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Judgment
The appellants are aggrieved by the two orders passed by the Tribunal below(DRT) in their Securitisation Application(S.A.) filed under Section 17(1) of SARFAESI Act. One order was passed on 05.11.2015 whereby the S.A. was rejected and the other other was passed on 06.10.2017 whereby their review application(R.A.No. 01/2016) seeking review of the final order dated 05.11.2015 was disposed of.
The appellants had filed an application (S.A.) under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) claiming that they were purchasers of property in question 2nd Floor, Geeta Bhawan, Verma Niwas, Khasra No. 1143, Vikas Nagar, Shimla (Himachal Pradesh). They claimed to have purchased the said property from respondent no. 1 herein under private treaty as per Rule 8 (5) of the Security Interest (Enforcement) Rules, 2002 for a sale consideration of Rs.29.00 lacs. That sale by way of private treaty took place when the respondents 2(a) and (b) herein had defaulted in repayment of the loan which they had taken from respondent no. 1 in the year 2007 and since the repayment of loan was secured by way of equitable mortgage of the property in question the respondent no.1 had taken recourse to its remedies as a secured creditor under SARFAESI Act. Firstly, account of the borrowers was declared as NPA and then demand notice under Section 13(2) was served upon the borrowers. Since they did not clear the loan dues the respondent no. 1 took physical possession of the property in question after obtaining order from the District Magistrate under Section 14 of SARFAESI Act on 15.03.2011.
Feeling aggrieved, respondents 2(a) and (b) herein approached the DRT-I, Chandigarh with an S.A. under Section 17(1) of SARFAESI Act to save the property in question from being auctioned. During the pendency of that S.A. (being S.A.No. 84/2011) the property in question came to be sold to the appellants by way of a private treaty for Rs.29 lacs on 23.11.2013. The proceedings of 23.11.2013 recording the settlement terms under which sale by way of private treaty took place are as under:-
"Item No.38/B
23.11.2013
Present: Shri Diwan Sharma, counsel for the applicant along with Shri Bharat Singh Verma, Shri Rajiv Verma and
Smt. Prabha Verma, applicants in person
Shri Dalip Singh and Shri Rajesh Kumar, aspirant buyers
Shri Ram Saran Dass Uppal, Manager of the respondent FI alongwith Shri Kailash Verma, Assitant Manager of the respondent FI
The matter has been settled amicably by the parties for an amount of Rs.29.00 lacs as full and final settlement of the account. The applicant has brought buyers of the secured assets/immovable property who are ready to buy the property for a consideration of Rs.29.00 lacs by way of private treaty and paid full consideration by way of two cheques being cheque No.816942 dated 29.11.2013 and banker cheque No.393346 dated 23.11.2013 of Rs.14.50 lacs each in favour of respondent FI. The authorised representative of respondent FI has accepted the cheques and stated that the sale certificate will be issued in favour of the buyers after encashment of the cheques within 7 days. The title deeds of the property alongwith no dues certificate shall be issued as well and physical possession of the property be handed over to the said buyers within 7 days. Accordingly SA alongwith all pending IAs, if any, stands disposed off."
Respondent no. 1 even after receiving the payment of Rs.29.00 lacs from the appellants-purchasers herein failed to comply with the said order of the Tribunal passed in Lok Adalat and consequently the respondents no. 2(a) & (b) filed an MA No. 159/13 for appointment of Local Commissioner to supervise the execution of sale deed by the authorised officer and for ensuring delivery of possession of the property in question to the appellants-purchasers. Respondent no. 1 appeared before the DRT on 30.12.2013 and filed reply stating that one Sh. Bhupinder Jeet Kashyap, respondent no. 3 herein, alongwith other persons had illegally and forcefully broken the seal and lock of the respondent no. 1 on 21.12.2013 and put his own lock upon the property after breaking the locks and seal of respondent no.1(FI). Thereafter, an FIR No. 116 was registered on 23/12/2013 against respondent no. 3 herein. Again lock was put up by the authorised officer. That lock was also broken by the miscreants and the authorised officer had also again put up his locks over the lock of the miscreants. The aforesaid MA was allowed on 30.12.2013 and DRT appointed a local commissioner to facilitate the delivery of possession by the respondent no. 1 herein to the appellants herein. Sale certificate alongwith original title deeds of the property in question were, however, delivered to the appellants herein.
It appears that possession of the property in question could not be taken over even by the local commissioner because of alleged illegal trespassing into the property by respondent no.3 herein.
Upon coming to know about the claim of the respondent no.3 herein in respect of the property in question the appellants-purchasers approached the respondent no.1 with the grievance that it had not got noted its charge over the property in question in the revenue records and the respondent no.3 herein had taken advantage of that fact and got the property mutated in his name. The appellants accordingly asked the respondent no.1(FI) to either execute the sale deed in their favour after getting the same mutated in their favour free from any encumbrances or to cancel the sale certificate already executed in their favour and to refund the sale consideration with interest @ 18% p.a and also to pay them compensation of Rs.3 lacs.
Getting no favourable response from respondent no.1 the appellants herein approached the DRT with their own securitisation application out of which the present appeal has arisen. That S.A was registered as S.A. No. 09/2014. It was pleaded in the S.A. inter alia that the respondent no.1 herein had sold the property to the appellants herein knowing that it will not be in a position to hand over possession of the property in question to them because respondent no.3 herein had got the property mutated in his name in revenue records taking advantage of the fact that respondent no.1 had not got noted its charge in revenue records and therefore the sale in their favour was no sale. They, however, also pleaded that they were still ready to take the property if possession was delivered to them by respondent no.1 free from the claim of respondent no.3 herein being its owner and a sale deed is executed in their favour free from all encumbrances. The prayers made in the S.A. were as under:- .
"In view of the facts and grounds mentioned in paragraph 5 above, the applicants pray for the following reliefs:
a] Direct the respondent No.1 Company to execute a sale deed in favour of the applicants after getting the revenue record corrected, removing the encumbrances on the property and issuing a fresh sale certificate free from all encumbrances.
Or
in the alternate set aside the sale dated 23.11.2013 and direct the respondent No.1 company to refund the amount of Rs.29 lakhs alongwith interest @18% p.a. alongwith compensation, costs and damages of Rs.3 lac in the interest of justice.
b] Any other order, as may be found appropriate and necessary in the nature and circumstances of this case and in the interest of natural justice, equity and fair play be passed in favour of the applicants and against the respondent no.1 with costs."
In response to the notice sent to respondent no. 1 it appeared before the DRT and claimed that it was under an obligation to issue only a sale certificate which had duly been issued and received by the security applicants on 30.12.2013 in terms Rule 9 (6) of the Rules, 2002. It was pleaded that the subject property was equitably mortgaged with the respondent no. 1 herein and the said property was free from all prior encumbrances and the respondent no. 1 was not legally responsible or liable for any encumbrances over the subject property created by the owners/mortgagors/respondents no. 2 (a) and (b) herein subsequent to the mortgage. It was further stated that the respondent no. 1 came to know that after creation of equitable mortgage of property on 29.09.2007, the respondent no. 2 (a) i.e. Shri Bharat Singh Verma, without redeeming the mortgage and without prior consent and knowledge of the respondent no. 1 sold his share to his son. It also averred that the respondent no. 1 further came to know that respondent no. 2 (b) on 10.12.2009 illegally, without redeeming the mortgage and without prior consent and knowledge of the respondent no. 1 entered into an agreement to sell with respondent no. 3 herein for sale of subject property for a consideration of Rs. 14.00 lacs and the said agreement to sell dated 10.12.2009 was subsequent to creation of equitable mortgage and had been executed during the subsistence of mortgage. Thus, legal rights if any of respondent no. 3 in the property in question were subject to the right and interest of respondent no. 1 and rights of the applicants, appellants herein, flow from the respondent no. 1 which are clear and without any encumbrances, therefore prayer of the applicants to direct the respondent no. 1 to remove the subsequent encumbrances on the property was misconceived in law and also against facts and consequently the applicants had no legal cause to seek directions against the respondent no. 1 to issue fresh sale certificate.
In their reply to SA, the respondent no. 2 (a) and (b) pleaded that against the property in question earlier they raised a loan of Rs.10.75 lacs from Central Bank of India (CBI) and lien was noted in the revenue record and thereafter said loan was repaid in full and final and the lien of the CBI was lifted in the revenue record on 11.10.2007. It was pleaded that thereafter they had raised two loans of Rs. 13.98 lacs and Rs. 13.42 lacs, total of Rs. 27.40 lacs from the respondent no. 1 herein and they had created equitable mortgage by deposit of title deed of the property in question. Thereafter on alleged defaults the respondent no. 1 FI under the provisions of the SARFAESI Act sought an order dated 08.09.2010 from the District Magistrate, Shimla for taking physical possession and accordingly possession was taken over by the respondent no. 1 FI with the help of Police Authorities. They then challenged the action of the respondent no. 1 (FI) by filing S.A. No. 84/11 which was ultimately disposed by DRT on 23.11.2013 as settled in Lok Adalat where they had brought buyers, the appellants herein, for a consideration of Rs.29.00 lacs in full and final settlement of the account with respondent no. 1.
Respondent no. 3 in his reply, pleaded that he was having some financial dealings the respondents no. 2 (a) & (b) who issued one cheque which got bounced and proceedings under Section 138 of Negotiable Instruments Act were initiated and later on the respondent no. 2 (a) & (b) agreed to sell the demised property vide agreement dated 10.12.2009 for a consideration of Rs. 14.00 lacs to him and it was agreed that amount of dishonoured cheque will be adjusted against the sale consideration and in furtherance of the agreement to sell he was put in possession of the property in question. When the respondents no. 2 (a) & (b) failed to execute sale deed he was constrained to file suit for specific performance and permanent prohibitory injunction against respondent no. 2 (b) before Additional District Judge (Fast Track), Shimla on 03.09.2010 which was ultimately decreed in his favour vide judgment and decree dated 28.04.2011. It was pleaded that despite judgement and decree dated 28.04.2011, the respondent no. 2 (b) failed to execute the sale deed in his favour and accordingly an execution application was filed on 01.06.2012 and he deposited Rs. 5.80 lacs with court at Shimla and then sale deed was executed on 01.06.2012 by court commissioner.
After considering the evidence adduced and hearing the parties the learned DRT dismissed the S.A. observing that since the Financial Institution, respondent no.1 herein, had executed the sale certificate in favour of the buyers of the property in question, appellants herein, and possession thereof also stood delivered to the buyers nothing remained to be performed by the Financial Institution under the terms of settlement on which the appellants were sold the property in question by way of private treaty. Consequently, DRT observed, the sale certificate could not be cancelled and Financial Institution could not be directed to return the sale consideration received by it from the buyers.
The appellants herein felt that there was some factual error which had crept in the order passed by the learned DRT dismissing their S.A. inasmuch as the learned Presiding Officer had wrongly observed that possession of the property in question stood delivered to the security applicants, the appellants herein, alongwith sale certificate while in fact it was no body's case including that of the Financial Institution that possession of the property was delivered to the appellants herein. In fact, respondent FI had joined the appellants herein before the DRT when an application was moved before the DRT for getting the possession delivered to them through a court commissioner which was appointed also but possession still could not be got delivered to the buyers because respondent no.3 herein was claiming to have bought the property from respondent no.2(a) and (b) herein through court decree for specific performance passed in 2012 of an agreement to sell executed in his favour in the year 2009.
The appellants herein accordingly filed a review application before the DRT pointing out the factual error in the final order of the learned DRT. After hearing the review application the learned DRT realised its mistake that it was wrongly observed in the earlier final order passed in the S.A. that possession of the property in question had been delivered to the buyers, appellants herein. Observing so the review application was disposed of vide order dated 06.10.2017.
The appellants-buyers felt that the DRT had committed another legal error in not granting the reliefs sought for in the S.A. despite coming to the conclusion that possession of the property in question had not been delivered to the buyers pursuant to the settlement agreement arrived at between the Financial Institution, the borrower and the buyers(appellants herein). So, the present appeal has come to be filed by the buyers(security applicants).
Elaborate arguments were advanced by the parties through their respective advocates and those agreements centred around the right of the respondent no.3 herein over the property in question which he claimed to have purchased from the mortgagors of respondent no.1 herein i.e. respondent no.2(b) herein. The mortgagors supported the appellants' case as well as the respondent no.1(FI) while respondent no.3 submitted that this appeal is liable to be rejected and his possession, of which he presently stands deprived by an interim order passed by this Tribunal during the pendency of this frivolous appeal, deserves to be restored to him. It was, however, pointed out that the order of this Tribunal sealing the property in question was challenged before the Hon'ble Himachal Pradesh High Court, but that writ petition of respondent no.3 was not entertained.
After giving my thoughtful consideration to the entire aspect of the matter and the submissions made by the counsel for the parties, I am of the view that the learned Tribunal below after reaching the conclusion that it had wrongly observed in its earlier order dated 5.11.2015 that possession of the property in question stood delivered to the appellants herein was not factually correct, the matter should have been heard afresh after giving opportunity to all the parties to put forth their respective cases in view of the finding that possession of the property in question was actually not delivered to the appellants herein. The S.A. was dismissed under a mistaken view that possession also stood delivered to the security applicants. To what relief the security applicants would have been entitled if it had been observed in the original order itself by the DRT that possession could not be delivered to the security applicants by the Financial Institution for the reasons which already have been noticed need not be decided by this Tribunal in this appeal. This should be left to the DRT. Therefore, this matter deserves to be remanded back to the DRT for fresh disposal of the S.A. of the appellants herein uninfluenced by any observation already made in the matter regarding entitlement of the appellants herein. Accordingly, the matter is remanded back to the DRT, which shall now take up the S.A. on 20.1.2020 at 2 p.m. for directions.
Since this Tribunal had appointed a Court Commissioner/ Receiver to take over the possession of the property during the pendency of the present appeal and the same is now custodia legis, the DRT shall pass fresh order within one month and in case for any reason that is not possible, the parties will be at liberty to approach this Tribunal for appropriate directions. Till fresh disposal of the S.A., the possession of the property in question shall remain with this Tribunal. Depending upon the decision now to be taken by the DRT, it will be open for the DRT to pass any appropriate order as to who will be entitled to get the possession and in that regard the DRT will not hesitate in passing appropriate order just because the possession was got taken over by this Tribunal.