Yes Bank Ltd. And Anr vs M/S Texcomash Exports And Ors

This order is being prepared while working from home for being signed and communicated to the parties because of the suspension of physical hearing of DRAT appeals due to spread of Corona Virus (Covid-19) in the entire country. This procedure for the preparation of orders by quasi judicial tribunals and their communication to the concerned litigants in place of formal pronouncement in open Court has been recognised by the Hon'ble Supreme Court in one of its judgments reported as AIR 2008 SC 2594, " State Bank of India and Ors. Vs. S.N.Goyal"(para 19) wherein it was observed that:-

".............While some quasi judicial tribunals fix a day for pronouncement and pronounce their orders on the day fixed, many quasi judicial authorities do not pronounce their orders. Some publish or notify their orders. Some prepare and sign the orders and communicate the same to the party concerned... "

These two appeals by Yes Bank Ltd. arise out of a common order dated 13.04.2017 whereby one Original Application No. 135/2011 filed by the appellant herein under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and four Securitisation Applications(SAs) under Section 17(1) of SARFAESI Act, one of which was by Yes Bank Ltd. against Kotak Mahindra Bank and two were by one Ms. Mili Raj, one of which was against some actions of Yes Bank Ltd. And other one was against some action taken under Section 13(4) of SARFAESI Act by Kotak Mahindra Bank and one by her father Narinder Rajgarhia, were disposed of. All the four SAs were in respect of second floor with roof rights of house no. D-52, Defence Colony, New Delhi( hereinafter to be referred as 'the property in question').

A proprietorship Firm by the name of Texcomash Exports, whose sole proprietor was one Narinder Kumar Rajgarhia, both of whom are respondents in these two appeals, had taken loan facilities of crores of rupees from appellant Yes Bank Ltd. sometime in the year 2007 and also from Citi Financial Consumer Finance India Limited sometime in the year 2003. Repayment of the loans from both these lenders was secured by Narinder Kumar Rajgarhia by creating equitable mortgage of second floor with roof rights of house no. D-52, Defence Colony(hereinafter to be referred as the 'property in question'). With Citi Financial Consumer Finance Limited he had deposited a title deed which showed him as the karta of N.K.Rajgarhia HUF while with Yes Bank Ltd. he deposited a title document showing him as the exclusive owner of the said property in question. The borrower Firm failed to repay the dues of both these lenders. While Yes Bank Ltd. has been pursuing its legal remedies to recover over fifteen crores of rupees from the borrower Firm and its proprietor the other lender got exhausted and sold the debt to Kotak Mahindra Bank.

Yes Bank Ltd. as well as Kotak Mahindra Bank initiated measures under SARFAESI Act being secured creditors to recover their respective dues from Texcomash Exoorts and its guarantors. Yes Bank Ltd. was able to take physical of the property in question before Kotal Mahindra Bank in 2011 while the latter felt satisfied in recovering symbolical possession only of the property in question in the year 2016.

Firstly Narinder Kumar Rajgarhia started legal battle to avoid recovery of crores of public money from him and his proprietorship Firm and his family members who had given their personal guarantees also for the return of loan money. He filed a Securitisation Application (SA) before the DRT under Section 17(1) of SARFAESI Act to save the property in question which he had mortgaged in favour of two lenders. He, however, failed in his attempt. Thereafter his daughter Ms. Mili Raj, who is also one of the respondents in both these appeals which are being disposed of by the present common order, jumped into the fray and which action of hers is being claimed by Yes Bank Ltd. to be a collusive and stage managed affair. She filed two independent and separate Securitisation Applications against Yes Bank Ltd. and Kotak Mahindra Bank being S.A.No. 73/2011 and 71/2016 respectively. In the S.A. filed by her against Yes Bank Ltd. she claimed that her father Narinder Kumar Rajgarhia had fraudulently mortgaged the property in question in favour of Yes Bank Ltd. by claiming himself to be the sole owner thereof which in fact the property was owned by N.K. Rajgarhia HUF of which she was one of the members and had deposited with this Bank while taking huge amount of loan a forged copy of the sale deed showing himself to be the sole owner of the property in question. Regarding the loan taken by her father from the other financial institution, which subsequently sold its debt to Kotak Mahindra Bank, her case was that though her father had taken loan in his capacity of karta of the said HUF of which she was one of the coparceners by depositing the title deed which showed the property to be an HUF property, but her consent was never taken by her father for mortgaging the HUF property and that too without any legal necessity for creating mortgage of the HUF property.

In view of these claims of Mili Raj Yes Bank filed a recovery case under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act (being O.A.No. 135/2011) against the defaulting borrower and guarantors for recovery of over eleven crores of rupees. Yes Bank Ltd. also lodged an FIR No. 05/2012 against Narinder Kumar Rajgarhia, his son Prateek Rajgarhia and others for having cheated it by taking loan from it on the basis of forged title deed of the property in question. This was claimed to be so since Mili Raj had come out with a sale deed which showed the property in question to be in the name of N.K.Rajgarhia HUF. She has also been claiming that she was not having good relations with her father N.K.Rajgarhia and her brother Prateek Rajgarhia and both of them had got together in obtaining loans of crores of rupees by mortgaging the property in question in favour of two financial institutions. I was informed during the course of hearing that till date no person had been held guilty by the court of criminal jurisdiction. In view of the fact that Yes Bank Ltd. had claimed in its FIR against Narinder Kumar Rajgarhia and his son and others that the title deed kept with it by Narinder Rajgarhia as security was being alleged by his daughter to be forged Kotak Mahindra Bank started claiming physical possession of the property in question from Yes Bank. Therefore, Yes Bank also approached DRT with its own S.A.(87/2016) for a direction to Kotak Mahindra Bank not to ask possession of the property in question from it.

It appears that during the pendency of the litigations between all these parties DRT permitted that Kotak Mahindra Bank could proceed to sell the property in question and Yes Bank will hand over possession to the successful bidder. It is the case of Yes Bank that that the sale proceeds from the sale of the property in question were to be paid to it after clearance of the dues of Kotak Mahindra Bank and thereafter possession was to be handed over to the buyer.

The learned DRT disposed of the O.A. of Yes Bank Ltd. as well as four SAs vide impugned common order dated 13.4 2017. O.A. of Yes Bank Ltd. has been allowed to the extent that the money claim of this bank only has been allowed while mortgage of the property in question has been negatived for the reason that Yes Bank Ltd. itself had lodged an FIR that mortgage in its favour was created by Narinder Rajgarhia on the basis of forged title document. Consequently the S.A of Mili Raj(S.A.No. 73/2011) filed against Yes Bank Ltd. has been allowed while that of Yes Bank Ltd.(87/2016) against Kotak Mahindra Bank was dismissed. Yes Bank Ltd. has not challenged that decision/findings of the DRT. That way the grievances of Mili Raj against Yes Bank Ltd. were taken care of.

The relevant portions of the impugned order in so far as the same pertain to the challenge of Ms. Milli Raj against Kotak Mahindra Bank and with which only Yes Bank Ltd. is aggrieved are re-produced below:-

"SA No. 71/2016

This SA has been filed on behalf of applicant herein i.e. Ms.Milli Raj under section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFEASI Act 2002) praying therein to declare the notice under section 13(4) of SRAFEASI Act and possession notice issued by respondent no.1 i.e. Kotak Mahindra Bank both dated 11.2.2016 under rule 8(1) as bad, illegal, void and unenforceable in law and same be quashed and set aside along with other relief(s).

Briefly stated facts of the case are that applicant herein is neither a borrower nor a guarantor nor a mortgagor of the respondent bank applicant remain most of time outside Delhi due to work involved. It is stated in the present case that on 22.2.2016, when the applicant came at her house at Premises No. D-52, Defence Colony, New Delhi-52, she was shocked to find a purported back dated notice purportedly dated 11.2.2016 interalia taking symbolic possession for non-payment of the dues of Rs. 1,34,79,773/- in respect of purported loan purportedly taken by Narendra Kumar Rajgarhia, together with Co-borrower Pratik Rajgarhia and purported guarantor Kalpana Rajgarhia, however, applicant is neither a borrower nor a guarantor to the alleged loan transaction. Further the respondents no.2 to 4 have wrongfully and illegally without any prior knowledge, consent and permission from the petitioner purportedly mortgaged 2nd Floor of the Flat in favour of respondent bank which was impermissible. The said Flat is the property belonging to HUF known as N.K. Rajgarhia (HUF), in which the petitioner is one of the co-parcener, member beneficiary and co-owner and because of her own right of ownership, she has valuable interest in the property. It is also stated that bank is also incompetent to take on mortgage the property belonging to HUF without the permission of all the members of the HUF. It is further stated that on enquiry, the petitioner came to know that the purported loan was purportedly taken initially by Citi Financial Consumer Finance Ltd., which was assigned to KMB and Citi Financial Consumer Finance Ltd., not being a Financial Institution within the definition of ''financial institution'' under the SARFEASI Act, respondent no.1, despite being a Bank, is not entitled to exercise any powers or authority as a Bank under provisions of the act. It is also stated that present petitioner has also earlier filed SA No. 73/2011 against the action of Yes Bank qua the property in question and vide order dated 12.9.2011. this Tribunal directed to maintain status quo in regard to property in question.

Notice on this SA was issued to the respondents and respondent no. 1 bank entered appearance through counsel and filed its reply.

Reply to this SA has been filed on behalf of respondent no. 1 bank stating therein that the petitioner herein not only consented for the mortgage of the property but the same was duly attested by Notary public on 03.02.2003. It is stated that present case is apparent connivance between the petitioner who is related as daughter to respondent no. 2, as sister to respondent no. 3 while respondent no. 4 is mother of the petitioner. It is further stated that another SA bearing no. 58/2011 filed by respondent no. 2 as proprietor of M/s Texcomash Export against Yes Bank Ltd. before this Tribunal was taken up on 26.8.2011 wherein opportunity was granted to the respondent no. 2 to deposit Rs. 50.0 lac before 2.9.2011 i.e. the date of auction and further sum of Rs. 1.50 crore upto 30.9.2011, however, respondent no. 2 failed to deposit even a single penny and finally on 9.1.2014, the petition was dismissed in default. It is also pertinent to note that yet another SA bearing no. 73/2011 was filed by the applicant herein wherein the ground taken was that the respondent no. 2 being the co-parcener of the HUF never consented for mortgage of the property favouring the said respondent bank. It is also relevant to note the FIR No. 05/2012 under Section 420, 467, 468, 471 read with Section 120B of IPC and 13(2) of PC Act, P.S. VasantKunj, New Delhi, district South was lodged inter alia against respondent no. 2 (father of petitioner), as accused no. 1 along with her brother Sh. Pratik Rajgharia, as accused no. 2 being respondent no.3 herein, which is being pursued by EOW before the Court of Ld. ACMM, District Court, Saket qua fraudulent transaction of about 13,93,42,983.69 involving Yes Bank and the charge sheet has been filed on 12.2.2013 by EOW. Respondent bank has given details about Bali Applications, SLP and WP preferred by respondent no. 2 as well as Execution Petition filed by respondent bank for execution of Award dated 31.3.2011. It is stated that petitioner along with respondents no. 2 to 4 are abusing the provisions of law, initiating various proceedings one after another, obtaining interim orders on various grounds thereafter define the same later on.

Re-joinder to SA has also been filed by the applicant herein denying the allegations made by respondent bank and reiterating the averments made in the present SA.

Both the parties have also filed their evidence, documents as well as their written submissions.

SA No. 174/2016

This SA has been filed on behalf of applicant i.e. Sh. Narender Kumar Rajgharhia under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act 2002) praying therein to declare the purported notice dated 2.6.2016 for effecting sale of the property bearing no. 2nd Floor, D-52, Defence Colony issued by respondent no.1 i.e. Kotak Mahindra Bank as bad, illegal, void and unenforceable in law and same be quashed and set aside.

Notice on this SA were issued to the respondents and respondent no.1 bank entered appearance through counsel.

Order on SAs

Having heard Ld. Counsels for the parties and perusal of record reveals that in all the four SAs, the whole controversy revolves around the property bearing no. D-52, 2nd Floor (with roof rights), Defence Colony, New Delhi which is common in all the four SAs, hence by way of this common order, I shall dispose of all the SAs by one common order. This is also a matter of record that vide order dated 1.4.2016 passed in S.A No. 87/2016 (Yes Bank Vs. KMB), this Tribunal directed the KMB to proceed further for sale of the said property and applicant to hand over the possession of the property to highest bidder. Further KMB in S.A No. 87/2016 (Yes Bank Vs. KMB) has also filed Tripartite Agreement dated 3.1.2017 wherein KMB (hereinafter referred to as 'Seller'), M/s Jairaj Developers LLP through its partners, Sh. Subhash Arora (hereinafter referred to as the 'Buyer'), Sh. N.K Rajgharia, Sh. Prateek Rajgharia and Ms. Kalpana Rajgharia (hereinafter referred to as 'Confirming Party no. 1') and Ms. Milli Raj (hereinafter referred to as 'Confirming Party No. 2') have executed the agreement wherein the second floor of the land and property no. D-52, Defence Colony, New Delhi - 110 024 has been valued at Rs. 4.50 crore and KMB has accepted Rs. 60.0 lac as part payment form the Buyer M/s Jairaj Developers and KMB shall be settling the claims for an amount of Rs. 1.60 crore as full and final settlement. It was further agreed that Rs. 150 crore shall be released in favour of Ms. Milli Raj and Rs. 1.40 crore shall be deposited with DRT-I, Delhi. It is now submitted on behalf of Yes Bank that the said arrangement, except the amount to be paid to KMB, is illegal and unlawful in the eyes of law since the same was executed without consultation with Yes Bank ( applicant of O.A No. 135/2011 ) and furthermore the shares have been decided without any indulgence and approval of this Tribunal.

After going through all the aspect of the controversy involved in all the four SAs, this Tribunal is of the view that the mortgage of Yes Bank in the property i.e. D-52, Second Floor with roof rights, Defence Colony, New Delhi was created on the basis of forged documents...................

Since mortgage of Yes Bank in respect of property bearing no. D-52, Second Floor (with roof rights) has been declined by this Tribunal and said property is released from the purview of mortgage of Yes Bank i.e. applicant in O.A No. 135/2011 hence S.A No. 73/2011 (Ms. Milli Raj Vs. Yes Bank Ltd.) is hereby allowed and S.A No. 87/2016 (Yes Bank Vs. KMB) is hereby dismissed accordingly."(emphasis supplied)

Now as far the second S.A. of Milli Raj(being S.A No. 71/2016) against Kotak Mahindra Bank and the fourth S.A. filed by her father also against Kotak Mahindra Bank are concerned, it appears from the records and submissions made by all the advocates during the course of arguments that even though Mili Raj had levelled very serious allegations against her father and brother on the basis of which Yes Bank Ltd. had initiated criminal proceedings against them which are still pending trial in a court of Magistrate but when the time came to establish the truth of her case she did not even make any attempt to prove her case against Kotak Mahindra Bank. It appears that when the O.A. of Yes Bank and SAs of different parties were pending, and which cases were all being taken up together by DRT, Kotak Mahindra Bank entered into a settlement on 03.01.2017 with Narinder Rajgarhia, his wife Kalpana and their son Prateek Rajgarhia and daughter Milli Raj. As per that settlement Kotak Mahindra agreed to accept payment of Rs. 1.60 crores in full and final settlement of its claim out of which Rs. sixty lacs was paid to it by a third party which had agreed to purchase the property in question for Rs. 4.50 crores. A sum of Rs. 1.50 was to be paid to Milli Raj and balance of Rs.1.40 crores was agreed to be payable to Narinder Kumar Rajgarhia and his son Prateek Rajgarhia.

Learned DRT accepted that settlement and put its seal of approval and disposed of the SAs of Milli Raj and her father filed against Kotak Mahindra Bank. This is how these two SAs were disposed of by the DRT:-

"60. Since all the parties of S.A No. 71/2016 (Ms.Milli Raj Vs. KMB) and S.A NO. 174/2016 (Sh. N.K Rajgharia Vs. KMB) have entered into a settlement by way of Tripartite Agreement dated 3.1.2017 and Ld. Counsels for the concerned parties have conceded for the said Tripartite Agreement and also prayed that the SAs may be disposed of in terms of Tripartite Agreement. Hence, in the light of Tripartite Agreement dated 3.1.2017, both the SAs stands disposed off accordingly. However, it is directed that being borrower / guarantor to the credit facilities granted by Yes Bank i.e. applicant of O.A No. 135/2011, the share of Sh. N.K Rajgharia (who is respondent no. 2 in SA No. 71/2016 and applicant of S.A No. 174/2016) and Sh. Prateek Rajgharia (who is respondents no. 3 in SA No. 71/2016), in pursuance to Tripartite Agreement dated 3.1.2017, shall be kept in the shape of FDR with this Tribunal which may be attached after issuance of Recovery Certificate in O.A No. 135/2011 in due course of time. It is also made clear that in case defendants of OA No. 135/2011 deposit the amount due to the Yes Bank, the amount so deposited in the shape of FDRs with this Tribunal shall be released in favour of Sh. N.K Rajgharia and Sh. Prateek Rajgharia (defendants no. 2 & 3 in O.A No. 135/2011)."

Yes Bank is aggrieved with the direction given for payment of Rs. 1.50 crores to Mili Raj out of the sale proceeds of the mortgaged property in question. Its case in appeal is that the entire amount of Rs. 2.90 crores after payment of Rs. 1.60 crores to Kotak Mahindra Bank ought to have been paid to Yes Bank Ltd.and further that agreement between members of Rajgarhia family was a collusive affair to siphon off over a crore of rupees from the sale proceeds of property in question and pay the same to Mili Raj who was all along complaining that she was a victim of fraud played upon her by her own father and brother. Learned counsel for the appellant bank Mr. Hashmat Nabi had submitted that the above quoted para from the impugned order clearly shows that the learned Presiding Officer of DRT was conscious of the fact that he had already issued a recovery certificate in favour of Yes Bank Ltd. and against Narinder Rajgarhia and his family members in the earlier part of his impugned order and so he rightly attached the payment of Rs.1.40 crores payable under the above-referred settlement to Narinder Rajgarhia and his son Prateek Rajgarhia but erroneously directed payment of Rs. 1.50 crores to Milli Raj without any reason or justification and the entire sale proceeds after payment of the dues of Kotak Mahindra Bank ought to have been attached and ordered to be paid to Yes Bank Ltd. which was fighting to recover over fifteen crores of public money while Rajgarhia family comprising of husband-wife and their two children were trying to save a big chunk of the sale proceeds of the asset of Rajgarhia family which desire of theirs was fulfilled by the learned Presiding Officer of DRT by allowing payment of Rs. 1.50 crores to Milli Raj and that too without her even making an attempt to establish her case that her father and her brother had illegally mortgaged the property in question without her consent which conduct of hers also showed that she had taken a false stand initially in her SA that mortgage was created without her knowledge and consent and which claim of hers was refuted by Kotak Mahindra Bank which had claimed that she was very much a party to the mortgage transaction.

On the other hand learned counsels representing Rajgarhia family, which was earlier split on the point of creation of mortgage of the property in question but with the passage of time appear to have got together, though the submission of counsel for Yes Bank was that they were always together but were showing as if there were serious disputes amongst them in order to avoid recovery of crores of rupees from them, had submitted in one voice that the S.A. of Yes Bank Ltd. having been rejected and in its O.A. its claim of being mortgagee of the property in question also having been rejected it is left with role to play and challenge the decision in the two SAs of Mili Raj and her father. It was contended that Yes Bank Ltd. no longer was a secured creditor and it has not challenged the decision of DRT and, therefore, it cannot be heard to say that the settlement arrived at with Kotak Mahindra Bank was not legal as far as it had been agreed by the Bank and Rajgarhia family members that after paying the dues of Kotak Mahindra Bank the Yes Bank Ltd. was not to have any claim over the remaining sale consideration. So, both these appeals are liable to be dismissed, submitted learned counsels for the Rajgarhia family as also of Kotak Mahindra Bank and even the buyer of the property in question under private treaty.

After giving my due consideration to the rival cases of the parties, submissions made at the Bar and going through the entire records I have unhesitatingly come to the conclusion that the learned DRT was not at all justified in disposing of the two SAs of father and daughter making the so called settlement dated 3rd January,2017 as the basis for its decision. The legal position for disposal of Securitisation Applications under the SARFAESI Act is that when any person feeling aggrieved by any of the measures taken by a secured creditor approached DRT he/she has to establish that the secured creditor had initiated measures under this Act without strict compliance of the provisions of law/Rules and in case the DRT after examining the evidence adduced from both sides is satisfied that there was any kind of violation of law/Rules by a secured creditor then its actions can be quashed and if possession of the mortgaged property stands taken over its restoration to the mortgagor can be directed. Ms. Milli Raj and her father in their respective SAs were both complaining that there was no valid mortgage of the property in question since consent of all the HUF members was not taken by the erstwhile Citi Financial Consumer Finance India which had originally granted loan to Narinder Kumar Rajgarhia on the security of property in question. However, Ms. Milli Raj as well as her father chose not even to adduce any evidence in support of their cases. In view of their not seeking to establish and substantiate their pleas in their S.As and particularly that of Milli Raj against Kotak Mahindra Bank the learned DRT ought to have dismissed the two remaining SAs(71/2016 and 174/2016) for want of evidence and substantiation of the cases based on which they were claiming that actions of Kotak Mahindra Bank as assignee of Citi Financial Consumer Finance India were illegal and so the property in question was liable to be released from the purview of mortgage as was done in the case of Yes Bank Ltd. However, the learned Presiding Officer did not do that and disposed of the two SAs of father and daughter in a way which according to the counsel for Yes Bank Ltd. and in my view also was not at all the right way of dealing with SAs under Section 17(1) of SARFAESI Act. The DRT has totally overlooked its limited jurisdiction while deciding SAs. It converted the two SAs into a suit for determination of shares of coparceners of an HUF which is totally impermissible and unknown procedure adopted by the learned Presiding Officer.

The learned Presiding Officer failed to notice that even as per the settlement deed which was placed before her clearly specified that all the cases between the parties except the Yes Bank's OA were to be withdrawn and no verdict was to be invited from the DRT. Thus, when the SA applicants themselves were not wanting to have a judicial determination of their disputes with Kotak Mahindra Bank the learned Tribunal for that reason also was not justified in not disposing of the SAs in the manner in which the same were disposed of. Learned DRT had nothing to do with the enforcement the private settlement in SARFAESI proceedings which have strictly to be conducted as per the provisions of the SARFAESI law and not as per the desires of litigants as has been done by the tribunal below in the present case. Therefore, the impugned order of DRT disposing of the two SAs of Milli Raj and Narinder Kumar Rajgarhia putting its seal of approval to the settlement dated 03.01.2017 instead of rejecting both the SAs cannot be sustained and has become liable to be set aside and the two SAs have also become liable to be dismissed.

FINAL ORDER

Both these appeals filed by Yes Bank Ltd. are accordingly allowed and consequently S.A. Nos. 71/2016 and 174/2016 both will now stand dismissed.