Punjab & Sind Bank vs Packed Ltd. And Ors.

J.M. Malik, J

The main jangle in this case pertains to the question whether an unregistered power of attorney holder is empowered to deposit title deed on behalf of the borrower in order to create a mortgage to secure the repayment of loan availed of. The learned trial Court, vide its order dated 14.1,2005 held that the power of attorney holder was not empowered to do so and as such it ordered that the respondents 5 and 6 were wrongly arrayed as defendants in the O.A.

In the O.A. filed by the appellant - Punjab and Sind Bank before the DRT, M/s. Packed Limited, defendant No. 1 was a Limited Company of which Mr. Mukesh Kumar and Mr. Suresh Kumar, defendant Nos, 2 and 3 respectively were Directors. Defendants 2 and 3 were also guarantors along with Smt. Payal Kumari, defendant No. 4. M/s. Gurukul Fashions through its sole proprietress Smt. Yashi Jaspal, defendant No. 5, and Smt. Yashi Jaspal, defendant No. 6 were mortgagors and Punjab State Industrial Development Corporation, defendant No. 7, was another institution having first charge over immovable mortgaged properties kept as collateral security in the case. All those defendants have been arrayed as respondents 1 to 7 respectively in this appeal. The case of the appellant Bank was that on 25.1.1995 the appellant Bank had sanctioned CC (Hypothecation) Limit of Rs. 60 lakh, Letter of Credit of Rs. 140 lakh and Bank Guarantee Limit of Rs. 10 lakh in favour respondent No. 1. Various documents were executed by respondent No. 2 on behalf of the respondent No. 1. The relevant paragraphs of the judgment are reproduced as follows:

The defendant Nos. 2 to 4 stood as guarantor and executed deed of guarantee (Ex. 19 to 21 respectively) on the same day. In order to secure the loan further, the defendant No. 5 mortgaged its immovable property in favour of the applicant through its attorney, defendant No. 2. The relevant documents for creation of mortgage are Exs. 22 to 25, which are intention to create mortgage. Power of Attorney, letter of acknowledge-ment of deposit of title of the property as detailed in para 5.8 of the O.A, respectively. Similarly, defendant No. 6 also created equitable mortgage of his property detailed in Para 5.9 of the O.A. through its attorney, defendant No. 4, the relevant documents are Exs. A-26 to 28.

Mortgage of the property has a/so been disputed and it has also been contended by the defendants that the OA is bad for misjoinder of parties and the defendant Nos. 5 and 6 have been wrongly impleaded as they are neither guarantors nor mortgagors. A perusal of the record shows that the mortgage has been created by defendant Nos. 2 and 4 as attorney holders of the defendant Nos. 5 and 6. A perusal of attorneys on record while creating the equitable mortgage in favour of the applicant Bank shows that these are notarized documents and are not registered with the Sub-Registrar. Section 17 of the Registration Act clearly stipulates that any document which intends to create charge on immovable property above the value of Rs. 100/- requires compulsory registration. The description of the properties is also not complete in the power of attorneys. The mortgage of the properties of defendants 5 and 6 has been created by defendant Nos. 2 and 4 respectively on the basis of attorney which is only notarized. It cannot be accepted that by way of notarized document, the power to sell, mortgage or alienate immovable property can be conferred. The mortgage in favour of the Bank is without any authority from the owner of the property and as such, the charge on the same is also illegal and without any basis. In view of the fact that there is no document of security or guarantee executed by the defendant Nos. 5 and 6 securing the repayment of defendant No. 7, as such, the mortgage of the properties of the defendant Nos. 5 and 6 cannot be said to be effective to secure the loan facilities of the defendant No. 1 and the defendant Nos. 5 and 6 have been wrongly arrayed as defendants in the present OA.

It may be mentioned here that the present appeal has been filed by Punjab and Sind Bank. The Bank has claimed relief only against M/s. Gurukul Fashions, respondent No. 5 through its sole proprietress and Smt Yashi Jaspal, respondent No. 6 and proprietress of respondent No. 5. Respondent Nos. 5 and 6 created mortgage through their power of attorney holders Mr. Mukesh Kumar, respondent No. 2 and Smt. Payal Kumari, respondent No. 4 respectively.

It was further contended that the pendente lite and future interest awarded by learned trial Court @12% p.a with quarterly rests from the date of filing of the application till its realization, is on the lower side and contractual rate of interest should have been awarded.

I have heard the Counsel for the parties. The learned Counsel for the respondents made the following submissions. Defendants 5 and 6 did not sign any document. They did not execute any guarantee deed. The learned Counsel for the respondents argued that respondents 5 and 6 had submitted the title deeds in question for verification only. In the written statement it was submitted that the title deeds were submitted with the appellant Bank to get the valuation report, and not for creation of equitable mortgage. It was contended that respondents 5 and 6 deposited the said document without consideration. They cannot be said to be the guarantors. Again, it is well settled that a mortgage is a transfer and a power of attorney holder has no power to deposit the title deeds by virtue of an unregistered power of attorney. It was also contended that such power of attorney required registration under Section 17 of the Registration Act. It was explained that in the absence of any contract, the above said mortgage was illegal and without any basis.

The respondents have tried to wrench the facts from their real significance. A distinction has to be drawn between the powers of attorney, i.e., those who transfer a property and those who deposit title documents simplicitor. The above said mortgage is valid by virtue of Section 59 of the Transfer of Property Act. The deposit of document itself makes a mortgage complete. There is no need of execution of any other document. The mortgagors need not append their signatures on any document. The question of guarantee is inbuilt. The money paid to the borrowers is the consideration.

Moreover, the duty of the Court is to cull out the real intention of the parties. The defence set up by the defendants/respondents themselves was that the title deeds were deposited by them to get the valuation done. The explanation given by the respondents is far from being satisfactory. For what purpose the defendants were made to get the valuation of the properties in question done is not clear. Again, the question of valuation is not connected with the facts of this case. The said documents of title were deposited in the year 1995. The Bank filed the Original Application for recovery of Rs. 1,69,08,739/- along with pendente lite and future interest, in the year 2001. What the respondents were doing all these six years? Assuming that these documents were given for valuation purpose only, what prevented the respondents from taking those back from the Bank after a reasonable time. Had the Bank been retaining the said documents illegally, the respondents could have taken action against it as per law. It is thus clear that the documents in question were deposited with the intention to create mortgage. The argument advanced by the learned Counsel for the respondents is strawman intended to divert the Court's attention from real issues.

For all these reasons, I am unable to countenance the finding recorded by the learned DRT. It has committed error in holding that defendants 5 and 6 were wrongly arrayed as defendants in the O.A. I, therefore, set aside his order to that extent. The defendant Nos. 1 to 6 are held to be jointly and severally liable to pay Rs. 1,69,08,739/- along with interest and costs.

The learned Counsel for the appellant invited my attention to the relief 6(i) sought in the appeal, which runs as follows:

(i) The appeal of the appellant may be allowed thereby setting aside the impugned judgment and decree dated 14th January, 2005 passed by the Hon'ble Debts Recovery Tribunal, Chandigarh in O.A. No. 197/2001 as against the respondent Nos. 5 and 6 only.

It appears to be a typographical mistake. The duty cast upon the Court is to read the appeal as a whole and to find out what is the real intention of the appellant. In the relief column it should have been mentioned that the impugned judgment with respect to respondents 5 and 6 be set aside and they be also made jointly and severally liable to pay the decreetal amount, along with respondents 1 to 4, and recovery certificate be amended accordingly. Consequently, I pin no significance to the above said argument advanced by the Counsel for the respondents.

The learned Counsel for the appellant did not raise the point of enhancement of pendente lite and future interest. In the cases reported in State Bank of India v. Sarathi Textiles & Ors., II (2009) BC 696=2008(3) SCALE 409, C.K Sasankan v. Dhanalakshmi Bank Ltd, : I (2009) CLT 368 (SC)=I (2011) BC 122 (SC)=2009(2) DRTC 320 (SC) and Sardar Associates and Others v. Punjab & Sind Bank and Others, : III (2009) BC 705 (SC)=III (2009) CLT 186 (SC)= AIR 2010 SC 218, it has been held that it is the discretion of the Court to award the pendente lite and future interest, which has to be exercised fairly. No rate of interest under the circumstances can be made a rule of thumb. Moreover, Section 19(20) of the DRT Act runs as follows:

19(20) The Tribunal may, after giving the applicant and the defendant an opportunity of being heard, pass such interim or final order, including the order for payment of interest from the date on or before which payment of the amount is found due up to the date of realization or actual payment, on the application as it thinks fit to meet the ends of justice,

I see no flaw in the finding given by the learned trial Court in this context. It was not called into question by the respondents. It has attained finality.

The appeal stands accepted with costs. Counsel's fee as per Bank's norms. Respondents 5 and 6 are given one month's time to clear off the debt, failing which nothing will preclude the Bank from initiating action against them as per law,

Copies of this order be furnished to the parties as per law and another copy, along with lower Court record, be sent to the learned DRT.