Dismissed

S. Selvi v. Indian Bank & Ors.

DRAT19 Jul 2022MISC APPEAL/145/2017

Case brief

AI extract

What is this about?

Allowed for dismissal. The Debt Recovery Appellate Tribunal dismissed appeals against orders confirming attachment of a mortgaged property and rejecting an auction purchaser's claim of mortgage fraud. The tribunal held the attachment related back to the notice date before the purchase, the claimant failed to disclose possession status, and the purchaser was not bona fide given the existing decree.

What did the court decide?

All appeals, including those challenging the attachment order and auction proceedings, are dismissed with costs. Pending relaxation applications are closed.

S. Selvi versus Indian Bank & Ors. — Execution and Attachment | DRAT (2022)

¶1

MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

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Dated the 19^th of July, 2022

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PRESENT: Hon’ble Mr. Justice S. Ravi Kumar CHAIRPERSON

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MA 5/2017

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[Appeal No.8/2014 in 20/2014 in DRC No.140/2006 in OA 110/2005 on the file of DRT-II, Chennai]

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MA 143/2017

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[IA 371/2015 in OA 110/2005 on the file of DRT-II, Chennai]

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MA 144/2017

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[IA 372 /2015 in OA 110/2005 on the file of DRT-II, Chennai]

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MA 145/2017

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[IA 373/2015 in OA 110/2005 on the file of DRT-II, Chennai]

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and

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MA 235/2017

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[AP No.11/2015 in MA 20/2014 in DRC No.140/2006 in OA 110/2005 on the file of DRT-II, Chennai]

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Between

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S. Selvi, W/o P.G. Sekar, No.16/01, 12^th Main Road, Abirami Avenue, Kaviarasu Kannadhasan Nagar, Chennai -600 118.

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……Appellant

¶19

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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And

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Indian Bank, Royapuram Branch, Chennai ( Now ARMB-II), Chennai. 2. Mr. Shankar, Proprietor, M/s. Priya Poly Pack, (Deceased) Represented by legal heirs. 3. Mrs. S. Susila, W/o Late Shankar, 4. Ms. Haripriya, D/o, Late Shankar, 5. Mr. R. Seethapathy, (Respondents 3, 4 & 5 are residing at No. 100, Arunakrishna Nagar, Veppampattu, Thiruvallur District). 6. Mr. P. Munusamy, S/o Pandurangan, No.31, T.V. Krishnamurthy Nagar, Erukkancherry, Chennai – 600 118.

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….. Respondents Counsel for Appellant : M/s. Ahmad Associates Counsel for R1 Bank : Mr. T. Sundar Rajan Counsel for R6 : Mr. R. Ganesh Kumar

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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COMMON ORDER

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All these Appeals are disposed of by a Common

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Order as the main point involved is one and the same for all the Appeals, and it is among the same parties.

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MA 5/2017 is preferred against Order dated 19.05.2015 in Appeal No.8/2014 on the file of DRT-II, Chennai. Appeal No.8/2014 is preferred against a Common Order of Recovery Officer dated 01.04.2014 in MA 19/2014 and MA 20/2014 in DRC No.140/2006 in OA 110/2005.

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MA 235/2017 is preferred against Order dated 16.08.2016 in Appeal No. 11/2015 on the file of DRT-II, Chennai. Appeal No.11/2015 is preferred against Order

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of Recovery Officer dated 04.08.2015 in MA 20/2014 in DRC No. 140/2006 in OA 110/2005.

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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MA-143/2017, MA 144/2017 & MA 145/2017 are preferred against a Common Order dated 11.08.2015 of DRT-II, Chennai passed in IA 371/2015, IA 372/2015 and IA 373/2015 in OA 110/2005. IA 371/2015 is filed

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to reopen the proceedings in OA 110/2005; IA 372/2015 is filed to implead Petitioner therein, who is Appellant herein, as Respondent No.6 in OA 110/2005 and IA 373/2015 is filed to stay all further proceedings in DRC No.140/2006.

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Parties are hereinafter referred to as arrayed in

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Appeal No.5/2017 for convenience sake.

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Brief facts that are relevant for the purpose of these Appeals are as follows:-

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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First Respondent Bank filed OA 110/2005 against Respondent Nos. 2 and 5 for recovery of Rs.14,35,423/together with future interest contending that Respondent No.2 borrowed a sum of Rs.10 Lakhs from 1^st Respondent Bank on 09.09.2002 and executed necessary documents for which Respondent No.5 stood as guarantor and executed guarantee agreement deed dated 19.09.2002, who also deposited title deeds of property land measuring 2466 sq. ft. together with building at door No.29, Plot No.29, 12^th Street, Abirami Avenue, Kodungaiyur, Chennai – 600 118 comprising Survey No.75/2A of Kodungaiyur Village with Respondent No.1 Bank with an intention to create equitable mortgage over said property as a security for loan amount. DRT allowed OA and issued Recovery Certificate for Rs.14,35,423/- with future interest at the rate of 14.86% p.a. with monthly rests from 01.08.2005

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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till the date of realization and issued Recovery Certificate dated 02.08.2006. Recovery Officer, in pursuance of Recovery Certificate, attached mortgaged property on 07.11.2013. Recovery Officer issued Sale Notice and affixed Sale Notice on the mortgaged property and Appellant herein filed MA 19/2014 seeking postponement of proposed auction sale and filed MA 20/ 2014 requesting Recovery Officer to investigate Appellant’s claim and objection taken in accordance with Rule 11 of II Schedule to Income Tax

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Act, 1961. Before filing these two Applications, Appellant filed three Applications in OA 110/2005 under SR Nos. 91, 92 & 93 and those Applications were returned raising certain objections on maintainability and on return of those Applications, Appellant filed MA 19/2014 and MA 20/2014 before Recovery Officer and after dismissal of MA 19/2014, during pendency of

¶46

¶47

MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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Appeal No.8/2014, these three Applications are again pursued, which are registered as IA 371/2015, IA 372/2015 and IA 373/2015. As Tribunal below dismissed Appeal No.8/2014, Appellant preferred Miscellaneous Appeal MA 5/2017 (AIR 461/2015) before this Tribunal. After filing of this Appeal, Recovery Officer dismissed MA 20/2014 on 04.08.2015 and Appellant challenged that Order by filing Appeal No. 11/2015 before DRT-II, Chennai. After dismissal of that Appeal and after dismissal of IA 371/2015, IA 372/2015 and IA 373/2015, subsequent Appeals are filed by Appellant.

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Advocate for Appellant and Respondent No.6 (Auction Purchaser) filed Written Submissions and oral arguments are advanced on behalf of Appellant, Respondent No.1 Bank and Respondent No.6. Advocate

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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for Appellant and Respondent No.6 reiterated Written Submissions at the time of oral arguments.

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Advocate for Appellant submitted that there is no valid mortgage in favour of 1^st Respondent Bank, therefore, Order passed on the basis of invalid mortgage is non est in law, and Respondent No.1 Bank cannot get any rights in pursuance of such Order. He further submitted that Recovery Officer cannot proceed on the basis of such Order and sale conducted is also not valid. It is submitted that mortgage is on the basis of forged documents, and on that ground itself, mortgage is to be treated as invalid. He submitted that 1^st Respondent Bank in its Counter and Additional Counter to MA 20/2014 specifically pleaded that Respondent No.5 deposited forged documents with Bank and that a complaint is given to Central Bureau of Investigation (CBI) in that connection. He submitted that Appellant

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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purchased this property through registered sale deed dated 29.12.2006 for a sale consideration of Rs.9.50 Lakhs. It is submitted that Respondent No.5 declared that property free from encumbrance and delivered title deeds to Appellant. He submitted that in view of registered Sale Deed, Appellant has right and interest in the property sold in auction and Recovery Officer is duty bound to investigate as to the claim of Appellant, but to the surprise of Appellant, Recovery Officer rejected the claim of Appellant on 04.08.2015 without examining the objection. It is further submitted that attachment is almost seven years after issuance of DRC, therefore, Recovery Officer is not right in refusing postponement of auction and also rejecting the claim of Appellant. It is submitted that the impugned Orders of DRT-II Chennai, in dismissing Appeal No.8/2014,

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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Appeal No. 11/2015, IA 371/2015, IA 372/2015 and IA 373/2015 in OA 110/2005 are liable to be set aside.

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Advocate for Respondent No.1 Bank submitted that

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as per Rule 51 of II Schedule to Income Tax Act, 1961, attachment relate back to Demand Notice, which was on 12.09.2006 in this case, much prior to purchase of property by Appellant herein. He submitted that it is well settled law that mortgage can be created even by producing copies of documents and what is important is intention to create mortgage, which is clearly established in this case. He submitted that Appellant purchased the mortgaged property, and her rights, if any, shall be subject to mortgage, therefore, the claim of Appellant is not tenable and Tribunal below rightly dismissed the Appeals and Applications.

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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Advocate for Respondent No.6 submitted that property is purchased for Rs.63 Lakhs and Sale Certificate is issued on 05.08.2015 which is registered on 07.08.2015. It is submitted that as Appellant purchased a mortgaged property, her rights, if any, must be for redemption before sale is taken place. It is submitted that ownership of Respondent No.5 over the property is not in dispute. When a Decree is passed on property of Respondent No.5 until it is set aside by a competent court, it is not open to Appellant to contend that mortgage is not valid.

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According to Appellant, she acquired rights over disputed property through registered Sale Deed dated 29.12.2006. As already referred to above, Appeal MA 5/2017 is filed questioning the orders of Tribunal below

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in Appeal No.8/2014. As already referred to above, Appeal No.8/2014 on the file DRT-II, Chennai is

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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preferred questioning the orders of Recovery Officer passed in MA 19/2014 and MA 20/2014. For both these two MAs, Affidavit of Appellant is common, and only change is in prayer portion. In first Application MA 19/2014 prayer is for postponement of proposed sale and for MA 20/2014 prayer is to receive objection and investigate into the claim of Appellant.

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In para 5 of Affidavit filed in support of MA 19/2014 and MA 20/2014, Appellant stated that the original title deeds, which are necessarily to be in the custody of 1^st Respondent Bank, have been released to Respondent No.5 with a premeditated criminal intention to dishonestly induce Appellant to part with a sum of Rs.9.50 Lakhs to purchase the property over which the Bank has made a claim in the year 2005 itself. In para 6 of the same Affidavit, Appellant stated that

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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Respondent No.5 and officials of Respondent No.1 Bank colluded together and cheated Appellant by dishonestly inducing her to part with Rs.9.50 Lakhs. She has asserted that, without the complicity of the officials of Respondent No.1 Bank, Respondent No.5 could not have submitted the original title deeds to her at the time of registration on 29.12.2006. So, it is specific case of Appellant that the original title deeds given to 1^st Respondent Bank have been released due to collusion between Respondent No.5 and officials of Respondent No.1 Bank in order to cheat her. When such is the specific assertion of Appellant, her immediate action should have been to proceed against Respondent No.5 and the officials of Respondent No.1 Bank, both under criminal law and civil law. Admittedly, till now, no such action is initiated in those lines. Very Application MA 19/2014 is filed seeking postponement of proposed

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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sale. So, by the date of filing of that Application, Appellant is aware that she was cheated or induced to purchase the property. If really Appellant is interested in safeguarding the property, she ought to have redeemed the mortgage to avoid its sale, thereafter, ought to have sued Respondent No.5 for redeemed portion of money. If Appellant is not interested in retaining the property, she ought to have immediately proceeded against Respondent No.5 for recovery of sale consideration together with interest and damages. Appellant has not opted for these two actions, on the other hand, sought for postponement of sale and investigation into her claim.

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So far as the postponement of sale is concerned, that relief has now become infructuous, because sale has already taken place and in pursuance of which Sale

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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Certificate is issued and registered. In fact, Appeal No. 8/2014 is filed after sale is completed. So, by the time of filing Appeal No. 8/2014, the relief of postponement of proposed sale has become infructuous . However, in Appeal No.8/2014, Appellant prayed for modification of impugned Common Order dated 01.04.2014 and for setting aside E- auction dated 03.04.2014, but in so far as second relief i.e. to set aside E-auction dated 03.04.2014, Appellant cannot claim that relief in the Appeal, because remedy is provided under Rule 60 of II Schedule to Income Tax Act, 1961 to challenge the sale before Recovery Officer, therefore, without availing that remedy, it is not open for Appellant to make such request. With regard to first relief, as already referred to above, since sale has already taken place, there is no question of postponement, and thereby that relief has become infructuous .

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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As already referred to above, Appellant also filed MA 20/2014 under Rule 11 of II Schedule to Income Tax Act, 1961. According to this Rule, where any claim is preferred or objection is made to attachment or sale, Recovery Officer has to investigate the claim or objection. But, as per the proviso to this Rule, no such investigation shall be made when Recovery Officer considers that the claim or objection was designedly or unnecessary delayed. As per Sub-rule 3 of Rule 11, the claimant or objector must show that he/she has some interest or was in possession of the property in question at the date of service of notice issued under II Schedule to Income Tax Act, 1961.

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From the material on record, it is clear that Recovery Officer has issued notice in September, 2006 and the same is duly served on Respondent No.5, on

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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which date Appellant was not the owner of property even according to her own case. So, as on that date, Appellant has no interest in the property because according to her own case, she purchased the property on 29.12.2006 i.e. almost three months after date of

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service of notice. According to Rule 51 of II Schedule to Income Tax Act, 1961, attachment relate back to date of service of notice. So, as rightly pointed out by Advocate for Respondent No.1 Bank, the attachment over disputed property relate back to September, 2006, which means, by the date of purchase, the property was under attachment. Further, Respondent No.5 mortgaged this property for loan availed by Respondent No.2 in September, 2002, which means, Appellant purchased the property in question four years after mortgage. Further, a Decree is passed against this property more than one year prior to purchase. So, for

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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all these reasons, Appellant cannot be treated as bona fide purchaser.

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As already referred to above, Appeal 235/2017 is preferred against orders of Learned Presiding Officer,

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DRT-II, Chennai passed in Appeal No.11/2015. According to Advocate for Appellant, Recovery Officer has not examined the claim of Appellant and the Order of Recovery Officer dated 04.08.2015 is an ex parte order. As already referred to above, Appeal No.11/2015 is against Order of Recovery Officer dated 04.08.2015. I have perused the Order of Recovery Officer dated 04.08.2015. From a perusal of this Order, on 20.07.2015, Recovery Officer passed an order directing the Advocates of both parties to present on 28.07.2015 for disposal of MA 20/2014, but, it appears on 28.07.2015, Advocate for Petitioner in MA 20/2014, i.e. Appellant herein was not present, and as opposite

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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Advocate sought time, it was posted to 04.08.2015. Even on 04.08.2015, neither Appellant nor her Advocate were present, therefore, Recovery Officer on the basis of material, passed an Order that MA 20/2014 is without any merits, and dismissed the same by relying on Order of DRT dated 26.02.2015 in Appeal No.8/2014. So, this Order cannot be called as an ex parte Order simply because, Appellant or Advocate for Appellant was not present on that date. Rule 11 of II Schedule to Income Tax Act, 1961 provides a right to raise objection or making a claim over possessed property and Sub-Rule 5 of Rule 11 authorizes Recovery Officer to disallow the claim, if he satisfies that on the date of attachment, if the property is in possession of defaulter. Here, as already referred to above, notice was issued to Respondent No.5 in September, 2006, which is duly served, on which date he was the owner and in

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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possession of property, therefore, under Sub-rule 5 of Rule 11 of II Schedule to Income Tax Act, 1961, Recovery Officer has every right to disallow the claim. A combined reading of this provision with Order dated 04.08.2015, there cannot be any doubt that Recovery Officer has rightly exercised his power, which order is confirmed by Tribunal below in Appeal No.11 /2015. Further, in Sub-rule 6 of Rule 11 of II Schedule to Income Tax Act, 1961, a right is provided to objector to institute a suit to establish the right which he/she claims to the property in dispute, and if such suit is filed, order of Recovery Officer shall be subject to result of such suit. Here, from the submissions of both sides, it appears that Appellant also filed a civil suit in OS No. 5819/2015 and the same is still pending. So, on a overall consideration of facts of the case, and for the reasons stated supra , I am of the considered view that,

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MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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Tribunal below rightly dismissed Appeal Nos.8/2014 and Appeal No. 11 /2015, and so also, IA 371/2015, IA 372/2015 & IA 373/2015 in OA 110/2005, and there are absolutely no grounds to interfere with those Orders.

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Appellant filed IA 314/2019 to implead CBI as party to this Appeal. That Application is dismissed on 01.04.2019. Appellant also filed IA 1003/2018 to issue summons to CBI for production of documents pertaining to complaint lodged by Respondent No.1 Bank; IA 497/2017 to direct Respondent No.1 Bank to file the status report with regard to criminal case pending with CBI and IA 933/2019 to pass suitable orders pending disposal in IA 497/2017. All these Applications have no bearing on the issue for the simple reason that the case pending with CBI has no

¶104

¶105

MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017

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relevance. Further, when Appellant purchased a

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mortgaged and attached property, which is already referred to above, investigation by CBI or result of investigation, has absolutely no bearing on the issue. Therefore, these Applications are also liable to be dismissed. Accordingly, IA 1003/2018, IA 497/2017 and IA 933/2019 are dismissed.

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In view of above, all the Appeals are liable to be dismissed, and accordingly, Appeal Nos. MA 5/2017, MA 143/2017, MA 144/2017, MA 145/2017 and MA 235/2017 are dismissed with costs. All pending IAs, if any, stand closed.

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[Dictated to Athistamani, PS transcribed by her, corrected, signed and pronounced by me in open court, this 19^th of July, 2022]

¶110

[ Justice S. Ravi Kumar] CHAIRPERSON

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S. Selvi v. Indian Bank & Ors.

Case brief

What is this about?

What did the court decide?

S. Selvi v. Indian Bank & Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

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