Kavitha Prahaladaka vs Authorised Officer, State Bank Of Hyderabad & Ors.

This appeal is filed under Section 18 of the SARFAESI Act against the order dated 22.8.2016 passed by Learned Presiding Officer, DRT-II, Chennai in SA No.89/2016.

Appellant filed SA No.89/2016 on the file of DRT-II, Chennai to set aside the order passed by Learned Chief Metropolitan Magistrate, Allikulam in Crl.M.P.No.909/2016 on 11.5.2016 under Section 14 of the SARFAESI Act.

The case of the appellant in brief is, that the property described in the schedule belongs to Hindu Undivided Family (hereinafter will be referred as ‘HUF’), headed by her father Mr. Anil Kumar Agarwal, who is the Kartha of HUF and consists of her mother Ms. Manju Agarwal, her brothers viz., Mr. Suraj Agarwal and Mr. Akash Deep Agarwal and her sister Ms. Savitha Agarwal and the appellant herein. She came to know that first respondent bank had taken steps for selling the schedule property in auction sale. She requested respondents 3 to 7 to put in possession of her 1/6^th share in the schedule property. However, they failed to accede to her demand. Since she is residing in USA, she appointed Challani R R as her Power Agent. On enquiry, it came to light that her father, i.e., the third respondent executed equitable mortgage in favour of the respondent bank to secure the loan availed by M/s Chennai Jute Company, wherein respondents 3 to 6 were partners. Third respondent has no independent right to create mortgage in respect of the schedule property, which is a HUF property. Appellant is not a partner in M/s Chennai Jute Company.

Appellant earlier filed SA No.5/2016 to protect her share and interest in the schedule property. She also filed a Suit for Partition in OS No. 179/2015 before City Civil Court, Chennai and the same is pending. Thus, the order passed by Learned CJM without considering her undivided 1/6^th share in the HUF property is illegal and unenforceable, therefore, SA 89/2016 was filed by the appellant and the Learned presiding Officer, DRT-II, Chennai dismissed the SA on the ground that the property exclusively belongs to the 3^rd respondent and even assuming that property is a HUF property, as kartha of HUF, 3^rd respondent is entitled to mortgage the property in question. Aggrieved against this order, this appeal is filed by the appellant.

Learned Counsel for the appellant submitted that the property is a HUF property consists of appellant and her other family members as detailed above and that appellant has 1/6^th share in this property. This property has also been treated as HUF by her father and other family members. Income Tax Returns filed in this case would prove, without any doubt, that schedule property was always treated as a HUF property. Not only that, the legal opinion given by the advocate of the first respondent bank dated 28.2.2005 very clearly states that the property is a HUF property, therefore, all the members of HUF may have to join in the execution of mortgage in favour of the first respondent bank.

Objecting to this submission, learned counsel for the first respondent bank submitted that the property is not a HUF property but it is an individual property belonging to the 3^rd respondent. Third respondent purchased this property with his own funds and it was always treated as his self-acquired property. For the loan availed by the partnership firm viz., M/s Chennai Jute Company, in which respondents 3 to 6 are its partners, the third respondent offered this property as security and created equitable mortgage by deposit of title documents. Loan documents would clearly prove this aspect without any iota of doubt. Appellant had not produced any document to show that 3^rd respondent has conveyed or transferred this property to HUF for the benefits and enjoyments of his family members.

The legal opinion given by the panel lawyer of the first respondent bank would only suggest that HUF members may also join in the execution of the mortgage in view of the fact that 3^rd respondent has entered into a construction agreement on 24.2.1992 as HUF with M/s Shiva Construction, a partnership firm. However, the advocate confirmed and clarified that 3^rd respondent has a clear, absolute and marketable title over the schedule property. Though the construction agreement dated 24.2.1992 mentions the 3^rd respondent as Mr.Anil Kumar Agarwal (HUF), there is no specific mention that this construction agreement was entered on behalf of HUF and who are the members of HUF, etc. Income Tax Returns filed by the appellant are prepared maliciously expecting to use them as a ruse to face future litigation. Income Tax return entries will not conclusively prove transfer of title from 3^rd respondent to HUF and the claim that the property is HUF property. There are lot of discrepancies in the construction agreement in the sense that it was not signed by Mr. Anil Kumar Agarwal, the 3^rd respondent and the payment details confirm that this document is a created document. Property had been sold in SARFAESI auction. Appellant filed SA No.5/2016 questioning the sale notice. Same grounds as raised in SA 89/2016 were raised in SA 5/2016. On dismissal of SA 5/2016, no appeal had been filed. Therefore, appellant cannot raise the ground that the property is a HUF property again in this SARFAESI application i.e., SA 89/2016. There are no defects pointed out or grounds raised on the merits of the order passed under Section 14 of the SARFAESI Act by Learned CJM. Thus submitting, learned counsel for the first respondent bank sought for confirming the order passed by the Learned Presiding officer, DRT-II, Chennai passd in SA No.89/2016 and for dismissal of this appeal.

I have considered the rival submissions and perused the records.

Perusal of SARFAESI Application i.e., SA 89/2016 and the grounds raised therein show that appellant filed this SA challenging the order passed under Section 14 of the SARFAESI Act, mainly, on the ground that she has 1/6^th undivided share in the schedule property. The grounds raised on the order passed under Section 14 of the SARFAESI Act are limited to the extent of,

Except these grounds, no other ground was raised touching upon the measures taken under the SARFAESI Act like, issuance of Section 13(2) demand notice, 13(4) possession notice, their service, non service, etc. May be that the appellant is a not a party to the loan availed by the 3^rd respondent and that she would not have been served with demand notice and possession notice. Therefore, these notices had not been challenged. However, in a challenge to the order passed under Section 14 of the SARFAESI Act, it is expected that valid and legal grounds are raised to show that how the appellant finds fault with the order passed by the Learned CJM under Section 14 of the SAFAESI Act, notably whether the bank has followed the requirements under Section 14 of the SARFAESI Act and filed an affidavit in support of following those measures. No such plea was taken in the SARFAESI application. Therefore, this Tribunal is confined to decide whether appellant’s claim of 1/6^th share in the schedule property, which according to the appellant is a HUF property is proved by her.

As stated earlier, learned Counsel for the appellant primarily relied on the Income Tax Returns filed and made available from pages 86 to 111 of the type set. Income Tax acknowledgments are produced to show that Mr. Anil Kumar Agarwal filed these Returns as HUF. In the statement filed along with acknowledgment, Flat at Gopalpuram is shown in the column meant for Trial Balance. Flat at Gopalpuram is valued at Rs.7.50 lakhs. However, this statement is not signed by any Income Tax Authority. Even otherwise, these Income Tax Returns and Acknowledgments cannot establish that the schedule property is a HUF property.

Next document relied by the appellant is the construction agreement executed between M/s Shiva Construction represented by T. Shyam Prasad Reddy, M.Shivakumar Reddy and T Sitaram Reddy and Mr. Anil Kumar Agarwal as HUF. This agreement was executed on 24.2.1992. Perusal of this agreement shows that of the three partners, only two partners had signed in this agreement. The main party of this agreement, viz., the 3^rd respondent had not signed this document at all. Strangely, in the contract amount payment details, it is mentioned as follows:

Learned Counsel for the appellant also brought to my notice the copy of the construction agreement produced by the first respondent bank wherein it is stated that the word ‘HUF’ is deleted with whitener. True it is that the word ‘HUF’ is not legible. If any deletion was attempted, that deletion is not professional. There is no indication whehter whitener was used for deletion. However, this aspect is immaterial when the 3^rd respondent is not a signatory to this agreement and when there is obvious discrepancy in the year of this agreement and in the payment details entered in this agreement. Even in this agreement, there is no indication, as to who are the members of HUF and whether this agreement is entered on behalf of HUF members. Just three letters, ‘HUF’ are entered after the name of the third respondent, Mr. Anil Kumar Agarwal. Even this document has specifically stated that Mr. Anil Kumar Agarwal agreed to purchase undivided share of 1535/15000 shares as shown in schedule ‘B’ and further agreed to take delivery of constructed portion incidental to his owning the intended share as shown in Schedule B. This recital unequivocally makes it clear that Mr. Anil Kumar Agarwal treated this property as an independent property and not as a property of HUF.

The last document which appellant heavily relied to drive home the point that the property is a HUF property is the legal opinion of the first respondent’s panel advocate dated 28.2.2005. In the said legal opinion, it is mentioned as follows:

The recital that wife and children may also join in the creation of mortgage in favour of the respondent bank is heavily relied by the appellant to state that the property in question is a HUF property. Entire reading of the legal opinion shows that the property was purchased by Mr. Anil Kumar Agarwal under a registered Sale Deed dated 27.6.1990. He became the absolute owner of undivided 1535/15000^th shares together with building in the second floor. It is made clear in this opinion that Mr. Anil Kumar Agarwal is the absolute owner of the property. Only because he entered into a construction agreement as HUF, there was a suggestion for roping his family members in the execution of mortgage in favour of the bank.

As already stated, construction agreement just refers as Mr. Anil Kumar Agarwal (HUF). There is no specific mention about who are all the members of HUF and whether the construction agreement is executed on behalf of HUF. When these specific recitals are missing, it cannot be held that construction agreement was executed by Mr. Anil Kumar Agarwal as a member of HUF. Even otherwise, this Tribunal already found that this construction agreement is not signed by Mr. Anil Kumar Agarwal and that there are discrepancies with regard to the date of agreement and the payments details. Therefore, the documents relied by the appellant in the form of Income Tax Returns, Construction Agreement and the legal opinion are of no use to the case of the appellant to conclude that the property in question is a HUF property, in which, appellant has 1/6^th share in the property. On the other hand, documents produced by the first respondent bank would conclusively establish that the property in question is the absolute and independent property of Mr. Anil Kumar Agarwal, the 3^rd respondent.

The partnership deed dated 25.1.2002 of Chennai Jute Company executed between 1) Shri Anil Kumar Agarwal 2) Smt. Manju Agarwal 3) Sri Suraj Agarwal and 4) Sri Akashdeep Agarwal shows that Shri Akashdeep Agarwal, minor son of Mr. Anil Kumar Agarwal was admitted as a partner, through this partnership deed. Loan sanction proceeding dated 5.2.2005 shows that M/s Chennai Jute Company availed Cash Credit Facility of Rs.60.00 lakhs from the first respondent bank. All the partners have signed the loan documents along with the guarantors. Equitable mortgage was created in respect of the property of Shri Anil Kumar Agarwal i.e., the property concerned in this appeal, by deposit of title documents. Thereafter, credit facility was enhanced to Rs.74.00 lakhs on 8.9.2006. At the time of enhancement also, the equitable mortgage created in respect of the property in question standing in the name of Shri Anil Kumar Agarwal is referred. Partners have also extended their personal guarantees.

Thus, documents produced by the first respondent bank, without any iota of doubt, establish the fact that the schedule property mentioned in SA 89/2016 is an absolute and independent property of the 3^rd respondent and he offered this property as security for the loan availed by M/s Chennai Jute Company as partner of this firm. Therefore, the claim of the appellant that she has 1/6^th share in this property and therefore the order passed under Section 14 of the SARFAESI Act is not legally enforceable, cannot be accepted. Having failed to prove the claim of her right of 1/6^th share in the property, SA has to necessarily fail. As already stated, there are no other grounds, challenging the merits of the order passed under Section 14 of the SARFAESI Act were raised in the SA preferred by the appellant.

It is curious to note that sale notice was challenged in SA 5/2016 by the appellant and on its dismissal, no appeal was preferred by the appellant. After the sale was held, no challenge was made to the sale held. Successful auction purchaser is entitled to physical possession of the secured asset.

From the facts narrated above, findings given, this Tribunal is of the view that Learned Presiding Officer has rightly dismissed SA 89/2016 on the failure of the appellant to prove her claim of 1/6^th share in the schedule property and the order of the Learned Presiding Officer needs no interference by this Tribunal.

In fine, the order of the Learned Presiding Officer, DRT-II, Chennai dated 22.8.2016 passed in SA No.89/2016 is confirmed and Appeal RA (SA) 171/2025 is dismissed.

Parties are directed to bear their own costs.

Pending IAs, if any, stand closed.