Dismissed

M Anand Kumar v. M/S Vistaar Financial Services Private Limited

DRT8 Feb 2023SA/153/2022

Case brief

AI extract

What is this about?

The DRT-I, Bengaluru dismissed an appeal filed by a buyer who alleged an agreement of sale overruled a secured creditor's rights. The Court held that an agreement of sale does not create a charge under the Transfer of Property Act, and the secured creditor's mortgage prevailed.

What did the court decide?

The appeal filed under Section 17(1) of the SARFAESI Act was dismissed; the direction for producing possession stands confirmed.

M Anand Kumar versus M/S Vistaar Financial Services Private… — Banking and Recovery | DRT (2023)

¶1

IN THE DEBTS RECOVERY TRIAUNAL-I, KARNATAKA

¶2

AT BENGALURU

¶3

Dated this the 8th day of February 2023

¶4

Present: Sri IMTIAZ ALI

Presiding officer

s.A.No.1s3l2022

BETWEENT

Sri M Anand Kumar

S/o. Muniyappa

Aged about 45^years

Residing at - Hargadde Villege Jignai Hobli, Anekar Taluk Bengalore 560 079

¶12

,. PETITIONER/ APPELLANT

¶13

AND:

¶14

M/s, vistaar Financial service Private Limited

¶15

Havino its reqistered office at:

¶16

Plot NO.59 and 60-23, 22nd Cross

¶17

29th Main, BTlvl Layout 2nd Stage, Bangalore 560 076 Represented by its Authorised Officer

¶18

sri J. Karna Prakash S/o. D Jaganatha Aged about 50^years

¶19

Smt. Irawa Lamani W/o. Sri J. Karna Prakash Aged about 45^years

¶20

Both the Respondents^{No.2 and 3 are R/a -}

¶21

No.778, said schedule^{property NO.451.27} Site No.27, Haragadde Jiganai Hobli, Anekal^Taluk Bangalore 562 106 .'

¶22

.' RESPoNDENTS/ RESPONDENTS

¶23

¶24

S.A.No.153 /2022

¶25

Counsels on record/appeared^for: Appella nt :Sri Venkatesh M Respondent No.1 :Sri^{Francis Xavier}

¶26

FINAL ORDER

¶27

The present appeal is filed under^{Section17(1) of the} SARFAESI Act, 2002 by the^{Appellant, prays to allow the} appeal by setting aside the order of^{LearnedChief judicial} Magistrate, Bangalore Rural District, Bangalore in^Crl' Misc.No.95/2022 on 29.O1.2O22 against the^Appellantfor taking and handing over^possession of the^{secured asset to} the secured creditor for recovery of Rs.26,59,368/(Rupees twenty-six lakh fifty-nine thousand and three hundred sixty-eight only) from the Appellant with further interest thereon charges, costs, expenses etc.

¶28

The facts of the case of the Appellant in a nutshell are, Respondents No.2 and 3 are the owners in^possession of said schedule property bearing E kahthaNo.150200010280090 2255 site No.27, Junjar No.77B, Serial No.183, said schedule property NO.45L/27, measuring East to West 40 feet, North to South 30 feet, totally measuring 1200 square feet consisting of RCC house said schedule^property formed in land bearing survey No.24612A situated at Haragadde Village,

¶29

¶30

5.A.No.151/2022

¶31

Jigani Hobli, Anekal Taluk, Bangalore which is morefully

¶32

described in the schedule said schedule property.

¶33

The Respondents 2 and 3 being the absolute owners of the above said schedule property with an intention to meet their urgent family requirements have offered to sell the above said schedule property in favor of the Appellant for a sale consideration of Rs. 20,00,000/-. Accordingly, they have executed a registered agreement of sale in favor of the Appellant on 06.06.2016 and this agreement is duly registered as document No.JGN-1-01028 / 2076 - 17 in the office of the Sub-Registrar, Jigani. On the very same date, the Appellant has^paid a sum of RS.15,OO,OOO/- to the^2nd and 3rd Respondents as advance. The 2nd and 3'd Respondents received the above sum of Rs. 15,00,000/which is more than 3/4th of the total sale consideration. The Appellant was always ready and willing to^pay the balance of sale consideration and^get the sale deed^{registered.However,} these Respondents No.2 and 3 have been dodging^the Appellant and have not executed the sale deed. The Appellant made repeated requests and demands to the^2nd and 3d Respondents to execute the sale^deed and^after several failed attempts, the^Appellant was^{constrainedto}

S.A.No.153 /2022

issue a legal notice to these Respondents on 18.04.2017 and this is referred to in the^plaint in O.S No.1091/2019. Despite the receipt of the legal notice, the 2"d and 3'd Respondents failed to come forward and execute the sale deed in favor of the Appellant. Hence, the Appellant filed a civil suit being numbered as O.S. No.1091/2019 for specific performance before the Senior Civil Judge at Anekal. The suit is pending for adjudication. Long after the execution of agreement of sale as well as after filing of the civil suit, the Respondents No.2 and 3 have colluded and have been able to secure a loan of Rs.20,00,000/- from the 1st Respondent by mortgaging the above said schedule property. This has been done behind the back of the Appellant to make an unlawful gain. The collusion between the Respondents becomes obvious due to the fact that this loan was granted despite an agreement of sale between the Appellant and the 2nd and 3.d Respondents. The above said schedule property although is under an agreement of sale, the Respondent No.1 has granted loan to the 2nd and 3'd Respondents. The Appellant was unaware of this fact. However, recently, one of the tenants of the secured said schedule property who is residing in the above said schedule property and a friend of the Appellant brought to the Appellant's notice that a notice has been issued by the

¶38

S.A.No.153 /2022

¶39

Respondent No.1 for having obtained an order under Section 14 of the Securitizations Act 2002. As^per this notice, the tenants, Sri Ragavendra T.J. and Sri Chowda Lala Bima have given a week's time to vacate the premises and handover vacant^possession as^per the order of the^{jurisdictional} magistrate. Under Section 14 the^{2nd and} 3d^Respondents, by creating fake documents in^respect of^{the immovable} schedule^property obtained^{the loan from the lst Respondent} by mortgaging the said^{scheduleproperty, and they have} become defaulters^{by not making repayment of the loan.This} loan account is said to^{have become NPA account. In such} circumstances, the^{Appellant filed this appeal.}

¶40

Upon service of^{notice, the RespondentNo.1has} appeared through^{its Counsel and subsequentlyfiled its} detailed statement^{of objections. According to the Respondent} No.1, the 2nd^and 3d^{Respondentshave approachedthe 1't} Respondent for a^{loan, for the purposeof working capital} requirements.^{consideringthe requestof the 2nd and 3rd} Respondents, the^{1"t Respondentgranteda loan of Rs 20 00} lakhs for the^{purposeof working capital requirement under} Sanction letter^{dated 30.03.2017.Upon sanctioning the loan} as aforesaid,^{the 2nd and 3d Respondentshave executedloan}

¶41

¶42

S.A.No.153 /2022

¶43

agreement inter-alia agreeing to^abide by the terms^and conditions stipulated thereon. In order to^secure the^said credit facility/loan, an equitable mortgage was created by^way of deposit of title deed in respect of the immovable said schedule^property, i.e., all that^piece and^parcel of the site bearing Janjar No.778, said schedule^property No.45lll27, Site No.27, as per Form No.9, No.183, Assessment Register No. 778, Said schedule property No. 451/27 as per Form No.10, E Khata No. 150200102800902255 situated at Haragadde Village, Jigani Hobli, Anekal Taluk, Bangalore District, morefully described to as Schedule Said schedule property. It is the duty of the 2nd and 3d Respondents to pay the installments regularly and punctually to the 1st Respondent as agreed upon. Contrary to the same, the 2nd and 3'd Respondents were irregular in paying the installments as and when they became due, and committed default in repayment of the installments. On account of continuous and persistent defaults committed the Respondents No.2 and 3, the loan account of the 2nd and 3'd Respondents was classified as NPA on 06.04.2019 in accordance with the Reserve Bank Of India directives and guidelines. After classifying the account as NPA as aforesaid, the 1st Respondent, on 76.09.2027, issued a notice under Section 13(2) of the

¶44

¶45

S.A.No.153 /2022

¶46

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2OO2 (for the sake of brevity hereinafter referred to as'Act') and called upon the 2'd and 3'd Respondents to repay total loan outstanding due of Rs.23,30,589,00 (Rupees Twenty Three Lakhs Thirty Thousand Five Hundred Eighty Nine only) as on 05.09.2021 together with further interest thereon within 60 days from the date of receipt of the Demand Notice dated 16.09.2021 issued by the Respondent No.1. The 2nd and 3rd Respondent was duly served with the said Notice. However, for the abundant caution, the contents of the Demand Notice dated 16.09.2021 were also^published in two daily newspapers i.e., New Indian Express dated 01.10.2021 and Kannada^Prabha dated 01.10.2021. Despite issuance/receipts^of the^Demand Notice dated 16.09.2O2L in the desired manner^{as aforesaid,} the 2nd and 3'd Respondent did not come^{forward, eitherto} discharge the liability as demanded^or to^{raise an objection to} the Demand Notice dated L6.09.2O2L^{as contemplatedunder} Section 13(3A) of the Act. As the 1't^{Respondent did not} receive any objection or representation^{from the borrowersas} contemplated under Section^13(3A) of the^{Act and despite} issuance/receipts of the notice in a^{desired manner as} aforesaid, the 2nd and 3'd Respondents^{failed to discharge the}

¶47

¶48

S.A.No.153 /2022

¶49

liability in full within the statutory^period of 60 days from the date of notice, the Respondent No.1 has taken the recourse to take the possession of the Secured Asset. The Authorised Officer of the Respondent No.1 on 07.12.2021 by exercising the^power conferred under Rule 8(1) of the Security Interest (Enforcement) Rules 2002 has taken the possession by affixing the Possession Notice on the outer door of the premises. In exercise of the power conferred under 8(2) of the Security Interest (Enforcement) Rules 2002, the Possession Notice was also published in two leading newspapers i.e., Kannada Prabha, in Kannada Edition dated f0.72.202f and the New Indian Express in English Edition dated 10.12.2021.

¶50

¶51

In order to take physical possession of the Secured Asset, the Authorized Officer of the Secured Creditor obtained an order under Section 14 of the Act from the Chief Judicial Magistrate, at Bangalore in Crl. Misc. No.95/2022 on 29.O1-2022. Aggrieved by the measures initiated as aforesaid, the Petitioner/Appellant has approached this Tribunal on the ground that, the 2nd and 3d Respondents alleged to have executed registered sale agreement of the Schedule Said schedule property on 08.06.2016 for a sum of

¶52

S.A.No.153 /2022

¶53

Rs.20.00 lakhs and he has paid an amount of Rs. 15.00 lakhs as an advance sale consideration filed a suit being numbered as O.S.No.109L/2Ot9 before the Senior Civil Judge, at Anekal is which is pending for consideration. The and the 1't Respondent being aware of the agreement of sale, has granted the loan he is having first charge over the Schedule Said schedule propety and there being^a charge/encumbrance of the Applicant over the immovable said schedule^property and there is no^provision for the^1* Respondent for taking the^{physical possessionof the Secured} asset,

¶54

The 1"t Respondent is disputing the^{alleged registered} sale agreement dated 06.06.2016'^{Further, the 1"t} Respondent after having obtained^{a Title Search Report from} the panel Advocate 'Law Quest'^{advanced the loan to the 2nd} and 3'd Respondents.^{Withoutprejudice, even presumedthat,} there exists an agreement^{of sale, that does not createany} charge over the said^{schedule property' Section 54 of the} Transfer of Said schedule^{propertyAct makes it clear that a} contract of sale, that^{is, an agreementof sale does not, of} itself, create any interest^{in or charge of such saidschedule} property. The law is well settled that,'Any^{contract of sale}

S.A.No.153 /2022

(agreement to sell) which fall short of the requirement of Section 54 and 55 of the TP Act will not confer any title nor transfer any interest in any immovable said schedule property. According to TP Act, an agreement of sale, whether with possession or without possession, is not a conveyance. Section 54 of TP Act enacts that the sale of immovable said schedule property can be made only by registered instrument and an agreement of sale does not create any interest of charges of its subject matter. Further, that mere agreement does not create any charge on the said schedule property, whereas, the mortgage create charge on the said schedule property itself. Agreement is a contract between the parties, whereas mortgage is concerned on the said schedule property itself.

¶59

¶60

When such being settled position, the contention of the Petitioner/Appellant that, he is having first charge over the Schedule Said schedule property by virtue of an agreement of sale dated 06.06.2016 and there ,s no provision of the Schedule Said schedule property etc., holds no water and liable to rejected. If at all, there exist an agreement of sale dated 06.06.2016 the remedy available for the Petitioner/Appellant under the Specific Relief Act for the

¶61

S.A.No.153 /2022

¶62

¶63

specific Performance,^{in which, he has alreadyapproached} the Civil Court.^{The 1't Respondenthas acted within the} scope of the law,^{and every steps of the 1tt Respondentis} within the^gamut of^{the SARFAESI Act, 2OO2 it is neither} illegal nor^{questionabte.In order to thwart the measures} initiated under^{the SARFAESIAct 2OO2and to cause wrongful} loss to the 1't^{Respondent, the Petitioner/Appellantin} collusion with the^{2nd and 3'd Respondentshas approached} this Tribunal^{on fallaciousgrounds. The grounds urged by the} petitioner/Appellant are not tenable and^{will not comefor the} rescue of the^{Petitioner/Appellant.The Petitioner/Appellant} has not made^{out any groundsto set aside the order passed} under section t4^{of the Act dated29.oL.2O22. Therefore, the} Respondent^{No.1 prayed for dismissal of the appeal filed by} the Petition^{erlAPPel lant.}

¶64

T.ontheabovebackground,Ihavegonethroughthe available^{recordsof the case, heard the argumentsaddressed} bytheLearnedCounselfortheRespondentNo'lonlyasthe petitioner/Appellant did not^{participate at the time of hearing} of arguments.^{The RespondentNo'2 and 3 did not appear} before this^{Tribunal to contest the appeal filed by the}

S.A.No.'153 /2022

Petitioner/ applicant. On consideration of the materials on

¶69

record, the following points arise for my consideration:

¶70

a) Whether the Petitioner/Appellant has made out the case for allowing the appeal? and

¶71

b) To what relief, the parties are entitled?

¶72

REASONS

¶73

It is manifest from the records that the Petitioner/Appellant who has challenged the impugned order passed by the Learned Magistrate is neither the borrower nor the guarantor. The prayer sought in appeal memorandum is to set aside the impugned order in respect of the said schedule property on the grounds, inter alia, that appellant has the first change to the schedule said schedule property and despite knowing the fact, the Respondent No.1 has sanctioned the loan in favour of 2nd and 3'd Respondents.

¶74

¶75

Admittedly, the^{petitioner/Appe} ant has fited the appeal memorandum on 17.03.2022 and the impuged order was passed on 29.O!.2O22. Therefore, the appeal was filed well within the period of limitation. prior to filing the appeal,

¶76

s.A-No.153 /2022

¶77

¶78

the Petitioner/appellant^{hasapproachedthe Hon'ble High} court of Karnataka^{by filing writ Petition No'5032/2022(GM-} RES). The said Writ^{Petition was disposed of with liberty to} the Petitioner/appellant^{toapproachthisTribunal'} Accordingly, the^{Appellant flled thls appeal beforethis} Tribunal.

¶79

Rebutting the^{contentionsof the Petitloner/Appellant,} the Respondent^{No 1 along with its statementof objections} has^{producedcopy of} loan Summary Schedule^vide Annexure-R2,^{copy of registered equitable mortgageby} deposit of title^{deeds dated 4.O4.2O17vide Annexure-R3;} copy of Demand^{Notice dated 16.09.2021issued to the} Petitioner/Appellant^{under Section13(2) of the Act; proof of} service of^{Demand Notice on L7.72.2016vide Annexure-R5;} copy of^{publicationof Demand Notice In newspapers;copy of} possession notice dated^{07,72.202Lissuedby the Respondent} No.1 under^{Section13(4) of the Act withproof of service of} Possession Notice;^{copies of paper publications in the} newspape6 both^{in English and Kannada languagesas} mandated^{underthe provisionsof the SARFAESIAct 2002} vide Annexures-R8.^{Affixture of the PossessionNotice at the} secured asset^{was done, which would be evldent from}

S.A.No.153 /2022

Annexure -^R7. It^{is subsequent there to, the Respondent} No.1 obtained^{the impugned orderon 29.01'2022 for taking} the^{physicalpossessionof the said schedulepropertyThe} Petitioner/appellant^{has challenged the said impugned order'} Admittedly, the said^{scheduleproperty in questionwas} mortgaged to the^{Respondent No.1 as securityfor the loan'} The Respondent^{No.1 has initiated proceedlngswhenthe} borrowers failed to^{repaythe loan amount.However, the} Petitioner/appellant^{has raised the issue that the said} schedule^property in^{questionwas to be sold to the} Petitioner/appellant^{by the borrowers and to that effect,and} agreement of sale^{was executedbetween the borrowersand} the Petitioner/appellant^{on 06.06.2016.It is true that the} agreement for sale^{would not affectthe mortgagemadeto the} Respondent^{No.1,since any sale would be subservientto the} mortgage created^{in favour of the RespondentNo'l However,} the Respondents^{No.2and3 having enteredintoan agreement} for sale, in respect^{of the schedule property in question, with} the Appellant^{have muddled with security provided to the} Respondent No.1.^{Sincethe mortgaged has been createdin} favor of the lender,^{the Respondent No.1 becomes the owner} of the mortgaged^{schedulepropertyuntil the loan is repaid'} The ownership documents^{like title deeds etc., are with the}

S.A.No.153 /2022

Respondent^{No'1.To sell such said schedule property' the} borrowers,^{i.e., the Respondents No'2 and 3 will require the} assent of^{the Respondent No 1, which is not likely to be done} unless^{the borrowers repay the loan amount' The Respondent} No.1 issued^{notice under Section 13(2) of the SARFAESIAct} requiring^{them to pay Rs 23,30'589/- alongwith future} interest^{and incidental expenses within 60 days' Upon receipt} of notice,^{RespondentNo 2 and 3 did not come forward for} making any^{payment of the loan availed by themThe} possession notice^{was not only affixed at the secured asset} but also^{publishedin two newspapersEven after this'the} Respondents^{No.2 and 3 did not bother to pay the} outstanding^{dues' Therefore' the actiontaken by the} Respondent^{No.1 for recovery of its dues by issuingnotices} under Section^{13(2) and 13(4)and by filing an application} under^{Section14 of the SARFAESIAct cannot be faultedon} any legally^{permissible ground' The impugned order shows} that^{there was complianceof Section13(2)'13(4) and Rule 8} and as^{such, it must be presumed that sufficientmaterials} were^{placed before the concernedMagistrate by the} Respondent^{No'l Further' the affidavit filed by the Authorised} Officer^{included statementssupportedby various documents}

sA.No.153 /2022

in favour of having^{complied with the provisionsof Section14} which include Section^{13(2),Section 13(4)and Rule 8 and the} same shows that^{the LearnedMagistrate after examiningthe} factual correctness^{of the assertionsmade by the Respondent} No.1 has^passed the^{impugnedorder. As the Respondent} No.2 and 3 had created^{a mortgaged by depositof title deeds} in favour of the Respondent No.1 in respect of said^schedule property in question, the right to^{recover the money,by} enforcing mortgage^{would also be a right of the Respondent} No.1 to enforce any^{interest in the said scheduleproperty' In} terms of Section 48 of the^{Transfer of Property Act, claimof} the first charge holder^{i.e., the RespondentNo.1 herein shall} prevail over the claim of the Petitioner/Appellant.^{Section 54} of the said Act says^{that an agreementof saledoes not create} any interest or charge on the^{said scheduleproperty. In this} case, the agreement entered^{intobetweenthe Appellantand} the Respondents No.2^{and 3 cannot createany right, title or} interest in respect of the^{schedule propertyin questionsince} there was no transfer of^{the said schedulepropertyin favour} of the Petitioner/Appellant by way of^{sale. Insuch} circumstances and considering^{the totalityof the materialson} records, this Tribunal is not inclined to^{grant any relief in the}

s.A.No.153 /2022

appeal in^{question. Accordingly,this appeal is liable to be}

¶96

dismissed^{as same is devoidof merits'}

¶97

I, therefore,^{pass the following order:}

¶98

ORDER

¶99

In the result,^{S.A. No.153 of 2022 is dismissed'}

¶100

Interim order,^{if any, stands vacated'}

¶101

Pending IAs,^{if any, also stands closed'}

¶102

There will be no order^{as to cost'}

¶103

(Dictated to the Stenographer,^{after its transcriptionandnecessary corrections'} .ii""Ji"a^p.**nced -by me in the Open court on this 8th day of February 2023) t '^q,,?' \qq' (IMTIAZ ALI) PRESIDING OFFICER DRT.I, BENGALURU

M Anand Kumar v. M/S Vistaar Financial Services Private Limited

Case brief

What is this about?

What did the court decide?

M Anand Kumar v. M/S Vistaar Financial Services Private Limited

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Mehul Kiritkumar Mehta versus PNB Housing Finance Limited

Punjab National Bank versus M/s Pankaj Handloom and Others

Idbi Bank versus M/s Rajat Ornaments Stores and Others

Punjab National Bank (United Bank of India) versus M/s Singh Dairy and Others

Punjab National Bank (United Bank of India) versus M/s Multi Developer and Others

Canara Bank versus M/s Ravis Mini Rice Mill and Others