IDBI Bank Ltd. vs Sunita Kakaria

S.N.H. Zaidi, J

This appeal impugns the order dated 5.1.2011 passed by the Presiding Officer of the Debts Recovery Tribunal-1 Delhi (for short, the DRT) allowing the application (SA No. 36 of 2010) and directing the respondent Bank to deliver back the possession of the property in question to the applicant. Briefly stated, the facts of the case are that a property measuring 1.65 acres was allotted by the Government of India, vide perpetual lease deed dated 15.3.1922, to one Seth Laxman Das Raisina, who transferred the same in 1926 to one Narain Das. The said Narain Das colonised the entire property and divided it into 11 plots, out of which one plot, measuring 345 sq. yards, bearing No. 8. Jain Mandir Road. New Delhi was transferred to one Labhu Ram in 1926. Thereafter, by virtue of perpetual lease deed dated 2.4.1927, leasehold right in the property was transferred to the said Labhu Ram. During this period two floors were constructed over that plot. One Ganeshi Lal came in possession over the ground floor whereas the rest of the building remained with Labhu Ram, who died intestate leaving behind five sons and one daughter. However, all the sons, except one Naresh Chandra Kakaria, settled abroad and only Naresh Kakaria, the husband of the applicant/respondent, remained in possession of the said property.

The appellant Bank sanctioned home loan facility of Rs. 35 lacs to one Jitender Kumar Bahal (J.K. Bahal) in 2003 for the purchase of second floor of the said property No. 8, Jain Mandir Road, New Delhi, hereinafter referred to as the property in question, from Vivek Raj Kakaria, one of the sons of Naresh Kakaria for Rs. 40 lacs. Vivek Raj Kakaria, executed the sale deed dated 14.8.2003 in favour of J.K. Bahal on the strength of a registered conveyance deed dated 29.8.2000 executed by the Land and Development Office (for short, the L&DO) on 14.8.2000 in his favour. J.K. Bahal, the borrower, created equitable mortgage of the property in question in favour of the appellant Bank by deposit of the sale/title deed along with copies of previous title documents. Naresh Kakaria died intestate on 15.1.2006 leaving behind his widow Smt. Sunita Kakaria (the respondent herein) and two sons, namely, Arun Raj Kakaria and Vivek Raj Kakaria. As the borrower failed to make regular payments of the agreed monthly instalments, the loan account was classified as non-performing asset (NPA) on 3.7.2004 and the Bank issued demand notice dated 5.3.2008 to him under Section 13(2) of the Securitisation and Reconstruction of the Financial Assets and Enforcement of Secured Interest Act, 2002 (for short, the SARFAESI Act). When neither any amount nor reply to the notice was received by the Bank, it took recourse to the actions under the said Act and moved the CMM, Delhi, under Section 14 of the Act, for taking the physical possession of the secured asset. The ACMM appointed the Authorised Officer of the appellant Bank as the Receiver of the Court for taking over the possession of the secured asset. The Court's Receiver accordingly issued notice dated 24.5.2010 for delivery of possession on 28.5.2010.

Smt. Sunita Kakaria claiming herself as one of the co-owners and in possession of the property in question, filed application (SA No. 36/2010) under Section 17 of the SARFAESI Act for restraining the Bank from taking the possession of the property bearing No. 12/15. Gali No. 1, Saket Block, Mandawali, Fazalpur, Delhi-92 and 8, Jain Mandir Road, New Delhi on the basis of the notice issued by the Receiver. It was alleged by her that the property in question was not a freehold property and it continued to be a lease hold property of the L&DO. She further alleged that her son Vivek Raj Kakaria, in connivance with her other son Arun Raj Kakaria, got a conveyance deed dated 14.8.2000 executed by the L&DO in his favour and also got the property mutated in his name by playing fraud. It was also alleged that the conveyance deed could not have been executed in the name of Vivek Raj Kakaria on 14.8.2000 as his father Naresh Kakaria was alive and had died in 2006. She further alleged that the sale deed dated 14.8.2003 was a forged document because it showed that Arun Raj Kakaria had impersonated himself as Jitendra Kumar Bahal as the photographs of both Vivek Raj Kakaria and Arun Raj Kakaria were affixed on it as those of vendor and vendee and the property in question never came in possession of J.K. Bahal. She also alleged that it seemed that her sons had managed to obtain loan in connivance with some officials of the Bank by giving forged documents and making false representations and the Bank also did not exercise due diligence in verifying the actual possession before sanctioning the loan.

As the DRT below declined to grant any interim protection to the applicant/ respondent in its order dated 28.5.2010, the Court's Receiver took physical possession of the property in question on that very day in the presence of Ms. Radhika Kakaria, the daughter of Arun Raj Kakaria. The respondent assailed the said order dated 28.5.2010 before this Tribunal in Appeal No. 262/2010. The appeal was dismissed by this Tribunal vide order dated 24.6.2010, which was challenged before Delhi High Court in WP (C) No. 4765/2010. The Hon'ble High Court disposed of the Writ Petition on 23.11.2010 with the direction to the DRT to dispose of the SA within the given timeframe. The DRT below allowed the SA by the impugned order dated 5.1.2011 with the direction, as mentioned above. Feeling aggrieved with it, the Bank has preferred this appeal.

Mr. Rajeev Agarwal, learned Counsel appearing on behalf of the appellant Bank, contended that the appellant had exercised due diligence before sanctioning the loan facility to J.K. Bahal by getting the title of the property in question verified through K.P. Menon & Co. Advocates, who confirmed about the mutation of the property in question in favour of Vivek Raj Kakaria on verification from the record of the L&DO and also about the execution of the conveyance deed dated 14.8.2000 by the L&DO in his favour from the record of the Sub-Registrar. He further contended that the SA was not maintainable as the other legal heirs of Labhu Ram, on whom the leasehold rights in respect of the property in question had allegedly devolved, were not arrayed as party to that application. He also contended that the respondent failed to prove her alleged title over the property in question as she did not produce any documentary evidence in support of her claim despite opportunity was given to her by the learned DRT below.

Mr. Agarwal also pointed out that contrary to her stand of co-ownership of the property in question, the respondent had relied upon the statement of an official of the L&DO who had deposed before the Delhi High Court, in Suit No. 1284/2004 filed by the HDFC against Smt. Rohina Kakaria and Others, including Vivek Raj Kakaria, that the entire property of 8, Jain Mandir Road, New Delhi belonged to the Government of India as it stood re-entered w.e.f. 5.4.1971. It is contended by him that the respondent also failed to prove her alleged possession over the property in question as she did not produce any documentary evidence in support thereof and had voluntarily admitted before the Local Commissioner appointed by the Delhi High Court that her daughter-in-law and grand daughter were in possession of that property. He further pointed out that she had specifically claimed in her affidavit that when her husband had received the notice of Suit No. 1284/2004 then they came to know about the fraud played by their sons in respect of the fraudulent mutation and execution of conveyance deed in the name of Vivek Raj Kakaria and then her husband had lodged a report against him with the police, but she failed to show as to what action was taken by the police against her son on that complaint or whether any step was taken by her for the cancellation of the conveyance deed despite knowing that their sons had cheated HDFC and Standard Chartered Bank on the strength of the said conveyance deed or for the declaration of her alleged ownership rights in the property in question before any Court of law

Mr. Abhijeet Chatterjee, the learned Counsel for the respondent, pointed out that on the allegation of unauthorised construction of the second floor on the said property, the L&DO, re-entered that property vide letter dated 21.10.1972 w.e.f. 5.4.1971 and the Estate Officer of the L&DO had passed an eviction order from that property on 4.12.2000 under Section 5(1) of the Public Premises (Eviction of Unauthorised Occupants) Act, 1971. The order of the Estate Officer was challenged by the respondent's husband Naresh Kakaria and occupants of the ground floor of that property in PP Appeal No. 122/2004, which was allowed by the ADJ Delhi vide order dated 9.3.2005 and the matter was remanded back to the Estate Officer for fresh adjudication, which is still pending.

He further pointed out that on receipt of the notice from the plaintiff (HDFC) of the Suit CS (OS) No. 1284/2004 pending before the Delhi High Court, when the respondent and her husband came to know about the fraud played by their sons in obtaining loan from HDFC by creating mortgage of property No. 8, Jain Mandir Road on the basis of several forged documents, her husband lodged a complaint against his son Vivek Raj Kakaria with Vasant Vihar Police Station on 15.12.2004 and also filed a Civil Suit No. 220/2004 against HDFC, Standard Chartered Bank and his son Vivek Raj Kakaria for declaration and injunction, but later on that suit was withdrawn and an application for impleadment was filed in the said Suit No. 1284/2004, which was allowed on 8.9.2005.

He also pointed out that Vivek Raj Kakaria had forged a will of his father on the basis of his forged death certificate and also forged a Memorandum dated 25.5.1992 purported to be of the L&DO showing that property No. 8, Jain Mandir Road was mutated in the name of Vivek Raj Kakaria and subsequently a conveyance deed dated 14.8.2000 of the said property was also forged in his name and on the basis of the said forged conveyance deed, he executed various sale deeds in the name of fictitious persons who allegedly created equitable mortgages in favour of Banks and obtained loans. Firstly, he sold the entire 8, Jain Mandir Road property which was mortgaged with HDFC, then the 1st Floor of that property was mortgaged with Standard Chartered Bank and lastly the 2nd Floor thereof was mortgaged with the appellant Bank and cheated all these Banks with crores of rupees. He also pointed out that the conveyance deed dated 14.8.2000 was forged on the strength of a registered perpetual lease deed dated 15.3.1922 in the name of Labhu Ram, whereas in fact the original perpetual lease deed dated 15.3.1922 was in the name of Seth Laxman Das Raisina.

Mr. Chatterjee contended that the appellant Bank had sanctioned the loan in question to J.K. Bahal on the basis of forged documents, which are under challenge before the Delhi High Court in suit No. 1284/2004, and as such neither the sale deed dated 14.8.2003 created any legal right in favour of J.K. Bahal nor deposit of the said sale deed with the appellant Bank created a valid mortgage of the property in question. According to him, the provisions of SARFAESI Act are not applicable in this case and since the appellant's action is based on forged documents, therefore, the appellant Bank does not hold a mortgageable security on the property in question

He further contended that the sons of the respondent appeared to be hand in glove with the officials of the appellant Bank as the loan was sanctioned without exercising due diligence because had any physical verification of the property in question been done prior to sanction, it would have revealed that there was no independent entry to the second floor and the entry to that floor was through the first floor wherein the respondent and her husband were residing. It is also stressed that the documents of the property in question were also not properly verified.

Mr. Chatterjee also contended that the leasehold character of the property in question is sufficiently established from the deposition of the official of L&DO made in suit No. 1284/2004 before the Delhi High Court that it was a leasehold property and no conveyance deed of the same was executed and as such the property in question cannot be legally mortgaged.

His further contention is that the appellant Bank was fully aware that the security created in its favour by mortgaging the property in question was based on forged and fabricated documents and J.K. Bahal was an imposter, as the real Jitender Kumar Bahal, an NRI, had lodged an FIR against Vivek Raj Kakaria on 17.10.2004 under Sections 419, 420, 468, 471, IPC with the allegations that in respect of a property transaction in which Vivek Raj Kakaria was involved, he was able to get various details about him and thereafter misused those details by giving his brother Arun Raj Kakaria the false identity of J.K. Bahal and they cheated several persons and Banks and a WANTED notice was also published by the police in the newspaper against Vivek Raj Kakaria and his brother Arun Raj Kakaria. He also contended that both the HDFC and the Standard Chartered Bank knowing that they have been cheated on the basis of forged documents did not invoke the provisions of SARFAESI Act and HDFC had filed a suit CS (OS) 1284/2004 before the Delhi High Court against Rohina Kakaria and others, including Vivek Raj Kakaria, wherein the respondent's husband and Standard Chartered Bank had got themselves impleaded as defendants but the appellant Bank despite knowing that it had been cheated on the basis of forged documents did not lodge any complaint with anybody or initiated any other appropriate proceeding and continued to take action under the SARFAESI Act, which are not maintainable in law.

Before proceeding to consider the submissions of the parties' Counsel, it is pertinent to mention that though the property in question in this matter is the 2nd floor of property No. 8, Jain Mandir Road, New Delhi, yet surprisingly, in relief Clause 6.1 of the SA, the applicant/respondent has claimed the relief in respect of property No. 12/15. Gali No. 1, bearing Khasra No. 1105/642, Saket Block. Mandawali, Fazalpur, Delhi-92, which was neither the secured/mortgaged property nor the appellant Bank had taken any action in respect thereof However, instead of moving any application for correction of the detail of the property in question, the applicant/respondent, in her rejoinder to the reply, has said that the property of Mandawali, Delhi had inadvertently been mentioned in Clause 6.1 of the SA, which should be read as property No. 8, Jain Mandir Road, New Delhi. The record of the Tribunal below, however, shows that after the impugned judgment was passed, the respondent had moved an application on 14.1.2011 for correction/ clarification of the judgment on the ground that due to wrong mentioning of the detail of property in question in Clause 6.1 of the SA, the same has been mentioned in the judgment, but it does not transpire that any order would have been passed on that application. In my view, since the applicant/respondent has also claimed relief in Clause 6.3 of the SA in respect of the said 8, Jain Mandir Road property, the SA does not suffer with any legal infirmity by wrong mentioning of the detail of the property in question in the said Clause 6.1 of the SA.

Now coming to the matter in dispute, it appears that the facts relating to sanctioning of home loan by the appellant Bank to J.K. Bahal, execution of sale deed dated 14.8.2003 of the property in question by Vivek Raj Kakaria in favour of J.K. Bahal and creation of mortgage in favour of the Bank by deposit of the said sale deed are not in dispute. According to the appellant's case, Vivek Raj Kakaria had executed the sale deed on the strength of mutation of the property in his name in the records of the L&DO and execution of a registered conveyance deed dated 14.8.2000 by the L&DO in his favour. A perusal of the copy of Memorandum dated 25.5.1992. Ann. D/7, regarding mutation of property No. 8, part Plot No. I, Block No. 90, Jain Mandir Road. New Delhi, filed by the appellant along with its reply to the SA. shows that consequent upon the death of Naresh Chand Kakaria, the leasehold rights in the said property were mutated in the name of Vivek Raj Kakaria on the basis of the registered will of Naresh Chand Kakaria dated 23.7.1987, his death certificate and affidavit furnished by him. The alleged will of Naresh Kakaria and his death certificate, referred to in the said Memo, have not been produced by any of the parties. However, as per respondent's case, all these documents, including the said Memo, are fabricated and forged. The Death Certificate, Ext. AW-1/4, issued by Sir Ganga Ram Hospital, New Delhi shows that Naresh Chand Kakaria had died on 15.1.2006. There is no reason to doubt its genuineness or disbelieve its contents. Even assuming that Naresh Chand Kakaria had executed a registered will dated 23.7.1987 in favour of his son Vivek Raj Kakaria. but since he was alive in 1992 when the alleged mutation in the name of Vivek Raj Kakaria was done, therefore the will could not have been acted upon and no mutation of rights could have been legally done on its basis in The name of Vivek Raj Kakaria. The alleged mutation was, therefore, bad in law and no legal right can be said to have accrued to Vivek Raj Kakaria on its basis. Thus, in my opinion, the registered conveyance deed dated 29.8.2000. Annexure D/8, which was executed on the basis of the said mutation, did not confer any legal right on Vivek Raj Kakaria or convert leasehold rights into freehold in his favour in respect of Plot No. 8. Block No. 90, known as 8, Jain Mandir Road, New Delhi. In view of this, no title in the property in question can be said to have passed to J.K. Banal on the basis of the alleged sale deed dated 14.8.2003, Annexure D/2. Ext. DW 1/3.

According to the respondent, the alleged Memorandum, conveyance deed and sale deed were forged, but in my opinion, since these documents have yet not been declared as forged or cancelled by any competent Court, though the registered conveyance deed dated 14.8.2000 and the Memorandum are said to be under challenge before the Delhi High Court in suit No. CS (OS) 1284/2004 filed by HDFC Bank, therefore, no finding in respect of its being genuine or forged can be recorded in these proceedings.

The contention of Mr. Agarwal that due diligence was exercised by the appellant Bank as the chain of title deeds of the property in question were verified through K.P. Menon & Co. Advocates before sanctioning the loan is not acceptable. The report of K.P. Menon & Co., Ext. DW 1/2, shows that they did verify the documents relating to the registered lease deed, mutation of the name of Vivek Raj Kakaria and execution of conveyance deed in his favour from the records of the L&DO and Sub-Registrar but no physical verification of the property in question was done by them. It is also not made out from the record that the property in question was ever visited or inspected by any Bank official before sanctioning the loan. The averment of the Bank's AGM in the affidavit dated 23.1.2012 that no physical verification of the secured asset was carried out by the officers of the Bank as there was no such guideline of the Bank and verification was got done by a private agency, viz., M/s. NCCB Pvt. Ltd., cannot, be accepted as a sufficient ground for not conducting the physical verification of the property in question. The report dated 11.7.2003, Ann. A/1 to the said affidavit, shows that M/s. NCCB Pvt. Ltd. had conducted the verification of the residence and office of Jitendra Kumar at S 473, GK II, New Delhi only and no verification of the property in question was done by the said agency also. Even this report reveals that the neighbours had shown their ignorance about the applicant (J.K. Bahal) and no activity was seen in the office. Moreover, there is nothing on record also to show that any valuation report of the mortgaged property was obtained by the Bank before sanctioning the loan. In my view, had such a report been called for by the Bank, the actual status of the property in question could have come. Considering the above circumstances. I am in agreement with the contention of Mr. Chatterjee that proper and due diligence was not exercised by the appellate Bank before sanctioning the loan and the possibility that the Bank officers might be in connivance with the borrower cannot be ruled out.

The genuineness of the borrower (Jitendra Kumar Bahal) has also been seriously disputed by the respondent. In Para 5.8 of her SA, the respondent has said that the sale deed executed by Vivek Raj Kakaria in favour of Jitendra Kumar Bahal shows that Arun Kakaria had projected himself as Jitendra Kumar Bahal as the photographs affixed on the sale deed are of Vivek Raj Kakaria and Arun Raj Kakaria, which is evident from their photographs published in the newspaper in a notice of the Crime Branch of the police. Though the appellant Bank, in its reply, has denied the said assertion, yet in my view, the photographs of Arun Raj Kakaria and Vivek Raj Kakaria published in a WANTED notice in the newspaper, Annexure C of the SA, appear to resemble with the photographs of vendor and vendee affixed on the sale deed, Ann-D/2. The said notice was got published by the Asstt. Commissioner of Police, Anti Robbery Cell, Crime Branch, Sector-8, R.K. Puram, Delhi with the allegation that both Vivek Raj Kakaria and Arun Raj Kakaria have cheated several persons and Banks on the pretext of selling/purchasing properties in Delhi and Haryana in the name of Jitendra Kumar Bahal and obtained loans worth crores of rupees and they run wanted in a case of Police Station C.R. Park, New Delhi, Mr. Chatterjee has also drawn my attention to the copy of an FIR. Annexure A/1, lodged by Jitendra Kumar Bahal, an NRI, on 27.10.2004 at C.R. Park Police Station, with the allegations that subsequent to a property transaction in which Vivek Raj Kakaria was involved, he misused his name by advertising to sell property in his (J.K. Bahal's) name and obtained credit cards and borrowed money from several Banks in his name. It is also pointed out by Mr. Chatterjee that Naresh Chand Kakaria had also lodged a complaint, Annexure R/8, to the Vasant Vihar Police Station, New Delhi on 15.12.2004 with the allegations that his son Vivek Raj Kakaria had forged and fabricated various documents and on the basis of those documents created equitable mortgage in respect of entire house No. 8, Jain Mandir Road, New Delhi and obtained Rs. 50 lacs from HDFC Bank. In view of the above circumstances. I am convinced that genuineness of the vendee (J.K. Bahal) of the said sale deed dated 14.8.2003 becomes highly doubtful and as such the said sale deed has become unreliable. This circumstance coupled with the fact that Vivek Raj Kakaria was not having any legal title over the property in question, as stated above, clearly indicates that the alleged mortgage of the property in question which was created by J.K. Bahal by deposit of said sale deed with the Bank is not a valid mortgage.

Indisputably the land of property No. 8, Jain Mandir Road, New Delhi was allotted by the Government through a registered perpetual lease deed in 1922 which was ultimately transferred to Labhu Ram in 1926 and constructions were raised thereon sometime thereafter. Annexure A to the SA shows that on the ground of unauthorised construction of the second floor on the said property, an eviction order was passed by the Estate Officer of the L&DO on 4.12.2000 under Section 5(1) of the Public Premises (Eviction of Unauthorised Occupants) Act, 1971. The said order was challenged by the respondent's husband Naresh C Kakaria and others in PP Appeal No. 122/2004, which was allowed by the ADJ, Delhi vide order dated 9.3.2005 and the matter was remanded back to the Estate Officer for fresh adjudication. The appellate Court had also described the said property as a leased property in its judgment. The registered conveyance deed dated 29.8.2000 executed in favour of Vivek Raj Kakaria has already been held to have conferred no legal right on him. Thus, it appears that leasehold rights in the said property were never converted legally into freehold. Except the said conveyance deed, there is nothing on record to show that leasehold rights in that property were ever converted into freehold in any body's name. The property in question is, therefore, held to be a lease hold and not a freehold property.

However. I find force in the contention of Mr. Agarwal that the learned Tribunal below had committed error in relying upon the statement dated 5.5.2009 of DW1 Mr. Awdhesh, a UDC of the L&DO, who had deposed before the Delhi High Court in suit No. CS (OS) 1284/2004 that the entire property of 8, Jain Mandir Road, New Delhi, as per office record, belonged to the Government of India as the property stood re-entered w.e.f. 5.4.1971 and no conveyance deed was issued by L&DO, as Ext. AW-1/5 (collectively) shows that his cross-examination was deferred on the date of his examination-in-chief and then he never appeared for cross-examination. There is nothing on record to show that the plaintiff's Counsel had given up his right to cross-examine the witness. A mere examination-in-chief of a witness, who could not be cross-examined, cannot be read in evidence as the testimony of a witness is incomplete without cross-examination. In my opinion since without looking to the statement of this witness, it has been held that the property in question is a leasehold property, therefore, the respondent's case is not adversely affected even if the statement of the said witness is ignored. As respondent's husband Naresh Kakaria was one of the sons of Labhu Ram, it can be said that leasehold right to the extent of her husband's share in the properly in question has devolved upon her and his other heirs on his death. In my view non impleadment of the other heirs of Labhu Ram in the SA who, according to the respondent, are settled in foreign countries and Naresh Chand Kakaria. was in exclusive possession of the property in question, does not disentitle the respondent to claim the relief under Section 17 of the SARFAESI Act.

Failure on the part of the respondent or her deceased husband to pursue the complaint lodged on 15.12.2004 by Naresh Chand Kakaria against his son Vivek Raj Kakaria with the Vasant Vihar Police Station or to file any suit for the cancellation of the memorandum of mutation or conveyance deed cannot be held to be a ground sufficient to dismiss the SA in view of the fact that Naresh Chand Kakaria's application for impleadment was allowed by the Hon'ble High Court in CS (OS) 1284/2004 wherein the said documents are said to be under challenge, Moreover, this circumstance only reflects on the conduct of the respondent, which in the light of what has been stated above, does not make the action of the appellant Bank taken on the basis of the alleged mortgage in accordance with the provisions of the SARFAESI Act.

In view of above, I am of the considered opinion that the appellant Bank appears to have been cheated in sanctioning the loan in question to Jitendra Kumar Bahal, whose identity was highly doubtful and the alleged mortgage of the property in question does riot empower the appellant Bank to take any action under the SARFAESI Act qua the said property. The impugned order of the learned Tribunal below directing the Bank to deliver back the possession of the property in question to the applicant/respondent, therefore, does not require any interference and this appeal being devoid of any force is liable to be dismissed.

The appeal is accordingly dismissed. The appellant Bank is directed to comply with the order of the learned Tribunal below within three weeks from the date of receipt of the copy of order. Parties to bear their own cost of the appeal. Copy of this order be sent to both the parties and one copy be sent to the DRT concerned.