Allowed

Mangal Nagnath Parkale v. Bank of Maharashtra

DRT9 Jun 2023SA/203/2022

Case brief

AI extract

What is this about?

This judgment deals with an auction notice issued under the SARFAESI Act against a property. The court held that the applicant was a bonafide purchaser without notice and quashed the auction, ordering the return of possession.

What did the court decide?

Order of District Magistrate under Section 14 quashed; Auction Sale Notice quashed; Defendant directed to deliver vacant possession to applicant.

Mangal Nagnath Parkale versus Bank of Maharashtra — Banking and Recovery | DRT (2023)

¶1

Presented on: 04.05.2022 Registered on: 06.05.2022 Decided on: 09.06.2023 Duration: Y M D 1 1 5

¶2

IN THE DEBTS RECOVERY TRIBUNAL AT PUNE (Before Shri Dilip G. Murumkar, Presiding Officer) SECURITISATION APPLICATION No.203/2022

¶3

Mrs. Mangal Nagnath Parkale Age: 41 years, Occ: Business R/at: Flat No.201, Prathmesh Apartment, Shivteerth Nagar, Paud Road, Kothrud, Pune – 411 038.

¶4

… Applicant

¶5

Versus

¶6

Bank of Maharashtra Having its Central Office at: Lokmangal, 1501, Shivajinagar, Pune – 411 005.

¶7

Through its Authorized Officer Mr. Shashank S. Sahu Age: Adult, Occ: Service Office at: S.No.288, 1A/1, Kapil Classic, Baner, Pune – 411 045.

¶8

Branch Manager, Bank of Maharashtra Eranwadane Branch, Address: Suma House, 94/7, Dr. Ketkar Road, Kamla Nehru Park, Erandwane, Pune – 411 004.

¶9

Mr. Amit Ashok Thepde

(SA No.203/2022)

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[KAUR]

Age: 47 years, Occ: Business R/at : 501, Galaxy Jay Parijat, 134/1A5G, Bhosale Nagar, Ganesh Khind, Pune – 411 007.

¶14

Sneha Enterprises Through its Partners

¶15

Mr. Vilas Madhav Atal Age: Adult, Occ: Business

¶16

Mr. Anurag Vilas Atal Age: Adult, Occ: Business Address: Unit No.1, Sai Estate, Kothrud, Pune – 411 038.

¶17

APPEARANCES

¶18

For the Applicants Mr. Vaibhav Jathar - Advocate For Defendant Nos.1 & 2 Mrs. Priti Bhat – Advocate For Defendant Nos.3 to 6 Ex parte

¶19

JUDGMENT

¶20

(Delivered on 9^th June, 2023)

¶21

The Securitization Application is filed by the applicant, third party being aggrieved by the measures initiated by defendant No.1 Bank of Maharashtra under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short ‘’the SARFAESI Act’’) in respect of Flat No.1101, Galaxy Vineet, S.No. 350, Bavdhan, Tal. Mulshi, Dist. Pune (hereinafter referred to as `suit flat’).

¶22

The averments made in the Securitisation Application can be summarized as under:

(SA No.203/2022)

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[KAUR]

The applicant is a third party who is neither borrower nor guarantor or mortgagor.

¶27

It is the case of the applicant that on 22^nd December, 2017 defendant Nos.4 to 6 approached defendant No.1 bank and availed Cash Credit facility of Rs.2,50,00,000/-. Defendant No.3 stood as guarantor for the said loan facility. On the same date, defendant Nos.3 to 6 executed Deed of Hypothecation, Deed of Guarantee, Mortgage Declaration for proposed equitable mortgage in favour of defendant No.1. Thereafter, Defendant No.1 registered Notice of Intimation of mortgage by way of Deposit of Title Deeds. On 31^st May, 2019 defendant No.1 declared the loan account of defendant Nos.4 to 6 as NonPerforming Asset. Thereafter, defendant No.1 initiated action under the SARFAESI Act by issuing Notice u/s 13(2) dated 13^th June, 2019 and Notice u/s 13(4) dated 12^th September, 2019 and 27^th September, 2019 of the said Act. On 2^th October, 2019 defendant No.1 published Possession Notice in daily Newspaper and approached District Magistrate by filing Application u/s 14 of the SARFAESI Act.

¶28

It is averred that on 3^rd October, 2020 defendant No.3 sold the suit flat to the applicant by executing registered Agreement to Sale and for purchasing the said flat applicant applied for Housing Loan from defendant No.2 bank. On 25^th March, 2021

(SA No.203/2022)

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[KAUR]

the Advocate for defendant No.2 bank issued “Legal Opinion” and “Certificate of Title” mentioning that except applicant there is no other encumbrance on the said property.

¶33

On 31^st March, 2021 defendant No.2 bank sanctioned the Housing Loan of Rs.59 Lakhs to the applicant and disbursed the first installment of Rs.47,30,000/- to defendant No.3 and thereafter, on 25^th February, 2022 disbursed the second installment of Housing Loan of Rs.6,80,000/- to defendant No.3. 4. It is contended that on 13^th April, 2022 defendant No.1 published the Notice for sale of suit flat in daily newspapers and pasted the said publication notice on the suit flat.

¶34

The applicant has challenged the action taken by the defendant No.1 on the grounds that she is bonafide purchaser of the suit flat. She had no knowledge of loan transaction between defendant No.1 and defendant Nos.3 to 6. It is stated that defendant No.1 had advanced the loan to defendant Nos.4 to 6 against the mortgage of the suit flat and had also advanced the housing loan to applicant through other branch i.e. defendant No.2 after getting the Search and Title Report from their Advocate. The Advocate in Search and Title Report dated 25^th March, 2021 has clearly mentioned that applicant has absolute clear and marketable title over the property. Defendant Nos.1 and 2 and defendant No.3 have acted in

(SA No.203/2022)

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[KAUR]

collusion with defendant Nos.4 to 6 and have cheated the applicant. The order of District Magistrate is obtained fraudulently.

¶39

Therefore, the applicant has claimed following reliefs:

¶40

(A) The order passed by the District Magistrate dated 20/07/2021 in an Application filed by defendant No.1 bank u/s 14 kindly be set aside.

¶41

(B) If auction is held as per the Notice dated 13/04/2022, further proceedings of said auction be stayed.

¶42

¶43

(D) A stay for taking alleged physical possession as per the order dated 20^th July, 2021 of District Magistrate, may kindly be granted.

¶44

(E) Any other just and equitable reliefs may be passed.

¶45

1. Defendant Nos.1 and 2 by filing Affidavit in Reply (Exhibit-10) resisted the application. It is contended that defendant bank has filed OA No.443/2021 against defendant Nos.3 to 6 for recovery of Rs.3,18,26,953/- which is pending before this Tribunal. It is stated that the alleged purchase of the applicant is fraud. The Agreement to Sell is executed after issuance of the Notice u/s 13(2) of the SARFAESI Act by defendant No.1 and the same is

(SA No.203/2022)

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[KAUR]

void ab initio. Defendant Nos.1 and 2 has no role in the illegal acts if any are done by defendant Nos.3 to 6. The applicant has misled the Hon’ble Tribunal. There are several discrepancies in the pleading about date of possession and in whose possession the property is. There is no proof of service against defendant Nos.3 to 6. It is stated that the defendants have declared the housing loan account of applicant as a fraud account on 27^th July, 2022 and the applicant has not paid any instalment to defendant No.2 after 29^th July, 2022. It is denied that the applicant is bonafide purchaser. The defendants have denied all the contentions raised in the application by the applicant. It is stated that there is no explanation how the applicant got details about the loan account, documents and SARFAESI proceedings of defendant Nos.1 and 3. It is stated that the suit property is in lawful possession of defendant Nos.1 and 2 and the possession has been handed over to the defendant bank by legal authority. The dispute between the applicant and defendant No.3 is beyond the purview of Section 17 of the SARFAESI Act in view of element of fraud involved. Hence, the application be dismissed with costs.

¶50

The applicant by filing Rejoinder (Exhibit-11) to the Reply filed by defendant Nos.1 and 2 tried to expunge the contentions raised in the reply.

(SA No.203/2022)

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[KAUR]

Defendant Nos.3 to 6 failed to appear despite service of Notice. Hence, Application proceeded ex parte against them and order in that respect has been passed below Main Application on 17^th May, 2023.

¶55

The following points arise for my determination and I record my findings as under:

¶56

(1) Does the applicant prove that she is bonafide purchaser of suit property for value without notice?

¶57

(2) Does the applicant is entitled for reliefs as claimed?

¶58

(3) Do the defendant Nos.1 and 2 have lawfully declared Housing Loan account of applicant as fraud account?

¶59

(4) What order?

¶60

Findings:

¶61

Point No.1 –In the affirmative.

¶62

Point No.2 – In the affirmative

¶63

Point No.3 – In the negative

¶64

Point No.4 – As per final order.

¶65

REASONS

¶66

I have heard arguments of learned Advocates appearing for the applicant and defendant Nos.1 and 2.

¶67

The learned Advocate appearing for the applicant has filed Written Notes of Arguments (Exhibit-15) and reiterated facts pleaded in the application and relied upon the following

(SA No.203/2022)

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[KAUR]

documents produced along with List (Exhibit-4) and Pursis (Exhibit-22):

¶72

Sr.No.	Date	Particulars
1.	18/12/2017	Copy of loan sanction letter issued
		by Defendant No.1 bank to Defendant Nos.3 and 4.
2.	22/12/2017	Copy of Application/Request Letter by Defendant Nos.3 and 4 issued to Defendant No.1.
3.	22/12/2017	Copy of Deed of Hypothecation and Deed of Guarantee executed by Defendant Nos.5 and with Defendant No.1 bank
4.	22/12/2017	Copy of Deed of Mortgage Declaration for proposed equitable Mortgage executed
		between Defendant No.1 and Defendant No.5
5.	24/01/2018	Copy of Notice of Intimation of Mortgage by way of deposit of Title Deed executed by Defendant No.1
6.	14/06/2019	Copy of Notice u/s 13 (2) of
		SARFAESI Act issued by
		Defendant No.1 bank to Defendant Nos.3 to 6
7.	12/09/2019 and	Copy of Notice u/s 13 (4) of SARFAESI Act issued by
	27/09/2019	Defendant No.1 to Defendant

(SA No.203/2022)

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[KAUR]

		Nos.3 to 6
8.	21/10/2019	Copy of Notice published in Daily newspaper(Marathi and English)
9.	14/01/2020	Copy of Application and Affidavit of Defendant No.1 filed before the Learned District Magistrate u/s 14 of the SARFAESI Act.
10.	7/10/2020	Copy of Index II and Agreement to Sale executed between defendant No.3 and applicant.
11.		Translation of Index II
12.	25/03/2021	Copy of Legal Opinion and Certificate of Title and No Encumbrances issued by Advocate to defendant No.1 Bank
13.		Copy of Housing Loan Statement of Applicant/sanctioned by defendant No.1 bank
14.	20/07/2021	Copy of the order passed by Ld. District Magistrate on an Application U/s 14
15.		Translation of order passed by District Magistrate
16.	13/04/2022	Copies of Notice for Sale of immovable properties published in Daily Newspaper (English and Marathi)
17.	30/04/2022	Copy of Police complaint filed by the applicant with Hinjewadi

(SA No.203/2022)

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[KAUR]

		Police Station with translation.
18.	29/03/2023	Letter addressed to defendant
		No.2 bank bythe applicant.

¶81

The learned Advocate for the applicant relied upon the Judgment dated 27^th March, 2023 of Hon’ble Supreme Court passed in the case of State Bank of India and Ors. Vs. Rajesh Agarwal and Ors. [Civil Appeal No.7300 of 2022].

¶82

The learned Advocate for defendant bank has also filed Written Notes Arguments (Exhibit-14) and reiterated the facts mentioned in the Affidavit in Reply and relied on following documents produced along with Pursis (Exhibit-7) and Pursis (Exhibit-19):

¶83

(1)Order dated 20/7/2021 by the District Magistrate

¶84

(2) Letter dated 17/1/2022 by the Tahsildar

¶85

(3) Panchnama dated 13/2/2022

¶86

(4) Possession Receipt dated 13/2/2022 by the Tahsildar

¶87

(5) Copy of the Police Complaint dated 16^th September, 2022.

¶88

As to Point No.1

¶89

It is admitted fact that defendant Nos.1 and 2 are single entity. It is also admitted fact that the suit property i.e. Flat No.1101, in Building No.1 Galaxy Vineet, S.No. 350, Bavdhan, Tal. Mulshi, Dist. Pune is common subject matter of loan taken by present applicant and loan taken by defendant Nos.4 to 6.

(SA No.203/2022)

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[KAUR]

On perusal of pleadings and documents of both the parties, it reveals that defendant No.3 who is Star Person has stood as guarantor to the loan of Rs.2,50,00,000/- taken by defendant Nos.4 to 6 in the year 2017 and same person i.e. defendant No.3 sold suit property to the applicant in the year 2020 by suppressing fact that the said suit property has been mortgaged with defendant No.1 bank for loan obtained by defendant Nos.4 to 6.

¶94

In the year 2019, defendant No.1 initiated action against defendant Nos.3 to 6 under provisions of SARFAESI Act as loan was not repaid to it and the applicant purchased the suit property in the year 2020. It is the defence of defendant Nos.1 and 2 that as per Section 13(13) of the SARFAESI Act after receipt of Demand Notice u/s 13(2) of the SARFAESI Act the borrower shall not transfer by way of sale, lease or otherwise any of the secured assets referred to in the Notice without written consent of the secured creditor. This provision relates to borrowers, guarantors and mortgagors and obligatory for them only. It was the duty of defendant No.3 to obtain such written consent of defendant No.1 before selling the suit property to the applicant. In the present case, the defendant No.3 who is guarantor to loan account of defendant Nos.4 to 6 had not taken such written consent of defendant No.1 bank. From these facts,

(SA No.203/2022)

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[KAUR]

it appears that defendant No.3 has suppressed the fact that suit property was mortgaged with defendant No.1 bank.

¶99

No doubt, the documents show that the suit property along with other two residential flats were mortgaged by defendant No.5, one of the borrowers with defendant No.1 bank as security against loan obtained by defendant Nos.4 to 6. At this juncture, it is to be noted that the applicant was not aware of these facts and defendant No.3 has also not disclosed these facts to the applicant. Per contra, the Agreement to Sale between applicant and defendant No.3 glaringly shows that defendant No.3 has thereby assured that the suit property is free from all encumbrances.

¶100

Most pertinent is that after execution of Agreement to Sale dated 7^th October, 2020, the applicant applied for Housing Loan to defendant No.2 bank, which is same bank i.e. Bank of Maharashtra but branch is different. The defendant No.2 bank before disbursement of loan obtained legal opinion and Certificate of Title from its panel Advocate who filed the same on 25^th March, 2021 in which it is candidly mentioned that the applicant has absolute clear and marketable title over the suit property.

¶101

It is true that the applicant has not

¶102

personally/independently verified any encumbrance on the

(SA No.203/2022)

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[KAUR]

suit property before purchasing the same. However, since the defendant No.2 bank has obtained legal opinion and certificate of title of suit property from its panel Advocate, it was not necessary for the applicant to take search independently and verify encumbrance on the suit property.

¶107

Most pertinent is that the defendant No.1 bank while granting loan to defendant Nos.4 to 6 obtained suit property along with other two properties as a security from borrowers by way of deposit of title deeds and thereby created equitable mortgage in the year 2017. The Deed of Mortgage Declaration for Proposed Equitable Mortgage was executed by defendant No.5, one of the borrowers in favour of defendant No.1 bank and Notice of Intimation of mortgage by way of deposit of title deeds was given to the Registrar of Documents in the month of January, 2018 by defendant No.4, Sneha Enterprises through defendant No.5 Mr. Vilas Madhav Atal. Thus, there was encumbrance on the suit property by way of mortgage for loan obtained by defendant Nos.4 to 6. However, it is surprise to note that the panel Advocate of defendant No.2 bank did not find this encumbrance during search. If reference of this encumbrance would have been mentioned in the title report by the panel Advocate of defendant No.2 bank, the applicant would not have dare to purchase the suit property.

(SA No.203/2022)

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[KAUR]

The applicant has purchased the suit property for substantial amount by raising loan from defendant No.2 bank. The record shows that as soon as the applicant came to know about the Sale Notice dated 13^th April, 2022 of the suit property, she filed Police complaint dated 30^th April, 2022 against defendant No.3 as well as then Manager of defendant No.2 bank of which copy is produced along with List of Documents (Exhibit-4). It is pertinent to note that defendant Nos.1 and 2 have also filed Complaint Application against defendant No.3 to 6 in respect of fraud committed by them.

¶112

Having regard to these facts, I hold that the applicant is bonafide purchaser for value without notice. Therefore, I answer this issue in the affirmative.

¶113

As to Point No.3:

¶114

Admittedly, the applicant has taken Housing Loan for purchase of suit property from defendant No.2 bank which has sanctioned loan and disbursed the same in the month of March, 2021 and thereafter, the applicant was regularly paying the EMIs for the same.

¶115

It is the contention of defendant Nos.1 and 2 in Affidavit in Reply (Exhibit-10) that Housing Loan account of the applicant was declared as fraud account on 27^th July, 2022 and the applicant has not paid any installment to the defendant

(SA No.203/2022)

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[KAUR]

No.2 after 29^th July, 2022. However, there is no shred of evidence brought on record by defendant Nos.1 and 2 to show that intimation or opportunity of being heard was given to the applicant before classifying her account as fraud account. It appears that defendant Nos.1 and 2 has classified loan account of applicant as fraud account on the basis of Master Directions on Frauds of Reserve Bank of India. However, in my opinion, rule of audi alteram partem ought to be read in relevant Clauses of Master Directions on Frauds. Consistent with the principles of natural justice, the lender banks should provide an opportunity to borrower by furnishing copy of the audit report and allow the borrower a reasonable opportunity to submit representation before classifying the account as fraud. On perusal of the facts, it transpires that lender bank i.e. defendant No.2 did not provide an opportunity of hearing to the applicant before classifying her Housing Loan account as fraud. Therefore, the impugned decision of classifying the applicant’s account as fraud is vitiated by failure to observe the rule of audi alteram partem. Further, defendant Nos.1 and 2 banks have not produced evidence to show that the applicant is related with either defendant No.3 or defendant Nos.5 and 6 or their loan accounts. Therefore, it is difficult to hold that applicant in collusion with defendant Nos.3 to 6 has committed fraud. Per

(SA No.203/2022)

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[KAUR]

contra, it appears from contents of Complaint Application produced along with Pursis by the defendant bank that only defendant Nos.3, 5 and 6 have been arrayed as accused and there is no allegation against present applicant. This fact supports my opinion that there is no collusion between the applicant and defendant Nos.3 to 6.

¶124

In pursuance of aforesaid reasons, I hold that declaring of Housing Loan account of applicant as fraud account by defendant Nos.1 and 2 is violative of principles of natural justice. The Authority cited on this aspect on behalf of the applicant supra is squarely applicable to the present case. Therefore, I answer this issued in the negative.

¶125

As to Point Nos.2 and 4

¶126

The record shows that defendant No.1 initiated action under the SARFAESI Act against defendant Nos.3 to 6 as they failed to repay the loan in the year 2017. Defendant No.1 issued Demand Notice u/s 13(2), took physical possession of the suit property on the basis of Order of District Magistrate passed u/s 14 of the SARFAESI Act. It is held by this Tribunal while recording findings on Issue No.1 that she is bonafide purchaser of suit property for value without notice. Therefore, Order passed u/s 14 by District Magistrate has to be set aside and process of selling the suit property by defendant No.1 has to be quashed.

(SA No.203/2022)

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[KAUR]

The defendant No.1 bank has taken physical possession of the suit property on 18^th February, 2022 on the basis of Order dated 20^th July, 2021 passed by District Magistrate u/s 14 of the SARFAESI Act which is seen from the documents produced by defendant No.1 along with Pursis (Exhibit-9). Since the applicant is held as bonafide purchaser of suit property, possession of the same has to be restored to her, though there is no specific prayer but it can be covered under last prayer i.e. ”Any other just and equitable reliefs may be passed” mentioned in the application. Therefore, I hold that applicant is entitled for reliefs as claimed.

¶131

Hence, by answering all the points accordingly , I pass the following order:

¶132

ORDER

¶133

A. The application is hereby granted.

¶134

B. Order dated 20^th July, 2021 passed by District Magistrate in Application filed by defendant No.1 Bank of Maharashtra u/s 14 of the SARFAESI Act is hereby quashed and set aside.

¶135

C. The Auction Sale Notice dated 13^th April, 2022 in respect of suit property is hereby quashed and set aside.

¶136

D. The defendant No.1 Bank of Maharashtra shall deliver

(SA No.203/2022)

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[KAUR]

vacant and peaceful possession of the suit property to the applicant immediately after appeal period is over. E. Both parties to bear their own costs.

¶141

Pronounced in open Court.

¶142

Place : Pune Date: 09.06.2023

¶143

Sd/(Dilip G. Murumkar) Presiding Officer Debts Recovery Tribunal, Pune

¶144

(SA No.203/2022)

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¶146

[KAUR]

Mangal Nagnath Parkale v. Bank of Maharashtra

Case brief

What is this about?

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Mangal Nagnath Parkale v. Bank of Maharashtra

Case brief

What is this about?

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