Dharmender Kumar vs Yes Bank Ltd. And Ors

The appellant at one time owned property no.G-364, Preet Vihar, Delhi (hereinafter to be referred as 'the property in question) without roof rights. Vide registered sale deed dated 13.04.2018 he sold the said property to respondent no. 3 herein. In the sale deed it was mentioned that the entire sale consideration stood paid by the respondent no.3/vendee and also that even physical possession of the sold property had been delivered by the present appellant at the time of execution of the sale deed.

Immediately after the execution and registration of the sale deed in his favour respondent no.3 created an equitable mortgage of the property in question in favour of respondent Yes Bank to secure the repayment of loan of Rs. Five crores and fifty lacs taken by respondent no.2 Orion Automobile Pvt. Ltd.

The abovenamed borrower Company defaulted in repayment of the loan money resulting in declaration its account as an NPA and initiation of further measures under SARFAESI Act by Yes Bank under Section 13(4) and Section 14 of SARFAESI Act. The property was going to be up for auction also on 14.11.2019 to recover bank's outstanding dues of four crores and seventy lacs odd. However, before physical possession of the property in question could be taken over and auctioned by the respondent Yes Bank the present appellant surfaced and he approached the DRT with a Securitisation Application(S.A.) under Section 17(1) of SARFAESI Act challenging the measures initiated by the Bank and sought the quashing of those measures and for restraining the Bank from taking over possession and auctioning the property in question. In the S.A. the buyer of the property in question was also impleaded as respondent no.3 besides borrower Company and Yes Bank.

The relevant averments made in the S.A. by the appellant are in the following paras of the S.A.:-

"5(iv) That the respondent no.3 has been known to the applicant for a number of years. That the respondent no.3 had approached the applicant in the month of March, 2018 and offered to purchase the built up basement floor, ground floor, first floor, without roof/terrace rights of the suit property, with common rights of staircase, entrance, main gate, passage, lift, 2/4 share in parking in stilt floor, right to install, repair water tank and TV antenna on the roof of the top floor, with 3/5th undivided right in the land underneath, from the applicant.

5(v) That the terms and conditions were discussed and the applicant and the respondent no.3 agreed for the sale of the above property for the sale consideration of Rs. 1,70,10,000/-. That out of the said amount, the respondent no.3 had paid Rs. 50,00,000/- to the applicant by way of cheque bearing no. 033020, dated 01.03.2018, drawn on ICICI Bank, Shalimar Bagh, Delhi. That since the said cheque was duly honoured on presentation, the applicant became assured about the intention of the respondent no.3 to complete the sale transaction as per the agreed terms.

5(vi) That according to the agreed terms and conditions and in order to complete the sale transaction, the applicant had offered to execute the sale deed of the property under sale in favour of the respondent no. 3 upon receiving the entire sale consideration from the respondent no.3. That the respondent no.3 also, assured the applicant that he had made sufficient arrangements to pay the balance sale consideration to the applicant at the time of execution of sale deed.

5(vii) That however it so transpired that sale deed dated 13.04.2018, has been executed and registered by the applicant in favour of the respondent no.3 on 13.04.2018, which was prepared by the respondent no.3 and which mentioned the payment of the balance sale consideration by the respondent no.3 to the applicant by way of cheques. That respondent no.3 upon the execution of the sale deed, had handed over to the applicant, the following cheques for the remaining sale consideration:

(a) Cheque bearing no. 011449 dated 30.03.2018 amounting to Rs. 80,00,000/- drawn on ICICI Bank, Shalimar Bagh, Delhi:

(b) Cheque bearing no. 011450 dated 13.04.2018 amounting to Rs. 38,39,900/- drawn on ICICI Bank, Shalimar Bagh, Delhi.

5(viii) That however, the respondent no.3 while handing over the cheques to the applicant requested the applicant not to present the said cheque immediately, since, he didn't have sufficient financial arrangements for honouring of the said cheques. That the applicant immediately protested and was not willing to execute the sale deed, but the respondent no.3 assured the applicant that the said cheques shall be honoured in first week of May, 2018. That the respondent no. 3 further assured the applicant that he shall not take the physical possession of the suit property and the same shall remain with the applicant and only after the cheques are encashed, the respondent no. 3 shall take physical possession of the property under sale. That the applicant, in good faith based on the past relations with the respondent no.3 as well as on his assurances, had to agree to the said suggestion of the respondent no.3 and executed the sale deed in his favour. That the applicant also handed over to the respondent no.3 the original title deeds of the said property, but as assured by the respondent no. 3, the applicant retained the possession of the suit property, till the time the cheques given by the respondent no.3 were honoured by his bankers.

5(ix) That the applicant, however, could not realize the malafide intentions of the respondent no.3 to play fraud on the applicant, by inducing him to execute the sale deed, when the respondent no.3 had no intentions to pay the balance sale considerations, which became evident to the applicant, by the subsequent conduct of the respondent no.3 and the events that unfolded after the execution of the sale deed. Needless to say the original sale deed executed by the applicant in favour of the respondent no.3 was retained by the respondent no.3.

5(x) That in the first week of May 2018, when the applicant informed the respondent no.3 that he was going to deposit the abovementioned cheques, the respondent no.3 requested the applicant not to deposit the cheques as the respondent no.3 was still suffering from some financial troubles. The applicant once again protested to the conduct of the respondent no.3 and demanded that the remaining sale consideration should be paid immediately so that the sale can be completed. That the respondent no.3 further requested the applicant that he still did not possess sufficient funds to complete the transaction and further assured the applicant that since the applicant continues to retain the physical possession of the property under sale. The respondent no.3 further assured that he shall make the remaining payment to the applicant within three months. The applicant, once again in good faith and in view of the good relations that he had with the respondent no.3, agreed to grant three more months to the respondent no.3, so that he could make the necessary financial arrangements.

5(xi) That however, even after three months the respondent no.3 failed to make the necessary financial arrangements and furthermore due to such delay, the aforesaid cheques given by the respondent no.3 to the applicant also become stale. That the applicant confronted the respondent no.3 and asked him to make the necessary payment of the balance sale consideration, but to much dismay of the applicant, the respondent no.3 asked for some time from the applicant and further assured that he shall make the payment of the remaining consideration through fresh cheques or Demand Drafts. That the applicant, shocked and stunned by such casual conduct of the respondent no.3, asked the respondent no.3 to return the original title documents of the property. That however, the respondent no.3 pleaded to the applicant to give him some more time did not return the title documents to the applicant and kept on requesting the applicant to give more time and assured him that he would make the remaining payment very shortly.

5(xii) That ultimately on 02.08.2019, the respondent no.3 replaced the aforesaid cheques mentioned in the sale deed which had became stale and issued two fresh cheques in favour of the applicant off the following description:

(a) Cheque bearing no. 000032 dated 02.08.2019 amounting to Rs. 80,00,000 and Cheque bearing no. 000031 dated 03.08.2019 amounting to Rs. 38,39,900; both drawn at Kotak Mahindra Bank, Branch Shalimar Bagh, Delhi

(b) That the respondent no.3 however requested the applicant to present the cheques after two months. That the respondent no.3 further assured the applicant that there would not be any delay this time after these two months and the remaining payment towards the sale consideration will be made through the above cheques on their presentation in the first week of October 2019.

5(xiii) That going by the respondent no.3's assurance the applicant deposited both the cheques bearing no. 000032 dated 02.08.2019 amounting to Rs. 80,00,000 and Cheque bearing no. 000031 dated 03.08.2019 amounting to Rs. 38,39,900; in the applicant's account in Punjab National Bank, Rajinder Nagar Branch, Delhi. That, to the shock and dismay of the applicant, both the said cheques were however dishonoured vide separate return memos dated 01.10.2019 due to the reason of ''Funds insufficient''.

5(xiv) That the payment of the sale consideration was an essential element of the sale deed and since the entire sale consideration amount has not been paid by the respondent no.3 the sale deed is therefore void and stands cancelled and therefore the respondent no.3 does not have any claim towards the title of the said property.

5(xvi) That the applicant because of the above conduct of the respondent no.3 realized that the respondent no.3 has infact played fraud upon the applicant by inducing the applicant to execute and register the sale deed in respect of the above mentioned portion of the suit property without having any intentions to pay to the applicant the complete sale consideration from the very beginning. The respondent no.3 has misused the faith and trust of the applicant to induce the applicant into executing and registering the said document on the assurance that the possession of the suit property shall remain with the applicant, until the respondent no.3 pays to the applicant, the entire balance sale consideration. The respondent no.3 further misused the trust and faith of the applicant by ensuring that the cheques mentioned in the sale deed are not presented till the time the same became stale. That the respondent no.3 again cheated in lieu of the cheques mentioned in the sale deed which again were not honoured on presentation.

5(xviii) That the applicant, upon coming across the said notice realized the complete ramifications of the fraud played by the respondent no.3. The respondent no.3 apparently had availed the financial facilities from the respondent no.1 by mortgaging the sale deed of the suit property, which he had got executed from the applicant, fraudulently, under inducement and without paying the complete sale consideration.

5(xix) That the applicant suspects that the respondent no.3 has some close nexus with respondent no.2 & 4, who have assisted the respondent no.3 in playing fraud with the applicant. The applicant also suspects the total collusion of the bank officials of respondent no.1, with the respondent no.3, in the said fraud, who have malafidely, not carried out any verification as to whether the post dated cheques mentioned in the sale deed have been encashed by the applicant before advancing the financial facilities by allowing the respondent no.3 to mortgage the portion of the suit property by depositing the sale deed. The bank officials have not even visited the suit property to verify whether the respondent no.3 even has the physical possession of the suit property before advancing the financial facilities. Had the bank officials, exercised due care and caution and acted with due diligence, before accepting the mortgage, the fraud played by the respondent no.3 with the applicant could have been easily avoided.

5(xxi) The applicant submits that the transaction was without complete sale consideration and as such would be void in view of section 25 of the Indian Contract Act, in as much as the consideration was paid by way of cheques which were dishonoured indicating that there was an attempt on part of the respondent no.3 to suppress certain facts that though he would handover a cheque, but the said cheque would never be encashed on account of insufficiency of funds and as such on account of such fraud, the vendee cannot claim any right when he is guilty of fraudulent transaction.

5(xxvii) That the applicant further submits that the respondent no. 3 has further compounded the fraud by creating mortgage of the portion of the suit property in favour of respondent no.1 on basis of impugned sale deed, without disclosing to the respondent no.1 that more than 2/3rd of the sale consideration for the said sale deed was yet to be paid by the respondent no.3 to the applicant and that the applicant was having the physical possession of the suit property for the said reason.

5(xxix) That the applicant has filed Civil Suit bearing no. titled, 'DHARMENDER KUMAR VS. ROHIT CHADDHA', for declaration regarding the impugned sale deed, permanent & mandatory injunction, pending before Shri Sumit Dass, ADJ (East), Karkardooma Courts, Delhi.

5(xxx) The applicant is neither the borrower nor the mortgagor or the guarantor for the financial facilities allegedly advanced by respondent no.1 and is filing the present application only as the victim of the fraud played by respondent no.3, who has mortgaged the basement, ground and first floor of the said property with the respondent no.1 on the basis of the sale deed dated 13.04.2018, which has been fraudulently got executed by the respondent no.3 from the applicant, without the payment of complete sale consideration as the cheques issued by the respondent no.3 for payment of balance sale consideration of Rs. 1,18,39,900/- have been dishonoured on presentation. The officials of respondent bank have also facilitated the respondent no.3 in committing the said fraud by not even caring to verify if the post dated cheques mentioned in the sale deed to have been handed over by respondent no.3 to the applicant for the payment of balance sale consideration have been honoured or not. The bare perusal of the sale deed dated 13.04.2018, would have revealed that the post dated cheque have been issued towards the payment of the balance sale consideration. The bank officials have not even cared to visit the suit property, prior to accepting the mortgage of the suit property. That such a visit would have revealed that the possession of the suit property was with the applicant, which is against the terms of the sale deed. In fact, is the officials of the respondent bank would have visited the suit property, they could have ascertained the reason for the respondent no.3, not being in physical possession of the suit property before advancing financial facilities. However, the officials have failed to exercise, due care and caution or act with due diligence, hence facilitating the respondent no.2 to 4 play fraud by taking the financial facilities. The applicant is not aware about the terms and conditions or the financial dealings agreed between the respondent no. 1 and respondent no. 2 to 4 since the applicant is not a party to the said transactions. The applicant has also did not have any knowledge of the earlier notices sent by the bank to respondent no.2 to 4, which are mentioned in the notice dated 27.09.2019."

The appellant had also sought interim relief from the DRT against his threatened dispossession from the property in question but the learned DRT had declined that relief to him vide impugned order dated 24.12.2019 which is now under challenge in the present appeal at the instance of the appellant who claims himself to be a victim of fraud played upon him by respondent no.3 Rohit Chadha in collusion with officials of Yes Bank. The learned DRT however trashed all the abovenoted pleas of the appellant herein and decline to grant him any interim relief.

Feeling aggrieved by the denial of interim relief by the DRT the appellant has approached this appellate Tribunal with an appeal against the impugned order of the DRT.

Appearing on behalf of the appellant his learned senior counsel Mr. Rajeeve Mehra raised same arguments which were made the grounds of challenge by the appellant in his S.A. before the DRT against the threatened action of the respondent Bank to take physical possession of the property in question and to auction the same. Mr. Mehra kept on reiterating the submission that had the bank officials bothered to carry out genuine due diligence before disbursing crores of public money to the borrower Company on the security of property in question they would have found the appellant to be in possession and he would have been asked as to how he was in possession and similarly the officials/valuer would have asked the proposed mortgagor as to how the property was in occupation of the appellant herein and the appellant would have told them that he still had a charge over the property in question as an unpaid seller. That would have raised some suspicion in the minds of bank officials and they would not have gone ahead with the disbursal of crores of public money to the borrower Company. Similarly the prospective mortgagor upon being asked about the presence of the appellant in the property in question would not have been able to tell them that he had acquired complete title in the property in question by paying full sale consideration to the appellant herein and that circumstance would also have dissuaded the bank officers from granting any loan to the borrower on the security of the sale deed in respect of the property in question being a document brought in existence by respondent no.3 with all the dishonest and fraudulent intentions right from day one. The bank officials were expected to find out from respondent no.3 as to where the earlier chain of documents were since all the previous title documents are still with the appellant. In the absence of due diligence having been carried out by bank officials, submitted Mr. Mehra, the respondent bank cannot be said to have acquired any secured interest in the property in question and consequently it cannot invoke the provisions of SARFESI Act. Mr. Mehra submitted that all the aforesaid facts do make out a very strong prima facie case in favour of the appellant justifying grant of interim protection against his dispossession from the property in question at least during the pendency of the S.A. before the DRT. The pleas raised by the appellant will be duly established during evidence and cross examination of bank's witnesses. It was also submitted that the appellant has already filed a civil suit also against respondent no.3 herein for cancellation of the sale deed dated 13.04.2018. Learned senior counsel also argued that in case the appellant is dispossessed from the property in question he will suffer irreparable loss and injury because he will be deprived of his money as well as the property and, therefore, balance of convenience is in favour of grant of interim relief to the appellant while the bank will not suffer any loss since it can always enforce its remedies under SARFAESI Act in case the appellant finally loses in the legal battle he is fighting to protect his property.

Arguing for the respondent bank Mr. Rajat Katyal, learned counsel, submitted that the story pleaded by the appellant in his S.A. was a cock and bull story which nobody can be expected to believe. In any case, submitted learned counsel, even if the appellant feels cheated by his good friend, the bank, which has lent cores of rupees to respondent no.2 Company on the security of title document which admittedly was executed by the appellant in favour of respondent no.3 who had deposited the same with the bank to create equitable mortgage, cannot be made to suffer. The appellant has his remedies in law to take his friend to task for pursuading him(the appellant) into executing the sale deed in question without paying the full sale consideration. It was contended that these days of frauds and dishonest commercial transactions even a father will not execute a sale document in favour of his son with first receiving the full consideration what to talk of execution of a sale deed between two persons not even related to each other. So, contended Mr. Katyal, even if the appellant and respondent no.3 were friends and the respondent no.3 had pursuaded the appellant to execute a sale deed in his favour with receiving full sale consideration the sufferer has to be the appellant himself who himself has landed himself in a pit dug by himself and certainly not the bank which has lent crores of rupees to the borrower Company accepting the security in the form of equitable mortgage of the property in question created by respondent no.3. It is also the case of the bank that the appellant himself has pleaded that he had given time to respondent no.3 to make full payment but it is not his case that he had prohibited him from using the sale deed dated 13.04.2018 for getting loan from a bank. Mr. Katyal also pointed out that when in the sale deed itself it had been mentioned that not only full consideration had been received by the appellant but he had also delivered possession of the property in question it does not lie in the mouth of the appellant that actually that was not so and there is no prima facie case in his favour requiring any evidence as was being argued by the learned senior counsel for the appellant and in fact S.A, itself was liable to be thrown out straightaway by the DRT even if the averments made in the S.A. were to be accepted as gospel truth that the appellant had been cheated by his so called good friend. Learned counsel submitted that no interim relief should be granted to the appellant since the bank is to recover crores of rupees and the bank is very serious to sell the property in question after taking its possession.

After giving my due to consideration to the rival submissions and other material available on record this Tribunal has no hesitation in coming to the conclusion that the appellant has no prima facie case in his favour. Even if it is established by the appellant after full trial contrary to what is recorded in the sale deed dated 13.04.2018 that he had not received full sale consideration in respect of the property in question and that actual possession also continued to be retained by him the bank's status as a secured creditor will not get affected because the appellant himself is accepting that he had executed the said sale deed in favour of respondent no.3/mortgagor. The argument of the learned senior counsel Mr. Rajeeve Mehra that bank ought to have made elaborate investigation into the correctness of the facts mentioned in the sale deed presented by respondent no. 3 before it for the creation of equitable mortgage and should have enquired from the mortgagor as to whether cheques given by him towards the sale consideration had been honoured by his banker or not is too far fetched an argument not worth acceptance. The bank having sanctioned and disbursed loan to the borrower Company on the strength of the sale deed which admittedly was executed by the appellant, the original owner and which records the statement of the appellant that not only he had received full sale consideration but had also delivered possession of the property being sold by him the Bank was not supposed to start any investigation into the facts as was being suggested by the learned senior counsel. On a prima facie view I find force in the submission of the bank that facts and circumstances make it a case of collusion between the appellant and respondent no.3. In fact, even if the appellant was a victim of alleged fraud played with him by respondent no.3 Rohit Chadha at the time of entering into sale transaction the facts narrated by the appellant himself show that the present situation has arisen because of his own fault/negligence and he cannot get away with it by putting the blame upon the respondent bank. The DRT is not expected to go into the question and investigate whether the appellant still has any charge over the property in question. The DRT is expected to examine if any secured interest stood created in favour of the respondent bank while granting loan to respondent no.2 and on a prima facie view of the matter it can be said that the respondent is a secured creditor as a mortgagee of the property in question entitled to enforce its charge.

Balance of convenience is not in favour of the appellant for the grant of interim protection to him as is being claimed by him. The appellant is claiming to be in possession of the property in question while the bank is disputing that fact. Since it is recorded in the sale deed dated 13.04.2018 itself that respondent no.3 herein/buyer had been given the possession also that fact is sufficient to belie the case of the appellant that he is in possession. In any case, even if he is in possession he has no prima facie case to continue to remain in possession and to resist the move of the respondent bank to take actual physical possession of the property in question and to auction the same to recover public money of crores of rupees. Restraining the respondent bank from taking possession of its mortgaged asset, whether the mortgagor is in possession or the appellant, will not be in 'public interest' also in the aforesaid facts and circumstances.

Resultantly, this appeal being devoid of any merit is hereby dismissed.