Dismissed

Bn Ramchander v. Indian Bank

DRAT21 Jun 2022REGULAR APPEAL/248/2013

Case brief

AI extract

What is this about?

The DRAT dismissed an appeal seeking to quash SARFAESI proceedings. Upholding the DRT's finding that the disputed property was a secured asset and the appellant was liable as a guarantor, and noting violations of bank rules by the appellant, the court affirmed the lower tribunal's decision to dismiss the appeal.

What did the court decide?

Appeal dismissed; judgment and order dated 20th November 2009 passed by the Debts Recovery Tribunal, Hyderabad, affirmed.

Bn Ramchander versus Indian Bank — Contract and Commercial Disputes | DRAT (2022)

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Appeal No. 248 of 2013-DRAT-Kolkata

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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(Appeal No. 248 of 2013)

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(Arising out of S.A. 164 of 2008 in DRT-1, Hyderabad)

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THE HON’BLE MR. JUSTICE ANIL KUMAR SRIVASTAVA CHAIRPERSON

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B.N. Ramchander, son of B.N. Narasimha, H. No. 18-1-5, Plot No. 6, M.E.S. Colony, Alwal, Trimulgherry Post, Secunderabad – 500 015.

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… Appellant

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-Versus-

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M/s. Indian Bank, Barkatpura Branch, Hyderabad, Andhra Pradesh.

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… Respondent

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Counsel for the Appellant … Mr. Sanjeev Das led by Mr. Ramesh Chandra Prusti

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Counsel for Respondent Bank … Ms. Sharmistha Pal led by Mr. Debasish Chakrabarti

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None for Respondent No. 3

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JUDGMENT : 21.06.2022

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THE APPELLATE TRIBUNAL :

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Instant appeal has been preferred against judgment and order dated 20^th November, 2009, passed by Learned DRT-Hyderabad in S.A. 164 of 2008 (B.N. Ramchander -vs- Indian Bank) dated 20^th November, 2009 whereby the learned DRT has dismissed the Sarfaesi Application.

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2. It appears from the record that the Appellant was a Government servant who was posted as a Senior Assistant in the Department of Institute of Preventive Medicine, Narayanaguda, Hyderabad. As per the allegations in the S.A., he had taken a loan of Rs.1.5 lac from his department against the property in dispute. Subsequent thereto, it is alleged that he was shown to have become a Guarantor to the loan facility availed by Ch. Ranga Rao, Proprietor of M/s. Sri Ranganatha Traders in the year 1999 for a sum of Rs.2.00 lac. This limit was further enhanced to an extent of Rs.5.75 lac. It is alleged that the

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Appeal No. 248 of 2013-DRAT-Kolkata Appellant never created any equitable mortgage over the scheduled property in favour of the Bank as it was already mortgaged in favour of the Government of Andhra Pradesh. On 14^th June, 2008, Appellant came to know about the fact that some Advocate Commissioner had taken forcible possession over the property in dispute. No notice under Section 13 (2) of the SARFAESI Act 2002 was issued. No Possession Notice was issued. Sale of the property was fixed on 24^th March, 2006. Procedure as provided under the SARFAESI Act 2002 was not followed. It is further alleged that neither any loan was taken from the Respondent Bank nor he stood Guarantor in the alleged loan in favour of M/s. Sri Ranganatha Traders. His signatures were obtained on blank printed forms. Even the property could not have been mortgaged without the permission of the Government as the first charge was in favour of the Government of Andhra Pradesh. This fact was well within the knowledge of the Respondents but no action was taken. Accordingly, Sarfaesi Application was preferred for challenging the possession over the secured assets which was taken on 14^th June, 2008.

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3. Heard Learned Counsel for Appellant as well as the Respondents and perused the record.

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4. Learned Counsel for Appellant, at the very outset, submits that the Appellant has not stood Guarantor for M/s. Sri Ranganatha Traders. It is further submitted that initially the Appellant was a Government servant who had taken a loan from his department wherein the property in dispute was mortgaged. In view of the Government Circular Rule 8 (f) of the HBA Rule in G.O. Ms No. 356 F&P dated 8^th October, 1994 it was required that the employee shall keep the house free from encumbrances although the Government employees, who were sanctioned house building advances from the Government, may be permitted to create a second mortgage on the property provided they obtained prior permission of the Head of the concerned Department on the draft deed of the second mortgage for

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Appeal No. 248 of 2013-DRAT-Kolkata scrutiny. Such subsequent mortgage may be created only in respect of loans to be granted for meeting the balance cost of house by recognized financial institutions. Learned Counsel submits that since no permission was obtained from the Head of the concerned Department, no second charge can be created in respect of the property in dispute.

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5. It is further submitted that on 6^th October, 2010 when the Appellant came to know about signatures on the blank printed forms, he sent a letter to the Manager, Indian Bank, Hyderabad seeking certain information but no reply was given by the Bank. It shows that the Bank was well aware that the first charge is created in favour of the Government over the property in dispute which cannot be marked as Guarantor for any other charge.

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6. Learned Counsel further submits that all the proceedings conducted by the Respondent Bank are against the specific provisions of the SARFAESI Act 2002, accordingly the sale is liable to be quashed. 7. Learned Counsel for Respondent further submits that Appellant has not filed the Sarfaesi Application with clean hands. It is submitted that prior to filing of this S.A. Appellant had filed another S.A., being S.A. 164 of 2006 wherein admission was made regarding mortgage in question wherein it was admitted that he Appellant stood Guarantor for the loan in favour of M/s. Sri Ranganatha Traders. It is further submitted that the letter dated 6^th October, 2000 shown to have been sent to the Respondent Bank was neither sent to the Bank nor received by the Bank and such fact was denied before the Learned DRT as well as in the appeal.

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8. Learned Counsel for the Appellant has placed reliance upon the following judgments:

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9. Further it is submitted that even the circular of the Government does not create any right in favour of the Appellant rather it could have been a dispute between the Bank and the Government as to how subsequent mortgage was created. Further, it is submitted that a duty

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Appeal No. 248 of 2013-DRAT-Kolkata has been cast upon the Government employee to obtain prior permission of the Head of Department for the subsequent mortgage. Subsequent mortgage can only be created in respect of the loans to be granted to meet the balance cost of house. It is submitted that the Appellant had not denied his signatures over the documents rather it is submitted that the signatures were obtained on printed forms. The fact is not challenged before any forum prior to filing of the S.A.

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10. It is further submitted that the S.A. was decided by the Learned Tribunal below on 20^th November, 2009 wherein the property in dispute was held to be a secured asset. Two writ petitions, bearing No. 14047 and 16126 of 2010, were filed by the Appellant before the Hon’ble High Court Judicature at Andhra Pradesh at Hyderabad which were decided by a common judgment by a Division Bench on 26^th July, 2010 wherein the Hon’ble High Court had held that the mortgaged property was treated as a secured asset towards the loan taken by the borrower of the DRT. Although an opportunity was given to the Appellant to prefer a statutory appeal against the judgment of the DRT.

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11. It is further submitted that in view of the admission of the Appellant coupled with that finding of the Hon’ble High Court and his signatures on the loan account wherein he stood as Guarantor itself proves that the Appellant stood guarantor for the loan availed by M/s. Sri Ranganatha Traders from the Respondents which was defaulted and accordingly proceedings under Sarfaesi Act 2002 were initiated by the Bank.

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12. Learned DRT below had framed the following points for consideration:

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1. Whether the Applicant can question the proceedings initiated by the Respondent prior to the alleged taking of possession of the property on 14.6.2008 by the Respondent through Advocate Commissioner?

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Appeal No. 248 of 2013-DRAT-Kolkata

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2. Whether the schedule property is a secured asset?

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3. Whether the Respondent has violated Rules 4(2) & 8(2) of the Security Interest (Enforcement) Rules, 2002?

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4. To what relief?

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13. Learned DRT held in point No. 1 that the Appellant cannot question the action and procedure adopted by the Respondent Bank prior to taking possession of the property by the Respondent through Advocate Commissioner on 14^th June, 2008. On the point no. 2, it was specifically held that he Respondent Bank had a charge over the property by way of mortgage and the schedule property can be treated as security asset towards the loan availed by M/s. Sri Ranganatha Traders. On the point No. 3, it was held that Bank was having a time upto 21^st June, 2008 for publication but the S.A. was filed prior to it. Accordingly, the S.A. was dismissed.

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14. At the very outset, I would refer to the judgment of the Division Bench of the Hon’ble High Court Judicature at Andhra Pradesh at Hyderabad passed in W.P. Nos. 14047 and 16126 of 2010 B.N. Ramachander -vs- Indian Bank, wherein in para 8 it was observed that the Bank had initially sanctioned a sum of Rs.2.00 lac as Over Draft Facility to the borrower which was enhanced to Rs.5.75 lac for which the petitioner had executed documents from time to time and in pursuance of the proceedings initiated under the Act he paid a sum of Rs.2.00 lac on 3^rd January, 2006 and agreed to pay the balance amount on 31^st January, 2006 but filed S.A. 164 of 2008 with the plea that he never mortgaged the property, which was dismissed by the Learned DRT. Main plea for the Appellant in the S.A. is regarding the fact that he was never a Guarantor for the loan taken by M/s. Sri Ranganatha Traders rather his signature were obtained on blank printed papers. As far as this plea is concerned, Appellant is estopped from raising the plea. He has not challenged his signatures when he came to know about the fact specially his own version on 6^th

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Appeal No. 248 of 2013-DRAT-Kolkata December, 2000 when allegedly Appellant had sent a letter to the Respondent Bank seeking sanction in his favour but no proceedings were drawn or no any criminal proceedings were instituted against alleged fraud or cheating by the Bank upon the Appellant. Had it been so, it would have been proper for the Appellant to lodge an F.I.R. but he kept mum till 2006 when he preferred his first S.A. and thereafter in 2008 when the present S.A. was filed by him. Hence, the conduct of the Appellant himself is such which creates a doubt about his bona fide.

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15. Admittedly, there is a circular of the Government of Andhra Pradesh wherein it is provided that the employee, who has taken a loan from the Government, should give a declaration that the house is free from encumbrances. Further an option is given to the concerned employee to take subsequent loan from financial institution but for the purpose of meeting the balance cost of the house provided he obtains prior permission of the Head of the department on the draft deed of the subsequent mortgage for scrutiny. It casts a duty upon the concerned employee and no duty on the Bank or the Financial Institution to seek permission for sanction of the subsequent loan or creating any mortgage. This itself shows that when the Appellant stood guarantor for the loan in favour of M/s. Sri Ranganatha Traders, he should have taken prior permission from the Head of the Department in this regard. Non compliance of the provisions itself shows that as a Government servant, the Appellant himself has not followed the Rules; although this Tribunal is constrained to record any adverse finding regarding misconduct of the Appellant.

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16. Allegedly a letter was also sent by the Appellant on 6^th October, 2000 to the Bank seeking certain information but there is no receipt of the letter attached which can show that any such letter was ever sent by the Appellant to the Bank. Even if, for the sake of argument, it may be accepted that such a letter was sent, then what action has been taken by the Appellant for the fraud or cheating having been

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Appeal No. 248 of 2013-DRAT-Kolkata committed by the Bank upon him? Further he has not informed his employer that fraudulently his signatures have been obtained wherein he has shown as the Guarantor of M/s. Sri Ranganatha Traders. This itself shows that the Appellant was well within the knowledge of the fact that he stood Guarantor for the loan.

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17. In para 3 of the reply, filed by the Respondent Bank before the Learned DRT on 30^th June, 2008, it is stated that in I.A. 704 of 2006 it was specifically mentioned that:

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"It is submitted that the respondent bank sanctioned the loan to M/s. Sri Ranganatha Traders, rep. by its ProprietorCh.Ranga Rao, amount of Rs.4,00,000/- in the year 2000. I am the Guarantor of the said loan and I have given my property documents house bearing H.No.18-1/5, MES-II Colony, Alwal, Ranga Reddy District, admeasuring 264 sq.yards, as collateral security........” This admission is unexplained by the Appellant.

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18. As far as proceedings under the Sarfaesi Act 2002 by the Bank are concerned, they have been taken in accordance with the provisions under Sections 13 (2) and 13 (4) of the Act, notices have been sent thereafter property in dispute was auctioned, sale was confirmed, Sale Certificate was issued and possession was taken.

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19. It would be relevant that the Director, an employee of Institute of Preventive Medicine, had sent a reply to the Bank Wherein it is informed that an amount of Rs. 1,31,949.00 is outstanding against the Appellant which was duly paid by way of Demand Draft by the Bank on 14^th December, 2010. The amount of Rs. 1,31,949.00 was paid. Accordingly, the first charge of the State Government of Andhra Pradesh stood satisfied from the sale proceeds. Relevant portion of the letter is reproduced below:

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“ Lr. No.Accounts/787/2004-05/IB From

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dated 28.09.2010

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The Director, Institute of Preventive Medicine,

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Appeal No. 248 of 2013-DRAT-Kolkata

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PH Labs & F (H) A Narayanguda, Hyderabad

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To The Manager, Indian Bank Barkatpura Branch, HYDERABAD

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Sub: -Accounts – mortgage of house by Sri BN Ramchander, Senior Asst, to the Indian Bank, Barkatpura-regarding Ref:- your letter dated 07-09-2010.

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I invite your kind attention to your reference cited and state that this office had a comprehensive study on your request.

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Sri BN Ramchander is working as Senior Assistant in this Directorate and he had been sanctioned a house building loan of Rs.150000 released in three phases in February 1995, March 1996, and January 1997 for constructing house at 18-1-5; plot no 61, MES colony, Sriramnagar, besides Bliss Academy, Alwal, RR district. An amount of Rs. 1,23,000.00 had already been recovered from the employee and the following would be recoverable from him taking 31.10.2010 as criterion.

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Principal remainingRs.23000.00 Total interest thereofRs. 108949.00 Total amountRs.131949.00

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As per the rules in force, the house would have to remain under mortgage to the Hon'ble Governor of Andhra Pradesh till the loan is paid back completely together with interest and the same is in the case of BN Ramchander, Senior Assistant. X x x x”

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On the basis of the discussion made above, I am of the view that the Learned Counsel DRT has recorded its finding on the basis of the evidence on record. The appeal lacks merit and is liable to be dismissed.

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O R D E R

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Appeal No. 248 of 2013-DRAT-Kolkata The appeal, being Appeal No. 248 of 2013, is dismissed. The judgment and order dated 20^th November, 2009, passed in S.A. 164 of 2008 by Learned Debts Recovery Tribunal, Hyderabad, is hereby affirmed.

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No order as to costs.

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File be consigned to Record room.

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Copy of the order be supplied to Appellant and the Respondents

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and a copy be also forwarded to the concerned DRT.

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Order dictated, signed, dated and pronounced in open Court.

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(Anil Kumar Srivastava,J) Chairperson