Dismissed

Punjab National Bank and Anr. v. Smt Poonam Agarwal and Ors.

DRAT18 Jul 2023

Case brief

AI extract

What is this about?

The Debt Recovery Appellate Tribunal dismissed appeals filed by Punjab National Bank. The Tribunal upheld the lower order finding that a mortgage on specific shops was invalid because the banks satisfied third-party purchasers were already in possession and doing business from the shops prior to the mortgage creation.

What did the court decide?

The impugned orders dated 16.10.2020 were maintained and the appeals were dismissed.

Punjab National Bank and Anr. versus Smt Poonam Agarwal and… — Specific Performance | DRAT (2023)

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IN DEBTS RECOVERY APPELLATE TRIBUNAL, ALLAHABAD

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Appeal Dy. No. 185/2021

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Punjab National Bank through its Branch Manager, 3/67 Bhai Bhai Market, Ruyee ki Mandi, Shahganj, Agra282002.

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Punjab National Bank through Authorized Officer, Circle Office 1-2, Raghunath Nagar, M.G. Road, Agra-282002

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……….....……………………...…………………………………………….Appellants

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Versus

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Smt. Snehlata Agarwal, W/o Shri K.K. Agrawal, R/o 80Basant Vihar, Kamla Nagar, Agra-282004

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Smt Laxmi Devi, W/o Shri Ashok Kumar Agrawal, R/o 116, Kaveri Kunj, Kamla Nagar, Agra-282004

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M/S City Mall, A unit of Shri Ram Krishna Sahkari Awas Samiti having its registered office at 8/173, Bhairon Bazar, Belanganj, Agra, U.P-282004 through its secretary Shri Vijay Kumar Gupta

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……….….………….…….………………………………………………….Respondents

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Appeal Dy. No. 186/2021

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Punjab National Bank through its Branch Manager, 3/67 Bhai Bhai Market, Ruyee ki Mandi, Shahganj, Agra282002.

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Punjab National Bank through Authorized Officer, Circle Office 1-2, Raghunath Nagar, M.G. Road, Agra-282002 ………...……………...………………………………………………..Appellants Versus

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Smt. Poonam Agarwal, W/o Shri V.K Agarwal, R/o 80Basant Vihar, Kamla Nagar, Agra-282004

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Smt Laxmi Devi, W/o Shri Ashok Kumar Agrawal, R/o 116, Kaveri Kunj, Kamla Nagar, Agra-282004

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M/s City Mall, A unit of Shri Ram Krishna Sahkari Awas Samiti having its registered office at 8/173, Bhairon Bazar, Belanganj, Agra, U.P-282004 through its secretary Shri Vijay Kumar Gupta

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…..………….…….………………………………………………….Respondents

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JUDGMENT

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Date of Decision: 19.07.2023

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JUSTICE R. D. KHARE, CHAIRPERSON

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The above mentioned appeals have been filed by the appellant-Bank under section 18 of the Securitization and Reconstruction of Financial Asset and Enforcement of Security Interest Act, 2002 (hereinafter referred to as

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“the SARFAESI Act”) against the judgment/order dated 16.10.2020 passed by the Tribunal below in S.A (T) No. 185 of 2018 and S.A. (T) No. 473 of 2018, by which both the S.As. were allowed, therefore, these are being decided by this common order.

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The brief facts of the present case as stated in the Appeal Dy. No. 185/2021 are that the respondent no. 3 approached the appellant-Bank for the loan to construct a commercial complex in the name and style of M/s City Mall, which is a unit of Shri Ram Krishan Sahkari Samiti Limited. The appellant-bank granted a term loan for a sum of Rs. 3.00 crores to the respondent no. 3. In order to secure the same, the respondent no. 3 (borrower) created an equitable mortgage over the said commercial complex including all the shops constructed there on 25/09/2009 and also executed other documents in favour of the appellant-Bank. Since the borrower did not adhere to the terms of the loan agreement, therefore the account was classified as NPA on 31/12/2009 and a demand notice dated 29/06/2010 was issued u/s 13(2) of the SARFAESI Act to borrower for a sum of Rs. 2,13,55,102/As the borrower did not pay any heed to the demand raised by the Bank, therefore, symbolic possession of the property in question was taken by the Bank by issuing possession notice dated 30/01/2012 u/s 13(4) of the SARFAESI Act to the borrower.

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It transpires that the appellant-Bank filed an application being No. 59/2012 before the District Magistrate, Agra u/s 14 of SARFAESI Act, which was allowed vide order dated 01/07/2013 with direction to the SSP, Agra to ensure the physical possession of the property in question. The said order was challenged by the borrower

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before the Hon’ble High Court by filing Writ Petition No. 4563/2013, which was dismissed vide order dated 31/07/2013 on the ground of alternative remedy. Inspite of the order dated 01/07/2013 passed u/s 14 of the SARFAESI Act, the physical possession of the property in question was not handed over by the borrower to the appellant-bank, therefore, the Bank again preferred a Writ-C No. 32405/15, in which vide order dated 27/05/2015 the District Magistrate, Agra was directed to file his personal affidavit as to why the order passed by his own authority u/s 14 has not been complied with. Pursuant to it , the physical possession of the mortgaged property was handed over by the District Administration to the Bank on 25/06/2015. Thereafter, the appellantBank published a possession notice dated 30/06/2015 in the newspapers on 01.07.2015 with regard to taking of physical possession of the property in question, which was challenged by the respondents no. 1 and 2 of both the case by filing S.A. No. 490/2015 and 491/2015 before the DRT, Lucknow, which were subsequently transferred to DRT, Allahabad and were renumbered as S.A (T) 185/2018 and S.A (T) 473/2018 stating inter alia that the S.A applicants have purchased the shop No. G-8 and G-9 in the City Mall, Agra vide sale deed dated 07/07/2008 from the respondent no. 3-borrower, whereas the respondent no. 3-borrower was granted the loan on 25/05/2009 and mortgage was created over the property in question on 22/06/2009, which was done much after selling the shops in question by the borrower to the respondents no. 1 and 2.

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The Tribunal below allowed both the S.As. filed by the respondents no. 1 and 2 vide order impugned holding that the mortgage created by the respondent no. 3 on

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22/06/2009 in favour of the appellant-bank in respect of the shops in question is invalid. Being aggrieved by the said order, both the appeals have been filed by the appellant-Bank.

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Learned counsel for the appellant-Bank submitted that the respondent no. 3 is a borrower, who had mortgaged the entire land and building of the commercial complex in the name of City Mall including all the shops constructed in the mall on 22.06.2009, but the said respondent did not disclose at the time of taking the loan that there is any encumbrance in the said property. The said averments have been stated in para 5.9 of the memo of appeal.

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Learned counsel for the appellant further submitted that when the possession was not handed over by the District administration to the appellant-Bank inspite of order dated 01/07/2013 u/s 14 of the SARFAESI Act, the appellant preferred a Writ-C No. 32405/2015 before the Hon’ble High Court, Allahabad, in which the Hon’ble High Court vide order dated 27/05/2015 had directed the District Magistrate to file his personal affidavit as to why the order passed u/s 14 has not been complied with. The said order dated 27/05/2015 has been annexed as annexure 5 to the memo of appeal.

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Learned counsel for the appellant further contended that after taking possession of the entire property in question on 25/06/2015, a possession notice dated 30.06.2015 was published in the newspapers on 01/07/2015. Subsequently, the respondent no. 3 filed S.A No. 440/2015 before the Tribunal below challenging the demand notice and the physical possession of the secured asset dated 25/06/2015, which was allowed by the

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Tribunal below vide judgment and order dated 09/10/2015, which was against the settled principal of law as laid down by the Hon’ble Apex Court. The said judgment was challenged by the appellant bank before this Tribunal by filing appeal no. 315/2015, in which the interim status-quo order was passed on 08/12/2015. It was further stated that inspite of status-quo order granted by this Tribunal on 08/12/2015 with regard to the property in question, the respondent no. 3-borrower has deliberately violated the said order in collusion with the respondents no. 1 & 2 and despite the lock and key/seal of the bank, the respondents unlawfully occupied the various shops including the shops in question, for which a FIR was lodged on 24/08/2016 against the respondent/borrower under section 461, 188, 424 of IPC, which was registered as crime case no. 0744 at PS New Agra.

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The learned counsel for the appellant further submitted that the respondents no. 1 & 2 have claimed their right pursuant to the sale deed dated 07/07/2008 in respect of shop no. G8 & G9 in the City Mall, whereas on that date such shops were neither constructed nor was in existence and when the possession was taken by the bank on 25/06/2015, the S.A applicants were neither in possession of the shops in question nor any business or any other activity was going on there and the said shops were lying vacant. The said averment has been stated in para 5.19 of the memo of appeal.

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Learned counsel for the appellant further submitted that it was specific case of the S.A applicants that the shops in question were in existence on 07/07/2008 and it was agreed between the parties that the shops will be handed

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over when the same was completed. As such the respondents no. 1 & 2 cannot say that the said shops were completed and the same were handed over to the respondents no. 1 and 2. It was also contended that in para 5.33 of the memo of appeal it has been specifically stated that the land on which shops were constructed was never subject matter of the alleged sale deed. It was further contended on behalf of the appellant that the respondents no 1 & 2 has alleged that they are the owners of the shops in question pursuant to the sale deed dated 07/07/2008, but that sale deed does not relate to the proportionate land of the said shops, therefore it cannot be said that the land on which the shops in question are constructed is a part of the sale deed and the finding of the Tribunal below pertaining to shop No. G-8 & G-9 is perverse and not sustainable.

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It was further argued on behalf of the appellant that the respondents have not brought any document on record to show that they have ever been put in possession of the shops no. G-8 and G-9 and the respondent no 3-borrower has not obtained even completion certificate from Agra Development Authority. The finding of the Tribunal below that the mortgage created by the respondent no. 3 pertaining to the shops No. G-8 & G-9 is invalid, is not correct, as it is clear from the document and sale deed itself as well as admission of the appellant/respondent that the shops in question were not in existence at all on the date of execution of sale deed and the property, which is not in existence, cannot be subject matter of transfer by virtue of any transfer deed. It was again reiterated that the structure of shop in question was sold to the respondent nos. 1 and 2, but the land, on which the shops are constructed, was mortgaged with the Bank,

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therefore, the finding of the Tribunal below that the mortgage of shops in question is invalid, is not sustainable. It was further contended that the alleged transfer as claimed by the respondents is in violation of section 8(1) of the Transfer of Property Act. It was lastly contended that the future property cannot be transferred in view o the judgment passed by the Hon’ble High Court, Allahabad in Moti Ram Vs. Khvali Ram and another, AIR 1967 Alld. 484.

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In the last, the learned counsel for the appellant-Bank has prayed that both the appeals may be allowed and the impugned order dated 16.10.2020 may be set aside to the extent of invalid mortgage in respect of the shops in question.

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Leaned counsel for the respondents no. 1 & 2 submitted that the contention of the appellant that at the time of taking possession of the shops in question 25.06.2015, the said shops were not complete nor the same was in possession of the respondents no. 1 & 2, are against the record and pleadings of the appellant itself and has referred to Annexure Nos. 5 & 9 at page no. 109 of the memo of appeal. It was further submitted that the perusal of the these annexures would demonstrate that the books of the respondents no. 1 & 2 were kept in the said shops, which are sealed by the appellant and an application was moved by the respondents no. 1 & 2 for release of the books and the Bank had ordered for release of the same by de-sealing the said shops vide letter dated 10/07/2015, which is annexure no 9 at page no 101 of the paper book. Therefore, the contention of the appellant that shops were never constructed and handed over to the respondent no 1 and 2 is against the

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record of the appellant-bank itself. The said record shows that the shops in question were in existence at the time of taking possession by the appellant bank. It was further submitted that there is no future transfer in the present case, as the sale deed was executed on 070/07/2008, in which it is mentioned that the possession of the shops in question will be handed over within 2 months, whereas the mortgage was created in favour of the Bank on 22.06.2009 which is after 14 months. It was further submitted that in the interregnum, the shops were handed over to the respondents no 1 and 2, therefore there is no question of any future transfer. Hence the arguments raised by the appellant with regard to it cannot be considered to be tenable.

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The next argument on behalf of respondents no 1 and 2 was that the shops as well as the land in question was sold by the respondent no 3 borrower in favour of the respondents no 1 and 2 as is apparent from annexure no 2, which is sale deed at page no 64 of the paper book. The said sale deed contains the details of the property sold and has further stated that the land was also sold. As such the argument of the appellant is contrary to the said averment, which is not sustainable.

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The learned counsel for the respondent no 1 and 2 further submitted that the averments or arguments raised by the appellant that the shops in question did not exist was never pleaded before the Tribunal below nor argued there.

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It was lastly contended that the respondents no 1 and 2 have neither executed any documents nor created any mortgage over the shops in question with the Bank, therefore, proceedings cannot be initiated by the Bank

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against the shops in question, which have been purchased by the respondents no 1 and 2 prior to the execution of mortgage deed by the respondent no 3 with appellant-bank. The appellant bank is neither secured creditor nor the shops in question is secured asset, therefore, no securitization proceedings can be initiated against the said respondents.

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It was lastly contended on behalf of respondents no 1 and 2 bank has not initiated any proceedings before any forum for cancellation of the sale deed dated 07/07/2008 executed by the borrower in favour of the respondents no 1 and 2. It is therefore prayed that the appeals of the appellant deserve dismissal with heavy cost.

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In the rejoinder, the learned counsel for the appellant submitted that the application which was moved by the respondents no 1 and 2 (annexure no 5 at page no 95 of the paper book) was only forwarded to the authority concerned but there is no admission of the bank that anything was stored in the said shops. It was further submitted that all the questions which have been raised before this Tribunal was also raised before the Tribunal below.

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Having heard the learned counsels for the parties and considering the material available on record, it is undisputed that the respondents No. 1 and 2 of both the appeals had purchased the shop No. G-8 and G-9 from the respondent No. 3-borrower vide sale deed dated 07.07.2008 and the mortgage was created by the respondent No. 3 on the entire land and building with the Bank on 22.06.2009. The main controversy raised by the appellant-Bank in the present case is that the shops in question were not in existence at the time of execution of

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the sale deed dated 07.07.2008, possession of the same were never handed over to the respondents No. 1 and 2 and future transfer could not be made in view of section 8(1) of the Transfer of the Property Act as also the land on which the said shops are constructed was never subject matter of the said sale deed. In this regard, para 3 of the sale deed dated 07.07.2008, which is annexure No. 2 at page No. 64 of the paper book, is relevant wherein it is stated that the seller shall handover the possession of the said shops to the respondents No.1 and 2 within two months by completing the same. From the said averment, it is clear that at the time of execution of sale deed, the shops in question were in existence but it might be that the same would not have been completed in all respects, hence it cannot be said that the said shops were not in existence. The contention of the appellant Bank that the land on which the shops are constructed is not subject matter of the said sale deed is not tenable because the said shops are situated at the ground floor and the shop No. G-8 having area of 33.82 sq. mtr. was sold for Rs. 9.10 lacs and the shop No. G-9 having area of 26.42 sq. mtr. was sold for Rs. 7.11 lacs, meaning thereby the said shops were sold by the borrower to the respondents No. 1 and 2 along with the land. As such the contention of the appellant Bank that there was future transfer in the present case is also not sustainable.

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Besides above, it is to be seen that the respondents No. 1 and 2 of both the SAs had given the letters dated 08.07.2015 to the Bank, which are at page No. 99 and 100 of the paper book, for de-sealing the shops in question so that the articles kept therein may be removed from the said shops and the said letters were replied by the Bank vide letter dated 10.07.2015, which

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is annexure No. 9 at page No. 101 of the paper book, stating therein “as per your letter dated 08.07.2015, our authorized officer has accepted your request and ready to de-seal your shop No. G-8 and G-9 for evacuation”. As such it is clear that the respondents No. 1 and 2 were in possession of the said shops and were doing their business from there. If the respondents No. 1 and 2 were not in possession of the said shops and were not doing their business from there, then on receipt of the letter dated 08.07.2015 from the respondents No. 1 and 2, the Bank would have denied straightway from de-sealing the said shops stating that there is nothing stored in the shops in question, which shops were not in possession of the respondents no. 1 & 2. Hence, the Tribunal below has rightly held that the mortgage created by the respondent No. 3-borrower with the Bank with regard to shops No. G-8 and G-9 is invalid.

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In view of the above, the impugned orders dated 16.10.2020 do not call for any interference of this Tribunal, hence both the appeals are liable to be dismissed. Accordingly, the same are dismissed with no order as to costs.

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A copy of this judgment be forwarded to the parties as well as the DRT concerned and be also uploaded on the e-drt portal.

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CHAIRPERSON

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VN Giri

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Punjab National Bank and Anr. v. Smt Poonam Agarwal and Ors.

Case brief

What is this about?

What did the court decide?

Punjab National Bank and Anr. v. Smt Poonam Agarwal and Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

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