HDFC Bank vs Naveen Kondal Nalla

Anil Kumar Srivastava, Chairperson

THE APPELLATE TRIBUNAL :

Instant appeal has arisen against an order dated 22nd June, 2022 passed by Learned DRT-1, Hyderabad in S.A. 178 of 2019 (Naveen Kondal Nalla -vs- The Authorised Officer, Housing Development Finance Corporation) whereby the SARFAESI Application was allowed and all the proceedings against the secured assets were quashed. Auction conducted on 30th June, 2019 was also set aside and the Bank was directed to redeliver the secured assets to the Applicant.

According to the pleadings, the SARFAESI Applicant, Naveen Kondal Nalla (hereinafter referred to as Applicant), is an NRI staying in USA. Sri Vallala Yashodhar is the co-brother of Applicant and Mr. K. Ramesh is the father-in-law of the Applicant and Mr. Vallala Yashodhar. Sri Vallala Yashodhar, the co-brother of Applicant, who is engaged in construction/real estate business under the name and style of Sree Lakshmi Ganapathi Developers Private Limited, developed a venture by name "Granada Project” in Sy No.18 P, 67 P & 70P situated at Mandaipally Pothalpally, Shameerpet Mandal, Ranga Reddy District. Applicant entered into an Agreement for Construction on 18th April, 2007 with M/s. Sree Lakshmi Ganapathi Developers Private Limited for construction of a villa. The project was approved and financed by Respondent Bank. Since the Applicant was staying in USA, Sri V. Yashodhar introduced the Applicant to Respondent Bank for housing loan. The Applicant clearly mentioned in his application that his father, Mr. Nalla Bhaskara Rama Murthy, will be his power of attorney holder. The Applicant executed Power of Attorney on 6th August, 2007 in favour of his father Nalla Bhaskara Rama Murthy and got the same notorized and attested by Consulate at USA. He sent the Power of Attorney to Vallala Yashodhar. The copy of the Power of Attorney, dated 6th August, 2007, executed by Applicant in favour of his father, was re-attested by Indian Consulate San Francisco USA on 27th July, 2010. Thereafter, the Applicant did not receive any information regarding sanction of credit facility by Respondent Bank. Subsequently, Applicant came to know that the Power of Attorney was manipulated and was executed in favour of his father and was misused by Mr. Vallala Yashodhar in collusion with K. Ramesh, father-in-law of the Applicant. Complaint was lodged by the Applicant’s father, being F.I.R. No. 684 of 2019 under Sections 420, 468, 471 IPC dated 6th December, 2020.

Under the orders from VI MM Cyberabad Court at Medchal, L.R. District No. 432/2011 dated 9th March, 2011 the original General Power of Attorney was handed over to the Inspector of Police, Alwal, Cyberabad dated 16th March, 2011 which was duly sent to the Forensic Laboratory, Hyderabad wherein in report was given that "There are obliterations in red enclosed portions marked Q1 and Q2 original writings deciphered as "Bhaskara Rama Murthy Nalla in Q1 and 10-1-31/A, Moberlypeta, Amalapuram – 533 201, AP, India as Q2".

When the Applicant came to know about the manipulation, he sent e-mail to the Bank which was also duly replied by the Bank. In spite of that Bank disbursed Rs.10.00 lac to the Builder in collusion with Vallala Yashodhar. Cheques were issued in the name of the Builder; while, as per agreement, cheques should have been issued in the name of the borrower. When the Builder used the fund, received on account to pay the pre-EMIS for Granada project, Respondent Bank funded an amount of Rs.4.00 crore plus, while the officials were fully aware of existence of both loans. Notice under section 13(2) of the Act was issued on 15th April, 2010. Since Applicant failed to pre-equate the monthly interest, the account became N.P.A. A sum of Rs.26,62,431.00 was demanded.

Respondent Bank filed written statement and contended that Applicant approached the Bank for financial assistant of Rs.30.00 lac for a term of 20 years on 14th September, 2007 which was sanctioned on 20th September, 2007, as per terms and conditions, set out in the Loan Agreement dated 1st October, 2007, against the loan application duly signed by the Applicant giving his local address “10-1-31/A, G. Dharma Rao Street, Moberlypeta, Amalapuram”. It was submitted by the Bank that General Power of Attorney was executed by the Applicant in favour of K. Ramesh and V. Yashodhar on 6th August, 2007. An amount of Rs.25.00 lac was disbursed to the Developer but subsequently, the Applicant failed to pay the monthly EMI. Accordingly, the loan was declared N.P.A. Physical possession of the property was obtained on 27th July, 2015. Possession Notice was published in newspaper on 27th July, 2015. Notice under Rule 8 (6) was issued on 7th May, 2019. Auction was fixed on 30th June, 2019. Sale notice dated 17th May, 2019 was sent to the Appellant through RPAD on 21st May, 2019. Auction was conducted on 20th June, 2019. Mrs. Pinjala Nikhila was declared a successful bidder.

Learned Counsel DRT framed the following points for determination:

(1) Whether the Respondent Bank is secured creditor and security interest is created in favour of Respondent Bank?

(2) Whether the Respondent Bank is in order in initiating the SARFAESI procedures?

(3) To what relief?

Learned DRT finds that the Bank failed to establish beyond reasonable doubt that security interest was created in favour of the Respondent Bank. Accordingly the SARFAESI Application was allowed and all the action of the Respondent Bank was quashed.

Feeling aggrieved, Respondent Bank has preferred the instant appeal. I have heard the Learned Counsel for Appellants as well as the Respondents and have perused the record.

Learned DRT has recorded a finding on issues No. 1 and 2 to the effect that the loan documents were executed and mortgage was created by K. Ramesh by way of a fabricated power of attorney hence no security interest was created in favour of the Respondent Bank. Accordingly, Respondent Bank has no legal right to initiate SARFAESI proceedings and consequently, the SARFAESI Application was allowed.

Perusal of the judgment will show that the Learned DRT had based its finding on the opinion of the Forensic Laboratory which was obtained on the signatures of power of attorney. As per the report of the Forensic Laboratory, the Power of Attorney was fabricated and the name of Mr. K. Ramesh was written in place of Bhaskara Rama Murthy Nalla whereas the original Power of Attorney was executed by the Appellant in favour of his father Bhaskara Rama Murthy Nalla. Learned DRT had also placed reliance upon the order of the Hon’ble High Court at Andhra Pradesh that C.P. No. 2570 of 2011 along with C.P. No. 3506 of 2011 whereby the Hon’ble Andhra Pradesh High Court has quashed the criminal proceedings against the officers of the HDFC.

It is no doubt true that the Hon’ble Andhra Pradesh High Court had quashed the criminal proceedings which were initiated on the basis of the First Information Report lodged by the complainant, being Crime No. 683 of 2010 before Alwal Police Station, Cyberabad. As far as charge upon the secured assets is concerned several defence are raised by the Bank in their written statement. One of the submissions is that some repayments were made by the Appellant, Naveen Kondal Nalla. Further, he had sent an e-mail to the Bank asking for changing the name of Power of Attorney Holder. Charge sheet was filed after investigation against the father-in-law of the Appellant. In the appeal original agreement is not filed. All these pleas, which are taken by the Bank before the Learned DRT, have not been considered, rather, the SARFAESI Application is allowed merely on the ground that he Hon’ble Andhra Pradesh High Court has quashed the criminal proceedings against the Bank officers.

As far as opinion of the Forensic Laboratory in the SARFAESI matter is concerned, it was an opinion under Section 45 of the Indian Evidence Act. Further, the Learned DRT has also not considered whether the Appellant has made repayments of loan amount or not? If any repayment is made then how it was made when the Appellant himself is challenging the Power of Attorney being fabricated and fraud? What would be the effect of making repayments? Whether the challenge of the Appellant would be barred by the principles of Estoppel and Acquiescence or not?

Further, Appellant has sent an e-mail message to the Bank that too was not considered. All the e-mails from 28th December, 2007 to 29th December, 2007 should have been considered by the Learned DRT but they were not considered.

Even in the judgment of the Hon’ble High Court, in para 16 it was held that :

“A plain reading of the GPA produced before the HDFC officials indicates that Naveen K Nalla authorised his father-in-law Kodimela Ramesh A-1 to apply for loan under various schemes or Housing Development Finance Corporation Limited, receive loan amounts, create encumbrances over the property in respect of which loan has been availed. The mail messages filed along with the additional material papers for which there is no serious dispute either from the complainant or from Nalla K. Naveen suggest that the loan has been released basing on the GPA dated 10-8-2007. Indeed, as per the e-mail communication dated 28-01-2008, Naveen K.Nalla sought for information from HDFC with regard to possibility of change of GPA holder. The loanee did not raise any objection for release of 1st instalment of Rs.10 lakhs on the date of execution of loan document itself. Therefore, the material brought on record clearly indicate that the officials of HDFC acted bonafidely on the GPA dated 10-8-2007 in releasing the loan amount. There is no deception on the part of the HDFC officials at the time of releasing the loan amounts. If there is any breach of the terms of the loan agreement is releasing the amount, it is a breach of contract simplicitor for which remedy is definitely not by initiating criminal proceedings against the officers of HDFC. In view of the above discussion, I find that continuance of proceedings against the petitioners amounts to abuse of process of Court.”

Learned DRT had passed the judgment on the basis of the finding of the Hon’ble Andhra Pradesh High Court. This finding, as reproduced above, have quashed the criminal proceedings against the Bank officials but as far as liability of the Appellant is concerned, it has to be looked into by the Learned DRT keeping in view the pleadings of the parties.

In the light of the discussions made above, I am of the view that the appeal is liable to be allowed and the matter should be remanded to the Learned DRT, Visakhapatnam for disposal afresh in accordance with law.

ORDER

The appeal is allowed. The judgment of the Learned DRT dated 22nd June, 2020 is hereby set side. Learned DRT is hereby directed to decide the matter afresh in accordance with law after affording an opportunity of hearing to the parties.

No order as to costs.

Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.

File be consigned to Record room.

Copy of the Judgment/Final Order be uploaded in the Tribunal’s Website.

Order pronounced by me in the open Court on this the 7th day of September, 2022.