ICICI Bank Ltd. vs Mahal Buildwell Pvt. Ltd.

P.K. Bhasin, J

The appellant Bank is aggrieved by the order dated 12 August, 2016 passed by the learned Presiding Officer of the Debts Recovery Tribunal-I, Delhi (DRT) in the Securitisation Application (S.A.) filed under Section 17 of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act' in short) titled as "M/s. Mahal Buildwel Ltd. v. ICICI Bank Ltd." whereby the appellant Bank was directed not to take coercive steps against the respondent in respect of the lower Ground Flour/Basement of property No. A-154, Sector-8, Dwarka, New Delhi (hereinafter to be referred as the 'the property in dispute') which the Bank claimed to have been mortgaged in its favour by its owner Sumit Gupta to secure the repayment of some loan facility granted by it to him. The relevant facts are that the respondent Company claiming itself to be the owner of the property in dispute having purchased the same in September, 2012 from its erstwhile owner, 'who now is alleged by the appellant Bank to be the defaulter borrower, filed a petition under Section 17 of the SARFAESI Act on 11.8.2016 in the DRT-I against the appellant herein challenging its action initiated under the SARFAESI Act for taking over physical possession of the property in dispute. In the S.A. the respondent Company had claimed interim relief also against the taking over of physical possession of the property in dispute.

Notice of the S.A. and stay application vas given by the DRT to the Bank for 12th August, 2016 and on that day the leaned Presiding Officer of DRT after hearing both the sides passed the following order:

"12.8.2016

Present

Mr. Vineet Malhotra along with Shri Vishal Gohri, Counsel for applicant

Mr. Puneet K. Bhalla Counsel for respondent Bank.

Learned Counsel for the applicant submits that applicant is the Director of M/s. Mahal Buildwel Pvt. Ltd. and is bona fide purchaser of lower ground floor/basement of the property bearing No. 154, Block-A, Sector-8, Dwarka, New Delhi having purchased the same by way of registered sale deed dated 24.9.2012. He further submits that the applicant is the absolute owner of the said property and has rented out the same to one M/s. Meander Software Pvt. Ltd. and is the only source of income for his livelihood.

He further submits that the respondent Bank has already taken the possession of ground floor of the property in question for the last three months and no further steps have been taken by the Bank. He further submits that the dues of the Bank are approximately Rs. 90 lacs and he is ready to buy the ground floor for Rs. 90 lacs. He further submits, that he is ready to deposit 5% of the said amount within three days and the balance amount will be deposited as per directions of this Tribunal.

Learned Counsel for the respondent Bank vehemently opposes the above submissions of the learned Counsel for the applicant and submits that the entire property is mortgaged with the Bank and the sale deed in favour of the applicant is subsequent to mortgage. He further relied upon the order dated 25.7.2018 passed by this Tribunal in the SA No. 151/2015 filed by the applicant. He further contends that merely by changing the name of the applicant will not change the facts of the case.

Having heard the learned Counsel for the parties and perused the record. Looking to the facts and circumstances of the case and considering the fact that applicant is ready to pay entire dues of the Bank, therefore, the applicant herein is directed to deposit 5% of the amount of 90 lacs within three days with the Registrar of this Tribunal by way of an FDR. The respondent Bank is also directed to file its valuation report of the ground floor of the property in question within a week. Till then no coercive steps be taken against the property in question.

List the case for compliance on 25.8.2016. Dasti."

Feeling aggrieved by this interim order the Bank has filed this appeal under Section 20 of the SARFAESI Act. At the outset, Mr. Puneet Bhalla, learned Counsel for the appellant Bank drew may attention to the order dated 25th July, 2016 passed by the same Presiding Officer in the S.A. filed earlier to the present one filed by one of the Directors of the respondent Company Mr. Manjit Singh Mahal through whom this subsequent S.A. was filed in the name of the Company. It was pointed out that that S.A. was withdrawn and a fresh one was filed on the same cause of action and same facts and without any change in circumstances and without any new facts or law having been brought to the notice of the (earned Presiding Officer impugned order came to be passed whereby same interim relief was granted in the matter which only few days back had been denied in the earlier S.A. The order dated 25th July, 2016 passed in the earlier S.A. filed by a Director of the respondent Company roads under:-

"I.A. No. 448/2016

This IA has been filed on behalf of the applicant seeking stay on the possession proceedings initiated by the Court Receiver appointed by the learned CMM Dwarka Court Delhi against the property bearing No. A-154. Lower Ground Floor, Sector-8, Dwarka, New Delhi.

Heard on this application.

Learned Counsel for the applicant contended that he is neither the borrower nor guarantor or mortgagor of the Bank. He is a bona fide purchaser of the property in question. He submitted that the applicant has purchased the property in question from one Shri Sumit Gupta on 24.9.2012 by way of registered sale deed. In July 2015, he came to know that the property in question is mortgaged with the ICICI Bank against a loan amount of Rs. 75,20,000/-. It has been prayed an ad interim protection be granted in favour of the applicant till the disposal of present SA.

Learned Counsel for the respondent Bank vehemently opposes the grant of any interim relief in favour of the applicant and submits that mortgaged of the Bank is of 2010 whereas the present applicant as such has purchased the property in September, 2012. Therefore, the mortgage of the Bank is prior in time and the applicant has no right, title or interest in the property in question till the entire dues of the Bank are liquidated. He also submits that the applicant herein has also moved an application for stay before the learned CMM Dwarka who has also dismissed his application for stay.

I have heard the rival submissions and perused the record.

Admittedly, the applicant has purchased the property in question on 24.9.2012 whereas the mortgage of the Bank is prior to that i.e. 2010. Since, the property in question is already mortgaged with the Bank prior to its alleged transfer in favour of the applicant; the same is subject to the charge of the respondent Bank. Being the secured asset, the respondent Bank is well within its right to sell the same to recover its dues from the sale of secured asset under the provisions of SARFAESI Act. Since the applicant has purchased the property with encumbrances, he is liable for the consequences also.

In view of the above, prima facie I find no force in the arguments advanced by the learned Counsel for applicant. The interim relief is hereby declined. The date of 3.8.2016 is hereby cancelled. List the case before Registrar for completion of pleadings, evidence and exhibition of documents on 31.8.2016 and thereafter before this Tribunal on 04.10.2016. Dasti

Sd/-

(Rekha Dhakar)

Presiding Officer

DRT-I"

It was submitted by Mr. Bhalla that earlier when on 25th July, 2016 the same very Presiding Officer of DRT-I had rejected the same interim relief against taking over of the possession of the property in dispute in another petition under Section 17 of SARFAESI Act which was filed by one of the Directors of respondent Company in his individual name that order was challenged before this Appellate Tribunal and the appellant therein withdrew the appeal when the appeal was taken up for ex parte consideration on 11.8.2016. Then this fresh S.A. came to be filed at the instance of the respondent Company and this time the DRT gave interim relief despite the fact that earlier same relief had been denied a few days back and that rejection of the relief was not on the ground that one Director could not have maintained the petition in his individual name but on merits observing that the alleged sale of the property in dispute in favour of the Company was after the creation of the mortgage in favour of the Bank.

On the other hand Mr. Vineet Malhotra, learned Counsel for the respondent had submitted that there was no bar for the DRT to have granted interim protection against the dispossession of the respondent despite the fact earlier no protection was granted to the individual director of the Company when he had as per the legal advice filed the petition under Section 17 in his own name instead of in the name of his Company and after realising the legal hurdle in the maintainability of that S.A. the appeal filed against the order dated 25.7.2016 was withdrawn from this Tribunal and this Tribunal had granted liberty that the Company could file the S.A. and accordingly the present S.A. was filed by the Company and in this S.A. the respondent Company had offered to purchase the ground floor also of property No. 154, possession whereof has already been taken over by the Bank and that offer persuaded the DRT to grant interim protection to the respondent Company and there was nothing wrong in granting that relief when the main petition is still pending. It was submitted that the whole purpose of giving the remedy by the Legislature under Section 17 of SARFAESI Act to aggrieved persons would get frustrated if their possession of the secured assets is not to be protected till the DRTs take any final decision in respect of the objections raised before the DRTs. It was also submitted by the learned Counsel that the entire property No. 154 and not only the portion purchased by the respondent Company was allegedly mortgaged with the appellant Bank and the total outstanding dues of the Bank were to the tune of Rs. 90 lacs odd and since the respondent Company has already offered before the DRT to purchase the ground floor also for Rs. 90 lacs the entire dues of the Bank would stand cleared and so there is no justification for dispossessing the respondent Company for auctioning the portion under its ownership. The respondent's further grievance is that the erstwhile owner of this property has been in collusion with Bank officials raising loans by mortgaging other properties also and then selling the same to different innocent persons, like the respondent herein, by showing them title deeds which he could not have shown without the collusion of the Bank officials and in this manner many persons have been duped and criminal cases already stand registered against the borrower.

Learned Counsel for the Bank responded to the offer of purchase of ground floor of property No. 154 by the respondent Company by saying that it is not only the amount of Rs. 90 lacs odd for which the entire property No. 154, of which the property allegedly purchased by the respondent Company is only a part, has to be sold but in fact the borrower Sumit Gupta and his wife had taken more loans also which also have to be recovered from their assets including the aforesaid property involved in the present litigation and, therefore, the offer being given by the respondent Company is not an innocent and genuine offer made before the DRT which can be accepted straightaway by the Bank.

In my view, I need not go into the sufficiency of the reason given by the DRT for granting the relief in this S.A. on 12.8.2016 to the respondent Company through the same director whom same relief had been declined only on 25.7.2016 viz. that the respondent Company was now offering to buy the ground floor also for Rs. 90 lacs to enable the Bank to recover its dues which were secured by the mortgage of property No. 154. This appeal is even otherwise on a strong legal footing and has to be allowed. The respondent Company is admitting that the property which it claims to have purchased from the borrower Sumit Gupta was, as per the information which it got after purchase by it, was already mortgaged with the appellant Bank. The respondent is claiming itself to be a bona fide purchaser without notice of the prior mortgage of the property in dispute. Now, even if for the present respondent's case is accepted, though it will have to be shown before the DRT at the appropriate stage, that the respondent Company purchased the basement of a larger property No. 154 without notice of the mortgage of the entire property and which knowledge it could not have got prior to purchase because the Bank had not got entered the mortgage anywhere in any official records meant for registering charge over immovable properties, the Bank's right to take legal action to recover its dues by auction of the mortgaged property cannot be defeated at the instance of the respondent Company. For this view I find support from various judgments of High Courts including that of Hon'ble Delhi High Court wherein under almost similar circumstances no relief was granted to such like bona fide purchasers of mortgaged properties.

Way back in the early eighties the right of bonafide purchaser of a mortgaged property came to be examined by a Division Bench of the Hon'ble High Court of Delhi in a judgment reported as 26 (1984) DLT 377 : AIR 1985 Delhi 83, Ishwar Das Malhotra v. Dhanwant Singh and Ors., and this is how the point was dealt with and answered:

"13. It will thus be seen that a mortgage by deposit of title deeds is like any other mortgage and there is a transfer of interest in the properly mortgaged to the mortgagee. The question, therefore, of the subsequent purchaser having bought the property subject to a mortgage by deposit of title deeds bona fide, with or without notice, is of no relevance. The subsequent purchaser cannot avoid the mortgage by leading evidence to show that he made all reasonable inquiries to find out if the property was subject to a mortgage by deposit of title deeds or not. Section 48 of the Transfer of Property Act does not admit of any such exception. According to this section, when a person purports to create, by transfer of different times, rights in or over the same immovable property, and such rights cannot all exist or be exercised to their full extent together, each later created right shall, in the absence of a special contract or reservation binding the earlier transferees, be subject to the rights previously created. Further, proviso to Section 48 of the Registration Act enacts that a mortgage by deposit of title deeds shall take effect as against any mortgage deed subsequently executed and registered relating to the same property. Thus, a subsequent sale cannot have priority over a mortgage by deposit of title deeds created before the sale. In my view, therefore, the trial Court fell in an error in holding that Harjeet Singh Dhanjal, the subsequent purchaser of the mortgaged property, was not liable on the ground that he took all reasonable care and acted in good faith."

In a recent order also of Hon'ble Delhi High Court in the case of Ritu Gupta & Anr. v. Usha Dhand & Ors. passed on 19 November, 2013 in CS (OS) 188 of 2011 after noticing the legal position on equitable mortgages it was held about the rights of a bona fide purchasers of mortgaged properties that:

"....Consequently, the question of a subsequent purchaser having bought the property subject to a mortgage by deposit of title deeds bona fide, with or without notice is of no relevance. A subsequent sale deed could, therefore, not have priority over a mortgage by deposit of title deeds created before the sale."

I may also refer to a decision of Calcutta High Court in the case of Bisseswar Poddar v. Nabadwip Chandra Poddar and Anr., AIR 1961 Cal. 300 wherein also it was held that:

"...............In the case before us the competition is between a mortgagee by deposit of title deeds and a subsequent purchaser. It appears to us that the principle embodied in Section 48 of the Transfer of Property Act is applicable to this case. Section 48 may be set out hereunder:

"Where a person purports to create by transfer at different times rights in or over the same immovable properly and such rights cannot all exist or be exercised to their full extent together, each later created right shall, in the absence of a special contract or reservation binding the earlier transferees, be subject to the rights previously created."

In AIR 1934 Oudh 283, Sitaram v. Rajnarain, Rachpal Singh, J. and Smith, J. held that the question of priority between a mortgagee and a subsequent purchaser is governed by Section 48 of the Transfer of Property Act and the purchaser is not protected by the provisions of Section 41 of the Transfer of Property Act when there is no proof of negligence on the part of the mortgagee. Reference may also be made in (his connection to a decision of the Nagpur High Court, AIR 1931 Nag. 144, Narayan v. Purushottam where it is held that Section 41 of the Transfer of Property Act does not apply to the case of a purchaser of an equity of redemption. The person who purchases equity of redemption cannot repudiate his liability under a mortgage even if he purchases without notice of the mortgage because there is no law which obliges the mortgagee to give notice of the mortgage to the who world. So having regard to these proportions it is clear that the defendant No. 2 cannot in any event get priority over the claim of the plaintiff as mortgagee........."

In view of the aforesaid legal position, this appeal has to succeed and the same is accordingly allowed. The impugned order doted 12.8.2016 passed by the learned DRT is set aside. It is, however, clarified that since the impugned order was passed only on an interim application, as and when the S.A. is disposed of finally, the DRT will be at liberty to pass any order in accordance with law uninfluenced by the present order which has been passed only on a prima facie view.