senior Manager of the applicant bank who has proved the documents as AW-1/1 to AW-1/11. The witness AW-1 submitted that he is duly authorised to file, sign, verify, deposit and represent the case on behalf of the applicant bank vide Power of Attorney, which is proved as AW-1/1. He further proved the documents such as copy of Sanction Letter is exhibited as AW-1/2, SD-11 Housing loan agreement as AW-1/3, SD-01 Letter of Guarantee as AW-1/4, SD-01 Letter of Guarantee as AW-1/5, SD-21 Promissory Note I as AW-1/6, Declaration and affidavit dated 29.02.2012 as AW-1/7, Deposited the document of Title Deed is exhibited as PW-1/8, Defendant no.3 & 4 stood guarantor for repayment credit facility and letter of guarantee in favour of the applicant bank on 29.02.2012 which is exhibited as AW-1/9, copy of Recall Notice dated 09.02.2013 are exhibited as AW-1/10. He further proved statement of account as per banker' book of evidence act as AW1/11.

This witness has fully corroborated the averments made in the O.A. Even otherwise the whole case of the applicant bank is based on the documents and the witness has duly proved all these documents.

The evidence filed by the applicant bank gone unrebutted and there is no question of disbelieving the evidence lead by the applicant bank and applicant bank has proved its case beyond reasonable doubts.

In the light of the above discussions, the Original Application deserves to be allowed.

ORDER

(i) I allow this OA and direct the defendants no.1 to 4 to pay jointly and severally to the applicant bank, within 30 days, a sum of Rs.21,66,900/- (Rupees Twenty-One Lacs Sixty-Six Thousand and Nine Hundred Only) together with cost, charges and future interest at the rate of 11% simple from the date of filing of this O.A. till the date of realization; failing which the aforesaid amount shall be recovered from the sale of the mortgaged property namely entire flat No. B-8/SL-6, on second floor with roof rights, built on plot no.B-8, out of Khasra No.1076/5//2/64, Dilshad Extension No.1, colony known as Dilshad Colony, in the area of village JhilmilTahirpur, IllaqaShahdara, Delhi-110095. In case of shortfall the same shall be recovered from the sale of movable and immovable assets of the defendants no.1 to 4.

(ii) The recovery certificate be issued forthwith and be sent to the Recovery Officer, Debts Recovery Tribunal-III, Delhi.

(iii) Parties are directed to appear before the Recovery Officer, DRT-III, Delhi on 27.02.2018.

(iv) Copies of final order as well as Recovery Certificate be sent to all concerned free of cost."

The short question involved in this matter is what was the remedy available to the appellant Bank when the property which allegedly had been mortgaged in its favour by its borrower has been ordered to be sold in execution of the recovery certificate which Unon Bank of India has obtained against its borrower in its O.A. No.547/2013 in which the appellant was not impleaded as a party.

The answer to the said question is to be found in the Division Bench judgment of Bombay High Court dated 11th July,2006 in "Dr. Anil NandkishorTibrewala And ... vs Jammu And Kashmir Bank Ltd.", (reported in I (2007) BC 6, 2007 (3) Bom C R 941, 2006 133 Comp Cas 645). The relevant paras from this judgment are re-produced below:-

"2. The petitioners had moved the Debts Recovery Tribunal under the provisions of Section 19(25) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the RDB Act). The application which was filed on December 1, 2005, was numbered as Misc. Application No. 52 of 2005 for rectification/modification/correction of the order dated September 15, 2005. It is the case of the petitioners, that the matter was posted for orders on December 7, 2005, however, the Presiding Officer ceased to hold the office and no order was passed on the same.

We may now refer to a few facts:

Respondent No. 1 had taken out proceedings before the Debts Recovery Tribunal being O. A. No. 305 of 2002 by application dated September 18, 2002. Respondents Nos. 2 to 10 herein were the respondents before the Tribunal. By order dated September 15, 2004, the Debts Recovery Tribunal was pleased to allow the application which included a prayer that Flat No. 902 was validly mortgaged in favour of respondent No. 1, i.e., the Jammu and Kashmir Bank Ltd., and if there was failure to pay the amount to respondent No. 1, respondent No. 1 was entitled to sell the flat. Pursuant to the said order, the Recovery Officer issued recovery certificate dated October 29, 2004. On May 30, 2006, respondent No. 1 moved an application for enforcement of the recovery certificate for attachment of Flat No. 902 and, according to the petitioners, without any notice to them. By order of May 30, 2005, the learned Recovery Officer was pleased to allow the said application. The petitioners' application being Misc. Application No. 52 of 2005 came up for hearing on June 14, 2006. Oral application was made by the petitioners' advocate for stay of allotment of Flat No. 902. That application was neither considered nor granted, according to the petitioners. The matter was then adjourned to June 29, 2006. It is consequent to this that the present petition has been filed on June 26, 2006. The petitioners thereafter have also preferred an Appeal (L) No. 203 of 2006 before the Debts Recovery Tribunal challenging the order dated May 30, 2006, passed by the Recovery Officer.

On behalf of the petitioners, their learned Counsel submits that there is specific documentary evidence on record being the share certificates issued by the society, the receipts issued by the society and the electric bills of the flat, which would show that the petitioners had legal title to Flat No. 902. It is also pointed out that there are documents also before the Tribunal which would show that Flat No. 902 belongs to the petitioners. It is, therefore, set out that there is documentary evidence on record which would indicate that Flat No. 902 was of the ownership of the petitioners. ................................

On behalf of the petitioners, their learned Counsel further submits that the only remedy that is available with the petitioners considering that Debts Recovery Tribunal has granted a declaration that there is a valid mortgage, would be under Section 19(25) of the RDB Act, in the absence of any other specific provision. It is pointed out that provisions of Sections 20 and 30 of the RDB Act, would be no effective remedy nor Rule 5A of the Debts Recovery Tribunal (Procedure) Rules, 1993. It is also pointed out that the provisions of Section 29 of the RDB Act which make applicable the provisions of the Second and Third Schedules to the Income-tax Act, 1961, on the facts of this case also would not be available.

On the other hand, on behalf of the respondents their learned Counsel submits, that they have documents of mortgage in their favour and in these circumstances this Court ought not to entertain the petition as filed by the petitioners, but, dismiss the same.

In the instant case, the petitioners have filed Misc. Application No. 52 of 2005 for rectification/modification/correction of the order dated September 15, 2004, under Section 19(25) of the RDB Act. That application is still pending. In the meantime, pursuant to application made by the respondent-bank, an order has been passed on May 30, 2006, attaching flat No. 902. The petitioners have now also preferred an appeal on June 30, 2006, against the said order of attachment.

By the present petition, the relief sought for by the petitioners is for a direction against respondents Nos. 1 to 11, that they cannot proceed further in regard to petitioners flat No. 902 and to set aside, the order dated May 30, 2006. In so far as it pertains to flat No. 902. Ordinarily as the petitioners have preferred an appeal and if that was an effective remedy against the order of May 30, 2006, we would not interfere in the exercise of our extraordinary jurisdiction. The petition however raises an issue of vital importance under the provisions of the RDB Act and the question which requires determination can be formulated as under:

What is the remedy available to a party, who is not a party in proceedings before the Debts Recovery Tribunal, but, whose property has been declared by the Tribunal to be validly mortgaged in favour of a financial institution ?

Against the order of the Tribunal an appeal lies to the Appellate Tribunal. In other words, the Act has conferred a specific jurisdiction on the Tribunal in respect of the class of matters which can be dealt with by the Tribunal under Section 17. An appeal is provided and the jurisdiction of other courts is taken away. In other words, the orders passed under the RDB Act becomes final and cannot be questioned in any court of law other than by way of petition before this Court or any available remedy before the apex court in appropriate cases. As the petitioners are not parties to the proceedings and as it is their case, that the property belongs to them what is the forum available to such parties.

Section 22(1) of the RDB Act specifically sets out that, the Tribunal and the Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and rules. By virtue of Sub-section (2) certain powers of the Code of Civil Procedure have been conferred on the Tribunal. Under Section 22(2)(e) that power includes the power of review. Rules have been framed which are known as the Debts Recovery Tribunal (Procedure) Rules, 1993. Rule 5A(1) reads as under:

5A. Review.-(1) Any party considering itself aggrieved by an order made by the Tribunal on account of some mistake or error apparent on the face of the record desires to obtain a review of the order made against him, may apply for a review of the order to the Tribunal which had made the order.

A reading, therefore, of Section 22(2)(e) and Rule 5A(1) would result in holding that the Tribunal or Appellate Tribunal has been conferred the power of review. Rule 5A(1) however uses the expression "any party". The expression used in Order 47, Rule 1 of the Code of Civil Procedure is "any person". The language in the two statutes, therefore, is different and distinct. In so far as the Code of Civil Procedure is concerned, the language is wider, in that, any person aggrieved can prefer a review whereas in so far as Rule 5A(1) is concerned there it is limited to parties to the proceedings. The power of review therefore conferred on the Debts Recovery Tribunal cannot be exercised by a party other than a party to the proceedings.

The next provision which we may gainfully refer to is Section 20 of the RDB Act. Section 20 uses the expression "any person aggrieved by an order made, or deemed to have been made, by a Tribunal". In other words, the expression is wider and not limited only to a party to the proceedings. A person other than the party to the proceedings, if the language in Section 20 is considered, would be entitled to prefer an appeal. It could, therefore, be said that in the case where the property of another is declared as being mortgaged in favour of parties to the proceedings that other person can also prefer an appeal. In other words, persons like the petitioners who claims right in the property in respect of which financial institution have sought a declaration, could have preferred an appeal. The only question is whether an appeal under Section 20 is a effective remedy to an aggrieved person. For that purpose, we may gainfully refer to some observations made by a Full Bench of Calcutta High Court in the case of Smt. Bimla Devi v. Aghore Chandra Mallick . We may quote paragraph 15 which reads as under (page 83):

The relevance of the observations of Mukerji, J. quoted above to the instant reference is apparent. When an application under Order 21, Rule 90 has been dismissed for default and an appeal is preferred from the order of dismissal the appellate court would have to go by the record as it stands and to determine upon the materials that are on record whether the appellant was prevented by sufficient cause from appearing before the trial court. It is obvious that the appellate court would have no material on record to render a decision on the sufficiency of the cause and can give no relief to the appellant.

If we examine, therefore, the remedy if available to the person like the petitioners, under Section 20, the question would be whether this is an effective remedy or is it elusive. In the appeal preferred, the Tribunal would be bound to consider the record as it stands. The question of invoking the provisions of Order 41, Rule 27 assuming it is applicable would not be attracted as is only meant in a case of producing additional evidence. We are dealing with a case where a party had no opportunity even to plead his case. The question therefore of leading evidence in the absence of any pleading would be futile. Section 20 though a remedy available would not be an effective remedy at law.

The other remedy which is available in respect of an order passed by Recovery Officer, is Section 30 of the Act. By virtue of Section 30 notwithstanding anything contained in Section 29, any person aggrieved by an order of the Recovery Officer made under the Act has to challenge that order within thirty days. Section 26(1) of the Act will also have to be considered, which reads as under:

26(1). It shall not be open to the defendant to dispute before the Recovery Officer the correctness of the amount specified in the certificate, and no objection to the certificate on any other ground shall also be entertained by the Recovery Officer.

In other words, it is not open to the Recovery Officer to go beyond the certificate. The grant of declaration in favour of a financial institution, cannot be gone into by the Recovery Officer. The Recovery Officer having no power to go in that issue, the question of Section 30 being an effective remedy would again be elusive. In our opinion, therefore, the remedy under Section 30 in a case where the Tribunal has given a declaration would again be elusive and non-effective, as the Recovery Officer cannot go behind the order or certificate issued by the Tribunal and/or Recovery Officer.

We may now refer to the provisions of Section 29 of the RDB Act. Section 29 makes applicable the provisions of the Second and Third Schedules of the Income-tax Act and the Income-tax (Certificate Proceedings) Rules, 1962, applicable for execution of the recovery certificate under the RDB Act. Under the Second Schedule, proviso, recovery of tax in the instant case for the recovery of amount under the order/certificate various modes of recovery have set out under Rule 4. Under Order 38, Rule 11 of the Code of Civil Procedure, if a claim is preferred or objection is preferred for attachment or sale in execution of the certificate on the ground that such property is not liable for such attachment or sale, it is open to the investigating officer to examine the same. Here also, the same difficulty would arise inasmuch as what the investigating officer can do is to hear the challenge to the attachment. It will not be open to the investigating officer to go behind the order or certificate. If the order and/or the certificate has given a declaration that the property is validly mortgaged in favour of the financial institution, such an exercise cannot be undertaken by the investigating officer. It is only in the event, if there been order/certificate for money and pursuant to that certificate, property of the judgment debtor is sought to be recovered in terms of Rule 4 or recovery by attachment or sale of immovable property then only Rule 11 apply. That rule will not apply in a case where the property was mortgaged and where the declaration was given in favour of the financial institution. The remedy, therefore, under Section 29 also is not available to a party like the petitioners. Our attention is invited to the judgment of a learned judge of the Karnataka High Court in the case of Actia Technologies P. Ltd. v. Canara Bank [2005] 126 Comp Cas 917 : [2006] 2 Bank CLR 169. In that case the property was put for sale by the Recovery Officer. The contention of the petitioners was that the property never belonged to the judgment debtor nor was mortgaged with the bank as a security of payment of loan amount. The court after observing the various provisions of the Act, came to the conclusion that a writ petition could not be entertained, as an alternate remedy was available to the petitioners before it. In that case on the facts we may note that there appears to have been no declaration given by the Tribunal that the property was validly mortgaged.

Does the Act provide any remedy to a person like the petitioners. The court while considering the legislation which has created a special mechanism for recovery of dues of financial institution and bearing in mind the various provisions earlier referred which exclude the jurisdiction of other courts and Tribunals will have to examine, whether an effective remedy is available under the Act itself. If a remedy is not available under the Act, a party may have a remedy at civil law. If an aggrieved person was not party to the proceedings before the Debts Recovery Tribunal, and a party to the proceedings has secured a decree, based on a fraudulent document, the jurisdiction of the civil court in such a case normally should not be ousted. For examining whether there is a provision under the Act, let us consider Section 19(25) of the RDB Act, which reads as under:

19(25). The Tribunal may make such orders and give such directions as may be necessary or expedient to give effect to its orders or to prevent abuse of its process or to secure the ends of justice.

A reading of this provision would indicate that there is a power in the Tribunal to give orders or directions to prevent abuse of its process or to secure the ends of justice. It is open to the Tribunal to lay down its own procedure and it is not hidebound by the procedural provisions of the Code of Civil Procedure. At the same time certain provisions of the Code of Civil Procedure have been conferred on the Tribunal. The expression "prevent abuse of its process" "or to secure the ends of justice" in our opinion would be wide enough to cover a case where a financial institution has obtained an order or the certificate pursuant to a mortgage created by the judgment debtor based on a fraudulent document, like for instance the property not belonging to the judgment debtor. If such party comes before the court and points out to the court that the mortgage created is sham and/or bogus, the Tribunal to prevent abuse of its process, can assume jurisdiction under Section 19(25) to decide that issue and for that purpose exercise powers conferred under Section 22 of the Act. On aggrieved person being allowed to participate in the proceedings, it will be open to the Tribunal to review the order or pass such other order to secure the ends of justice. We are, therefore, of the clear view that in those cases where the Recovery Officer cannot go beyond the certificate, a party like the petitioners who claims title in the property or interest in the property can move the Tribunal by invoking jurisdiction of the Tribunal under Section 19(25), and in such cases if a prima facie case is disclosed before the Tribunal, the Tribunal is bound to consider the application so moved and dispose it according to law, after giving an opportunity to all parties before it."

Thus, in view of this judgment of the Bombay High Court this appeal cannot be maintained and so it is liable to be dismissed and the appropriate remedy for the appellant Bank is to invoke the provisions of Section 19(25) of the Recovery of Debts Due to Banks and Financial Institutions Act,1993 by moving appropriate application armed with the present order and the above referred judgment of Bombay High Court, in the O.A No. 547/2013 decided by DRT-III, Delhi.