Simmi Pahwa vs Punjab And Sind Bank And Ors

This order is being prepared while working from home for being signed and communicated to the parties because of the suspension of functioning of DRAT due to spread of Corona Virus (Covid-19) in the entire country. This procedure for the preparation of orders by quasi judicial tribunals and their communication to the concerned litigants in place of formal pronouncement in open Court has been recognised by the Hon'ble Supreme Court in one of its judgments reported as AIR 2008 SC 2594, "State Bank of India and Ors. Vs. S.N.Goyal"(para 19) wherein it was observed that:-

".............While some quasi judicial tribunals fix a day for pronouncement and pronounce their orders on the day fixed, many quasi judicial authorities do not pronounce their orders. Some publish or notify their orders. Some prepare and sign the orders and communicate the same to the party concerned... "

I now proceed to decide this appeal which can be disposed of without wasting much breath.

The appellant is daughter of one S. Jagdish Singh Kamboj who was owner of property no.289, East Mohan Nagar, Amritsar. He had mortgaged that property in favour of the respondent Bank to secure the re-payment of loan which this bank had given to respondent no.2 herein M/s Singh Sons, a proprietorship concern of one Tribhuvan Singh who had died during the pendency of the O.A. and his legal representatives were on record. The said borrower Firm had defaulted in repayment of bank loan and to recover its outstanding dues the respondent bank had filed an Original Application(O.A.) under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act,1993('RDDBFI Act, 1993'in short). The DRT had allowed that O.A. against all the defendants impleaded therein including the father of the appellant who was defendant no.3. Recovery certificate was forwarded to the recovery officer attached to the DRT for execution. The property which the appellant's father had allegedly mortgaged in favour of the respondent bank was put up for auction by the recovery officer. At that stage the appellant filed objections before the recovery officer claiming that part of the property in question had been sold by her father and the person who had purchased the same S. Sukhwinder Singh had further sold it to her and so her property could not be auctioned to recover bank's dues. The appellant had also claimed before the recovery officer that the property which was being sought to be auctioned could not in any even be auctioned in execution of the recovery certificate issued in the bank's O.A. since her father had died during the pendency of the O.A. but his legal heirs were not brought on record and consequently the decree was a nullity qua her father/mortgagor.

The objections filed by the appellant were rejected by the recovery officer as also by the learned Presiding Officer of the DRT before whom she had preferred an appeal under Section 30 of the RDDBFI Act, 1993 against the order of the recovery officer. Now the present second appeal has come to be filed before this appellateTribunal.

The order passed by the DRT is re-produced below:-

"This Appeal has been filed by a third party, challenging the order passed by learned Recovery Officer dated 22.02.2018 by which the objections filed by appellant were dismissed. The counsel for appellant has argued that Sh. Jagdish who had given guarantee in a loan in 1987 had mortgaged his property having area of around 698 Sq. Yards with the bank. Sh. Jagdish (Guarantor) had expired in 2007 and decree was passed against him after his death and an amended RC was issued with this direction that if any of the defendants has expired before the decree, then his legal heirs will be liable to the extent of shares inherited by them from the property of deceased defendant. The counsel for appellant has stated that appellate Simmi is daughter Late Sh. Jagdish and she has not inherited anything from the property of Sh. Jagdish. Therefore, bank cannot auction this property. The learned counsel for appellant has further argued that Sh. Jagdish has alienated 175 Yards of this property on 28.06.1996 to Sukhwinder and Sukhwinder had sold 528 Sq. Meter of this property to Simmi in 2003 and Simmi had sold out some portion of this property to Mr. Sandeep in 2005. The learned Recovery Officer has not considered all these points in its order and has stated that since Simmi had become owner by way of sale deed in 2003, therefore her portion cannot be auctioned by the learned Recovery Officer and requested to set aside the order passed by learned Recovery Officer dated 22.02.2018 and to stay the auction proceedings as the learned Recovery Officer has fixed to auction this property on 29.10.2018.

The counsel for bank has opposed the arguments of appellant and requested to dismiss this Appeal.

Heard both the counsels. Perused the file and the impugned order passed by learned Recovery Officer dated 22.02.2018. This is an admitted fact that Sh. Jagdish had mortgaged his 698 Sq. Yards land with the bank as a guarantor and this property was mortgaged in 1987. Since, this property was already mortgaged, therefore, any portion which was sold by Sh. Jagdish to any person does not take away the first right of the creditor bank on this property. "It is well settled principle of law that if any mortgaged property is sold out to anyone then the purchaser does not get any right on the property and mortgagee has always prior charge on that property."

Therefore, all these transactions after 1987 relating with this property do not affect the rights of the mortgagee creditor bank and bank is recovering its dues by auctioning the mortgage property. If appellant Simmi had purchased any share of this property after 1987, even then she has no right to stop the creditor bank to auction this property to recovery its dues. The point raised by the learned counsel for appellant regarding LR's of deceased has not relevancy in the case in hand. It is well settled principle of law that if any judgment debtor dies, then his legal heirs are liable only to the extent of share which they have inherited from the property of the deceased judgment debtor. This situation arises only in those matters, where there is no mortgage property and recovery has to be affected from the legal heirs. In that situation, legal heir can claim that he is liable only to the extent of the share inherited by him from the property of deceased but not from his personal property. In the case in hand, the property which is being auctioned that was mortgaged by the deceased Sh. Jagdish in 1987 as guarantor. Therefore, bank has prior charge on this property and all transactions regarding this property after 1987 do not affect the rights of creditor bank. Therefore, there is no illegality in the order passed by learned Recovery Officer dated 22.02.2018 and there is no reason to interfere in the recovery process before the learned Recovery Officer and accordingly this Appeal is dismissed."

From the foregoing narration it is evident that appellant's father had died during the pendency of the bank's O.A. and none of his LRs were brought on record. So, the decree stood passed against a dead person. It is well settled legal position that decree against a dead is a nullity. The appellant in her written submissions had rightly taken this plea. In this regard reliance can be placed on two decisions of the Hon'ble Supreme Court reported as (1998) 5 SCC 567 and (2005) 6 SCC 300. Learned counsel for the respondent bank could not refute this legal position nor was any judgment taking a contrary view was brought to my notice. Even in reply to the appeal this legal position was not controverted on by the respondent bank.

In view of the fact that recovery certificate in the present case was issued against a dead person, namely, late Jagdish Singh, appellant's father the same could not have been executed qua this defendant/CD. Therefore, the objections of the appellant against its execution ought to have been allowed on this short ground alone firstly by the recovery officer and in any case by the learned Presiding Officer of DRT in first appeal. In this scenario I need not into other objections raised by the appellant before the recovery officer and Presiding Officer of DRT.

This appeal is accordingly allowed and it is declared that the recovery certificate issued in O.A.No.491/2000 against the mortgagor late Jagdish Singh was a nullity and so not executable.