Dismissed

Tata Capital Housing Finance Ltd. v. Canara Bank

DRT24 May 2023SA/290/2022

Case brief

AI extract

What is this about?

Securitization Application arising from dispute over mortgage release. Applicant deposited funds to release mortgaged property per bank "No Objection Letter" but bank continued SARFAESI proceedings. Court found applicant lacked legal standing as no formal transfer of mortgage rights occurred via the letter.

What did the court decide?

Securitization Application dismissed; Applicant has no ground to set aside SARFAESI measures.

Tata Capital Housing Finance Ltd. versus Canara Bank — Banking and Recovery | DRT (2023)

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IN THE DEBTS^{RECOVERYTRIBUNAL-2 AT HYDERABAD} DATED THrs^{rHE 24rH DAY OF MAY'2023}

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PRESENT:^{SH. RAMESHWAR KOTHE,B'com" L'LB' (Hons')'M'A'} PRESIDING^OFFICER

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Securitization^{Application No' 290 OF 2022}

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Between:

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Tata Capitat^{HousingFinanceLtd'} Rep. by its^{Authorized Officer} Plot No.3, 4,^{5 and 6, RoadNo.3} Auto Plaza,^{OPP.Times of India} Ba nja ra^{H i tls, HYderabad- 500034'} Rep. by its^{AuthorisedOfficer.}

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. . .... .Applicant.

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Versus

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Canara Bank MID CorPorate^Branch #6-1-1086,^{Vista Grand Towers} Rai Bhavan^{Road, Somajiguda} Hyderabad -^{500 082.}

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P. SatYajith^ReddY S/o P. Ram ReddY Aged about 54 Years Flat No.B1, Green^{View APartments} lournalist ColonY,^{lubilee Hills} Hyderabad.

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Smt. SuravaraPu^Laxmi W/o S. Srinivasa^Rao H. No. s-101517/t56 1't Floor, Avinash^Building PresidencY Avenue Pakalakunta, Alwal Hyderabad.

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S. Srinivasa^Rao S/o Samba MurthY H. No.5-1015lLlts6 1't Floor, Avinash Building

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sA 29O/2022

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Presidency Avenue Pakalakunta, Alwal Hyderabad.

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M/s. LN Constructions Rep. by Sri S. Vinay Kumar Reddy Managing Partner, Flat No.107 Karan Residency, Green View Lane Bowenpally, Secunderabad.

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. .... .Respondents.

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Counsel for the Applicant : Mr. Lanka Jagannadham. Counsel for 7st Respondent : Mr. Dish it Bhattacha rjee Respondents 2 to s : Ex parte

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-:ORDER:-

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The Applicant filed the present Securitisation Application u/s.17(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2OO2 (hereinafter referred to as "sARFAESI Act 2002") for setting aside all measures including the sale notice dated lO.Og.2OZ2 issued by the 1st respondent bank with a direction to 1't respondent to release the mortgage in respect of the SA schedule property.

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The case of the applicant as per the averments of securitisation application, in brief, is that applicant deposited a sum of Rs.85,00,000/- into the loan account of 5th respondent with the 1st respondent basing on a No Objection Letter of 1st respondent bank dated 22.0t.2020 for release of SA schedule mortgaged property to the 2nd respondent, for the purpose of sanctioning loan of Rs.94,50,000/- to respondents 3 and 4 in furtherance of Agreement of Sale dated 30.01.2020 executed by 2nd respondent. However, the 1st respondent initiated SARFAESI $:ro

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sA29o/2o22

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proceedings by classifying the^{loan account of 5th respondentas} NPA on 31.03.202L^{and issued demand notice u/s 13(2) on} L2.04.2021, followed^{by possession notice and sale notices} dated t3.tO.2O2l,^{18.02.2022,L3'04'2022 and finally} 10.08.2022 fixing^{auction on 17.09'2022for auction of} mortgaged^{properties including the SA schedule property'} However, the auction^{did not materialize' The action of 1't} respondent in not^{releasing the mortgage of SA schedule} property and putting the^{propertyfor auctionvide salenotice} dated L0.08.2022^{even after accepting the deposit of} Rs.85,00,000/- into^{the loan account 5th defendant,is null and} void, illegal, arbitrary^{and liable to be set aside' In view of the} aforementioned^{facts and circumstance,applicant prayed for} setting aside the^{sale notice dated10'08} '2022^{and with a} direction to the^{1st respondent to releasethe mortgageover the} application schedule^{propertyin the interestof iustice'}

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The I't respondent^{bank filed reply statement'The submissions} of respondent^{bankas per the avermentsof reply statement,in} brief, are that the lst^{respondentissued a letter to 2nd} respondent dated 22.01.2020^{demanding a payment of Rs'42'50} lakhs by 31.01.2020 and^{balancepayment by 28'02'2020for} redemption of mortgage^{claimsof his property.It appears that} after receiving the letter^{dated 22.01.2020,the 2nd respondent} entered into an Agreement of^{Sale of applicationschedule} property with respondents 3 and 4 on 30.01.2020^{without the} knowledge of ltt respondent bank and^{without any mentionof} subsisting mortgage over the said^{property. The originaltitle} deeds of the^property are still^{in the possessionof the l't} respondent bank. The respondents 2^and 5^{were informed that} firy*

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sa29012022

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in view of the order passed in I.A. 150/2020 in C.O.p. No.03/2020, the amount of Rs.85,00,000/- deposited into the loan account would be released, subject to consent/undertaking of remaining partners of the 5th defendant firm, vide letter dated 07.08.202t. The 2ndl5th respondents fited SA No.232l2)2t challenging Securitization measures initiated by 1.t respondent bank. They also fited Writ petition Nos.30146/2021, 77575/2022, 213t8/2O22 chaltenging the sale notices dated 73.7O.2027, 18.02.2022 and t3.04.2022 and the Writ petitions were disposed of from time to time. The subject matter in writ petitions pertains to sA.232/2027 before this Tribunal. whereas the present SA is filed by the applicant seeking relief against the action of 1't respondent in initiating SARFAESI proceedings for recovery of loan availed by 5th respondent in which 2"d respondent is a mortgagor of SA schedule petition property. The writ petition No.2l3lA/2022 disposed of vide order dated 27.04.2022 directing the 2nd respondent to deposit Rs.50,00,000/- and with a liberty to the 1st respondent bank to appropriate the amount of Rs.85,00,000/- deposited into the loan account of 5th respondent. The applicant has a right to proceed against other respondents but not against the 1st respondent bank which had followed the due process of law for recovery of outstanding dues from the borrowers under the SARFAESI Act and followed the directions of the Hon'ble High Court. Accordingly, the SA is liable for dismissal.

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The respondents 2 to 5 were set ex parte on 20.04.2023 as calted absent and no representation. s$ts

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sA29O/2022

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Heard learned counsel appearing^{for the applicant, learned} counsel appearlng for the 1't^{respondentbank and perused the} material brought on^record.

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It is the contention of the^{Ld. Counsel appearing for applicant} that the 1't respondent^{bank havingissueda no objection letter} daled 22.01.2020 in^{favour of 2nd respondent for conditional} release of mortgaged^{property, cannot backtrack subsequently'} The 1't respondent bank also^{accepted the money depositedin} the borrower's account^{wherein the 2nd respondentis the} mortgagor. Since the subsequent^{actlon of 1't respondentbank} in initiating the Securitisation^{proceedingsagainst a property} which was agreed to be^{released on payment of a specified} amount, it is not^{justified on the part of the 1't respondentbank} in putting the same^{propertyfor auction underSARFAESIAct'} Hence learned counsel^{prayed for quashingthe actionof 1"t} respondent bank in^{putting the appllcation schedule property for} sale and also for a direction^{for release of mortgagecreated} against the application^property.

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According to learned counsel for^{the 1't respondentbank, the} applicant has no /ocus standi^{to questionthe Securitisation} measures initiated against a^{mortgaged property in the first} place. Secondly, the 2nd respondent illegally entered^{into an} Agreement of Sale when the^{mortgage was subsisting.The 1st} respondent bank issued a letter to^{2nd respondentdated} 02.05.2020 ln^{response to his representation dated 02.03.2O2O} that it was willing to^{reverse the transactionof Rs.85,00,000/-in} favour of the applicant herein^{subject to consent letters from the} other^partners of the^{5th respondent-borrowerflrm. The appllcant}

zfltsrr..'.O

5A290/2022

has a right to proceed against the other respondent but not against the 1"t respondent bank for recovery of its dues sanctioned to respondents 3 and 4. Ld. Counsel further submits that no document conferring the mortgage right has been executed in favour of applicant hence the applicant cannot force to set aside Securitization measures that are rightfully initiated by the 1't respondent. The learned counsel placed reliance on the judgement of Hon'ble Supreme Court in Ameer Minhaj vs. Dierdre Elizabeth (Wright) rssar and Ors. [(2018) 7 SCC 639].

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With the above submissions, learned counsel sought for dismissal of the sA.

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Now the points that arise for adjudication are: -

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i) Whether the Applicant made out any valid ground for quashing the measures initiated by the 1st respondent bank against the SA schedule property under the provisions of Securitisation Act?

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ii) To what relief?

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Point No,(il:

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The sum and substance of the case is that 2"d respondent mortgaged SA schedule property belonging to him as a collateral security to the loan availed by 5th respondent from 1st respondent bank. At the request of the 2nd respondent, 1st respondent bank agreed to release the mortgaged property on payment of Rs.85,00,000/- in two instalments of Rs.42.50 lakhs each by 31.01.2020 and 28.02.2020 respectively vide letter dated 22.01.2020. Basing on the said letter, 2nd respondent executed an Agreement of Sale dated 30.01.2020 with respondents 3 and 4 in respect of application schedule property belonging to 2nd . n\nv..t>

/J/ -a]'.''

SA29O/2022

respondent. Taking into consideration the agreement of sale dated 30.01.2020 and 1't respondent's letter dated 22.01.2020, applicant^paid an amount of Rs.85,00,000/- to 1't respondent in the loan account of 5th respondent on LO.O2.2O2O towards release of mortgaged property belonging to the 2nd respondent. However, the 1st respondent bank did not release the application schedule^property despite deposit of Rs.85,00,000/- in terms of its letter dated 22.0L.2020. Instead, the 1st respondent bank declared the 5th respondent's loan account as NPA on 31.03.2021 and issued demand notice on 12.04.2021 followed by^possession notice. Thereafter, the lst respondent issued sale notices one after another i.e., t3.L0.2021, 18.02.2022, L3.04.2022 and L0.08.2022 putting the application schedule property along with other secured assets for auction sale. But none of the auctions materialised.

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The 1tt respondent bank sanctioned loan to 5th respondent. The 2nd respondent is one of the mortgagors who offered his^property as a security for the due repayment of loan availed by 5tn respondent. As the business of 5th respondent was not running properly, the mortgagors approached the 1tt respondent bank for release of their respective mortgaged properties on^payment of monies as agreed by the 1't respondent. It is in this back ground, 2nd respondent obtained a letter dated 22.01.2020 from the 1't respondent for getting his^property released on^payment of Rs.85,00,000/-. Thereafter, applicant released an amount^oF Rs,85,00,000/- to the loan account of 5th defendant-borrower for the purpose of release of mortgaged^property belonging to^2nd respondent. Thereafter a dispute has arisen among the^partners of 5th respondent bank over the valuation of^property belonging dw"

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SA29O/2022

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to 2nd respondent. The 1tt respondent bank issued a letter dated 02.05.2020 to 2nd respondent to^produce consent of remaining partners of 5th respondent for reversing the payment of Rs.85,00,000/- deposited by applicant company herein. Thereafter, the 2ndl5th respondents reported to have filed Writ Petitions bearing Nos. 30146/202L, ll5l5/2022 and 2l3LB/ 2022 challenging the sale notices issued under SARFAESI Act against all the mortgaged properties for recovery of dues from the 5th respondent borrower.

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What is observed in the entire episode is that the 1st respondent is targeted for initiating SARFAESI measures against the mortgaged property i.e., SA schedule property. The reason, acceptance of Rs.85,00,000/- from the applicant company and non-release of property despite issuance of no objection letter. The original title deeds are said to be with the 1st respondent bank and money as well. The reason attributed for not refunding amount to applicant is inter se disputes among the partners of 5th respondent and anticipation of legal problems. That is not at all an amicable solution. I fail to understand money is received from applicant and refund is to be made to the applicant then what makes the 1't respondent to seek no objection from the partners of 5th respondent. After receiving the money back, it is entirely in the domain of the applicant whether to seek remedy whatsoever against its borrowers. In my considered opinion, the 1't respondent ought to have refunded the money so that the applicant could recoup major portion of amount it parted with, in the form of sanction of loan. Howevea, refund of money is not the V*$$L/prayer in this applicatior '' l:-/'/ 6qt'

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s^2so/2021

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12, It is an admitted fact that the 2nd^{respondentcreated mortgage} over the SA schedule^property to secure^{loan facilitygranted to} 5th respondent and the original title^{deeds are still in possession} of the 1st respondent, The 1't^{respondentbank is enforcing the} security under the^provisions of the^{SARFAESIAct, Itis a} different matter that 5th respondent^{and its associateshave been} challenging the SARFAESI measures before one^{Forum or the} other, one of which is SA No.232/2021^{pendingbefore this} Tribunal. The validity or otherwise of^{SARFAESImeasuresshall} be decided on merits in that SA.^Be that as it^{may. But in the} case of applicant, it has not filed any^{legally valid and} enforceable document evidencing transfer^{of mortgagerights} over the SA schedule^property by^{the 1't respondentbankin} exchange of Rs.85,00,000/- into the^{loan account of sth} respondent. The simple no objection^{letter available on record} cannot be considered as a legally^{enforceabledocument to get} the mortgage rights transferred so as^{to direct 1st respondent} bank as sought for by the applicant.^{As statedsupra, tne remedy} available would be refund of^{money whichis not soughtfor in} this application. Therefore, in my considered^{view, the applicant} cannot challenge the SAERFAESI^{measures initiated by the 1st} respondent bank against the^{securedasset which is the SA} schedule^property.

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13, In view of the above, I am^{constrained to find that the applicant} failed to establish any valid^ground to^{set aside the SARFAESI} measures initiated by the 1tt^{respondent against the SA schedule} property, Accordingly, the SA is liable to be dismissed.

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sA290/2022

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Point No.(ii):

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t4. In the result, the SA fails and is hereby dismissed.

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Consequently, Interlocutory Applications^pending, if any, shall stand closed.

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No order as to costs.

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t7. Communicate a copy of this order to the^parties concerned. (Typed to my dictotion by the Steno, corrected, signed ond pronounced by me in the open court on this the 24th doy of Moy, 2023).

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ulutttl'-/ ^ {"06'$v2 ESHWAR KOTHE) PRESIDING OFFICER

Tata Capital Housing Finance Ltd. v. Canara Bank

Case brief

What is this about?

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Tata Capital Housing Finance Ltd. v. Canara Bank

Case brief

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