Allowed

Bhawarlal Heerachand v. Canara Bank

DRT4 Sept 2023APPEAL/2/2023

Case brief

AI extract

What is this about?

The Tribunal allowed the appeal against the Recovery Officer as the respondent bank disclosed a cloud in the title of the mortgaged property, constituting an impediment to the confirmed sale. The court directed the refund of the 25% bid amount with bank rate interest.

What did the court decide?

Refund of 25% bid amount with bank rate interest within seven working days.

Bhawarlal Heerachand versus Canara Bank — Banking and Recovery | DRT (2023)

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Appeal No.2 of 2023 in TRC No.44/2022 04.09.2023

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IN THE DEBTS RECOVERY TRIBUNAL- III, CHENNAI

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Dated this the 04^th day of September, 2023

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Present: Shri Ganapathi K.R.K. Presiding Officer

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Appeal No. 02 of 2023

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Against

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M.A.No.04 of 2023

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T.R.C.No.44 of 2022

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1. Mr.Bhawarlal Heerachand

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Flat No.701, B Block Prince Galada Garden, EVK Sampath Road Vepery Chennai

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2. Mr.Bhawarlal Ramesh Kumar

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Flat No.701, B Block Prince Galada Garden, EVK Sampath Road Vepery Chennai

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3. Mr.Ashok Kumar

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Flat No.701, B Block Prince Galada Garden, EVK Sampath Road Vepery Chennai

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4. Mr.Praveen Kumar Flat No.701, B Block Prince Galada Garden, EVK Sampath Road Vepery Chennai ….. Appellants Vs.

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1. The Senior Manager ARM Branch M/s.Canara Bank Spencer Towers 1^st Floor, No.770, A Anna Salai Chennai – 600 002

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Appeal No.2 of 2023 in TRC No.44/2022 04.09.2023

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2. Mrs.Vijayakumari

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Partner of M/s Amman Beverages Company W/o.R.Krishnamurthy No.42/178, Mannarswamy Koil Street Royapuram Chennai – 600 013 …… Respondents

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Counsels on record / appeared:

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Counsel for Appellants : M/s.N.Nagu Sah & N.Chandra Sekar Counsel for 1^st Respondent : M/s.S.Kesavan 2^nd respondent remained absent.

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ORDER

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This is an appeal filed by appellants challenging the order passed in M.A.No.04/2023 dated 18.04.2023 in T.R.C.44/2022, before the Ld.Recovery Officer, DRT-III, Chennai and to refund the advance bid amount of Rs.76,62,500/- together with interest at the rate of 18% per annum to appellants herein.

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Heard Ld.Counsels appearing for both the parties.

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It is the case of appellants that they are participants in a public auction of the schedule mentioned property, conducted by the Ld.Recovery Officer of this Tribunal. It is the further case of appellants that they are the highest bidders and consequent to confirmation they have deposited 25% of the bid amount in order to secure the property. It is submitted on behalf of appellants, that, on receipt of the back papers / link documents to the title deeds of the property, it transpired that the original claimant through the title deeds is one Mr. C.T. Shanmugam. The said Mr. C.T. Shanmugam has executed a registered will bequeathing his properties and the subject property is bequeathed in favour of his daughter - Mrs. Vijayakumari and her son to be enjoyed jointly during her life time. It is the case of applicants that the said Will is executed in 1999 and the testator had passed away in the year 2001, thus

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Appeal No.2 of 2023 in TRC No.44/2022 04.09.2023

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bringing the Will into force. As the said Mr. C.T. Shanmugam had several properties, the Will is duly probated by an order of the Hon’ble High court of Madras in the year 2002. Subsequent to the said Will, the executrix of the will, Mrs. C.T. Shanmugam has executed a registered Settlement Deed exclusively in favour of her daughter Mrs. Vijayakumari on 28.03.2005 over the same extent of property over which originally her father Mr. C.T. Shanmugam had bestowed a joint right to be enjoyed along with her son.

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It is the further case of appellants that basing on the said settlement deed, the said Mrs. Vijayakumari had allegedly mortgaged the property in favour of respondent bank herein for loan facilities to M/s Amman Beverages, where Mrs.Vijayakumari is also a partner. For the default of M/s Amman Beverages represented by its partners, OA is filed and DRC came to be issued, in which the mortgaged property is brought for sale by the recovery officer in the course of recovery. It is the case of appellants that they had participated in the alleged auction and made the bid on the assumption that the mortgagor has full title of the property and that the mortgagee is executing the mortgage on the strength of the title deeds.

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It is also submitted on behalf of appellants that the son of Mrs.Vijayakumari who is the beneficiary of the original Will executed in 1999, has filed a declaratory suit before the competent civil court over his share of 50% and got his right duly declared by a decree, in which respondent bank is also made a party. It is thus the case of appellants herein that respondent bank as mortgagee is acquiesced of the litigation as well as the dent in the title of their mortgage but did not choose to inform about the same to appellants herein.

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Appeal No.2 of 2023 in TRC No.44/2022 04.09.2023

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Ld.Counsel for appellants further submitted that their bid was for 100% of the entire extent of property and now by virtue of their litigation and declaration of title over 50% of the property in favour of the son of Mrs.Vijayakumari by a competent civil court, the amount of bid made by them, if at all if prosecuted to its logical conclusion would be ending up with 50% of the property only, for which appellants are not interested to quote with such a high bid. Even on that ground, appellants herein wish not to continue further and would like to take return of their 25% amount while withdrawing from the bid. Appellants relied upon the provisions of Sec.303 of Succession Act with regard to intermeddling of assets by an executor / executrix without any right thereupon.

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It is also submitted that since there are cross claims between mother and son with regard to their property, appellants would not like to enter into that litigation nor continue their offer for purchasing the property and prayed for return of the 25% EMD which is lying with the Recovery Officer. It is the further case of appellants that they have preferred an application before Ld.Recovery Officer in MA No.04/2023, which was dismissed holding that the said Vijayakumari is having the entire 100% share, which finding is erroneous vide its order dated 18.04.2023, since the claim of the respondent bank as well as the other appellants, is contrary to the documents available in this application.

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Ld.Counsel for appellants therefore submits that it is not for them to certify the veracity of the documents and the evolution of title, but since they are not interested in the present property in view of a cloud in the title, they intend to withdraw. It is their express contention that they do not want to or they cannot have any say with regard to the respective contentions of the mortgagors and other rival claimants, as

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Appeal No.2 of 2023 in TRC No.44/2022 04.09.2023

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they are third parties and they came to know of this property only through the public auction notice and therefore shall not have any say in the respective contentions of the parties. Submitting so, Ld.Counsel prayed for appropriate orders.

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Whereas Ld.Counsel appearing for the respondent bank submitted that they are parties to the Civil proceedings and therefore they are aware of the cloud in the title, but however the settlement deed executed on 23.08.2005 in favour of their mortgagor is still valid and not set aside by any competent court for them to agitate on the said issue and therefore Ld.Counsel submits that their mortgage is valid and correct and that respondent bank is only irregular in its actions, for non-disclosure of the subject litigation in their sale notice through the Ld.Recovery officer. It would be open for appellants to withdraw from the auction if they are not interested so. Submitting so, Ld.Counsel prayed for passing necessary orders.

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In the circumstances, since respondent bank had conceded that it could not disclose the pendency of litigation and now the outcome of the suit in which the declaration of 50% of the title in favour of the son has been ascertained, it is a definite impediment to the sale concluded in favour of appellants on 23.12.2022, and confirmed on 24.12.2022. The first objection letter addressed by appellants is on 04.01.2023 which did not yield the correct reply from the bank which prompted them to file the present MA No.04/2023 before the Ld.Recovery officer. Having been not successful in their attempts before Ld.Recovery officer, appellants had approached this Tribunal in the present Appeal No.02/2023.

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From the foregone submissions of respective parties, it is evident that the flow of title over the mortgaged property is not an absolute title but is only a derivative title, which calls for substantial additional precautions, by any subsequent

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Appeal No.2 of 2023 in TRC No.44/2022 04.09.2023

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purchasers. Here is a case, where applicant bank knowing fully well as a party to proceedings in the declaratory suit for 50% of the share by another share holder, is unable to explain how it can bring the full extent of property to sale and induce an innocent purchaser like appellant herein. Obviously applicant bank has no mortgage of entire share of property since the alleged settlement deed relied upon by them is executed by an executrix of will, who never had any title over the property nor was bequeathed of the schedule mentioned property by testator. It is contended by appellants that the so called beneficiary of settlement deed Smt.Vijayakumari can only have her 50% of share pursuant to will executed by original owner, Mr.C.T.Shanmugam, to be enjoyed along with her son who succeeded in obtaining a decree from competent civil court for his 50% share in the property. However this Tribunal is not a competent forum to adjudicate on the respective rights of parties and so is not conceding to the said submissions leaving it open to parties to contend.

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In the result, as appellants had made out a proper case with regard to the cloud in the title of the property for which they had participated in the auction proceedings of Ld.Recovery Officer, and as the same was not disclosed, despite express knowledge by applicant bank, the present appeal is liable to be allowed. Accordingly, Appeal No.02/2023 stands allowed. Ld.Recovery officer is directed to refund the 25% bid amount to appellants together with applicable bank rate of interest for the period within seven working days from the date of receipt of this order. There shall be no order as to costs.

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With the above directions, appeal stands disposed.

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Appeal No.2 of 2023 in TRC No.44/2022 04.09.2023

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Registry is directed to forward a copy of this order to the Ld. Recovery Officer for further course of action. Notice to parties in accordance to the rules.

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(Dictated to Stenographer (DD), transcribed by her, corrected, signed and pronounced by me in Open Court, on this the 04^th day of September, 2023)

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Sd/- (GANAPATHI K.R.K) PRESIDING OFFICER

Bhawarlal Heerachand v. Canara Bank

Case brief

What is this about?

What did the court decide?

Bhawarlal Heerachand v. Canara Bank

Case brief

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