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Judgment
COMMON ORDER
These Appeals are filed against the order passed by the Learned Presiding Officer, DRT-I, Chennai, in SA No. 7/2012 on 30.01.2017.
The SA 7/2012 has been filed by the Appellant, G. Sarathy in RA (SA) 144/2017, to set aside the entire proceedings initiated under Section 13 of the SARFAESI Act, 2002, by the first Respondent, Indian Bank, including the affixture of notice dated 24.12.2011 on the property as detailed in the Schedule, and restraining the first Respondent Bank from claiming any right or interfering with Appellant’s possession of the Schedule property, and for other incidental and consequential reliefs.
The case of the Appellant, in brief, is that the Appellant is a third party to the SARFAESI proceedings culminating in the issuance of Possession Notice dated 24.12.2011. He is the absolute owner of the property by virtue of purchasing it in a sale held under the SARFAESI Act, 2002, by the 3rd Respondent, State Bank of India (State Bank of Mysore). A Sale Certificate was issued to him and registered as document No. 396/2011 at SRO, Kodambakkam. Respondent No.2, Dena Bank now Bank of Baroda, affixed a copy of the attachment order dated 16.09.2011. Appellant filed CP No. 50/2011 in DRC No. 174/2009 in OA 18/2008 before the Recovery Officer, DRT-I, Chennai, and it is pending. The documents available with first Respondent are not valid documents, and therefore, there is no valid mortgage or security interest was created in favour of the first Respondent. Respondent No.4, Mr. M. G. Karunanidhi availed a Housing Loan from Respondent No.3. The loan was secured by an equitable mortgage of the Schedule property. He deposited the original title documents and created mortgage. Later, he defaulted in repaying the loan. Therefore, Respondent No.3 Bank initiated measures under SARFAESI Act, 2002, which culminated in the sale in favour of Appellant. The first Respondent has also initiated measures under the SARFAESI Act, 2002 against the same property and that is not valid in law. Appellant is a bonafide purchaser for value and is in possession of the property. Without verifying the sale in favour of the Appellant, the first Respondent and the second Respondent are proceeding against the Appellant’s property under the SARFAESI Act, 2002 and the RDB Act, 1993, respectively. That is impermissible in law. Therefore, the SA has been filed for the aforesaid reliefs.
The case of the first Respondent, Indian Bank, in brief, is that the Respondent No.4 had availed a Home Loan from the first Respondent in 2005, and created a valid mortgage over the Schedule property by depositing the original title deed and executing necessary loan documents. Therefore, the right claimed against the property by the Appellant is subject to the mortgage in favour of the first Respondent. The Sale Certificate issued by Respondent No.3, in favour of the Appellant and registered as document No.396/2011 is not valid under law. The title document produced by Respondent No.4 to 1st Respondent, is genuine, true and original.
The case of the 2nd Respondent, Bank of Baroda, in brief, is that the Appellant is a pendente lite purchaser, and therefore, cannot claim a better right or title in respect of the Schedule property. The title deed deposited by the Respondent No.4 with Respondent No.2, is genuine, true and original document, and therefore, the title deed relied on by the Appellant cannot be used against this Respondent.
The case of the Respondent No.3, State Bank of India, in brief, is that the Respondent No.4 availed a Housing Loan of Rs.12.40 Lakhs from the Respondent No.3, on 31.08.2005. Respondent No.4 deposited the original title deed i.e. the Sale Deed dated 16.03.2005 executed by Mrs. S. Kalyani in his favour, and created an equitable mortgage by deposit of the title documents. Since Respondent No.4 defaulted in repayment of loan, measures under the SARFAESI Act, 2002, were initiated for sale of the property, and the sale was held on 29.12.2010. The Sale Certificate dated 07.02.2011 was issued in favour of the Appellant and it was duly registered. It appears that Respondent No.4 offered the same property as security to several other Banks on the basis of fabricated and bogus title deed. Previously, Syndicate Bank, Purasaivakkam Branch, Chennai, filed OA 619/2009 before DRT-II, Chennai. When the claim came to the notice of the Respondent No.3, State Bank of India, Respondent No.3 filed a Claim Petition in the said proceedings. After verifying the title document of Respondent No.4, Mr. M. G. Karunanidhi and other documents, Syndicate Bank conceded that the title document deposited by Mr. M. G. Karunanidhi with Respondent No.3, was original and genuine document. Therefore, the Respondents 1 and 2 cannot claim any right in the subject property.
On these pleadings, an enquiry was conducted. The Leaned Presiding Officer, DRT-I, Chennai, found that the first Respondent had initiated SARFAESI measures in conformity with the provisions of SARFAESI Act and Rules made thereunder, and therefore, held that the SARFAESI action need not be interfered with. Thus, the Securitisation Application was dismissed. Aggrieved by said order, the Auction Purchaser from Respondent No.3, G. Sarathy and Respondent No.3, State Bank of India, filed the Appeals in RA (SA) 144/2017 and RA (SA) 70/2019, respectively.
The Learned Counsel for the Appellant, G. Sarathy, submitted that Respondent No.4 had cheated many Banks by availing loans and offering the same property as security interest. He created forged and fabricated sale deed as if they are original title document and produced the forged and fabricated sale deed with other Banks for availing credit facilities. However, the original Sale Deed was produced before Respondent No.3, State Bank of India, at the time of availing the Housing Loan, and a valid and legal security interest was created by way of an equitable mortgage by deposit of title documents. The Appellant is a bonafide purchaser in the sale held by Respondent No.3. He availed a loan from Respondent No.5 and discharged the loan. Respondent No.4 is a rank forger. In the litigation arising out of the recovery proceedings initiated by Syndicate Bank under the RDB Act, 1993, Syndicate Bank admitted that the original sale deed of Respondent No.4 was produced before Respondent No.3. A criminal case was registered by the CBI. The proceedings of DRT show that the original sale deed was produced before the DRT by the Manager of Respondent No.3 Bank. An Advocate Commissioner was appointed for the purpose of obtaining a certified copy of the disputed sale deed. The certified copy obtained by the Advocate Commissioner tallies with the original sale deed produced by Respondent No.3 in all aspects. Therefore, it is established beyond doubt that a valid legal mortgage was created in favour of the Respondent No.3 by deposit of the original sale deed by Respondent No.4 with Respondent No.3 Bank.
The Respondents 1 and 2 have not challenged the sale in favour of the Appellant. The mortgage in their favour was created using forged and fabricated sale deeds, and therefore, the mortgage created in their favour by Respondent No.4, is not legal and valid. A bare perusal of the copies of the sale deeds produced by Respondents 1 and 2 before the Tribunal and the original/registration copy of the sale deed produced before this Tribunal by the Appellant shows that there are lot of discrepancies, like the fingerprint of seller, the placement of the seal, wrong PAN number, variation in the signatures of vendors, placement of signature, handwriting of the stamp vendors, etc. On the other hand, the copy of sale deed produced by the Appellant and copy of the certified copy produced by the Advocate Commissioner perfectly match with each other. When the Appellant produced the original sale deed for perusal, Respondents 1 and 2 did not produce the original sale deed despite the direction of this Tribunal to produce the original sale deed in their possession for the purpose of comparison. This conduct of Respondents 1 and 2 shows that the sale deeds in their possession are not true and genuine sale deeds. Without considering this important issue, the Learned Presiding Officer dismissed the Securitisation Application. Thus, the Learned Counsel for the Appellant prays for setting aside the order of the Learned Presiding Officer, DRT-I, Chennai, and for allowing this Appeal.
In support of his submissions, he pressed into service of the following decisions for the proposition that the Bank is bound to disclose all the encumbrances on the property sought to be sold. :-
I. The decision in Jai Logistics Represented by its Partners Vs. The Authoised Officer, Syndicate Bank , reported in 2010 (4) CTC 627;
II. The decision in Chemstar Chemicals and Intermediates Private Vs. The Commercial Tax Officer, reported in Kanoon 1750169,
III. The decision in S. Shanmuganathan Vs. The Authorised Officer, reported in Indian Kanoon 91487387;
IV. The decision in Indian Bank Vs. M/s. Punjab National Bank, reported in AIR 2010 Madras 84
Learned Counsel for the Appellant in RA (SA) 70/2019 and Respondent No.3 in RA (SA) 144/2017 i.e. the State Bank of India, adopted the submissions of Learned Counsel for Appellant in RA (SA) 144/2017.
Learned Counsel for the first Respondent, Indian Bank, in reply, submitted that the mortgage in favour of the first Respondent is prior in point of time, and therefore, the first Respondent has the first charge over the property. The first Respondent initiated measures under SARFAESI Act, 2002, against Respondent No.4, observing the mandatory requirements of the SARFAESI Act and the Rules made thereunder. That was clearly observed by the Learned Presiding Officer in the impugned order. The DRT has no power to decide the issue of title on the basis of documents. The Learned Presiding Officer has also held so. Charge was created in favour of the first Respondent on 21.03.2005, and MODT was executed on 23.03.2005, however, the mortgage in favour of Respondent No.3 was created only on 31.08.2005. When that be the case, Respondent No.3 ought to have filed a Civil Suit with reference to the mortgage, instead of initiating SARFAESI proceedings. The issue involved in these Appeals is as to who has priority over the charge. This issue has to be resolved only through arbitration under Section 11 of the SARFAESI Act, 2002. Thus he prayed for dismissal of these Appeals.
In support of his submissions, he pressed into the following decisions:-
I. Central Bank of India Vs. Prabha Jain reported in 2025 (2) CTC 305, is relied for the proposition that the DRT has the jurisdiction to consider as to whether the measures under SARFAESI Act and its legality and it cannot assume jurisdiction over the matters such as final declaration of title or validity of an antecedent sale deed and mortgage document.
II. C. Rajagopal Vs. State Bank of Travancore, reported in CDJ 1994 MH 827, is relied for the proposition that as to whether a valid equitable mortgage can be created by depositing photostate certified copies of the title deeds instead of originals.
III. UCO Bank Vs. State Bank of India and Ors. reported in 2012 Supreme (All)33, is relied for the proposition that the deposit of title deed is not necessarily essential for creation of a valid mortgage and the important factor is the intention of the parties to create the mortgage.
Learned Counsel for Respondent No.2, Bank of Baroda, submitted that there is no prayer against Respondent No.2 in the Securitisaton Application. Respondent No.2 filed OA 18/2009 against the Respondent No.4, and it was allowed on 21.08.2009 by the DRT-I, Chennai. A Debt Recovery Certificate (DRC) was issued and later closed in view of the pendency of the Appeal. Dena Bank, Respondent No.2, is not a necessary party. This matter can be resolved through arbitration under Section 11 of the SARFAESI Act, 2002.
In reply to these submissions, Learned Counsel for Appellant, G. Sarathy, submitted that the mortgage in favour of Respondents 1 and 2 had been created using forged documents. It is for the first Respondent, Indian Bank to go to the arbitration under Section 11 of the SARFAESI Act, 2002. However, the Appellant is a bonafide purchaser for value, and the Appellant’s right has to be protected. The sale in favour of the Appellant was not specifically challenged by anybody, including Respondents 1 and 2. A case has been registered before the CBI against the officials of the Indian Bank. Thus, he reiterated his prayer for allowing of the Appeal.
Considered the rival submissions and perused the records.
It is a strange but interesting case where the Respondent No.4 M. G. Karunanidhi, the borrower, had availed loan facilities from Respondents 1, 2 and 3 and Syndicate Bank, by mortgaging the same property again and again. The property concerned is, all that piece and parcel of House Site Old Door No.32 and 32A, New Door No.37, Flat bearing No.F-1, First Floor in Block-B of Shruthilaya Apartments, Bharatheeswarar Colony, 4th Street, Kodambakkam, Chennai – 600 024, measuring 750 Sq., Ft., of constructed area together with 450 sq., ft., undivided share of land out of total extent of 2 Grounds 405 sq., ft., situated in T.S.No.96, Block No.8, situated at No.109, Puliyur Village, Egmore-Nungambakkam Taluk, Chennai District. He had manipulated to forge and fabricate multiple sale deeds and produced them before these Banks as security for availing the loan facilities by creating mortgage. All these Banks claim that the sale deed produced by Respondent No.4 for creation of mortgage with them is the original and genuine sale deed and the sale deed produced before the other Banks is not the original and genuine sale deed, but forged sale deed. There is no dispute with regard to the title deed of the property concerned in favour of the Respondent No.4. The Respondent No.4 purchased this property from one Mrs. S. Kalyani on 16.03.2005 through a registered sale deed.
The Appellant, G. Sarathy is the Auction Purchaser of this property in the sale held under SARFAESI Act, 2002, by the Respondent No.3, State Bank of India. When the first Respondent, Indian Bank proceeded against his property on the basis of mortgage created by Respondent No.4 in its favour by taking measures under SARFAESI Act, 2002, the Appellant, G. Sarathy filed SA 7/2012 before DRT-I, Chennai. On dismissal of SA 7/2012, this Appeal is filed. The Learned Presiding Officer, DRT-I, Chennai, found that the sale deed and title deed in favour of the Respondent No.4 were not disputed by the Appellant. The first Respondent, Indian Bank, produced documents to show that the measures under Section 13(4) of the SARFAESI Act had been taken without any procedural or legal violation, and thus dismissed the Securitisation Application.
The issue now canvassed before this Tribunal by the Appellant is that,
a valid mortgage was created only in favour of 3rd Respondent, State Bank of India, by producing the original and genuine sale deed, whereas the sale deeds produced before Indian Bank and Bank of Baroda (Dena Bank) are not the original sale deeds, and thus there is no valid and legal mortgage created in favour of the Respondents 1 and 2. Therefore, they cannot enforce the security interest.
ii) The mortgage created in favour of the first Respondent was prior in point of time, but the fact remains that the sale deed produced before the first Respondent is not the true and original sale deed, but a forged and fabricated false document and thus not enforceable. So is the case with the mortgage created in favour of the Respondent No.2.
It is submitted that this specific ground was not considered by the Learned Presiding Officer, DRT-I, Chennai. It is further submitted relying on the decision of the Hon’ble High Court of Madras, in Indian Bank Vs. M/s. Punjab National Bank, reported in AIR 2010 Madras 84, that when a mortgage had been created on the basis of certified copies of the title documents and on the basis of original title documents, the mortgage created on the basis of the original title documents has priority of right in claiming debt recovery.
On the other hand, it is the submission of the Learned Counsel for the first Respondent that the issue is with regard to the enforcement of right against the same security interest among two or more Banks. When that be the issue, the same has to be resolved as required under Section 11 of the SARFAESI Act, 2002, by referring the matter to the arbitration. In support of his submission, he pressed into service the decision of the Hon’ble Supreme Court of India in Bank of India Vs. M/s. Sri Nangli Rice Mills Pvt. Ltd., reported in 2025 Supreme (Online)(SC) 4160.
Admittedly, at least three Banks i.e., Indian Bank, Bank of Baroda and State Bank of India, claim that they are in possession of the original title document, namely the sale deed in favour of Respondent No.4, which was used for creation of mortgage in favour of each of these Banks. The Appellant, being the Auction Purchaser, produced copy of the sale deed dated 16.03.2005, i.e. the sale deed executed by Mrs. S. Kalyani in favour of Respondent No.4, M. G. Karunanidhi, in this case. The copy of the sale deed dated 16.03.2005 produced by the first Respondent is made available at pages 82 to 92. The copy of the sale deed produced by Respondent No.2 is made available at pages 93 to 118, and the copy of the sale deed produced by the Appellant is made available at pages 188 to 198. Apart from these documents, the Appellant produced a certified copy obtained from the concerned Sub-registrar Office by the Learned Advocate Commissioner appointed by DRT-I, Chennai. This copy of the sale deed is available at pages 119 to 133. On instructions, the Appellant produced the original sale deed dated 16.03.2005 delivered to him by the Respondent No.3, along with a colour xerox copy. This Tribunal summoned the original sale deed dated 16.03.2005 produced by Respondent No.4 to the first Respondent, Indian Bank, for creation of the mortgage at the time of availing the loan.
The comparison of these sale deeds would show that the colour xerox sale deed, compared with the original produced by the Appellant, xerox sale deed produced at pages 188 to 198, tally with the certified copy of the sale deed obtained by the Advocate Commissioner and available at pages 119 to 133. The 2nd Respondent has not produced the registration/ certified copy of sale deed for comparison, to ascertain whether the copy of sale deed produced by it conform to and tally with the certified copy of the sale deed obtained from the Sub-Registrar Office. This certified copy of the sale deed available at pages 119 to 133, obtained from the Sub-Registrar Office is a xerox certified copy. It is not a handwritten certified copy. The fact that the original sale deed, colour xerox and xerox copy of the sale deed produced by the Appellant conforms to and tallies with the certified copy of the sale deed obtained from Sub-Registrar Office in all aspects, without any minuscule change, would go to prove that the sale deed produced by the Appellant is the original sale deed.
This Tribunal noticed the following discrepancies between the certified copy of the sale deed obtained by the Advocate Commissioner and the copies/original sale deeds produced by first Respondent and Respondent No.2. The same are extracted hereunder:-
“I. Notable differences in the sale deed produced by the 1st Respondent when compared with the copy of the sale deed obtained by Advocate Commissioner and original sale deed produced by the Appellant.
Page 1
1.The signatures of M.G. Karunanidhi and S. Kalyani differ slightly in their angle.
o M.G. Karunanidhi’s signature is upward-slanting in the original sale deed, whereas the signature appearing in the sale deed produced by R1 is different in its angle.
o In the case of S. Kalyani’s signature, there is a difference in the space or gap between the signature and the contents of the sale deed when compared with the original sale deed.
2.The purchaser’s name at the top and the stamp value of Rs. 1,000/- are written in different handwriting, and the stamp vendor’s signature also differs from that in the original sale deed.
3.The seal are in different position.
4.The address mentioned in the original sale deed is “No. 15, KAT Colony, Valapalayam, Chennai – 26.” However, the sale deed produced by R1 contains a different address, namely, “No. 64, Bharathidasan Nagar, Okkarai, near Military Road, Kancheepuram – 2.”
5.The seal in the original document shows a different location:
o Original sale deed :Mambalam–Guindy
o Sale deed produced by R1:Egmore–Nungambakkam
6.The structure of the content in the 2nd paragraph is different compared to the original sale deed.
7.The original sale deed contains the PAN number, whereas no PAN number is mentioned in the sale deed produced by R1.
8.The total number of pages is different:
o Original: 12 pages
o RI’s document: 11 pages
Page 2
1.The signatures of M.G. Karunanidhi and S. Kalyani differ slightly in angle.
2.The left thumb impression differs in size compared to the original sale deed.
3.The address mentioned in R1’s document is different, i.e., “No. 64, Bharathidasan Nagar, Okkarai, near Military Road, Kancheepuram – 2 in page 1,” whereas on Page 2 of the same document, the address is mentioned as “No. 15, KAT Colony, Valapalayam, Chennai – 26,” as stated in the original sale deed.
4.The space between the signatures and the seal of the Sub-Registrar is different.
5.The structure of the note regarding the number of copies is different.
6.In the original, the Sub-Registrar has signed at the bottom, whereas in the sale deed produced by R1, the Registrar has signed.
Page 3
1.The signatures of M.G. Karunanidhi and S. Kalyani differ slightly in angle compared to the original.
2.The name of the purchaser at the top is written in different handwriting.
3.The seal affixed on this page differs from the original sale deed in both its location and position.
4.Stamp Vendor’s signature is totally different
5.In the original sale deed, S. Kalyani's signature is under the seal, whereas in the fake sale deed, the signature is to the top right of the seal.
Page 4
1.The signatures of M.G. Karunanidhi and S. Kalyani differ from those in the original sale deed, including a slight difference in their angle.
2.The purchaser’s name at the top is written in different handwriting, and the stamp value Rs 1000 written by the vendor also differs from the original sale deed.
3.The seal affixed on this page differs from the original sale deed in both its location and position.
4.Stamp Vendor’s signature is in totally different
5.On Page 4, the word “Encumbrances” is smudged in R1’s document, whereas it is clear in the original sale deed.
Page 5
1.The signatures of M.G. Karunanidhi and S. Kalyani differ from those in the original sale deed, including a slight difference in their angle.
2.The purchaser’s name at the top is written in different handwriting, and the stamp valueRs1000 written by the vendor also differs from the original sale deed.
3.The seal affixed on this page differs from the original sale deed in both its location and position.
Page 6
1.In the original, S. Kalyani's signature is to the left of the seal, whereas in the sale deed produced by R1 document, it is to the right of the seal.
2.The purchaser’s name at the top is written in different handwriting, and the stamp value Rs1000 written by the vendor also differs from the original sale deed.
Page 7
1.In the original, S. Kalyani's signature is close to the the seal, whereas in the sale deed produced by R1 document it is to the right side of the seal.
2.The name of the purchaser at the top is written in different handwriting.
3.A stamp paper of ₹500 is used in the original, whereas a stamp paper of ₹1,000 is used in the fake sale deed.
4.The spacing after the emblem and the content is different compared to the original sale deed.
Page 8
1.In the original, S. Kalyani's signature is close to the the seal, whereas in the sale deed produced by R1 document it is to the right side of the seal.
2.The name of the purchaser at the top is written in different handwriting.
3.A stamp paper of ₹500 is used in the original, whereas a stamp paper of ₹10 is used in the fake sale deed.
4.The spacing after the emblem and the content is different compared to the original sale deed.
5.The stamp vendor’s signature and document number and date are different compared to the original sale deed:
o Original: 16192 / 16.03.2005
o R1’s sale deed : 15611 / 07.03.2005
Page 9
1.In the original sale deed, S. Kalyani’s signature is positioned below the seal, whereas in the sale deed produced by R1 document, the signature is positioned slightly to the right side of the seal.
2.The name of the purchaser at the top is written in different handwriting.
3.In the schedule of the property, the spacing between “East” and “West” is different in the fake document compared to the original.
Page 10
1.The signatures of M.G. Karunanidhi and S. Kalyani differ slightly in angle.
2.The name of the purchaser at the top is written in different handwriting.
Page 11
1.The name of the purchaser at the top is written in different handwriting.
2.The signatures of the witnesses and the names appearing beneath them differ from those in the original sale deed.
3.The signatures of the vendor and purchaser also differ from those in the original sale deed.
4.The space between the name and address of the person typed is different compared to the original sale deed.
5.The space between the notary seal and signature and the document seal is different compared to the original sale deed.
II. Notable differences in the sale deed produced by the 2nd Respondent when compared with the certified copy of the sale deed obtained by Advocate Commissioner and original sale deed produced by the Appellant.
Page 1
1.The signatures of M.G. Karunanidhi and S. Kalyani differ from those in the original sale deed in both their style and angle.
2.The purchaser’s name at the top and the stamp value of Rs. 1,000/- are written in different handwriting, and the stamp vendor’s signature also differs from that in the original sale deed.
3.The seal are in different position
4.The seal in the original document shows a different location:
o Original: Mambalam–Guindy
o R2 sale deed : Egmore–Nungambakkam
5.The PAN number is different:
o Original: AHJPG4443M
o R2 sale deed: AHJPG444M
6.The total number of pages is different:
o Original: 12 pages
o R2 sale deed : 11 pages
Page 2
1.The signatures of M.G. Karunanidhi and S. Kalyani differ slightly in both their style and angle.
2.The left thumb impression differs in size compared to the original sale deed.
3.The space between the signatures and the seal of the Sub-Registrar is different.
4.The structure of the note regarding the number of copies is different.
5.In the original, the Sub-Registrar has signed at the bottom, whereas in the other document, the Registrar has signed.
Page 3
1.The signatures of M.G. Karunanidhi and S. Kalyani differ slightly in slightly in both their style and angle compared to the original.
2.The seal affixed on this page differs from the original sale deed in both its location and position.
3.The name of the purchaser at the top is written in different handwriting.
4.In the original sale deed, S. Kalyani's signature is below the seal, whereas in the sale deed produced by R2, the signature is to the top right of the seal.
Page 4
1.The signatures of M.G. Karunanidhi and S. Kalyani differ slightly slightly in both their style and angle.
2.The name of the purchaser at the top is written in different handwriting.
Page 5
1.The signatures of M.G. Karunanidhi and S. Kalyani differ slightly in both their style and angle.
2.The name of the purchaser at the top is written in different handwriting.
3.The signature of S. Kalyani and the document number seal are centrally positioned in R2’S sale deed, whereas in the original sale deed, both are positioned slightly towards the right.
Page 6
1.In the original, S. Kalyani's signature is to the left of the seal, whereas in the other document, it is to the right of the seal.
2.The purchaser’s name at the top is written in different handwriting, and the stamp value Rs1000 written by the vendor also differs from the original sale deed.
3.The stamp vendor’s signature is completely different from the signature appearing in the original sale deed.
Page 7
1.In the R2 sale deed, S. Kalyani's signature is closer to the seal, compared to the original.
2.The name of the purchaser at the top is written in different handwriting.
Page 8
1.The signatures of S. Kalyani and M.G. Karunanidhi in the R2 sale deed are different from those in the original sale deed.
2.The name of the purchaser at the top is written in different handwriting.
Page 9
1.In the original sale deed, S. Kalyani’s signature is positioned below the seal, whereas in the sale deed produced by R1 document, the signature is positioned slightly to the right of the seal.
2.The name of the purchaser at the top is written in different handwriting.
3.In the schedule of the property, the spacing between “East” and “West” is different in the R2 sale deed document and to the original.
Page 10
1.The name of the purchaser at the top is written in different handwriting.
2.The signature of the witness is different compared to the original.
Page 11
6.The name of the purchaser at the top is written in different handwriting.
7.The signatures of the witnesses and the names appearing beneath them differ from those in the original sale deed.
8.The signatures of the vendor and purchaser also differ from those in the original sale deed.
9.The space between the name and address of the person typed is different compared to the original sale deed.
10.The space between the notary seal and signature and the document seal is different compared to the original sale deed.”
Though this Tribunal is not an expert in comparison of handwriting and fingerprints, certain aspects can be compared even by a layman. Section 73 of the Indian Evidence Act empowers the Court to compare a signature, writing or seal admitted by a person and proved to the satisfaction of the Court with the disputed signature, writing or seal which is to be proved. Accordingly, this Tribunal compared signatures, writings and seals, and confirmed the aforesaid discrepancies. These discrepancies point to the only conclusion that the sale deed produced by the Appellant, alone is the original and genuine sale deed, and the copies of the sale deeds produced by the Respondents 1 and 2 are not the original and genuine sale deeds.
Be that as it may, merely because Respondent No.4 had produced the fake, forged and fabricated sale deeds to the Respondent Nos. 1 and 2 for creation of mortgage, whether the Respondent Nos. 1 and 2 are barred from proceeding against the security interest? the answer to this question is an emphatic NO. Even as per the decision cited by the Learned Counsel for the Appellant in Indian Bank Vs. M/s. Punjab National Bank, case, the Hon’ble High Court held that:
(i)The Indian Bank had accepted the certified copies of the original title deeds i.e., sale deed and the registered Will at the time of creation of the equitable mortgage.
(ii)There is nothing to indicate that Indian Bank had taken any care at the time of creation of mortgage to investigate as to why the original title deeds were not produced.
(ii)Affidavit to the effect that the original title deeds were lost was given by the owner after about two months for creation of equitable mortgage.
Therefore, the Hon’ble High Court upheld the decision of the DRAT that the Indian Bank had not taken proper care and caution while accepting the certified copies of the sale deed and the Will for creation of the equitable mortgage. In substance, as the mortgage was created with the Punjab National Bank by deposit of the original title document, it was held that the Punjab National Bank was entitled to have priority as contemplated in Section 78 of the Transfer of Property Act.
Here, in this case, it is not a question of creation of mortgage by Respondents 1 and 2 with the help of certified copies of the documents. Respondent No.4 produced a fake, forged and fabricated sale deed which looked like the original sale deed for creation of an equitable mortgage with Respondents 1 and 2. On a bare look, the original sale deed produced by the Appellant and the original sale deed produced by Respondent No.1 before DRT-I, Chennai, and summoned by this Tribunal, appears identical except for the aforesaid differences/discrepancies etc. It is very difficult for any Bank officer, to say, on the face of it, even to doubt that document produced by the first Respondent is a fake, forged and fabricated document. One thing is clear, Respondent No.4 intended to create a mortgage in favour of the Respondent 1 and 2 Banks for availing loan, of course, by producing the fake, forged and fabricated sale deed with Respondents 1 and 2. Therefore, they cannot be denied remedy on the basis of the mortgage created for availing the loan.
In this context, it is pertinent to discuss the decision of the Hon’ble Supreme Court of India in Bank of India Vs. M/s. Sri Nangli Rice Mills Pvt. Ltd., reported in 2025 Supreme (Online)(SC) 4160. The facts of this case in brief are that, the appellant in this case is Bank of India, the first respondent M/s Sri Nangli Rice Mills Pvt. Ltd. is a manufacturing unit dealing in rice and other allied products and it is the borrower with Appellant. The respondent No. 2 is Punjab National Bank. The respondent no. 3 is National Bulk Handling Corporation and it is the collateral manager of the respondent Punjab National Bank. The borrower had availed credit facility from the appellant bank on 31.07.2003 by hypothecating stocks of paddy and other assets. These securities were hypothecated with appellant. A Credit Facility Agreement dated 23.09.2006 was executed between the borrower and the appellant. There is a condition that the borrower shall not avail any credit facility or loan from any other Bank or Financier until the borrower repays the amount.
Despite that, the borrower availed credit facility from the respondent bank and an Agreement of Advance / Pledge Agreement was executed on 06.12.2013 between the borrower and the respondent bank. The respondent bank addressed a letter dated 16.09.2014 to the appellant bank seeking for the credit information report in respect of the warehouse receipts. This letter was not responded by the Appellant, and thereafter, the respondent bank enhanced the credit facilities.
Since the borrower defaulted in paying the loan amount, appellant bank conducted an inspection of the stocks of paddy and rice that were hypothecated in 2015 and it discovered that the pledge tags of the respondent bank had been affixed on the said security. Appellant bank sent a letter to the respondent bank on 02.04.2015 seeking details of the credit facilities. After series of correspondences between two banks, appellant bank classified the account of the borrower as NPA on 31.09.2015, and issued a Demand Notice dated 17.10.2015 under Section 13(2) of the SARFAESI Act, 2002. Appellant also filed a Civil Suit in CS No. 127/2015 before the Civil Judge, Senior Division, Gurdaspur, and that came to be dismissed on 11.11.2021 as infructuous.
In the interregnum, the Appellant filed an Application under Section 14 of the SARFAESI Act and that Application was partly allowed permitting the appellant bank to take physical possession of the secured asset except the stocks of paddy and rice pledged with the respondent bank. Aggrieved against this order, the appellant bank filed a Writ Petition in CWP–COM No. 177/2017 before the Hon’ble High Court. The Hon’ble High Court by its order dated 26.05.2017, directed the appellant to approach the DRT and dismissed the Writ Petition as withdrawn.
Accordingly, the appellant bank filed SA 285/2017 before DRT-I, Chandigarh, challenging the order passed under Section 14 of the SARFAESI Act, 2002. The DRT passed an interim order on 14.06.2017 permitting the appellant and the respondent banks to conduct a joint sale of the secured asset to facilitate realization of maximum amount. Then, by final order dated 10.11.2017, the DRT allowed the SA on the ground that the charge created in favour of appellant bank by way of hypothecation over stocks of paddy and rice was prior in point of time, and thus, would take precedence over the subsequent charge created in favour of the respondent bank by way of pledge.
Against this order, the respondent bank filed an Appeal No. 500/2017 before DRAT and the DRAT held that the DRT failed to take into consideration the preliminary objection raised with regard to maintainability of the Application under Section 17 of the SARFAESI Act, 2002, and thus, remanded the matter back to the DRT for deciding the matter afresh.
When the matter was considered afresh on remand, the DRT by its order dated 12.02.2020 held that it has no jurisdiction to adjudicate the dispute since the controversy pertained to competing claims between two Banks over the same secured asset. The dispute has to be adjudicated by way of arbitration in terms of Section 11 of the SARFAESI Act, 2002 by approaching the competent authority by seeking appointment of arbitrator by filing application under Section 11 of the Arbitration and Conciliation Act. Thus has directed the parties to approach the Hon’ble High Court. Aggrieved against this order, the Appellant filed CWP No. 13538/2020 (O&M), wherein the Hon’ble High Court confirmed the order of DRT and dismissed the Writ Petition.
In the Appeal filed before the Hon’ble Supreme Court of India, the following issues arose for determination:-
I. What is the scope of Section 11 of the SARFAESI Act? In other words, what is the meaning of the expression “any dispute relating to securitisation or reconstruction or non-payment of any amount due including interest” occurring in Section 11 of the SARFAESI Act?
II. What is the significance of the expression “arises amongst any of the parties, namely, the bank or financial institution or asset reconstruction company or qualified buyer” used in Section 11 read with Section 2 of the SARFAESI Act? What is the underlying object behind prescribing arbitration for the adjudication of disputes between a bank, financial institution, asset reconstruction company or qualified buyer, in Section 11 of the SARFAESI Act?
III. Whether the existence of a written arbitration agreement between the parties is required for the purpose of resolution of disputes under Section 11 of the SARFAESI Act, 2002? In other words, is there any conflict between the decisions of Oriental Bank of Commerce (supra) and Federal Bank (supra)?
IV. Whether Section 11 of the SARFAESI Act, 2002 should be construed as mandatory or directory in its nature?
During the course of discussion, it is observed in para 63 that the scope and ambit of Section 11 have been limited or confined by the twin conditions laid therein, that have to be satisfied in order to attract the said provision:
(I)Where the dispute arises between:
a. any bank;
b. any financial institution;
c. any asset reconstruction company;
d. any qualified buyer; and
(ii)Where the dispute relates to:
a. securitization of financial assets;
b. reconstruction of assets;
c. non-payment of any amount due and / or interest
In para 66, it is observed that the kind of disputes that may arise from the scheme of SARFAESI Act, broadly fall into two categories:-
(i)disputes in relation to the recovery proceedings or measures taken under the said Act and
(ii)disputes pertaining to any rights or claims in respect of the secured asset.
The former disputes concern only the secured creditor and the borrower. However, the latter disputes are specific in respect of the secured asset or security interest, the nature of dispute is not in relation to the manner of recovery but rather the manner of apportionment of the recovery proceeds. Such disputes arise and concern the secured creditors that are covered under the SARFAESI Act, namely banks, financial institutions, asset reconstruction companies and qualified buyers. Thus, the legislature keeping the aforesaid distinction in mind, incorporated the provisions of Section(s) 11 and 17 of the SARFAESI Act, for resolution of disputes pertaining to any rights or claims in respect of the secured asset and disputes in relation to the recovery proceedings or measures taken thereunder, respectively.
In para 77, it was observed as follows:-
In cases, involving two banks acting as creditors, a dispute may not arise directly between the banks due to the “non-payment of any amount” they owe to each other. Instead, disputes typically emerge because of the borrower’s failure to discharge their debt obligations. For instance, if a borrower defaults on repayment after availing of credit facilities extended by two banks, issues of non-payment of loan amounts (including interest) owed by the borrower, the same may lead to a dispute. Such a dispute is likely to concern the priority of charges over the borrower’s assets, especially in situations where the borrower has secured loans from both banks by mortgaging the same property. In the present case, the question of priority arises due to the simultaneous loans extended by the appellant and respondent banks and the creation of charges over the same security.
In para 79, it is observed that the dispute stems from the borrower’s failure to discharge their debt obligations, including the amounts they were bound to pay to the banks. This non-payment gives rise to a conflict between the creditors regarding the hierarchy of their respective charges over the borrower’s assets. Consequently, the issue of priority of charge is inherently and intrinsically linked to the borrower’s “non-payment of any amount due” as contemplated under Section 11 of the SARFAESI Act. This provision, therefore, would undoubtedly bring such disputes within its ambit, and thereby mandate resolution of such disputes through conciliation or arbitration as prescribed under the Act, 1996.
The Hon’ble Supreme Court, while answering these issues raised, after referring to several precedents on this issue, finally came to the following conclusion:
(i)Section 11 of the SARFAESI Act deals with resolution of disputes relating to securitisation, reconstruction or non-payment of any amount due between the bank or financial institution or asset reconstruction company or qualified buyer.
(ii)In order to attract the provision of Section 11 of the SARFAESI Act, twin conditions have to be fulfilled being; first, the dispute must be between any bank or financial institution or asset reconstruction company or qualified buyer and secondly, the dispute must relate to securitisation or reconstruction or non-payment of any amount due including interest. Where the aforesaid two conditions are found to be prima-facie satisfied, then the DRT will have no jurisdiction and the proper recourse would only be through Section 11 of the SARFAESI Act read with the Act, 1996.
(iii)The expression “non-payment of any amount due, including interest” used in Section 11 of the SARFAESI Act is of wide import and would include a various range of scenarios of ‘disputes’ connected to unpaid amounts including those arising due to third-party defaults, such as indirect defaults of the borrowers.
(iv)Any dispute between two banks, financial institutions, asset reconstruction companies or qualified buyers etc., where the jural relation between the two is of a lender and borrower, then Section 11 of the SARFAESI Act will have no application whatsoever. The use of the phrase “any person” in the definition of ‘borrower’ in Section 2(f) of the SARFAESI Act, makes it abundantly clear that even a bank, financial institution or asset reconstruction company or qualified buyer can be considered a borrower, if they receive financial assistance from a bank or financial institution etc by providing or creating a security interest. Thus, a lender-turned-borrower would also fall within the scope of a “borrower” under the SARFAESI Act and shall be governed by the same statutory framework as any ordinary borrower.
(v)Section 11 of the SARFAESI Act, provides for a statutory arbitration for any dispute mentioned therein between any of the parties enumerated thereunder. There is no need for an explicit written agreement to arbitrate between such parties in order to attract Section 11 of the SARFAESI Act. The said provision creates a legal fiction as regards the existence of an arbitration agreement notwithstanding whether such agreement exists or not in actuality.
(vi)Section 11 of the SARFAESI Act is mandatory in nature. The use of the word “shall” therein, the mandate of the said provision cannot be bypassed or subverted by the parties by seeking recourse elsewhere.
Respondent No.4, borrower, availed loan facilities from Respondents 1 to 3 on the basis of his title document. However, the title document produced with Respondent No.3 proved to be true and genuine, and the title document produced with Respondent Nos. 1 and 2 are found to be not genuine documents. Respondent No.4 produced look alike title documents which were not originals/ but forged and fake document with Respondents 1 and 2, with an intention of creating a mortgage for the purpose of availing loan facilities. Respondent No.4 defaulted in repayment of the loans availed from these Banks. Therefore, there is a dispute arises with regard to the enforcement of right against the security interest among these Banks. This dispute, as per the dictum laid down by the Hon’ble Supreme Court extracted hereinabove, has to be necessarily adjudicated as required under Section 11 of the SARFAESI Act, 2002.
In the case before hand the property was sold in favour of the Appellant in an auction held under the SARFAESI Act, 2002, by the Respondent No.3, State Bank of India. Therefore, the probable issue arises for consideration under Section 11 of the SARFAESI Act, 2002, is as to who has priority in apportionment of sale price, and in what proportion among Respondents 1 to 3? To resolve these issues and/or other issues that may crop up, this Tribunal directs Respondents 1 to 3 to agree on a mutually acceptable arbitrator or approach the appropriate authority under Section 11 of the Arbitration and Conciliation Act, 1996, for appointing an arbitrator to decide the matter by arbitration as provided under the Arbitration and Conciliation Act, 1996.
The sale in favour of the Appellant is not challenged by any of the litigating parties. Therefore, the sale in favour of the Appellant and the right accrued out of sale, is confirmed. If the Appellant is in possession of the secured asset, such possession is also protected.
In terms of above, the Appeals in RA (SA) 144/2017 and RA (SA) 70/2019 are disposed of. Both the parties shall bear their own costs. All pending IAs, if any, stand closed.