Dismissed

State Bank of India v. Bank of Baroda

DRT16 Dec 2022SA/233/2022

Case brief

AI extract

What is this about?

In a securitization application, State Bank of India challenged the auction initiated by Bank of Baroda. The Tribunal dismissed the application, finding the applicant failed to prove title deeds were lost due to cheating when its own officer was likely responsible for the loss. The matter was remanded for criminal proceedings.

What did the court decide?

The domiciliary search and seizure initiated by the Respondent Bank was allowed to proceed; the Applicant's Securitization Application was dismissed. Local police were directed to register an FIR for

State Bank of India versus Bank of Baroda — Banking and Recovery | DRT (2022)

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SA/233/2022

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DEBTS RECOVERY TRIBUNAL, JAIPUR PRESIDING OFFICER: SH. VIVEK SAXENA

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SECURITIZATION APPLICATION No.- 233/2022

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STATE BANK OF INDIA

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RASMECC, LIC Building Ground Floor, Patel Circle, Udaipur, Rajasthan 303001, through Authorized Officer cum Chief Manager Shri Balendra Prasad

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………Applicant

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Versus

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1. BANK OF BARODA

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Branch Fatehpura, Bedla Main Road, District Udaipur (Rajasthan) through Authorized Officer

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2. M/s ISHIKA TRADING COMPANY

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Office at 21, Bahubali Colony, Bohra Ganeshji Marg, Near Dhuolkoot Chouraha, Udaipur, Rajasthan – 313001 through Proprietor Sh. Vikas Nalwaya S/o Sh. Bhagwati Lal Nalwaya

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3. SHRI VIKAS NALWAYA

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S/o Sh. Bhagwati Lal Nalwaya

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21, Bahubali Colony, Bohra Ganeshji Marg, Near Dhuolkoot Chouraha, Udaipur,

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Rajasthan – 313001 AND 455, Bhopalpura, Near Shastri Circle, Udaipur

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4. SHRI VAIBHAV NALWAYA

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S/o Sh. Bhagwati Lal Nalwaya

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21, Bahubali Colony, Bohra Ganeshji Marg, Near Dhuolkoot Chouraha, Udaipur, Rajasthan – 313001 AND 455, Bhopalpura, Near Shastri Circle, Udaipur

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5. SMT. SAROJ NALWAYA

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W/o Sh. Bhagwati Lal Nalwaya

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21, Bahubali Colony, Bohra Ganeshji Marg, Near Dhuolkoot Chouraha, Udaipur,

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Rajasthan – 313001 AND 455, Bhopalpura, Near Shastri Circle, Udaipur

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---- Respondent Bank

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Counsel –

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Sh. S.K. Soni, Ld. Counsel for the Applicant

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Sh. R.N. Vijay along with Sh. Ayush Kumar Jain, Ld. Counsel for the Respondent No. 1 Bank

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SA/233/2022

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None for Respondents No. 2 to 5

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(Final Order)

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(16.12.2022)

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This Securitization Applicant was filed on 27.04.2022, but came to be Registered on 30.04.2022.

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This is a matter between two secured creditors, wherein the SA Applicant Bank claims their right over the subject mortgaged property, which was put to auction by the Respondent No. 1 Bank through Auction Notice dt. 28.03.2022 and the subject mortgaged property was put to Auction on 07.05.2022.

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The Borrowers/Guarantors/Mortgagors, are at Respondents No. 2 to 5 and none appeared during the course of proceedings of this SA.

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The Applicant Bank filed this SA on 27.04.2022 and vide Order dt. 05.05.2022, passed by this Tribunal, the Respondent No. 1 Bank was directed to not to confirm the Sale, which was proposed on 07.05.2022.

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Reply to the SA was filed by the Respondent No. 1 Bank on 26.05.2022 and vide Order dt. 01.06.2022, the Sale was allowed to be confirmed in favour of successful Auction Purchaser but the Respondent Bank was directed to not to handover physical possession of the subject mortgaged property in favour of SA Applicant till the decision of this SA.

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As per facts of this SA, the Applicant Bank has challenged Sale Notice dt. 28.03.2022, issued by the Respondent Bank and they have challenged the action of the Respondent Bank mainly on the ground that Respondents No. 2 to 5 obtained a credit facility from other Bank and the subject mortgaged property was mortgaged with them on 27.11.2009, original title deeds were deposited by the borrowers with them.

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SA/233/2022

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It is further admitted by the Applicant Bank that as the borrowers, being Respondents No. 2 to 5 failed to repay the outstanding amount, they filed an Original Application before this Tribunal and the same was decided through an ex parte Order dt. 18.02.2019 and Recovery Certificate was issued. The Judgement & R.C. are at Annexure-A1-A & A-2-A and so he prayed that as the property was mortgaged with them, Recovery Ceritificate has been issued, so they do have every right to recover the said amount by way of sale of subject mortgaged property, for which, the Respondent No. 1 Bank has issued Auction Notice.

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Ld. counsel for Applicant Bank argued that as per law, the property, which is once mortgaged, is to be treated as always mortgaged and so until and unless the entire outstanding amount is deposited by the Defaulters, the property cannot be released in favour of borrowers or the same cannot be put to Auction, by any other third party.

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In para 5(iii) to the grounds of SA, it is admitted that Judgement Debtors took away original title deeds by cheating the Bank and when Judgement Debtor already created equitable mortgage by depositing the original title deeds, the right title and interest had already been transferred in favour of Applicant Bank .

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Based on these grounds, Ld. counsel for Applicant Bank argued that Respondent No. 1 Bank do not have any right to enforce security interest on the subject mortgaged property and so he prayed that the actions initiated by the Respondent No. 1 Bank, are required to be quashed and set aside.

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On the other hand, Ld. counsel for Respondent No. 1 Bank strongly objected the prayer and submitted that the Respondents No. 2 to 5 obtained credit facility from other Bank through Sanction Letter dt. 02.03.2016 and 07.03.2016. As per Annexure-R/3, the Respondents deposited

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SA/233/2022

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original title deeds of the subject mortgaged property with them.

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Ld. counsel further submitted that as the Respondents committed default in repayment of the said credit facility, so Bank has filed an Original Application No. 131/2020 in which, an ex parte Order and Recovery Certificate, has already been issued on 01.03.2022 (Annexure-R/5).

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Ld. counsel further submitted that the credit facility, which was sanctioned in favour of Respondents No. 2 to 5, was transfer of credit facility from Axis Bank and the amount so sanctioned was transferred on 03.03.2016 through RTGS. He further submitted that through Annexure-R/7, Axis Bank has removed their CERSAI charge on the subject mortgaged property, therefore, the Applicant Bank do not have any right upon the subject mortgaged property and as the title deeds of the subject mortgaged property, are deposited with them, credit facility, so sanctioned by them, so they are legally entitled to take all kind of actions under the provisions of SARFAESI Act of 2002, for recovery of outstanding amount.

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Heard arguments and perused the record.

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15. It might be a fact that credit facility was sanctioned by the Applicant Bank in favour of Respondents No. 2 to 5 but no such Sanction Letter, is filed by the Applicant Bank along with SA. Respondents No. 2 to 5 are defaulters of the Applicant Bank as well as of the Respondent No. 1 Bank also but a very innocent ground is been taken by the Applicant Bank in para (iii) of the Grounds of Appeal, wherein it is said that

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“Judgement Debtor has taken away, the original title deeds by cheating the Bank.” Here, I failed to understand that who was the Bank Officers, who was cheated by the Judgement Debtors and borrowers obtained original title

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SA/233/2022

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deeds from the said Officers of the Bank, whereas the credit facility was not fully paid, borrowers were at default and on account of this negligent act taken by the so called officer of the Applicant Bank, the Judgement Debtors/Respondents No. 2 to 5 dishonestly, deposited the said title deeds, first, with the Axis Bank and then got the credit facility transferred to Respondent No. 1 Bank. The Respondents No. 2 to 5 deposited the title deeds with the Respondent No. 1 Bank, committed default and now the Respondent Bank is taking steps for recovery of outstanding amount and in my considered opinion, they are legally and validly entitled to recover their outstanding amount.

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16. The fault, behind the providing original title deeds to borrowers/judgement debtors, is completely an act of the Officer of the Applicant Bank, who has caused wrongful loss to the Applicant Bank to the tune of Rs. 1.50 Crore, when the Original Application was filed and in my considered opinion, this act cannot be treated as natural act and or cannot be said that the Respondents being borrowers cheated the Bank and obtained original documents, because Officer of Applicant Bank, handed over original title deeds intentionally.

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17. No document, which can show that the original title deeds were handed over to the Respondents No. 2 to 5 being borrowers, is filed and therefore, it is also not clear that when and by whom being an officer of the Applicant Bank, original title deeds were given to the borrowers/judgement debtors.

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18. Accordingly, in my considered opinion, the Applicant Bank do not have any right to stop the recovery process, being initiated by the Respondent No. 1 Bank and therefore, SA, filed by the Applicant Bank, is dismissed with no cost.

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19. Considering such kind of practice, this Tribunal feels that such type of acts are required to be

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SA/233/2022

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brought to a conclusion and it is a clear cut matter of criminal conspiracy between the Officer of the Applicant Bank and the Borrowers and by an act of handing over the original title deeds to the borrowers, the Bank suffered wrongful loss of an amount of Rs. 1.50 Crore and the Borrowers are at wrongful gain. So, it is a clear cut case of criminal conspiracy, fraud, cheating, wrongful loss & wrongful gain, therefore, local Police Authority are directed to register a case under the appropriate Sections by registering FIR against the Respondents No. 2 to 5 and erring officer of the Applicant Bank. The details can be obtained by the Investigating Officer of the case, during the course of investigation.

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20. Copy of this Order be forwarded to the Superintendent of Police, Udaipur for taking necessary actions.

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This Securitization Application stands disposed of as dismissed. Copy of the order be given free to the parties concerned. File be placed before the Registrar for compliance. After compliance file be consigned to record.

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(Vivek Saxena) Presiding Officer DRT, Jaipur

State Bank of India v. Bank of Baroda

Case brief

What is this about?

What did the court decide?

State Bank of India v. Bank of Baroda

Case brief

What is this about?

What did the court decide?

What the court decided

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