Partly allowed

The Federal Bank Ltd. v. Madhav Structural Engineering Ltd. and Anr.

DRAT4 Jan 2023REGULAR APPEAL/66/2022

Case brief

AI extract

What is this about?

Appellant Federal Bank appealed a DRt order refusing charge over mortgaged properties due to non-production of title deeds. Appellant submitted letters evidencing deposit of deeds creating equitable mortgage under Sec 58(f). DRt erred; appeal allowed in part, charge upheld, fresh recovery certificate directed.

What did the court decide?

Appeal allowed in part. Charge over mortgaged properties upheld. Fresh recovery certificate issued reflecting that properties remain chargeable for debt realisation.

The Federal Bank Ltd. versus Madhav Structural Engineering… — Banking and Recovery | DRAT (2023)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr Justice Ashok Menon, Chairperson Appeal No. 66/2022

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Between

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The Federal Bank Ltd … Appellant/s

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V/s.

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M/s. Madhav Structural Engineering Ltd and …Respondent/s Anr.

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Ms Asmita Maurya, i/b Mr Vivek Sawant, Advocate for Appellant.

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-: Order dated: 04/01/2023:-

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This is an appeal filed by the original Applicant Federal Bank Ltd in Transfer Original Application No. 332/2017 on the files of Debts Recovery Tribunal (D.R.T)- II, Mumbai challenging the impugned judgment dated 16.06.2017. The Appellant/Applicant had filed the application for recovery of ₹ 24,06,270.53 together with the interest @ of 22.75% p.a. realisable from Defendant No. 1 & 2 jointly and severally with a charge over the mortgaged properties scheduled to the application. The Defendants remained ex-parte and the officer of the Applicant Bank filed a claim affidavit in support of the averments made in the application as Ext.11. Documents produced in support of the claim were marked as Exts. 13 to 35.

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However, the Ld. Presiding Officer observed that the Applicant Bank for reasons best known to it has failed to file any documents with respect to the alleged securities and, therefore, declined to grant reliefs with respect to the mortgaged properties. The Appellant is aggrieved by that portion of the judgment and hence in appeal.

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The Ld. Counsel appearing for the Appellant Ms Asmita Maurya submitted that together with the affidavit of claim, all the documents have already been produced and submitted. Though the title deeds were not produced, the letter evidencing the deposit of title deeds duly stamped was produced. The affidavit of claim refers to the letter dated 20.03.2008 Exhibited as A4 which clearly states

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that the title deeds are deposited as contemplated u/s. 58(f) of the Transfer of Property Act, for continuing collateral security for different loans including a cash credit loan of ₹ 10,00,000/- availed by the Defendant. Even the description of the properties is given in that letter. Subsequently, a further extension of the loan was granted to the Defendants and on 03.09.2008 yet another letter Exhibited as A9 was sent by the Defendants to the Bank confirming the deposit of title deeds pertaining to the various properties. Defendants did not appear to contest the fact regarding the creation of the mortgage by deposit of title deeds. What is important in the creation of an equitable mortgage u/s 58f of the Transfer of Property Act is the intention of the mortgager to create a mortgage by depositing his title deeds. The fact that the title deeds as such were not produced before the D.R.T. is of no consequence. Even a copy of the title deeds could be deposited by the mortgager expressing his intention to create a mortgage. The two letters Exts. A4 and A9 undoubtedly indicate the intention of the Defendants to create a mortgage with regard to their properties. The Ld. Presiding Officer somehow overlooked this fact to hold that no documents are produced to prove the mortgage.

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The memorandum of deposit of title deeds need not be registered because the mandatory provision regarding registration of the memorandum of deposit of title deeds was incorporated into Sec. 17 of the Registration Act, 1908 by way of Maharashtra Government amendment which came into effect only on 01.04.2013. The letters produced have the stamp duty affixed on them and indicate that those documents are genuine, evidencing the deposit of the title deeds. Under the circumstances, I find that the Ld. Presiding Officer has committed an error in not upholding the charge over the properties mortgaged, and therefore, the finding requires to be interfered with.

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The Appellant has also raised an objection regarding the declined interest at the contractual rate of 22.75%. Interest, as prayed for till the date of filing of the application, has been allowed. It is only the future interest that was limited to 12% p.a. in the impugned judgment. That being the discretion of the Tribunal, I do not intend to interfere with that portion of the judgment.

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Hence, the appeal is allowed in part. While upholding the decree with regard to the amount and the interest awarded, it is also added that the properties scheduled to the application shall remain a charge for the realisation of the debt due from the Defendants. The judgment is modified to that effect and a fresh recovery certificate to this effect shall be issued in favour of the Appellant.

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The appeal is allowed as above.

Sd/-

Chairperson

rm-14

The Federal Bank Ltd. v. Madhav Structural Engineering Ltd. and Anr.

Case brief

What is this about?

What did the court decide?

The Federal Bank Ltd. v. Madhav Structural Engineering Ltd. and Anr.

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

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