State Bank of India vs V. Karthick

S. Ravi Kumar, Chairperson

This Appeal is against the judgement of DRT-III, Chennai, dated 04.10.2018 in OA No. 1/2013.

Brief facts leading to this Appeal are as follows:-

Appellant herein filed above referred OA for recovery of Rs.10,34,916.09p, together with interest at 13% p.a. with monthly rests from the date of Application till date of realization contending; Respondents 1 and 2 herein entered into an agreement on 14.02.2003 and thereafter obtained registered Sale Deed under document No.963/2003, SRO, Kannur; Respondents 1 and 2 approached for a Housing Loan through application dated 05.04.2003, for purchase of Schedule property and considering request of Respondents 1 and 2, Appellant Bank sanctioned Rs.6.50 Lakhs on 21.04.2003, subject to certain terms and conditions;

Respondents 1 and 2 executed necessary loan documents, availed loan facility and also deposited title deeds of Schedule property by creating equitable mortgage through Letter dated 24.04.2003; After availing loan, Respondents 1 and 2, defaulted, and Bank invoked SARFAESI provisions and took possession of property on 10.08.2012; At the time of taking physical possession, Respondent No.3 herein objected, claiming title over Schedule property contending, he had purchased the same from V.M. Chelladurai through document No.4291/2011 registered at SRO, Kannur; As Respondents 1 and 2 failed to repay the amount, Recovery Certificate may be granted against them, and also to realize the debt through sale of mortgaged property.

Borrowers, who are Defendants 1 and 2, remained ex parte.

Respondent No.3 herein, filed Written Statement contending : he is neither borrower nor guarantor, and Respondents 1 and 2 have no right to mortgage the property; He purchased Schedule property from V.M. Chelladurai through registered Sale Deed dated 11.10.2011, and that, his vendor purchased said property on 06.02.2002 from V. Sankaran, power agent of M.J. Saravana Perumal & Ors., whereas, Respondents 1 and 2 purchased the very same property from the very same person, V. Sankaran, power agent of M.J. Saravana Perumal & Ors., on 06.03.2003, long after registered sale deed in favour of V.M. Chelladurai, therefore, mortgage is not valid.

To support their case, Appellant Bank produced 11 documents and Respondent No.3 produced 15 documents, and on a consideration of contention and rival contentions and documents of both parties, Tribunal below held that there is a cloud against title of Respondents 1 and 2 herein, and they have no right to create mortgage over Schedule property, and they did not have valid title as on the date of conveyance, Bank is not entitled for mortgage decree, and only entitled for money decree, and granted for a sum of Rs.6.50 Lakhs, with interest at 9% p.a. (simple) from the date of Application till the date of realization. Aggrieved by the same, Bank preferred present Appeal.

Both Appellant and Respondent No.3 filed Written Arguments and reiterated the same during oral submissions.

Advocate for Appellant submitted, Sale Deed in favour of Respondent No.3, is of the year 2011, whereas Respondents 1 and 2 created mortgage on 24.04.2003, therefore, finding of Tribunal below that Respondents 1 and 2, have no valid title as on the date of creation of mortgage, is incorrect. He further submitted that Learned Presiding Officer grossly failed to take judicial notice that Appellant Bank took physical possession through Advocate Commissioner on 10.08.2012 by invoking Section 14 of SARFAESI Act, 2002. He further submitted that though Respondent No.3 challenged SARFAESI proceedings before DRT, the same was not considered, and he preferred an Appeal against that, but not prosecuted for the reason best known to him resulting dismissal of Appeal as well as Restoration Applications, against which he filed a Writ, which is pending adjudication. It is further submitted, Tribunal below erred in granting Recovery Certificate for Rs.6.50 Lakhs only, whereas claim is Rs.10,34,916.09p, together with contract rate of interest. He further submitted, Tribunal below also erred in granting interest only at 9% p.a. (simple), for the reason that Bank failed to verify title of borrowers, which is not a convincing ground for refusing interest at contract rate. He submitted, for these reasons, Order of Tribunal below is to be set aside and OA is to be allowed as prayed for.

On the other hand, Advocate for Respondent No.3 submitted, Tribunal below, after considering material produced before it, passed correct Order with regard to sale of Schedule property. He submitted, it is not the date on which Respondent No.3 purchased property is relevant, but the date on which Schedule property is mortgaged is the crucial date, to decide whether Respondents 1 and 2 have a valid title over Schedule property as on that date. He submitted, the very same property was sold to V. M. Chelladurai through Sale Deed dated 06.02.2002, by the very same person V. Sankaran, power agent of M.J. Saravana Perumal & Ors. He submitted, original owner of property is Mr. J. Saravana Perumal and Ors., and their power agent, V. Sankaran, executed the document. When Schedule property is already sold on 06.02.2002, in favour of V.M. Chelladurai, vendor of Respondent No.3, the same cannot be conveyed in favour of Respondents 1 and 2, while Sale Deed in favour of V.M. Chelladurai, vendor of Respondent No.3, is in force. He submitted, as seller under Sale Deed dated 06.03.2003, has no right to convey Schedule property to Respondents 1 and 2, and they did not acquire any title or right over said property, therefore, creation of mortgage over it, does not arise, and Tribunal below rightly held so, and there are no grounds to interfere with that finding. He submitted, with regard to rate of interest and other aspects, Respondent No.3 is nothing to do with it, because it is only against Respondents 1 and 2.

I have perused material papers, Written Submissions and impugned Order dated 04.10.2018. As referred to above, with regard to mortgage over Schedule property is concerned, argument of Advocate for Appellant Bank that Respondent No.3, acquired title only in the year 2011 and mortgage was in the year 2003, cannot be accepted for the simple reason that, the crucial aspect that has to be examined is whether Respondents 1 and 2 have acquired title over Schedule property on the date of creation of mortgage. From the documents produced before Tribunal below, it is crystal clear that Schedule property was already sold to V. M. Chelladurai, that is, vender of Respondent No.3, on 06.02.2002, through a registered document, if that is so, the seller, under document dated 06.03.2003, who conveyed the very same property in favour of Respondents 1 and 2, has no title over it, because he already parted title almost 13 months prior to 06.03.2003. So, as rightly contended by Advocate for Respondent No.3, document dated 06.03.2003, would no way convey any right over Schedule property to Respondents 1 and 2, because by that date, seller has no saleable interest over Schedule property.

At the time of arguments, Advocate for Appellant Bank filed a paper captioning it as ‘Genealogy of title’, disclosing dates of purchase, at best, this paper can be called as ‘dates and events’, and through this, he tried to focus that property purchased through document dated 06.03.2003 is for an extent of 270 sq. ft., whereas, purchase under document dated 06.02.2002, is to an extent of 280 sq. ft. From verification of pleadings, at no point of time, identity of property is questioned. When boundaries for these documents are one and the same, a small difference in the extent, will have no bearing, and it is settled law that, boundaries will prevail over extent. When Respondents 1 and 2, have approached Bank for loan offering Schedule property as security, it is expected from Bank to verify the title and possession by physically inspecting property. It is also expected from Bank to verify encumbrances before accepting mortgage, but it is not known whether those steps are taken, because in the entire pleadings or evidence, no such events are pleaded and stated. On the other hand, Respondent No.3, produced documents supporting his plea that after proper verification, he purchased property. So, from the material, it is crystal clear that Respondents 1 and 2, have not acquired any valid title over Schedule property through document dated 06.03.2003, and Tribunal below was right in refusing to grant mortgage decree, and that finding cannot be interfered with.

As already referred to above, Bank filed OA for recovery of Rs.10,34,916.09p, with interest at the rate of 13% p.a., with monthly rests from the date of Application till the date of realization, with costs. Tribunal below, granted Recovery Certificate for Rs.6.50 Lakhs, with future interest, without assigning any reasons for reducing the amount claimed in the OA, and only granting Recovery Certificate for sanctioned amount. When Respondents 1 and 2, have not contested OA, and when Bank claimed Rs.10,34,916.09p, with interest at contract rate, granting only Rs.6.50 Lakhs, is improper, particularly, when borrowers have not disputed the quantum.

One the of the arguments of Advocate for Appellant Bank is that interest is reduced to 9% p.a. (simple), stating, Bank having parted with its funds for utilization by Respondents 1 and 2 for acquisition of house property in which title is clouded, but said reason is not a convincing reason. I completely agree with Advocate for Appellant, for not taking care in examining the title, reducing rate of interest, is not a convincing reason. When borrowers did not appear and not challenged, and Bank produced both oral and documentary evidence substantiating their claim for Rs.10,34,916.09p, with contract rate of interest, without assigning valid and convincing reason, the same cannot be denied. So, to that extent, Order of Tribunal below is to be set aside.

In view of my foregoing observations and findings, Order of Tribunal below is confirmed to the extent of refusing mortgage decree; Order of Tribunal below granting Recovery Certificate for Rs.6.50 Lakhs, with future interest at 9% p.a. (simple) is set aside, by granting total claim amount, with contract rate of interest, as prayed for in OA, as against Respondents 1 and 2. DRT shall issue a modified Recovery Certificate accordingly.

In the result:- Appeal RA 188 /2018 is partly allowed as indicted above. No order as to costs. All pending IAs, if any, stand closed.