Dismissed

Shri Arvind Dattatreya Potnis v. Bank of India & Ors.

DRAT28 Jul 2022REGULAR APPEAL/301/2006

Case brief

AI extract

What is this about?

The APPellant challenged the DR.T order confirming his liability and the validity of a mortgage deed. The Tribunal held the mortgage valid based on registered documents, rejecting limitation arguments and claims of discharge due to non-prosecution of movable assets.

What did the court decide?

The appeal was dismissed with costs; all miscellaneous applications were dismissed as infructuous.

Shri Arvind Dattatreya Potnis versus Bank of India & Ors. — Banking and Recovery | DRAT (2022)

¶1

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

¶2

Appeal No. 301/2006

¶3

Between

¶4

Shri. Arvind Dattatreya Potnis … Appellant/s V/s.

¶5

Bank of India & 4 Ors. …Respondent/s

¶6

Mr Prashant J. Pandit and Mr Jay P. Pandit, i/b M/s. Pandit & Associates, Advocate for Appellant.

¶7

Mr. Anant B. Shinde, M/s. Anant B. Shinde & Co., Advocate for Respondent No.1.

¶8

-: Order dated: 28/07/2022:-

¶9

This is an Appeal preferred by the 5^th Defendant in Original Application (O.A.) No. 684/1999 on the files of Debts Recovery Tribunal No. III, Mumbai (the D.R.T. for short). The 1^st Respondent is the Bank of India, the original Applicant (the Bank for short). The 2^nd Respondent is M/s. M. R. Bahalkar which is a proprietary concern of Shri. Moreshwar Shamrao Jagtap, the 3^rd Respondent herein, and Respondent Nos. 4 and 5 herein are original Defendant Nos. 3 and 4 in the O.A. The parties are hereinafter referred to in accordance with their status in the O.A. Defendant Nos. 1 and 2 had approached the Bank for a loan to finance the building construction work in which the proprietorship was involved. A sum of Rs.10 Lacs was sanctioned by the Bank. The first installment was paid and documents such as Promissory Note, Hypothecation Deed, and Guarantee Deed were executed by Defendant Nos. 1 to 5. On 12.11.1990, by way of collateral security the Defendant No. 2 and D5, t he Appellant herein,

¶10

¶11

allegedly created a charge on property Plot Nos. 14 and 15 comprised in Survey No. 687/B-1-3 and 687/B-1-4, respectively, and a Mortgage Deed was allegedly executed by Defendant Nos. 2 and 5 in favour of the Bank. The Defendants acknowledged the debts on 28.11.1992 and thereafter Defendant Nos. 3 and 4 acknowledged the debt again on 28.11.1992. The payment of the loan amount stood defaulted, and the Bank issued a legal notice on 29.07.1994 calling upon the Defendants to pay a sum of Rs.12,49,771.90 together with interest @ 23.25% p.a. There was no response, and hence a Suit was filed before the Civil Court. The Suit was subsequently transferred to the D.R.T and re-filed as the O.A.

¶12

All the Defendants resisted the claim by filing the Written Statement. The main contention in the Written Statement was that the Bank had forced them to execute and sign some blank printed forms and documents and that they were not aware of the contents of the document. The second Defendant c ontended that Rs.4 Lacs was initially advanced as a loan in February 1999 and the balance of Rs.6 Lacs was advanced during the month of October 1999. The cost of construction escalated and because of the delay, and the proprietorship run into a loss. The prospective buyers of the flats constructed by the proprietorship have formed themselves into a Cooperative Housing Society named ‘Digshaill’ and are necessary parties to the Suit. The 2nd Defendant had even suggested a settlement of loan but the Bank was not amenable. The rate of interest is also challenged and stated to be exorbitant in the valuation of RBI Rules and Circulars.

¶13

¶14

The 5^th Defendant/Appellant also filed a Written Statement stating that he had entered into an agreement to purchase the aforesaid two Plot Nos. 14 and 15 situated in Nashik from its original owners on the basis of an agreement and had entrusted the construction of the flats to the proprietorship. The original owners were also promised flats. The Appellant also was to be allotted one of the flats. Subsequently, the original owners executed a Sale Deed in the favour of the Appellant and he became the absolute owner of the property. It is contented by the Appellant that he had not created any mortgage pertaining to the subject properties and that he was made to sign certain documents by the officers of the Bank. Hence there is no valid mortgage binding on the properties. It is further stated that the Bank was negligent in not proceeding against the flats which were already sold and they could have very well realized a sum due to them by proceeding against those flats which were sold. The Appellant states that he is old and in a precarious condition to repay the debts. He himself has been cheated since the flats to which he was entitled have not been allotted to him.

¶15

On considering averments raised in the O.A. and contentions raised by the Defendants, the Ld. P.O. vide the impugned order dated 12.02.2004 found that there was a transaction as averred and that the Applicant Bank is entitled to a decree of Rs.15,86,995.90 together with future simple interest of 15 % p.a. for the date of application till the realization jointly and severally from all the Defendants. The charge created be a way of mortgage over the properties belonging to the Appellant was also upheld and he was given three months time to redeem the mortgage, failing which the appellant Bank could proceed

¶16

¶17

against those properties for the realization of the amount.

¶18

Aggrieved by the aforesaid order, the 5th Defendant is in Appeal. He contends that he has not signed any document as guarantor and nor has he signed any acknowledgement deed to renew the loans. The creation of the mortgage has also been erroneously found by the Ld. P.O in favour of the Bank. The plea of limitation as well has not been properly considered. Hence it is prayed that judgment in the order dated 12.02.2004 of the Ld. P.O., D.R.T-III, Mumbai, may be set aside and the O.A. as regards the Appellant be dismissed.

¶19

Heard Shri. Prashant Pandit, learned counsel appearing for the Appellant, and Shri. A. B. Sinde, the learned Counsel appearing for the Bank. The rest of the Respondents did not appear.

¶20

The main contestation raised by the Appellant is that it is a simple money suit and that the claim of the Bank expired after three years and, therefore, the Appellant cannot be found liable to pay the amount. It is stated that the Bank is guilty of inaction or non-feasance since the flats which were sold to several persons have not proceeded on time. The Ld. Counsel Mr Pandit appearing for the appellant submits that even if a letter of guaranty was relied upon, it restricts the liabilities of the surety to only Rs.10 Lacs and not beyond that. He points out the relevant portion of the letter of guarantee deed at Exh. J. The Ld. Counsel Mr Pandit also challenged the validity of the mortgage deed which was allegedly prepaid on 09.11.1990 but remained unregistered till 02.12.1994 on which the Civil Suit No.450/1994 was filed which was later on transferred to D.R.T.

¶21

¶22

The Ld. Counsel has relied upon the decision in State Bank of India Vs Ramakrishna J. Sakharkar & Anr. III (2007) BC 84 in support of the argument that there is a bar of limitation. The Ld. Counsel also submits that there is no proof produced before the D.R.T. to show the mortgage was registered. Ex-167 which is a copy of the Mortgage Deed shows that it was prepaid on the stamp paper of Rs.20,000/was submitted for registration on 12.11.1990. The receipt of registration for Rs.5,037/- was also obtained from the Sub-Registrar at Nashik. The Ld. Counsel’s argument is that since the mortgage has not been proved legally, the Bank will not get 12 years time to file a suit that suit will have to be filed within 3 years, otherwise, it is barred by limitation.

¶23

The main point, therefore, that arises for consideration is whether a valid mortgage was created by the Appellant or not. Before the trial court, the registered Mortgage Deed was not produced because it was not obtained from the Sub-Registrar but the copy of the registration document shows that it was drawn on payment of Rs.20,000/- as stamp fees and the registration charges of Rs.5,037/was also paid. The Ld. Counsel appearing for the Bank Mr Shinde, has produced a certified copy of the Mortgage Deed later at the time of the arguments which indicates that the mortgage deed was indeed registered and, therefore, a simple mortgage has been created in favour of the Bank regarding the Plot Nos.14 and 15 which admittedly belongs to the Appellant. The Appellant is, therefore, not entitled to the contention that the Suit is barred by limitation holding that it is to be considered as a simple money suit. There is a valid mortgage and the Bank is entitled to proceed against the properties. The plea of

¶24

¶25

limitation was rightly declined by the learned P.O. in the impugned order. The signatures on the documents produced by the Bank to prove the transaction has not been denied by the Appellant. There is a presumption that if the documents bear a signature that is admittedly that of the borrower or the guarantors, the burden is heavy upon the executors of the documents to prove that they did not sign the documents with the knowledge of the contents therein. The Appellant has not produced any evidence to disprove the veracity of the documents produced by the Bank.

¶26

The learned counsel for the Appellant has also taken refuge under the provision of Section 139 and 141 of the Indian Contract Act wherein the provision of discharge of a surety indicates that the creditor does not proceed against the principal debtor in time, the sureties cannot be proceeded against. The allegation against the Respondent Bank is that they did not proceed to take possession of the hypothecated goods or the tangible movable assets and because of their negligence in proceeding against the properties which were available, the sureties or the guarantors are to be exonerated from the liability. The argument of the learned counsel for the Appellants appears to be attractive on the first blush, but in view of the charge created over the movables property belonging to the Appellant, the Bank is at liberty to proceed against the property and the property would definitely include the buildings constructed thereon. I am, therefore, not impressed by the arguments of Mr Pandit. In view of the fact that the mortgage holds good, the execution of the acknowledgement by the Appellant is inconsequential. The fact that the Bank did not proceed against the movable assets which were

¶27

¶28

hypothecated will also not result in their losing rights and the claim over the mortgaged asset and, therefore, the argument of the learned counsel appearing for the Appellant, Shri. Pandit is not acceptable. The learned counsel has also relied upon a catena of decisions, but most of them are of no help to the Appellant in view of the fact that the mortgage is to be upheld.

¶29

In view of my above finding that the mortgage holds good, the impugned judgment cannot be interfered with and hence the Appellant has no merits and requires to be dismissed. As the result, the Appeal is dismissed with costs.

¶30

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

¶31

Sd/Chairperson

¶32

dpj-1

¶33

Shri Arvind Dattatreya Potnis v. Bank of India & Ors.

Case brief

What is this about?

What did the court decide?

Shri Arvind Dattatreya Potnis v. Bank of India & Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Parties & counsel

Coram

Case details

All orders in this case

Similar cases

Punjab National Bank versus State Bank of India & Ors.

Lokesh Janardhan Waghmare versus Union Bank of India

Bank of Baroda versus Shri Naushad Taufiq Khan

Phoenix ( India )& Ors. versus Bank of Baroda

M/S Phoenix ( India ) & Ors. versus Bank of Baroda

M/s Mitexco and Ors. versus Canara Bank