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Judgment
R. D. Khare, Chairperson
The present appeal has been filed by the appellants under section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 against the final order dated 11.05.2022 whereby the S.A. No. 391/2020 filed by the appellants has been disposed off.
The brief facts of the matter are that the property in question was purchased by late Chamanwati Arora vide sale deed dated 13.06.1956 and sale deed dated 01.09.1956. During her life time, she had executed a Will dated 21.08.1988, which was registered in the office of the Sub-Registrar- II, Lucknow in favour of her son Love Kumar, who is appellant No. 3 in the present case. After her death, the appellant No. 3 inherited the property in question with limited rights and thereafter he executed a lease deed in respect of the property in question in favour of the appellant No.1-firm for a period of 29 years on 23.04.2011. The appellant No. 1-borrower was granted a credit facility of Rs. 5.10 crores by the respondent No. 2-Punjab National Bank. In order to secure the same, the appellant No. 3 created an equitable mortgage over the property in question on 08.10.2011 by depositing the original title deed with the Bank. In addition to it, the borrower company had also mortgaged its lease rights with the respondent-bank to secure the aforesaid facility. The said security was also extended to secure the credit facility granted by the Bank to M/s Shri Colonizer Pvt. Ltd.
It appears that due to delay in issuance of license of the Multiplex Cinemas and the other adverse circumstances, the appellant-borrower failed to maintain the financial discipline, therefore, the account was classified as NPA by the Bank and demand notice dated 22.11.2018 was issued under section 13(2) of the SARFAESI Act withdrawing the previous notices dated 03.04.2017 and 05.11.2018. Since the borrowers did not pay any heed to the said demand, therefore, the symbolic possession of the property in question was taken by the Bank by issuing the possession notice dated 16.02.2019 under section 13(4) of the said Act, which was subsequently published in the newspapers. Thereafter the sale notice dated 24.11.2020 at page No. 537 of Volume II of the paper book was issued scheduling the auction to be held on 15.12.2020 and the property was sold for a sum of Rs. 11.41 crores in favour of the respondent No. 3- auction purchaser.
The borrowers challenged the entire proceedings of the respondent-Bank by filing the Securitization Application No. 391/2020 before the Tribunal below. During the pendency of said S.A., an order dated 31.03.2022 was passed by the ADM (Executive), Lucknow, which was challenged by filing Amendment Application along with interim application. The Tribunal below vide order impugned has dismissed the said S.A. of the appellant holding that the entire action of the respondent-Bank is in accordance with the Act and Rules made thereunder and the possession notice was held to be barred by limitation. Being aggrieved by the said order, the present appeal has been filed the appellants for quashing the impugned order dated 11.05.2022, the order dated 31.03.2022 passed by the ADM, the auction dated 15.12.2020, sale certificate dated 16.12.2020 and the demand notice and possession notice.
Learned counsel for the appellants submitted that the main thrust of the appeal is based on the fact that the finding as recorded by the Tribunal below is against the record, therefore, perverse order cannot be sustained in the eye of law. The learned counsel has referred to page no. 31 of volume 1 of the paper book, wherein the prayer has been made for quashing the order impugned dated 11.05.2022 passed by the DRT, Lucknow in S.A. No. 391/2020, the order dated 31.03.2022 passed by the ADM (Executive), Lucknow U/s 14 of the SARFAESI Act, setting aside the auction dated 15.12.2020 as well as the sale certificate issued dated 16.12.2020 and demand notice and possession notice.
The learned counsel has further drawn attention of this court to the order impugned at page no. 35 of volume 1 of the paper book and has argued that the final arguments in the matter were heard on 11.04.2022, on which date the judgment was reserved, but the judgment was pronounced after 1 month i.e. on 11.05.2022.
The learned counsel has further drawn attention of this court to the order dated 31.03.2022 passed by the ADM (Administration) under section 14 of the SARFAESI Act and has contended that the said order has been passed against M/s Shri Colonizers and Developers Ltd. and not against the appellant-Shri Krishna Cinitech Pvt. Ltd. The said order was also sought to be challenged by filing an amendment application dated 08.04.2022 at page no. 44 of the volume 1 of the paper book and has contended that the said amendment application is still pending and has not been decided by the Tribunal below while passing the final order, which is impugned in the present case.
The learned counsel has further argued that the property in question is collateral security in the loan accounts of M/s Shri Colonizers and Developers Pvt. Ltd. as well as M/s Shri Krishna Cinitech Pvt. Ltd. and has drawn attention of this court to page no. 54 of volume 1 of the paper book, which is “no dues certificate dated 16.07.2019” issued by the respondent-Punjab National Bank in favour of Shri Colonizers and Developers Pvt. Ltd. showing that the property in question has been released as the account of M/s Shri Colonizers and Developers Pvt. Ltd. stood settled.
The learned counsel has further argued that the application filed under section 14 of the SARFAESI Act against the appellant was rejected twice by the ADM, one by the order dated 03.06.2021 and secondly in the month of March 2022. Thereafter, the auction purchaser in connivance with the Bank moved another application u/s 14 of the SARFAESI Act purportedly against the property of M/s Shri Colonizers and Developers Pvt. Ltd. in the year, 2022 and obtained the order inspite of the fact that the respondent-bank had already given “no dues certificate” to M/s Shri Colonizers and Developers Pvt. Ltd. on 16.07.2019 (at page 54 of the paper book). It was, therefore, argued that the said action of the Bank in connivance of the auction purchaser is totally malicious.
The learned counsel for the appellant has further drawn attention of this Court to page no. 362 of volume 1 of the paper book, which is an order dated 11.05.2022 passed by the Tribunal below, which records that “after pronouncement of final order by the DRT below, the Bank has filed the copy of demand notice dated 22.11.2018 u/s 13(2) and postal receipts thereof without supplying copy of the same to the other side. Since the final order had already been pronounced, therefore, the documents filed by the Bank today cannot be taken on record” and has argued that without filing copy of demand notice, the entire proceedings were drawn and final order has been passed, which cannot be sustained in the eye of law.
The next argument was in reference to page no 386 of volume 1 of the paper book, which is a letter dated 07.09.2011 of the Bank regarding sanction of loan for Rs. 510.00 lacs in favour of the appellant-firm, for which a collateral security consisting land and building bearing municipal no. 551/ka/CC, previously known as Krishna Cinema at Alambagh, Lucknow, was given. It was contended that the said property was purchased by 2 separate sale deeds, one is of 13.06.1956 having area of approximately 800 sq. meter and second is of 01.09.1956 consisting approximately 600 sq. meter. It was further argued that the equitable mortgage was created over the property, which was purchased vide sale deed dated 01.09.1956 consisting area 600 sq mtr and not over the property purchased vide sale deed dated 13.06.1956 having area of 800 sq. mtrs. but the final order has been passed with regard to the entire property, which never stood mortgaged.
In this regard, reference has been drawn to page no. 460 of volume 1 of the paper book, which is an order dated 07.01.2021 passed by the Tribunal below, in which the Tribunal below has recorded the aforesaid facts as raised by the learned counsel for the appellant. It was also contended that while passing the final order by the Tribunal below, this finding was not recorded in the judgment impugned and even has not been referred to.
Learned counsel has further drawn attention of this Court to Annexure No. 8 at page no. 417 of volume 1 of the paper book, which is notice of sale under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 and has stated that the said notice is dated 24.11.2020, but the sale was fixed for 15.12.2020, which is against the provisions of the Rules, 2002, which provides 30 days clear notice prior to sale and it was further argued that the said notice records that the constructive/physical possession of the property has been taken, but the fact remains that the physical possession is still with the appellant. The said notice is also in contravention of Appendix 4 (A) of the Act and Rules made thereunder.
The learned counsel for the appellant has drawn attention of this Court to Annexure No. 1 at page No. 1000 of volume 3 of the paper book and has argued that the a letter was sent by the auction purchaser dated 16.12.2020 addressed to the concerned officer of the Bank intimating that he has deposited entire auction money on 15.12.2020 at 4:00 p.m. He has next referred to an affidavit filed by the Bank before the Tribunal below at page no 937 of the paper book and has referred to para 3 thereof, wherein it is stated by the Bank that auction was held between 12:00 to 4:00 p.m. on 15.12.2020 and communication to the successful bidder was given by the respondent-Bank that M/s Avani Paridhi Energy Communication Pvt. Ltd. was declared as successful bidder for Rs. 1141.00 lacs by the respondent bank at 5:44 p.m. on 15.12.2020 and the auction purchaser had remitted an amount of Rs. 10.27 crores at 18:03:30 hrs on the same day. The said affidavit further states that the respondent-Bank has confirmed the sale on 15.12.2020 and the sale confirmation letter was delivered to the auction purchaser at 07:00 p.m. on the same day, as he was personally present in the Circle Office of the Bank, which is contradictory to the documents on record of the paper book. It was thus argued that the aforesaid fact will go to show that the auction sale was done in connivance with the respondent-Bank and the auction purchaser, which has not been considered by the Tribunal below while passing the final order, which is impugned in the present case.
Learned counsel for the appellant has again referred to page 54 of the volume 1 of the paper book, which is letter dated 16.07.2019 of the respondent bank, whereby one property of Shri Colonizers and Developers Pvt. Ltd. was released on deposit of requisite amount, which is situated at plot no. D/2/126, Sushant Golf City, Sultanpur Road, Lucknow. It was argued by him that against the said property, the Bank has already given ‘no dues certificate’. Therefore, it cannot be said that there is charge over the property in question against the loan of M/s Shri Colonizers and Developers Pvt. Ltd.
Learned counsel has further contended that the order dated 03.06.2021 was passed by the ADM(Judicial/finance) on technical ground, as relevant document could not be produced before the ADM and it was not decided on merits. It was therefore prayed that the appeal may be allowed and the case may be remanded back to the Tribunal below for deciding it afresh.
Learned counsel for the respondent-Bank submitted that the appellant No. 1-borrower had availed the cash credit facility from the respondent-Bank through its directors appellants No. 2 and 3. The appellant No. 3 had also deposited the original title deeds dated 01.09.1956 and 13.06.1956 along with the original decree passed in Regular Suit No. 179/1980, whereby the total mortgaged property was 1421.33 sq.mtrs., which came in the share of Chamanwati, mother of the mortgager Love Arora.
The learned counsel further submitted that as per the Registered Will dated 21.08.1998, the entire mortgage property had been bequeathed in favour of the appellant No. 3. There is another company namely M/s Shri Colonizers and Developers Pvt. Ltd., in which the appellants No. 2 and 3 were directors. The said company also availed cash credit facility from the respondent-Bank through its Directors-appellants no. 2 & 3. To secure the said loan, the appellants No. 2 and 3 gave a letter of intent extending the mortgage of appellant No. 1-firm by giving constructive delivery of the title deeds, original decree and the original Registered Will. Thus, the property in question measuring 1421.33 sq. met. were mortgaged for the loans of both the companies.
The learned counsel further submitted that the application filed before the ADM under section 14 of the SARFAESI Act against the appellant No. 1 was rejected on technical ground, but the application filed against M/s Shri Colonizers and Developers Pvt. Ltd. was allowed vide order dated 31.03.2022 and the same has never been challenged, therefore, it has attained finality and is binding on M/s Shri Colonizers and Developers Pvt. Ltd. As such the said order cannot be challenged in the present case. It was also contended that in the meantime, the property in question was auctioned in favour of the respondent No. 3 for Rs. 11.41 crore, out of which Rs. 5,63,62,124.54 was adjusted towards the dues of the appellant No. 1-Company and Rs. 4,61,17,036.47 towards the dues of M/s Shri Colonizer and Developers Pvt. Ltd. and both the loan accounts were settled and closed.
Learned counsel also submitted that the contention of the appellant that the amendment application filed by the appellant before the Tribunal below has not been considered and decided, is incorrect, as perusal of the order dated 11.04.2022 shows that the said application assailing the order dated 31.03.2022 passed under section 14 was considered by the Tribunal below and it was held that since the account M/s Shri Colonizer & Developers Pvt. Ltd. has been settled and closed, therefore, with the consent of the parties, the case was taken up for final arguments and reserved for judgment. It is thus clear from the order dated 11.04.2022 that the said application was considered by the Tribunal below.
The learned counsel further submitted that the demand noticed and possession notice were issued and served properly upon all the borrowers, guarantor and the mortgagors as held by the Tribunal below. It was further contended that the sale notice was issued on 24.11.2020, whereas the auction was held on 15.12.2020, but it was subsequent sale, as the first auction sale had failed, therefore, it cannot be said that a clear 15 days’ notice was not given to the borrowers. The said sale was concluded at 4:00 PM on 15.12.2020 in favour of the respondent No. 3, who had deposited the entire sale consideration in accordance with the provisions of the Act and Rules made thereunder.
Learned counsel for the respondent-Auction Purchaser submitted that it is argued on behalf of the appellant that one of the properties, which was not even mortgaged with the Bank, has been proceeded against. In this regard, the learned counsel has drawn attention of this court to page No. 42 of the paper book, which is order dated 31.03.2022 passed by the ADM (Admn.), Lucknow and has contended that before the District Magistrate, both the properties were subject matter and under referernce, therefore, it is incorrect to say that only one property was mortgaged with the Bank and not the other. It was next argued that the contention of the appellant that the issue of mortgage cannot be decided by the DRT is not tenable because in this regard the Hon’ble Apex Court has held in the case of State of Haryana and Ors. Vs. Narvir Singh and Anr., reported in (2014) 1 Supreme court cases 105 that if there is an intention to create a mortgage by depositing the title deed, it will be presumed that the mortgage has been created. It was, therefore, prayed that the appeal may be dismissed and the Bank may be directed to handover the possession of the property in question to the auction purchaser.
Having heard the learned counsels for the parties and considering the material available on record, it is undisputed that appellant-company was sanctioned credit facilities by the respondent-Bank through its directors appellants No. 2 and 3, which was disbursed and availed by the borrowers. It is also admitted that the appellant No. 3 had created equitable mortgage over the property, which was inherited through a Will dated 21.08.1998 executed by his mother Late Chamanvati Arora.
The learned counsel has raised various issues including the validity of mortgage created by the appellant No. 3 over the property in question inherited through a Will dated 21.08.1098 executed by his mother Late Chamanvati Arora. In this regard, it is to be seen that the absolute owner of the property in question was Late Chamanvati Arora, who had purchased the same vide sale deeds dated 13.06.1956 and 01.09.1956. During her life time, she had executed a Registered Will dated 21.08.1998, which is at page No. 503 of Volume II of the paper book. In para 5 of the said Will, it is stated that Love Kumar Arora, who is son of the executants of the Will, would have right to look after and manage the property in question, but no right for sale and after Love Kumar Arora, her grandson Rishi Arora would be absolute owner of the property and he would have all rights over the said property. After the death of Chamanvati, who is mother of the appellant No. 3-Love Kumar Arora, he has inherited the property and created the mortgage by depositing the title deeds with the respondent-Bank. In this regard, a letter dated 08.10.2011 is relevant, which is at page No. 501 of the Volume II of the paper book, wherein it is mentioned “please acknowledge receipt of the under noted title deeds deposited by me on 08.10.2011 by way of equitable mortgage to secure the under noted limit sanctioned and moneys advanced are to be advanced to Shri Krishna Cinetech- Appellant No. 1”. In the column of list of title deeds of the said letter, it is mentioned “entered book No. 1, Jild 1510, pages 29/31, Serial No. 3012 dated 01.09.1956 and posted on book I, Jild 1506, pages 97/98 along with Will.” With regard to it, it was contended on behalf of the appellant that only one property, which was purchased vide sale deed 01.09.1956, was mortgaged with the Bank and not the other property, which was purchased through sale deed dated 13.06.1956 having area of 800 sq. meter. In this regard, the affidavit of appellant No. 3 addressed to the respondent-Bank is at page No. 1116 of Volume III of the paper book, is relevant for deciding the alleged mortgage of the property in question, but the Tribunal below has not considered the same.
It is averred that the appellant No. 3 had executed a lease deed for the period of 29 years in favour of the appellant No. 1-company and the said lease was also mortgaged by the borrower company with the respondent-Bank. The appellant had raised the question of mortgage in Para 5.22 of the S.A. before the Tribunal below, but the same was not considered while deciding the S.A. finally, whereas the Tribunal below, while granting the interim order dated 07.01.2021 (at page No. 460 of the paper book) had observed as under:-
“ From the perusal of page 16 of the objection filed by the Bank reflects that only one deed entered in Book NO. 1, Jild No. 1510, page 29/31 at Sr. No. 3012 dated 01.09.1956 was deposited on 08.10.2011 to secure the Term Loan facility of Rs. 510.00 lacs, The Bank had annexed the copy of the sid deed with its objection at page 26 of the objection. As per the said sale deed the measuring area does not come to 1421.33 Sq. meter. It appears that the Bank had sold total area 1421.33 Sq. meter. It appears that the Bank had sold total area 1421.33 sq. meter on the basis of valuation reports, but failed to produce any documents to prove that how much area was mortgaged in favour of the Bank. The applicants expressed that there is apprehension of loosing the physical possession.
In view of the same, for the time being, without entered into the merits of the case and without giving any adverse finding against the measurement of the area, to protect the possession of the applicants, status quo order is being passed till the next date in respect of property in question.
The Bank is directed to satisfy this Tribunal by cogent documentary evidence actual area mortgaged with the Bank at the time of granting the credit facility”.
From the perusal of above order, it is clear that the Tribunal below had taken serious view with regard to the mortgage, but it is not known as to why at the time of passing the order impugned the Tribunal below has not considered the said issue and has not given any finding in this regard. Hence, I consider it appropriate to remand the matter back to the Tribunal below for deciding it afresh. Since the matter is being remanded back, therefore, I deem it proper not to consider the other issues as raised by the appellant at this stage.
In view of the discussions as held above, the order impugned is set-aside, the appeal is allowed and the matter is remanded back to the Tribunal below for deciding it afresh in accordance with law after affording opportunity of hearing to the parties concerned without being influenced by the observation made herein above.
Parties shall appear before the Tribunal below on 27.05.2024.
A copy of this judgment be forwarded to the parties as well as to the DRT concerned and be also uploaded on the e-DRT portal.