Allowed

H.Amarnath v. Kotak Mahindra Bank & Ors.

DRAT24 Jul 2025MISC APPEAL/21/2017

Case brief

AI extract

What is this about?

The Debt Recovery Appellate Tribunal allowed the appeal filed by a third-party property purchaser. The court set aside orders dismissing objections to a proclamation of sale, holding the appellant was a bona fide purchaser without notice of recovery proceedings where the attachment was not communicated to the registrar.

What did the court decide?

Orders of Recovery Officer and Presiding Officer setting aside sale proclamation dismissed; appellant's objections allowed; sale of property proceeding realized.

H.Amarnath versus Kotak Mahindra Bank & Ors. — Banking and Recovery | DRAT (2025)

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MA 21/2017

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IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

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Dated the 24^th day of July, 2025

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PRESENT: HON’BLE MR. JUSTICE G. CHANDRASEKHARAN

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CHAIRPERSON

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MA 21/2017

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(Arising out of AOR 8/2010 on the file of DRT, Karnataka)

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Between

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Sri H. Amarnath Son of Sri M.A. Hanumantha Sa, R/o No.331/29 (Old No.331), 8^th ‘A’ Main Road, “A” Block, 2^nd Stage, Milk Colony, Rajaji Nagar, Bangalore 560 010.

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…..Appellant

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And

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1. Kotak Mahindra Bank, No.487, 1^st Floor, 9^th Main Road, 4^th Block, Jayanagar, Bangalore 560 011.

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2. M/s Hiteck Profile Formers Pvt. Ltd. No.2, Sangeetha Apartments, 4^th Main Road, Malleswaram, Bangalore 560 003.

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3. Sri S. Ramji, S/o Swaminathan

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4. Smt. Geetha Ramji, Wife of Sri S. Ramji

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5. Ms. Kritika Ramji D/o Sri S. Ramji

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MA 21/2017

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6. Ms. Deepika Ramji D/o Sri. S. Ramji

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Respondents 3 to 6 are at:

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No.49/3, 2^nd Floor, 16^th Cross, Malleswaram, Bangalore 560 003.

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…..Respondents

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Counsel for Appellant : M/s S.R. Rajagopal & Co. Counsel for R1 Bank : M/s Ramalingam & Associates Counsel for R2 : None Counsel for R3 to R6 : Mr. S. Sashikumar

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ORDER

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This Appeal is filed under Section 20 of RDB Act, challenging theorder of

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Learned Presiding Officer, DRT, Bangalore dated 20.2.2014 passed in AORNo.8/2010.

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The first respondent bank is the assignee of State Bank of India. State Bank of India filed a suit in OS No.1815/1994 on the file of the Additional City Civil Court at Bangalore against 1) M/s Hitek Profile Formers Pvt. Limited 2) S. Ramji 3) Smt. Geetha Ramji and 4) Prakash Swaminathan, Director of M/s Hitek Profile Formers Pvt. Ltd for recovery of a sum of Rs.29,60,039.43p along with interest and costs. State Bank of

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India advanced two loan facilities viz., a) Cash Credit (Hypothecation) to

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the tune of Rs.24.00 lakhs and b) Cash Credit (Bills) to the tune of Rs.25.00

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MA 21/2017

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lakhs, totalling to Rs.49.00 lakhs to the first defendant therein. On failure

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to pay the loan due, the aforesaid suit was filed.

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Later, the suit was transferred to DRT, Bangalore and re-numbered as OA No.730/1995 for issuance of a Recovery Certificate. The aforesaid

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OA was allowed on 30.7.1999 issuing a Recovery Certificate on 17.10.2000. Learned Recovery Officer issued a Proclamation of Sale in DCP No.1300 on 15.3.2010. Challenging the proclamation of sale, appellant filed objections before the Learned Recovery Officer, claiming that he is the owner of the schedule mentioned property on purchase from Ms. Krithika Ramji and Ms. Deepika Ramji, represented by their mother, Smt. Geetha Ramji through a Sale Deed dated 25.4.2005. The said objections were dismissed by the Learned Recovery Officer on 9.6.2010. Against the dismissal order, appellant filed the aforesaid Appeal i.e. AOR No.8/2010 and that was also dismissed by Learned Presiding Officer on 20.2.2014. Therefore, this appeal is filed.

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Learned Counsel for the appellant submitted that appellant is a third

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party purchaser from respondent Nos. 5 and 6. In the Suit filed in OS No.1815/1994, the property purchased by the appellant was not shown as property in the schedule. This property was never attached when Suit

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MA 21/2017

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in OS No.1815/1994 and OA No.730/1995 were pending. After the

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disposal of OA No.730/1995 on 30.7.1999, the third respondent viz., Shri S. Ramji gifted this property to his daughters viz. respondents 5 and 6. On 18.1.2003, there had been a partition effected between respondents 5 and 6. On 25.4.2005, respondents 5 and 6 represented by their mother, sold the property to the appellant. Appellant verified the encumbrance, if any, on the property prior to the sale. Encumbrance Certificate did not reflect any encumbrance with the regard to the property purchased by the appellant. Till date, encumbrance certificate does not reflect any attachment on the subject property in any Court proceedings. Attachment was not properly effected by following proper procedure and attachment order was not communicated to the concerned Sub-Registrar

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Office by the Learned Recovery Officer. Appellant had purchased his property only after verifying the title and encumbrance. Thus, he is a bona fide purchaser. Without considering the valid objections raised by the appellant, both Learned Recovery Officer and the Learned Presiding Officer dismissed the appellant’s objections and the Appeal.

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It is further submitted that finding recorded by the Learned Recovery

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Officer, alienation in favour of respondents 5 and 6 by the 3^rd respondent is hit by lis pendis, is not correct, for the reason that property purchased

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MA 21/2017

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by the appellant is not a subject matter of the Suit or the OA. Rejecting

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the claim of the appellant on the basis of Section 53(1) of Transfer of Properties Act is not correct. There is no material filed by the first respondent bank to show that it had taken over the loan from State Bank of India. Thus submitting, Learned Counsel for the appellant submitted that appellant is a bona fide purchaser for value without notice of the Suit, OA and the recovery proceedings. He prayed for reversing the judgment of Learned Presiding Officer and allowing his objections raised against the Proclamation of Sale of the property and allow this appeal.

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Learned Counsel for the first respondent bank, in his reply, stated

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that in the recovery proceedings, Learned Recovery Officer passed an attachment order of this property on 29.9.2004. Prior to that, Original Application was allowed on 30.7.1999 and recovery certificate was issued on 17.11.2000. Meanwhile, third respondent, in order to defeat and delay the recovery proceedings, had fraudulently gifted the property to his daughters viz. respondents 5 and 6 on 20.1.2000. Demand Notice was issued to the borrowers on 23.11.2000. Notice had been served on them. Property was attached by the Learned Recovery Officer on 29.9.2004. Despite that, appellant purchased the property on 25.4.2005. The property purchased by the appellant, when litigation is pending, cannot

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MA 21/2017

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be considered as a bona fide purchase and it is hit by Section 53 of the

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Transfer of Property Act and Rule 16(2) of Schedule II of the Income Tax

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Act , wherein private alienation is held to be void in certain cases.

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In support of his submissions, Ld. Counsel relied on the judgment of

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the Hon’ble High Court of Mumbai reported in MANU/MH/0148/2001

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(AIR 2001 Bom 179) in re, SBI Home Finance Limited Vs. Credential

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Finance Limited and others, for the proposition that any transaction effected with an intention to defeat and delay the recovery process of the creditor, is liable to be set aside on the option of the creditor. Learned Counsel also relied on the judgment in re, C. Abdul Shukoor Saheb Vs.Arji Papa Rao and others reported in AIR 1963 AC 1150 rendered by Hon’ble

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Supreme Court of India, which is referred in the earlier judgement referred above, for the same proposition and prayed for dismissing the appeal.

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Learned Counsel for respondents 3 to 6 submitted that third respondent had settled the property to his daughters on 20.1.2000. Attachment has been effected on 29.4.2004. This property was not part

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of the secured asset, no mortgage nor security interest was created on it.

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When there is no mortgage or attachment, there is no bar for the 3^rd

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MA 21/2017

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respondent to executed a Gift Deed in favour of his daughters. Attachment order was not intimated to the concerned Sub-Registrar Office and it was not reflected in the Encumbrance Certificate. Procedure was not properly followed before attaching the property. Even the recovery certificate was issued subsequent to the Gift Deed only. Thus contending, he defended the Gift Deed executed by the 3^rd respondent in favour respondents 5 and 6 as valid.

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I have considered the rival submissions and perused the records.

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From the facts narrated above, it is evident that State Bank of India filed suit in OS No.1815/1994 on the file of the Addl. City Civil Court, Bangalore against the defendants therein and the said Suit was transferred to DRT, Bangalore and re-numbered as OA 730/1995. Admittedly, no mortgage was created on this property. Obviously, loan was sanctioned on the basis of movables that were hypothecated and pledged. No immovable property was taken as security for the loan. OA 730/1995 was allowed on 30.7.1999 and recovery certificate was issued only on 17.11.2000. In the meanwhile, third respondent gifted this property in favour of his daughters viz. respondents 5 and 6 on 20.1.2000. On the basis of the recovery certificate, demand notice was issued to the borrowers only on 23.11.2000. Thereafter on 29.9.2004, property was

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MA 21/2017

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attached by the Learned Recovery Officer. It is candidly admitted by

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Learned Counsel for the first respondent bank that this attachment order was not intimated to the concerned Sub-Registrar Office. Appellant purchased this property on 25.4.2005. When the attachment order was not communicated to the concerned Sub-Registrar Office and when the encumbrance certificate does not reflect the attachment order, it is possible that appellant believed that there was no attachment or encumbrance in the property and proceeded to purchase the property through a registered Sale Deed dated 25.4.2005, for a valuable consideration. It is not the case that property was sold without consideration and there is collusion between the appellant, his sellers and the third respondent. Obviously, the third respondent, expecting that the bank would proceed against his property and in order to defeat the claim of the bank had gifted this property to his daughters. At the same time, we have to bear in mind that the first respondent bank had not taken care and caution, while advancing the loan to secure the loan amount by insisting on creating mortgage on an immovable property. Even the attachment order was not obtained immediately on the issuance of recovery certificate.

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The loan was advanced only against the hypothecation and pledge created on the movables and not the immovable property, especially the property in question. Even after the OA was allowed, there was delay in issuing the recovery certificate and passing of attachment order. Attachment order was passed only on 29.9.2004 after the property was gifted by third respondent to respondents 5 and 6. Therefore, we cannot

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deny the claim of the appellant that appellant is a bona fide purchaser without notice of the Suit, OA and the recovery proceedings.

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So far as the contention of the Learned Counsel for the appellant that this transaction is hit by Section 53 of the Transfer of Property Act, this Tribunal finds it necessary to extract Section 53 for proper

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understanding, which is as follows:

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“53. Fraudulent transfer.

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(1)Every transfer of immoveable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed.

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Nothing in this sub-section shall impair the rights of a transferee in good faith and for consideration.

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Nothing in this sub-section shall affect any law for the time being in force relating to insolvency.

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A suit instituted by a creditor (which term includes a decree-holder whether he has or has not applied for execution of his decree) to avoid a transfer on the ground that it has been made with intent to defeat or delay the creditors of the transferor shall be instituted on behalf of, or for the benefit of, all the creditors.

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(2)Every transfer of immoveable property made without consideration with intent to defraud a subsequent transferee shall be voidable at the option of such transferee.

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For the purposes of this sub-section, no transfer made without consideration shall be deemed to have been made with intent to defraud by reason only that a subsequent transfer for consideration was made.”

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As per Section 53 (1) of the Transfer of Property Act, it is true that transfer of immoveable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed. However, section does not stop with this. Next

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part is important. It reads as follows:

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“ Nothing in this sub-section shall impair the rights of a transferee in good faith and for consideration.”

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Here, in this case, appellant claims himself a transferee in good faith and for consideration. As already stated, there is no evidence placed before this Tribunal by the appellant that the appellant has not purchased the property in good faith and there was no consideration for the property purchased. Appellant has made out the ground that appellant is a bona fide purchaser for a value without notice of previous litigation, including attachment of the property.

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The judgment relied on by the Learned Counsel for the first respondent bank reported in MANU/MH/0148/2001 (AIR 2001 Bom 179)

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in re, SBI Home Finance Limited Vs. Credential Finance Limited and others did not lend support to the case of the first respondent bank. What was decided in the judgment is only the requirement to file a substantive suit, when a claim is made. Not only that, in the facts of that case, there was collusion between first respondent, the seller, and the buyers i.e. 3^rd and 4^th respondents, whose registered office address is shown as the same address as that of the first respondent. In the case on hand, collusion between the appellant and respondents 3 to 6 is not established. Therefore, this judgment cannot be made applicable to the facts and circumstances of this case.

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Thus, the Tribunal finds that from the evidence made available, appellant has clearly established that appellant is a bona fide purchaser for value without any notice of litigation between the first respondent and other respondents and attachment of the property. Therefore, challenge made by the appellant to the sale proclamation before the Learned Recovery Officer should have been allowed. Both Learned Recovery Officer and the Learned Presiding Officer without considering the facts and legal

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aspects in proper perspective, dismissed the objections raised by the

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appellant and the Appeal.

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In the considered view of this Tribunal, both orders are liable to be set aside and the objections raised by the appellant in so far as the effort made for selling the property for realizing the debt due to the first respondent bank is liable to be allowed.

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Accordingly, the Order of the Ld. Recovery Officer, DRT, Bangalore dated 9.6.2010 passed in DCP 1300 in OA 735/1995 and the order of the Ld. Presiding Officer, DRT, Bangalore dated 20.2.2014 passed in AOR 08/2010 are set aside and the objections of the appellant in so far as the effort made for selling the property for realizing the debt due to the first respondent is allowed.

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In the result, Appeal MA 21/2017 is allowed. Parties are directed to bear their own costs.

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Pending IAs, if any, stand closed.

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[Dictated to Steno(SN), transcribed by him, corrected, signed and pronounced by me in open court, this 24^th July, 2025)

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Sd/-

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(JUSTICE G. CHANDRASEKHARAN) CHAIRPERSON

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H.Amarnath v. Kotak Mahindra Bank & Ors.

Case brief

What is this about?

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H.Amarnath v. Kotak Mahindra Bank & Ors.

Case brief

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