Sadanand Narsappa Mendon vs Lic Housing Finance Ltd

Raj Mani Chauhan, J

The challenge under the present Appeal under Section 18(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short the SARFAESI Act) is the judgment and order dated 7th November, 2006 passed by Shri K.P. Kotecha, the then learned Presiding Officer (learned P.O.), Debts Recovery Tribunal (DRT) No. 1, Mumbai, in Securitisation Application (S.A.) No. 94/2006 (Sadanand Narsappa Mendon v. LIC Housing Finance Limited) whereby the learned Presiding Officer has dismissed the aforesaid S.A. filed by the Appellant. The relevant facts giving rise to the present Appeal may be briefly stated as under:

The property involved in the present Appeal is the Flat No. 525 situated on First Floor, Building No. 27, Poisar Ashirwad Co-operative Housing Society Limited, Samata Nagar, Kandivali (East), Mumbai-400101 (hereinafter referred to as the said flat).

Admittedly, Maharashtra Housing & Area Development Authority (MHADA) was the owner of a piece of land admeasuring 896.29 sq. metres situated at S. No. 56, City Survey No. 838 (pt) and 840 (pt) being part of Boards Lands at Poisar, Kandivali (East), Mumbai-400101, in the Sub-registration District Borivali, Mumbai. MHADA constructed a building No. 27 upon the aforesaid piece of land consisting of 20 tenements. MHADA transferred the aforesaid building in favour of Poisar Ashirwad Co-operative Housing Society Ltd. and granted lease of the land for 999 years in favour of the society on 23rd June, 2006. MHADA before transferring of the said building had allotted the said flat to one Mr. Shivram Somappa Suvarna vide allotment letter dated 28th March, 1984. Mr. S.S. Suvarna on the basis of aforesaid allotment letter, applied for Housing Loan to the respondent, LIC. Housing Finance Limited. The respondent on the aforesaid application of Mr. S.S. Suvarna sanctioned housing loan of Rs. 6,00,000/- in favour of Mr. S.S. Suvarna vide its letter dated 9th February, 2001 on the terms and conditions provided in the loan agreement entered into between it and the borrower. Mr. Dhirendra R. Vaghani and Mr. Dinesh Subbanna Mendon stood guarantors to the term loan availed by the borrower. The borrower on 16th March, 2001 created equitable mortgage of the said flat in favour of the respondent by depositing title deeds of the said flat to secure the amount of housing loan.

Indisputedly the account of the borrower became irregular. Consequently the Respondent classified his account as Non-Performing Asset (N.P.A.) and proceeded under the SARFAESI Act recover its dues. The authorized officer of the respondent on 17th December, 2004 issued demand notice under Section 13(2) of the SARFAESI Act to the borrower and guarantors calling upon them to pay the outstanding dues of Rs. 5,29,018/- due as on 31st December, 2004 within 60 days from the date of issuance of the notice. The borrower and the guarantors could not pay the amount as demanded by the authorized officer. The authorized officer thereafter moved an application under Section 14 of the SARFAESI Act before the Chief Metropolitan Magistrate, Esplanade, Mumbai, for taking over the possession of the secured asset and thereafter to hand over possession of the secured asset to him. The application was allowed by the CMM vide order dated 17th February, 2006. The CMM directed the Assistant Registrar to take over the possession of the said flat after giving 15 days notice to the borrower.

Mr. P.G. Joshi, Assistant Registrar, Chief Metropolitan Magistrate's Office, Esplanade, Mumbai, in pursuant to the aforesaid order dated 17th February, 2006 passed by the CMM issued notice on 5th April, 2006 to the borrower, Mr. Shivram S. Suvarna, informing him to hand over possession of the said flat within 15 days from the date of receipt of the notice failing which he may take over the possession of the said with the help of Police. The aforesaid notice was also pasted on the said flat on 31st May, 2006. The appellant, who was in possession of the said flat, consulted his Advocate, Mr. A.V. Joshi, as he was occupying the said flat on the basis of agreement of sale executed by Mr. S.S. Suvarna. Mr. A.V. Joshi, Advocate, or the instructions of the appellant sent a letter/notice to the Assistant Registrar, on 14th July, 2006 requesting him not to take over possession of the said flat in pursuant to the order dated 17th February, 2006 passed by the CMM, on the ground that the appellant was in possession of the said flat as bona fide purchaser for valuable consideration and without notice of any prior mortgage.

The authorized officer of the respondent on 21st July, 2006 moved MA No. 282/MISC./2005 before the CMM, with the prayer to enforce his order dated 17th February, 2006. The CMM allowed the aforesaid M.A. vide order dated 5th September, 2006 and directed the Assistant Registrar to the execute order dated 17th February, 2006 passed by him on the application filed by the authorized officer of the Respondent under Section 14 of the SARFAESI Act.

Mr. P.G. Joshi, Assistant Registrar, thereafter on 11th September, 2006 wrote a letter to the Sr. Inspector of Police, Samata Nagar Police Station, Mumbai-400101, for providing Police force for taking over the possession of the said flat on 19th September, 2006, Shri Joshi sent the copy of the aforesaid letter to the Secretary, Poisar Ashirwad Co-operative Housing Society, Kandiwli (East), Mumbai-400067 and to the appellant, Shri Sadanand Narsappa Mendon.

The appellant on 18th September, 2006 wrote to the Sr. Inspector of Police, Samata Nagar Police Station, Mumbai-400101, that he is owner in possession of the said flat and as per order dated 17th February, 2006 and 5th September, 2006 passed by the CMM, Mr. S.S. Suvarna has to be dispossessed from the said flat, while Mr. S.S. Suvarna never had been in possession of the said flat since 2005. It appears that Mr. S.S. Suvarna has colluded with the Respondent to dislodge him from the said flat. He, therefore, requested the Sr. Inspector of Police not to dispossess him from the said flat in pursuant to the aforesaid orders passed by CMM.

The Assistant Registrar, Mr. P.G. Joshi, on 19th September, 2006 with the help of Police took over the forcible possession of the said flat ousting the appellant along with his family members from the said flat. He prepared site report of taking over the possession of the said flat as well as prepared inventory of the movables found therein.

The appellant being aggrieved by the action taken by the authorized officer of the Respondent under Sections 13(4) and 14 of the SARFAESI Act as well as on account of his forcible dispossession from the said flat filed Appeal/Securitization Application (S.A.) No. 94 of 2006 on 3rd October, 2006 under Section 17 of the SARFAESI Act in the DRT-I, Mumbai.

The appellant in the aforesaid S.A. has alleged that he was in search of a flat. He approached to Mr. S.S. Suvarna to purchase the said flat. Mr. S.S. Suvarna accepted his proposal and agreed to sell the said flat in his favour. He enquired from Mr. S.S. Suvarna as to whether there were any encumbrance on the said flat who disclosed that the said flat was free from all encumbrances. The appellant by way of precaution published a notice in the newspaper i.e. Free Press Journal on 10th August, 2005 informing the public at large that he wants to purchase the sale flat so that if any person has claim over the said flat, he may come forward to put up his claim. But, despite publication in the newspaper none turned up to put up his claim over the said flat. He also got title search report of the said flat. He also came to know that the Building No. 27 is located on a piece of land admeasuring 896.29 sq. metres situated at S. No. 56, City Survey Nos. 838 (pt) and 840 (pt) being part of Boards Lands at Poisar, Kandivali (East), Mumbai-400101, which belongs to MHADA, therefore, he has to obtain No Objection Certificate (N.O.C.) from MHADA to purchase the said flat for which he has to pay transfer charges to MHADA. He also came to know that there were dues of the society amounting to Rs. 25,000/- against Mr. S.S. Suvarna, he, therefore, paid the same to the society. He also paid Rs. 35.000/- to MHADA towards transfer charges. He thereafter purchased the said fiat from Mr. S.S. Suvarna on 31st December, 2005 through a registered agreement of sale. Mr. Suvarna after transfer of said flat to him handed over the possession of the said flat to him.

The appellant further alleged that he was unaware of the fact that Mr. Suvarna had availed any housing loan from the respondent and had created equitable mortgage of the said flat in favour of the respondent. He for the first time on 31st May, 2006 came to know about the said mortgage when the notice was pasted by the Assistant Registrar, CMM, on the said flat. The appellant alleged that he had taken all the possible precautions to ascertain the ownership of Mr. S.S. Suvarna regarding the said flat and after being satisfied about his title purchased the said flat for valuable consideration. In this way he is bona fide purchaser of the said flat.

The appellant has further alleged that the MHADA constructed the aforesaid building No. 27 on a price of land admeasuring 896.29 sq. metres situated at S. No. 56, City Survey Nos. 838 (pt) and 840 (pt) being part of Boards Lands at Poisar, Kandivali (East), Mumbai-400101 which belongs to it. MHADA had not transferred the land to the society, rather it has transferred only the building to the society. The MHADA had transferred the lease hold rights of the land in favour of the appellant on 23rd June, 2006.

The appellant further contended that respondent had sanctioned housing loan to Mr. S.S. Suvarna in February, 2001. At that time the society was not the owner of the said flat. As per the lease agreement prior permission of the MHADA to mortgage the said flat was required. But Mr. S.S. Suvarna, without obtaining any prior permission or obtaining N.O.C. from MHADA, created the equitable mortgage in favour of the respondent which was not a valid mortgage in the eyes of law. Moreover, Mr. S.S. Suvarna had not deposited the original title deeds of the said flat with the respondent, while creating so called equitable mortgage. Therefore, there could be no valid equitable mortgage of the said flat in favour of the respondent. The Respondent on the basis of the so-called equitable mortgage, had got no security interest upon the said flat. The appellant contended that the original title deeds of the said flat are lying with the Abhyuda Co-operative Bank Ltd., which had also sanctioned loan to the borrower. MHADA has issued no objection certificate for creation of mortgage which too, is lying with Abhuday Co-operative Bank. The action taken by the respondent under Section 13(4) as well as under Section 14 of the SARFAESI Act is, therefore, illegal. He had been illegally dispossessed by the respondent under Section 14 of the SARFAESI Act, therefore, he is entitled to get the possession of the said flat restored back as well as for damages for his wrongful dispossession from the said flat. The appellant in the aforesaid S.A. has sought for following reliefs:

"(a) that this Hon'ble Tribunal be pleased to declare that the measure taken by the respondents purportedly under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 by taking forcible possession of the property being Flat No. 525, Bldg. No. 27, Poisar Ashirvad Co-operative Housing Society, Kandivili (East), Mumbai, by the respondent as illegal;

(b) that this Hon'ble Tribunal be pleased to order and direct the respondents to restore the possession of the said property being Flat No. 525, No. 27, Poisar Ashirwad Co-operative Housing Society, Kandivali (East), Mumbai, to the applicant;

(c) that this Hon'ble Tribunal be pleased to order and decree the respondent to pay to the applicants compensation and damages of Rs. 15 lacs for the loss caused to the applicant as a result of illegal action on the part of the Respondent;

(d) for costs;

(e) for such further and other reliefs as this Hon'ble Tribunal may deem fit and proper in the facts and circumstances of the present case."

The respondent opposing the aforesaid S.A. filed its Written Statement in which it has denied the averments made by the appellants in his S.A. The respondent has alleged that admittedly the said flat was allotted by MHADA in favour of Mr. S.S. Suvarna who had availed housing loan sanctioned by the respondent. Mr. Dhirendra R. Vaghani and Mr. Dinesh Subbanna Mendon stood guarantors to the housing loan availed by the borrower. The borrower created equitable mortgage of the said flat in favour of the respondent by depositing the title deeds of the said flat. The borrower before creation of the mortgage in favour of the respondent had produced share certificate in his name, copy of N.O.C. issued by the society for creation of the mortgage of the said flat and original allotment letter of the said flat issued by the MHADA. The borrower on the basis of the aforesaid documents created equitable mortgage of the said flat in favour of the respondent. A memorandum of entry was also recorded in the records of the respondent on 16th March, 2001 regarding creation of equitable mortgage of the said flat by the borrower by depositing title deeds of the said flat. The mortgage of the said flat created by the borrower in favour of the respondent is a valid mortgage, therefore the respondent on the basis of the equitable mortgage has no security interest upon the said flat. On the other hand, the appellant has got no valid title of the said flat. He is not a bona fide purchaser of the said flat, too.

The respondent has further alleged that one of the guarantors i.e. Shri D.S. Mendon, to the loan availed by the borrower was in-mate of the appellant, therefore, he was well aware of the equitable mortgage of said flat created by the borrower. In this way, the appellant was well aware of the fact that the said flat had already been mortgaged by the borrower in favour of the respondent. The publication by the appellant in the newspaper that he was going to purchase the said flat, will not cure the defect in his title. The lien of the respondent over the said flat too was recorded in the record of the society. If the appellant had made search of the record of the society he would have known about the charge of the respondent over the said flat. The appellant, therefore, cannot be said to be the bona fide owner of the said flat. He, therefore, cannot challenge the measures taken by the authorized officer of the respondent under Section 13(4) of the SARFAESI Act.

The respondent has further contended that the borrower and the guarantors despite the service of demand notice issued by the Authorised Officer of the Respondent under Section 13(2) of the SARFAESI Act did not pay outstanding dues as indicated in the notice. The authorized officer thereafter filed application before the CMM under Section 14 of the SARFAESI Act to take over the possession of the said flat and thereafter hand over the possession of the same to him. The application was allowed by the CMM vide order dated 17th February, 2006. The CMM directed the Assistant Registrar to take over the possession of the said flat. Mr. P.G. Joshi, Assistant Registrar, on 5th April, 2006 issued notice to the borrower, Mr. Shivram Somappa Suvarna, to hand over the possession of the said flat within 15 days from the date of the receipt of the notice. The aforesaid notice was pasted by Shri. P.G. Joshi, Assistant Registrar, on the flat on 31st May, 2006. The appellant thereafter sent a notice to Mr. P.G. Joshi, Assistant Registrar, through his Advocate, informing him that he was bona fide purchaser and as well as in possession of the said flat. The Authorized Officer of the respondent thereafter moved an application before the CMM for execution of the order dated 17th February, 2006 passed by him which was allowed by the CMM on 5th September, 2006. The Assistant Registrar, Mr. P.G. Joshi, in pursuant to the aforesaid order dated 5th September, 2006 passed by the CMM, wrote at letter on 11th September, 2006 to the Sr. Inspector of Police, Samata Nagar Police Station, Mumbai-400101, for providing Police force for taking over the possession of the said flat on 19th September, 2006. A copy of the aforesaid letter was sent to the Secretary, Poisar Ashirwad Co-operative Housing Society, Kandivali (East), Mumbai-400067 and to the appellant, Mr. Sadanand Narsappa Mendon. The Assistant Registrar, Shri P.G. Joshi, thereafter on the scheduled date i.e. 19th September, 2006 took over possession of the said flat with the help of the Police. He prepared inventory of the movables found therein and handed over possession of the said flat to the authorized officer of the respondent. The measures taken by the Authorized Officer of the respondent under Section 13(4) and under Section 14 of the SARFAESI Act is perfectly legal. The respondent has sought for dismissal of the S.A. filed by the appellant.

The parties in support of their contentions filed affidavits and documentary evidence. The learned Presiding Officer, DRT, after hearing the learned Counsel for the parties and going through the documentary evidence available on record found that the appellant had prior information of the equitable mortgage of the said flat created by the borrower in favour of the respondent, therefore, he cannot be said to be bona fide purchaser of the said flat. He, therefore, is not entitled for any relief. Consequently the learned Presiding Officer, DRT-I, Mumbai, vide impugned judgment and order dated 7th November, 2006 dismissed the aforesaid S.A. filed by the appellant.

The appellant being aggrieved by the aforesaid judgment and order passed by the learned P.O., DRT has filed the present Appeal.

The appellant at the appellate stage has filed additional affidavit dated 13th December, 2012 along with copies of certain documents. The appellant in the aforesaid affidavit has stated that the borrower, Mr. Shivram Somappa Suvarna, had availed loan sanctioned by the number of Banks creating equitable mortgage of the said flat in favour of all the Banks depositing title deeds of the said flat. One of those Banks viz. Syndicate Bank had filed Original Application No. 31 of 2007 in DRT-II, Mumbai, for recovery of an amount of Rs. 11,75,944/- together with future interest against the borrower and the guarantors by liquidating the said flat/mortgaged property. The Original Application was allowed by the learned Presiding Officer, DRT, vide judgment and order dated 3rd October, 2003. The learned Presiding Officer, DRT, declared that the amount adjudged is secured by the mortgage of the said flat. When he came to know about the judgment and order dated 3rd October, 2008 passed by the learned Presiding Officer, DRT, in Original Application No. 31/2007 he moved Miscellaneous Application (M.A.) No. 10/2010 under Section 19(25) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (in short the RDDBFI Act) before the learned Presiding Officer, DRT, to withdraw the declaration of mortgage of the said flat given by him. The aforesaid M.A. filed by the appellant was opposed by the Syndicate Bank, The learned Presiding Officer after hearing, the learned Counsel for the parties allowed the aforesaid M.A. filed by him vide judgment and order dated 10th February, 2010 and declaration of the mortgage granted by him in the Original Application No. 31/2007 regarding the said flat had been withdrawn.

The deponent has further stated that another Bank i.e. the State Bank of Travancore had also proceeded under the SARFAESI Act to recover its outstanding dues against the same borrower, Mr. S.S. Suvarna. The Authorized Officer of the aforesaid Bank took over symbolic possession of the said flat. He thereafter being aggrieved by the measures taken by the Authorized Officer of the State Bank of Travancore filed Appeal/Securitisation Application (S.A.) No. 180/2010 under Section 17 of the SARFAESI Act. He had challenged the measures taken by the Authorized Officer under Section 13(4) of the SARFAESI Act on the ground that he was bona fide purchaser in possession of the said flat. The equitable mortgage of the said flat created by the borrower in favour of the State Bank of Travancore is invalid. The learned Presiding Officer, after hearing the learned Counsel for the parties, allowed his S.A. vide judgment and order dated 7th September, 2012 holding that he is bona fide purchaser in possession of the said flat. The learned Presiding Officer also held that the so called equitable mortgage of the said flat created by the borrower in favour of the Bank was not valid mortgage therefore, the Bank has got no security interest over the said flat. The appellant in his affidavit has further stated that the Respondent Bank he got no original title deeds of the said flat, rather the original title deeds of the said flat are lying with the Abhyudaya Cooperative Bank Ltd., therefore, the so called mortgage in favour of the respondent is invalid. The respondent, therefore, has got no security interest upon the said flat.

Heard the rival submissions advanced by the learned Counsel for the parties and perused the material available on record.

In this case, the appellant has challenged the measures taken by the authorized officer under Section 13(4) of the SARFAESI Act as well as the order passed by the CMM under Section 14 of the SARFAESI Act mainly on following two grounds:

(i) The appellant has alleged that he is bona fide purchaser of the said flat for value without prior notice of any mortgage;

(ii) The so called equitable mortgage of the said flat created by the borrower in favour of the respondent is invalid, therefore, the Respondent has got no security interest over the said flat.

From a perusal of the impugned judgment and order passed by the learned Presiding Officer it appears that the learned Presiding Officer has held that the appellant has failed to prove that he is bona fide purchaser in possession of the said flat. Consequently, he has dismissed the S.A. filed by the appellant.

The learned Counsel for the appellant contended that the aforesaid finding recorded by the learned Presiding Officer is not based on proper appreciation of the documentary evidence available on record, therefore, the aforesaid finding of the learned P.O. suffers from perversity. The learned Counsel contended that the MHADA had constructed building No. 27 on the piece of land admeasuring 596.29 sq. meters situated at S. No. 56, City Survey No. 838 (pt.) and 840 (pt) being part of Boards Lands at Poisar, Kandivali (East), Mumbai-400101, which was owned by it. The MHADA had transferred the building to the Poisar Ashirwad Cooperative Housing Society Limited, but not the land. Mr. Shivram Somappa Suvarna was living in the said flat on the basis of allotment letter issued by the MHADA in his favour. The appellant approached to Mr. S.S. Suvarna to purchase the said flat who accepted his proposal and agreed to sell the said flat in his favour. The appellant came to know that the land on which the aforesaid building No. 27 is located still belonged to MHADA, therefore, he was required to pay the transfer charges of the said flat to MHADA. Consequently he paid an amount of Rs. 35,000/- to MHADA towards transfer charges. The appellant also learnt that there were dues of Rs. 25,000/- of the society against Mr. S.S. Suvarna. The appellant on behalf of Mr. S.S. Suvarna paid Rs. 25,000/- to the society to clear its dues against Mr. S.S. Suvarna. The appellant had got the title of the said flat searched since 13 years back. The appellant did not find any defect in the title of Mr. S.S. Suvarna. The appellant by way of abundant precaution got notice published in the newspaper "Free Press Journal" informing the public at large that he wants to purchase the said flat so that if any person has claim over the said flat, he may come forward to put up his claim. But, despite publication of the notice in the newspaper, none turned up to put up his claim over the said flat. The appellant, therefore, got himself fully satisfied that the said flat was free from all encumbrances. The appellant, therefore, purchased the said flat from Mr. S.S. Suvarna through registered agreement of sale dated 31st December, 2005. He after purchasing the said flat took over the possession of the said flat and resided therein along with his family members till he was forcibly dispossessed by the respondent on 19th September, 2006. The appellant in this way before purchasing the said flat had taken every precaution to ascertain the title of the said flat. He, after being fully satisfied that Mr. S.S. Suvarna was owner in possession of the said flat which was free from all encumbrances, purchased the said flat from Mr. S.S. Suvarna through registered agreement of sale dated 31st December, 2005. He had paid the entire sale consideration to Mr. S.S. Suvarna. He was in possession of the said flat. The appellant in support of his contention has filed copy of the title search report, cutting of the newspaper publication, telephone/electricity bills, documents of gas connection, details of payments of sale consideration, which clearly demonstrate the appellant as bona fide purchaser of the said flat. He had been in possession of the said flat till he was forcibly evicted by the Assistant Registrar, Chief Metropolitan Magistrate's Office, Esplanade, Mumbai, in pursuant to the order dated 17th February, 2006 passed by the CMM.

The learned Counsel further contended that Syndicate Bank had filed Original Application No. 31/2007 for recovery of an amount of Rs. 11,75,944/- together with future interest against the borrower/Mr. S.S. Suvarna and the guarantors, by liquidating the said flat/mortgaged property in DRT-11, Mumbai. The Original Application was allowed by the learned Presiding Officer, DRT vide judgment and order dated 3rd October, 2008. The learned Presiding Officer, DRT, declared that the amount adjudged by him was secured by the mortgage of the said flat. When the appellant came to know about the aforesaid judgment and order dated 3rd October, 2008 passed by the learned Presiding Officer DRT, in Original Application No. 31/2007, he moved M.A. No. 10/2010 under Section 19(25) of the RDDBFI Act before the learned Presiding Officer, DRT, to withdraw the declaration of mortgage given by him. The aforesaid M.A. filed by the appellant was opposed by the Syndicate Bank. The learned Presiding Officer after hearing the learned Counsel for the parties allowed the aforesaid M.A. filed by the appellant vide judgment and order dated 10th December, 2010 and declaration of the mortgage granted by him in the Original Application No. 31/2007 regarding the said flat had been withdrawn.

The learned Counsel further contended that another Bank i.e. the State Bank of Travancore had also proceeded under the SARFAESI Act to recover the outstanding dues against Mr. S.S. Suvatna. The authorized officer of the aforesaid Bank took over symbolic possession of the said flat. The appellant thereafter being aggrieved by the measures taken by the State Bank of Travancore, filed Appeal/Securitisation Application (S.A.) No. 180/2010 under Section 17 of the SARFAESI Act. He had challenged the measures taken by the Authorised Officer under Section 13(4) of the SARFAESI Act on the ground that he was bona fide purchaser in possession of the said flat. The equitable mortgage of the said flat created by the borrower in favour of the State Bank of Travancore is invalid. The S.A. was opposed by the Bank. The learned Presiding Officer after hearing the learned Counsel for the parties, allowed the aforesaid S.A. vide judgment and order dated 7th September, 2012 holding that the appellant is bona fide purchaser of the said flat. The learned P.O. also held that the so called equitable mortgage of the said flat created by the borrower in favour of the Bank was not a valid mortgage, therefore, the Bank has got no security interest over the said flat. The learned Counsel contended that the appellant in his affidavit, has stated that the respondent-Bank has got no original title deeds of the said flat, rather the original title deed of the said flat is lying with the Abhyudaya Co-operative Bank Ltd., therefore, the so called mortgage of the said flat in favour of the respondent is invalid. Therefore, the respondent has got no security interest upon the said flat.

The learned Counsel further contended that although the aforesaid judgments are subsequent judgments rendered by the two learned P.Os. i.e. the learned P.O., DRT-II, Mumbai and the learned Presiding Officer, DRT-III, Mumbai whereby the appellant is adjudged as the bona fide purchaser of the said flat and in those cases the respondent was not party but the learned Presiding Officer, on the basis of evidence filed by the appellant has held that the appellant was bona fide purchaser of the said flat. In this way on the basis of documentary evidence as well as the facts and the circumstances of the case it is established that the appellant is bona fide purchaser in possession of the said flat. The finding of the learned Presiding Officer that the appellant is not the bona fide purchaser of the said flat is contrary to the evidence available on record which is perverse, therefore, the impugned finding recorded by the learned Presiding Officer is liable be quashed.

The learned Counsel for the appellant further contended that the said flat is said to have been allotted by the MHADA in favour of the borrower Mr. S.S. Suvarna through letter dated 28th March, 1984. Admittedly, when the allotment letter of the said flat was issued by the MHADA, the MHADA was the sole owner of the land on which the said flat forming portion of the Building No. 27 was located. The land was let out by MHADA in favour of the society on 23rd June, 2006. The said flat could not be mortgaged by Mr. S.S. Suvarna without obtaining N.O.C./prior consent from MHADA. In this case admittedly Mr. S.S. Suvarna had not obtained any NOC from MHADA to mortgage the said flat. Moreover, the equitable mortgage can be created by depositing original title deeds. In this case, the borrower, Mr. S.S. Suvarna, had not deposited original title deeds of the said flat with the respondent for creating equitable mortgage of the said flat. He had deposited share certificate, copy of the allotment letter of the said flat. The share certificate cannot be treated as document of title. The allotment letter was not the original allotment letter, therefore, so called equitable mortgage of the said flat created by Mr. S. Suvarna in favour of the respondent is invalid and on the basis of aforesaid invalid mortgage the respondent cannot be said to have security interest over the said flat. The learned Counsel contended that the learned Presiding Officer DRT-II, Mumbai, in M.A. No. 10/2010 and the learned Presiding Officer, DRT-III, Mumbai, in S.A. No. 180/2010 has held that there was no valid mortgage of the said flat in favour of the respective Banks. The learned Counsel contended that in fact the borrower by playing fraud has duped so many Banks and had availed term loan by creating equitable mortgage of the said flat by depositing forged title deeds and other forged documents, while he had deposited the original title deeds only with Abhyudaya Co-operative Bank Ltd. The respondent did not file any documentary evidence to show that the appellant had created the equitable mortgage of the said flat by depositing original title deeds with it. The finding of the learned Presiding Officer that the appellant had created valid equitable mortgage of the said flat in favour of the respondent is against the evidence available on record which is perverse, therefore, the finding of the learned Presiding Officer, DRT, is liable to be quashed.

Per contra, the learned Counsel for the respondent supporting the impugned order passed by the learned Presiding Officer contended that the appellant has not disputed the title of the borrower, Mr. S.S. Suvarna, regarding the said flat. He himself claims to have purchased the said flat from Mr. S.S. Suvarna. In this way, Mr. S.S. Suvarna was admittedly the owner of the said flat, who had availed housing loan sanctioned by the respondent Bank and created equitable mortgage of the said flat by depositing the allotment letter issued by MHADA, share certificate and NOC issued by the society. The creation of equitable mortgage by Mr. S.S. Suvarna finds place in the memorandum of entry dated 16th March, 2001 which is available in the Bank's record. Mr. S.S. Suvarna had produced NOC issued by the society for creation of the equitable mortgage. The lien of the Bank on the said flat was also recorded in the records of the Society. The learned Presiding Officer on the basis of the aforesaid documentary evidence, has held that Mr. S.S. Suvarna had created equitable mortgage of the said flat in favour of the Respondent which was valid.

The learned Counsel further contended that the appellant claims to be bona fide purchaser of the said flat. Indisputedly the borrower had availed housing loan sanctioned by the Respondent. Mr. Dhirendra R. Vaghani and Mr. Dinesh Subbanna Mendon stood guarantors to the term loan availed by the borrower. One of the guarantors viz., Mr. D.S. Mendon is closely related to the appellant. The appellant, therefore, will be deemed to have notice of the equitable mortgage of the said flat created by the borrower in favour of the respondent. Moreover, the lien of the respondent Bank on the said flat was recorded in the record of society. If the appellant could have made sincere efforts like a prudent man to know about the mortgage created by the borrower in favour of the respondent he could have inspected the records of the society. If he had inspected the society's record he could have learnt about the lien of the respondent over the said flat. But he did not try to inquire from the record of the society. The learned Presiding Officer on the basis of evidence available on record has held that the appellant had notice of the mortgage created by the borrower in favour of the respondent, therefore, he cannot be said to be bona fide purchaser of the said flat. The finding of the learned Presiding Officer is based on documentary evidence which does not call for any interference. The learned Counsel further contended that as regards the judgment passed by the learned Presiding Officer, DRT-11, Mumbai and the learned Presiding Officer, DRT-111, Mumbai, these cases relate to the subsequent loan. The respondent Bank was not party to those proceedings, therefore, the finding of the learned Presiding Officer, DRT-11, Mumbai and the learned Presiding Officer, DRT-111, Mumbai, in the aforesaid cases will not be binding upto the respondent. The copies of the above referred two judgments relied upon by the appellant will be of no help to the appellant.

Considered the rival submissions advanced by the learned Counsel for the parties.

As regards the first ground raised by the appellant in his S.A., the appellant claims himself to be bona fide purchaser of the said flat for value without any notice of prior mortgage. The appellant has alleged that he had approached to Mr. S.S. Suvama to purchase the said flat who accepted his offer. He enquired from him about the encumbrances, if any, on the said flat. He disclosed that there was no encumbrance on the said flat. He also got the title search report for 13 years and on the basis of the title search report he found no encumbrance on the said flat. He published a news item in the newspaper 'Free Press Journal' on 10th August, 2005 informing the public at large that he wants to purchase the said flat so that if any person has claim over the said flat, he may come forward to put up his claim. But, despite the publication in the newspaper none turned up to put up his claim over the said flat. He also came to know that the land on which the aforesaid building No. 27 was constructed belongs to MHADA. The MHADA who had constructed the building had transferred the said building only to the society but not transferred the land to the society, therefore, he was required to pay transfer charges to MHADA. He accordingly paid an amount of Rs. 35,000/- towards transfer charges to MHADA. He also came to know that Mr. S.S. Suvama had outstanding dues of Rs. 25,000/- to the society towards society charges. He also paid the aforesaid amount of Rs. 25,000/- towards the dues of the society against Mr. S.S. Suvarna. Thereafter he through registered agreement of sale dated 31st December, 2005 purchased the said flat from Mr. S.S. Suvama for Rs. 11 lacs. Mr. S.S. Suvarna handed over the possession of the said flat to him where he has got telephone connection, gas connection, electric connection etc. in his name. The appellant in support of his contention has filed newspaper cutting issuing notice to public at large in newspaper 'Free Press Journal'. He has filed copy of pay order dated 21st November, 2005 of Rs. 35,000/- prepared in the name of Estate Manager II, MHADA Board, Mumbai. He has also filed copy of the receipt of the aforesaid amount. He has also filed copy of receipt dated 13th September, 2005 for payment of Rs. 25,000/- issued by Poisar Ashirwad Co-operative Housing Society Ltd. The appellant has also filed title search report dated 8th March, 2006 of the said flat from the year 1994 to 2006 submitted by Ganjanan Shingote, Search Clerk, wherein it is mentioned that there is a document registration dated 31st December, 2005 in the name of Sadanand N. Mendon, at Serial No. BUR-12-7221/2005.

From a perusal of judgment and order dated 7th September, 2012 passed by DRT-III, Mumbai, in S.A. No. 180/2010 it appears that the same borrower/Mr. S.A. Suvarna had availed housing loan from State Bank of Travancore. He had created equitable mortgage of the said flat by depositing title deeds of the said flat. When the borrower committed default in repayment of the installments of the housing loan, the Bank classified his account as N.P.A. and proceeded under the SARFAESI Act. The authorized officer of the State Bank of Travancore took symbolic possession of the said flat. The appellant being aggrieved by the measures taken by the authorized officer of the Bank under Section 13(4) of the SARFAESI Act filed Appeal/S.A. No. 180/2010 under Section 17 of the SARFAESI Act before the DRT-III, Mumbai. He in the aforesaid S.A. claimed himself to be bona fide purchaser of the said fiat for value without any notice of prior mortgage. The S.A. was opposed by the Bank. The learned Presiding Officer formulated following three main points for consideration:

"1. Whether the Respondent Hunk proves that the property in question is the secured asset of the respondent-State Bank of Travancore, and that the borrowers had created valid charge on the property in question in favour of the respondent Bank as security for the debt?

Whether the applicant proves that the applicant is the bona fide purchaser of the property in question and that the applicant is entitled for an order restraining the respondent Bank from taking measures under the SARFAESI Act for recovery of its debt?

Whether the Applicant proves that the measures taken by the respondent are illegal and the same are liable to be set aside?"

The learned Presiding Officer on the basis of the affidavit and the documentary evidence adduced by the parties decided the question No. 1 in negative and the question Nos. 2 and 3 in affirmative. The learned Presiding Officer specifically held that the appellant is the bona fide purchaser of the said flat. The respondent could not show that the aforesaid judgment and order passed by the learned Presiding Officer, DRT-III, Mumbai, has been set aside. The judgment rendered by the learned Presiding Officer in the aforesaid S.A. still holds good.

From a perusal of the impugned judgment and order passed by the learned Presiding Officer it appears that the learned Presiding Officer has observed that one of the guarantors to the housing loan availed by the borrower was Mr. Dinesh Subbanna Mendon who is inmate of the appellant, therefore, it cannot be said that the appellant had no notice of prior mortgage of the said flat created by the borrower in favour of the respondent but this finding, in my opinion, is not supported with any reliable documentary evidence. There is no record to show the relations between one of the guarantors, Mr. Dinesh Subbanna Mendon, and the appellant. On the other and, the details of payments made by the appellant to Mr. S.S. Suvarna show that he had paid Rs. 11 lacs to the borrower on different dates towards the sale consideration of the said flat. If the appellant was well aware of a fact that Mr. S.S. Suvarna had availed housing loan sanctioned by the respondent and he created equitable mortgage of the said flat in favour of the respondent he would not have spent huge amount for purchasing the said flat. The finding of the learned Presiding Officer that the appellant has notice of the prior mortgage of the said flat created by the borrower in favour of the Bank appears to be perverse as the same is not supported with documentary evidence.

The affidavit and documentary evidence filed by the appellant as well as the attending circumstances demonstrate that the appellant has no information of the prior mortgage of the said flat created by the borrower in favour of the respondent. The appellant, in my considered opinion, appears to be bona fide purchaser of the said flat for value without prior notice of so called equitable mortgage created by the borrower in favour of the respondent.

As regards the security interest of the Bank over the said flat is concerned, the appellant has challenged the validity of the so called equitable mortgage of the said flat created by the borrower in favour of the respondent. Although the appellant has admitted that the said flat was allotted by the MHADA to Mr. S.S. Suvarna but he has contended that the land on which the aforesaid building No. 27 was constructed belonged to MHADA which was not transferred by the MHADA in favour of the society. Mr. S.S. Suvarna, therefore, could not transfer the said flat without obtaining prior permission/NOC from the MHADA. The borrower admittedly had not obtained any prior permission for creation of the equitable mortgage of the said flat in favour of the respondent, therefore, the equitable mortgage of the said flat created by Mr. S.S. Suvarna in favour of the respondent is no valid.

The appellant has further contended that Mr. S.S. Suvarna was having dominating role in the society. He had created forged documents/NOG alleged to have been issued by the Co-operative housing society permitting him to mortgage the said flat and other documents. He did not deposit the original allotment letter issued by the MHADA with the respondent Bank to create equitable mortgage of the said flat, therefore, the so called equitable mortgage created by Mr. S.S. Suvarna in favour of the respondent is invalid and the Respondent, on the basis of the said equitable mortgage, has got no security interest upon the said flat. The appellant has also contended that the original title deed of said flat was deposited by the borrower with Abhudaya Co-operative Bank for availing the housing loan. MHADA had issued NOC to the borrower to create mortgage in favour of Abhyudaya Cooperative Bank.

On the other hand, the Respondent has alleged that Mr. S.S. Suvarna had deposited with it NOC issued by the society for creation of the equitable mortgage of the said flat, the letter of allotment issued by MHADA in his favour and a copy of the share certificate in his name. In this way Mr. S.S. Suvarna has created valid mortgage by depositing title deeds.

Admittedly, the land on which the aforesaid building No. 27 is located belonged to MHADA which let out the same to the society on 23rd June, 2006. The borrower without prior permission of the MHADA could not transfer the said flat by way of sale/mortgage/lease etc. without obtaining prior permission of the MHADA. Even Clause I of the lease agreement dated 23rd June, 2006 filed by the appellant provides that the lessee will not assign, sublet, underlet or otherwise transfer in any other manner whatsoever including part with the possession of the whole or any part of said land or its interest thereunder or benefit of this lease to any person or persons or change the user of the said land or any part thereof without the previous written permission of the Authority (MHADA). The respondent in its Written Statement has contended that the appellant while availing housing loan had deposited with the respondent Bank following documents:

(1) Copy of NOC issued by Poisar Ashirwad Co-operative Housing Society noting the lien of respondent on the flat.

(2) Copy of Share Certificate.

(3) Copy of allotment letter issued by Bombay Housing & Area Development Authority (MHADA).

The appellant had contended that the borrower had not deposited the original title deeds of the said flat with the respondent. The copy of the NOC deposited by the borrower was a forged one. He has further alleged that the original title deed had been deposited by Mr. S.S. Suvarna with the Abhyudaya Cooperative Bank Ltd. MHADA had also issued NOC to mortgage the said flat to the borrower in favour of Abhyudaya Co-operative Bank Ltd. the mortgage created by Mr. S.S. Suvarna in favour of the respondent Bank is invalid.

The appellant has filed affidavit of Mr. Jaywant M. Purohit, Secretary of Poisar Ashirwad Co-operative Housing Society Ltd. Building No. 27. The deponent in his affidavit has stated that he is Secretary of the society and has been a member of the said society from the year 1993. He knows Mr. S.N. Mendon, the appellant, who has purchased the said flat from Mr. S.S. Suvarna. The MHADA had conveyed the land to the society in the year 2006. If any owner of the flat wants to transfer the said flat prior NOC has to be obtained from MHADA. The appellant had filed letter dated 7th April, 2010 issued by the Secretary, Poisar Ashiward Cooperative Housing Society Ltd. addressed to him wherein it has been stated that the NOC dated 2nd September, 1997 and lien note dated 28th March, 1998 are a fabrication of lies by Mr. S.S. Suvarna with a view to getting the loan sanctioned by the Syndicate Bank. As per statement of Shri J.M. Purohit, Secretary, it appears that the NOC submitted by the borrower with the respondent was forged. It appears from the record that the borrower had deposited copy of the allotment letter with respondent and not the original allotment letter. The borrower had deposited share certificate with respondent which cannot be termed as document of title. The same documents were submitted by Mr. S.S. Suvarna with Syndicate Bank for obtaining the housing loan. He succeeded in obtaining the loan by creating equitable mortgage of the said flat in favour of the Syndicate Bank.

Syndicate Bank filed Original Application No. 31/2007 for recovery of outstanding dues as well as for declaration of the mortgage. The Original Application was allowed by the learned Presiding Officer, DRT-II, Mumbai vide judgment and order dated 3rd October, 2008. The appellant thereafter filed M.A. under Section 19(25) of the RDDBFI Act to withdraw the declaration of the mortgage of the said flat. The learned presiding Officer vide order dated 10th December, 2010 allowed the aforesaid M.A. The learned Presiding Officer in Para. 8 of the judgment had specifically observed that the borrower had not deposited any document of title to create valid mortgage of the flat. From a perusal of the judgment dated 7th September, 2012 passed by the learned Presiding Officer, DRT, in S.A. No. 180/2010 it appears that in that case the learned Presiding Officer, too, has held that the borrower had not created any valid mortgage of the said flat in favour of the Bank, therefore, the Bank has failed to prove that the property in question is its secured asset.

In case in hand too, the borrower had not deposited original title deeds of the said flat with the respondent. He had deposited copy of the allotment letter which cannot be treated as original document of title for creation of the equitable mortgage. The share certificate is not a document of title. The legal position for creation of equitable mortgage is that the borrower has to deposit original title deeds of the property to be mortgaged in favour of the Bank which was net done in this case.

From a perusal of documents available on record it appears that Mr. S.S. Suvarna playing fraud with so many Banks had created equitable mortgage of the same flat to secure the housing loan availed by him. The equitable mortgage created by the borrower in the present case, does not appear to be valid mortgage for the reasons stated above, therefore, the respondent has got no security interest upon the said flat which it can enforce under the SARFAESI Act. From a perusal of the impugned judgment and order dated 7th November, 2006 it appears that the learned Presiding Officer has not properly appreciated the documentary evidence available on record. He did not also properly appreciate the legal points involved for consideration in the S.A. The impugned order passed by the learned Presiding Officer is, therefore, bad in the eyes of law and is liable to be quashed and Appeal filed by the appellant deserves to be allowed.

As observed above, the appellant appears to be bona fide purchaser of the said flat for valuable consideration without prior notice of the mortgage alleged to have been created by the borrower, Mr. S.S. Suvarna, in favour of the respondent. The equitable mortgage of the said flat created by Mr. S.S. Suvarna is invalid, therefore, the respondent could not proceed under the SARFAESI Act to recover its dues from the said flat. It is, therefore, held that the measures taken by the respondent under Section 13(4) of the SARFAESI Act including the taking over possession of the said flat is illegal and is liable to be quashed. The appellant is entitled to get the possession of the said flat restored back. The S.A. filed by appellant accordingly deserves to be allowed. As observed above, the Appeal as well as the S.A. filed by the appellant deserves to be allowed.

ORDER

The Appeal is allowed with no order as to costs. The impugned judgment and order dated 7th November, 2006 passed by the learned Presiding Officer, DRT-I, Mumbai in S.A. No. 94 of 2005 is set aside and the aforesaid S.A. is allowed. It is declared that the measures taken by the respondent under Section 13(4) of the SARFAESI Act including taking over possession of the said flat is illegal and is hereby quashed.

Consequently, the respondent is directed to restore back the possession of the flat to the appellant within 30 (thirty) days from the date it receives a copy of this judgment.