Allowed

Union Bank of India v. M/S Monu Trading Co. & Ors.

DRAT13 Oct 2023REGULAR APPEAL/108/2013

Case brief

AI extract

What is this about?

The Debts Recovery Appellate Tribunal allowed the appeal filed by Union Bank of India, setting aside the lower tribunal's dismissal of the original application against defendants nos 3 to 5. The appellate court held that evidence of deposit of title deeds indicated an intention to create a mortgage and rejected the defendants' claim of non-execution.

What did the court decide?

Impugned judgment and order with regard to dismissal of O.A against Defendants Nos. 3 to 5 are set aside and O.A. allowed with charge over mortgaged properties. A recovery certificate shall be issued

Union Bank of India versus M/S Monu Trading Co… — Contract and Commercial Disputes | DRAT (2023)

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

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Appeal No. 108/2013

Between

Union Bank of India

… Appellant/s

V/s.

M/s Monu Trading Co. & Ors.

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…Respondent/s

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Ms Ruchi Bagwe, i/b M/s Nainesh N. Amin & Co., Advocate for Appellant Bank.

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-: Order dated: 13/10/2023:-

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The Union Bank of India is an appeal aggrieved by the judgment and order dated 09.05.2011 in Original Application (O.A.) No. 106 of 2002 on the files of the Debts Recovery Tribunal, Nagpur (D.R.T.) whereby the O.A. was allowed in part against Defendants Nos. 1 & 2 and disallowed against Defendants Nos. 4 & 5. The O.A. against the third Defendant stood abated.

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2. The facts in brief are thus:

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The first Defendant proprietorship is owned by the second Defendant. He was conducting wholesale business in Iron and Steel and in metal scraps under the name and style Monu Trading Company. He approached the Applicant Bank for financial assistance to improve his business. A cash credit facility of ₹20 lakhs was granted to him vide sanction letter dated 04.01.2000 repayable with interest at the rate of 16.32% per annum with quarterly rests. Documents such as Demand Promissory Note, Letter of Continuity, Letter of Negative Lien,

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Declaration and Undertaking as well as Agreement of Hypothecation of Stock in Trade and Book Debts were executed in favour of the Bank. In order to secure the debt, Defendants Nos. 3 & 4 created an equitable mortgage of their property situated at Mouza No. 330, bearing Kh. No. 20 in plot No. 60 admeasuring 60 ft. N-S and 40 ft E-W Tah and District Nagpur on 08.01.2009. Defendant No. 5 also created an equitable mortgage of her property admeasuring 2400 sq. ft. in Survey No. 20, Circle No. 17/23, Division No. 4 situated at Mouza Bhankheda Tah. & District Nagpur. Title deeds of these properties were deposited with the bank.

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The principal borrower defaulted on repayment and hence, the bank filed the O.A. for recovery of the amount. The first Defendant filed a written statement stating that he was induced by one Rafiq Ahmed to approach the Bank for facilitating a loan and he was made to sign some blank forms and papers. It is also contended by the second Defendant that Defendants Nos. 3 & 4 had requested the aforesaid Rafiq to discharge them from their liability as guarantors and they were informed that they have been discharged and in their place, the fifth Defendant was made a guarantor. It is also contended that the loan granted to the proprietorship is covered under the Deposit Insurance and Credit Guarantee Corporation of India Act, 1961 (DICGC). The bank is compensated for the loss sustained due to nonpayment and interest at a compounded rate is not realisable. The second Defendant also contends that there was a recession in the iron and steel business which resulted in heavy losses.

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Defendants Nos. 3 & 4 contend that they have not stood as guarantors and have also not deposited the title deeds of their property as alleged. The original sale deeds are still with them. They never visited the bank but Rafiq made them sign certain papers allegedly for the purpose of standing as witnesses for the loan availed by the second Defendant who is their relative. On coming to know about the papers being used as a guarantee, they requested Rafiq to release them and it was assured that their guarantee would be withdrawn and in their place the guarantee of a person named Raj Mohammed S/o Shaikh Abdula was being furnished. It was also stated that in case of default, there was sufficient hypothecated movable property available for the realisation of the debt and that there was no need for any action against the other Defendants.

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The fifth Defendant also raised a similar contention stating that she has never executed any guarantee document in favour of the bank with regard to the loan availed by the second Defendant. The documents produced by the bank purportedly to prove the equitable mortgage are allegedly forged and fabricated. The original documents belonging to the fifth Defendant are still in her possession, she states. 6. After considering the evidence in detail, the Ld. Presiding Officer allowed the O.A. in part against the first Defendant proprietorship owned by the second Defendant. The O.A. as against the rest of the Defendants stood dismissed.

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The Appellant Bank is aggrieved and hence, in appeal. It is contended that Defendants Nos. 3 to 5 had executed guarantee deeds

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and they have been exonerated without any cogent evidence supporting their contentions. It is also stated that Defendants Nos. 2 to 5 are all related to each other and the possibility of Defendants Nos. 3 to 5 standing surety and offering their properties for the loan availed by the second Defendant cannot be disbelieved. The original title deeds belonging to Defendants Nos. 3 & 4 were produced as Exhibit33 and there is no reason to disbelieve the version of the bank. The memorandum of deposit of title deeds and declaration with regard to the equitable mortgage are also produced apart from the letter of guarantee and hence it is prayed that the impugned judgment and order with regard to Defendants Nos. 3 to 5 be set aside and the O.A. allowed as prayed for.

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The Defendants did not appear and therefore, were set ex-parte.

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Heard the Ld. Counsel appearing for the Appellant. Records perused.

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The Ld. Counsel for the Appellant points out to the memorandum of deposit of title deeds created by Defendants Nos. 3 & 5.

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The contention raised by Defendants Nos. 3 to 5 is that they did not execute any documents in favour of the bank. They also denied having ever gone to the bank. The Ld. Presiding Officer seems to have believed the contentions raised by the Defendants that they were made to sign certain documents by a person named Rafiq. The Ld. Presiding Officer has also noticed that there was a cross mark ‘X’ in front of their thumb impressions and signatures which indicates that it was not signed in the presence of the Bank Manager. The Ld. Counsel

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appearing for the Appellant submits that no such inference could have been drawn just because there was a pencil cross mark in the documents. Usually, such pencil cross marks are made to suggest the places where signatures/thumb impressions are to be subscribed. Just because there was such a mark it could not have been concluded that the documents are concocted. There is no positive evidence regarding the mortgagors/guarantors not signing the documents or their signatures being forged. Such conclusions could not have been drawn on conjectures and surmises. Creation of the mortgage by deposit of title deeds is to be proved by the intention of the parties. There is no contrary evidence to indicate that the mortgagors in this case had no intention to mortgage their properties. On the contrary, Defendants Nos. 2 to 5 are all related to each other and there is a high probability that the mortgagors were created in support of the loan availed by the second Defendant. I am, therefore, of the opinion that the Ld. Presiding Officer had gone wrong in disallowing the O.A. as against Defendants Nos. 3 to 5.

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As a result, the appeal is allowed. The impugned judgment and order with regard to the dismissal of the O.A. against Defendants Nos. 3 to 5 is set aside and the O.A. is allowed against all the Defendants with a charge over the mortgaged properties. A recovery Certificate shall be issued afresh.

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Sd/Chairperson

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mks-01

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Union Bank of India v. M/S Monu Trading Co. & Ors.

Case brief

What is this about?

What did the court decide?

Union Bank of India v. M/S Monu Trading Co. & Ors.

Case brief

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