Allowed

Pradip Jamnadas Arora & Anr. v. State Bank of India & Ors.

DRAT14 Feb 2023MISC APPEAL/119/2013

Case brief

AI extract

What is this about?

In Misc. Appeal No. 119/2013, aggrieved by a tribunal dismissing their application to quash a charge over a flat, appellants (bona fide purchasers) appealed against the Darats Recovery Tribunal-II, Mumbai allowed an original application for recovery from a prior defaulting borrower, holding that a charge created in favour of the bank was not enforceable against them.

What did the court decide?

The charge created over the subject flat in favour of the Respondent Bank was withdrawn, and the Recovery Certificate was modified to limit recovery to the original borrower and their assets.

Pradip Jamnadas Arora & Anr. versus State Bank of India & Ors. — Banking and Recovery | DRAT (2023)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr Justice Ashok Menon, Chairperson Misc. Appeal No. 119/2013

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Between

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Pradip Jamnadas Arora & Anr. … Appellant/s V/s.

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State Bank of India & Ors.

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…Respondent/s

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Mr Rajesh Nagory along with Mr Vinod Kothari & Mr Priyansh Jain, i/b M/s. Apex Law Partners, Advocate for Appellants.

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Ms Jaishree S., i/b M/s. Ashwini Kumar & Co. LLP, Advocate for Respondent No. 1

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Ms Vaishali R. Bhilare, Advocate for Respondent No. 5 Canara Bank.

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-: Order dated: 14/02/2023:-

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The Appellants are in appeal aggrieved by the dismissal of Misc. Application No. 67/2011 filed by them in Original Application No. 264/2005 on the files of the Debts Recovery Tribunal -II, Mumbai (DRT) vide order dated 08.04.2013.

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The 1^st Respondent State Bank of India had filed the aforesaid O.A. No. 264/2005 under the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (‘RDDB & FI Act’, for short) for recovery of housing loan advanced to the 2^nd Respondent named Amiya Kumar Jha for the purchase of Flat No. 503 A on the fifth floor of Tejas Apartment, Malad (West), Mumbai (subject flat) which was constructed and sold to him under an

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agreement for sale by the 3^rd Respondent builder as the sole proprietor of M/s Tejas Enterprise. The 2^nd Respondent alone was made a party in O.A. 264/2005. He remained ex-parte and vide Judgment dated 18.09.2006 the O.A. 264/2005 was allowed ex pate, and a Recovery Certificate was issued for recovery of ₹17,07,390.13 together with interest at the rate of 8.25% per annum with a charge over the subject flat was allowed.

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The present Appellants who claim to be bonafide purchasers of the subject flat were surprised by the attachment of the property in the execution of the Recovery Certificate referred to above. Hence, they approached the D.R.T. with the aforesaid M.A. No. 67/2011 under Sec. 19(25) of the RDDB & FI Act.

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The Appellants would claim exclusive right, title and possession over the subject flat stating that they had purchased the flat for valid consideration from the 3^rd Respondent builder vide a registered agreement for sale on 11.09.2006 for a consideration of ₹18.43. Lacs paid in full. Ever since, they have been in possession of the subject flat and have produced documents such as copies of cheques evidencing payment of the consideration, copies of receipts issued by the 3rd Respondent acknowledging the payment of consideration, maintenance receipt issued by Tejas Enterprises, share certificate issued by Tejas Apartment Co-operative Housing Society in favour of the Appellants, ration card issued to the Appellants receipts of maintenance paid by them to the housing society, and the electricity bills received by them evidencing their occupation of the subject flat.

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The Appellants, as also the 3^rd Respondent, admit that the subject flat was first sold to the 2^nd Respondent. For the purpose of purchasing the flat, the 2^nd Respondent had availed a housing loan from the Bank of Baroda, the 4^th Respondent herein, with one Sarvesh Kumar D. Singh as the guarantor. The 3^rd Respondent also admits having received ₹15 lacs towards the sale consideration from the 4^th Respondent Bank. However, two cheques issued by the 2^nd Respondent towards the payment of the balance sale consideration were dishonoured. The 2^nd Respondent also defaulted on the payment of instalments due to the 4^th Respondent. As a consequence, the 4^th Respondent Bank filed O.A. No. 66 of 2005 before the Debts Recovery Tribunal-III, Mumbai against the 2^nd Respondent and guarantor Sarvesh Kumar D. Singh. The O.A.66/2005 was allowed and a Recovery Certificate was issued. When the Bank of Baroda intended to proceed against the subject flat for recovery of the amount, the 3^rd Respondent approached the Bank of Baroda and offered to clear the debt and executed a deed of indemnity on 06.09.2006. The entire amount due to the 4^th Respondent was settled and a ‘No dues Certificate’ was issued by the 4^th Respondent. In view of the fact that the sale consideration was not paid as agreed, the 3^rd Respondent repudiated the agreement for sale with the second Respondent regarding the subject flat, and that stands unchallenged by the 2nd Respondent.

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The 3^rd Respondent thereafter offered to sell the subject flat to the Appellants and they accepted the offer and proceeded to purchase the falt vide agreement dated 11.09.2006 registered at Sub-

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Registrar Office No.1, Borivali. Three cheques were issued by the Appellants in favour of the 3^rd Respondent. The first cheque for ₹15 lacs was towards sale consideration and the other two cheques were towards payment of amounts due towards availing of extra amenities by them. All the cheques were encashed and receipts were issued by the 3^rd Respondent acknowledging payments.

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It is submitted that the 2^nd Respondent had cheated not only the Bank of Baroda by availing a loan and defaulting payment, but he had also availed similar housing loans from the 5^th Respondent Canara Bank and the 1^st Respondent State Bank of India.

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The 3^rd Respondent would contend that he had issued a no objection certificate with regard to availing of a loan by the 2^nd Respondent only to the Bank of Baroda. He is not aware of any other loans availed by the 2^nd Respondent. In his reply, the 3^rd Respondent stated that the no objection certificate purported to have been issued by him, and relied upon by the 1^st Respondent is forged and fabricated. He also would contend that he has not received any amount allegedly disbursed by the 1^st Respondent in his favour and deposited in his account maintained at Citi Bank, Nariman Point branch. The 3^rd Respondent would contend that he has no account maintained with Citibank., and that the only account that he has is with the Jankalyan Sahakari Bank Ltd in the name of his proprietorship.

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The 1^st Respondent would contend that the subject flat was mortgaged to it by way of a deposit of title deeds by the 2^nd Respondent and Mr Sarvesh Kumar D. Singh had stood as

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guarantor for the debt. The amount of ₹15 lacs was paid by way of cheque dated 23.10.2003 and was credited to the account of the builder M/s Tejas Enterprises maintained with the Citibank, Nariman Point branch.

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The Appellants would contend that the documents were obtained from Citibank to establish that the account with the Citibank, Nariman Point branch was maintained in the name of Tejas Enterprise with Himansu Rajendra Bhatt as the proprietor. His KYC documents are also obtained from the Bank to establish that the third Respondent has nothing to do with the Tejas Enterprise referred to in the account maintained with the Citi Bank into which the amount disbursed by the 1^st Respondent by way of a cheque was credited.

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In the impugned order, the Ld. P.O. did not consider the fact that the amount was credited to the account of someone other than the 3rd Respondent, and dismissed the application.

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The 2^nd Respondent and his guarantor are skulking away from all the proceedings after having obtained loans from at least three banks, indicating that he has deliberately cheated the banks and is on the run with whatever money he could amass. The 1^st Respondent ought to have been careful in conducting the due diligence with regard to the property mortgaged. The bank should also have ensured that the money it had dispersed was actually credited to the dealer who allegedly sold the flat to the 2^nd Respondent. It is adequately clear that the account maintained with the Citibank, Nariman point branch in the name of Thejas

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Enterprises is operated by one Mr Himansu Rajendra Bhatt as its proprietor. The 3^rd Respondent has not received the money which was dispersed by the 1^st Respondent bank in order to purchase the subject flat. Under the circumstances, it cannot be said that the 1^st Respondent has a valid mortgage by the creation of a charge over the subject property for the loan disbursed by it to the 2^nd Respondent or the 3^rd Respondent.

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The Appellants could never have had an opportunity to realise the manipulations made by the 2^nd Respondent. They are bona fide purchasers who have purchased the subject flat for valid consideration, the payment of which stands proved by documentary evidence.

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The 3^rd Respondent had sold the subject flat to the Appellants after repudiating the contract with the 2^nd Respondent. The 2^nd Respondent has not challenged the said repudiation. The debt incurred by the 2^nd Respondent from the Bank of Baroda had come to the knowledge of the 3^rd Respondent and he had also cleared that obligation to the Bank of Baroda and obtained a ‘No due Certificate’ from them.

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The appeal is therefore to be allowed and the charge created over the subject flat for the amount due to the 1^st Respondent from the 2^nd Respondent is liable to be withdrawn.

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The appeal is allowed and the impugned order of the DRT dated 08.04.2013 in Misc. Application No. 67/2011 is set aside, and the said Misc. Application No. 67/2011 is allowed and the charge created over the subject flat in favour of the 1^st Respondent vide

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judgment dated 18.09.2006 in O.A. 264/2005 on the files of the Debts Recovery Tribunal-II, Mumbai is set aside and the Recovery Certificate issued is limited to the realisation of amount from the defendants therein personally and from out of their assets. The Recovery Certificate is directed to be modified accordingly.

Sd/-

Chairperson

mks-2

Pradip Jamnadas Arora & Anr. v. State Bank of India & Ors.

Case brief

What is this about?

What did the court decide?

Pradip Jamnadas Arora & Anr. v. State Bank of India & Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

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