Vishwanath Sharma & Anr. vs Syndicate Bank & Ors.

JUSTICE R. D. KHARE, CHAIRPERSON

The present appeal has been filed under section 18 of the Securitization and Reconstruction of Financial Asset and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "the SARFAESI Act") against the order dated 08.01.2014, whereby the Securitization Application No. 316/2012 filed by the borrowers namely Madan Pal Sharma and Respondent no. 3-Vivek Kumar has been dismissed.

Brief facts of the matter are that the appellants are the legal heirs of deceased S.A. Applicant No. 1 Madan Pal Sharma. The S.A. Applicants were granted a housing loan/term loan of Rs.12.00 lacs by the respondent no. 1 for purchase of a residential plot and construction of house thereon. Accordingly, the property in question was purchased by the SA applicants vide registered sale deed dated 27.09.2006 and constructed the house thereon and the same was mortgaged with the Bank as Security. Since the borrowers did not maintain the financial discipline, therefore, the account was classified as NPA on 31.03.2010 and a demand notice dated 27.01.2011 was issued u/s 13(2) of the SARFAESI Act for a sum of Rs.15,48,510.84, but in the subsequent notice dated 01.01.2011 u/s 13(2) of the SARFAESI Act, the total outstanding amount was shown as on 01.01.2011 Rs.17,38,951.39. Since the borrowers did not pay any heed to the said demand, therefore, the possession notice was issued by the Bank on 01.08.2011, which was published in the newspapers. Thereafter, the sale notice was issued and published in the newspapers on 05.05.2012 scheduling the auction of the property on 06.06.2012.

The borrowers challenged the proceedings of the Bank before the Tribunal below by filing SA No. 316/2012, which has been dismissed vide order impugned. Being aggrieved by the said order, the present appeal has been filed by the appellants.

Learned counsel for the appellants submitted that the appellants are neither borrower nor guarantor to the loan advanced by the respondent-Bank to the respondent no. 3 as well as Madan Pal Sharma, who is father of the appellants as well as the respondent no. 3. It was further contended that during the pendency of the said S.A., the S.A. applicant no. 1 Madan Pal Sharma had expired on 12.02.2013 and the mother of the appellants had expired on 05.05.1989. It was further contended that the appellants and the respondent no. 3 being legal heirs of deceased Madan Pal Sharma have 1/3^rd share in the property in question. It was also contended that the appellants were not aware about any proceedings of the Bank in respect of the property in question, as the appellant no. 1 was residing in Delhi for the purpose of completing the courses of chartered accountant and the appellant no. 2 was residing at Jhajjar in Haryana with her husband after her marriage on 14.02.2013 and as such there was no occasion for her coming back to Meerut thereafter.

Learned counsel further submitted that the appellants for the first time came to know about the present case, when the respondent no. 3 had placed the order dated 08.01.2024 of the Tribunal below before the appellants. It was further contended that the appellant no. 1, thereafter, rushed to Lucknow on 27.01.2014 and obtained the relevant documents for the purpose of filing the present appeal.

It was further contended that the Tribunal below while passing the order impugned has failed to consider the fact that the loan was approved and sanctioned by the Bank as a housing loan/term loan on the terms and conditions of loan clearly stipulated in the agreement of loan and the letter of sanction, which was purely a housing loan on the interest @ 10.25% p.a. as admitted on record and the bank has no legal right or authority whatsoever to convert the home loan into commercial loan and to charge contractual rate of interest @ 15%(PLR+3) as against the agreed rate without consent of the borrower in respect thereof. It was thus contended that the entire proceedings of recovery, therefore, with the inflated amount as alleged is absolutely perverse, vitiated and is not sustainable and deserves to be quashed.

It was further submitted that at no point of time any notice or opportunity whatsoever has ever been given by the respondent-Bank nor any acceptance was ever taken from the borrower prior to converting the housing loan into the commercial loan and in absence thereof, the entire proceedings so undertaken by the respondent-Bank for conversion and to change the nature of loan and charging exorbitant interest at market rate is absolutely perverse, illegal and is not sustainable in law. It was thus contended that the observation of the Tribunal below is contrary to the documents available on record and rejection of objection of the applicants is absolutely perverse, unreasonable and is not sustainable in law, therefore, the order impugned deserves to be set aside.

Learned counsel for the respondent-Bank stated in its reply that the borrower had used the loan amount as commercial loan by constructing a school and in this regard, a notice was given to the borrowers on 24.07.2010. It was further contended that the loan agreement was not signed by the appellants, therefore, they have no locus standi to file the present appeal. It was further contended that during pendency of the S.A., the S.A. applicant no. 1 had expired on 12.02.2013 and as such the respondent no. 3 (S.A. applicant no. 2) being sole borrower is liable to pay the loan amount of the Bank and as such the order passed by the Tribunal below is absolutely legal and valid and is not required to be interfered with by this Tribunal.

Learned counsel further submitted that the respondent no. 3-Vivek Kumar, S/o late Madan Pal Sharma is liable to pay the entire amount, because now the property will be inherited by only respondent no. 3 as it is non-ancestral property. It was further contended that due to the pendency of the S.A., the auction purchaser had only paid 1/4th amount of auction price on 06.06.2012 and the remaining amount was not deposited by the Auction Purchaser.

Learned counsel further submitted that the other family members were aware about the proceedings of the Bank, but the present appellant was not aware about the same is not practically possible. It was further contended that the Advocate Commissioner had given his report with regard to the property that the same is a school, which is running in the building, which was constructed by the borrower after getting financial facility from the respondent-Bank. It was further contended that since the object of the loan was changed by the borrower, therefore, rate of interest was changed by the Bank as commercial. It was, therefore, prayed that the order impugned passed by the Tribunal below may be affirmed and the appeal filed by the appellants may be dismissed with heavy costs.

Learned counsel for the respondent-Auction Purchaser has adopted the arguments as advanced by the respondent-Bank and prayed that the appeal filed by the appellants may be dismissed with heavy costs.

I have considered the rival contentions of the learned counsels for the parties and perused the material available on record.

Undisputedly, the appellants are neither borrowers nor guarantors or mortgagors to the loan advanced by the respondent-Bank to the S.A. applicants, but they are the legal heir of deceased S.A. applicant no. 1 namely Madan Pal Sharma and the brother and sister of respondent no. 3. Now, the question arises, as to whether they have locus to challenge the proceedings of the Bank by filing the present appeal or not?

It is to be seen that the father of the appellants namely Madan Pal Sharma and respondent no. 3, who is son of Madan Pal Sharma were granted a housing/term loan of Rs.12.00 lacs by the respondent no. 1-Bank for purchase of a residential plot measuring about 167.22 sq.mtrs., which was part and parcel of Khasra No. 178/2, Saraswati Vihar, Phase-II, Meerut and construction of a house thereon and accordingly, the said plot was purchased by the S.A. applicants from one Shri Jagdish Singh vide sale deed dated 27.09.2006 and thereafter, construction was raised by withdrawing the said loan amount. In order to secure the said loan facility, the loan agreement was signed by Madan Pal Sharma and respondent no. 3 by giving one guarantor Mr. Arvind Kumar and also created equitable mortgage over the property in question by depositing original title deed with the respondent-Bank and as such it is clear that the property in question was self-acquired property of Madan Pal Sharma and the respondent no. 3.

It is further to be seen that the appellant no. 1 is son and appellant no. 2 is daughter of Madan Pal Sharma and being a son and daughter, they are claiming their proportionate share in the property in question, which cannot be accepted, because the property in question is not an ancestral property, but it was self-acquired property of Madan Pal Sharma and respondent no. 3, who had purchased the same and constructed the house thereon from taking the loan of Rs.12.00 lacs from the respondent no. 1-Bank. Thus the appellants have no right to claim their proportionate share in the property in question as the deceased-Madan Pal Sharma and respondent no. 3 were absolute owners of the property in question. If the property in question was an ancestral property of Madan Pal Sharma and respondent no. 3, then the case of the appellants would have been otherwise. Admittedly, during the pendency of the S.A. before the Tribunal below, the S.A. applicant no. 1 namely Madan Pal Sharma had expired, but none of the legal heirs had come forward to contest the case. The contention of the appellants that they were not aware about the proceedings of the case cannot be accepted as their one brother namely Vivek Kumar was party in the present case and it cannot be believed that he would not have discussed about the case with his family members including the appellants.

It is relevant to point out that one recall application of the order dated 20.11.2013 was filed before the Tribunal below, copy of which is at page no. 142 to 144 of the memo of appeal. In para 7 of the said application, it is stated "since the son of applicant no. 1 (i) (a)-late Madan Pal Sharma, who also happens to be co-owner of the mortgaged property, was already a party as applicant no. 1 (i) (b) in the S.A., as such, there was no requirement for substituting the legal heirs of the applicant no. 1 (i) (a), as the matter was being contested by the applicant no. 1 (i) (b) and the fact was well within the knowledge of the respondents."

From the above, it is clear that the respondent no. 3, who is also legal heir of the S.A. applicant no. 1, was contesting the case, but after death of his father, i.e. S.A. applicant no. 1 he had not filed any substitution application before the Tribunal below under the impression that there was no requirement of substituting the legal heirs of applicant no. 1 (i) (a), but when he could not get success in the case, then the appellants came forward to challenge the order impugned passed by the Tribunal below by filing the present appeal, which cannot be permitted. Besides it, appellants have no locus to challenge any proceedings of the Bank because the property mortgaged with the Bank was self acquired property of the mortgagors namely Madan Pal Sharma as well as Vivek Kumar.

Since the appellants are held in the preceding paragraphs of this judgment to have no locus to challenge the proceedings of the Bank, therefore, merits of the case are not required to be dealt with by this Appellate Tribunal.

In view of the discussions as held above, the order impugned passed by the Tribunal below is affirmed and the appeal filed by the appellants is dismissed with no order as to costs.

A copy of this judgment be forwarded to the parties as well as the DRT concerned and be also uploaded on the e-DRT portal.