Allowed

Kumari Mahin Zeeshan and Ors. v. Punjab National Bank and Ors.

DRAT24 May 2024REGULAR APPEAL/104/2018

Case brief

AI extract

What is this about?

This appeal challenges a regular appeal dismissed by the Debt Recovery Tribunal (DRT) for lack of jurisdiction. The appellate court observes that while the DRT cannot decide ultimate title, it must adjudicate the validity of the mortgage as a prerequisite to proceeding under the SARFAESI Act. The lower tribunal failed to address this essential issue, and the order is remanded.

What did the court decide?

Set aside the order dated 23.05.2018 dismissing the regular appeal. Remand the matter to the Debts Recovery Tribunal to decide afresh on the validity of the mortgage after affording an opportunity of hearing to the parties concerned.

Kumari Mahin Zeeshan and Ors. versus Punjab National Bank and… — Banking and Recovery | DRAT (2024)

Outcome

Issue for consideration

Whether the Appellate Tribunal has jurisdiction to adjudicate the validity of a mortgage created in favour of a secured creditor under the SARFAESI Act, despite the existence of a civil suit regarding the title of the property. +2 more

Detailed headnote3 paragraphs

In proceedings under the SARFAESI Act, 2002, the creating of a valid mortgage in favour of a secured creditor is a relevant factor that the Debts Recovery Tribunal (DRT) must consider to ensure that the proceedings are conducted in accordance with the Act and rules. While the DRT does not have the power to adjudicate the ultimate ownership or title of a property—that limited jurisdiction belongs to a competent Civil Court—the validity of the mortgage encumbering the asset is a substantive judicial question prior to the exercise of powers under Sections 13, 17, or 18 of the Act.

In the present matter, an application was filed by third parties claiming a Hibanama (gift deed) in their favour. The DRT dismissed the maintainability of their appeal, observing that the issue regarding the execution of the deed was for a civil court, and thus the applicants had no locus standi. This finding was held to be perverse because the DRT failed to consider the essential issue of whether the alleged mortgage created in favour of the Bank was valid or validly registered. Such a failure to record a finding on the validity of the mortgage makes the impugned order unsustainable in law.

Therefore, it is appropriate to allow the appeal, set aside the order of the lower tribunal, and remand the matter to the Tribunal to decide afresh after affording a hearing to the parties. The Tribunal must be guided by the observation that the validity of the mortgage is a primary question to be resolved before determining the applicability of the SARFAESI Act provisions, without allowing the decision to be influenced by the initial dismissive observation regarding the civil forum.

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IN DEBTS RECOVERY APPELLATE TRIBUNAL, ALLAHABAD

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Regular Appeal No. 104/2018

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Kumari Maheen Zeeshan aged about 20 years, College Student, Daughter of Shri Zeeshan Ali, Resident of First Floor, Shamim Villa, Riyaz Manzil Compound, Khanugaon, Bhopal, M.P.- 462030.

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Kumari Fatima Zeeshan, aged about 6 years, Student, Daughter of Zeeshan Ali, minor through Elder Sister and next friend/ Guardian Kumari Mahin Zeeshan, Resident of First floor, Shamim Villa, Riyaz, Riyaz Manzil Compound, Khanugaon, Bhopal, M.P. 462030.

¶5

Kumari Koshar Zeeshan, aged about 4 years, Student, Daughter of Zeeshan Ali, minor through Elder Sister and next friend/ Guardian Kumari Mahin Zeeshan, Resident of First floor, Shamim Villa, Riyaz, Riyaz Manzil Compound, Khanugaon, Bhopal, M.P. 462030.

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

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Versus

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Punjab National Bank through Branch Manager, Mallick Market Branch, Bhopal, M.P. 462003.

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Zeeshan Ali son of Shri Shamim Uddin, aged about 46 years, Resident of Near Sufia Maszid, Ahmedabad, Kohefiza, Bhopal, M.P. 462030.

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M/s Royal Heritage Builders, Colonizers Infrastructure Pvt. Ltd. Shamim Villa, Riyaz Manzil, Compound Khanugaon, Bhopal, M.P.- 462030.

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

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Advocates who appeared in this case

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For the	appellant	Shri V.K. Shukla, Advocate
For the	respondent-Bank	Shri A. P. Singh, Advocate
For the	respondents No.	None
2 & 3
		JUDGMENT
	Date of	Decision: 24.05.2024

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JUSTICE R. D. KHARE, CHAIRPERSON

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The present appeal has been filed under section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short “ the SARFAESI Act”) against the order dated 23.05.2018, whereby the S.A. No. 110/2018 filed by the appellant has been dismissed by the Tribunal below.

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¶17

The brief facts of the matter are that the respondent No. 3 was granted credit facility of about Rs. 2.00 crore by the respondent No. 1-Bank, to which respondent No. 2 mortgaged his property by depositing the title deed with the respondent-Bank, whereas the appellants are the daughters of the respondent No. 2, who had executed a Hibanama in favour of the appellants on 10.07.2013, while they were minors, but out of these, Kumari Maheen Zeeshan-appellant No. 1 is now major. The appellants are neither borrower nor guarantor or mortgagor to the said credit facility. The appellants came to know that the property in question has been kept in security with the respondent No. 1 on 16.09.2017. Thereafter the appellants filed a suit before the Civil Court 04.10.2017 claiming that respondent No. 2 had no right to mortgage the said property, which is still pending.

¶18

It appears that since the respondents No. 2 did not maintain the financial discipline, therefore, the account was classified as NPA and demand notice dated 03.01.2018 was issued under section 13(2) of the SARFAESI Act, against which the respondents No. 2 and 3 filed objection under section 13(3A) of the SARFAESI Act before the Bank, which has been stated to be not decided.

¶19

It transpires that respondents No. 2 and 3 offered another property having worth of Rs. 37.00 crore and in this regard, several letters were written to the Bank, but the same has not been considered, instead rejected by the Bank. Thereafter the respondent-Bank issued possession notice dated 07.03.2018 under section 13(4) of the SARFAESI Act for Rs. 2,07,86,807.48.

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¶21

It is averred that a representation was given by the appellant No. 1 on 25.03.2018 to the respondent No. 1. The appellant had also filed an application before the Trial Court for injunction, which was rejected vide order dated 07.02.2011. The said order was challenged by the appellants by filing M.A. No. 907/2018 before the Hon’ble Madhya Pradesh High Court, which is still pending.

¶22

The appellants challenged the proceedings of the Bank by filing S.A. No. 110/2018 before the Tribunal below. During the pendency of the said S.A., an amendment application was filed by the appellants for taking additional documents. The Tribunal below vide order impugned has dismissed the S.A. as not maintainable holding that the Tribunal below has no jurisdiction to adjudicate the issue with regard to execution of gift deed. Being aggrieved by the said order, the present appeal has been filed by the appellants.

¶23

Learned counsel for the appellants submitted that appellants are third party, as they are neither borrower nor guarantor or mortgagor. The property was given as gift to the appellants by way of Hibanama by their father on 10.07.2013, which is at page No. 22 of the paper book. The property is being claimed on the basis of the aforesaid gift deed executed by their father and the application under section 17 has been dismissed by the Tribunal below on the ground that the issue under the provision of the SARFAESI Act can be decided by the Tribunal, but the issue with regard to the gift deed can be decided by the competent court, for which separate suit has already been filed and further that the appellants, who are third parties, are not aggrieved by the action taken by the Bank under the SARFAESI Act. Hence, the said finding is perverse as

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the Tribunal below has authority to adjudicate the genuineness of the mortgage. Therefore, the order impugned is not sustainable in the eye of law. In support of his contention, the learned counsel has relied upon a judgment passed earlier by this Appellate Tribunal in Appeal Dy. No. 147/2020- Kumari Maheen Zeeshan & Ors. Vs. Royal Heritage Builders Colonizers Infrastructure Pvt. Ltd. and Ors, decided on 16.09.2021.

¶26

Learned counsel for the respondent-Bank submitted that the Hibanama cannot be relied upon for the reason that it was not executed on stamp paper and it was only notarized, therefore, the same cannot be relied upon. It was next contended that the Hibanama was executed on 10.07.2013 by the respondent No. 2 in favour of the appellants, whereas the respondent No. 2 took the loan for Rs. 2.00 crore from the Bank in the year 2015. When the financial discipline was not followed, the proceedings were initiated by the Bank in the year 2018 and a letter dated 20.02.2018 was given by the principal borrower i.e. respondent No. 2 to the Bank, which is at page No. 38 of the paper book, stating therein that he has been suffering from mental disease for the last three-four years and treatment is being done under Dr. R.N. Shahu. It was further stated that the property, which was given as security, had already been given by the respondent No. 2 to his three daughters on 10.07.2013, which is prior to the mortgage. It was contended that on account of the said act, the financial discipline was deliberately not maintained by the father of the appellants, therefore, the present litigation has been initiated at the behest of his daughters on the ground of said alleged Hibanama and his daughters are defending the case of his father, whereas the financial

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disbursement was made and utilized by the respondent No. 2. It was also contended that 2015 onwards the borrowers who is father of the appellants, had himself written various letters to the Bank for settlement of the claim offering another property etc., which was also being supported by his daughters, therefore, it was argued that subsequently, the appellants cannot claim their right in the property in question. If they were aggrieved by any act of the principal borrower, they should have initiated the proceedings against him under the remedy available to them, which was not done. It was also contended that there is no injunction passed by the Civil Court. It was therefore contended that the Tribunal below has rightly dismissed the S.A. of the appellants, hence it was prayed that the appeal may be dismissed.

¶29

In the rejoinder, the learned counsel for the appellant submitted that all these issues, which have been argued, were never raised before the Tribunal below, therefore, the matter may be remanded back to the Tribunal below for deciding it afresh.

¶30

Having heard the learned counsels for the parties and considering the material available on record, undisputedly, one Hibanama was executed on 10.07.2013 in favour of the appellants and the Civil Suit filed by the appellants before the Civil Court is still pending. The loan was sanctioned in the year 2015 and the title deed of the property is also alleged to have been deposited with the respondent-Bank and the respondent No. 2 is not denying the disbursement and utilization of the loan from the respondent-Bank.

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¶32

With regard to the above, the Tribunal below was required to decide, as to whether the alleged mortgage created in favour of the respondent-Bank was valid or not? Although it is true that the Tribunal below cannot decide the ownership and title of the property, which can only be decided by the competent Civil Court, but in the SARFAESI proceedings, the creation of mortgage in favour of the secured creditor is relevant factor, which has to be decided by the DRT so as to arrive at the conclusion that the proceedings conducted under the provisions of the SARFAESI Act and Rules made their under are in accordance with the procedures or not. In the instant case, the Tribunal below has not considered the issue of validity of mortgage, which was essential to be decided in the present case and the Tribunal below ought to have recorded the clear finding on this aspect, but without going into the intricacy of the matter, it has casually observed that “ it is apparent that this Tribunal is having jurisdiction to adjudicate the issue with regard to compliance of the provisions of SARFAESI Act, 2002 only in a Securitization Application. The applicants may be having their grievance with regard to execution of gift deed, but that issue has to be agitated before a proper forum and admittedly the applicants have challenged the same before Civil Court. Since the applicants have failed to establish that they are aggrieved by any of the measures initiated by the respondent No.1-Bank under the SARFAESI Act, I am of the opinion that the applicants (who are neither borrower nor mortgagors nor guarantors) have no locus to file the present S.A .”. Such finding is not sustainable because the issue of validity of mortgage plays an essential role in the proceedings conducted under the SARFAESI Act.

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¶34

In view of the above, it is observed that the important factual and legal aspect has not been decided by the Tribunal below, therefore, I deem it appropriate to remand the matter back to the Tribunal below to decide it afresh.

¶35

Accordingly, the appeal is allowed and the impugned order dated 23.05.2018 is set-aside. The matter is remanded back to the Tribunal below to decide it afresh after affording opportunity of hearing to the parties concerned on the basis of the observation made herein above, but without being influenced in any manner by such observations on merits. No order as to costs.

¶36

The parties shall appear before the Tribunal below on 02.07.2024.

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

¶38

CHAIRPERSON

¶39

VN GIRI

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Kumari Mahin Zeeshan and Ors. v. Punjab National Bank and Ors.

Case brief

What is this about?

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Kumari Mahin Zeeshan and Ors. v. Punjab National Bank and Ors.

Case brief

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