Central Bank Of India vs Reena Gambhir And Ors

The appellant bank is aggrieved by the following miscellaneous order dated 12.10.2018 of the tribunal below(DRT) in the Securitisation Application filed by the respondent under Section 17(1) of SARFAESI Act:-

"Security Applicant Ms.ReenaGambhir has filed this Securitization Application under Section 17 of the Securitization Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 for quashing the impugned Demand and Possession Notices dated 10th October, 2014 and 8th January, 2015 and also Court Receiver's Notice dated 18th May, 2015 under the SARFAESI Act and also for quashing the impugned sale notice dated 20th September, 2018 for sale of the secured assets (a) one shop on Ground Floor forming part of building No A3, C.C Colony, Opposite RanaPratapBagh, Delhi -- 110007 admeasuring 4½ X 16½ sq. yards (74.25 sqyards) and (b) entire mezzanine Floor between Ground Floor and First Floor (without roof rights and with proportionate freehold rights of the land underneath), Part of built up freehold property bearing no. A-3 admeasuring 134 sq. meters, C.C. Colony, Opposite RanaParatapBagh, Delhi - 110007. The security applicant has also prayed for declaring her personal surety as also the mortgages created by her in respect of the abovementioned properties ceased to subsist after perfection of Kiratpur, Jaipur property for which the collateral securities were created as interim bridge securities.

Briefly, the case of the security applicant is that her husband, Mr. Sanjay Gambhir is well known to defendant no.3 who is Managing Director of defendant no.2 Company which is engaged in the business of operating Luxury Trains in India such as Palace on Wheels, Deccan Odyssey and Gold Chariot etc. Defendants no.2 & 3 for their business requirements have since been availing of credit facilities from respondent no 1 bank. It is further submitted that as per the information available with the security applicant bank, on 31st January, 2012 respondent no.1 bank had sanctioned OD facility of Rs.75 lads to defendant no.2 and then the said facility was enhanced from Rs 75 lacs to 6 crores. The aforesaid facility was secured by way of hypothecation of current assets of defendant no.2, mortgage of residential flat no.8410, Block C-8, VasantKunj, New Delhi - 110070 belonging to defendant no.3, personal surety of defendant no.3, Mr. RohenTrehan, Mr. Digvijay Singh, Mr.Nathu Singh Skhekhawat, Ms.MadhuShekhawat and Ms. KesarKanwar and corporate surety of Luxury Deluxe Hotels Pvt. Ltd. The security applicant, at no point of time, had any business, commercial or professional interest in defendant no. 2. It is further the case of the security applicant that in February 2013 defendant no.3 had approached the respondent no.1 bank for enhancement of the credit limit from Rs.6 crores to Rs.24 crores. Considering the request of defendants' no.2 & 3. the respondent no.1 bank, on 11th April, 2013, sanctioned the Working Capital of Rs.20.60 crores and as per sanction letter, the aforesaid credit facility would be collateral secured by mortgage of residential Flat no.8410, C-8, VasantKunj, New Delhi belonging to defendant no.3 and land situated at village Kiratpur, Tehsil Amer, Panchayat Kant, District Jaipur, Rajasthan belonging to Luxury Deluxe Hotels Pvt. Ltd. as also the surety of defendant no.3 and the aforesaid persons as well as the surety of Luxury Deluxe Hotels Pvt. Ltd. In September, 2013 on the request of defendant no.3, her husband Mr. Sanjay Gambhir had requested her to stand as personal surety and create mortgage of her immovable properties viz. (a) one shop on Ground Floor forming part of Building No.A3, C.C. Colony, Opposite RanaPratapBagh, Delhi - 110007 admeasuring 4½ X 16½ sq. yards (74.25 sq. yards) and (b) entire mezzanine Floor between Ground Floor and First Floor (without roof rights and with proportionate freehold rights of the land underneath), part of built up freehold property bearing No. A-3, admeasuring 134 sq. meters, C.C. Colony, Opposite RanaPartapBagh, Delhi - 110007 as interim bridge / ad hoc security for a period of three months during which time defendant no.3 had assured her that he would ensure perfection of the title of respondent no 1 as mortgage in respect of the property at Jaipur and unequivocally and without any letters, the respondent no.1 bank, vide sanction letter dated 23rd September, 2013, accepted the aforesaid offer of defendant no.3 including the nature of collateral security proposed to be created by the security applicant. The security applicant further submits that on 4th October, 2013 had executed Agreement of Guarantee and deposited original title deeds of her aforesaid properties with respondent no.1 bank. According to the security applicant, one of the Agreements of Guarantee has been interpolated by the officials of respondent no.1 bank to have been antedated to 16th September, 2013 and the interpolation and forgery demonstrate that the officials of the respondent no.1 bank connived and colluded with defendant no.3 and perpetrated fraud upon her It is further submitted that defendant no.3 as also the officials of respondent no.1 bank kept on assuring the security applicant that by the end of December, 2013 i.e. on the expiry of 90 days, the collateral securities furnished by her would be discharged and released with all legal consequences. However, defendant no.3 did not perfect the security in respect of the property at Kiratpur, Jaipur, and as a result respondent no. 1 bank declined to release the collateral securities furnished by her.Vide letters dated 18th September, 2014 and 7th October, 2014, the security applicant was informed that the credit facilities sanctioned to respondent no.2 had been classified as NPA on June 30. 2014 and vide Demand Notice dated 10th October, 2014 respondent no.1 bank demand a sum of Rs.24,59,85,781/- alongwith future interest and then issued Possession notice dated 8th January, 2015 in respect of the aforesaid subject properties. It is further submitted that thereafter respondent no.1 moved an application under Section 14 of the SARFAESI Act before the learned CMM, Rohini Courts, Delhi. which was allowed vide order dated 28th April, 2015 and pursuant to the order the Court Receiver issued Possession Notice dated 18th May, 2015 to take possession of the properties in question. Ultimately, the Court Receiver took possession of the properties in question on 20th June, 2015. Aggrieved by the action of respondent no.1 bank under the SARFAESI Act, the security applicant had approached the Tribunal by filing S.A.No.296 of 2015, which was dismissed vide order dated 15th May, 2018 and a Review Application filed by the security applicant is pending. Respondent no.1 bank has now issued impugned sale notice dated 20th September, 2018 for auctioning the properties in question which is scheduled for today i.e. 12th October, 2018. It is further alleged that on 25th September, 2018 respondent no.1 bank has issued auction notice relating to the property situated at Kiratpur (Jaipur) which does not aver that the same is not demarcated. Respondent no.1 bank cannot be heard to allege that the auction sale of the property at Kiratpur (Jaipur) is not expected to succeed and further that the property at Kiratpur was demarcated throughout and there was no imperfection in the security interest created by the borrower in favour of respondent no.1 bank By way of interim relief, the security applicant has prayed for staying the auction of the properties in question i.e. (a) one shop on Ground Floor forming part of Building No. A3. C.C. Colony, Opposite RanaPratapBagh, Delhi - 110007 admeasuring 4½ X 16½ sq. yards (74.25 sq. yards) and (b) entire mezzanine Floor between Ground Floor and First Floor (without roof rights and with proportionate freehold rights of the land underneath), Part of built up freehold property bearing No.A-3, admeasuring 134 sq. meters, C.C. Colony. Opposite RanaPartapBagh, Delhi - 110007.

On the other hand, though 1st respondent bank has not filed its reply, but its counsel has vehemently opposed the interim relief as prayed for by the security applicant.

I have heard the counsel for the parties and have gone through entire material on record.

Now the point for consideration is whether the security applicant is entitled for stay of the auction of the properties in question i.e. (a) one shop on Ground Floor forming part of Building No.A3, C.C. Colony, Opposite RanaPratapBagh, Delhi - 110007 admeasuring 4½ X 16½ sq. yards (74.25 sq. yards) and (b) entire mezzanine Floor between Ground Floor and First Floor (without roof rights and with proportionate freehold rights of the land underneath). Part of built up freehold property bearing No A- 3.admeasuring 134 sq. meters, C.C. Colony, Opposite RanaPartapBagh, Delhi - 110007 as an interim relief as prayed for?

The contention of the security applicant is that as per sanction letter dated April 11, 2013 collateral security was created by the security applicant and defendant no.3 was to ensure perfection of the security in the form of mortgage of property at Jaipur and obtaining Commercial Land Use from Jaipur Development Authority in respect thereof and, thus, the creation of the aforesaid security was a condition precedent to the disbursements under the aforesaid fresh Working Capital Limit. It is further contended that the security applicant had agreed to keep her properties mortgage as ad hoc and as an interim bridge security till only the respondent no.1 banks obtains regular mortgage from respondent no.3 and further that respondent no.1 bank vide its letter dated 23rd September, 2013 had accepted the said offer of respondent no.3, It is further contended that the sanction letter dated 23.09.2013 further provides that the proposal personal guarantee and mortgages of ne security applicant shall be released after perfection of security in respect of the land situated at Kiratpur (Jaipur) and the security applicant had executed guarantee agreement dated 4th October, 2013. While so, a demand notice dated 10th October, 2014 was issued by the respondent no.1 bank demanding a sum of Rs.24,59,85,781/- with future interest and thereafter the security applicant contacted respondent no.3, who assured that he would get regularized his security interest at Kiratpur (Jaipur) and while so the respondent no.1 issued possession notice dated 8thJanuary, 2015. It is further contended that thereafter respondent no.1 bank approached the learned Chief Metropolitan Magistrate under Section 14 of the SARFAESI Act and the Court Receiver issued Possession Notice and she was informed on Jure 05, 2018 that the mortgage of land situated at Kiratpur (Jaipur) has not been created by depositing its title deeds and the security in favour of respondent no.1 bank stood perfected and even after that, respondent no.1 bank failed to release the properties in question of the security applicant. It is further contended that thereafter the security applicant preferred S.A. No.296 of 2016 which was dismissed on 15th May, 2018 as the respondent no.1 bank took a stand that the landed property situated at Kiratpur (Jaipur) is not identifiable and demarcated and therefore it was not a competent security and on the said submissions, the abovementioned S.A. of the security applicant was dismissed. It is further the contention of the security applicant that she has filed a Review Petition against the final judgment and now the respondent no.1 bank has issued sale notice dated 29th August, 2018 for sale of the properties in question which is scheduled for today i.e. 12th October, 2018. It is further contended that when Kiratpur property was demarcated and security was created in respect thereof in favour of respondent no.1 bank, the respondent no.1 has to release the properties in question of the security applicant but without releasing the same, it is going for auction of the same, which is illegal and hence a prayer has been made for staying the sale of the properties in question as an interim relief.

As seen from the sanction letter dated April 11, 2013 - Annexure A/1, the collateral security proposed to be perfected in the form of land situated at Jaipur and the same should be atleast 150% of the proposed exposure of Rs.20.60 crores.

CLUto Le obtained from J.D.A. and The Company shall consequently ensure creation of equitable mortgage in the name of the bank, once the formalities pertaining to transfer of and in the name of the Company M/s Luxury Deluxe Hotels Pvt.Ltd. is completed. In letter dated 11e September, 2013 - Annexure A/2, it is proved that as an interim measure we are offering as 'Interim Bridging Security' of a very close friend Mr. Sanjay Gambhir, his wife Mrs. ReenaGambhir and his son Mr Karan Gambhir whose property is situated at A-3, CC Colony. Opp. Rana PratapBagh, Delhi. It is further provided inthis letter that We would also wish to reiterate that this is only an Interim Bridging Security' and will have to be returned out our friends and also they all be released from their guarantees as soon as our Jaipur land is 'perfected' and you receive the lease deed from JDA forcreating an equitable mortgage of the same. In its letter dated 23rd September, 2013 Annexure A/3, the respondent no.1 bank has provided that "B/o to obtain of all existing collaterals and the property proposed to be mortgaged admeasuring 32400 square meters at village Kiratpur, Rajasthan and satisfy themselves regarding sufficiency of collaterals in the account to the extent of 150.00% of the sanctioned limit.In case of any shortfall, Bio to obtain additional collateral / cash collaterals (FDRs)," It is further mentioned in this very letter that "B/o to closely monitor efforts made by the Company towards perfection of security of the land at village Kiratpur till 30.11.2013 and report developments in this regard to our office from time to time." It is also evident from letter Annexure A/8 that 'PATTA' has been finalized and the original documents are received by respondent no.3 and they are ready to deposit the same and the title deeds of the security applicant Ms.ReenaGambhir alias Ms.KavitaGambhir, Ms.KesarKanwar, Ms. MadhuShekhawat and Mr.Nathu Singh Shekhawat. Annexure A/17 also reveals that the bank accepted the security of Jaipur properly and the charge was also created and the date of creation of charge is 3rdAugust, 2015. At page 130 of the present S.A. it is mentioned that "Collateral - Patta No.2639 issued by Jaipur Development Authority Registered on 30th July, 2014 in favour of M/s Luxury Delux Hotels Pvt. Ltd., situated at Khasra No.10, Village Kiratpura, Tehsil Amer, District Jaipur.

Thus, as per original sanction letter, defendant no.3 substituted prior charge at Jaipur with the security of the applicant. It seems that at the time of arguments in S.A. No 206 of 2015, respondent no.1 bank represented that the property at Kiratpur (Jaipur) even after submitting the title deed was not demarcated and even was not identifiable, whereas Annexure A/21 at page 214 of the present S.A., it is revealed that Khasra No.10 village Kiratpura, Tehsil Amer, Jaipur (Rajasthan) leased by JDA for Hotel and Resorts purposes on 99 years lease was put to auction. In the present case the e-auction is only slated for today. As the auction is scheduled for today, it is not a fit case to interdict the sale in respect of the properties in question at this stage, in view of the provisions of Order XXI Rule 59 CPC, which provides as under:

Stay of sale: Where before the claim was preferred or the objection was made, the property attached had already been advertised for sale, the Court may ------

a. If the property is movable, make an order postponing the sale pending the adjudication of the claim or objection.

b. If the property is immovable, make an order that, pending the adjudication of the claim or objection, the property shall not be sold, or, the pending such adjudication, the property may be sold but sale shall not be confirmed.

And any such order may be made subject to such terms and conditions as to the security or otherwise as the court thinks fit.

In view of the above provisions of Order XXI Rule 59 CPC, the respondent no. 1 bank is at liberty to proceed with the impugned sale, but the same shall not be confirmed pending disposal of the present S.A. The interim relief is accordingly disposed of.

For competition of pleadings, the matter be posted before the Registrar on 20thNovermber, 2018.

From a reading of this impugned order of the DRT the undisputed which emerges is that the grievance of the appellant was that even though she had created equitable mortgage of her two properties in Delhi to secure the repayment of loan of twenty crores availed by respondent no.2 herein from the appellant bank but her guarantee and mortgaged was only an interim and ad hoc one for a period of 90 days during which period the borrower was to create regular mortgage of its land in Rajasthan and her titled deeds were supposed to be returned back to her. Her further case was that even though the borrower Company has given to the appellant bank title deeds of its land in Rajasthan she was not discharged nor were her title deeds returned back to her after 90 days period. She had then challenged the very initiation the measures under SARFAESI Act by the appellant bank before the DRT-III, Delhi by way of an S.A. which was registered as S.A.No. 296/2015. That S.A. was, however, dismissed by the DRT on 15.05.2018 and the plea of the respondent no.1 herein that the mortgage created by her was a stop gap arrangement for 90 days only.

The respondent then decided to take another chance by filing a fresh S.A. when her properties were being auctioned. The second S.A. was filed before another DRT which, as noticed above, granted her interim relief to the effect that in case her properties were sold the sales will not be confirmed during the pendency of the S.A. That way virtually the bank's efforts to recover public money of over twenty cores stood frustrated since nobody would have come forward to buy the properties worth cores of rupees when the sales were not to be confirmed.

The learned Presiding Officer of DRT-II did not attach any importance to the fact that the first S.A. of the respondent no.1 herein already stood dismissed on merits. Even in the second S.A. the learned Presiding Officer did not even notice that the securitization applicant had any prima facie case which could not in any case be there after rejection of main ground of challenge in the previous S.A. and in the present S.A. a huge relief has been granted to her by passing an order that the sale if any of the two mortgaged properties, if conducted, will not be confirmed. Public interest has been thrown to the winds.It has also not been stated as to how the respondent no.1 herein will suffer irreparable loss in case the mortgaged properties are auctioned particularly when her challenge to the very initiation of measures under SARFAESI Act stood rejected already by co- ordinate DRT. How the balance of convenience could be said to be in favour of the respondent no.1 herein has also not been said in the impugned order.

Mr. Pallav Saxena, learned counsel for the respondent no.1/guarantor/mortgagor took lot of pain to persuade me in oral as well as written argumentsthat the mortgage crated by his client was only as a stop gap arrangement intended even by the bank also to be only for a period of 90 days. However, that argument cannot be accepted in view of the earlier decision of the DRT in the first S.A. No. 296/2015 rejecting said plea and no attempt was made to show that order was in any way illegal and not binding on the DRT-II and could be ignored. Though an application for review of the order of rejection of first S.A. was filed but that decision has not been reviewed so far. Learned counsel for respondent no.1 had also contended that now even in the bank's O.A. the case of the this respondent-defendant that the mortgage created was only as an ad hoc stands accepted by the DRT-II. However, counsel for the bank had submitted that against that order of exoneration also the bank has preferred an appeal which is yet to be decided by this appellate tribunal. Thus, prima facie that finding of DRT in the O.A. is also of no help to the respondent no.1. That decision has not attained finality so far. In any event, in view of other weaknesses in the case of respondent no. as far as her second S.A. is concerned the learned DRT-II was not justified in granting the interim direction of non-confirmation of the auction was no justified. And just because the bank has also sought to auction another property in Rajasthan, reference to which is made in the impugned order, will not entitle, on a prima facie view for grant of any interim relief in this second S.A.

Learned counsel for the appellant bank had submitted that the appellant had indulged in forum shopping by filing her second S.A. before another DRT. I, however, need not make any comment on this contention since the main S.A. is still pending adjudication before the DRT and it will be for the learned Presiding Officer to examine this allegation of the bank. Suffice it is to say that there was no prima facie case in favour of respondent no.1 herein, guarantor/mortgagor. Having helped her known people in getting loan to the extent of twenty crores it cannot be said that she would suffer irreparable loss in case the properties placed by her at the disposal of the bank as security for repayment of loan money utilized by her husband's friend are auctioned.

The impugned order, therefore, cannot be allowed to stand even for a moment.

This appeal is accordingly allowed and the impugned order dated 12.10.2018 is set aside. Accordingly decks are now clear for the bank to auction the mortgaged properties if same have not been sold already.