Mehar Chand Goyal vs Canara Bank and Others

Sanjay Kishan Kaul, C.J.—This is a case where respondent No. 1/Canara Bank having given an assurance to release a mortgaged property on payment of specified amount seeks to back out of the assurance after the amount has been deposited and appropriated by the bank. Such act is not expected at least from a nationalized bank.

The petitioner was a promoter cum Director of M/s. Nova Lamiboards Pvt. Ltd. Company incorporated and registered under the Companies Act, 1956 and engaged in the business of manufacturing of laminated boards at Kala Amb, Himachal Pradesh. In order to secure the loan, four properties were mortgaged and one such property was residential house of the petitioner bearing # 3175, Sector 32-D, Chandigarh (hereinafter referred to as ''the mortgaged property'').

There is no doubt that over a period of time, the account has become irregular and there are outstanding in the account. The petitioner approached respondent No. 1 bank for release of the mortgaged property on deposit of Rs. 2.25 Crores in January, 2012. This was in the context of evaluation of this property at Rs. 2,23,67,000/- as per evaluation report dated 16.07.2011. We may add that the valuation was much less when the property was mortgaged and suffice it to say that as per previous valuation dated 3.3.2008 it had been evaluated at Rs. 1,01,26,000/-. The petitioner apparently wanted to sell the property to a third party to realize the full potential. It is the case of the petitioner that the amount had in fact been specified by the bank itself before the property could be released. In this context, a letter dated 16.02.2012 was issued to the prospective purchasers, when the petitioner produced a copy of agreement to sell for benefit of the bank, which reads as under:-

Sub: Releasing of house property in the name of Mr. Mehar Chand Goyal, Mortgaged to M/s. Nova Lamiboard Pvt. Ltd.

We wish to inform that we agreed to release the title deeds of the house property in the name of Mr. Mehar Chand Goyal, as mentioned below, on payment of Rs. 225.00 lacs (Rupees two hundred and twenty five lacs).

Property details:

House No. 3715 Sector 32-D, Chandigarh.

This letter is issued on specific request of the party and is to be submitted to your goodself only.

The petitioner subsequently issued a letter dated 30.03.2012 requesting for release of title deeds of the property as he claimed to have deposited a sum of Rs. 2.25 Crores. The secondary prayer made in that letter was to renew the credit limit w.e.f. 31.03.2012 as all the accounts of the company had also been regularized. In response to this letter, respondent No. 1 bank issued a letter dated 31.05.2012 which is comprehensive qua both the aspects. However, while referring the issue of release of the mortgaged property, a new rider was sought to be added that it would be permitted to be released after regularization of the account, vide orders of the General Manager dated 09.02.2012. This was despite the fact that the communication dated 16.2.2012 did not contain any such stipulation which had naturally been issued after 09.02.2012.

The aforesaid matter appears to have then dragged on with exchange of legal notices. In the meantime, the prospective purchasers made a complaint to the police authorities stating that they had entered into an agreement to sell dated 01.02.2012 qua this property for consideration of Rs. 1.5 Crores and did not know at that time that the property was mortgaged. The stand of the petitioner was that the agreement to sell had been executed after the oral discussions with the bank, pursuant thereto a letter had been obtained from the bank on 16.02.2012. Since the bank had been asking for the larger amount to release the property, the balance amount had been so arranged by the petitioner from his own resources. The complaint also resulted in an enquiry by Economic Offences Wing Cell of Chandigarh Police where queries were posed to respondent No. 1 bank and the bank responded vide communication dated 14.12.2013. The contents of that letter are as under:-

To

Shri Rakesh Kumar, S.I. Enquiry Officer, EOW, Sector 17, Chandigarh.

Sub: Your letter No. 1604/5A/EOW dated 5.12.2013 regarding complaint No. PW201306620 dated 13.6.2013.

Ref: Our letter No. CB/CHD/35-B/RLY/EOW 17 dated 21.9.2013.

Dear Sir,

With reference to the above we supply you the following information as sought by you:-

The H.No. 3715, Sector 32-D, Chandigarh owned by Mr. Mehar Chand Goyal has been mortgaged with our bank against the OCC/OD/BD Limit., Term Loan, ILC/FLC and BG granted to M/s. Nova Lamiboard Pvt. Ltd. Kala Amb, HP, in which Mr. Mehar Chand Goyal stands as Director as well as Guarantor.

The bank had vide his letter No. 35-B/CR386/157/2008/AKK dated 26.5.2008 intimated to the Estate Office with regard to mortgage.

No.

The bank had issued letter No. CHD35B-CR-NLB-1361; 2012 dated 10.2.2012 & letter No. CHD35B-CR-NLB-1493; 2011 dated 16.2.2012 to Anup Gupta & Amit Gupta regarding release of the above mentioned property on payment of Rs. 225.00 lacs (Rs. Two Crores twenty five lacs only).

The Bank has received Rs. 100.00 lacs on 23.2.2012 vide cheque no. 962401 from Mr. Mehar Chand Goyal and Rs. 75.00 lacs on 01.03.2012 through cheque No. 23382 in the CC a/c of M/s. Nova Lamiboards P. Ltd. (1625.261.20043). We have not received any amount on 29.03.2012 as mentioned in your subject letter. Further, we have also received Rs. Fifty lacs in the form of two credits of 25.00 lacs each on 29.3.2012 & another Rs. Fifty lacs by way of two credits of 25.00 lacs each on 30.3.2012 through RTGS from ICICI Bank from the a/c of Mr. Rajesh Goyal in the current account of M/s. Nova Lamiboards Pvt. Ltd. (1625.201.2895).

The account was irregular. It was upgraded with the recovery of Rs. 225.00 lacs through various modes and Rs. 50 lacs through cheque which was discounted. This Rs. 50.00 lac cheque was returned subsequently making the account irregular again.

The bank thereafter had proceeded to issue a sale notice of the immovable properties taking recourse to the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short ''the SARFAESI Act''). It is at that stage the petitioner approached this Court by filing the present writ petition under Article 226 of the Constitution of India seeking directions against respondent No. 1 bank to release the title deeds of the mortgaged property which they had sold to respondents No. 2 and 3 before us and to act in accordance with the letter dated 16.02.2012 issued to these respondents. The sequitur prayer was made to stay the auction proceedings qua those properties. We may add that in so far as other three properties are concerned, the petitioner has not made any claim which still continues to be mortgaged with the respondent No. 1 bank and are available for realization of any balance due.

The matter came up before us for the first time on 04.02.2014 when the following order was passed:-

The limited controversy raised in the present petition by the petitioner, as urged by learned counsel, is that as per Annexure P-2 at page-29, the house property was to be released to the prospective purchasers on payment of Rs. 225 lacs. The schedule of payment was as specified at pages 6 & 7 of the petition. It is the case of the petitioner that all these payments have been made. Yet, the property has not been released and the prospective purchasers have even initiated criminal proceedings against the petitioner.

On the other hand, learned counsel appearing for the respondent-bank submits that the last tranche of Rs. 50 lacs payable on 29.2.2012 was never paid, though the earlier two payments are not in dispute. In this behalf, learned counsel for the petitioner has drawn our attention to the letter dated 14.12.2013 of the bank (at page-61) wherein in response to the enquiry from the EOW Cell, the bank itself admits the payment of Rs. 50 lacs on 29.3.2012 (wrongly mentioned as 29.9.2012) and a further sum of Rs. 50 lacs which, apparently, bounced. He, thus, submits that the bouncing of the subsequent payment of Rs. 50 lacs may have created a liability for the borrower, but has nothing to do with the release of the property which was assured by the bank when amount of Rs. 225 lacs stands paid.

Learned counsel for the respondent-Bank, faced with the aforesaid situation, seeks a short accommodation to look into the matter and if need be file an affidavit within three days from today.

Respondents No. 2 and 3 are prospective purchasers while respondent No. 4 is the borrowing entity in which the petitioner was a Director and a guarantor when he had mortgaged the property, but claims to have resigned since then.

Learned counsel for respondent-bank has shown to us the documents, but we are not satisfied.

The short point for consideration before us is only that once the respondent-bank unequivocally informs the prospective purchaser, as per Annexure P-2, that on deposit of Rs. 225 lacs the property would be released in favour of the prospective purchaser, the bank is not permitted to play ducks and drakes by alleging that there are other outstandings because of which the property is not being released. It is not in dispute that this sum of Rs. 225 lacs stands paid to the bank of which Rs. 1.5 lacs is the apparent consideration paid by the purchaser and the borrower has made arrangement for the balance Rs. 75 lacs to be deposited with the respondent-bank.

Learned counsel for respondent-bank seeks a short accommodation to examine the matter and explain why the bank should not be directed by this Court to adhere to the arrangement specified at page-29 (Annexure P-2).

List on 11.02.2014.

On the next date i.e. 11.02.2014, we passed the following order while issuing formal notice to the bank which had been represented before us on the earlier date:-

The short point for consideration before us is only that once the respondent-bank unequivocally informs the prospective purchaser, as per Annexure P-2, that on deposit of Rs. 225 lacs the property would be released in favour of the prospective purchaser, the bank is not permitted to play ducks and drakes by alleging that there are other outstandings because of which the property is not being released. It is not in dispute that this sum of Rs. 225 lacs stands paid to the bank of which Rs. 1.5 lacs is the apparent consideration paid by the purchaser and the borrower has made arrangement for the balance Rs. 75 lacs to be deposited with the respondent-bank.

Learned counsel for respondent-bank seeks a short accommodation to examine the matter and explain why the bank should not be directed by this Court to adhere to the arrangement specified at page-29 (Annexure P-2).

In the reply filed by the bank, the issue is sought to be raised about the account being irregular as also the sources of the amount deposited with the bank. It is the contention of respondent No. 1-bank as advanced before us that what was deposited with the bank apart from the initial amount of Rs. 1 Crore was really the money which was received from the normal banking transactions for which the facility was available with the borrower. The doubts were also sought to be cast on the Agreement to Sell. A reference is also made to the fact that there were subsequent endeavours for ''One Time Settlement" of the account due which ultimately did not mature.

We have heard learned counsels for the parties including the prospective purchasers.

In our view, the bank is seeking to obfuscate the issue by seeking to raise different pleas which are not germane to the controversy in question. The issue is not as to how much debt is due from the borrower, what is the nature of the agreement to sell, from where the funds have been received which have been deposited in the account etc. but the issue is that the bank had called upon the petitioner to release the title deeds of the mortgaged property on deposit of Rs. 2.25 Crores. In fact, only cobweb which we wanted to remove was that the plea of respondent No. 1 bank that though the initial amount of Rs. One Crore was deposited out of the amount of Rs. 2.25 Crores, the balance amount may have been for clearing the limits availed off by the borrower and not towards the deposit of balance of Rs. 2.25 Crores.

In the aforesaid context, learned counsel for the petitioner has drawn our attention to own letter of the respondent No. 1-bank dated 14.12.2013 (Annexure P-13) sent to the ''Economics Offences Wing Cell" where paras No. 4 and 5 clinch the issue. The issuance of letter dated 16.02.2012 is not doubted and thus what was stated therein would be binding on the bank. The bank acknowledged the receipt of Rs. One Crore on 23.02.2012 in para No. 5 as also further sum of Rs. 75 lacs on 01.03.2012-both through cheques. The balance of Rs. 50 lacs was stated to have been received in the form of two credits of Rs. 25 lacs each on 29.03.2012. Not only that, further sum of Rs. 50 lacs was also received, beyond this amount of Rs. 2.25 Crores, by way of two credits of Rs. 25 lacs each on 30.03.2012 through RTGS from ICICI Bank from the account of Mr. Rajesh Goyal (son of the petitioner). It has thereafter been stated in the same letter that the account was upgraded with the recovery of Rs. 2.25 crores through various modes and also Rs. 50 lacs through cheque which was discounted but the said cheque of Rs. 50 lacs was, however, returned and the account became irregular again. It is thus clear that this amount of Rs. 50 lacs is over and above a sum of Rs. 2.25 Crores against which the mortgage property had to be released.

Not only aforesaid, the petitioner has produced before us the certificates issued by the ICICI Bank on 10.02.2014 confirming that these two amounts of Rs. 25 lacs each totaling Rs. 50 lacs deposited through cheques were from the individual saving account of Mr. Rajesh Goyal. Thus, really no question remains about even payment of the balance amount of Rs. 50 lacs.

Learned counsel for respondent No. 1 faced with the aforesaid situation, yesterday sought to raise another issue i.e. he had produced a statement of account and states that it is not clear as to from where Rs. 75 lacs had been received, though this issue had never been raised earlier. However, as a matter of caution we deferred the proceedings to today and called upon the petitioner to clarify this issue as it was his stand that this amount was also received from the account of Mr. Rajesh Goyal. He has today produced before us a certificate issued by the ICICI bank certifying that this amount was also received from the same personal account of Mr. Rajesh Goyal.

We are thus of the view that the amount of Rs. 2.25 Crores sought by the bank as a condition for release of the mortgaged property (being one of four properties) clearly stands satisfied and the bank ought not to have withheld the papers and thereafter made endeavours to auction the property. The aspect of regularization of the account is clearly an after-thought but be that as it may there are three remaining properties available with the bank for the said purpose.

We have also perused the documents annexed to the reply filed by the bank. Since on the first date of hearing an impression was sought to be created before us by learned counsel for respondent No. 1-bank that the mortgaged property had again been mortgaged to secure the loan, this is not so, as the documents in question are for continuing the mortgage which were routinely taken by the bank and non-signing of the same would have naturally invited trouble for the petitioner.

We may add at the cost of repetition in view of now a persistent plea of learned counsel for respondent No. 1-bank that the condition of regularization of the account is not met-this being not a condition as per letter dated 16.02.2012 nor bring mentioned even in the letter dated 14.12.2013 in response to the EOW Cell queries. It is not the case of respondent No. 1-bank that some communication has been unauthorizedly written or that some disciplinary action has been taken against any officer of the bank for having acted beyond his authority.

We, thus, direct respondent No. 1 bank to release the title documents of the mortgaged property only to the petitioner within a period of seven days from today and to handover the possession which is stated to have been taken over in pursuance of the SARFAESI proceedings despite having been received an amount of Rs. 2.25 Crores in the account. This would facilitate the petitioner to carry out his obligation qua respondents No. 2 and 3. The natural sequitur would be that the SARFAESI proceedings qua this property would lapse leaving the bank free to proceed against the remaining three properties.

We are also informed that in the present market condition, the endeavour to sell the remaining three properties was not successful which itself would show that adequate price well above the market value had been fixed for release of the mortgaged property.

We are also of the view that this is a fit case where costs of Rs. 10,000/- should be imposed on the concerned Manager of respondent No. 1 bank. However, at the request of learned counsel for respondent No. 1, we say that this costs will not be leviable if needful is done within seven days.

The petition is allowed in the aforesaid terms.