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Judgment
Ashok Menon, Chairperson
The appellants assail the order dated 24.11.2023 in Interim Application (I.A.) No. 3652/2023 in Securitization Application (S.A.) No. 273/2023 on the files of the Debts Recovery Tribunal-III, Mumbai (D.R.T.) declining to grant a stay concerning the taking over of possession by the Tahsildar, the secured asset namely Flats Nos. 3, 8, and 24 after confirmation of sale conducted by the authorised officer, in compliance with the orders u/s 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act” for short). The Appellants filed the S.A. challenging the Sarfaesi measures stating that they are victims of fraud and that their guarantee was only to the extent of ₹15 crores and not to the entire loan which was availed of by the principal borrower.
It was also contended that the order of u/s 14 of the SARFAESI Act is not sustainable for the reason that the Authorized Officer who has applied u/s 14 has not produced any letter of the authority. It is further pointed out that the Ld. Chief Metropolitan Magistrate (CMM) had directed the bank to produce the letter of authority and certain other documents which the bank had purportedly complied, but the letter of authority pertains to someone else and not a person who has applied u/s 14 is the contentions raised by the appellants. Hence, it is submitted that the order u/s 14 will have to be quashed and set aside. In consequence, the sale also will have to be set aside, the prayers for which have been sought to be incorporated in the S.A. by way of amendment.
I.A. No. 841/2023 is for a complete waiver of pre-deposit. This Tribunal had, vide order dated 04.01.2024 directed the appellants to deposit ₹50 crores as mandatory pre-deposit under Sec.18(1) of the SARFAESI Act as a condition precedent for entertaining the appeal, considering the outstanding amount of debt due as around ₹106 crores.
Regarding the alleged commission of fraud by the borrower in collusion with the bankers, this Tribunal thought it appropriate to relegate the decision to the stage of deciding the appeal, and it was opined that the allegation of fraud will have to be inquired in detail in the S.A.
Aggrieved by the decision of this Tribunal, the appellants filed Writ Petition No.623 of 2024 before the Hon’ble High Court, Bombay, and got the orders of this Tribunal set aside vide order dated 26.02.2024, with a direction to this Tribunal to decide I.A. No. 841 of 2023 afresh after taking into consideration the argument of forgery and fabrication and to give prima facie finding thereon.
After the remand order by the Hon’ble High Court, the I.A. was heard afresh, and the records were perused.
The averment of the appellants in the S.A. is also the appeal is that they had executed only the sanction letter on 09.01.2012. It is admitted that the said document bears the signatures of each one of the appellants. The bank relies upon yet another sanction letter dated 18.10.2013 purportedly signed by all the appellants. It is a specific allegation of the appellants that this document is concocted, forged and fabricated by the bank officials in collusion with the 2nd respondent borrower. Appellants had a copy of the original sanction letter dated 09.01.2012 with them as it was handed over by the officials soon after the execution of the same period. They did not have a copy of the purportedly for the document executed on 18.10.2013. It is stated that they got a copy of the document and got it compared by the handwriting expert of their choice. Vide a report dated 30.01.2017, the expert opined that the signatures and the document dated 18.10.2013 over all forged. There is a guarantee agreement purportedly signed and executed by the appellants on 10.01.2012 and yet another guarantee agreement allegedly executed by the appellants on 28.10.2013. The appellants are not sure whether the guarantee letter dated 10.01.2012 allegedly executed on the date next to the sanction letter admittedly executed on 09.01.2012 was also forged or fabricated. The Ld. Counsel appearing for the appellants submits that the said guarantee letter may also have been fabricated. There is yet another guarantee agreement allegedly executed by the appellants on 28.10.2013, which to is alleged to be forged. However, the expert opinion pertains only to the document dated 18.10.2013.
The appellants approached the police with the complaint of forgery against the bank officials and the principal borrower. The police did not register a crime and hence, they were compelled to file a complaint before the jurisdictional Magistrate, which was forwarded to the police under Sec. 156 (3) of the Code of Criminal Procedure. Consequently, Crime No. 270 of 2017 was registered at the Gangapur Police Station. Apprehending arrest, the persons arraigned as accused in the crime approached the Court of Sessions, Nashik under Sec. 438 Cr.P.C. for anticipatory bail. The application was dismissed on the ground that custodial interrogation of the applicants is essential to proceed with the investigation of the allegedly forged documents and hence, the accused were not granted anticipatory bail. The attempt made by the accused to approach the Hon'ble High Court of Bombay was also futile.
Armed with the registration of the criminal case and the rejection of the anticipatory bail application, the Ld. Counsel appearing for the appellants argues vehemently that the appellants have a good prima facie case regarding the allegation of forgery and fraud. It is pertinent to note that the final report on the crime that was registered in the year 2017 has not yet been filed by the investigating agency. Apart from the expert opinion relied upon by the appellants, there is no other document to prove that there is forgery as alleged. The opinion of a handwriting expert, that too of a private expert employed by the appellants has little value until it crosses the crucible of trial before the court. It is also pertinent to note that the appellants have not disputed the guarantee agreements allegedly executed by them on 10.01.2012 and 28.10.2013. The rejection of anticipatory bail is not conclusive evidence of the existence of forgery. It is only an allegation which needs to be investigated. The investigation has not reached anywhere even after seven years. This would rather militate against the genuineness of the case alleged by the appellants.
Yet another important aspect in the case put forth by the appellants is that they are only liable to the extent of the mortgage they had executed and therefore, would be liable to the extent of the value of the mortgaged property and nothing more. This argument of the appellants is fallacious because there are two guarantee documents executed by them. In paragraph 5.4 of the S.A., the appellants have admitted to giving a guarantee and collateral security for the loan transaction. In the order of the Sessions Court while rejecting the anticipatory bail the case of the prosecution is stated in paragraph 4 where it is mentioned that according to the informant, certain documents such as the guarantee deed for the security of the loan by deposit of title deeds were submitted with the bank. In paragraph 11 of the written statement filed by the appellants in Original Application No. 80 of 2017 before the D.R.T. the execution of the mortgage is admitted. The deed of guarantee executed by the appellants on the date next to the sanction letter dated 10.01.2012 indicates that it is a continuing guarantee. Paragraphs 5, 6 and 7 of the guarantee agreement reads thus:
“5. This guarantee shall be enforceable against the guarantors notwithstanding any securities or any other collateral securities that the bank may have obtained or may obtain from the borrower(s) or any person shall at the time when the proceedings are taken against the guarantors hereunder be outstanding and/or not enforced and/or remain unrealised.
The guarantee is a continuing one for all the amounts advanced to the borrower(s) under the said facilities as also for all interest, costs, charges, expenses and/or other monies which may from time to time become due and remain unpaid to the bank thereunder and shall not be determined or be affected by any account/s becoming nil or coming into credit or being closed at any time or by any rephasement of repayment schedules of all or any of the said facilities/limits and/ or fresh account/s being opened in respect of the fresh/ revised facilities granted/ being granted to the borrower(s).
The guarantors shall forthwith on demand made by the bank deposit such sum or security as the bank may specify for the due fulfilment of their obligations hereunder and the bank shall have the liberty to sell any security so deposited with the bank in or towards the satisfaction or non-fulfilment of the said obligations by the guarantors.” (Sic)
The Hon’ble Supreme Court has in Sitaram Gupta vs. Punjab National Bank & Ors. AIR 2008 SC 2416 that it was not open to guarantors to revoke the guarantee as he had agreed to treat the guarantee as a continuing one and was bound by the terms and conditions of the said guarantee and that by agreeing to continue the guarantee with the bank, the guarantor had waived his benefit under Sec. 130 of the Indian Contract Act. In the instant case too the appellants had entered into a continuing guarantee which would continue till the debt is repaid in full.
About the police complaint, it has to be observed that it is only an afterthought to wriggle out of the liability to discharge the debt. The demand notice under Sec. 13(2) of the SARFAESI Act was issued to the appellants on 22.03.2016. The police complaint was filed only on 29.03.2017.
The appellants have no prima facie case worth mentioning and they have also not proved financial strain. Hence, they are not entitled to any indulgence at the hands of this Tribunal to exercise the discretion under the third proviso to Sec. 18(1) of the SARFAESI Act.
The appellants are, therefore, directed to deposit 50% of the outstanding amount. The earlier order of this Tribunal directing the appellants to deposit a sum of ₹50 crores is, therefore, retained and the said amount shall be paid within two weeks i.e. on or before 03.07.2024.
Default in payment of the aforesaid amount shall entail dismissal of the appeal without any further reference to this Tribunal.
The amount shall be deposited as a Demand Draft/RTGS with the Registrar of this Tribunal.
As and when the said amounts are deposited, they shall be invested in term deposits in the name of Registrar, DRAT, Mumbai, with any nationalised bank, initially for 13 months, and thereafter to be renewed periodically.
With these observations, the I.A. is disposed of. The Respondents are at liberty to file a reply in the Appeal with an advance copy to the other side.
List on 04.07.2024 for reporting compliance regarding payment.