Dismissed

Bank of India v. Shri Satish Bhujang Bhandari

DRAT3 Aug 2022MISC APPEAL/9/2008

Case brief

AI extract

What is this about?

In an appeal against an order allowing a claimant's request to set aside a sale of mortgaged property, the Tribunal held that the equitable mortgage was invalid. The bank failed to register lis pendens and obtain authorization for original title deeds, enabling judgment debtors to fraudulently sell the property to an unaware bonafide purchaser who was not liable to the mortgage.

What did the court decide?

Appeal dismissed with costs; ancillary miscellaneous applications dismissed as infructuous.

Bank of India versus Shri Satish Bhujang Bhandari — Execution and Attachment | DRAT (2022)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr. Justice Ashok Menon, Chairperson

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Misc. Appeal No. 9/2008

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Between

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Bank of India … Appellant/s V/s. Shri. Satish Bhujang Bhandari & Ors. … Respondent/s Mr. Anant B. Shinde, Advocate for Appellant.

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Ms. Varsha Palav along with Mr. Anuj Tiwari, Advocate for Respondent No.1.

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-: Order dated: 03/08/2022:-

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The 1st Defendant Bank of India in OA 139/2006 on the files of the DRT, Pune, is the Appellant. The judgment of the Ld. P.O. in the aforesaid O.A. dated 05.11.2007 is impugned.

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The facts necessary for the disposal of this Appeal, in brief, are thus:

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The 2nd Defendant/Respondent company named Ecoline Development Engineers Ltd. had borrowed money from the Appellant Bank in the year 1989 and on 6.11.1999 an equitable mortgage was created in favour of the Bank by the 2nd Respondent company with respect to the subject property which is Flat No. 101, Kanchenjunga, Erandawane, Pune. The title deeds were deposited and the charge was created. The said property was purchased by the 2nd Defendant company from Krishna Constructions on 30.06.1982. The Company defaulted payment, and as a result of which, the appellant Bank instituted Special Civil Suit No. 282/1993

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on 20.02.1993 in the Court of the Civil Judge, Sr. Division, Pune, for recovery of the total outstanding sum of Rs.3,37,76,971.68. The 2nd Defendant did not raise any objections about the mortgage, and the Suit was decreed with costs on 28.02.1996, directing the Defendants therein to deposit the decretal amount within six months from the date of the order together with interest, failing which, the Plaintiff Bank was entitled to realise the money by the sale of the mortgaged property. The Appellant filed an Execution Petition as SP. Darkhast No. 101 of 1997 before the Civil Court. The subject property was attached on 26.09.1997 under Order 21 Rule 54 of C.P.C. The order of attachment was served on the 1st Defendant on 28.09.1997.

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Satish Bhujang Bhandari, the 1st Respondent herein. is the original Applicant in O.A. No. 139/2006. On getting to know about the attachment by the Execution Court, he filed a Petition on 02.02.1998 claiming that he is a bonafide purchase of the subject property. On 02.07.1999 the Execution Court dismissed his claim application stating that the judgment debtor had sold the property after it was mortgaged to the decree-holder and during the pendency of the Suit. The said order of the Execution Court was challenged by the Applicant before the Hon’ble High Court of Bombay and vide order dated 12.01.2000, the Hon’ble High Court set aside the order of the Execution Court and directed the claim put forth by the Applicant to be considered afresh and to dispose the claim petition under the provisions of Rule 58 of Order 21 of C.P.C. within a period of six months.

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During the pendency of the Execution Petition and the consideration of the claim made by the Applicant, D.R.T. was set up and since the decretal exceeded Rs10 Lakhs, the Petition was transferred to D.R.T., Pune, and came up for consideration before the Recovery Officer, D.R.T., as Recovery Proceeding No. 82P/01. The Appellant Bank filed an application to attach and sell the subject properties and the Recovery Officer ordered the property to be attached.

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The Applicant moved an application before the Ld. R.O. for release of the property from attachment. After hearing the decreeholder Bank as well as the Applicant/Claimant, the claim petition was dismissed. The property was put up for sale and sold in auction to the highest bidder who also deposited 25% of the sale amount, and thereafter, the balance amount was also deposited on 05.07.2004 and he became the absolute owner of the property. Misc. Appeal No. 45/2004 was filed by the Applicant before this Tribunal with an application for condonation of delay. It was dismissed. The dismissal was challenged before the Hon’ble High Court of Bombay in Writ Petition No. 5909/2004 which was allowed and the order of the Recovery Officer was also set aside. The Recovery Officer heard the claim of the 1st Defendant afresh, and once again, rejected it on 14.07.2006. The Applicant challenged that order of the Recovery Officer before the Presiding Officer, D.R.T., Pune, by filing Appeal No. 26/2006 which was re-filed as O.A. No. 139/2006. On 05.11.2007 the Ld. P.O. allowed the claim vide the impugned judgment which is now under challenge before this Tribunal.

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The challenge raised by the Applicant/Claimant before the D.R.T. and the Recovery Officer is two-pronged. The creation of the mortgage, as well as notice to the Applicant, are both challenged. It is contended that the subject property was purchased by the 2nd Defendant company on 29.08.1985 from M/s. Krishna Constructions under a registered Sale Deed. Thereafter, the property was sold by the 2nd Defendant on 16.08.1994 to Shri. Ashok Pandurang Kadam. The Applicant Claimant had purchased the property from the aforesaid Kadam vide registered Sale Deed executed on 21.06.1995. The Applicant was not aware of any decree, mortgage, or Execution Proceeding pertaining to the subject property. He was not a party to the Special Civil Suit No. 282/1993. The property was attached in the execution proceedings only on 26.06.1997. That is when the Applicant comes to know about the mortgage and the decree. Though he approached the Execution Court with a Claim Petition under Order 21 Rule 58 of C.P.C., it was rejected, and ultimately, in Appeal before the Hon’ble High Court, the Claim Petition was directed to be decided by the Execution Court. It is stated that the Recovery Officer did not consider the claim raised by the Applicant in accordance with the provisions of Sections 47 and 48 of the C.P.C. that is how it was challenged before the D.R.T. and rightly allowed by the Ld. P.O. in the impugned judgment.

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The Appellant filed a Written Statement stating that the flat which was purchased by the judgment debtor on 29.08.1985 in consequence of the agreement of sale dated 30.06.1982 was mortgaged to the Appellant Bank on 06.11.1989. The original

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documents were retained by Photo Zinco as the infrastructure in the Sub-Registrar’s office was not updated. It is contended that the creation of a valid mortgage has been decided against the mortgagor by the Civil Court as stated above, and the sale to the Claimant/Applicant was made after the filing of the suit. Hence, the Applicant cannot claim to be a bonafide purchaser, and his claim is hit by lis pendens.

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The Ld. P.O. considered the defence set up by the Appellant Bank under Section 52 of the Transfer of Property Act and held that the sale was not hit by the principles of lis pendens. It is also held that the validity of the equitable mortgage is questionable.

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The main argument that was raised by the learned counsel appearing for the Applicant/ Claimant is that there was no possibility of the Applicant knowing about the mortgage or the suit since the notice of lis was not registered as required by the Maharashtra Amendment to Section 52 (1) of the T.P. Act. On the other hand, it was argued for the Appellant that registration of the lis was not mandatory and that the creation of the mortgage would run with the property and despite the sale, the mortgage and the charge of the property cannot be got rid of.

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10 Heard the learned counsel Mr. Anant B. Shinde, Advocate appearing for Appellant, and the learned counsel Ms. Varsha Palav, Advocate appearing for 1st Respondent Claimant. Records perused.

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The learned counsel for the Appellant relies on two decisions in support of his argument that the mortgage is valid. In K.J. Nathan Vs. S.V. Maruthi Rao & Anr. AIR 1965 SC 430 wherein it was held

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that the necessary conditions of the mortgage by deposit of title deeds are (i) debt, (ii) constructive delivery, and (iii) intention of creating a mortgage by deposit of title deeds. The learned counsel for the Appellant submits that all these three aspects are present in their instant case. The learned counsel also relied on the decision in State Bank of Travancore, Trivandrum Vs. Velayudhan Pillai Bhaskaran Nair & Ors. AIR 1996 KER 32 to argue that a mortgage by deposit of title deeds even by depositing a duplicate copy of the title deed.

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After having heard both sides at length, I find that the claimant never knew about the creation of the mortgage by the judgment debtor. There was no registration of the mortgage about which the Claimant could have known after inquiry with the Registration Department. Even after due diligence, there was no possibility of the claimant knowing about such a mortgage. The original title deeds of the property were handed over to the Claimant by his Assignor and there was no reason to doubt about the creation of the mortgage by deposit of title deeds. The inquiries made with the Registrar of Companies regarding charges created by the judgment debtor company were also negative, and clearance was obtained. The argument of the learned counsel for the Appellant that the document was not obtained from the Sub-Registrar’s office is no excuse. The Bank could have insisted on getting authorization to receive the document after it was registered. No such authorisation was obtained by the Bank and resultantly, the judgment debtor got hold of the original title deeds and sold the property using that title deed, to one Ashok Kadam. Even after filing the suit the fact regarding the pendency of the lis was not

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registered with the Registrar u/s 52 of the T. P. Act with its amendment as applicable to the State of Maharashtra. The excuse is not acceptable. There was also no attachment before judgment or intimation given to the Sub-Registrar so as to caution an intending purchaser about the lies.

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The decisions relied upon by the learned counsel for the Appellant do not apply to the facts and circumstances of this case. In the decision of the State Bank of Travancore (supra), what was deposited of a duplicate of the partition deed. The fact regarding duplicates being issued to the Sharers was explicit from the document itself and, therefore, it was as good as the original title deed. In K. J. Nathan (supra) the title deed was deposited much earlier than the creation of the mortgage. The later intent of the mortgagor to create a mortgage with regard to the title deeds which were deposited earlier was held to be sufficient. Under the circumstances, the decisions do not help the Appellant.

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For the reasons stated above, I find that the Appeal has no merits and there is no reason to interfere with the findings of the Ld. P.O. in the impugned judgment.

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The Appeal is dismissed with costs.

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All Miscellaneous Applications, if any, are dismissed as infructuous.

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Sd/Chairperson

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dpj-1

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Bank of India v. Shri Satish Bhujang Bhandari

Case brief

What is this about?

What did the court decide?

Bank of India v. Shri Satish Bhujang Bhandari

Case brief

What is this about?

What did the court decide?

What the court decided

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