Uttar Pradesh State Industrial Development Corpn. Ltd. vs Oriental Bank Of Commerce And Ors.

P.K. Bhasin, J

These appeals have been knit together for being heard and decided as a composite case with the consensus amongst the Counsel for all the parties on questions common to both the cases under scrutiny before this Tribunal. So, by this common order I shall be disposing of both these appeals between the same parties which have arisen under common facts and circumstances though are against separate judgments of the Debts Recovery Tribunal passed on 12.2.2014 in two separate Original Applications filed by the Global Trust Bank Ltd. (hereinafter to be referred as 'the GTB') under Section 19 of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the 'RDDBFI Act') against the same set of defendants who are now respondents 2 and 3 in both these appeals. Since the points involved and urged in both the appeals by the Counsel for the parties were common and the appeals were heard also analogously the same can be conveniently disposed of by a common order. Uttar Pradesh State Industrial Development Corporation Ltd. ('UPSIDC' in short), is fighting this legal battle to save huge piece of its land admeasuring 188.33 acres in the Industrial Area at Masuri Gulawati Road in village Dehra Amarpur, Lodha, Raoli, Sheikhpur, Khichra Pargana Dasna, Tahsil Hapur, Distt. Ghaziabad from the clutches of the respondents herein out whom respondent No. 2 M/s. Wise Industrial Parks Limited allegedly had mortgaged the said land without its permission in favour of the GTB, which had amalgamated with Oriental Bank of Commerce sometime in the year 2004 during the pendency of the O.A. and which is now respondent No. 1 in these appeals, to secure the repayment of loans of crores of rupees granted to it as well as respondent No. 3 herein by the GTB during the years 1997-2001 and which land now stands sold to respondent No. 4 herein (auction purchaser) M/s. KJS Concrete (P) Ltd. in execution of the Recovery Certificates obtained by Oriental Bank of Commerce from the Debts Recovery Tribunal-II, Delhi ('DRT in short') on 12.2.2014 in the two Original Applications filed by the GTB. The recovery certificate issued in O.A. No. 38/2004 was for a sum of Rs. 51,34,74,787/- with interest thereon @ 18.50% p.a. with quarterly rests from 8.4.2004 onwards until recovery and the recovery certificate issued in O.A. No. 37/2004 on 12.2.2014 was for a sum of Rs. 2,79,29,317/- with interest etc. Respondents 2 and 3 herein were defendants in the two O.As. and they were made liable for payment jointly and severally.

The grievance of the appellant UPSIDC to whom no relief was granted in the O.As. for the protection of its land (hereinafter to be referred as 'the mortgaged land') has been that despite the fact that it had not granted any permission as the owner/superior lessor of the mortgaged land to the lessee, respondent No. 2 herein to mortgage the same in favour of any Bank and even lease in favour of the said Company stood cancelled in the year 2002 and possession also taken back by UPSIDC and there were no leasehold rights in the mortgaged property subsisting in favour of the lessee (respondent No. 2 herein), which could be auctioned but still 188.33 acres of land belonging to UPSIDC has been shown on papers to have been sold in auction to respondent No. 4 to discharge the loan liability of the respondents 2 and 3 towards the GTB and that had necessitated filing of the present appeal so that the so called auction purchaser does not lodge any sort of claim with UPSIDC relying upon sale documents issued by the Recovery Officer mechanically. The grievance of the UPSIDC also appears to be that the auction purchaser which could not have obtained leasehold rights in the mortgaged lands through normal channel now claims to have acquired the same through the auction proceedings initiated at the instance of Oriental Bank of Commerce ('OBC' in short) after loan amount of crores of rupees was not paid by the respondents 2 and 3 herein.

Thus, the grievance of the UPSIDC is that the public land has been sold for the discharge of private liability of respondents 2 and 3 towards a public sector Bank in whose favour the leasehold rights in the public land had been mortgaged by way of deposit of title deeds in the form of two lease deeds which were in favour of respondent No. 2 herein by UPSIDC.

The relevant paras from the Original Application No. 38/2004 of the Global Trust Bank are being re-produced hereunder which give background facts leading to the initiation of this long drawn and unending litigation:

"(III) That on the request of the defendant No. 1 (which is now respondent No. 3 in these appeals) the applicant Bank's, Bandra West Mumbai Branch sanctioned inter alia a term loan vide sanction letter dated 16.9.97 in the name of the defendant No. 1 in the sum of Rs. 450 lacs hereinafter called the First Term Loan now bearing account No. 17004024 for the purpose of procurement of building material, construction activity payment to creditors etc.............

(IX) That further on the request of the defendant No. 1, the applicant Bank's Bandra (West) Mumbai Branch sanctioned overdraft/TL in the sum of Rs. 400 lacs vide their sanction letter dated 13.10.98 on the securities and terms and conditions contained in the sanction letter dated 13.10.98 repayable in eight quarters within two years in equal instalments of Rs. 200 lacs (Rupees two hundred lacs) each on 1st April, 2000 and 1st October, 2000 or Rs. 300 lacs (Rupees hundred lacs) per acre of sale of land whichever is earlier, for the purpose of development of land procured on lease by Wise Industrial Parks Ltd. (which is respondent No. 2 in these appeals) from UPSIDC for development of Agro Industrial Park on the security inter alia (a) containing security of land leased by UPSIDC and already mortgaged by Wise Industrial Parks Ltd., i.e. the defendant No. 2 to the Bank for the term loan of Rs. 400 lacs (Rupees four hundred lacs) availed by defendant No. 2 (since now closed).......

(XI) That the defendant No. 2 has continued the equitable mortgage created by it on 11.3.98 in order to secure the loan of Rs. 400 lacs availed by it (now closed) with regard to plot of land admeasuring 133.33 acres in Industrial Area at Masuri Gulawati Road in Village Dehra Amarpur, Lodha, Raoli, Sheikhpur, Khichra Pargana Dasna, Tehsil Hapur, Distt. Ghaziabad by on or towards the East of Masuri Gulawati Road and on or towards West of Agro Park by executing a continuity letter dated 15.10.98 in order to secure the above overdraft/term loan sanctioned and availed by defendant No. 1.

(XIII) That the defendant No. 1 has availed the amount of overdraft/term loan in the account from time-to-time and the amount was availed in its entirely as detailed in the statement of account.

Thereafter, the Bank pleaded further facts regarding more financial facilities granted to the borrower Company (respondent No. 3 herein) and that those additional facilities had also been secured by respondent No. 2 herein by extending the charge by way of equitable mortgages already created by it in favour of GTB in respect of the lands taken on lease from UPSIDC vide lease deeds dated 11.3.1998 and 30.3.1999 and then after pleading that the borrower Company had defaulted in repayment of the loan amounts as per the loan agreements/documents executed by the borrower as well as the guarantor, it summed up its case in para Nos. LVIII to LXI, which are reproduced as under:

"(LVIII) That after the availment of the above term loans, overdrafts, amount of NCD the defendants have failed to make the payment of instalments/to regularise the account on the due dates. Even the defendant has also failed to make the payment of the interest as and when debited in the account as per agreement and the accounts of the defendants has become dormant except debit entries of interest and other charges. Despite the repeated requests/reminders of the applicant Bank and despite assurances, the defendant failed and neglected to clear the liability/payment of instalments, However, the liability in the accounts were specifically acknowledged by the defendant No. 1 on 28.9.99 in account No. 17004024 at Rs. 2,88,01,322/- (Rupees two crores eighty-eight lacs one thousand three hundred twenty two only) and in account No. 1700116040 at Rs. 5,56,05,043/- (Rupees five crores fifty six lacs five thousand forty three only) and in account No. 17004025 at Rs. 2,00,00,000/- (Rupees two crores only). The liability in all the accounts were again acknowledged specifically by the defendant No. 1 on 10.4.2001 in Account No. 17004024--Rs. 3,11,34,207/- (Rupees three crores eleven lacs thirty four thousand two hundred seven only) Account No. 17004025--Rs. 2,33,59,669/- (Rupees two crores thirty three lacs fifty-nine thousand six hundred sixty nine only) Account No. 17004028--Rs. 1,17,14,727/- (Rupees one crore seventeen lacs fourteen thousand seven hundred twenty seven only), Account No. 1700116040--Rs. 8,19,65,715/- (Rupees eight crores nineteen lacs sixty five thousand seven hundred fifteen only), Account No. 1700116056--Rs. 2,07,41,762/- (Rupees two crores seven lacs forty one thousand seven hundred sixty two only) inclusive of interest upto 11.3.2001 together with future interest and other charges. Even after acknowledgement of the liability, the defendant No. 1 has failed and neglected to clear the liability outstanding in the account.

(LIX) That even the legal notice dated 15.6.2002 has failed to invoke any response from the defendants for the repayments of the amount outstanding in the account, hence the applicant Bank has been left with no alternative but to file the present application. Hence, this application. It is pertinent to mention that the entire amount has become due long time back.

(LX) That the applicant Bank is entitled to charge interest @ 18.50% p.a. compounded with quarterly rests on the outstanding amounts.

(LXI) That the balance due in all the accounts as per ledger extract is Rs. 29,31,15,281.30 (Rupees twenty nine crores thirty one lacs fifteen thousand two hundred eighty-one and paise thirty only) as on date inclusive of interest upto 29.9.2001, further interest has not been debited in the account since this account has been classified us non-performing account as per the guidelines of the Reserve Bank of India. The interest and other charges accrued from 30.9.2001 to 7.4.2004 calculated at the rates applicable from time to time work out to Rs. 22,03,59,506.30 (Rupees Twenty two crores three lacs fifty nine thousand five hundred six and paise thirty only). The defendants are liable to pay this amount along with interest due and payable. The total balance due from defendants as on dated, i.e. 8.4.2004 is Rs. 51,34,74,787.60 (Rupees fifty one crores thirty four lacs seventy four thousand seven hundred eighty seven and paise sixty only)........................."

This claim of the Bank was contested by the principal borrower, respondent No. 2 herein, guarantor and mortgagor, respondent No. 2 herein as well as the appellant herein, which had got itself impleaded in the O.A, though no relief was claimed against it by the Bank.

Now, the relevant paras from the joint written statement of respondents 2 and 3 filed in O.A No. 38/2004 herein are re-produced below:

"(A) That the present original application is an outcome of the collusion between the two ex-employee (Mr. Arun Anand & Mr. P.C. Rao) of the defendants with erstwhile management of the applicant Bank and has been filed without any cause of action against the answering defendants, solely on the basis of fabricated and manipulative documents, which can be assessed on the basis of following facts:

(d) The applicant Bank alleged that Mr. P.C. Rao Managing Director of Wise Industrial Parks Ltd. created an equitable mortgage (at page No. 199-202 of the documents enclosed) but however, as has been stated above, no resolution, which ought to have been passed and signed by the Managing Director of UPSIDC has not been placed on record by the applicant Bank, meaning thereby, that the Bank could not mortgage any of the aforesaid property of UPSIDC without its prior permission.....

(j) The applicant Bank has not arrayed The Housing and Urban Development Corporation Ltd., U.P. State Industrial Development Corporation Ltd......... Similarly from the documents enclosed it appears that the applicant Bank was very well known to the fact that in both the property at Industrial Area, Masuri Gulawati Road, U.P. State Industrial Development Corporation Ltd. is a lessor and said properties cannot be alienate transfer and mortgage without the permission of U.P. State Industrial Development Corporation Ltd. this fact invariably proves the manipulation by the applicant Bank."

The relevant paras from the written statement of the appellant herein filed in O.A. No. 38/2004 are also being reproduced below:

"1. That a plot measuring 400 acres was allotted to M/s. Wise Industrial Park Ltd./defendant (hereinafter referred to as WIPL/defendant) in industrial area, Mussorie Gulawati Road, Ghaziabad. U.P. vide letter dated 24.5.1995 and a license agreement was executed on 24.5.1995 for 400 acres of land.

It is submitted that the UPSIDC had leased the above said land to WPIL/defendant through a conveyance deed executed 23.5.1994 for the purpose of land industrial development in District Ghaziabad for the purpose of developing the land as Agro Industrial Park for the sole purpose of setting up of agro industrial unit including erection of dwelling houses for the residence of supervisory staff of such units and authorizing the lessee/WIPL to sublease the plot carved out of the part of the said land after layout for roads, parks and other public utility services to the persons or parties as shall bind themselves on such terms and conditions including those for rent and premium of sublease as may be decided by the lessee with the acceptance of the lessor.

It is submitted that as per term 3(j) of the Lease Deed dated 30.3.1999, it was agreed by the WPIL/defendant that they will not without the previous consent of the lessor/UPSIDC transfer, sublet relinquish, mortgage or assign its interest in the agro industrial park or the building standing thereon or both as a whole except by way of sublease/sub-licence to entrepreneurs for the sole purpose setting an agro industrial unit and every such transfer, assignment, relinquishment, mortgage or subletting or both shall be subject to and the transferees or assignees shall be bound by all covenant and conditions herein contained and be answerable to the lessor in all respects, therefore, and the lessee in no case assign, relinquish, mortgage, sublet.............................................

It is pertinent to mention here that WIPL/defendant has not sought by any permission/No Objection from UPSIDC/defendant to mortgage the above said lands lease to them by UPSIDC with the above Bank. Therefore, any mortgage by the WIPL/defendant is not binding upon UPSIDC. It is pertinent to mention here that NOC for mortgage of the property has not been issued by UPSIDC to any financial institution including M/s. Global Trust Bank.

That a lease deed was executed in favour of WIPL for an area of 133.33 acres on 11.3.1998 and possession of the same was handed over on 26.3.1998. Another lease deed executed for an area of 133.33 acres on 31.3.1999 and the possession of the same was handed over to WIPL on 6.3.2000. It is submitted that the balance area of 133.33 acres allotted to WIPL was cancelled by UPSIDC/defendant vide letter No. 1055 dated 23.3.2001.

It is submitted that a recovery certificate was issued against WIPL/defendant vide HO Letter of UPSIDC/defendant bearing No. 359/SIDC dated 25.7.2002 for recovery of Rs. 3,26,31,166.30.

It is further submitted as the WIPL defendant had violated the terms and conditions of the lease deeds and licence agreements entered into with UPSIDC/defendant for the lease of the above said lands, a non-utilization notice was issued against them vide office letter No. 2702-04/SIDC/ROG dated 14.7.2002.

It is further submitted that a letter sent to Deputy General Manager, (PM) of UPSIDC in reference to the representation of M/s. WIPL/defendant for non-utilization notice dated 14.7.2002 was rejected by UPSIDC vide their letter dated No. 690/SIDC/PM dated 10.10.2002.

It is submitted that the allotment of land measuring 266.66 acres to WIPL/defendant was cancelled vide letter dated 11.11.2002 by UPSIDC/defendant and the possession of the same was taken over by UPSIDC/defendant out of which land measuring 133.33 acres in Phase-3 was developed for IIDC and the plots were allotted.

It is pertinent to mention here that at the time institution of the present O.A. before this Hon'ble Court, UPSIDC/defendant have not made party deliberately by the Oriental Bank of Commerce i.e. applicant as well as the Global Trust Bank with an intention to have a favourable order from this Hon'ble Court without disclosing the true facts of the case.....................

PRELIMINARY OBJECTIONS:

That the present O.A. filed by the Bank before this Hon'ble Court is liable to be dismissed in favour of UPSIDC as they have concealed material facts from this Hon'ble Court. It is submitted that the Bank has concealed from this Hon'ble Court that the lease of the land in question has been cancelled by UPSIDC in the year 2002 much before the institution of the present case. It is submitted that the Bank is also guilty of the fact that it has not brought before the Court the fact that the possession of the land in question was also taken over by UPSIDC. It is pertinent to mention here that on misrepresentation of the Bank, this Hon'ble Court was pleased to grant an interim relief to the Bank vis-à-vis possession of the land.

It is submitted that since the lease has been cancelled by UPSIDC and the possession of the land in question has been taken over by the UPSIDC/defendant, especially in the facts and circumstances that no NOC has been given to WPIL/defendant to mortgage the land in question with any financial institution or Bank, any mortgage of the land in question with any institution or Bank is therefore illegal and not enforceable against the UPSIDC/defendant. It is further submitted that for any misrepresentation only WIPL/defendant is liable to make good the losses/recovery incurred by the Bank."

The relevant paras of the other O.A. No. 37/2004, in which respondent No. 2 herein was sued as the principal borrower and respondent No. 3 herein as the guarantor, may also be noticed and the same are reproduced below:

"(III) That on the request of the defendant No. 1 (respondent No. 2 in this appeal M/s. Wise Industrial Park Limited) the applicant's Bank, Bandra West Mumbai Branch sanctioned a term loan in the name of defendant No. 1 on the terms and conditions and securities contained in the sanction letter dated 3.5.99 in the sum of Rs. 150 lacs for the purpose of purchase and development of land and building infrastructure thereon on the land to be taken from UPSIDC (Trench II) and to convert it into Agro-Industrial Park on the securities inter alia equitable mortgage of hundred acres of lease-hold land out of the 133.33 acres IInd Trench of Land acquired from UPSIDC by the Company, Corporate guarantee of defendant No. 2 (impleaded in this appeal as respondent No. 3 M/s. Wise Infrastructure Limited)....................

(IV) That after executing the necessary loan and other documents in favour of the applicant Bank the defendant No. 1 availed the above mentioned term loan on 3.4.99

(VI) That the defendant No. 1 has also created equitable mortgage by deposit of title deed of its land admeasuring 100 acres out of total land admeasuring 133.33 acres in Industrial Area at Mussorie Gulawati Road in Village Dhera, Amarpur, Lodha, Raoli, Tehsil Hapur, Distt Ghaziabad to secure the repayment of the above term loan together with interest and other charges thereon. The details and particulars of the said mortgage is as under:

(It is pertinent to mention that the above mortgage was also continued for the credit facilities sanctioned and availed from time-to-time by defendant No. 2 herein.)

(IX) That subsequently the defendant No. 1 has also extended the charge on another lease hold plot of land admeasuring 133.33 acres, in Industrial Area of Masuri Gulawati Road in Villages Dehra, Amarpur, Lodha, Raoli, Tehsil Hapur, Distt. Ghaziabad by letter of continuity. However, out of the above land a part of the land was sold and now the applicant Bank is having a charge over an area admeasuring 88.33 acres.

(XI) That after the availment of the above term loan the defendant has failed to make the payment of instalments on the due dates. Even the defendant has also failed to make the payment of the interest as and when debited in the account as per agreement, and the account of the defendant has become dormant except debit entries of interest and other charges. Despite the repeated requests/reminders of the applicant Bank and despite assurances, the defendants failed and neglected to clear the liability/payment of instalments. However, the liability in the account was specifically acknowledged by the defendant No. 1 on 10.4.2001 at Rs. 1,75,07,458/- (Rupees one crore seventy five lacs seven thousand four hundred fifty eight only) inclusive of interest upto 31.3.2001 together with future interest and other charges. Even after acknowledgement of the liability, the defendant No. 1 has failed and neglected to clear the liability outstanding in the account.

The defence of UPSIDC and borrower/mortgagor Companies in O.A. No. 37/2004 was same as in O.A Mo. 38/2004 and so I am not reproducing any paras from their written statements in O.A. No. 37/2004.

It appears from the records of DRT that respondents 2 and 3 herein, had not responded to the defence pleas taken UPSIDC in its written statements in both the cases. As noticed already it was in fact their own case in their joint written statement that without the prior permission of UPSIDC lands in dispute could not be mortgaged in favour of erstwhile GTB and two ex employees of these two Companies had colluded with Bank officials to show that lands had been mortgaged to secure huge amounts of loans from GTB. As far as the Bank is concerned in its replication to the written statement of UPSIDC it claimed that UPSIDC had no right under the lease deeds to cancel the lease in favour of respondent No. 2 so long as there was any mortgage debt outstanding against the leased lands and since respondents 2 and 3 owed crores of rupees to the Bank which the lands in dispute were duly mortgaged with the Bank UPSIDC could not cancel the leases as was being claimed by it.

The learned Presiding Officer of the DRT, Shri K. Asokan, allowed the Bank's O.As. vide separate judgments passed on 12.2.2014. The learned Presiding Officer had after noticing the detailed facts of the case leading to the institution of the OA 38/2004 and the evidence adduced by the parties and the submissions advanced by the Counsel for the parties came to the following conclusion in O.A. No. 38/2004, as far as the case of the appellant UPSIDC as well as respondents 2 and 3 herein concerning the mortgaged land is concerned:

"7. The points for determination are:

(i) Whether the application is maintainable?

(ii) Whether D1 had not availed the credit facilities from the applicant on executing valid documents?

(iii) Whether D2 had not stood as guarantor?

(iv) Whether it is a valid mortgage of the property in favour of the applicant Bank?

(v) Whether applicant is not entitled to recover amount as claimed from the defendants?

(vi) Relief."

Point Nos. (iii and iv) D2 (respondent No. 2 in the present appeal) has denied guarantee to the credit facilities. D2 has also denied creation of equitable mortgage in respect of the property. The applicant would say that D2 created equitable mortgage in respect of the property admeasuring 133.33 acres in Industrial Area at Masuri Gulawati Road in Village Dehra Amarpur, Lodha, Raoli Sheikhpur, Khichra Pargang Dasna, Tehsil Hapur, District Ghaziabad. The credit facilities were availed for the purpose of development of land procured on lease by Wise Industrial Park Ltd. from UPSIDC for development of Agro Industrial Park on the security of land leased by UPSIDC. Whenever the credit facility was enhanced/new facility was guaranteed D2 had filed the undertaking to continue the equitable mortgage. AW2/12 is an undertaking letter AW2/13 is the continuity letter dated 15.10.1998. The lease deed dated 11.3.1998 was deposited for creating equitable mortgage (AW2/14), The original was produced before the Registrar and it was returned and the copy of the same has been marked. Thereafter, D2 had executed and delivered A W2/24, AW2/25, AW2/26 and AW2/27, AW2/37, AW2/38, AW2/44, AW2/45, AW2/52, AW2/58, AW2/66, AW2/71. D2 had executed a letter of continuity with regard to the land admeasuring 188.33 acres to trenches I and II situated at Wise Industrial Parks, Industrial Area, Masuri Gulawati Road, Dehra Amarpur, Lodha Raoli Sheikhpur, Kichra, Pargana Dasna. Tehsil Hapur, Distt. Ghaziabad on 31.8.2001. In order to secure Rs. 2,300 lacs sanctioned and availed by D1 (respondent No. 3 in the present appeal and Rs. 150 lacs availed by D2 (respondent No. 2 in this appeal). The continuity letter is AW2/72. Whenever the charge was renewed, the charge was recorded before the Registrar of Company and the applicant has also produced and proved the documents to record the charge over the immovable property.

The main contention taken by defendants 1 and 2 to challenge the mortgage is that the mortgage is not created by registered documents, secondly, the mortgage is not recorded on proper stamp paper, thereby the mortgage proposed to be set up by the Bank through Bank's witness cannot be admitted in evidence and thirdly, UPSIDC the lessor did not grant permission for mortgage of lease hold and thereby even if there is a mortgage the same is not valid.

D3 is the lessor UPSIDC has stated that the Plot measuring 400 acres was allotted to M/s. Wise Industrial Park Limited vide letter dated 24.5.1995 and a licence agreement was executed on 24.5.1995. A supplementary licence agreement D-3W1/1 was executed on 9.2.1998. UPSIDC had leased the land through conveyance deed dated 23.5.1994 for the purpose of Industrial Development. D3 would say that the lease deed stipulated that without the previous consent of the lessor no mortgage could be created D-3 W1/2 is the copy of the lease deed produced by D3. D3 would say that the defendant has not sought any permission/no objection from UPSIDC to mortgage the lease land, therefore, the mortgage is not binding upon UPSIDC. D3 had executed the lease deed in favour of WIPL for an area of 133.33 acres and possession was handed over on 26.3.1998. Another lease deed for an area of 133.33 acres was executed on 23.3.1999 and possession was delivered on 6.3.2000. The balance area of 133.33 acres allotted to defendant was cancelled by UPSIDC. Thus, the contention of UPSIDC is that in the absence of permission from the lessor-D3, the alleged mortgage created by D2 in favour of the applicant is not valid. D3 has also stated that as on 22.12.2001 Dl was liable to pay the sum of Rs. 3,23,72,326/- to UPSIDC as per D-3W1/11 statement. In these circumstances, D3 says that the applicant Bank cannot lay any claim on the property.

Now, I have to see whether the mortgage created without permission and consent of the lessor is valid. In order to answer this issue it is necessary to consider the lease deed. D-3W1/2 is the copy of the lease deed produced by D3. Clause 3(J) is relevant. Clause 3(J) says as follows:

"That the Lessee will not without the previous consent of the Lessor transfer, sublet, relinquish, mortgage or assign its interest in the agro industrial park of the buildings standing thereon or both as a whole except by way of sub-lease/sub-licence to entrepreneurs for the sole purpose of setting up an agro industrial units and every such transfer, assignment, relinquishment, mortgage or sub-letting or both shall be subject to and the transferees or assigns shall be bound by all the covenants and conditions herein contained and be answerable to the Lessor in all respects therefore and the Lessee will in no case assign, relinquish, mortgage, sublet, transfer or part with the possession of any portion less than the whole of the demised premises or cause sub-division thereof by metes and bounds or otherwise."

This clause says that the lessee will not without previous consent of the lessor mortgage its interest in the property. It is relying upon this clause UPSIDC has contended that in the absence of such consent from the lessor the mortgage is not valid. But in the documents produced as D-3W1/2 page 9 of the lease deed is not there and the next of that page No. 10 is there. I hope that this was not intentionally made by the party or the Counsel. Let us see the lease deed produced by the applicant Bank. It is marked as AW2/14. After page 8 at page 9 there are few provisos to Clauses 3(J). It is these provisos that have been conveniently taken away, by D3 when they produced the copy of the lease deed and marked it. The second proviso to Clause 3(J) reads as under:

"Provided the prior permission of aforesaid shall not be necessary in the event of mortgage or mortgages by the Lessee/sub-lessee without possession in favour of the State Government or of the Industrial Finance Corporation of India or the U.P. Financial Corporation or the Industrial Development of India or the Life Insurance Corporation of India or Industrial Credit and Investment Corporation of India or Pradeshiya Industrial and Investment Corporation of Uttar Pradesh or Industrial Reconstruction Bank of India or any Scheduled Bank (including the State Bank of India and its subsidiaries). Unit Trust of India or General Insurance Company and its subsidiaries viz. National Insurance Company and trustees for debenture holders to secure loan or loans advanced by any of them for setting up on demised premises the industry herein before mentioned if the Lessee either furnishes to Lessor and undertaking from the financial institution as aforesaid that entire outstanding amount of premium and interest thereon shall be directly paid by such financial institution to the Lessor as soon as mortgage is created or pays the entire amount aforesaid from his own resources."

This proviso makes it clear that prior permission for creation of mortgage shall not be necessary if the mortgage is without possession in favour of any schedule Bank or other financial institution mentioned therein. The creditor is a schedule Bank, therefore, the second proviso applies and prior permission for creation of mortgage without possession was not necessary at all. The next proviso further says that it any time the finance body or bodies mentioned in the second proviso decides to take over, sell, lease or assign the mortgaged assets in exercise of any rights vesting in it by nature of the deed or deeds executed in its favour by the lessee at the time of taking the loan the sale, lease or assignment will be subject to the mutual consultation with lessor and the financing body. So, in case of sale of the mortgage property the lease deed says that consultation of the lessor is required. Thus, the lease deed executed by UPSIDC does not warrant prior permission for mortgage in favour of a schedule Bank and the applicant being a schedule Bank prior permission for mortgage was not required at all. I, therefore, find that there is a valid mortgage in respect of the property. The fact that D3 has taken possession of the property is not very material because by way of mortgage the applicant was not in possession of the properly and in case of an equitable mortgage the transfer of possession was not required and necessary at all. Thus, the contentions raised by the defendants are devoid of merit.

Defendants 1 and 2 have raised a contention that the mortgage is not an proper stamp paper that the mortgage is not created by registered document and thereby there is no valid mortgage. The applicant has stated that by deposit of title deed D2 had created equitable mortgage in respect of the property. When equitable mortgage is created by deposit of title deed it need not be reduced to writing and no document is required to be prepared. So also creation of equitable mortgage is not by way of any registered document and registration is also not mandatory or required at all. It is the intention of the parties that is relevant and material. The borrower had availed credit facilities from the applicant. Defendant No. 2 was the guarantor and defendant No. 2 had offered as collateral security the lease hold property obtained from D3. The original lease deed was deposited with the intention to create mortgage to secure the debt availed Thus, there is a valid mortgage in respect of the property in favour of the applicant created by D2."

The relevant observations of the DRT in its judgment in O.A. No. 37/2004 were also on similar lines as in its judgment dated 12.2.2014 in O.A. No. 38/2004 but the same are also being re-produced below:

"7. The points for determination are:

(i) Whether the application is maintainable?

(ii) Whether D1 had not availed the credit facilities from the applicant on executing valid documents?

(iii) Whether D2 had not stood as guarantor?

(iv) Whether it is a valid mortgage of the property in favour of the applicant Bank?

(v) Whether applicant is not entitled to recover amount as claimed from the defendants?

(vi) Relief

Point Nos. (iii & iv)

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D1 (respondent No. 2 in these appeals) has also denied creation of equitable mortgage in respect of the property. The applicant would say that D2 created equitable mortgage in respect of the property admeasuring 100 acres out of land 133.33 acres in Industrial Area at Masuri Gulawati Road in Village Dehra Amarpur, Lodha, Raoli, Sheikhpor, Khichra Pargana Dasna, Tehsil Hapur, Distt. Ghaziabad The copy of the Board Resolution dated 8.12.1997 is AW2/7. The memorandum of entry dated 31.3.1999 is AW2/8, The copies of the title deeds are AW2/9. The affidavit-cum-declaration D1 dated 3.4.1999 is AW2/10. The charge was recorded with the Registrar of Companies and the extract is AW2/11. Subsequently D1 has extended the charge on another lease hold plot of land admeasuring 133.33 acres in Industrial Area of Masuri Gulawati Road in Village Dehra, Amarpur, Lodha, Raoli. Tehsil Hapur, Distt. Ghaziabad. Out of the above land a part of the land was sold and now the applicant is having a charge over an area admeasuring 88.33 acres AW2/11(a). The credit facilities were availed for the propose of development of land procured of lease by Wise Industrial Park Ltd. from UPSIDC for development of Agro Industrial Park on the security of land leased by UPSIDC.

The main contention taken by defendants 1 and 2 to challenge the mortgage is that the mortgage is not recorded on proper stamp paper, thereby the mortgage proposed to be set up by the Bank through Bank's witness cannot be admitted in evidence and thirdly, UPSIDC the lessor did not grant permission for mortgage of lease hold and thereby even if there is a mortgage the same is not valid.

D3 is the lessor. UPSIDC has stated that the Plot measuring 400 acres was allotted to M/s. Wise Industrial Park Limited vide letter dated 24.5.1995 and a licence agreement was executed on 24.5.1995. A supplementary licence agreement D-3W1/1 was executed on 9.2.1998 UPSIDC had leased the land through conveyance deed dated 23.5.1994 for the purpose of Industrial Development. D3 would say that the lease deed stipulated that without the previous consent of the lessor no mortgage could be created. D-3W1/2 is the copy of the lease deed produced by D3. D3 would say that the defendant has not sought any permission/no objection from UPSIDC to mortgage the lease land, therefore, the mortgage is not binding upon UPSIDC D3 had executed the lease deed in favour of WIPL for an area of 133.33 acres and possession was handed over on 26.3.1998. Another lease deed for an area of 133.33 acres was executed on 23.3.1999 and possession was delivered on 6.3.2000. The balance area of 133.33 acres allotted to defendant was cancelled by UPSIDC. Thus, the contention of UPSIDC is that in the absence of permission from the lessor-D3, the alleged mortgage created by D1 in favour of the applicant is not valid. D3 has also stated that as on 22.12.2001 D1 was liable to pay the sum of Rs. 3,23,72,326/- to UPSIDC as per D-3W1/6 statement. In these circumstances, D3 says that the applicant Bank cannot lay any claim on the property.

Now, I have to see whether the mortgage created without permission and consent of the lessor is valid. In order to answer this issue it is necessary to consider the lease deed. D-3W1/2 is the copy of the lease deed produced by D3. Clause 3(J) is relevant Clause 3(J) says as follows:

"That the Lessee will not without the previous consent of the Lessor transfer, sublet, relinquish, mortgage or assign its interest in the agro industrial park of the buildings standing thereon or both as a whole except by way of sublease/sub-licence to entrepreneurs for the sole purpose of setting up an agro industrial units and every such transfer, assignment, relinquishment mortgage or subletting or both shall be subject to and the transferees or assignees shall be bound by all the covenants and conditions herein contained and be answerable to the Lessor in all respects therefore and the lessee will in no case assign, relinquish, mortgage, sublet transfer or part with the possession of any portion less than the whole of the demised premises or cause sub-division thereof by metes and bounds or otherwise."

This clause says that the lessee will not without previous consent of the lessor mortgage its interest in the property. It is relying upon this clause UPSIDC has contended that in the absence of such consent from the lessor the mortgage is not valid. The Clause 3(J) has four provisos. The second proviso to Clause 3(J) reads as under:

"Provided the prior permission of aforesaid shall not be necessary in the event of mortgage or mortgages by the Lessee/sub-lessee without possession in favour of the State Government or of the Industrial Finance Corporation of India or the, U.P. Financial Corporation or the Industrial Development of India or the Life Insurance Corporation of India or Industrial Credit and Investment Corporation of India or Pradeshiya Industrial and Investment Corporation of Uttar Pradesh or Industrial Reconstruction Bank of India or any Scheduled Bank (including the State Bank of India and its subsidiaries). Unit Trust of India or General Insurance Company and its subsidiaries viz. National Insurance Company and trustees for debenture holders to secure loan or loans advanced by any of them for setting up on demised premises the industry herein before mentioned if the Lessee either furnishes to Lessor and undertaking from the financial institution as aforesaid that entire outstanding amount of premium and interest thereon shall be directly paid by such financial institution to the Lessor as soon as mortgage is created or pays the entire amount aforesaid from his own resources."

This proviso makes it clear that prior permission for creation of mortgage shall not be necessary if the mortgage is without possession in favour of any schedule Bank or other financial institution mentioned therein. The creditor is a schedule Bank, therefore, the second proviso applies and prior permission for creation of mortgage without possession was not necessary at all. The next proviso further says that if any time the finance body or bodies mentioned in the second proviso decides to take over, sell, lease or assign the mortgaged assets in exercise of any rights vesting in it by nature of the deed or deeds executed in its favour by the lessee at the time of taking the loan the sale, lease or assignment will be subject to the mutual consultation with lessor and the financing body. So, in case of the sale of the mortgage property the lease deed says the consultation of the lessor is required. Thus, the lease deed executed by UPSIDC does not warrant prior permission for mortgage in favour of a schedule Bank and the applicant being a schedule Bank prior permission for mortgage was not required at all. I, therefore, find that there is a valid mortgage in respect of the property. The fact that D3 has taken possession of the property is not very material because by way of mortgage the applicant was not in possession of the property and in case of an equitable mortgage the transfer of possession was not required and necessary at all. Thus, the contentions raised by the defendants are devoid of merit.

Defendants 1 and 2 have raised a contention that the mortgage is not on proper stamp paper, that the mortgage is not created by registered document and thereby there is no valid mortgage. The applicant has stated that by deposit of title deed D1 had created equitable mortgage in respect of the property. When equitable mortgage is created by deposit of title deed it need not be reduced to writing and no document is required to be prepared. So also creation of equitable mortgage is not by way of any registered document and registration is also not mandatory or required at all. It is the intention of the parties that is relevant. The borrower had availed credit facilities from the applicant, D1 is the principal borrower and defendant No. 1 had offered as collateral security the lease hold property obtained from D3. The original lease deed was deposited with the intention to create mortgage to secure the debt availed. Thus, there is a valid mortgage in respect of the property in favour of the applicant created by D1."

Though the borrower Company as well as the guarantor/mortgagor Company had very seriously challenged the creation of any mortgage of the leasehold land of UPSIDC and not only that they had also claimed that the entire loan transactions relied upon by the Bank were a result of fraud and manipulations committed by their two ex employees but they had lost before the DRT and feeling aggrieved appeal was also filed by them against the impugned order dated 12.2.2014 of the DRT but because of non compliance of the condition of pre-deposit of 75% of the amount of debt determined by the DRT payable by them the appeal was not entertained These Companies, however, accepted the rejection of their appeal and did not carry the matter any further thereby allowing the DRT's order to attain finality qua them. These Companies appear to be least bothered about the passing of the recovery certificate against them by the DRT for a huge amount of over fifty crores with heavy interest thereupon from 8.4.2004 onwards and the reason appears to be that the leasehold land of UPSIDC has been auctioned for forty six lacs odd in favour of respondent No. 4.

UPSIDC alone is feeling aggrieved by the rejection of its case before the DRT that there was no valid mortgage in respect of the mortgaged land owned by it and created in favour of the GTB because its prior permission/NOC was never obtained by the lessee Company (respondent No. 2 herein) before mortgaging its leasehold rights in the mortgaged land. Accordingly it has continued its legal fight to save its land by filing the present appeal in which it has challenged the finding of the DRT that no permission was required to be taken from it by the mortgagor Company (respondent No. 2 herein) before creating equitable mortgage in favour of the Bank by deposit of lease deeds executed in its favour by UPSIDC.

As far as the auction purchaser is concerned it has shown over confidence that come what may nothing adverse to its interest can happen in these proceedings and its learned Senior Counsel Mr. Rajeeve Mehra had submitted very forcefully during the course of arguments, relying upon one judgment dated 8th January, 2014 rendered in Civil Appeal No. 161 of 2014, Sadashiv Prasad Singh v. Harender Singh & Ors., that even if the appellant UPSIDC succeeds in this appeal on any ground the right which the auction purchaser has already acquired in the mortgaged land by way of issuance of sale certificate in its favour by the Recovery Officer, challenge to which made by UPSIDC already stands rejected by the Recovery Officer, cannot be defeated. According to Mr. Mehra this is an open and shut case for UPSIDC and all that it has now to do is to deal with the transfer of leasehold rights in the land purchased by the auction purchaser in its favour for which purpose UPSIDC has already been approached by the auction purchaser. When it was put to Mr. Mehra that the sale proclamation had not clarified that only leasehold rights in the mortgaged lands were being auctioned Mr. Mehra made it clear that the auction was of leasehold rights only in the mortgaged land and not of absolute ownership nor was the auction purchaser intending to claim absolute ownership in the land purchased by it in Court auction and that is why UPSIDC had been approached by the auction purchaser to effect transfer of lease hold rights only in the leasehold lands in its favour by way of execution of fresh lease deed etc.

I have heard the Counsel for the parties and also gone through the voluminous record of the DRT as also of the Recovery Officer which had been requisitioned for deciding these appeals.

From the submissions made by the learned Counsel for the parties during the course of hearing of the appeal and the perusal of the record of the DRT certain undisputed facts emerged which may be noticed first of all.

The State of Uttar Pradesh had acquired some land in Industrial Area, Masuri Gulawati Road, Dehra Amarpur, Lodha Raoli Sheikhpur, Kichra, Pargana Dasna, Tehsil Hapur, Distt. Ghaziabad sometime in the early nineties for the establishment of Agro Industrial Park and the job of establishment of that Park was entrusted to UPSIDC by the State Government to whom the acquired land msg. 400 acres was handed over. The UPSIDC in turn entrusted the job to one Company by the name of M/s. Western India Industrial Parks Limited vide Licence Deed executed in 1995. Under the terms of the Licence Deed the licencee was to fulfil certain terms and conditions regarding payment of premium etc. before the handing over of possession of the land to it on lease, The licence however appears to have not fulfilled its obligations under the licence deed and that delayed execution of formal lease deed in its favour by UPSIDC and handing over of possession of the land which was to be leased to it. Formal lease deed was, however, executed on 11.3.1998 in respect of land msg. 133.33 acres only. That lease was for a period of ninety nine years and the terms and conditions of grant of lease including the amount of premium etc. were incorporated therein. In March 1999 another lease deed was then executed in favour of M/s. Wise India Industrial Parks Limited, respondent No. 2 herein, for a piece of land msg. 133.33 acres for making Agro Industrial Units and possession whereof, as claimed by UPSIDC and not disputed by the respondents, was handed over to the said lessee Company only on 6.3.2000. That lease was also for a period of ninety years. It is, however, not clear from the records as to how this second lease came to be executed in favour of respondent No. 2 M/s. Wise Industrial Parks Ltd. and not in the name of the original licence M/s. Western India Industrial Parks Ltd. in whose favour the lease in respect of entire area of 400 acres was to be executed by UPSIDC as per the licence deed executed in 1995 nor anything in that regard was said at the time of hearing by the Counsel for the UPSIDC as well as by the Counsel for the respondents. So, I assume that after the execution of the first lease on 11.3.1998 the name of the licence Company M/s. Western India Industrial Parks Ltd. must have been changed to M/s. Wise Industrial Parks Ltd., respondent No. 2 herein and that is why even UPSIDC had executed the second lease in favour of respondent No. 2 and thereafter throughout it has been recognising this Company only as lessee of 266.66 acres of its land.

Remaining land out of total land msg. 400 acres which was to be leased to the licencee Company was, however, not leased and its allotment was cancelled on 23.3.2001 and reason for that also is not forthcoming but it can be presumed that must have been done by UPSIDC since licencee/lessee Company was finding it difficult to fulfil its obligations under the licence deed/lease deeds already executed in its favour and which had already resulted in lot of delay in handing over of possession of 133.33 acres of land under the second lease to the licencee and even thereafter no development appears to have commenced resulting into cancellation of the lease deeds and taking over of possession of the leased land by UPSIDC.

Sometime in the year 1997 GTB had granted loan facility of Rs. 450 lakh to respondent No. 3 herein (which earlier was known as Western India Services and Estates Ltd.) and the purpose of that loan facility was 'Procurement of building material, construction activity, payment to creditors etc' That loan was secured by the said borrower Company be creating second charge over some property in Calicut over which HUDCO had already a charge for having extended some financial facility to it and allegedly HUDCO had agreed in writing for the creation of second charge over the same property in favour of GTB and GTB also had agreed to extend loan to respondent No. 3 on the security of second charge of the property in Calicut

It appears from the records that sometime in early 1998 the GTB had also granted loan of four crores of rupees to Western India Industrial Parks Ltd. (respondent No. 2 herein) on the security of land measuring 133.33 acres which had been leased out to it by UPSIDC vide lease deed dated 11.3.1998, in first phase in terms of the licence deed already executed in its favour in 1995 and respondent No. 2 had deposited with GTB lease deed dated 11.3.1998 on 21.5.1998 to create equitable mortgage. As per the Bank's own case that loan account was closed though when it was closed had not been pleaded in the O.A. but the lease deed dated 11.3.1998 was not taken back by the mortgagor Company.

Then in October, 1998 GTB granted another loan facility of Rs. 4 crores to M/s. Wise Infrastructure Limited and as a security for the repayment of that loan amount respondent No. 2 herein had re-deposited with GTB the lease deed dated 11.3.1998 for creating equitable mortgage after taking its symbolic possession only to secure the additional loan facility which was granted to respondent No. 3. From that date the respondent No. 2 herein became the mortgagor of 133.33 acres of that land to secure various loan facilities showered upon respondent No. 3 herein M/s. Wise Infrastructure Ltd. by GTB during the period from 1998 till 2001 as the respondent No. 2 had allegedly been extending its mortgage created in October, 1998 to all subsequent credit facilities also granted to respondent No. 3 by GTB.

It may be noticed here that on 30.3.1999 UPSIDC had granted lease of additional piece of its land admeasuring 133.33 acres to respondent No. 2/mortgagor vide lease deed dated 30.3.1999 registered on 17th April, 1999 for a period of ninety nine years, though possession of that leased land war actually handed over to Lessee Company only in the year 2000, and that lease deed was also allegedly deposited with GTB before getting of possession of the leased land in the year 1999 itself to create equitable mortgage of additional land msg. 100 acres out of the additional leased land of 133.33 acres covered under this second lease deed to secure the re-payment of various loans granted by GTB to respondent No. 3/borrower thereby making the mortgage in respect of total area of 233.33 acres of land. It appears from the records that some area out of the two pieces of land allegedly mortgaged came to be sold. However, it is not clear from the records as to why and how that small piece of land was sold but it is the common case of the borrower/mortgagor as well as the Bank that the Bank's charge remained after that sale only in respect of 188.33 acres of land and that much land only has been sold in auction to respondent No. 4 in execution proceedings initiated pursuant to the recovery certificate issued by the DRT on 12.4.2014 in O.A. No. 38/2004 in which sale of mortgaged land of UPSIDC had been permitted. It may also be clarified here that the land msg. 188.33 acres has been sold in the year 2015 not only in execution of the recovery certificate issued in O.A. No. 38/2004 but also in execution of the recovery certificate issued by the DRT on 12.2.2014 in O.A. No. 37/2004 which was in respect of the loan facility of Rs. 1.50 crores granted to respondent No. 2 herein in 1999 allegedly on the security of the mortgage of land msg. 100 acres only out of the land of 133.33 acres leased to it by UPSIDC vide second lease deed dated 30.3.1999 even though possession of land under that lease was delivered to it in the year 2000 as per the case of UPSIDC and not controverted by any of the respondents. In that O.A. recovery certificate was issued for a sum of Rs. 2,79,29,317/- plus interest etc. UPSIDC has filed appeal against the recovery certificate issued in that case also (being Appeal No. 205/2015) allowing sale of the mortgaged land of UPSIDC which was the subject matter of that O.A. also. It was also the case of the Bank that respondent No. 2 had extended the charge in respect of land measuring 133.33 acres leased to it earlier vide lease deed dated 11.3.1998 to the loan granted to it in 1999 also thereby making charge over total 188.33 acres of land for the loan involved in O.A. 37/2004 also and that is how 188.33 acres of land came to be sold in execution of the recovery certificates issued in both the O.As.

The learned Counsel for the appellant UPSIDC submitted, and his submissions were confined only to the aspect of its challenge to the creation of mortgage of the lands belonging to UPSIDC in favour of GTB by the respondent No. 2 herein, that the DRT has erred in giving a wrong interpretation to Clause 3(j) and its second proviso resulting in grave injustice to the appellant and in the facts and circumstances of this it is clear that no mortgage could be created in respect of the mortgaged land without prior permission/NOC of UPSIDC. It was also contended that the Recovery Officer had shown undue haste in putting the mortgaged land to auction during the pendency of these appeals before this Tribunal against the judgments dated 12.2.2014 of the DRT. As far as the amount for which the DRT has issued recovery certificate against respondents 2 and 3 herein is concerned, Counsel for UPSIDC submitted that UPSIDC has no grievance against that part of the impugned judgment of DRT and respondents have already accepted that conclusion and the Recovery Officer can proceed to recover the decreed amount by attaching any properties of the certificate debtors but the mortgaged land in question cannot be touched at all and even if on paper the same has been sold by the Recovery Officer in favour of the respondent No. 4 herein but validity of that sale will be dependent upon the verdict which this Appellate Tribunal may give in these appeals regarding the validity of the mortgage created by respondent No. 2 and the ship of the auction purchaser has to sail or sink along with the ships of the Bank and its borrowers.

On the other hand, the attack on the merits of this appeal was spearheaded by Mr. Rajeeve Mehra, learned Senior Counsel for the auction purchaser whose submissions, in fact, were more for the benefit of the borrower/mortgagor and the Bank as the fate of the auction purchaser, who has already spent forty six crores in acquiring leasehold rights in the mortgaged land, is to a large extent dependent upon the result of the fight between the appellant as the superior lessor of the mortgaged land, the Bank as the lender of crores of rupees and mortgagee and the borrower/mortgagor.

Mr. B.B. Sawhney, learned Counsel for the Bank mainly adopted the submissions of Mr. Rajeeve Mehra while submitting that there was no merit in this appeal and there was no infirmity in the impugned judgment of the DRT. However, when I asked him as to what would be the position in law of the Bank in case the appeal of UPSIDC were to be allowed Mr. Mehra immediately intervened to answer that query also and submitted that firstly there was no requirement of taking of prior permission of UPSIDC and DRT had correctly held so and further that in any case in the facts and circumstances of this case this Tribunal could balance the equities between the appellant, the Bank, the borrower and the mortgagor by passing appropriate directions if at all it is held that the mortgage was invalid for want of prior permission of UPSIDC. As already noticed, Mr. Mehra had already contended while arguing for his client that even if this Tribunal were to hold in favour of UPSIDC the auction purchaser's rights accrued already with the confirmation of the sale in its favour by the Recovery Officer, before whom also UPSIDC had lost, will in any case be not affected at all and it cannot be asked now to surrender the possession of the land which has also been handed over to it by the Recovery Officer.

It was also submitted by Mr. Mehra that the main defence of UPSIDC before the DRT in its written statement was that no permission was obtained from it by its lessee before creating equitable of the leased lands and to support that plea attention of the DRT was drawn on its behalf to Clause 3(j) of the lease deed, which has already been extracted above, wherein it was no doubt provided that prior permission of UPSIDC was required to be taken by the lessee for creating mortgage of the leased lands but the DRT had taken note of the fact that the copy of the lease deed placed on record by UPSIDC did not have page No. 9 and the copy of that lease deed which was placed on record by the defendant Bank showed that page No. 9 of the lease deed had some provisos to Clause 3(j) and second proviso was reproduced by DRT in the impugned judgments. Mr. Mehra submitted that the said second proviso to Clause 3(j) clearly carves out an exception to the requirement of prior permission of UPSIDC by providing that in case mortgage was to be created by the lessee in favour of any scheduled Bank without handing over physical possession of the land to the Bank no prior permission of UPSIDC was required. Mr. Mehra then submitted that in this appeal UPSIDC had not challenged the observation of the DRT that the copy of the lease deed exhibited by its witness did not have page No. 9 and there was an exception to the requirement of prior permission of UPSIDC as provided under Clause 3(j) in second proviso to that Clause and when he asked the Counsel for the appellant UPSIDC whether that position was correct or not, the learned Counsel for UPSIDC meekly agreed with the submission of Mr. Mehra instead of clarifying that even page No. 9 was also there in one of the two lease deeds placed on record by UPSIDC and which page No. 9 I have noticed and the learned Presiding Officer would also have noticed if he had gone through the entire record minutely. The Counsel for UPSIDC also submitted that there was no attempt on the part of UPSIDC to mislead the DRT as was the impression which appears to have entered into the mind of the Presiding Officer and which impression appears to have weighed heavily with the Presiding Officer while rejecting the defence of UPSIDC.

The Counsel for the respondents 1 and 4, however, did not argue that even if it is concluded by this Tribunal that prior permission for the creation of equitable mortgage of the leasehold land belonging to UPSIDC was required to be taken from UPSIDC that decision of this Tribunal would still not invalidate the mortgages in question. They kept on maintaining that no prior permission of UPSIDC was required for the mortgage accepted by GTB as security for the repayment of crores of rupees lent to the two borrower companies, impleaded as respondent No. 2 in appeal No. 205/2014 and respondent No. 3 in appeal No. 206/2014 and Mr. Mehra kept on reiterating his stand that auction purchaser in no event can get affected even if the mortgage is now held to be invalid for want of prior permission of UPSIDC and also because of UPSIDC having given up its fight before the Recovery Officer who has already issued sale certificate in favour of the auction purchaser.

As far as the borrowers/mortgagor are concerned their main Counsel never turned up on any of the dates of hearing and simply deputed some proxy Counsel to attend the hearings on his behalf and so no arguments were advanced on their behalf. As noticed already they were supporting the appellant that there was no mortgage at all of its lands in favour of the GTB and so they must be simply waiting for whatever decision this Tribunal may take on the mortgage part of the case and as far as the recovery certificates issued against them are concerned they must be sitting cool without bothering for the outcome of this legal battle after having abandoned their challenge to the judgments of the DRT since public lands, and not theirs anymore because of the leases having been cancelled by UPSIDC much before the filing of the OAs by the Bank, have already been sold in auction for the discharge of their liability towards the Bank and the Bank does not seem to be any more interested in proceeding against their any other assets for the recovery of balance amount under the two recovery certificates.

I now proceed to give my verdict on the issue of mortgage of land belonging to UPSIDC without its prior permission,

A perusal of the paras extracted already from the judgment the DRT shows that the learned Presiding Officer had just in one sentence rejected the plea of UPSIDC that its prior permission for the creation mortgage of its land leased out to respondent No. 2 herein was required to be taken for the creation of a valid mortgage of its land primarily relying upon that part of the second proviso of Clause 3(j) of the lease deed where it is provided that no prior permission of UPSIDC is required for creation of mortgage when leasehold land is to be mortgaged in favour of a scheduled Bank without delivery of possession of the land proposed to be mortgaged. One of the grounds of appeal taken by the appellant UPSIDC is that the learned Presiding Officer was pre-determined to accept the case of the Bank that there was a valid mortgage in its favour of the land belonging to UPSIDC. After minutely and carefully reading the impugned findings of the DRT insofar as the controversy of mortgage is concerned, I am of the view that the learned Presiding Officer had certainly not dealt with this aspect with the seriousness which was expected from him. There is no doubt that these type of cases are expected to be disposed of by adopting a summary procedure but that does not mean that the decisions can be rendered mechanically in the manner it has been rendered in the present case without proper appreciation and analysis of the material brought on record by the parties during trial.

Since the entire controversy in this appeal of UPSIDC centres around the controversy whether there was a valid mortgage of its lands in favour of the GTB some of the relevant clauses of the lease deeds between UPSIDC and the mortgagor Company, respondent No. 2 herein, may be noticed. Those clauses are common in both the lease deeds dated 11.3.1998 and 30.3.1999 and the same are re-produced hereunder. The introductory Clause in the Lease Deed reads as under:

"Whereas the State of Utter Pradesh has acquired land at Mussorie Gulawati Industrial comprising of villages Dehra..............Khichra Pargana Dasna, Tehsil Hapur, Distt. Ghaziabad under Land Acquisition Act, 1894 and has conveyed the same to Lessor through a conveyance deed executed on 23.5.1994 for the purpose of planned industrial development in district Ghaziabad. Out of the land thus conveyed by the State of U.P. to the Lessor 133.33 acres of the Land is being leased to the Lessee, a Joint/Assisted Company, for the purpose of developing the same as an Agro Industrial Park for the sole purpose of setting up Agro Industrial Units including erection of dwelling houses for the residence of the supervisory staff of such units and authorising the Lessee to sub-lease the plots carved out of the part of the said land....................... The sub-lessee will also be entitled to mortgage the plots sub-leased to him/it by the Lessee for the purpose of getting financial assistance to such financial institution as may be approved by the Lessee."

Clause 3(j) and its second proviso, heavily relied upon by the Bank and the DRT as well, read as under:

"3(j) That the Lessee will not without the previous consent of the Lessor transfer, sublet, relinquish, mortgage or assign its interest in the agro industrial park of the buildings standing thereon or both as a whole except by way of sublease/sub-license to entrepreneurs for the sole purpose of setting up an agro industrial units and every such transfer, assignment, relinquishment, mortgage or subletting or both shall be subject to find the transferees or assigns shall be bound by all the covenants and conditions herein contained and be answerable to the Lessor in all respects therefor and the Lessee will in no case assign, relinquish, mortgage, sublet, transfer or part with the possession of any portion less than the whole the whole of the demised premises or cause sub-division thereof by metes and bounds or otherwise."

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Provided that prior permission of aforesaid shall not be necessary in the event of mortgage or mortgages by the Lessee/sub-lessee without possession in favour of the State Government or of the Industrial Finance Corporation of India or the U.P. Financial Corporation or the Industrial Development of India or the Life Insurance Corporation of India or Industrial Credit and Investment Corporation of India or Pradeshiya Industrial and Investment Corporation of Uttar Pradesh or Industrial Reconstruction Bank of India or any Scheduled Bank (including the State Bank of India and its subsidiaries), Unit Trust of India or General Insurance Company and its subsidiaries viz. National Insurance Company and trustees for debenture holders to secure loan or loans advanced by any of them for setting up on demised premises the industry herein before mentioned if the Lessee either furnishes to Lessor an undertaking from the financial institution as aforesaid that entire outstanding amount of premium and interest thereon shall be directly paid by such financial institution to the Lessor as soon as mortgage is created or pays the entire amount aforesaid from his own resources."

The above quoted introductory para of the lease deeds shows that some land was acquired by the State of Uttar Pradesh for a public purpose viz. development of the acquired land for making an Agro Industrial Park comprising of small Agro Industrial Units to be allotted to entrepreneurs only. The Lessee (respondent No. 2 herein) was permitted to sub-lease the smaller plots after curving to the entrepreneurs who and none else could mortgage the plots for getting financial assistance for setting up their Agro Industrial Units from those financial institutions only which were to be notified by the Lessee (respondent No. 2 herein). In the present case the need for mortgage of small plots by entrepreneurs did not arise since it appears that the development work for setting up of Agro Industrial Park did not even take off despite the Bank having released crores of rupees to the borrower Company and because of the failure of the borrower Company to fulfil its obligations under the Lease Deeds the UPSIDC had cancelled the Leases in favour of the mortgagor lessee way back in the year 2002 which fact was not refuted before this Tribunal either by the Bank's Counsel or the Counsel for the borrower. This was one of the two main defence pleas raised by UPSIDC before the DRT also in its written statement as well as in its evidence and the same remained unchallenged by the Bank and the borrower. In fact, the documents available on record would show that at one stage after the cancellation of the lease deeds by UPSIDC there were some negotiations also between UPSIDC and the OBC but no settlement could be arrived at. Copy of the minutes of a meeting held between the representatives of UPSIDC and OBC on 13.7.2007 was annexed with the affidavit of the witness of UPSIDC and that shows that OBC wanted UPSIDC to accept Bank's absolute right in the mortgaged land on payment of its lease rent etc. as also the right of the Bank to disposed off that property at its discretion. The Bank had offered to release its claim over mortgaged land in case it was paid the money which it was claiming from the borrower/mortgagor. However, those proposals and counter proposals from both sides do not appear to have been acceptable to anyone of them finally.

Though the Bank had claimed in O.A. No. 38/2004 that initially respondent No. 2/mortgagor itself was, granted loan of Rs. 400 lacs by GTB (exact date of grant of that loan was however not pleaded) and that loan was secured by respondent No. 2 by creating equitable mortgage of 133.33 acres of land taken on lease by it vide lease deed dated 11.3.1998 and which lease deed was allegedly deposited with the GTB by it on 21.5.1998 but the sanction letter for that loan facility has not been placed on record by the Bank, perhaps because of the reason that it was also its case in the O.A. that account stood closed. So, it is not clear that loan was taken by respondent No. 2 by creating equitable mortgage of 133.33 acres of land taken on lease by it vide lease deed dated 11.3.1998 for the purpose of setting up of Agro Industrial Units on the leased land, for which purpose only the land could be mortgaged for obtaining financial assistance from a scheduled Bank.

It is common case of the Bank and respondent No. 2 that the lease deed dated 11.3.1998 was not taken back by respondent No. 2 even after the closure of the four crores loan account of respondent No. 2 and the same continued to remain in the possession of GTB.

In October, 1997 the GTB had sanctioned further loan facility of four crores to respondent No. 3 herein and which sanction was conveyed to respondent No. 3 only in October, 1998 vide its letter dated 13.10.98 (Ex. AW2/9 in O.A. 38/2004). As per that sanction letter the purpose of loan was 'For development of land procured by WIPL (respondent No. 2 herein) from UPSIDC for development of Agro Industrial Park'. One of the term of sanction of that fresh financial assistance extended to respondent No. 3 herein was that as a security for the repayment of this loan facility respondent No. 2 will create equitable mortgage of its leased land of 133.33 acres already created by it earlier for securing the loan of four crores granted to it earlier (which account had already stood closed) by way of deposit of first lease deed executed by UPSIDC in its favour on 11.3.1998. It was the case of the Bank that respondent No. 2 did comply with that requirement of the sanction of additional loan of four crores in favour of respondent No. 3 herein by signing confirmation letter dated 15.10.1998 to the effect that leased deed dated 11.3.1998 was being re-deposited with GTB after taking back its symbolic possession on 15.10.1998. The Bank was claiming that this equitable mortgage created by respondent No. 2 to secure the loan availed of by respondent No. 3 was a valid mortgage while UPSIDC has been claiming that was not a valid mortgage which the Bank could enforce against UPSIDC as the mortgagee since mortgage was not created with its prior permission.

The DRT has relied upon some lines in the second proviso to Clause 3(j) of the Lease Deeds for rejecting the plea of UPSIDC that its prior permission was required to be obtained before creation of mortgage of its land leased to respondent No. 2 herein. That proviso has been re-produced already. In my view, even under that proviso also there was a requirement of taking prior permission of UPSDIC for the creation of mortgage of leased land and that becomes clear from reading the following lines of the proviso:

"Provided that prior permission of aforesaid shall not be necessary in the event of mortgage or mortgages by the Lessee/sub-lessee without possession in favour of State Government or of the Industrial Finance Corporation of India or the U.P. Financial Corporation.......any Scheduled Bank (including the State Bank of India and its subsidiaries), Unit Trust of India or General Insurance Company and its subsidiaries viz. National Insurance Company......to secure loan or loans advanced by any of them for setting up on demised premises the industry herein before mentioned if the Lessee either furnishes to Lessor on undertaking from the financial institution as aforesaid that entire outstanding amount of premium and interest thereon shall be directly paid by such financial institution to the Lessor as soon as mortgage is created or pays the entire amount aforesaid from his own resources. (highlighting and underlining of the lines is mine)"

The learned Presiding Officer of the DRT did not travel to the aforesaid lines of the proviso underlined by me and arrived at its conclusion simply by taking note of only the few lines in the beginning of the proviso highlighted by me in bold, where it is provided that no permission of UPSIDC will be required in case of mortgage is to be created in favour of a scheduled Bank and possession of land proposed to be mortgaged in not to be delivered to the Bank. However, it is also clearly provided in the latter part of the proviso underlined by me that the mortgage could be created by the Lessee only for taking loan facility for the purpose of development of Agro Industrial Park on the leased land for which purpose only land was leased to the Lessee. Here, the Lessee, respondent No. 2, had approached the GTB for grant of loan to it but not for setting up of Agro Industrial Units for the entrepreneurs as provided under both the lease deeds. Lease deed dated 30.3.1999 was deposited with the Bank for loan (subject matter of O.A. No. 37/2004) at a time when respondent No. 2 had not even been delivered possession of the leased land and the purpose of loan as mentioned in the Bank's sanction letter was for obtaining land on lease from UPSIDC. The lease deeds also provided that the lessee on that and could mortgage the leased land for taking loan for setting up Agro Industrial Units on the 'demised' land. Till March, 1999 there was no 'demised' land in existence upon which respondent No. 2 could set up Agro Industrial Units and so it could not approach any Bank for loan setting up of Agro Industrial Units on the land proposed to be mortgaged on the basis of lease deed dated 30.3.1999 As noticed already, the possession of the land covered under the second lease deed dated 30.3.1999 was delivered to respondent No. 2 in the year 2000 and that was perhaps for the reason that before that it had not fulfilled its obligations of payment of premium etc. towards UPSIDC and in fact subsequently the lease in favour of the respondent No. 2 was cancelled also, which fact has not been refuted by respondents nor its legality is claimed to have been challenged by the lessee Company before any forum. Some photographs available on the file of the Recovery Officer, which was also made available, show that even as on date the land in question is lying in a barren condition what to talk of there being any Agro Industrial Park there. The Banks normally advance loan when the prospective borrower pools in his/its own money also to begin with to show his/its own financial worth. However, in the present case the GTB did not consider it necessary to ask its prospective borrower to first obtain possession of land from UPSIDC which it was seeking to mortgage and rushed to disburse crores of rupees without satisfying itself about the competence of the Company approaching the Bank to mortgage public land. Here it may also be noticed that at the time of sanction of loan facility to respondent No. 3 herein in September, 1997 (subject matter of O.A. No. 38/2004) the GTB was informed that the property being offered as security belonged to HUDCO and the Bank itself claims to have obtained at that time No Objection from HUDCO for the mortgage of its property in favour of GTB. It is a different thing that subsequently even HUDCO denied having given any NOC to GTB and the NOC letter being relied upon by the Bank was disowned by HUDCO. It has also come on record that some criminal proceedings were also initiated by CBI in respect of the financial dealings between GTB and different Companies of a Group of Companies of which the respondents 2 and 3 herein were also a part. However, I am not going into that aspect and even DRT has also not gone into aspect to notice that CBI had charge-sheeted some Companies for some bungling in various loan transactions and it was simply observed that mere filing of charge sheet in Court will not prove anything. GTB officials could have written to UPSIDC to confirm whether the land was being mortgaged with its permission or not. That was however not done. Therefore, I am of the view that the mortgage of leasehold land belonging to UPSIDC was created at a time when the mortgagor, respondent No. 2 herein, was not competent to mortgage the same. It does not matter that the GTB ignored the lack of authority of respondent No. 2 to create mortgage in favour of the Bank on the basis of lease deed dated 30.3.1999 and showered upon it crores of rupees.

Now comes stage to examine the validity of the mortgage created by respondent No. 2 to secure the repayment of various loan facilities showered upon respondent No. 3 also by the GTB on the basis of mortgage of the land belonging to UPSIDC and leased to respondent No. 2 vide first lease deed dated 11.3.1998.

In my view, the plea taken by UPSIDC that no valid mortgage of its lands could be created without its prior consent has to be accepted as correct. As noticed already, under Clause 3(j) of the lease deeds in question it was clearly provided that the lessee could not mortgage the leased land without the previous consent of UPSIDC. However, in case the lessee wanted to mortgage the leased land with any scheduled Bank without delivering physical possession thereof to the Bank to get loan or loans for the purpose of setting up of Agro Industrial Units only on the leased land no prior permission of UPSIDC was required to be obtained. There is no 'doubt that in this case respondent No. 2/lessee/mortgagor had not delivered possession of the leased land to the Bank and had simply deposited lease deed dated 11.3.1998 with GTB but even that deposit of lease deed did not bring into existence a valid mortgage by way deposit of title deed in favour of GTB since the leased deed not permit creation of mortgage of leased land to secure the re-payment of loan taken not by the lessee for itself for the purpose of setting up of Agro Industrial Units but by some third party which in this case was respondent No. 3 herein. Thus, mortgage to secure the loan advanced to respondent No. 3 could not be created by respondent No. 2 without the prior consent of UPSIDC.

And it is not that the Bank and the mortgagor Company were not conscious about the lack of competence of respondent No. 2 to create mortgage of the leased land belonging to UPSIDC in favour of a third party like respondent No. 3 herein. Both of them were very much aware of this deficiency in the mortgage transaction and that is evident from one document placed on record by the Bank itself. That document is a letter dated 23rd July, 1999 (Ex. AW-2/28 in O.A. No. 38/2004). By which time GTB had already disbursed crores of rupees to respondent No. 3 herein, written by respondent No. 2/mortgagor to GTB wherein it was accepted by respondent No. 2 that had to be a clause in both the lease deeds dated 11.3.1998 and 31.3.1999 to the effect that there was no need of having prior permission of UPSIDC for mortgaging leased lands to secure the loans obtained by other Companies belonging to the Group of Companies to which respondent No. 2 herein belonged. Respondent No. 2 had assured GTB to have that clause incorporated in the lease deeds. The relevant contents of the said letter are re-produced below:

"Re: Indenture of Lease Deed dated 11.3.1998. Indenture of Lease Deed dated 30th March, 1999..................

We, Wise Industrial Park Limited (WIPL) do hereby irrevocably undertake the following:

(a) We shall incorporate suitable clause stating non-requirement of No-Objection Certificate from UPSIDC for mortgage of lease hold land for loans raised by WIPL or loans raised by companies with the same group against the land demised to us under the above lease. The clause shall read as under:

"Provided further that the prior permission of the Lessor shall not be necessary in the event of the mortgage or mortgages (without possession of the demised lands or any part thereof) being created in favour of the State Government or the Financial Institution(s) or Banks referred to above, in consideration of loans or other credit facilities granted to another company, concern, or firm within the same groups, if such loans or other credit facilities are granted for any purpose connected with the development of the said lands or any part thereof including setting up infrastructure or Infrastructural amenities as envisaged under these covenants."

This document clearly establishes the requirement of prior permission of UPSIDC for the creation or mortgage of leased lands belonging to it to secure the repayment of loans advanced by GTB to respondent No. 3 herein, However, neither the Bank claimed nor the mortgagor that this clause was got incorporated in the lease deeds at any stage from UPSIDC by way of execution of supplementary lease deeds or otherwise and no document also had been filed by anyone of them to show that the UPSIDC had at any stage consented to the creation of mortgage of its lands by respondent No. 2 for securing the repayment of loans taken by respondent No. 3 from GTB. Consequently none of them could claim that prior permission of UPSIDC was not required to be obtained by respondent No. 2/mortgagor for the creation of mortgage of its leasehold rights, which only it possessed under the two lease deeds, to secure the repayment of loans advanced by GTB to respondent No. 3. Unfortunately, the learned Presiding Officer failed to notice all these facts. At least the learned Counsel for UPSIDC could have made some submissions in respect of the said letter placed on record by the Bank itself and its impact on the Bank's case as far as the relief sought by it on the basis of mortgage was concerned but he left the entire responsibility upon this Tribunal itself to have a deep plunge into the voluminous record to see whether this was really an open and shut case, as was strongly sought to be; projected by the learned Senior Counsel Mr. Rajeeve Mehra while arguing for the auction purchaser-respondent No. 4. All that can be said about the throwing away of Bank's money by its officials is that the acceptance of mortgage of public land by them was only a paper formality to show that Bank's money was fully secured while in fact that was not so.

For the aforesaid reasons, it is concluded that no valid mortgage for the repayment of the loan granted to respondent No. 3 by GTB in 1997 ever came into existence as was being claimed by the Bank and though same stand was for a long time being taken by respondent Nos. 2 and 3 also but for reasons best known to them only they abandoned their challenge to the mortgages of the land of UPSIDC. For the same reasons it is also concluded that the mortgages allegedly created by respondent No. 2 for all the subsequent loans also very generously showered upon respondent No. 3 by GTB, purpose of which sanctions was 'For the development of land procured by respondent No. 2 herein from UPSIDC towards the Agro Industrial Park Project at Ghaziabad' by continuing to represent to GTB that it could hold on to the two lease deeds as a continuing security for the re-payment of crores of rupees, which liability by now must have crossed 100 crores, were not valid in law so as to bind UPSIDC.

Now, I come to the Bank's case in O.A. No. 37/2004 which was in respect of the recovery of loan of Rs. 150 lakh granted to respondent No. 2 herein and in which also mortgage decree was sought. It was the Bank's case that respondent No. 2 had obtained loan facility of Rs. 150 lakh sanctioned vide sanction letter dated 3rd May, 1999 and the purpose for which that loan was sanctioned was for purchase and development of land and building infrastructure thereon on the land to be taken on (lease from UPSIDC (trench II) after it had obtained another piece of land msg. 133.33 acres on lease from UPSIDC pursuant to the original licence deed of 1995. It was pleaded that to secure that loan respondent No. 2 had created equitable mortgage of 100 acres of land out of 133.33 acres taken on lease from UPSIDC vide lease deed dated 30.3.1999. However, the Bank had not placed on record any loan documents which might have been executed by respondent No. 2 after 3rd May, 1999. Instead, it had placed on record some loan documents which show that loan of Rs. 150 lakh was sanctioned to respondent Nos. 2 on 3rd April, 1999. Bank's Counsel did not even refer to any of the documents filed by the Bank in support of its case. Everybody from the side of the respondents was in a hurry to wrap up the proceedings in the appeals after submitting that whatever Mr. Rajeeve Mehra had submitted should be considered their submissions also. Even the Counsel for the appellant did not make any effort to clarify this ambiguity.

Be that as it may, even the loan documents allegedly executed by respondent No. 2 in April, 1999 and which were exhibited during Bank's evidence also do not show the purpose for which loan was sanctioned in favour of respondent No. 2 and when was the equitable mortgage of the land leased by UPSIDC in favour of respondent No. 2 was created and when was the original lease deed dated 30.3.1999 deposited with GTB for the creation of equitable mortgage. In the case of mortgage of the other piece of land already leased in March, 1998 the Bank had placed on record the letter of May, 1998 of respondent No. 2 whereby lease deed dated 11.3.1998 was deposited in original with GTB but no such letter regarding deposit of lease deed dated 30th March, 1999 was proved or even placed on record by the Bank. At least my attention was not drawn to any such document. As noticed already under the lease deeds in question the lessee could mortgage the leased land only for developing Agro Industrial Park and for no other purpose. So, it was incumbent upon the Bank to show that respondent No. 2 was granted this loan of Rs. 150 lakh in April, 1999 for the purpose of developing Agro Industrial Park on the leased land That has not been shown by the Bank.

Even if it is accepted that the loan granted to respondent No. 2 as per sanction letter of 3.5.1999 was secured by mortgage of additional land of 100 acres even then that mortgage was also not valid since at that time no development activity had even commenced and the loan was obtained for acquiring additional land on lease from UPSIDC and not for commencing the development work for the proposed Agro Industrial Park. As noticed already, the lease deeds provided that the leased lands could be mortgaged by the lessee for obtaining loan for the development of the leased land, and not for enabling it to pay to the UPSIDC on account of premium etc. before delivery of possession of the land intended to be taken on lease. In March, 1999 the respondent No. 2 did not even have possession of the additional land which, as noticed already, was handed over to it in the year 2000 and so there was no question of that land being mortgaged in April, 1999 in favour of GTB and that too without the prior permission of UPSIDC. Since the Bank had failed to prove that the loan granted to respondent No. 2 in 1999 was for the development of Agro Industrial Park there could even otherwise also no mortgage without the permission of UPSIDC. Therefore, the Bank's case that the loan of Rs. 150 lakh granted to respondent No. 2 was secured by way of mortgage of the land msg. 100 acres teased to respondent No. 2 under the lease deed dated 30.3.1999 cannot be accepted and even the DRT should not have accepted that case of the Bank. Accordingly the conclusion of the DRT to that effect also arrived at in favour of the Bank is liable to be set aside.

Though the Bank had also pleaded in O.A. No. 37/2004 that the loan granted to respondent No. 2 was secured by the mortgage of 133.33 acres of land leased to it vide lease deed dated 11.3.1999 but in that respect of also there is no documentary proof submitted to establish that plea. In any event, in the absence of any proof that the loan in 1999 was applied for by respondent No. 2 to carry on the work of development of Agro Industrial Park on the additional land of 100 acres leased to respondent No. 2 in the second phase. I have already held that land could not be mortgaged without the prior permission of UPSIDC only to acquire (and from UPSIDC and only the land already acquired from UPSIDC on lease could be mortgaged and that too for developing Agro Industrial Park. So, for this reason also it has to be held that even if the Bank granted any loan to respondent No. 2 in April, 1999 the same could not be said to be a mortgage debt.

Consequently these appeals of UPSIDC are allowed and it is declared that the loans granted to respondents 2 and 3 by GTB were not secured by mortgage of lands belonging to UPSIDC and leased out to respondent No. 2, alleged mortgagor and the findings of the DRT in the impugned judgments holding to the contrary stand set aside and now there will only be a simple money decree in favour of the respondent No. 1 Bank and not a mortgage decree. The direction for the recovery of money due to the Bank under the two recovery certificates can be recovered from attachment/sale of other assets of respondents 2 and 3 herein.

Consequences of the Aforesaid Declaration in Respect of the Mortgaged Controversy Between the Parties Upon the Rights of the Auction Purchaser (Respondent No. 4 in Both of the Appeals)

Having held that the loans granted by the erstwhile Global Trust Bank Ltd. to respondent Nos. 2 and 3 herein were not secured by way of equitable mortgage of the lands belonging to the appellant UPSIDC and leased to respondent No. 2 it is now to be seen as to what effect this declaration has upon the rights of the auction purchaser. As noticed already, it was the forceful submission of Mr. Rajeeve Mehra, learned Senior Counsel for the auction purchaser that even if this Tribunal comes to the conclusion that there was no valid mortgage of the lands in question in favour of the Bank the auction purchaser will not get affected in any manner because of that decision since it has already acquired valuable rights in the lands purchased by it through the auction conducted by the Recovery Officer attached to the DRT-II, Delhi because not only sale certificate has been issued in its favour but even possession of the auctioned land has also been delivered to it at the instance of the Recovery Officer and the objections of the appellant were also rejected by the Recovery Officer. In support of this submission Mr. Rajeeve Mehra had cited one judgment of the Hon'ble Supreme Court in Sadashiv Prasad Hugh's case (supra) In the said Judgment it was held that if a third party auction purchaser purchases mortgaged property in Court auction and subsequently the decree passed by the Court is set aside sale in favour of the auction purchaser will not get affected while in the case of the decree holder auction purchaser the property purchased by the decree holder in Court auction will have to be surrendered in case the decree pursuant to which the mortgaged property was sold is set aside. However, this judgment relied upon by Mr. Rajeeve Mehra will not come to the rescue of the auction purchaser in the present case because the lands in question which the DRT found to have been mortgaged in favour of the Bank were put to auction during the pendency of the present appeal which for all intents and purposes is in continuation of the OA proceedings. Not only that, the auction purchaser had got itself impleaded in the present appeals and had also prayed for early disposal of the appeals because its rights were getting affected as an auction purchaser. Thus, the auction purchaser of the present case cannot be considered to be a bona fide purchaser without notice of the pending litigation between the Bank, the borrower, the mortgager and the superior lessor (UPSIDC) of the lands in question. In the judgment cited by Mr. Rajeeve Mehra, no appeal against the original decree was pending before the appellate Court as is the position in the present case.

In the facts and circumstances of the present case earlier judgment of the Hon'ble Supreme Court in the case of Chinnammal & Ors. v. P. Arumugham & Anr., 1990 SCR (1) 78 and also in AIR 1990 SC 1828 will apply, wherein the sale in favour of the auction purchaser was set aside upon setting aside of the mortgage decree in appeal holding that if it is shown by evidence that the auction purchaser was aware of the pending appeal against the decree when he purchased the property it would be in appropriate to term him as a bona fide purchaser. In the present case, the auction purchaser was aware of the pendency of the present appeals when the proceedings were pending before the Recovery Officer for execution of the two recovery certificates and these the appellant UPSIDC had claimed that the appeals against the judgments dated 12.2.2014 of the DRT were pending before the Appellate Tribunal. The auction purchaser had sought its impleadment in these appeals. In these circumstances, the auction purchaser of the present case (respondent No. 4 in both the appeals) cannot be termed as a bona fide purchaser of the lands put to auction by the Recovery Officer. Since, it has now been held by this Tribunal that there was no valid mortgage of the lands put to auction by the Recovery Officer it does not matter if sale certificate already stands issued in favour of the auction purchaser and it has also been shown to have been put into possession of the auctioned lands, which as noticed by the DRT itself in the impugned judgments, was with the UPSIDC and which fact has not been challenged by any of the parties. So, all legal consequences as a result of the aforesaid declaration given by this Tribunal in respect of controversy between the Bank and the appellant centering around the mortgage of the lands in dispute must follow as far as the auction purchaser is concerned. It is also not a case where this Tribunal can work out equities between the claim of the UPSIDC and the auction purchaser as well as the Bank, as was also the submission of learned Senior Counsel for the auction purchaser. The auction purchaser will only be at liberty to get back the money which it has paid to purchase the lands in question and that is the only relief available to it and nothing beyond that.