Allowed

State Bank of India v. M/S Magadh Colonisers Pvt. Ltd. and Ors.

DRAT11 Nov 2024

Case brief

AI extract

What is this about?

The Appellate Tribunal allowed the Bank's appeal against the Tribunal below's order that had set aside the Recovery Officer's attachment order regarding a flat mortgaged with the Bank. The court held that an unregistered agreement to sale executed after the mortgage deed cannot override the bank's first charge or nullify the attachment.

What did the court decide?

The order dated 10.05.2022 passed by the Tribunal below is set aside, and the order dated 16.09.2014 passed by the Recovery Officer withdrawing the attachment is also set aside.

State Bank of India versus M/S Magadh Colonisers Pvt… — Execution and Attachment | DRAT (2024)

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IN DEBTS RECOVERY APPELLATE TRIBUNAL, ALLAHABAD

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Appeal Dy. No. 301/2022

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State of Bank of India, Stressed Asset Recovery Branch, 2^nd Floor, Main Branch Building, West Gandhi Maidan, Patna 800001 through its Chief Manager.

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.………....……………………...…………………………………………….....Appellant Versus

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M/s Magadh Colonizers Pvt. Ltd., Regtd. Office at Tube Well No. 2, Sheikhpura, Police Station Shashtri Nagar, District Patna-800001

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Ranjana Das, W/o Late P.C. Das, Tube Well No. 2, P.O. BV College, Sheikhpura, Patna-800001

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Binod Kumar, S/o Shri Tulsi Prasad Singh, A/47, Ashyray Pawan Apartment, Near Bharat Petrol Pump, Beli Road, Patna.800001.

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Master Raghav Pandey through his Natural Guardian Amar Nath Pandey, R/o Flat No. 702, Ashray’s R.P. Tower, Frazer Road, Patna 800001.

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

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Advocates, who appeared in this case:

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For the appellant Shri Sandeep Arora, Advocate For the respondents None

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JUDGMENT

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Date of pronouncement: 11.11.2024

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JUSTICE R. D. KHARE, CHAIRPERSON

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The present appeal has been preferred under Section 20 of the Recovery of Debts and Bankruptcy Act, 1993 against the order/judgment dated 10.05.2022, whereby the appeal filed by appellant under Section 30 of the said Act has been dismissed by the Tribunal below.

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The brief facts of the matter are that Respondent No.1 was granted cash credit facilities by the appellant-Bank. In order to secure the said facilities, the respondents no. 2 and 3, who are directors of the respondent No. 1, had created an equitable mortgage over their property by

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depositing the tile deeds with the Bank, which is detailed in scheduled-B of the O.A No. 29/2002 and also created mortgage over Flat No. 701 and Flat No. 702 at 7^th Floor of Ashrey’s R.P. Tower, Frazer Road, Patna. Since the respondents- borrowers did not maintain the financial discipline, therefore, the loan account was classified as NPA.

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It appears that the appellant-Bank filed an original application under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993 before the Tribunal below for recovery of its dues, which was registered and numbered as O.A. No. 29 of 2002. The said O.A. was decreed vide judgment dated 07.08.2003 and the Recovery Certificate was issued for a sum of Rs. 22,39,166.86 with future interest @ 14% per annum with quarterly rests from 01.04.2002 in MT loan and 16.50% per annum on OD account. The said Recovery Certificate was instituted as RP No. 36/2003 before the Recovery Officer, pursuant to which an attachment order dated 04.06.2004 was passed, whereby the immovable properties belonging to the borrowers were attached including the Flat No. 702. Despite the said attachment order, neither any amount had been paid nor any appeal was filed by the borrowers under Section 30 of the RDB Act. Thereafter, the Recovery Officer issued an order for proclamation of sale on 19.05.2005, against which the respondent no. 4 through his natural guardian preferred an objection seeking release of flat no. 702 situated at Ashray’s R.P. Tower, Frazer Road, Patna stating therein that on 27.06.2000 an agreement to sale was executed in his favour. The Recovery Officer vide order dated 23.02.2007 allowed the objection of the respondent no. 4 withdrawing the

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attachment order dated 04.06.2004 in respect of flat no. 702. Against the said order, the appellant-Bank preferred an Appeal No. 01 of 2010 under Section 30 of the RDB Act before the Tribunal below, which was allowed vide order dated 30.03.2011, against which the respondent no. 4 filed a miscellaneous application no. 408 of 2012 and the same was dismissed on 02.11.2012. The respondent no. 4 challenged the said order by filing CWJC No. 1065 of 2013 before the Hon’ble High Court, which was disposed off vide order dated 17.09.2013 and the matter was remanded back to the Recovery Officer, DRT, Patna for hearing and deciding the matter afresh in accordance with law.

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It also appears that in the meantime, the Recovery Officer again passed an attachment order dated 15.11.2011 for attaching the properties in question including the Flat no. 702, but the Recovery Officer vide order dated 16.09.2014 withdrew the attachment order dated 15.11.2011 in respect of the flat no. 702.

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The appellate-Bank challenged the order dated 16.09.2014 passed by the Recovery Officer before the Tribunal below by filing an Appeal No. 12 of 2014, which was dismissed by the Tribunal below vide order dated 10.05.2022 holding that the attachment of the Flat No. 702 could not be justified. Being aggrieved by the said order, the present appeal has been filed by the appellant-Bank.

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Learned counsel for the appellant has drawn attention of this court to annexure no. 2 at page no. 42 of the paper book, which is an order dated 16.09.2014 passed by the Recovery Officer and has referred to para 3 thereof, wherein the Recovery Officer has taken note that one document is sale and purchase agreement dated

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09.01.1999 regarding Flat No. 702 of Ashray’s R.P. Tower, which was mortgaged with the CH Bank by the borrower i.e. Shri Binod Kumar, Director of M/s Magadh Colonizers being his personal property and the other document is also a sale and purchase agreement dated 27.06.2000 executed in favour of Master Raghav Pandey.

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Learned counsel for the appellant has further drawn attention of this court to page no. 64 of the paper book, which is an affidavit of Mr. Binod Kumar (Respondent no. 3) and has referred to its para 2, wherein it is stated that the Flat in question was also mortgaged with the Bank. It was thus argued that the observation of the Recovery Officer that both the sale and purchase agreements, although one is unregistered document, have the same standing in the eyes of law, if they at all have any standing, is not correct, because on the said ground, the Recovery Officer had earlier attached the property in question.

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Learned counsel for the appellant has also drawn attention of this court to the page no. 67 of the paper book, which is an order dated 07.08.2003 passed by the Presiding Officer, DRT Patna in O.A. No. 29/2002 and has further drawn attention of this court to the finding of the Tribunal below to the effect that to secure the repayment, defendant nos. 2 and 3 namely Neena Das and Binod Kumar had deposited the tile deeds on 25.11.1998 in respect of their properties described in scheduled-B of the original application for creating equitable mortgage in favour of the appellant-Bank. It was thus contended that the Tribunal below has recorded that the property in question was duly mortgaged with the Bank, but the Recovery Officer has recorded the contrary finding to it

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and detached/out the property in question from the mortgage.

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It was further contended that the finding of the Tribunal below at page No. 41 of the paper book regarding attachment order dated 15.11.2011 to the extent as it relates to the Flat No. 702 owned by Master Raghav Pandey is incorrect, because an agreement to sale does not create any interest or title in the property and no detachment order could be passed. It was also contended that the Recovery Officer has exceeded its jurisdiction in detaching the property in question, which is not provided under the law, as Rule 11 of the second schedule of the Income Tax Act, 1963 does not confer any such right, which may empower the Recovery Officer to turn down the finding of the learned Presiding Officer of the Tribunal below.

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Despite service of notice through paper publication, no one has appeared on behalf of the respondents nor any reply has been filed by them.

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Heard the learned counsel for the appellant and considered the material available on record.

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It is admitted that respondent no. 1 was granted credit facility by the appellant-Bank, to which the respondents no. 2 & 3 being Managing Directors executed and signed the Guarantee Agreement in their personal capacity. The respondents no. 2 & 3 also in addition to deposit of title deeds in respect of their property at Mauza Saguna, Danapur, District Patna created mortgage over the Flat No. 701 at 7^th Floor including the Flat No. 702 in question, which is evident from the affidavit, which is filed at Page No. 64 of the paper book. The relevant Para 2 of the said

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affidavit records that “ I have given flat No. 503 on 5^th floor and 702 on 7^th floor of Ashray’s R.P. Tower, Fraser Road, Patna standing on the land of C.S. Plot No. 64 and M.S. Plot 95 as a security for the loan advanced by State Bank Bikaner and Jaipur, Fraser Road, Patna Branch, Patna ”. It is thus clear that the said flat was also mortgaged with the Bank on 16.01.1999 in order to secure the loan facility granted in favour of the respondent no. 1-Company through its Managing Directors.

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With regard to ownership of respondent no. 4 over the Flat No. 702, it is to be seen that the said flat was mortgaged with the Bank on 16.01.1999, which is clear from the affidavit of Mr. Binod Kumar, respondent no. 2 as referred to above, whereas an agreement to sale for the said property was executed by the respondent No. 2 on 27.06.2000 in favour of the respondent No. 4, meaning thereby the said agreement to sale was executed after mortgage, as such first charge over the said property is of the Bank.

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However, so far as the agreement to sale executed in favour of respondent no. 4 is concerned, the same does not create any right over the property in question. The agreement to sale means, the sale and purchase of the property has been fixed and the purchaser became bound to abide by the terms and conditions as mentioned in the agreement to sale. On the basis of said document, nobody can claim his right over the property, for which agreement to sale has been made between the parties. In the case in hand, the respondent No. 3 could not execute the agreement to sale in favour of the respondent No. 4 because the said respondent had already mortgaged the

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flat in question with the Bank to secure the loan advanced in favour of the respondent No. 1-Company.

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While going through the order impugned, it is found that the aforesaid facts/aspects of the matter have not been considered either by the Recovery Officer or by the Presiding Officer of the Tribunal below. If these facts were considered by them, the result of the objection filed by the respondent No. 4 before the Recovery Officer and the appeal filed by the appellant-Bank before the Tribunal below would have come otherwise. Thus, the order impugned is not tenable, consequently the order of the Recovery Officer also is not tenable.

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In view of the above, the order impugned dated 10.05.2022 passed by the Tribunal below is set aside and the order dated 16.09.2014 passed by the Recovery Officer in RP No. 36/2003 also.

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Accordingly, the present appeal filed by the Bank stands allowed with no order as to costs.

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A copy of this judgment be supplied to the parties as well as to 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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State Bank of India v. M/S Magadh Colonisers Pvt. Ltd. and Ors.

Case brief

What is this about?

What did the court decide?

State Bank of India v. M/S Magadh Colonisers Pvt. Ltd. and Ors.

Case brief

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