M/s Om Anand Builders vs Bank of Baroda & Ors.

JUSTICE R. D. KHARE, CHAIRPERSON

The present appeal has been preferred under section 20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the "RDDBFI Act") against the judgment dated 08.07.2013, whereby the Original Application No. 43/2007 filed by the respondent-Bank has been allowed.

Brief facts of the present case are that the respondent no.3 approached the appellant (defendant no. 4 in the O.A.) for the development and construction of multi-stories residential complex on the land bearing no. 23, Block 7-10, Civil Lines, Kanpur having area of 418 sq.mtrs. and for the said purpose, an agreement dated 10.01.2002 was executed between them. As per the said agreement, the appellant was the shareholder of 63% and the respondent no. 3 was the shareholder of 37% of the construction and the appellant was authorized to book and sell the share of the respondent no.3 with his consent. Accordingly, the construction was started and a flat was booked by the appellant in favour of respondent no.2, who is wife of respondent no.3 and an allotment letter dated 08.07.2002 was issued by the appellant to the respondent no.2-Smt. Niti Kapoor. Pursuant to the said letter, the respondent no.2 approached the respondent-Bank to grant a loan of Rs. 10.00 lacs for purchasing a flat in the property in question. The respondent-bank had granted the said loan to the respondent no. 2, to which the appellant and respondent no. 4 stood as guarantors for repayment of the same and the said loan amount was disbursed by the Bank to the appellant through a bank draft on behalf of the borrower. It appears that the appellant had executed a separate undertaking dated 16.07.2002 stating therein that the sale deed with regard to the said property shall be provided by the appellant to the Bank for the purpose of creating equitable mortgage.

It further appears that the respondent no. 3 further entered into an agreement dated 01.08.2002 with Jugal Kishore Garg and agreed not to make any construction over and above the first floor and also proceeded to revoke the registered power of attorney dated 10.01.2002 by a cancellation deed dated 02.08.2002. Thereafter, the agreement dated 10.01.2002 was cancelled vide cancellation deed dated 27.11.2003, which was accordingly informed by the appellant to the respondent-Bank vide letter dated 28.11.2003. Since the respondent no.2-borrower as well as the appellant and the respondent no.3 & 4 did not maintain the terms of agreement, therefore, the account became irregular and an Original Application No 43/2007 was filed by the Bank for recovery of a sum of Rs. 11,02,941/- together with interest and costs. The Tribunal below vide order impugned has decreed the said O.A. in toto against the appellant including the respondents no. 2 to 4. Being aggrieved by the said order, the appellant (defendant no. 4 in the O.A.) only has filed the present appeal.

Learned counsel for the appellant submitted that the appellant is neither borrower nor guarantor or mortgagor to the loan advanced by the bank in favour of the respondent no. 2. It was further contended that an agreement was executed on 10.01.2002 between the appellant and respondent no.3 as well as his father Mohinder Kapoor and as per the said agreement, the appellant was only shareholder of 63% of the constructed building and land and the respondent no. 3 and his father Mohinder Kapoor was the shareholder of the remaining 37% of the same. It was further settled in the said agreement that the share of the respondent no. 3/Mohinder Kapoor will be sold by the appellant with their consent and whatever the sale consideration is received, the same shall be paid to the land owners. It was also contended that for the said purpose, a separate Registered Power of Attorney was executed by the respondent no.3 and his father Mohinder Kapoor on 10.01.2002 in favour of one Mr. Vinod Kumar.

Learned counsel further submitted that the respondent no. 2 was issued allotment letter dated 08.07.2002 by the appellant and pursuant to it, the respondent no. 2 had taken the loan of Rs.10.00 lacs from the respondent-Bank and the same was withdrawn by the borrower by way of bank draft in favour of the appellant. It was further contended that as per the agreement, the construction was to be completed within two years from the date of sanction of building plan or within the period mutually extended by them, but the same was stopped in August, 2002 on account of complaint made by one Jugal Kishore Garg to the Development Authority of Kanpur. It was also contended that the land in question was purchased by the respondent no.3 and Mohinder Kapoor from the said complainant. It was further contended that the respondent no.3 further entered into an agreement on 01.08.2002 with Jugal Kishore Garg without informing the appellant and undertook and agreed not to make any construction over and above the first floor of the property in question and the respondent no.3 also proceeded to revoke the registered power of attorney dated 10.01.2002, which was executed vide deed dated 02.08.2002. It was further contended that the amount received from respondent no.2 was returned by the appellant to respondent no 3 through a cheque no. 256054 dated 05.08.2002, for which a receipt was executed between the respondent no. 3 and his father Mohinder Kapoor on the stamp paper of Rs.100/- stating therein that in case the flat is not constructed and sale deed is not executed within stipulated time, the land owner respondent no. 3 shall be liable to refund the money to the borrower.

Learned counsel also submitted that the appellant thereafter, came to know about the conduct of the land owners and also that the respondent no.2 is wife of respondent no. 3 and respondent no. 3 and his father Mohender Kapoor are in the habit of executing numerous deeds in respect of the same plot. It was further contended that ultimately, it was decided between the parties to get the agreement dated 10.01.2002 cancelled and accordingly the same was cancelled vide cancellation deed dated 27.11.2003. It was further contended that the said cancellation deed was sent by the appellant to the respondent-bank vide letter dated 28.11.2003. It was further contended that with the mutual consent, the allotment letter dated 08.07.2002 issued by the appellant in favour of the respondent no. 2 was also cancelled by executing a separate deed dated 01.12.2003. It was also contended that the respondent no. 2 had executed an affidavit on the stamp paper of Rs.10/- before the Branch Manager of the respondent no.1-Bank clarifying therein that the appellant has no concern with the loan taken by her and the amount already paid to the appellant has been given to her husband-respondent no.3 and has referred to annexure no. 13, which is copy of the said affidavit, to the memo of appeal. It was thus contended that there is no liability of the appellant, but the Tribunal below without considering these facts has held the appellant to be liable for payment of the outstanding amount of the Bank jointly and severely by passing the order impugned, which is not sustainable. It was, therefore, prayed that the order impugned may be set aside and the appeal may be allowed.

It appears that earlier Shri Vikram Bhalla, Advocate was appearing in the case on behalf of the respondent-Bank, but later on Shri Maneesh Mehrotra, Advocate has appeared in the present case on behalf of the respondent-Bank as per the order sheet dated 07.03.2024, but he did not file any reply to the memo of appeal and the respondents no. 2 & 3 were directed to be proceeded ex-parte by this Tribunal vide order dated 30.05.2023.

Learned counsel for the respondent-Bank submitted that the appellant had executed an undertaking in favour of the land owner and the said undertaking was also a document on which the Bank acted to release the amount. It was further contended that a Bi-partite agreement was executed between the owners of the land and the appellant-builder and as per the said agreement, the loan was sanctioned in favour of the respondent no. 2, who is wife of the land owner-respondent no.3. It was further contended that the appellant had also given an undertaking that in case of non-execution of sale deed in favour of the respondent no.2 within the stipulated period, it will be liable to refund the money given to him on behalf of the borrower and for this reason, the loan amount was disbursed to the appellant. It was further contended that the agreement was entered into before the sanction of the loan. It was further contended that the appellant has also issued an undertaking in favour of the respondent no.3, by which he had undertaken to repay the dues of the Bank. It was thus contended that the appellant is also liable to pay the outstanding amount of the respondent-Bank and it cannot be absolved from its liability. It was, therefore, prayed that the appeal filed by the appellant may be dismissed with heavy costs.

I have considered the rival contentions of the learned counsels for the parties and perused the record.

It is to be seen that Mr. Mohinder Kapoor and respondent no.3-Lalit Kapoor, who are the owners of the property in question, had offered their land to the appellant for construction of multi-stories residential complex on their land bearing no. 23, Block no. 7-10, Civil Lines, Kanpur, to which an agreement was executed on 10.01.2002 between the Mohinder Kapoor, Lalit Kapoor and the appellant-Builder. As per para 6 of the said agreement at page no. 51 of the memo of appeal, the appellant was shareholder of (63%) of the total constructed building as well as the land and Mohinder Kapoor and Lalit Kapoor had right to retain remaining (37%) share in the construction.

It is stated that pursuant to the aforesaid agreement, the appellant started the construction over the land in question. The respondent no.2, who is wife of respondent no.3, has been allotted on her request a flat vide allotment letter dated 08.07.2002 by the appellant, for which the respondent no. 2 was granted a loan of Rs.10.00 lacs by the respondent no. 1-Bank. To secure the said facility, the respondent no. 4 as well as appellant stood as guarantors. The respondent no. 2 withdrew the said loan amount and got a bank draft of the same in favour of the appellant.

Admittedly, the appellant had given an undertaking on 16.07.2002 to provide the sale deed to the bank for creating equitable mortgage, but the respondent no.3 before completion of the project executed another agreement on 01.08.2002 with one Jugal Kishore Garg for non making any construction over and above the first floor of the property in question, copy of which is placed at page no. 83 to 85 of the paper book and, thereafter, the owner of the land in question had also executed a cancellation deed on 02.08.2002, by which the power of attorney dated 10.01.2002, by which Vinod Kumar was authorized to look after any disputes with regard to the property in question, has been cancelled. Due to this conduct of the respondent no.3 and his father Mohinder Kapoor, the agreement dated 10.01.2002 between the land owners and the appellant came to an end and construction work was also stopped.

It is true that the loan was granted by the bank to the respondent no. 2 on the basis of the undertaking of the appellant to repay the loan of the Bank, but after creation of so many hindrances by the landlords, the construction work could not be completed. Consequently, the flat was not allotted to the respondent no. 2 and the sale deed was also not executed, but the fact remains that the purchaser of the flat is wife of the respondent no.3, who is also one of the land owners. From the record, it is clear that there is no nexus of the appellant with the borrower as well as the land owners, though the borrower and the land owners are related to each other, as Mohinder kapoor is the father of the respondent no.3 and grand father of the respondent no.2-borrower and the respondent no.3 is the husband of the respondent no.2 and is son of Mohinder Kapoor.

It is relevant to say that initially the loan was granted by the bank to the borrower and at the instance of the borrower, the said amount was paid to the appellant, but the said amount has been returned by the appellant to the husband of the borrower-respondent no.2 through a cheque no. 256024 dated 05.08.2002, which is evident from Annexure no. 9 at page no. 93 to 94 of the memo of appeal, which is copy of an undertaking dated 29.07.2002 executed between the appellant and the land owners. The relevant paragraph of the said undertaking is as under:

From the above, it is clear that the flat allotted to the respondent no.2 was under the share of the land owners, who are the family members of the respondent no.2-borrower and in case of non-completion of the construction of the flat in question and non-execution of the sale deed, the land owners shall be liable to refund the same. As such the responsibility of the payment of the amount outstanding is of the land owners i.e. respondent no. 3 and Mohinder Kapoor to the bank and is not of the appellant, as the appellant appears to have been in loss due to non-completion of the project. However, the project could not be completed on account of misconduct of the land owners, who are the family members of the respondent no. 2-borrower.

Further, the whole scenario of the present case reveals that all the games, which have been played, were pre-plan of the respondent no. 3 and his father Mohinder Kapoor to grasp the public money and accordingly, they enjoyed the money given by the bank at the instance of the respondent no.2, who is wife of respondent no.3-Lalit Kapoor and daughter-in-law of Mohinder Kapoor. If this aspect of the matter was considered by the Tribunal below while passing the order impugned, the result of the case would have come otherwise against the appellant. After going through the record, the mistake of the appellant is only that while the above mentioned deeds were being executed between the appellant and the land owners, the bank ought to have been made party to the same, but for such a little lapse, the appellant should not be made to suffer.

It is relevant to point out that the construction was to be made over the land of the respondent no.3 and Shri Mohinder Kapoor, who are the family members of the respondent no.2-borrower and the loan granted by the Bank to the borrower was actually utilized by the family members of the borrower, therefore, liability, which has occurred in the present case, should be fastened upon the respondents no. 2 to 4 and not on the appellant. Thus the order impugned is liable to be modified to this extent.

In view of the discussions as recorded above, the order impugned is modified to the extent that the dependents no. 1 to 3 (respondents no. 2 to 4) are liable to pay the dues of the Bank as determined by the Tribunal below vide order impugned and the appellant (defendant no. 4) is absolved from its liability.

Accordingly, the appeal is disposed off with no order as to costs.

Copy of this judgment be forwarded to the parties as well as the DRT concerned and be also uploaded on the e-DRT portal.