Varun Sachdeva vs Bank Of Baroda And Anr

The appellant was one of the two security applicants before the Tribunal below(DRT) who had filed a Securitisation Application(S.A.) under Section 17(1) of the SARFAESI Act to save their sole residential house in Amritsar(Punjab) from being taken over and auctioned by the respondent Bank to recover its dues which it had lent to one Company. The other security applicant was the appellant's mother, Smt. Vaneeta Sachdeva, who was one of the owners of the mortgaged house in Amritsar, others being her deceased husband and father of the appellant, late Shri Vinod Sachdeva, Shri Ashok Sachdeva and Smt. Indu Sachdeva. These persons had mortgaged their house in Amritsar, which the appellant claims to have been built on a part of big piece of agricultural land.The outstanding loan dues being sought to be recovered are stated to be the tune of over 22 crores. The appellant had nothing to do with the loan advanced to the abovenamed Company and guaranteed by the abovenamed persons all of whom are members of one family. The appellant has entered the scene after thedeath of his father lateShri Vinod Sachdeva as one of his legal representatives in respect of his father's share in the mortgaged property in question. He claims to have become owner of 1/16 share after the death of his father since there were four joint owners and his father had 1/4share.

The appellant and his mother had laid a challenge in their S.A. to the threatened action of the respondent bank to take over physical possession of the property in Amritsar which the appellant's parents had mortgaged in favour of the Bank to secure the repayment of loan money by the borrower Company. The learned DRT however rejected the S.A. vide its order which has been challenged only by the son of the deceased mortgagor late Shri Vinod Sachdeva and not by Appellant's mother, the other mortgagor.

For the entertainment of this appeal the appellant has to make a pre-deposit of 50% of the amount of debt which isbeing claimed by the Bank even though the appellant is the legal representative only of his deceased father who was one of the mortgagors of the property in question, which was jointly owned by the deceased, his wife and two children and the appellant claims to have inherited a share in the share of his father. This view is supported by a judgment dated 7thNovember, 2017 of Madras High Court in "S. Neeraja vs The Asset Reconstruction Company"(Writ Petition No.28296 of 2017.

The grievance of the appellant as highlighted by his learned counsel was that the impugned order of dismissal of the S.A. is no order in the eyes of law since it has not touched the merits of the case and that no hearing was given to the appellant's advocate to address oral arguments.

The relevant portions from the impugned order are re-produced below:-

"1. The applicant has filed this application under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (The SARFAESI Act, 2002) challenging the action taken by the Respondent bank under the SARFAESI Act.

Briefly stated facts are that the applicant is neither borrower nor guarantor nor mortgagor but a legal representative of late Sh. Vinod Kumar but is aggrieved by the action having been initiated by the bank against the sole residential property under the SARFAESI Act whereas other secured assets are in the hands of bank which can very well satisfy the dues of the bank. It has been also stated that the bank for recovery of Rs. 22,59,10,950/- has filed suit before DRT-I, Delhi. The plea of the Applicant is that there are two other secured assets, i.e. factory land and building measuring 26K-12M situated at village Mehlanwala, Tehsil Ajnala, Distt. Amritsar and land 7 bhiga measuring 309 Marias situated at village Chabba Sanrana Sahib, Tarantaran Road, Amritsar and unit measuring 25K- 1M situated at Mehlanwala, Tehsil Ajnala, Distt. Amritsar, the total value of which is more than Rs. 22.70 crore and would satisfy the dues of the bank. Hence, there is no necessity to put on sale the sole residential property of the applicant. It has also been stated that the property in question is an agriculture property unless segregated.

Therefore, the applicant has stated that the action of the Resp. Bank be set aside and SA be allowed.

The Respondent bank in its reply has stated that the applicant in the present application is the guarantor mortgagor Smt. Vineeta Sachdeva is Def. No. 7 in Original Application and that Def. No. 6in the original application has since deceased. The property had been mortgaged by Def. No. 4 to 7 in the original application, i.e. Ashok Sachdeva, Indu Sachdev w/o Sh. Ashok Sachdev, Vinod Sachdev and Smt. Vaneeta Sachdev w/o Sh. Vinod Sachdeva in favour of the bank and the Resp. Bank is proceeding against all the secured assets including the property in question after taking orders from Distt. Magistrate for taking over possession of the property on 16.03.2018.

It has been further stated that since the bank is lawfully proceeding against the mortgaged properties, the plea of sole residential is not available to the applicants as the same is already lying mortgaged with the Bank. If the applicant no.1 is claiming inheritance to the property and estate of deceased guarantor Vinod Sachdeva then the estate of Sh. Vinod Sachdeva is liable jointly and severally for the entire liability of the bank. It has been also stated that the applicants are always at liberty to pay off the debt of the bank and on clearance of the loan account completely, they may get the property released to the extent of mortgage of their predecessor in Interest.

It has been stated that since the applicants have failed to point out any irregularity or illegality in the action initiated by the bank and the property being duly mortgaged, the only plea of the applicants being loan residential house has no ground and that the mortgagors/borrowers/guarantors cannot dictate the Resp. Bank as to which property to be proceeded first................................................

The counsel for the applicants mainly stressed upon securing the lone residential property by selling other secured assets being sufficient to discharge the liability. It has been further argued that the bank in its original application filed for recovery of dues has evaluated the property from its own valuers and fixed the reserve price of the same. The value of the other two secured assets as per reserve price fixed by the bank comes to Rs.22.70 crore in total whereas the outstanding amount in the OA filed is about Rs.22.60 crore. The Applicants have thus stressed that there is no need to sell the residential house when the other properties are sufficient to liquidate the dues of the bank but the bank, in connivance with the other defendants in the OA and some interested buyers, are adamant to sell the same and has prayed that the action of the bank be set aside against the residential house.

On the other hand side, counsel for the Resp. Bank taking preliminary objection argued that the applicants are misusing the process of law and pointed out towards the list placed on record by the applicants to prove that the applicants are hard core litigants as they are litigating in different Courts through their nears and dears. The counsel for the Resp. Bank has further drawn my attention that the properties were mortgaged by 4 mortgagors who have given their independent affidavit having ownership and specifying their possession of area as well as undertaking given by deposit of title deeds, declaring that the secured assets including this property are in their possession and are free from encumbrances of any nature whatsoever and with a clear marketable title.

The contention of the Respondent bank is that the applicant is none else but a proxy litigant in connivance with other defendants in the OA and filing of the application is another attempt to derail the recovery process. The counsel for the respondent bank pointed out that when the Distt. Magistrate issued orders for taking over possession of secured assets, one of the defendants who is uncle of the Applicant Ashok Sachdeva, Def. No. 3 in the O.A, approached the Hon'ble High Court where no stay was granted by Hon'ble High Court as per Exh. B2, repeating the abstract of orders, "... since we have not granted any stay, the DM shall proceed in the matter in accordance with the law".

The counsel for the Resp. Bank has further pointed out that when the Tehsildar went to take physical possession, the Applicants produced order of another civil court granting stay. The Bank after getting a copy of order moved the court for impleading the Bank as the order was obtained at the back of the Bank. The counsel for the Bank has further clarified that the Applicants who are pleading inheritance, they are equally liable along with other borrowers/mortgagors for the dues of the bank to the extent of inheritance of deceased mortgagor as per settled proposition of law. Since the Bank has already proceeded as per rule and the Applicants have failed to point out any irregularity, this SA should have to be dismissed.

I have heard counsel for the Applicants and perused the record.

The entire arguments of the Applicants are revolving around the issue of discharge of their liability being legal heir to the value to the extent of residential house but surprisingly failed to put forth any provision in their support of argument. The plea of the applicant is without any base and wrong proposition that the guarantors/mortgagors were alleged guarantors. In fact the Applicant No.1 in his written statement as LR of Vinod Kumar Sachdeva has never disputed the factum of guarantee and has admitted his liability to the extent of inheritance from the estate of deceased. The guarantee which was executed by predecessor in the interest of Varun Sachdeva and Vinita Sachdeva who have also in individual capacity has signed guarantee agreement, giving continuing guarantee. As the Hon'ble Apex Court has already settled law in Sita Ram Gupta Vs. Punjab national Bank" 2008 AIR (SC) 2416 that "....loan sanctioned by the Bank to the company appellant issued a guarantee to the bank, but cancelled the same before loan amount was actually paid to company - Bank however, making payment of loan to company - Default in repayment by the company a civil suit by the Bank for recovery amount, Appellant who was a guarantor liable to pay decretal amount despite the fact that he revoked the guarantee before payment of loan to company as per guarantee agreement the guarantee was irrevocable by the appellant and Appellant is not entitled to protection of Section 130 of Indian Contract Act." We cannot ignore that the DM who has passed order for taking physical possession of the security against which written petition filed by one co-guarantor/mortgagors Ashok Kumar Sachdeva was also dismissed and the Applicant have got collusive suits filed by the alleged tenant and delayed the taking over of possession. Moreover the Resp. Bank has submitted a list giving detail of suits filed by nears and dears in different courts against the bank to prove that the Applicants are, making every attempt to further delay recovery.

So far as the plea of the Applicant being LR of the guarantor and taking other properties first, the Hon'ble Apex Court in case titled Bank of Bihar Vs. Damodar Prasad (1969) 1 SCR 620 and State Bank of India Vs. M/s Indexport Registered and Others (1992) 3 SCC 159 held that the decree holder has right to proceed against the primary security or the security of the guarantors. Now it is settled proposition of law that the liability of the guarantor and borrower is co-extensive with the borrower for the recovery of dues.

Another touch of argument qua agriculture property further could not be sustained in the light of the judgement passed by Hon'ble Supreme Court in ITC Vs. Blue Coast. Once the property is being used as a residential, it cannot be treated as agriculture land.

The Applicant No.2 who has claimed to have written a letter qua relieving or discharging the guarantors in the account of company/firm could not be sustained further as guarantee is continuing guarantee and the predecessor of the Applicant is liable jointly as well as severally with the borrowers .

Moreover, we could not ignore that the Applicants who when approached this Tribunal did not press much for the interim and the Hon'ble DRAT in Appeal No.377 of 2016 titled Seema Aggarwal Vs. Standard Chartered Bank and Ors. has crystalised "...neither this tribunal granted any interim relief to the appellant nor the counsel for the Bank extended his assurance given on 08.05.2016 that for ten days the Bank will not take further actions in respect of the appellant's house. From the record it is nto clear as to why the Bank did nto proceed further to enforce its rights under the SARFAESI Act and to take physical possession from the appellant and she continues to retain the possession and that too without clearing the bank's dues of crores of rupees.

This in fact is not the only case where the Bank has permitted the defaulting borrower/guarantor/mortgagor to restraint the secured asset even when there is no stay order of the tribunal or any other court and it has been observed by this tribunal that in a large number of cases the Banks do not take physical possession of their secured assets in exercise of their rights under SARFAESI Act despite that fact that DRTs had declined any interim protection to the borrowers etc. against their dispossession. Perhaps the higher Authorities of the Banks are not apprised of that situation by the lower authorities and that emboldens the defaulting borrowers not to clear the public dues. It is high time this aspect is seriously examined by all the Banks as also by the Reserve Bank of India as well as the Government which has enacted SARFAESI Act with the object of providing teeth to the banks etc. for recovery of public money by coercive measures made available to them by the Parliament....."

The Applicants along with the borrower/guarantors/ mortgagors against whom the RC has already been issued has failed to prove any irregularity in the whole process initiated by the Bank under The SARFAESI Act.

Hence, having examined the averments made by the respective counsel of the parties and documents and evidence filed by them in support of their pleadings, I have come to the conclusion that the action taken by the Bank is absolutely in accordance with law just and proper.

Accordingly this SA is dismissed "

The grievances of the appellant highlighted by the learned counsel Mr. Sanjeev Bhandari that the dismissal of the S.A. is really not disposal on merits but is a result of bias of the learned Presiding Officer towards him as appellant's counsel, because on an earlier occasion when a miscellanous order was passed by the same Presiding Officer in the S.A. which at that time was pending very harsh and unwarranted observations having nothing to do with the case of the applicants there were made against the two securitisation applicants which had constrained them to approach this Tribunal and this Tribunal had expunged those harsh and unwarranted observations. That order passed by this Tribunal, according to the appellant's learned counsel, seems to have been taken to his heart by the learned Presiding Officer and as a result of which the S.A. itself has now been dismissed and that too by denying the appellant's counsel an opportunity to address oral arguments and had shown undue haste in proceeding to dispose of the S.A.is the state of affairs calling upon the appellant to make a pre- deposit will be further denial of justice to him.

However, in my view and the well settled legal position whatever be the grievances of the appellant the same can be appreciated only once his appeal is entertained and the appeal will be entertained when the appellant crosses the threshold hurdle of 'pre-deposit' of 50% of the debt which the respondent Bank is seeking to recover from the mortgaged property in question in which the appellant himself claims to have inherited some share.

The appellant is accordingly directed to deposit 50% of the amount of debt in question within a period of four weeks. In case pre- deposit is made the amount shall be kept in a fixed deposit with a nationalised bank for an initial period of one year. In case the pre- deposit is not made the appeal shall become liable to be rejected as not entertainable.