G.R. Malhotra And Ors vs Canara Bank And Ors

The appellants, who are husband and wife, and before the Tribunal below(DRT) are the Security Applicants having filed An application(being S.A.No. 61/2008) under Section 17(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002('SARFAESI Act') to save their property from being sold by way of public auction by the respondent no.1 Bank claiming the same to have been mortgaged in its favour by respondent no.3 herein, to secure the repayment of loan of Rs.15 lacswhich had been granted by the respondent no.1 Bank to respondent no.4, proprietorship concern of respondent no.2, husband of respondent no.3, in the year 2002. The respondent no.1 Bank was selling the said property to recover over a croreof rupees since it had been enhancing the loan limit from time to time and the original mortgagor was allegedly extending the mortgage to all subsequent enhanced limits as well.

The appellants claimed in their S.A. that they were bona fide purchasers of the mortgaged property in question i.e. first floor of house no. 401, Gagan Vihar, New Delhi that after they had purchased the mortgaged property on 07.11.2003 by way of a registered sale deed the bank could not have enhanced the loan limits on the security of that property in Gagan Vihar and consequently it was not a secured creditor for the enhanced limits. This appears to be the main plea though some other pleas also were raised. They claimed that even if is held that they were not bona fide purchasers still they had a right to challenge the enhancements on loan limits sanctioned by the bank in favour of its borrower were not justified and were as a result of fraud and conspiracy between the borrower/mortgagor and bank officers. These very submissions were made at greater detail during the course of hearing by appellants' learned senior counsel Mr.Rajeeve Mehra.

The respondent no.1 Bank in its reply to the S.A. had primarily opposed the S.A. on the ground that the sale deed executed by its mortgagor, respondent no. 3 Rashmi Srivastava, in favour of the appellants in respect of the mortgaged property was a sham document created by these persons in collusion with each other in order to cheat the Bank. Learned counsel for the bank Ms.Seema Gupta reiterated the same stand during the course of hearing of this appeal.

After completion of pleadings both the parties adduced their evidence before the learned DRT by way of affidavits. Thereafter, the learned DRT fixed the matter for final arguments, when the appellants moved an application before the learned DRT seeking permission to cross-examination the witness of the bank whose affidavit had been filed. That application of the appellants, however, came to be rejected by the learned DRT vide impugned order dated 07.03.2016.

Feeling aggrieved, appellants (security applicants) have filed the present appeal challenging the rejection of their application filed before the learned DRT for permission to cross-examine banks witness.

The impugned order of the learned DRT reads as under:-

"IA No.125/2015

By this order I well dispose off an IA moved by the applicants praying for permission to cross-examine Shri K.R. Prabhakaranrao, Chief Manager of the respondent bank.

I have heard the Ld. Counsel for the parties and perused the record.

Ld. Counsel for the applicants argued that applicants are neither the borrowers nor guarantors nor any loan was disbursed by respondent No.2 to them and that they are the bonafide purchasers of property bearing No. 401, First Floor, Gagan Vihar, New Delhi (hereinafter referred to as the property in question) having purchased the same from Smt. Rashmi Srivastava wife of Shri Raj Kamal vide sale deed dated 7.11.2003; that at the time of purchase of the property in question they were assured by Smt. Rashmi Srivastava that the property is free from all sorts of encumbrances and were also shown the original sale deed in favour of Smt. Nirmal Kaur. However the respondent No. 3 avoided to give the original sale deed stating that the original papers had been lost in a fire in their office. He further argued that at the time of mortgage the applicant bank did not obtain proper valuation of the property in question nor inspected the property in question. He further submits that the OCC limited granted by the respondent bank to the borrower is more than the value of the property in question and that the bank has violated the guide lines issued by the Reserve Bank of India. He further submitted that without obtaining the fresh valuation report the bank has enhanced the loan amounts fromtime to time and as such the cross-examination of the witness is necessary to arrive at a just decision of the case. He further contended that the applicants have already lodged a complaint with the police against the seller and the bank officials in which charge sheet has been filed against the Manager of the Bank. In support of his contention he relied upon a judgment Sonu Textile & Others Vs. Punjab National Bank decided by Allahabad High Court on 11.10.2007 and S.P. Kanaudia and Another Vs. Chairperson, DRTW.P. No. 21491 of 2006 decided on 18.04.2007 and contended that the cross examination of the witness is necessary.

Rebutting the arguments of the Ld. Counsel for the applicants the Counsel for the respondent bank submitted that mortgage was created by the respondent No.3 on 15.07.2002 whereas the sale deed was created by the respondent No.3 in November 2003, therefore, the bank has the prior change on the property in question and the applicants were well aware of the action being taken by the respondent bank under the filling of the SA and it is only after the bank has initiated action against the property in question, the applicants filed the FIR and approached this Tribunal. He further contended that the documents were filed by the respondent bank long back but the application under consideration has been filed only at the fag end of the case when it has been listed for final arguments and that it is nothing but a delaying tactic to halt the recovery of the public money. He prayed that the application of dismissed.

I have considered the rival submissions advanced by the Ld. Counsel for the parties and perused the record. It is a matter of record that the Hon'ble High Court vide order dated 6.5.2015 passed in WP(C) 3459/2011 has allowed the applicants to amend their S.A. The points agitated by the applicants in the present IA have already been permitted by this Tribunal to incorporate in the amendment S.A.

The claim of the respondent bank is a documented claim and I am of the view that no fruitful purpose would be served by allowing the applicants to cross examine the witness of respondent bank. Enhancement of OCC limit by the respondent bank is a matter of record and whether the same has been enhanced rightly or wrongly is a matter of argument. Admittedly, the original title deeds are not available with the applicants. Bank has to prove its case on the basis of his own documents and the applicants have to prove their case on the basis of their own documents.

Proceedings under the SARFAESI Act, 2002 are summary proceedings. Judgments relied upon by the applicants are not applicable in the present facts and circumstances as in the present S.A., the applicants has already been allowed to incorporate all the facts relevant to the matter. Thus, I do not find any merit in the present IA and same is hereby rejected.

List the case for final arguments on 06.04.2016."(Highlighting is mine)

After giving my thoughtful consideration to the entire aspect of the matter, including the submissions made at the Bar, I have come to the conclusion that the request of the appellants (security applicants) that they should be permitted to cross-examine the respondent Bank's witness who has filed his affidavit is not justified in the facts and circumstances of the case. As observed already, the real grievance of the appellants is that they had purchased the property in question from the Bank's mortgagor after creation of the equitable mortgage. They had purchased the property in November 2003 when the debt of the Bank was around Rs.15 lacs. The stand of the Bank is that the sale deed dated 7.11.2003 executed by its mortgagor in favour of the appellants was a sham transaction. This defence plea shows that the Bank is not claiming that it had no knowledge of that sale deed in favour of the appellants. As far as its plea that the sale in favour of the appellants was a sham is concerned, it has to be established by the Bank that it was so and consequently the mortgagor had a right to continue to extend the original mortgage which was created for a sum of Rs.15 lacs only to enhancements of loan limits sanctioned by the Bank, which were all after execution of the registered sale deed by the mortgagor in favour of the appellants. Therefore, it can be seen by the DRT whether without getting the sale deed in favour of the appellants declared to be a sham document can appellants be fastened with any liability on the basis of enhanced loan limits sanctioned by the Bank. The Bank has not claimed in its written statement that the sale deed dated 7.11.2003 in favour of the appellants was not within the knowledge of the officer who had sanctioned the enhanced limits. In these circumstances, I am of the view that there is no necessity of cross-examining the Bank's witness. The DRT can always decide these questions on the basis of legal arguments to be raised before it from both sides. The DRT will also have to decide whether Smt.Rashmi Srivastava was left with any right or title in the property in question after having sold the same to the appellants, to extend the mortgage of that property in favour of the Bank for enhanced limits.

For the foregoing reasons, this appeal is dismissed.

DRT records be sent back forthwith along with a copy of this order.