Sri. Duddala Lokesh & Anr. vs South Indian Bank Limited & Anr.

Instant Appeal is preferred against a judgement and order dated 10.06.2024 passed by Learned DRT-II Hyderabad dismissing the S.A. No. 75 of 2021 Duddala Lokesh & Another Vs The South Indian Bank & Another.

As per pleadings of the parties an application under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI ACT) (hereinafter referred as to as the ‘Act’) was filed challenging the notice under Section 13(4) dated 05.09.2021 issued by the Respondent No. 1 herein i.e. South Indian Bank with the assertions that the Securitization applicant and appellants namely Sri Duddala Lokesh and Smt. Duddala Vara Lakshmi purchased the scheduled property from VR Associates Constructions i.e. Respondent No. 2 through two sale deeds. Respondent No. 2 executed a registered sale deed in respect of a Scheduled property in favour of Mr. Jatin R. Jain on 12.06.2018 wherein allegedly fraud was played by Jatin R. Jain upon Respondent No. 2. Original suit No. 1391 of 2018 was filed on the file of Learned XV Additional District and Sessions Judge, Ranga Reddy district for cancellation of the sale deed dated 12.06.2018 which was decreed in favour of the Respondent No. 2. The Appellants are in possession over this property but the Respondent No. 1 issued a notice under Section 13(4) of the Act which is under challenge.

Respondent No. 1 alleged that the decree was passed in O.S. 1391 of 2018 was challenged before the Hon’ble High Court of Telangana in A.S. No. 668/2019. Hon’ble High Court stayed the operation of the decree and judgement. Jatin R. Jain availed cash credit loan facility of Rs. 4 crores from Respondent No. 1 bank in the year 2018 and also created equitable mortgage by deposit of sale deed No. 4279/2018 dated 12.06.2018 executed by Respondent No. 2 to secure the loan. But the O.S. No. 1391/2018 was filed by Jatin R. Jain in collusion with Respondent No. 2 and obtained an Ex parte decree of cancellation of deed. When the account of Jatin R. Jain in the name of M/s. Crown Metal marketing, became NPA by 30.06.2019, recovery proceedings were initiated by the bank then bank came to know about the collusive decree passed in O.S. No. 1391/2018. Thereafter the appeal was preferred before the Hon’ble High Court and interim order of stay of operation of decree and judgement was passed which is still in force. Accordingly, appellants have no right over the subjective property. S.A. is liable to be dismissed.

Respondent No. 2 also filed a separate written statement stating that the sale deed dated 12.06.2018 was executed by the Respondent No. 2 in favour of Jatin R. Jain without receiving a complete sale consideration and without delivery of the physical possession. However, Jatin R. Jain availed the loan facility from the Respondent No. 1 South Indian Bank on 18.06.2019. When Jatin R. Jain failed to honour the memorandum of understanding between the parties, O.S.1391/2018 filed by the Respondent No. 2 for cancellation of the sale deed dated 12.06.2018 which was decreed ex parte, factum of pendency of appeal is not disputed.

Learned DRT framed filing two issues for disposal in Para 10

ii) To what relief?

Learned DRT arrived at a finding that since the dispute over the schedule property was pending before the Hon’ble High Court in A.S. NO. 668 of 2019, S.A. could not be adjudicated and dismissed the same as pre-mature.

Learned counsel for the Appellant would submit that on the date of filing of S.A. Appellants were having sale deed in their favour. The possession notice issued by the bank is illegal as the same is issued in pending appeal. Appellants are neither borrower nor guarantor. Their valid right, title and interest have to be secured. Appellants on the basis of the sale deed had taken the loan from the Bank of Maharashtra and created the mortgage. S.A. was not pre-mature rather the Appellants rights are duly secured under the deed executed in their favour.

Per Contra Learned Counsel for the Respondents would submit that the decree was obtained by fraud and the deed dated 12.06.2018 was cancelled by the Civil Court but appeal is pending against the judgement before the Hon’ble High Court wherein operation of the decree was stayed by the Hon’ble High Court. Appeal is still pending and interim order is still in force. Bank has right over the secured assets, accordingly appeal is liable to be dismissed.

As far as facts of the matter are concerned, Appellants are claiming title over the secured assets on the basis of sale deed. They also availed some loan from the Bank of Maharashtra on the basis of the deed. It so appears that the Respondent No. 2 before executing the deed in favour of the Appellants executed a registered sale deed in favour of Jatin R. Jain vide document No. 4279/2018 dated 12.06.2018 which was cancelled in O.S. No. 1391/2018 by Learned XV Additional District and Sessions Judge, Ranga Reddy District. A.S. No. 668/2019 is pending before the Hon’ble High Court of Telangana wherein an interim order of stay on operation of decree is passed by the Hon’ble High Court. It is also borne out from the record that Jatin R. Jain, who is proprietor M/s. Crown Metal marketing, availed cash credit facility of Rs. 4 crores from the Respondent No. 4 South Indian Bank and created an equitable mortgage by depositing the sale deed No. 4279/2018 dated 12.06.2018 by creating an equitable mortgage.

O.S. No. 1391/2018 was filed by Respondent No. 2 VR Associates Constructions in collusion with Jatin R. Jain and obtained an ex parte decree and the sale deed was cancelled. It would be relevant to observe that the bank, Respondent No. 1 i.e. South Indian Bank was not arrayed as a party in the original suit. When Bank came to know about the decree an appeal A.S. No. 668/2019 was preferred before the Hon’ble High Court for the state of Telangana wherein the operation of the decree was stayed by the Hon’ble High Court. Meaning thereby that the prima facie the charge in favour of the bank Respondent No. 1 was duly established as the deed in question was cancelled and the operation of the decree was stayed by the Hon’ble High Court. Hence the steps taken by the Respondent No. 1 under the SARFAESI Act for realization of its dues was in accordance with law.

I do not find any illegality or impropriety in the impugned judgement except for the finding that the S.A. is dismissed being pre-mature rather S.A. was liable to be dismissed. Accordingly, appeal deserves to be dismissed with the observations made in the body of the judgement.

Appeal is dismissed. Impugned Judgement and order dated 10.06.2024 passed by Learned DRT-II Hyderabad is modified to the extent that S.A. is dismissed.

File be consigned to Record room.

Copy of the Judgment/Final Order be uploaded in the Tribunal’s Website.

Order signed, dated and pronounced in open Court.