Allowed

State Bank Of India and Ors. v. Shyamal Chakraborty and Ors.

DRAT12 Apr 2024REGULAR APPEAL/202/2017

Case brief

AI extract

What is this about?

The Debts Recovery Appellate Tribunal allowed the bank's appeal against an order passing symbolic possession. The Tribunal held that subsequent transfer of mortgaged property is barred under the SARFAESI Act and the recovery proceedings were time-barred due to the failure to file within 45 days of the possession notice.

What did the court decide?

Judgment and order dated 08.03.2017 of the DRT allowed the bank's appeal against the possession notice; the appeal in S.A. No. 235 of 2015 was dismissed.

State Bank Of India and Ors. versus Shyamal… — Contract and Commercial Disputes | DRAT (2024)

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IN THE DEBTS RECOVERY APPELLATE TRIBUNAL AT KOLKATA

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Appeal No. 202 of 2017

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(Arising out of S.A. No. 235 of 2015 – DRT-3, Kolkata)

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THE HON’BLE JUSTICE SHRI ANIL KUMAR SRIVASTAVA, CHAIRPERSON

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12.04.2024

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State Bank of India having its central office at Madam Cama Road, Mumbai – 400021 and Branch Office at Chowringhee Branch, 38B, J.L. Nehru Road, Kolkata – 700071 and also Branch Stressed Assets Management Branch – II at 1, Middleton Street, Kolkata – 700071.

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2.AUTHORISED OFFICER, STATE BANK OF INDIA CHOWRINGHEE BR., HIMALAYA HOUSE, 38B JAWAHARLAL NEHRU ROAD, Kolkata – 700071.

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... Appellants

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--Vs--

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Shyamal Chakraborty residing at Neelam 2, Flat No.1, 1^st floor, 132, Kalitala Road, Kolkata – 700078.

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2.SMT ANINDITA CHAKRABORTY residing at Neelam 2, FLAT NO 1, 1ST FLOOR, 132 KALITALA ROAD, Kolkata – 700078,

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Mr. KAUSHIK KUMAR NATH residing at 662, PICNIC GARDEN ROAD, P.S-TILJALA, Kolkata – 700039.

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... Respondents

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For Appellant : Mr. Debasish Chakraborty, Learned Advocate Ms. Sharmistha Pal, ld. adv.

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For Respondent : Mr. Samik Basu, Learned Counsel

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JUDGEMENT

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THE APPELLATE TRIBUNAL :

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Feeling aggrieved by the judgement and order dated

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08.03.2017 passed by learned DRT-III, Kolkata allowing the

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S.A. No. 235 of 2015 [Sri Shyamal Chakraborty &Anr. Vs. State Bank of India &Ors.], appellant bank preferred the appeal.

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Facts in brief as per pleadings are that respondent no.1 and 2(SARFAESI applicants) are the employees of appellant bank. It is stated that they are the bona fide purchaser of flat no.1 situated at the first floor measuring 1302 Sftof premises no. 132, Kalaitala Road, P.S. Kasba, Kolkata from the date of purchase i.e. 18.05.2011. They have availed loan for purchase of the said flat from their employer i.e. appellant bank. Loan was obtained on the basis of application dated 10.05.2011 which was sanctioned on 17.05.2011.

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Flat in question was purchased from respondent no.3, Sri Koushik Kr. Nath. An agreement of sale was executed on 29.04.2011 by the vendor and sale deed was executed on 18.05.2011 duly registered in the office of ARA-I, Kolkata. Possession was taken by respondent no.1 and 2 and started living in the flat. Mutation before the local municipal authority was also done.

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A possession notice dated 21.12.2012 was issued by the appellant bank to M/s. Cotwall Commerce Pvt. Ltd, Sri Koushik Kr. Nath, respondent no.3, and other guarantors for the loan of Rs.24.28 Crores taken by them from the appellant bank. In the said possession notice the disputed property i.e. the flat was included as secured asset. Loan was sanctioned to respondent no.1 and 2 by the appellant bank after making appropriate title search report. When the possession notice was received, respondent no. 1 and 2approached their

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vendor Shir Koushik Kr. Nath, respondent no.3, who informed that the flat in question was not to be mortgaged in the bank’s favour. Sri Nath also wrote a letter dated 22.12.2012 to the appellant bank that said flat was never intended to be mortgaged. An FIR was also lodged by respondent no.1 and 2 on 24.04.2013.

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Appellant bank filed their objection stating that cash credit limit of Rs.1200.00 Lakh was sanctioned to respondent no.3, Shri Kaushik Kr. Nath, and M/s. Cotwall Commerce Pvt. Ltd. upon security of various assets as equitable mortgage. Mortgage was created on the land measuring 2 Cottah, 10 Chittack and 100 Sft situated at Premises No. 132, Kalitala Road, PS Kasba, Kolkata covered under title Deed No. 6913 of 2009. Having failed to pay the debts appellant bank initiated SARFAESI proceedings against the borrower and guarantors. Flat in question was constructed on the mortgaged land. Respondent no.3 promised to pay the value of the flat and to get the same released but he did not pay the same. Hence, there was charge over the secured property.

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A plea was taken that possession notice was issued on 21.06.2013 and S.A. was filed on 16.06.2015 which is barred by limitation. Provision of Section 78 of the Transfer of Property Act would not be applicable as appellant bank has charge over the property.

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Learned DRT had allowed the S.A. holding that appellant bank would have to be vigilant to protect the mortgaged property from probable transfer by putting public notice either on the flat in question or by publishing it in the newspapers. It is further held that bank was negligent while granting loan to respondent 1 and 2 for purchasing the flat which was already mortgaged with them.

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I have heard the learned counsel for the parties and perused the records.

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Learned counsel for the appellant would submit that learned DRT has erred in arriving in its finding. It is submitted that admittedly respondent 1 and 2 were the employees of the bank who were posted in different Branches of the bank. Loan to respondent no.3 was sanctioned by Chowringhee Branch on 17.05.2011 which was sanctioned in favour of M/s Cotwall Commerce Pvt. Ltd and respondent no.3. It is submitted that it is not in dispute that flat in question was constructed on a piece of land which was mortgaged by respondent no. 3. Learned counsel would further submit that respondents themselves were not vigilant at the time of purchase of the flat that said flat was mortgage property of the bank. Principle ofCaveat Emptor would apply in this case. Purchasers were required to verify the title of

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the property before purchasing the same. It is further submitted that vendor of respondent no.1 and 2, Shir

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Kaushik Kr. Nath, respondent no.3, has written a letter dated 16.05.2011 to the appellant bank that he has not borrowed any financial assistance from any financial institution to meet the cost of the construction of the flat in question. Learned counsel would further place reliance on the letter dated 22.12.2012 written by respondent no.3 to the Authorised Officer of the bank,Chowringhee Branch wherein it is stated that he had no intention to defraud the bank. He had created equitable mortgage of the loan and ready to deposit the value which will be assessed by the valuer. Learned counsel would submit that respondent no.1 and 2 themselves were not vigilant and could not be treated as bona fide purchaser for value with notice.

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Learned counsel for the appellant would further submit that S.A. was barred by limitation. Same argument was raised by bank in their opposition before learned DRT, which was not considered and no finding was recorded on the issue. It is submitted that symbolic possession was taken by the bank on 21.12.2012 which fact was well within the knowledge of respondent no.1 and 2, but same was not challenged and SA was filed on 16.06.2015, which is time barred.

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Learned counsel for the respondent would submit that they are the bona fide purchaser for value without notice. Reliance is placed upon the title search report obtained by

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the bank through its legal team dated 17.05.2011 wherein no incumbrances were found to have been incurred on the property in dispute. It is not a case that respondent no.1 and 2 has independently made any effort to verify the title deed of ownership. Report of the legal team dated 17.05.2011 came to the knowledge of respondent no.1 and 2 at the time of registration of the sale deed in their favour. It is further submitted that as per provision of Section 78 of the Transfer of Property Act there is negligence on the part of the bank in sanctioning the loan to respondent no.1 and 2.

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There are certain admitted facts in the matter. Admittedly, respondent no.1 and 2 are the employees of the appellant bank who havetaken loan for purchase of the flat in dispute. It is also not in dispute that loan was given for purchasing the flat in question which was constructed on the land mortgaged with the bank on 19.09.2009 which was renewed on 17.01.2011. Respondent no.1 and 2 purchased the flat subsequent thereto.

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Now the question to be decided as to whether respondent no.1 and 2are bona fide purchaser for value without notice or the bank was negligent in sanctioning the loan to respondent no.1 and 2 ?

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Admittedly, respondent no.1 and 2 are the borrower of the loan taken from the bank. They purchased the flat in

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dispute which was constructed on a piece of land mortgaged by respondent no.3 in favour of the bank by creating equitable mortgage by depositing title deed. Mortgage created by deposit of title deed is valid in Kolkata as per provision of Section 58 of the Transfer of Property Act. At this stage it would be relevant to observe that learned DRT has placed heavy reliance on the point that no publication of equitable mortgage was made by the appellant bank either by affixing notice on the flat or by publishing the same in the newspapers. Learnd DRT has not quoted any provision of law which makes it mandatory on the part of the bank to make a publication of the equitable mortgage having been created by deposit of title deed, rather it is the duty of the purchaser of the property to ensure by making due diligence and enquiries whether the vendor is the lawful owner of the property or not? Purchaser has to be vigilant enough to verify the original title deed of the property at the time of purchasing the same. In the present case, when property in diusputeis a flat which is constructed on a piece of land. It was the duty of the purchaser to ensure and verify the original title deed of the land in possession of the vendor so that they could legally satisfy themselves that the vendor is the lawful owner of the land on which said flat was constructed and they are purchasing the same. Respondent no.1 and 2 did not make any effort to verify the documentof ownership prior to

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purchase of the flat in question. There is no provision under the law which makes it mandatory on the part of the bank to make a publication of every equitable mortgage in the newspapers.

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Respondent no.1 and 2 have placed reliance upon the documents of legal team of the bank wherein it was recorded that there is no bar or restriction of creation of mortgage. This report was obtained by the bank not by respondent no.1 and 2. Report was meant for verifying as to whether loan can be sanctioned to the employees of the bank. Report was submitted merely on the basis of original agreement for sale dated 29.04.2011. There is no mention of the fact as to whether the land on which such flat was constructed was unencumbered or not? Further, as has been observed earlier principle of Caveat Emptor would be applicable in the case. When purchaser is purchasing a property it is his duty to verify the documents of ownership of its vendor. Neither such effort has ever been made nor any such document is brought on record, rather simply an application for loan was moved before the appellant bank and the loan was granted and amount was paid to the vendor. At this stage it would be pertinent to note that vendor, Shir Kaushik Kr. Nath, respondent no.3, himself wrote a letter dated 22.12.2012 to the bank that inadvertently his Secretary sold the above mentioned property vide registered deed No. 04285 of 2011

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executed on 18.05.2011 to Shri Shyamal Chakraborty and Smt. Anindita Chakraborty who has availed housing loan from the Kalikapur Branch of the bankagainst equitable mortgage. It is further stated that he was not intended to defraud the bank and is ready to deposit the value which will be assessed by the bank’s valuer. This letter itself would show that equitable mortgage of the land was already created by the vendor, respondent no.3, in favour of the appellant bank by depositing the title deed. Flat in question was constructed on the land which was already mortgaged in favour of bank. It is also admitted fact that flat was sold to respondent no.1 and 2 who paid consideration value taking housing loan from the appellant bank, but without verifying the title deed. Accordingly, I am of the considered view that respondent no.1 and 2 did not exercise due diligence at the time of purchasing the flat or taking loan from the appellant bank and are not entitled to any relief. It is for the respondent no.1 and 2 to challenge whether any fraud is played by respondent no.3? Accordingly, in view of the provision of sub-section (13) of Section 13 of the SARFAESI Act subsequent transfer of mortgaged property is barred.

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A plea of limitation was taken by the appellant bank before learned DRT in Para 9 of their objection. In the letter dated 26.12.2012 written by respondent no.1 and 2 to the General Manager, State Bank of India, it is admitted that on

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21.12.2012 their domestic help informed them that some bank officials delivered symbolic possession letter at the flat. This letter shows that they had knowledge of the fact that respondent no.3 had mortgaged the landed property to Chowringhee Branch of the bank to secure the credit facilities availed by M/s Cotwall Commerce Pvt. Ltd. and respondent no.3. It is also admitted in this letter that respondent no.3 created mortgage by mistake in favour of Chowringhee Branch of the bank and ensured to make good the value of the flat so that bank can release the title deed. This letter itself proves that cause of action arose on 21.12.2012 when the symbolic possession notice was served upon the respondent no.1 and 2, but no application u/s 17 of the Act was filed. It was filed on 16.06.2015 challenging the letter dated 16.05.2015 and possession notice dated 21.12.2012. Relief claimed itself makes it clear that symbolic possession notice dated 21.12.2012 was not challenged within 45 days as prescribed u/s 17(1) of the Act, which reads as under :

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17. Application against measures to recover secured debts—

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(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorized officer under this Chapter, may make an application along with such fee, as may be prescribed, to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken:

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Bare perusal of the provision will make it clear that challenge to the notice u/s 13(4) of the Act can only be made by the borrower or guarantor if appropriate application is filed within

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45 days from the date of such measure has been taken. Accordingly, proceedings u/s 17 of the Act filed by the respondent no. 1 and 2 before learned DRT was barred by limitation.

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On the basis of the discussions made above I am of the considered view that learned DRT has erred in allowing the S.A. Instant appeal is liable to be allowed.

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ORDER

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Appeal is allowed. Judgement and order dated 08.03.2017passed by learned DRT-III Kolkata is set aside. Consequently, S.A. No. 235 of 2015 filed by respondent no.1 and 2 stands dismissed. No order as to costs.

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File be consigned to record room.

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Copy of the order be supplied to the appellants and the respondents and a copy be also forwarded to the concerned DRT.

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Copy of the judgement/Final Order be uploaded in the Tribunal’s website.

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Order dictated, signed and pronounced by me in the open Court on this the 12^th day of April, 2024.

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(Anil Kumar Srivastava, J) Chairperson

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Dated :12.04.2024 pkb

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State Bank Of India and Ors. v. Shyamal Chakraborty and Ors.

Case brief

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State Bank Of India and Ors. v. Shyamal Chakraborty and Ors.

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