Dec 12, 2009
The Supreme Court has held that banks are liable
to compensate a customer whose money is wrongly paid
to another person without verifying the original
signature of the account-holder as it amounted to
deficiency of service.
A bench of Justices D K Jain and T S Thakur
said the bank was guilty of honouring
the cheque presented by the fraudster by releasing
an amount over and above the amount in the account even
though the customer Gurnam Singh had no overdraft facility.
“On a query by the Court how in the absence of any overdraft
facility being enjoyed by the complainant, a cheque for the
amount which was in excess of the balance amount in the
account of the complainant could be honoured, learned counsel
is unable to furnish any satisfactory explanation.
“In our opinion, this fact, highlighted by the State
(Consumer) Commission, by itself is a glaring example
of negligence/deficiency in the service ofthe bank,” the bench said.
The bench made the remarks while dismissing the appeal of public
sector Vijaya Bank which had challenged the concurrent findings
of district consumer forum, Chandigarh, State Consumer Commission
and the National Consumer Commission which had heldthe bank
guility of deficiency in service for releasing an amount of
over Rs 3.5 lakh to a fraudster who had presented stolen
cheques of Gurnam Singh.
Saturday, December 12, 2009
Bank Officers should carefully examine the title deeds being deposited by borrowers :: DRT-2 Chennai.
Title :: Bank of Rajasthan Ltd., Applicant Vs. Authorised Officer,
State Bank of India & Others, Respondents
SARFAESI Application No.23/2007
Decision dated 25-02-2009
J U D G M E N T
Hon'ble Shri E. Jacob R. Daniel,
M.A., M.L., D.C.F.Sc.,
Presiding Officer
1. This application is filed by the Bank of Rajasthan Ltd. the applicant herein to set aside the Tender Notice dt.20.1.2007 published by the 1st respondent bank in respect of the subject property and to declare that the 1st respondent did not have the legal right or authority in law to take any steps against the subject property under the provisions of SARFAESI Act.
1.1 The case of the applicant, in brief, is as follows:-
The applicant had given certain financial facilities, namely, bank guarantee facilities to the 2nd respondent and the 3rd respondent had deposited the title deeds of the subject property at New Door No.34, (Old No.3-B) Balu Mudali Street, Thondiarpet, Chennai-600033 with an intention to create equitable mortgage thereon in favour of the applicant, on 19.1.2001. Memorandum of entry evidencing the creation of mortgage of the said property in favour of the applicant was recorded on 17.03.05. The 3rd respondent vide declaration dt.14.5.2003 and 1.12.2005 confirmed that the applicant would continue to hold the title deeds already deposited with the applicant on 19.1.2001 in respect of the subject property, as security for the enhanced limits sanctioned to the 2nd respondent by the applicant. The property was secured to the applicant in respect of the financial facilities granted to the 2nd respondent and also in respect of the financial facilities granted to M/s. C.D. Bullion, a partnership firm, in which the 3rd respondent is the managing partner.
1.2 It is also contended by the applicant that the beneficiaries of the bank guarantee facilities, i.e. State Bank of India and MMTC invoked the bank guarantees and payments were made by the applicant to the beneficiaries. As the 2nd respondent defaulted in making payments under the said Bank guarantee to the applicant, the account of the 2nd respondent was declared as Non-Performing Asset (NPA) on 21.5.2006. Subsequently notice under sec.13(2) of the Securitisation Act was issued to the 2nd respondent on 22.6.2006 by the applicant and on 30.8.2006, the applicant took possession of the subject property and published the Possession Notice in the New Indian Express and Thina Mani dt.16.9.2006. On 20.1.2007, the applicant was shocked to see a Tender Notice published by the 1st respondent in the New Indian Express with respect to the subject property which is exclusively mortgaged to the applicant, whereby the 1st respondent bank with an intention to sell the subject property, had invited tenders from interested public. The sealed tenders have been called for on or before 29th January 2007 and the auction was proposed to be held on 31.11.2007. Hence, the applicant vide letter dt.22nd January 2007 addressed to the 1st respondent objected to the said Tender Notice and called upon the 1st respondent to withdraw the said notice immediately.
1.3 The applicant has further contended that even assuming whilst denying that the applicant does not have exclusive charge, the 1st respondent has not approached it for any consent and no consent was given by the applicant to the 1st respondent. As on 22.6.2006, a sum of Rs.118.78 lakhs with interest is payable by the 2nd respondent to the applicant. The act of the 1st respondent is clearly illegal, malafide and without authority. Therefore the same deserves to be struck down.
2. The 1st respondent has filed a reply statement contending that the applicant has not by any document substantiated that they have a valid security interest created in their favour over the subject property. The SARFAESI Appeal does not contain any schedule disclosing the details of the property over which the applicant claims that security interest is created in their favour, under the provisions of the SARFAESI Act. Further, in various paragraphs of the application, the property is described as situated in Chennai-600033. The 1st respondent is not proceeding against any property situated in Chennai-600033 and the auction is only against the property that is situated in Chennai-600021, which is secured in their favour by virtue of mortgage created by the 3rd respondent herein. On this ground alone, the above appeal is liable to be dismissed with an exemplary cost.
2.1 The 1st respondent has denied that this Tribunal has jurisdiction to entertain the the present application. The entire cause of action arose at Erode where the 2nd he and 3rd respondents reside and at Coimbatore where the respondent is carrying on the business. Even according to the contentions of the appellant, the 2nd and 3rd respondents availed the facilities at Erode. Therefore this Hon'ble Tribunal has no jurisdiction to entertain this application. The 1st respondent has also denied that the application is filed within the period of limitation.
2.2. The 1st respondent has contended that it was not aware of the alleged financial facilities said to have been given to the 2nd respondent by the applicant. The 3rd respondent could not have created any equitable mortgage in favour of the applicant as alleged. The 3rd respondent, as the absolute owner of the subject property covered in the Sale Deed dt.20.10.1994 had mortgaged the same with the State Bank of India, Coimbatore Main Branch to secure credit facility availed by them The mortgage was created by depositing the original title deed and the same was confirmed by execution of a memorandum by the 3rd respondent. The alleged memorandum of entry evidencing the alleged mortgage relied on by the appellant is self serving and does not in any manner substantiate the alleged mortgage in their favour. The contentions that the 3rd respondent acknowledged the deposit of title deeds for the enhanced limit has been denied.
2.3 The 1st respondent has also contended that on the request of the 3rd respondent, as Proprietor of the 2nd respondent, State Bank of India, Coimbatore Main Branch had sanctioned a metal (Gold) Loan, Bank Guarantee and Cash Credit facilities by sanction letter dt.28.3.2005. The 2nd respondent had been enjoying the facilities with the State Bank of India, Coimbatore Branch, even before and the said sanction was only for the enhanced limits. The sanctioned terms were duly agreed by the 3rd respondent as the proprietor of the 2nd respondent and his wife Mrs. Pushbha, being the guarantor to the facilities. The facilities were availed against the security of the subject property owned by the 3rd respondent and necessary documents were executed to secure the facilities availed. The security of the immovable property was created by deposit of the original title deeds and confirmed by a letter executed by the 3rd respondent.
2.4 As the 3rd respondent did not repay the outstanding dues, the 1st respondent issued a demand notice under sec.13(2) dt.4.7.2006 to the borrower as well as the guarantor, calling upon them to pay the outstanding sum of Rs.98,16,187.04 with further interest and cost. Since the said demand was not complied with, the 1st respondent initiated further action as provided under sec.13(4). The property was taken possession by the 1st respondent on 28.10.20026 by affixure of the possession notice in the property and serving the same on the 3rd respondent. The possession notice dt.28.10.2006 was also published in two newspapers. Pursuant to the possession notice, the 1st respondent advertised the property for sale by sale notice dt.14.11.2006. The sale notice was served on the 3rd respondent and his wife. The 3rd respondent and his wife aggrieved by the auction notice, filed O.A.(S)118/06 on the file of DRT, Coimbatore. After considering the entire pleadings and arguments, the Hon'ble Tribunal Coimbatore dismissed the said application. The 1st respondent has contended that the applicant does not have any valid security interest created in their favour, as alleged. Hence, the action by them against the property under Securitisation Act is unsustainable in law. Therefore the 1st respondent has prayed to dismiss this application as devoid of merits with exemplary costs.
3. The points that arise for consideration are:
1. Whether this Tribunal has jurisdiction to adjudicate this matter;
2. Whether the claim of the applicant is barred by limitation;
3. Whether the applicant is entitled to the relief sought for in the application;
4. Whether R1 bank has legal right or authority in law to take any step against the subject property under the provisions of SA.
3.1 I have heard in detail, the arguments of the counsel for applicant bank and R1 bank. I have also perused the application, reply statement filed by R1 bank and typed set of papers submitted by both sides.
4. Point 1: R1 bank has challenged the jurisdiction of this Tribunal to adjudicate the issue in the above SA. The Ld. Counsel for the applicant submitted that the subject property in respect of which tender notice was published by R1 bank on 20.1.07 in the New Indian Express under the provisions of the SARFAESI Act is situated in Chennai. Further, tender notice was also published in the Chennai edition of the said newspaper. As such, substantial part of the cause of action has arisen in Chennai. Therefore the Ld. Counsel for applicant bank pleaded that this Tribunal has jurisdiction to adjudicate this matter. Per contra, the Ld. Counsel for R1 bank vehemently contended that the entire cause of action arose at Erode where R2 and R3 are residing and at Coimbatore where R1 bank is carrying on business. Moreover, R2 and R3 had availed credit facilities from R1 bank at Erode. Therefore according to the Ld. Counsel for R1 bank, the above SA ought to have been filed before Hon'ble DRT, Coimbatore and this Tribunal has no jurisdiction to entertain the SA.
4.1 I have given a careful consideration to the arguments put forth by both the counsels. I am inclined to agree with the submissions made by the counsel for the applicant bank for the simple reason that R1 bank had taken steps under sec.13(4) of the SARFAESI Act by taking possession of the subject property which is situated in Chennai and making publication in the Chennai edition of the newspaper. Therefore, even though R1 bank had sanctioned credit facilities to R2 and R3 at Erode, substantial part of the cause of action, namely, measures taken by R1 bank u/s 13(4) of the Act falls within the jurisdiction of this Tribunal.
4.2 It is not out of place to point out that in SARFAESI Act no specific provision has been provided to decide and determine the jurisdiction. Sec.17(1) of the Act, reads as under: any person (including borrower), aggrieved by any of the measures referred to in subsection (4) of section 13 taken by the secured creditor or his authorised officer in this chapter may make an application........ to the DRT having jurisdiction in the matter, within 45 days from the date of such measures have been taken. Thus, a plain reading of section 13(1) of SARFAESI Act, makes it clear that any person aggrieved by any measures taken under sec.13(4) of SARFAESI Act is permitted to file an application under section 17 before DRT having jurisdiction in the matter. As already decided by the Hon'ble Supreme Court in the landmark judgement M/s. Transcore Vs. Union of India , provisions of SARFAESI Act can be invoked even though recovery proceedings have been initiated under RDDB&FI Act by the bank/R1. Once the bank invokes the provisions under section 13(4) of SARFAESI Act, the jurisdiction has to be decided and determined by taking into account, the place where the measures referred to under section 13(4) of the Act has been taken.
4.3 In this case, admittedly, the subject property is situated in Chennai. The applicant bank had taken symbolic possession of the property on 30.8.06 and the 1st respondent bank had taken possession of the subject property on 28.10.06. The Hon'ble Supreme Court in the decision M/s. Transcore Vs. Union of India & Another reported in AIR 2007 SC 712 has categorically held in para 56 as under:
Section 13(4) of the NPA Act proceeds on the basis that the borrower, who is under a liability, has failed to discharge his liability within the period prescribed under S.13(2), which enables the secured creditor to take recourse to one of the measures, namely, taking possession of the secured assets including the right to transfer by way of lease, assignment or sale for realising the secured assets. S.13(4-A) refers to the word 'possession' simpliciter. There is no dichotomy in sub-section (4-A).
Rule 8 deals with the stage anterior to the issuance of sale certificate and delivery of possession under R.9. Till the time of issuance of sale certificate, the authorised officer is like a court receiver under O. XL, R.1, CPC. The Court receiver can take symbolic possession and in appropriate cases where the Court receiver finds that a third party interest is likely to be created overnight, he can take actual possession even prior to the decree. The authorised officer under R.8 has greater powers than even a Court Receiver as security interest in the property is already created in favour of the Bank/FIs. That interest needs to be protected. Therefore, R.8 provides that till issuance of the sale certificate under R.9, the authorised officer shall take such steps as he deems fit to preserve the secured asset. It is well settled that third party interests are created overnight and in very many cases those third parties take up the defence of being bona fide purchaser for value which are sought to be avoided by R.8 read with R.9 of the 2002, Rules. In the circumstances, the drawing of dichotomy between symbolic and actual possession does not find place in scheme of the NPA Act read with the 2002, Rules.
Thus, when the Authorised Officer of the 1st respondent bank had taken possession of the subject property on 28.10.06, the right of the owner of the property to deal with the same is interfered.
4.5 As per S.13(6) of SARFAESI Act, Any transfer of secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditor shall vest in the transferee all rights in , or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset. It is, thus, clear that when possession of the subject property which is situated in Chennai was taken by R1 bank, a part of cause of action had arisen within the jurisdiction of this Tribunal. The action taken by the Authorised Officer under S.13(4) of SARFAESI Act does not directly relate to the debt. On the other hand recovery of debt is the result of the action taken by the Authorised officer under S.13(4) of the Act. Thus the action taken by the Authorised Officer under S.13(4) of the SARFAESI Act has resulted in the taking possession of the subject property. Therefore, it can be safely concluded that a part of cause of action in this case has arisen within the jurisdiction of this Tribunal.
4.6 It is true that under SARFAESI Act, jurisdiction of the Tribunal is not mentioned. But S.37 of the SARFAESI Act has not barred the application of RDDB&FI Act. In other words, SARFAESI Act co-exists with RDDB&FI Act. As observed by the Hon'ble Supreme Court in the landmark Judgement in M/s. Transcore Vs. UOI & Another, SARFAESI Act 2002 is an additional remedy to RDDB&FI Act 1993 and both the Acts together constitute one remedy.
4.7 As the provisions of RDDB&FI Act are not excluded by SARFAESI Act 2002, for deciding the jurisdiction of the Tribunal, we have to take recourse under S.19 of RDDB&FI Act, 1993, which reads as under:-
19. Application to the Tribunal.- (1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction,-
1. the defendant, or each of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or
2. any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or
3. the cause of action, wholly or in part, arises:
Rule 6 of DRT (Procedure) Rules, 1993, also deals with the place of filing application under S.19 of RDDB&FI Act, 1993 which reads as under:-
�Place of filing application.- The application shall be filed by the applicant with the Registrar within whose jurisdiction,-
1. the applicant is functioning as a Bank or Financial Institution, as the case may be, for the time being; or
2. the defendant, or each of the defendants where there are more than one, at the time of making application, actually or voluntarily resides, or carries on business, or personally works for gain; or
3. any of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or
4. the cause of action, wholly or in part, arises.
Thus, under S.19 of RDDB&FI Act and Rule 6 of DRT (Procedure) Rules, 1993, the Tribunal within whose jurisdiction cause of action, wholly or in part, arises, gets jurisdiction to entertain the application under S.19 of RDDB&FI Act, and S.17 of SARFAESI Act, 2002.
As discussed supra, in this case, part of cause of action has arisen within the jurisdiction of this Tribunal. Therefore, there cannot be any iota of doubt that this Tribunal has jurisdiction to adjudicate the subject matter in the above SA. Accordingly, this point is answered in favour of the applicant bank.
5. Point 2: The Ld. Counsel for R1 bank has contested the claim of applicant bank that the above SA was filed within a period of 45 days as provided under section 17(1) of the SARFAESI Act. In the application itself, the applicant bank has specifically stated that the tender notice was published by R1 bank in the �New Indian Express� on 20.1.07. Copy of the said publication is available in the typed set and the date of publication is not in dispute. Therefore , this Tribunal has no hesitation to conclude that the above SA has been filed by the applicant bank within the period of limitation under section 17(1) of the SARFAESI Act.
6. Point 3 & 4: This is a peculiar case in which two nationalised banks are claiming mortgage right over the same property mortgaged by the same person. The applicant bank as well as R1 bank have based their claim on the same title deed standing in the name of R3 bearing Doc.No.2221 of 1994. Therefore, at the very outset it can be said that the original documents relating to the said property submitted before this Tribunal by the applicant bank and R1 bank cannot be genuine. There cannot be two original documents in respect of the same property. Therefore a meticulous and critical analysis of evidence placed before this Tribunal by the applicant bank and R1 bank, is required to find out as to which original is genuine.
6.1 It is an admitted fact that R2 had availed credit facilities from the applicant bank and R1 bank and R3 had stood as guarantor for the credit facilities sanctioned in the name of R2 and R3 had submitted the original title deed relating to his property at Chennai and created equitable mortgage in favour of the applicant bank and R1 bank. The documents submitted by the a/b along with the above SA, beyond doubt, shows that credit facilities were availed by R2 & R3 from the applicant on 19.1.2001. On 19.1.2001 itself, R3 had deposited title deed of the property situated at 34, Balu Mudali Street (R.S.3687), Chennai-21 which was offered as security for the credit facility granted to R2. On 17.3.05, Memorandum of Entry was drawn in favour of the applicant by R3 for having deposited the title deed creating equitable mortgage. On 14.5.03 and on 1.12.08, R3 had declared and confirmed the deposit of title deed on 19.1.01 and stated that the applicant bank would continue to hold the title deed to secure the liabilities of R2. The account of R2 was classified as NPA by the applicant bank on 21.5.06. Notice under section 13(2) of SARFAESI Act was issued by the applicant bank on 22.6.06. Symbolic possession of the subject property was taken by the applicant bank on 30.8.06 and on 16.9.06, possession notice was published by the applicant bank.
6.2 Now let us see the sequence of events and chronology of dates relating to the credit facilities sanctioned by R1 bank in favour of R2 and R3. In paragraph 5 of the reply statement, R1 has categorically admitted that metal (gold) loan, Bank Guarantee and cash credit facilities were sanctioned by R1 bank in favour of R2 and R3 by sanction letter dt.28.3.05. Even though in paragraph 5 of reply statement, it is stated that R2 and R3 had availed credit facilities prior to 28.3.05, the date of availing such facilities is conspicuously missing in the reply statement. Therefore, it has to be taken that R2 and R3 were granted credit facilities by R1 bank only on 28.3.05.
6.3 As per document No.1 in the typed set of papers submitted on behalf of R1 bank , Memorandum of Deposit for creation of charge for Term loan was signed by the bank officers on 17.3.05. R3, vide letter dt.18.3.05 (p.9 of the typed set of R1) had confirmed the creation of mortgage by R2 and R3 in favour of R1 bank. R1 bank had issued notice under section 13(2) of SARFAESI Act, to R2 and Smt. Pushbha on 4.7.06 (page Nos.11 & 23 of the typed set of R1). On 5.9.06, possession notice was issued by R1 to R2 and Mrs. Pushbha, the Guarantor (page Nos.29 & 33 of R1's typed set). Again on 20.9.06, possession notice under sec.13(4) of SARFAESI Act was sent to R2 and Mrs.Pushbha. Vide letter dt.28.9.06, R1 had withdrawn the possession notice dt.5.9.06 and 20.9.06. Thereafter, possession notice dt.28.10.06 was issued by R1 bank to R2 & Mrs. Pushbha. On 9.11.06, possession notice was published in Tamil daily �Dinamani� and an English Daily. On 14.11.06, sale notice was issued by R1 bank to R2 and Mrs.Pushbha challenging the possession notice issued by R1 bank, R2 filed OA(S) No.118/06 before DRT, Coimbatore which was dismissed on 5.2.07.
7. From the above details furnished by R1 bank, it is crystal clear that R1 bank had granted credit facilities to R2 & R3 only on 28.3.05 and equitable mortgage was created on 17.3.05 which was confirmed by R3 on behalf of R2 on 18.3.05. On the other hand, R2 and R3 had availed credit facilities from the applicant bank as early as on 19.1.2001 and R3 on behalf of R2 had deposited title deed relating to the subject property on 19.1.01 itself. Further R3 had confirmed deposit of title deed on 19.1.01 in his letter dt.14.5.2003. Again on 1.12.05, R3 had confirmed that applicant bank would continue to hold the title deed relating to the subject property which was already deposited by R3 with applicant bank on 19.1.01.
7.1 It is, thus, established beyond any shadow of doubt that the applicant bank had transacted business with R2 & R3, four years prior to R1 bank, granting credit facilities to R2 & R3. Therefore, it goes without saying that applicant bank had the first charge over the subject property which was offered as security for the credit facilities availed by R2 & R3 by creating equitable mortgage in favour of the applicant bank. The sequence of events and chronology of dates would clinch the issue that the transaction between the applicant bank and R2 & R3 was first in point of time and that the applicant bank has first charge over the subject property.
8. Having established that the applicant bank has first charge over the subject property offered as security by R3 on behalf of R2, it has to be next seen as to how and on what circumstances R3 had deposited two original title deeds in respect of the same property with document No.2221/1994 registered on 20.10.94. On the direction of this Tribunal, the applicant bank and R1 bank had submitted the original title deed with document No.2221/1994 registered on 20.10.94 in respect of the subject property along with a memo. There cannot be two original title deeds in respect of the same property and same document number. Therefore, on the basis of the materials available on record, it should be decided as to which title deed is genuine.
8.1 On 29.11.07, on behalf of applicant bank, a memo was filed enclosing a certified copy of document No.2221/1994 registered in favour of R3 on 20.10.94 which was obtained from the Office of Sub-Registrar, Royapuram. The applicant bank has submitted a memo on 29.11.07 enclosing Annexure B (chart) showing comparison of the original title deeds submitted by the applicant bank, R1 bank and certified copy of the same title deed furnished by SRO, Royapuram. The applicant bank has pointed out 16 differences between the original titled deed produced by R1 bank and certified copy of the title deed with Doc. No.2221/94 issued by the SRO, Royapuram. The chart showing details of the differences between the two title deeds submitted by the applicant and R1 banks was again verified by this Tribunal and I am convinced that the title deed relating to document No.2221/1994 registered on 20.10.94 in favour of R3 which was produced by the applicant bank tallies with the certified copy of the same title deed issued by SRO, Royapuram.
8.2 The applicant bank has succeeded in demonstrating before this Tribunal that the title deed submitted by R3 before R1 bank for creating equitable mortgage in favour of R1 bank is not the genuine title deed. Hence this Tribunal has no hesitation to come to the irresistible conclusion that the title deed with document No.2221/1994 issued by the Office of Sub-Registrar in favour of R3 and submitted to the applicant bank on 19.01.01 is the genuine title deed registered in favour of R3. In other words, R3 who had availed credit facilities in the name of R2 from the R1 bank had cheated the R1 bank by depositing a forged title deed in respect of the subject property which was already offered as security for the credit facilities sanctioned by R1 bank. Therefore, it is confirmed that the applicant bank which has first charge over the subject property is in possession of the genuine title deed registered in the name of R3 and offered as security for the credit facilities availed from applicant bank.
8.3 Further, on 21.5.06, the account of R2 was classified as NPA. Notice under section 13(2) of the SARFAESI Act was issued by applicant bank on 22.6.06. But, R1 bank which has been cheated by R3 by depositing fake and forged title deed had issued notice under 13(2) of SARFAESI Act only on 4.7.06, i.e., after the applicant had initiated SARFAESI proceedings against R2 and R3. Similarly, on 30.8.06, the applicant bank had taken symbolic possession of the subject property,whereas the R1 bank had taken symbolic possession of the same property only on 28.10.08. Thus starting from deposit of title deed till taking possession of the subject property, the applicant bank is the fore-runner taking action under SARFAESI Act in respect of the subject property before R1 bank started initiating action under the said Act. That is why, on 22.10.07, the applicant bank had sent a letter to R1 bank protesting the impugned tender notice for auction sale dt.20.10.07 issued by R1 bank. In other words, the applicant bank did not waste time to bring it to the notice of R1 bank that the subject property was mortgaged to applicant bank by R2 and R3 as early as on 18.1.2001 and that they have first charge over the subject property. The applicant bank through the said letter has also informed R1 bank that they have already taken possession of the subject property and caused paper publication.
9. From the facts and circumstances of this case, which are duly supported by documentary evidence, this Tribunal is of the considered view that the impugned tender notice of auction sale dt.20.1.07 is based on fake and forged title deed submitted by R2 and R3 and it is not in accordance with law. Hence the impugned tender notice dt.20.1.07 is liable to be set aside.
10. Before parting with the case, it should be pointed out that R1 bank has been cheated by R2 and R3 who had the audacity to produce a fake and forged title deed relating to the subject property and create equitable mortgage in favour of R1 bank for the credit facilities availed by R2 and R3. The acts committed by R2 and R3 amounts to commission of cognizable offences punishable under Indian Penal Code. This is a clear case in which a nationalised bank has been cheated by R2 and R3 who availed credit facilities from R1 bank and applicant bank giving same property as security and producing the genuine title deed before the applicant bank and fake and forged title deed before R1 bank. R2 and R3 who have availed such huge facilities on the basis of fake and forged title deed, should be brought to book and punished in accordance with law.
10.1 The fake and forged title deed relating to document No.2221/1994 was produced before R1 bank which in turn produced the same before this Tribunal, on 29.11.07. Therefore it is clear that R2 and R3 had created fake and forged title deed before it was produced before this Tribunal. Hence the bar against prosecution under sec.195 of Cr.P.C does not apply to the facts of this case. The Constitution Bench of Hon'ble Supreme Court in the decision in Iqbal Singh Marwah Vs. Meenakshi Marwah� reported in 2005 CRL LJ 2161 has held as under:-
Section 195 (1)(b)(ii) of CRPC applies when a document was forged in the custody of the Court. Forgery, if committed, before production in Court, sec.195 does not apply. Therefore, R1 bank which has been cheated by R2 and R3 by committing cognizable offences is hereby directed to lodge a criminal complaint with the Crime Branch CID of local police or Special Crime Branch of CBI, Chennai to register a case against R2 and R3 in respect of the fake and forged title deed with document No.2221/1994.
10.2. It is an unfortunate case, wherein a nationalised bank, which believes and trusts customers, had to part with public money of Rs.98 lakhs on the basis of fake and forged title deed. In the light of the forgoing discussion, I am of the considered view that the applicant bank has succeeded in proving its case through documentary evidence. Therefore, I am of the view that the impugned tender notice dt.20.10.07 is liable to be set aside. Accordingly, the impugned tender notice dt.20.10.07 issued by R1 bank is set aside.
10.3. After selling the subject property in auction sale and adjusting the sale proceeds towards the outstanding dues, the remaining sale proceeds after satisfying the applicant's dues, shall be deposited by the applicant bank with respondent bank towards the amounts due by R2 and R3 to R1 bank.
10.4 R1 bank is directed to lodge a criminal complaint as referred supra without delay, so that a case can be registered against R2 and R3 who have cheated the R1 bank to the tune of Rs.98 lakhs. This case should be an eyeopener to the bank officers who sanction credit facilities against title deeds which is produced by the borrowers as security. It is pertinent to point out that the bank officers should verify the genuineness of the title deeds by comparing the same with the copy available in the Sub-Registrar's Office before the same is accepted. It is not known whether in this case legal opinion was obtained by R1 bank before credit facilities were sanctioned to R2 and R3 on the basis of the forged title deed. If legal opinion was obtained, it is unfortunate that the forged nature of the title deed was not detected at that stage. With this observation, the above SA is allowed. No order as to costs.
11. Copy of the order be communicated to the parties concerned.
(Dictated to stenographer, transcribed by him, corrected, signed and pronounced by me in the Open Court on this 25th day of February 2009)
Sd/-
(E. JACOB R. DANIEL)
Presiding Officer
State Bank of India & Others, Respondents
SARFAESI Application No.23/2007
Decision dated 25-02-2009
J U D G M E N T
Hon'ble Shri E. Jacob R. Daniel,
M.A., M.L., D.C.F.Sc.,
Presiding Officer
1. This application is filed by the Bank of Rajasthan Ltd. the applicant herein to set aside the Tender Notice dt.20.1.2007 published by the 1st respondent bank in respect of the subject property and to declare that the 1st respondent did not have the legal right or authority in law to take any steps against the subject property under the provisions of SARFAESI Act.
1.1 The case of the applicant, in brief, is as follows:-
The applicant had given certain financial facilities, namely, bank guarantee facilities to the 2nd respondent and the 3rd respondent had deposited the title deeds of the subject property at New Door No.34, (Old No.3-B) Balu Mudali Street, Thondiarpet, Chennai-600033 with an intention to create equitable mortgage thereon in favour of the applicant, on 19.1.2001. Memorandum of entry evidencing the creation of mortgage of the said property in favour of the applicant was recorded on 17.03.05. The 3rd respondent vide declaration dt.14.5.2003 and 1.12.2005 confirmed that the applicant would continue to hold the title deeds already deposited with the applicant on 19.1.2001 in respect of the subject property, as security for the enhanced limits sanctioned to the 2nd respondent by the applicant. The property was secured to the applicant in respect of the financial facilities granted to the 2nd respondent and also in respect of the financial facilities granted to M/s. C.D. Bullion, a partnership firm, in which the 3rd respondent is the managing partner.
1.2 It is also contended by the applicant that the beneficiaries of the bank guarantee facilities, i.e. State Bank of India and MMTC invoked the bank guarantees and payments were made by the applicant to the beneficiaries. As the 2nd respondent defaulted in making payments under the said Bank guarantee to the applicant, the account of the 2nd respondent was declared as Non-Performing Asset (NPA) on 21.5.2006. Subsequently notice under sec.13(2) of the Securitisation Act was issued to the 2nd respondent on 22.6.2006 by the applicant and on 30.8.2006, the applicant took possession of the subject property and published the Possession Notice in the New Indian Express and Thina Mani dt.16.9.2006. On 20.1.2007, the applicant was shocked to see a Tender Notice published by the 1st respondent in the New Indian Express with respect to the subject property which is exclusively mortgaged to the applicant, whereby the 1st respondent bank with an intention to sell the subject property, had invited tenders from interested public. The sealed tenders have been called for on or before 29th January 2007 and the auction was proposed to be held on 31.11.2007. Hence, the applicant vide letter dt.22nd January 2007 addressed to the 1st respondent objected to the said Tender Notice and called upon the 1st respondent to withdraw the said notice immediately.
1.3 The applicant has further contended that even assuming whilst denying that the applicant does not have exclusive charge, the 1st respondent has not approached it for any consent and no consent was given by the applicant to the 1st respondent. As on 22.6.2006, a sum of Rs.118.78 lakhs with interest is payable by the 2nd respondent to the applicant. The act of the 1st respondent is clearly illegal, malafide and without authority. Therefore the same deserves to be struck down.
2. The 1st respondent has filed a reply statement contending that the applicant has not by any document substantiated that they have a valid security interest created in their favour over the subject property. The SARFAESI Appeal does not contain any schedule disclosing the details of the property over which the applicant claims that security interest is created in their favour, under the provisions of the SARFAESI Act. Further, in various paragraphs of the application, the property is described as situated in Chennai-600033. The 1st respondent is not proceeding against any property situated in Chennai-600033 and the auction is only against the property that is situated in Chennai-600021, which is secured in their favour by virtue of mortgage created by the 3rd respondent herein. On this ground alone, the above appeal is liable to be dismissed with an exemplary cost.
2.1 The 1st respondent has denied that this Tribunal has jurisdiction to entertain the the present application. The entire cause of action arose at Erode where the 2nd he and 3rd respondents reside and at Coimbatore where the respondent is carrying on the business. Even according to the contentions of the appellant, the 2nd and 3rd respondents availed the facilities at Erode. Therefore this Hon'ble Tribunal has no jurisdiction to entertain this application. The 1st respondent has also denied that the application is filed within the period of limitation.
2.2. The 1st respondent has contended that it was not aware of the alleged financial facilities said to have been given to the 2nd respondent by the applicant. The 3rd respondent could not have created any equitable mortgage in favour of the applicant as alleged. The 3rd respondent, as the absolute owner of the subject property covered in the Sale Deed dt.20.10.1994 had mortgaged the same with the State Bank of India, Coimbatore Main Branch to secure credit facility availed by them The mortgage was created by depositing the original title deed and the same was confirmed by execution of a memorandum by the 3rd respondent. The alleged memorandum of entry evidencing the alleged mortgage relied on by the appellant is self serving and does not in any manner substantiate the alleged mortgage in their favour. The contentions that the 3rd respondent acknowledged the deposit of title deeds for the enhanced limit has been denied.
2.3 The 1st respondent has also contended that on the request of the 3rd respondent, as Proprietor of the 2nd respondent, State Bank of India, Coimbatore Main Branch had sanctioned a metal (Gold) Loan, Bank Guarantee and Cash Credit facilities by sanction letter dt.28.3.2005. The 2nd respondent had been enjoying the facilities with the State Bank of India, Coimbatore Branch, even before and the said sanction was only for the enhanced limits. The sanctioned terms were duly agreed by the 3rd respondent as the proprietor of the 2nd respondent and his wife Mrs. Pushbha, being the guarantor to the facilities. The facilities were availed against the security of the subject property owned by the 3rd respondent and necessary documents were executed to secure the facilities availed. The security of the immovable property was created by deposit of the original title deeds and confirmed by a letter executed by the 3rd respondent.
2.4 As the 3rd respondent did not repay the outstanding dues, the 1st respondent issued a demand notice under sec.13(2) dt.4.7.2006 to the borrower as well as the guarantor, calling upon them to pay the outstanding sum of Rs.98,16,187.04 with further interest and cost. Since the said demand was not complied with, the 1st respondent initiated further action as provided under sec.13(4). The property was taken possession by the 1st respondent on 28.10.20026 by affixure of the possession notice in the property and serving the same on the 3rd respondent. The possession notice dt.28.10.2006 was also published in two newspapers. Pursuant to the possession notice, the 1st respondent advertised the property for sale by sale notice dt.14.11.2006. The sale notice was served on the 3rd respondent and his wife. The 3rd respondent and his wife aggrieved by the auction notice, filed O.A.(S)118/06 on the file of DRT, Coimbatore. After considering the entire pleadings and arguments, the Hon'ble Tribunal Coimbatore dismissed the said application. The 1st respondent has contended that the applicant does not have any valid security interest created in their favour, as alleged. Hence, the action by them against the property under Securitisation Act is unsustainable in law. Therefore the 1st respondent has prayed to dismiss this application as devoid of merits with exemplary costs.
3. The points that arise for consideration are:
1. Whether this Tribunal has jurisdiction to adjudicate this matter;
2. Whether the claim of the applicant is barred by limitation;
3. Whether the applicant is entitled to the relief sought for in the application;
4. Whether R1 bank has legal right or authority in law to take any step against the subject property under the provisions of SA.
3.1 I have heard in detail, the arguments of the counsel for applicant bank and R1 bank. I have also perused the application, reply statement filed by R1 bank and typed set of papers submitted by both sides.
4. Point 1: R1 bank has challenged the jurisdiction of this Tribunal to adjudicate the issue in the above SA. The Ld. Counsel for the applicant submitted that the subject property in respect of which tender notice was published by R1 bank on 20.1.07 in the New Indian Express under the provisions of the SARFAESI Act is situated in Chennai. Further, tender notice was also published in the Chennai edition of the said newspaper. As such, substantial part of the cause of action has arisen in Chennai. Therefore the Ld. Counsel for applicant bank pleaded that this Tribunal has jurisdiction to adjudicate this matter. Per contra, the Ld. Counsel for R1 bank vehemently contended that the entire cause of action arose at Erode where R2 and R3 are residing and at Coimbatore where R1 bank is carrying on business. Moreover, R2 and R3 had availed credit facilities from R1 bank at Erode. Therefore according to the Ld. Counsel for R1 bank, the above SA ought to have been filed before Hon'ble DRT, Coimbatore and this Tribunal has no jurisdiction to entertain the SA.
4.1 I have given a careful consideration to the arguments put forth by both the counsels. I am inclined to agree with the submissions made by the counsel for the applicant bank for the simple reason that R1 bank had taken steps under sec.13(4) of the SARFAESI Act by taking possession of the subject property which is situated in Chennai and making publication in the Chennai edition of the newspaper. Therefore, even though R1 bank had sanctioned credit facilities to R2 and R3 at Erode, substantial part of the cause of action, namely, measures taken by R1 bank u/s 13(4) of the Act falls within the jurisdiction of this Tribunal.
4.2 It is not out of place to point out that in SARFAESI Act no specific provision has been provided to decide and determine the jurisdiction. Sec.17(1) of the Act, reads as under: any person (including borrower), aggrieved by any of the measures referred to in subsection (4) of section 13 taken by the secured creditor or his authorised officer in this chapter may make an application........ to the DRT having jurisdiction in the matter, within 45 days from the date of such measures have been taken. Thus, a plain reading of section 13(1) of SARFAESI Act, makes it clear that any person aggrieved by any measures taken under sec.13(4) of SARFAESI Act is permitted to file an application under section 17 before DRT having jurisdiction in the matter. As already decided by the Hon'ble Supreme Court in the landmark judgement M/s. Transcore Vs. Union of India , provisions of SARFAESI Act can be invoked even though recovery proceedings have been initiated under RDDB&FI Act by the bank/R1. Once the bank invokes the provisions under section 13(4) of SARFAESI Act, the jurisdiction has to be decided and determined by taking into account, the place where the measures referred to under section 13(4) of the Act has been taken.
4.3 In this case, admittedly, the subject property is situated in Chennai. The applicant bank had taken symbolic possession of the property on 30.8.06 and the 1st respondent bank had taken possession of the subject property on 28.10.06. The Hon'ble Supreme Court in the decision M/s. Transcore Vs. Union of India & Another reported in AIR 2007 SC 712 has categorically held in para 56 as under:
Section 13(4) of the NPA Act proceeds on the basis that the borrower, who is under a liability, has failed to discharge his liability within the period prescribed under S.13(2), which enables the secured creditor to take recourse to one of the measures, namely, taking possession of the secured assets including the right to transfer by way of lease, assignment or sale for realising the secured assets. S.13(4-A) refers to the word 'possession' simpliciter. There is no dichotomy in sub-section (4-A).
Rule 8 deals with the stage anterior to the issuance of sale certificate and delivery of possession under R.9. Till the time of issuance of sale certificate, the authorised officer is like a court receiver under O. XL, R.1, CPC. The Court receiver can take symbolic possession and in appropriate cases where the Court receiver finds that a third party interest is likely to be created overnight, he can take actual possession even prior to the decree. The authorised officer under R.8 has greater powers than even a Court Receiver as security interest in the property is already created in favour of the Bank/FIs. That interest needs to be protected. Therefore, R.8 provides that till issuance of the sale certificate under R.9, the authorised officer shall take such steps as he deems fit to preserve the secured asset. It is well settled that third party interests are created overnight and in very many cases those third parties take up the defence of being bona fide purchaser for value which are sought to be avoided by R.8 read with R.9 of the 2002, Rules. In the circumstances, the drawing of dichotomy between symbolic and actual possession does not find place in scheme of the NPA Act read with the 2002, Rules.
Thus, when the Authorised Officer of the 1st respondent bank had taken possession of the subject property on 28.10.06, the right of the owner of the property to deal with the same is interfered.
4.5 As per S.13(6) of SARFAESI Act, Any transfer of secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditor shall vest in the transferee all rights in , or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset. It is, thus, clear that when possession of the subject property which is situated in Chennai was taken by R1 bank, a part of cause of action had arisen within the jurisdiction of this Tribunal. The action taken by the Authorised Officer under S.13(4) of SARFAESI Act does not directly relate to the debt. On the other hand recovery of debt is the result of the action taken by the Authorised officer under S.13(4) of the Act. Thus the action taken by the Authorised Officer under S.13(4) of the SARFAESI Act has resulted in the taking possession of the subject property. Therefore, it can be safely concluded that a part of cause of action in this case has arisen within the jurisdiction of this Tribunal.
4.6 It is true that under SARFAESI Act, jurisdiction of the Tribunal is not mentioned. But S.37 of the SARFAESI Act has not barred the application of RDDB&FI Act. In other words, SARFAESI Act co-exists with RDDB&FI Act. As observed by the Hon'ble Supreme Court in the landmark Judgement in M/s. Transcore Vs. UOI & Another, SARFAESI Act 2002 is an additional remedy to RDDB&FI Act 1993 and both the Acts together constitute one remedy.
4.7 As the provisions of RDDB&FI Act are not excluded by SARFAESI Act 2002, for deciding the jurisdiction of the Tribunal, we have to take recourse under S.19 of RDDB&FI Act, 1993, which reads as under:-
19. Application to the Tribunal.- (1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction,-
1. the defendant, or each of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or
2. any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or
3. the cause of action, wholly or in part, arises:
Rule 6 of DRT (Procedure) Rules, 1993, also deals with the place of filing application under S.19 of RDDB&FI Act, 1993 which reads as under:-
�Place of filing application.- The application shall be filed by the applicant with the Registrar within whose jurisdiction,-
1. the applicant is functioning as a Bank or Financial Institution, as the case may be, for the time being; or
2. the defendant, or each of the defendants where there are more than one, at the time of making application, actually or voluntarily resides, or carries on business, or personally works for gain; or
3. any of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or
4. the cause of action, wholly or in part, arises.
Thus, under S.19 of RDDB&FI Act and Rule 6 of DRT (Procedure) Rules, 1993, the Tribunal within whose jurisdiction cause of action, wholly or in part, arises, gets jurisdiction to entertain the application under S.19 of RDDB&FI Act, and S.17 of SARFAESI Act, 2002.
As discussed supra, in this case, part of cause of action has arisen within the jurisdiction of this Tribunal. Therefore, there cannot be any iota of doubt that this Tribunal has jurisdiction to adjudicate the subject matter in the above SA. Accordingly, this point is answered in favour of the applicant bank.
5. Point 2: The Ld. Counsel for R1 bank has contested the claim of applicant bank that the above SA was filed within a period of 45 days as provided under section 17(1) of the SARFAESI Act. In the application itself, the applicant bank has specifically stated that the tender notice was published by R1 bank in the �New Indian Express� on 20.1.07. Copy of the said publication is available in the typed set and the date of publication is not in dispute. Therefore , this Tribunal has no hesitation to conclude that the above SA has been filed by the applicant bank within the period of limitation under section 17(1) of the SARFAESI Act.
6. Point 3 & 4: This is a peculiar case in which two nationalised banks are claiming mortgage right over the same property mortgaged by the same person. The applicant bank as well as R1 bank have based their claim on the same title deed standing in the name of R3 bearing Doc.No.2221 of 1994. Therefore, at the very outset it can be said that the original documents relating to the said property submitted before this Tribunal by the applicant bank and R1 bank cannot be genuine. There cannot be two original documents in respect of the same property. Therefore a meticulous and critical analysis of evidence placed before this Tribunal by the applicant bank and R1 bank, is required to find out as to which original is genuine.
6.1 It is an admitted fact that R2 had availed credit facilities from the applicant bank and R1 bank and R3 had stood as guarantor for the credit facilities sanctioned in the name of R2 and R3 had submitted the original title deed relating to his property at Chennai and created equitable mortgage in favour of the applicant bank and R1 bank. The documents submitted by the a/b along with the above SA, beyond doubt, shows that credit facilities were availed by R2 & R3 from the applicant on 19.1.2001. On 19.1.2001 itself, R3 had deposited title deed of the property situated at 34, Balu Mudali Street (R.S.3687), Chennai-21 which was offered as security for the credit facility granted to R2. On 17.3.05, Memorandum of Entry was drawn in favour of the applicant by R3 for having deposited the title deed creating equitable mortgage. On 14.5.03 and on 1.12.08, R3 had declared and confirmed the deposit of title deed on 19.1.01 and stated that the applicant bank would continue to hold the title deed to secure the liabilities of R2. The account of R2 was classified as NPA by the applicant bank on 21.5.06. Notice under section 13(2) of SARFAESI Act was issued by the applicant bank on 22.6.06. Symbolic possession of the subject property was taken by the applicant bank on 30.8.06 and on 16.9.06, possession notice was published by the applicant bank.
6.2 Now let us see the sequence of events and chronology of dates relating to the credit facilities sanctioned by R1 bank in favour of R2 and R3. In paragraph 5 of the reply statement, R1 has categorically admitted that metal (gold) loan, Bank Guarantee and cash credit facilities were sanctioned by R1 bank in favour of R2 and R3 by sanction letter dt.28.3.05. Even though in paragraph 5 of reply statement, it is stated that R2 and R3 had availed credit facilities prior to 28.3.05, the date of availing such facilities is conspicuously missing in the reply statement. Therefore, it has to be taken that R2 and R3 were granted credit facilities by R1 bank only on 28.3.05.
6.3 As per document No.1 in the typed set of papers submitted on behalf of R1 bank , Memorandum of Deposit for creation of charge for Term loan was signed by the bank officers on 17.3.05. R3, vide letter dt.18.3.05 (p.9 of the typed set of R1) had confirmed the creation of mortgage by R2 and R3 in favour of R1 bank. R1 bank had issued notice under section 13(2) of SARFAESI Act, to R2 and Smt. Pushbha on 4.7.06 (page Nos.11 & 23 of the typed set of R1). On 5.9.06, possession notice was issued by R1 to R2 and Mrs. Pushbha, the Guarantor (page Nos.29 & 33 of R1's typed set). Again on 20.9.06, possession notice under sec.13(4) of SARFAESI Act was sent to R2 and Mrs.Pushbha. Vide letter dt.28.9.06, R1 had withdrawn the possession notice dt.5.9.06 and 20.9.06. Thereafter, possession notice dt.28.10.06 was issued by R1 bank to R2 & Mrs. Pushbha. On 9.11.06, possession notice was published in Tamil daily �Dinamani� and an English Daily. On 14.11.06, sale notice was issued by R1 bank to R2 and Mrs.Pushbha challenging the possession notice issued by R1 bank, R2 filed OA(S) No.118/06 before DRT, Coimbatore which was dismissed on 5.2.07.
7. From the above details furnished by R1 bank, it is crystal clear that R1 bank had granted credit facilities to R2 & R3 only on 28.3.05 and equitable mortgage was created on 17.3.05 which was confirmed by R3 on behalf of R2 on 18.3.05. On the other hand, R2 and R3 had availed credit facilities from the applicant bank as early as on 19.1.2001 and R3 on behalf of R2 had deposited title deed relating to the subject property on 19.1.01 itself. Further R3 had confirmed deposit of title deed on 19.1.01 in his letter dt.14.5.2003. Again on 1.12.05, R3 had confirmed that applicant bank would continue to hold the title deed relating to the subject property which was already deposited by R3 with applicant bank on 19.1.01.
7.1 It is, thus, established beyond any shadow of doubt that the applicant bank had transacted business with R2 & R3, four years prior to R1 bank, granting credit facilities to R2 & R3. Therefore, it goes without saying that applicant bank had the first charge over the subject property which was offered as security for the credit facilities availed by R2 & R3 by creating equitable mortgage in favour of the applicant bank. The sequence of events and chronology of dates would clinch the issue that the transaction between the applicant bank and R2 & R3 was first in point of time and that the applicant bank has first charge over the subject property.
8. Having established that the applicant bank has first charge over the subject property offered as security by R3 on behalf of R2, it has to be next seen as to how and on what circumstances R3 had deposited two original title deeds in respect of the same property with document No.2221/1994 registered on 20.10.94. On the direction of this Tribunal, the applicant bank and R1 bank had submitted the original title deed with document No.2221/1994 registered on 20.10.94 in respect of the subject property along with a memo. There cannot be two original title deeds in respect of the same property and same document number. Therefore, on the basis of the materials available on record, it should be decided as to which title deed is genuine.
8.1 On 29.11.07, on behalf of applicant bank, a memo was filed enclosing a certified copy of document No.2221/1994 registered in favour of R3 on 20.10.94 which was obtained from the Office of Sub-Registrar, Royapuram. The applicant bank has submitted a memo on 29.11.07 enclosing Annexure B (chart) showing comparison of the original title deeds submitted by the applicant bank, R1 bank and certified copy of the same title deed furnished by SRO, Royapuram. The applicant bank has pointed out 16 differences between the original titled deed produced by R1 bank and certified copy of the title deed with Doc. No.2221/94 issued by the SRO, Royapuram. The chart showing details of the differences between the two title deeds submitted by the applicant and R1 banks was again verified by this Tribunal and I am convinced that the title deed relating to document No.2221/1994 registered on 20.10.94 in favour of R3 which was produced by the applicant bank tallies with the certified copy of the same title deed issued by SRO, Royapuram.
8.2 The applicant bank has succeeded in demonstrating before this Tribunal that the title deed submitted by R3 before R1 bank for creating equitable mortgage in favour of R1 bank is not the genuine title deed. Hence this Tribunal has no hesitation to come to the irresistible conclusion that the title deed with document No.2221/1994 issued by the Office of Sub-Registrar in favour of R3 and submitted to the applicant bank on 19.01.01 is the genuine title deed registered in favour of R3. In other words, R3 who had availed credit facilities in the name of R2 from the R1 bank had cheated the R1 bank by depositing a forged title deed in respect of the subject property which was already offered as security for the credit facilities sanctioned by R1 bank. Therefore, it is confirmed that the applicant bank which has first charge over the subject property is in possession of the genuine title deed registered in the name of R3 and offered as security for the credit facilities availed from applicant bank.
8.3 Further, on 21.5.06, the account of R2 was classified as NPA. Notice under section 13(2) of the SARFAESI Act was issued by applicant bank on 22.6.06. But, R1 bank which has been cheated by R3 by depositing fake and forged title deed had issued notice under 13(2) of SARFAESI Act only on 4.7.06, i.e., after the applicant had initiated SARFAESI proceedings against R2 and R3. Similarly, on 30.8.06, the applicant bank had taken symbolic possession of the subject property,whereas the R1 bank had taken symbolic possession of the same property only on 28.10.08. Thus starting from deposit of title deed till taking possession of the subject property, the applicant bank is the fore-runner taking action under SARFAESI Act in respect of the subject property before R1 bank started initiating action under the said Act. That is why, on 22.10.07, the applicant bank had sent a letter to R1 bank protesting the impugned tender notice for auction sale dt.20.10.07 issued by R1 bank. In other words, the applicant bank did not waste time to bring it to the notice of R1 bank that the subject property was mortgaged to applicant bank by R2 and R3 as early as on 18.1.2001 and that they have first charge over the subject property. The applicant bank through the said letter has also informed R1 bank that they have already taken possession of the subject property and caused paper publication.
9. From the facts and circumstances of this case, which are duly supported by documentary evidence, this Tribunal is of the considered view that the impugned tender notice of auction sale dt.20.1.07 is based on fake and forged title deed submitted by R2 and R3 and it is not in accordance with law. Hence the impugned tender notice dt.20.1.07 is liable to be set aside.
10. Before parting with the case, it should be pointed out that R1 bank has been cheated by R2 and R3 who had the audacity to produce a fake and forged title deed relating to the subject property and create equitable mortgage in favour of R1 bank for the credit facilities availed by R2 and R3. The acts committed by R2 and R3 amounts to commission of cognizable offences punishable under Indian Penal Code. This is a clear case in which a nationalised bank has been cheated by R2 and R3 who availed credit facilities from R1 bank and applicant bank giving same property as security and producing the genuine title deed before the applicant bank and fake and forged title deed before R1 bank. R2 and R3 who have availed such huge facilities on the basis of fake and forged title deed, should be brought to book and punished in accordance with law.
10.1 The fake and forged title deed relating to document No.2221/1994 was produced before R1 bank which in turn produced the same before this Tribunal, on 29.11.07. Therefore it is clear that R2 and R3 had created fake and forged title deed before it was produced before this Tribunal. Hence the bar against prosecution under sec.195 of Cr.P.C does not apply to the facts of this case. The Constitution Bench of Hon'ble Supreme Court in the decision in Iqbal Singh Marwah Vs. Meenakshi Marwah� reported in 2005 CRL LJ 2161 has held as under:-
Section 195 (1)(b)(ii) of CRPC applies when a document was forged in the custody of the Court. Forgery, if committed, before production in Court, sec.195 does not apply. Therefore, R1 bank which has been cheated by R2 and R3 by committing cognizable offences is hereby directed to lodge a criminal complaint with the Crime Branch CID of local police or Special Crime Branch of CBI, Chennai to register a case against R2 and R3 in respect of the fake and forged title deed with document No.2221/1994.
10.2. It is an unfortunate case, wherein a nationalised bank, which believes and trusts customers, had to part with public money of Rs.98 lakhs on the basis of fake and forged title deed. In the light of the forgoing discussion, I am of the considered view that the applicant bank has succeeded in proving its case through documentary evidence. Therefore, I am of the view that the impugned tender notice dt.20.10.07 is liable to be set aside. Accordingly, the impugned tender notice dt.20.10.07 issued by R1 bank is set aside.
10.3. After selling the subject property in auction sale and adjusting the sale proceeds towards the outstanding dues, the remaining sale proceeds after satisfying the applicant's dues, shall be deposited by the applicant bank with respondent bank towards the amounts due by R2 and R3 to R1 bank.
10.4 R1 bank is directed to lodge a criminal complaint as referred supra without delay, so that a case can be registered against R2 and R3 who have cheated the R1 bank to the tune of Rs.98 lakhs. This case should be an eyeopener to the bank officers who sanction credit facilities against title deeds which is produced by the borrowers as security. It is pertinent to point out that the bank officers should verify the genuineness of the title deeds by comparing the same with the copy available in the Sub-Registrar's Office before the same is accepted. It is not known whether in this case legal opinion was obtained by R1 bank before credit facilities were sanctioned to R2 and R3 on the basis of the forged title deed. If legal opinion was obtained, it is unfortunate that the forged nature of the title deed was not detected at that stage. With this observation, the above SA is allowed. No order as to costs.
11. Copy of the order be communicated to the parties concerned.
(Dictated to stenographer, transcribed by him, corrected, signed and pronounced by me in the Open Court on this 25th day of February 2009)
Sd/-
(E. JACOB R. DANIEL)
Presiding Officer
Wednesday, December 9, 2009
PRIORITY OF BANKS' DUES VIS-À-VIS THOSE OF SALES TAX
During this year a three judge bench of Supreme Court
had disposed off four cases related to the above matter
where the Kerala State Sales Tax law was considered.
The gist of the judgements is as under: Section 26 B of the
Kerala Act gives priority over the banks' dues and the state
government can even revoke the sale effected by the bank
in its efforts of recovery of state revenue.
Further the invocationcan be at different
stages of litigation and can even be done with
retrospective effect. Some details are as under:
1. In C.A. No. 95/2005 between
Central Bank of India and State of Kerala,
the state authorities had invoked their priority
of charge before the suit filed by the bank is
decreed and their priority was upheld.
2. In C.A.3549/2006 between IOB and state of Kerala,
the suit filed by the bank in DRT was decreed
but the bank's appeal against the quashing of their
request to restrain the state sales tax officials from
claiming their dues was declined despite the fact that
the said section 26B was inserted in Kerala Act
w.e.f. 01.04.1999 after the suit was filed by the
bank was decreed in their favour.
3. In C.A. 3973/2006 between BOB and State of Kerala,
the supreme court had upheld the decision of the bench
of High court where they expressed that "State has
got priority in the matter of recovery of debts due
and specific statutory charge created under the Sales
Tax notwithstanding the equitable mortgages created by
defaulters in favour of banks prior to the liability in favour
of the state".
In had opined further that till the decree passed by a
civil court is executed through executing court, the title
of the mortgaged property remains with the mortgagor
and the state's overriding rights would not be disturbed.
4. In C.A. 4174/2006 involving one
Mr. Ahmad Koya and the District collector, the Canara Bank
which was a creditor had obtained a decree in the DRT
on17.02.2000 and obtained recovery certificate on 24.08.2000
.Before actually recovery was effected the District collector
had invoked Recovery Act on 18.07.2000 and attached the
property and on 13.02.2001 had tried to sell the property.
On a petition from the bank the sale notice was stayed. Bank
sold a part of the property to Mr. Koya for Rs. 60,60,010/-
as it sufficed their dues. State of Kerala had sought and obtained
a decree nullifying the sale by the recovery officer since he did no
give notice to the state though he is aware of the attachment of
the property by the state.
Mr. Koya contended that since the attachment is
after the date of decree the bank is not wrong in
disposing of the property and further that there is
another piece of property which can be auctioned by
the state for recovering its dues.
However the court had upheld the High court order
which nullified the sale as the state is not informed of
the same despite the property under attachment.
The bench of the Supreme Court had given the freedom
to Mr. Koya to take appropriate remedial steps
for getting back the amount paid by him.
had disposed off four cases related to the above matter
where the Kerala State Sales Tax law was considered.
The gist of the judgements is as under: Section 26 B of the
Kerala Act gives priority over the banks' dues and the state
government can even revoke the sale effected by the bank
in its efforts of recovery of state revenue.
Further the invocationcan be at different
stages of litigation and can even be done with
retrospective effect. Some details are as under:
1. In C.A. No. 95/2005 between
Central Bank of India and State of Kerala,
the state authorities had invoked their priority
of charge before the suit filed by the bank is
decreed and their priority was upheld.
2. In C.A.3549/2006 between IOB and state of Kerala,
the suit filed by the bank in DRT was decreed
but the bank's appeal against the quashing of their
request to restrain the state sales tax officials from
claiming their dues was declined despite the fact that
the said section 26B was inserted in Kerala Act
w.e.f. 01.04.1999 after the suit was filed by the
bank was decreed in their favour.
3. In C.A. 3973/2006 between BOB and State of Kerala,
the supreme court had upheld the decision of the bench
of High court where they expressed that "State has
got priority in the matter of recovery of debts due
and specific statutory charge created under the Sales
Tax notwithstanding the equitable mortgages created by
defaulters in favour of banks prior to the liability in favour
of the state".
In had opined further that till the decree passed by a
civil court is executed through executing court, the title
of the mortgaged property remains with the mortgagor
and the state's overriding rights would not be disturbed.
4. In C.A. 4174/2006 involving one
Mr. Ahmad Koya and the District collector, the Canara Bank
which was a creditor had obtained a decree in the DRT
on17.02.2000 and obtained recovery certificate on 24.08.2000
.Before actually recovery was effected the District collector
had invoked Recovery Act on 18.07.2000 and attached the
property and on 13.02.2001 had tried to sell the property.
On a petition from the bank the sale notice was stayed. Bank
sold a part of the property to Mr. Koya for Rs. 60,60,010/-
as it sufficed their dues. State of Kerala had sought and obtained
a decree nullifying the sale by the recovery officer since he did no
give notice to the state though he is aware of the attachment of
the property by the state.
Mr. Koya contended that since the attachment is
after the date of decree the bank is not wrong in
disposing of the property and further that there is
another piece of property which can be auctioned by
the state for recovering its dues.
However the court had upheld the High court order
which nullified the sale as the state is not informed of
the same despite the property under attachment.
The bench of the Supreme Court had given the freedom
to Mr. Koya to take appropriate remedial steps
for getting back the amount paid by him.
DRT cracks the whip again
Abhay Vaidya,
|
PUNE: The Debt Recovery Tribunal (DRT), Pune,
which in May created a stir by attaching state
government properties and treasury account, has now
taken the extraordinary step of initiating proceedings
to issue arrest warrants against the members of prominent
industrialist family in the city.
The DRT has upheld the State Bank of India’s (SBI)
application for the “arrest and detention” of 11 members
of the Ashok Lunkad family (owners of the Nav Maharashtra
Chakan oil mills) for failing to clear dues of Rs 16.60 crore
with the SBI’s industrial finance branch,Wakdewadi, Pune.
DRT recovery officer S. Ravinder Yadav issued his order on
Wednesday, stating that jail warrants against 11 members of
the Lunkad family for six months’ detention in civil prison
would be issued once SBI deposits “subsistence allowance”
with the tribunal, “equivalent to a period of one month in
the first instance, and thereafter, every month in advance”.
“We have decided to deposit subsistence amount for 15 days
initially.
The main grievance of the bank is that the Lunkads are trying
to create hurdles in the recovery process,” advocate Ramesh Ganbote,
representing SBI, Representing the Lunkads,
advocates Rajendra Jagtap and M.M. Joshi filed two separate
applications with the DRT on Thursday, appealing for a “stay”
against the order.
While Jagtap has appealed for a 30-day stay, Joshi, along with one
of the defendants, Nitin Lunkad, has appealed for a 10-day stay “for
the purpose of filing an appeal.” The DRT is scheduled to hear these
applications on Friday.
The SBI’s application for the “arrest and detention” of the Lunkads
relates to its case against the Nav Maharashtra Chakan oil mills, Ahmednagar,
and 11 partners in the firm, namely, Ashok Mohanlal Lunkad,
his brothers Vijay and Subhash Lunkad, Abhijit Ashok Lunkad,
Shantilal Ratanchand Lunkad, Pravin Surajmal Lunkad, Tushar
Shantilal Lunkad, Mohanlal Pranlal Lunkad, Nitin Mohanlal
Lunkad, Atul Ashok Lunkad and Mitesh Subhash Lunkad.
The case relates to the default on extension of Rs 10 crore in May, 1994,
under the cash credit facility and import letter of credit.
The loans were extended against a number of properties mortgaged
with the bank by the Lunkads.
This is the first such action against a prominent Pune-based
industrialist family taken by the DRT, which established an
independent presence in Pune two years ago.
Pointing out that the purpose of the DRT is to uphold the
“Recovery of Debts due to Bank and Financial Institutions Act, 1993”,
Yadav in his order has said, “If a softpedalling policy on the matter
of sentence is adopted in a case of this nature, it will not only
send wrong signals to other defaulters, but also the public will
lose faith in banking institutions.”
Yadav also said, “A deterrent sentence of maximum period
of six months would be commensurate and just keeping in
mind” that the defaulters “are illegally retaining the huge
amount of Rs 16.60 crore of public money in spite of
having sufficient means to discharge their liability.”
The DRT Pune’s previous actions forced the state government
to compromise with the IDBI (Industrial Development Bank of India)
and other lending institutions to the tune of Rs 200 crore and the
auctioning of the prominent Holiday Inn premises and Hotel Amir
premises owned by prominent city-based businessman, R.L. Bhojwani.
Source:TOI
|
PUNE: The Debt Recovery Tribunal (DRT), Pune,
which in May created a stir by attaching state
government properties and treasury account, has now
taken the extraordinary step of initiating proceedings
to issue arrest warrants against the members of prominent
industrialist family in the city.
The DRT has upheld the State Bank of India’s (SBI)
application for the “arrest and detention” of 11 members
of the Ashok Lunkad family (owners of the Nav Maharashtra
Chakan oil mills) for failing to clear dues of Rs 16.60 crore
with the SBI’s industrial finance branch,Wakdewadi, Pune.
DRT recovery officer S. Ravinder Yadav issued his order on
Wednesday, stating that jail warrants against 11 members of
the Lunkad family for six months’ detention in civil prison
would be issued once SBI deposits “subsistence allowance”
with the tribunal, “equivalent to a period of one month in
the first instance, and thereafter, every month in advance”.
“We have decided to deposit subsistence amount for 15 days
initially.
The main grievance of the bank is that the Lunkads are trying
to create hurdles in the recovery process,” advocate Ramesh Ganbote,
representing SBI, Representing the Lunkads,
advocates Rajendra Jagtap and M.M. Joshi filed two separate
applications with the DRT on Thursday, appealing for a “stay”
against the order.
While Jagtap has appealed for a 30-day stay, Joshi, along with one
of the defendants, Nitin Lunkad, has appealed for a 10-day stay “for
the purpose of filing an appeal.” The DRT is scheduled to hear these
applications on Friday.
The SBI’s application for the “arrest and detention” of the Lunkads
relates to its case against the Nav Maharashtra Chakan oil mills, Ahmednagar,
and 11 partners in the firm, namely, Ashok Mohanlal Lunkad,
his brothers Vijay and Subhash Lunkad, Abhijit Ashok Lunkad,
Shantilal Ratanchand Lunkad, Pravin Surajmal Lunkad, Tushar
Shantilal Lunkad, Mohanlal Pranlal Lunkad, Nitin Mohanlal
Lunkad, Atul Ashok Lunkad and Mitesh Subhash Lunkad.
The case relates to the default on extension of Rs 10 crore in May, 1994,
under the cash credit facility and import letter of credit.
The loans were extended against a number of properties mortgaged
with the bank by the Lunkads.
This is the first such action against a prominent Pune-based
industrialist family taken by the DRT, which established an
independent presence in Pune two years ago.
Pointing out that the purpose of the DRT is to uphold the
“Recovery of Debts due to Bank and Financial Institutions Act, 1993”,
Yadav in his order has said, “If a softpedalling policy on the matter
of sentence is adopted in a case of this nature, it will not only
send wrong signals to other defaulters, but also the public will
lose faith in banking institutions.”
Yadav also said, “A deterrent sentence of maximum period
of six months would be commensurate and just keeping in
mind” that the defaulters “are illegally retaining the huge
amount of Rs 16.60 crore of public money in spite of
having sufficient means to discharge their liability.”
The DRT Pune’s previous actions forced the state government
to compromise with the IDBI (Industrial Development Bank of India)
and other lending institutions to the tune of Rs 200 crore and the
auctioning of the prominent Holiday Inn premises and Hotel Amir
premises owned by prominent city-based businessman, R.L. Bhojwani.
Source:TOI
Monday, December 7, 2009
Don't stop recovery procedures
New Delhi December 07, 2009,
The Supreme Court last week set aside the judgement
of the Punjab and Haryana high court and declared that
the court could not stop the state financial institutions
from taking steps to recover loans given to industries.
The court cannot act as an appellate authority and nullify
the recovery steps unless they are against the law,
unreasonable and unfair.
The financial corporations are
“not expected to flounder public money for
promoting private interests”.
In this case,
Punjab Financial Corporation vs Surya Auto Industries,
the court observed that the borrower was recalcitrant
and did not accept the liberal terms offered by the
corporation. The high court altered the terms of the
agreement to suit the borrower, which was illegal.
Source:BS
The Supreme Court last week set aside the judgement
of the Punjab and Haryana high court and declared that
the court could not stop the state financial institutions
from taking steps to recover loans given to industries.
The court cannot act as an appellate authority and nullify
the recovery steps unless they are against the law,
unreasonable and unfair.
The financial corporations are
“not expected to flounder public money for
promoting private interests”.
In this case,
Punjab Financial Corporation vs Surya Auto Industries,
the court observed that the borrower was recalcitrant
and did not accept the liberal terms offered by the
corporation. The high court altered the terms of the
agreement to suit the borrower, which was illegal.
Source:BS
Sunday, December 6, 2009
Wednesday, December 2, 2009
Tuesday, December 1, 2009
A Cry For Help &Credit Consumers Association of India 's Response
A cry for help and our response
November 24, 2009
by vinodchandDear Mr. Kambli
I read about you in one of the news papers and was really happy to know that someone is voicing against these MNC banks who are charging exorbitant ROI and really sucking the blood of poor middle class who is un organised.
I read about you in one of the news papers and was really happy to know that someone is voicing against these MNC banks who are charging exorbitant ROI and really sucking the blood of poor middle class who is un organised.
RBI has also added to woes of middle class by creating CIBIL which will again hamper the middle class only. One really wonders why these banks need any protection when they are charging such a high rate of intrest.
The govt of India is also hand in glove with these banks as nothing is done against the recovery agents of these banks.CIBIL must be banned as it will kill the middle class in long run.
I have lost my job due to recession and now finding it very difficult to pay back as the amount is huge and there is no regular income for me and a family to look after. These cards have really messed up my life and I am totally frustrated . I have already informed all the credit cards co about the settlement but HDFC and ICICI bank are trying muscle power.
what is way out of this if you could guide me on this that will be a great help and what is right amount one can pay towards full and final settlement I am pursuing them for 30% of the total outstanding towards the full and final settlement as that s all i can manage at this jucture.looking forward for your response.
Regards
Jai
Jai
Our Response
Dear Sir,
Many thanks for sharing our concern vis-a-vis foreign and indian private banks. These banks are the modern version of Shylock.
Banks get protection because they are cleverly using the SYSTEM from the inside. They have deep pockets which are being used to grease some palms at the right places, common man be dammed.
Someone aptly defined a banker as a person who will lend you his umbrella while the sun is shining and take it away the moment it begins to rain! Our bankers are no different, they are indeed fair weather friends unless the sum involved runs into thousands of crores in which case they will give you still more in the hope of protecting their earlier exposure.
We empathize with your loss of job and the fact that credit cards have made your life miserable. Using credit cards is one of the worst thing that one can do in a crunch situation, it is better to borrow from friends and relatives to help you tide over tough times. But then often our ego gets the better of us.
We agree that CIBIL will systematically destroy the middle class and the banks will then have no one to lend to. The banks will not lend to the poor because they do not have the repayment capacity, the rich will not borrow and the middle class would have been made in-eligible by CIBIL!
A settlement of 30 to 40% can be negotiated for stressed assets. In your case too, take time to find out your principal outstanding with the banks(the amount you have actually spent, minus the interest, late fees, penalties, etc.). Banks will normally agree to settle on this amount.
If harassed or threatened, please approach your nearest police station and file a criminal complaint of intimidation against the person/ persons/ organizations that are indulging in this.
Please do not hesitate to write to us or call us for further help.
Regards
Vinod Chand
General Secretary
Credit Consumers Association of India
Statebank of India On Line Help Line
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