State Bank Of India vs Dev Pal Nagar

P.K. Bhasin, J

The appellant is aggrieved by the order dated 18.9.2015 passed by the Debts Recovery Tribunal (Jaipur) whereby his Securitisation Application No. 55/2015 (S.A.) filed under Section 17(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act' in short) has been allowed and appellant Bank's action initiated for sale of its secured asset to recover its money from its borrower, who happens to be respondent's mother has been quashed. That order which besides giving the reasons for the acceptance of the S.A. also gives the facts also leading to the filing of the S.A. by the appellant is re-produced below:

"1. The applicant has filed the above S.A. under Section 17 of SARFAESI Act, 2002 for quashing and setting aside the possession notice dated 18.6.2015 issued by non applicant Bank in respect of secured asset - Khasra No. 1201, Ward No. 29, Kunj Vihar Colony, Near Navdeep Hospital, Kotputli, Jaipur admeasuring 314.03 sq. yds. The applicant has also made a declaration that no security interest in favour of the non-applicant Bank up to 3/4 undivided share in the secured asset is created.

The applicant inter alia submits -

2.1 That the applicant is neither a mortgagor nor has given any guarantee in favour of the Bank. The secured asset was in the ownership of applicant's father Sh, Madan Pal Nagar. The office of Nagar Palika Mandal, Kotputli, Jaipur has executed a Patta dated 28.2.2002 in favour of their father Sh. Madem Pal Nagar, copy of which is marked as Annexure A. 1. Sh. Madan Pal Nagar died on 1.4.2007, copy of death certificate is marked as Annexure A. 2.

2.2 That after the death of Madan Pal Nagar, the immovable property was inherited jointly by four persons namely - Smt. Uma Nagar (Wife), Sh. Dev Pal Nagar (Son), Sh. Shiv Pal Nagar (Son), and Smt. Poonam Badana (Daughter). Thus, all the four persons have 1/4 undivided shares in the said immovable property.

2.3 That Smt. Uma Nagar obtained credit facility from non-applicant Bank in April 2013 and has created charge of her share in the said immovable property. The loan account of Smt. Uma Nagar, Proprietor of M/s. Shree Krishna Tractor was classified as NPA, therefore, the non-applicant Bank has initiated action under the SARFAESI Act, 2002 and posted the possession notice on the outer wall of the property and published the same in the newspaper, copy of the possession notice dated 18.6.2015 published in the newspaper on 25.6.2015 is marked as Annexure A. 4. Being aggrieved by the possession notice dated 18.6.2015, the applicant has filed the present S.A. and submitted that there exist no security interest of the non-applicant Bank in his 1/4 undivided share in the immovable property as he had not mortgaged his share in the property to the Bank.

2.4 That the District and Sessions Judge, Kotputli, Jaipur has issued a Succession Certificate No. 96 on 31.3.2010 in favour of him and other legal heirs of Late Sh. Madan Pal Nagar and in lieu of this Succession Certificate, the applicant is on absolute owner of 1/4 undivided share in the secured aspect.

2.5 That the non-applicant Bank con enforce its security interest in the secured asset only upto the extent of 1/4 undivided share, which is owned by Smt. Uma Nagar. The applicant has never executed any relinquishment deed, neither has gifted his share nor has sold his share till date and the other joint owners of the immovable property Sh. Shiv Pal Nagar and Smt. Poonom Badana have also not executed any relinquishment deed/gift deed/sale deed in favour of Smt. Uma Nagar, therefore, the claim of the non-applicant Bank as mortgagee upon the entire secured asset is contrary to the law and therefore, the proceedings of possession initiated by the Bank are liable to be quashed and set aside.

The non-applicant Bank filed reply to the S.A. on 28.8.2015 and raised preliminary objections -

3.1 That the S.A. filed by the applicant is not maintainable as the immovable property in question left by Late Sh. Madan Pal Nagar solely belongs to Smt. Uma Nagar and the sold immovable property is mutated in the Municipal record at Kotputli in her name. The applicant mala fidely in order to create hindrance in taking physical possession of the cured asset by the Bank has filed this S.A. with an ulterior motive. The applicant has no locus standi to file this S.A. as he has no right, title and interest/share in the secured asset. The property was previously mortgaged in Bank's favour by all the legal heirs of Late Sh. Madan Pal Nagar and thereafter on the basis of mutation in the name of Smt. Uma Nagar in the record of Nagar Palika, Kotputli, Jaipur she has created mortgage of the entire secured asset in Bank's favour, therefore, the S.A. filed by the applicant claiming 1/4 share of the secured asset is liable to be dismissed with cost.

3.2 That Smt. Uma Nagar has obtained Cash Credit Limit under Electronic Dealers Finance Scheme to the tune of Rs. 3.50 Crore and a sum of Rs. 2,90,87,783.11 was due as on 31.5.2015 for which the Bank has filed the O.A. against the Defendants on 1.6.2015.

3.3 That Smt. Uma Nagar, Proprietor of M/s. Shree Krishna Tractor being the sole owner of the secured asset has created equitable mortgage of her property left by Late Sh. Madan Pal Nagar in Bank's favour and the contention of the applicant that Smt. Uma Nagar has mortgaged only her share in the Bank's favour is wrong and denied as the borrower M/s. Shree Krishna Tractor, proprietor Smt. Uma Nagar has committed default and the loan account has become NPA and the Bank has proceeded to take action under the SARFAESI Act, 2002. The authorized officer of the Bank has taken symbolic possession of the secured asset on 18.6.2015 and published the possession notice as per rules in two daily newspapers. The applicant is not owner of 1/4 undivided share in the immovable property mortgaged by his mother Smt. Uma Nagar. The entire property belongs to Smt. Uma Nagar, who has mortgaged the said property in Bank's favour as security in the Cash Credit facility obtained from the non-applicant Bank. The said mortgaged property is presently mutated in the name of Smt. Uma Nagar in the record of lessor Nagar Palika, Kotputli, Jaipur.

3.4 That the non-applicant Bank after thorough investigation and obtaining the Title Investigation Report accepted the mortgage of the property and the claim of 1/4 undivided share in the mortgaged property by the applicant is totally baseless. The non-applicant Bank is entitled to enforce its security interest in the entire secured asset owned by Smt. Uma Nagar who created mortgage in Bank's favour. The applicant with an ulterior motive has mala fidely objected the mortgage created by his mother in Bank's favour in order to save the property from auction and therefore, prayed that the S.A. filed by the applicant be dismissed with cost.

I have perused the pleadings and heard arguments of both the Counsel on 4.8.2015.

I find on perusal of Annexure-A1 which is a Patta dated 28.2.2002 issued by Nagar Palika Mandal, Kotputli, Jaipur in favour Sh. Madan Pal Nagar in respect of immovable property - Khasra No. 1201, Kunj Vihar Colony, Near Navdeep Hospital, Kotputli, Jaipur admeasuring 314.03 Sq. Yds. I also find on perusal of Annexure A. 2 that Sh. Madan Pal Nagar expired on 1.4.2007. I also find on perusal of Annexure A. 3 that the said immovable property after the death of Sh. Madan Pal Nagar is inherited by Smt. Uma Nagar (Wife), Sh. Dev Pal Nagar (Sen), Sh. Shiv Pal Nagar (Son) and Smt. Poonam Badana (Daughter) as per Succession Certificate dated 30.3.2010 issued by Upper District and Sessions Judge, Kotputli, Jaipur under Section 372 Act 1925 in on Succession Application No. 04/2010.

I also find on perusal of Annexure R. 1 filed by the non-applicant that all the four persons Smt. Uma Nagar, Sh. Dev Pal Nagar, Sh. Shiv Pal Nagar and Smt. Poonam Badana vide letter dated 24.1.2011 had jointly confirmed creation of equitable mortgage by deposit of title deeds of the secured asset to secure the Cash Credit Limit of Rs. 80.00 lac granted by the non-applicant Bank to M/s. Shree Krishna Tractor Proprietor Smt. Uma Nagar. I also find that the said Cash Credit facility of Rs. 80.00 Lac was adjusted/liquidated by the borrower M/s. Shree Krishna Tractor and a fresh Cash Credit Limit under Electronic Dealers Finance Scheme to the tune of Rs. 3.50 Crore was sanctioned to M/s. Shree Krishna Tractor and Smt. Uma Nagar vide letter of confirmation dated 25.4.2013 has confirmed creation of equitable mortgage over the immovable property - Part of Khasra No. 1201, Ward No. 29, Kunj Vihar Colony, Near Navdeep Hospital, Kotputli, Jaipur, copy of which is marked as Annexure R. 2. The non-applicant Bank has accepted mortgage from Smt. Uma Nagar issued by Nagar Palika, Kotputli, Jaipur.

I also find on perusal of affidavit dated 4.8.2012 in support of documents filed by Mr. Jitendra Yadav, Chief Manager of the applicant Bank that the Bank has obtained Title Investigation Report from Mr. Hukam Chand Sharma, Advocate, Behror marked as Pages H to Q and such confirmation submitted by Sh. Dev Pal Nagar, Sh. Shiv Pal Nagar and Smt. Poonam Badana confirming the fact of release of their right, title and interest in the immovable property confirming that they have already release their shares in favour of their mother and the non-applicant Bank on the basis of certificate issued by the Nagar Palika, Kotputli, Jaipur dated 22.11.2012 has accepted the mortgage. Smt. Poonam Badana being a business manager of M/s. Shree Krishna Tractor also submitted a letter dated 1.3.2013 to the Bank confirming the release of right, title and interest in the property in favour of her mother and requested the Bank to release her from guarantee, which is marked as Page R in the list of documents filed by the non-applicant Bank on 4.8.2015.

I find on perusal of Title Investigation Report dated 3.4.201(sic) by Mr. Hukam Chand Sharma, Advocate in respect of the said immovable property, wherein he has stated in Para 14 of his report that in addition to his comments in Para 6(a) that Smt. Uma Nagar W/o. Sh. Madan Pal Nagar is competent to create mortgage in Bank's favour by deposit of sale deed dated 17.4.2000 and lease deed dated 28.2.2002 in original along with certificate of Nagar Palika, Kotputli, Jaipur and that by deposit of above documents a valid mortgage will be created in Bank. A suitable confirmation may also be obtained from the legal heirs of deceased Sh. Madan Pal Nagar.

I find on perusal of the reply filed by the non-applicant Bank marked as Annexure A-2 that only Smt. Uma Nagar has created equitable mortgage in respect of secured asset to secure the Cash Credit limit of Rs. 3.50 Crore granted to M/s. Shree Krishna Tractor and there is no registered relinquishment deed by the other legal heirs namely Sh. Dev Pal Nagar, Sh. Shiv Pal Nagar and Smt. Poonam Badana releasing their shares in favour of their mother Smt. Uma Nagar.

I, therefore, of the view that in the absence of registered relinquishment deed by the three legal heirs of Late Sh. Madan Pal Nagar in favour of their mother Smt. Uma Nagar, the borrower Smt. Uma Nagar cannot create equitable mortgage of entire immovable property to secure the Cash Credit Limit of Rs. 3.50 Crore in favour of the non-applicant Bank and the non-applicant Bank cannot sell the 1/4 share of applicant in the secured asset. With this, the S.A. of the applicant Sh. Dev Pal Nagar is allowed.

Accordingly, this S.A. is disposed of Copy of the order be given free to all the concerned parties.

Sd/-

(R.K. Madan)

Presiding Officer Jaipur"

As per the facts narrated in this order of DRT and other material on record the appellant's mother Smt. Uma Nagar as the proprietor of M/s. Shree Krishna Tractor had availed of credit facility in the form of Cash Credit Limit of Rs. 80 lacs under Electronic Dealers Finance Scheme in the name of her Firm from the appellant Bank sometime in the year 2011. Re-payment of the outstanding amount in the C.C. account was secured by way of equitable mortgage of the property referred to in para No. 1 of the of the DRT (hereinafter to be referred as 'the mortgaged property') by all the four legal heirs, including the appellant, of its owner late Shri Madan Pal Nagar who had died on 1.4.2007. It appears that that loan account was cleared and thereafter another Fund Based CC (Hyp) credit facility (e-DFS) of Rs. 3.50 crores was granted by the appellant-Bank in April, 2013 in favour of Shree Krishna Tractors and appellant's mother created equitable mortgage of the mortgaged property to secure the repayment of outstandings in this account also. As per the Bank's case in its reply to the S.A. the mortgaged property had come to be mutated in the name of appellant's mother in the municipal records on 22.11.2012 and so she had created fresh equitable mortgage for this facility on 25.4.2013 and it was also pleaded in the reply by the Bank that all the other legal heirs had also created mortgage that time also.

As on 31.5.2015 a sum of Rs. 2,90,87,783.11 was due in the account of the aforesaid Firm and since the respondent's mother defaulted in clearing the said outstanding amount in her C.C. account the appellant Bank initiated action under Sections 13(4) and 14 of the SARFAESI Act after declaring her account as Non-Performing Asset (NPA) and the possession of the mortgaged property was sought to be taken over. That led to the filing of S.A. by the appellant before DRT, Jaipur on the ground that his mother could mortgage only her 1/4th share in the mortgaged property and not of the shares of other three legal heirs of their father late Shri Madan Pal Nagar, including the appellant who has 1/4th share therein and therefore the appellant-Bank could enforce its security interest in the mortgaged property only to the extent of 1/4th share of Smt. Uma Nagar. The appellant further claimed that he had never executed any Relinquishment Deed in favour of his mother nor had he gifted his share in the mortgaged property to her and even other legal heirs had also neither relinquished their shares nor gifted the same to their mother.

The DRT, as noticed already, allowed the S.A. only for the reason that other legal heirs of the deceased owner of the mortgaged property had not executed any registered relinquishment deed in favour of their mother and, therefore, their mother Uma Nagar could not create mortgage of the entire property to secure the credit facility of Rs. 3.50 crores and the Bank could not sell the 1/4th share of the appellant herein.

During the course of arguments learned Counsel for the respondent pressed into service the reason given by the DRT in the impugned order that since there was no registered relinquishment deed executed by him and other legal heirs of their father in favour of their mother the mortgage created by her could only be operative in respect of her 1/4th share only. The Counsel, however, did not say anything in respect of the document of deposit of title deed executed by him as well as other legal heirs on 25.4.2013, copy of which is available at page No. 96 of the appeal paper-book nor was its genuineness doubted. That document was executed by all legal heirs to secure the re-payment of fresh CC limit sanctioned by the appellant-Bank on 25.4.2013 in favour of Shree Krishna Tractors. As far as the reason for allowing the S.A. i.e. there being no registered deed of relinquishment given by DRT is concerned, that was not even the ground taken by the appellant in the S.A. The respondent did not even file reply to this appeal claiming that there was no registered relinquishment deed executed by him. In fact, even in the earlier memorandum of deposit of title deed signed by all the legal heirs in 2011 it had been agreed by all the legal heirs that that mortgage was not only for the CC limit being sanctioned at that time but also in respect of financial facilities to be sanctioned in future also to the borrower Firm. This aspect was also not considered by the DRT nor the Counsel for the respondent said anything in this regard at the time of arguments. He kept on submitting that there was no relinquishment deed proved by the Bank to show that his mother alone could create mortgage of the entire property inherited from late Shri Madan Pal Nagar.

It appears that late Shri Madan Pal Nagar was carrying on business in the name of Shri Krishna Tractors and after his death his children had decided as a gesture of respect to their mother to make her as the proprietor of the said Firm and on both the occasions all had joined in the creation of equitable mortgage in favour of the appellant Bank to secure the repayment of Bank's loan which was obtained for the family business but when it came to repayment of Bank's dues the respondent turned dishonest and to avoid sale of the mortgaged property cooked up the plea that his mother could not mortgage the entire mortgaged property. The intention of the appellant being only to put obstacles in the way of the Bank in realising its money becomes evident from the fact that if at all he was aggrieved with the creation of mortgage of entire property in question without his consent, express or implied, he would have lodged a complaint/protest somewhere, if not with the police at least with the Bank or with the Municipal Authority which had mutated the property in question only in the name of his mother and it cannot be accepted that before the issuance of possession notice by the Bank he had no knowledge about the creation of the mortgage of his house by his mother while taking loan of crores of rupees. The appellant does not claim that he has nothing to do with the family business in the name of Shree Krishna Tractors for which credit facility was obtained from the appellant-Bank to run the business. So, it is clear that the mortgage in respect of the entire property of the deceased owner was created with the consent of all the legal heirs of the deceased Shri Madan Pal Nagar, whether there was a registered relinquishment deed executed by all the legal heirs or not. For the aforesaid reasons I set aside the order of the DRT, Jaipur accepting the S.A. No. 55/2015 of the respondent Dev Pal Nagar and resultantly that S.A. would now stand dismissed.