Dismissed

Sadda Swetha v. Hdfc Housing Finfnce Ltd. Limited

DRT24 Nov 2023SA/334/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed a Securitisation Application filed by a third-party owner challenging a bank's possession of disputed property. The Tribunal held that since civil rights are pending before a civil court and fraud is alleged, the DRT lacks jurisdiction.

What did the court decide?

The Securitisation Application was dismissed with no order as to costs.

Sadda Swetha versus Hdfc Housing Finfnce Ltd. Limited — Banking and Recovery | DRT (2023)

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IN THE DEBTS^{RECOVERY TRIBUNAL'II} AT HYDERABAD

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DATED THIS^{THE 24TH DAY OF NOVEMBER,2023}

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

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SECURITISATION^{APPLICATIONNO. 334 OF 2022}

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Sadda Swetha

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W/o Sadda Suresh^Babu Aged 30^years, Occ:Housewife R/o D.No,4-48l1,^{Sri KrishnaNagar} Mutya la ReddYPalli Tirupati Town, Chittoor^District

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.....Applicant.

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Versus

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HDFC Housing^{Finance Ltd.}

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Rep. by its Manager Having Office at^{Chinnamgari Plaza}

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V.V. Mahal, TiruPathi-517501

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R. Venkatamuni^ReddY

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S/o P. Nadamuni^ReddY

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Aged 44^years, Occ:Business R/o D, No. 13-2-236, Chinnakaapu^Street

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Tirupati, Chittoor District

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. .. .Respondents.

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Counsel for the Applicant^{:Sri V. VenkataMayur} Counsel for 7st respondent bank:^{Sri N.V. Sumanth} 2nd respondent : Ex parte

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-:Q_U_B:-

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The Applicant filed the^present Securitisation^Application uls.L7 of the Securitization and Reconstruction of^{Financial Assets} and Enforcement of Security Interest Act, 2002^{(hereinafter referred} to as "SARFAESI Act 2002") to declare the action of the^1't 5ffiv

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Page 2 of 11

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SA No.334/2022

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respondent bank in taking physical possession of the application schedule property as null and void and non est in the eye of law.

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The case of the applicant as per the averments of securitisation application, in brief, is that she is neither the borrower nor guarantor/mortgagor to the loan availed by the 2no respondent. The petitioner bequeathed the petition schedule property from her mother vide registered gift deed dated 29.07.2019 and has been in possession and enjoyment of the application schedule property. The 1st respondent initiated the Securitization measures against the subject property for recovery of outstanding dues from 2nd respondent. In fact, the right and tiue of the petitioner,s mother was upheld by the civil court in OS No.1266/2017 vide judgment and decree dated 18.04.2011 and conftrmed in nS No.44l2013 vide judgment dated 25.06.2019. The petitioner on coming to know about the fraudulent claim, fited os No.7/2020 in which the 1st respondent admitted in the written statement that the property details mortgaged were tallying with that of property mortgaged by the 2nd respondent.

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It is further submitted that, one M. Venkataramana filed OS No.1266/2017 claiming the property through agreement of sale allegedly entered with the mother of the^petitioner. The said OS and the Appeal No.44/2Of3 were dismissed. Pending the Appeal, M. Venkataramana fraudulently alienated 185 sq. yds to one K. laganatham who in turn sold it to the 2ndrespondent. The 2nd respondent created mortgage over the petition schedule^property without any right or title to secure the loan availed from 1st respondent and became defaulter. Knowing fully well about the fraud, the 1st respondent has illegally dispossessed the petitioner

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,dnwo.,.'r, t/' ':sll-t-

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Page 3^{of 11}

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sA No'334/2022

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from the^{petition schedule propertythrough advocatecommissioner} on L3.ll.2O?2^{inpursuance ofordersobtainedinCrI MP} No.86/2022.^{Hence this SA to declare the action of the 1st} respondent^{as illegal and void ab initio'}

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parte on 21.02.2023^{as called} 4. The 2nd^{respondent was set ex} receipt^{of notice.} absent^{and no representationdespite}

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The^{1st respondent filed reply statement slatlng' inter alia'} that the^{2nd respondentis the borrowerand R Sumathiis co-} borrower^{of the loan of Rs'24 lakhs and Rs'1 lakh towardsinsurance} premium vide^{loan agreement dated 28'12'2017They were never} regular in^{paymentof instalments and hence the loanaccount} became^{NPA on 30.112018 After issuing loan recall noticeon} 18.10.2019,^{the 1st respondentissued demand notice dated} 01.11.2019^{u/s 13(2) of the Act whichwas served on 2n0} respondent^{on 11.11'2019besides affixtureon schedule property} andpublication.Asnopaymentmade'symbolicpossessionwas taken on^{29.07.2022and possessionnotice was publishedOn} 30.l!.2022^{the advocate commissioner took physical possession} pursuant to orders^{in crl MP No'8612022on the file of learned CIM} Cum Senlor^{Civil Judge,chittoor'}

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The 2nd^{respondent createdsecurity interestin respectof SA} schedule^{propertyby depositing the sale deed Doc'No'7224/2077} dated 28.12.2017.^{The title has flownby purchase from one R'} Venkat^{Reddyto K. Venkat Reddy vide sale deed Doc No 1703/1966} dated 23.06.1966^{who died in testate' The sons of K Venkat Reddy} also dled in^{testate, their legal heirs executedagreement cumGPA} vide Doc.^{No.715 A/2007 datedO1 1O'2007 in JavourofM}

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sA No,t34l2022

Venkataramana who in turr vide sare deed ""..r"]r;:[jI;".""T;t;.i;:rTi;."": Jagannatham sold it to R. Venkatamuni Reddy, the 2nd respondent herein and borrower of 1st respondent bank, vide sate Oeed Doc.No.7224/2077, dated 28.72.2017. Therefore, the tiue has ftown down validly to 2nd respondent_borrower and the mortgage has been validly created. The appticant failed to get any retief in OS N,.7/2O2O and hence SA is r dismissed with exemprary .o.',o.1^{'u'ntu'nuoleThe sA is riabre to be}

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7' Heard rearned counser appearing for the appricant and rearned counsel for the 1st respondent bank. perused the written arguments filed by the 1st respondent bank and the material brought on record.

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The learned counsel for sch ed u r e p ro pe rty wa s oe r o n e i nl ll T:["J^"":; lli,:;; il:i:,:; the same vide registered sale deed dated 23.06.1966. Subsequent to his death in testate, his son Janardhan Reddy executed wi, dated 05.04.1993 in favour of his son K. Ramachandra Reddy. Ramachandra Reddy sold the property to Sooraparaju Sivaram Raju under registered Sale Deed dated 31.0g.1994 who in turn sotd an extent oF 235 square yards out of the total extent to Munnimohana Pillai who in turn sold the same to one M. layaramaiah for his minor son M. Roopesh Babu under the guardianship of M. Laxmi vide registered Sate Deed Doc. No.6946/200 2 dated 72.12.2002 who was in possession and enjoyment of the property. The applicant bequeathed the property from lvl. Laxmi and M. Roopesh Babu vide registered cift Setuement Deed Doc. No.317Ol2019 dated 29.07.20t9 to the extent of 235 square varas. e,$>

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PaBe 5 of u

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SA No'334/2022

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The^{learned counselfurther submits that oneM'} VenkataramanaWhoallegedlyenteredintoagreementofsalewith the mother^{of the applicantvide Doc No'7158 l2OO? to the extent of} 235 square^{yards, filed civil suit OS No'1266/2007 on the file of} learnedPrincipalJuniorcivilJudge,Tirupathiwhichwasdismissed on merits^{on 18.042011' M Venkataramanapreferred Appeal} No.44120l3beforeVAddl.District]udge,Tlrupathiwhichwasalso dismissed^{on 25.062019The tearned civil court in os 1266/2007} categorically^{held that M' Venakataramanawas not in possession} and enjoyment^{of suit schedule propertybut the mother of the} applicant^{viz., Smt.Muchhakayala Lakshmi is in possession'Having} coming to^{know about fraudulent claim in respectof the property'} the applicant^{filedOS No'07/2020 on the file of learnedPrincipal} Senior Civil^{Judge, Tirupathi for declaring her as lawful owner} having^{perfect title over the plaint schedulepropertyand} consequentially^{for permanentinjunctionThe gth defendantbank} (1st respondent^{bank herein)confirmedin the written statement} thattheschedulepropertyismatchingWiththeplaintschedule property in the OS.

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The^{learned counselfurther contends that the2nd fraudulently} created^{mortgageon the schedule propertywithout any legal right} or title and^{hence the 1't respondent bank is not entitled to proceed} against the^{propertybelongingto the applicant'With these} contentions,^{learned counsel prays to allow the SA'}

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Per contra,^{learned counsel for 1't respondent bank submits} that the 2nd^{respondent and R. Sumathias co-borrower availedloan} for^purchase of^{residential propertyvide loanagreement dated} 28.72.2017. After^{availing credit facility, the borrow€r} to -failed //).''^${r U,'

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SA No.33412022

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make regular payment and therefore the account became NpA as per RBI norms and Securiti asainst the mortsaeed r.l'jfl :1"j":1'::r:ffi TLITT; issuing demand notice dated 01.11.2019 under Sec.t312; anO possession notice dated 29 2002. rhereaft e., r., .",polJ#1JlTj:..'rrJ;lJ:,.T"::: learned Chief Judicial Magistrate Cum Senior Civil Judge, Chittoor and obtained orders in Crl.M to UU"022 for taking over physical possession ofsecured ur.u,,,' rrough advocate commissioner.

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The learned counsel ful ther submits that the 2nd respondent created security interest in deposit n e the sa re deed r". i:::::t rl :: .:::';r:, ::::l]J: title has flown by purchase fr( Reddy vide sare deed r"..^Iil,l;.""'i:::"::::T.:"[T died in testate. The son of K. Venkat Reddy viz., K. Janardhan Reddy and his son K. Rama Chandra Reddy also aiea in testate. Their legal heirs viz., K. Sar Reddy a nd K. Rash i mtha ".:','.::;'J:: J:::ti: "-;r: :T: in favour of vide Doc.No.7 7Sg/2007 dated 01.10.2007 in favour of M. Venkataramana who in turn t"r[.Ji]rTii.,r"l vide sare deed ".r".rr;;rti;,""i.",IJ Jagannatham sold it to R. Venl Reddy' the 2nd respondent herein and borrower o, ,,, '"tu"n' Doc.No.7224/2o7r,our"oru.r!."]ll).'rT:,:"".::',:,:i.:,i::: to copy of relevant sale deeds and translation copies filed with memo dated 26.f2,2022.

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As per learned counsel for respondent bank, the mortgage has been validly created to secure the loan by the 2nd respondent. He

Page^{7 of 11}

SA No'334/2022

further^{contends that the applicanthas already filed OS No'07/2020} on the^{file of learned Principal SeniorCivil Judge' Tirupati and the} Tribunal^{has no jurisdictionto adjudicatethe subjectmatter' While} relying^{on the judgments of (i) Hon'ble BombavHigh CoL!',4in-ggnkgl} ffi""n "no^{orn"rt, the learned counselsought} for dismissal^{of the SA as not maintainable'}

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L4. In^{rePlY to} the specific^{contentionas to jurisdictionof the} Tribunal^{to deal} with the^{subject matterf the learnedcounselfor} judgement of^{the Hon'ble SuDreme Court in Ka--natgla!} applicant^{filed a} rorn rur"r^{ru, whereunder,the Hon'ble} ffi" Supreme^{Court held that an efficacious statutory remedy of appeal} under^{Section 17 of the Act was availableto the appellants therein'}

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Now,^{the points that arise for consideration are;}

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0)^{Whetherthe applicanthas made out.any valid ground} bank in^takingto declare tnu^{actiii"-oi'-i"} '"tpondent possession of t;;'^{SA schedulepropertYvide advocate} commissione'^{*"u'ini- aiiua 'fi'11'2022 in Crl'MP} No.86/2022^{ut i'ii'"ti i' niiv" of law' nutl and void ab}

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initio?

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(ii) To what relieP

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Point No.(il:'

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Before^{delving into merits of the case,the specific contention} of respondent^{bank about maintainabilityof the SA is to be} examined and^{answered' In the 1st cited judgement in Bank of} Baroda vs. Gopal^{shriram Pandacase (supra) videpara 22'3, the} OY*

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sANo.334/2022

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Hon'ble Bombay High Court gave a nearly_exhaustive list of illustrative cases in which jurisdiction of Civil Court or Debts Recovery Tribunar exists where security interest of banks/Fls or civir rights of third parties other than borrowers/guarantors is involved. After illustrations from (a) to (k) in para ,r.r, ,nu Hon,ble High Court observed as hereunder:

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"(a).....(k)...

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(1) whether security interest was vatidry created and when the yfl!:;il:f#:r..uu,i,ui iiiui,Li,n oo,0,, can the DRi

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These situations are,jldilative and point towards existence of Civil Court,s iurisdiction, even in ,ur"r, ilii.," security interest has been created. rf-1oovg "ir;;;i;r'";:;; not exhaustive and '!:::#":: z:l;;::' wnere tn| iJci,itv'intu,.,t coutd atso involved under the rl,..,21t'^of. 1^titigation .involving rights therefore each case si"tt iiiZ to be tested ", ,t, .*',1',*Ziiriid

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It is imperative to reproduce the euestion framed by the Hon'ble Bombay High Court after elaborate discussion and the answer thereto, The relevant portion of the decision is as hereu nder:

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"27. In view of what we^h_aue dis,cussed above, our considered opinion of the question as reterred to is as under: _

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Ouestion:

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"Whether the jurisdiction ,of ..a^{Civil Court to decide} alt the matters of civit nature. exltullnO tnose-i-'O.e ii,"i Oy the Debts Recovery rribu na t u nder .219tioi.. i i ;; ;;"";";;Tltization Act, i n relation to enforcement of- T.ecuritv inteist iiJ-r"rrrua creditor, is barred by Section 34 of the suluriiiuliin"eii..

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Answer:

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tookins to the nature of the suestion, in our view, is i:;:;:i-""

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(A) . .(c)

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'!?)-_W!er:.civit right of pe.rsons other than the borrow(s) or guarantor(s) are invotved,. lhe cirit Ziii' woutd have jurisdiction, that too, when'it is priia' iaci"ip)ur.nt from the zfln /ry"n

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face of^{recordthat the relief claimed' is incapable of being} decided bv^{the DRr, i'i"' i'i'tii' tz oi-the onr Act' 199i read} iiiiiitiont^{13 and 17 of the SARFAESIAct'}

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(E) Even in^{cases where the enforcementof a security interest} involves^lssuesas '''a"ili"i'i'^{iu'aiu chgmigals(supra) of fraud} Zii iriiotitn"a^{witnii ine parameterslaid} .down^{in A' Avvasamv} (supra); a claim^{or iiiliiuii" oy a guarantor under Sections133} and 135 of^{tne contiiZi'Ait-tiiuaachemica.ts(supra)l; 9.'!zit.} of discharge^ov "^{g'iiiniirina"r Sectio.ns 13e' 142 and 743 or} the contract^{A,t; u'ii'"'tini if,i"i-siition^sa'or tne rransfer of} Property^Act []'P'^{a'iii""'tiup*)l; the Civit Court shallhave} iurisdiction;

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(F) Examples as indicated^{in para 22'3' are ittustrativeof the} Civil Court's iurisdiction "'

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In the^{2nd cited judgment in sri Raghavans case (supra)' lhe} Hon'ble^{Karnataka High Court held under para 36 as hereunder:}

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"j6. Thus,^{the catena of cases discussed.abovehave clearly} brought^{about a aisliiitionietweenthe jurisdictionof the Debts} i"ririi-rriounut^{'iii-tniAppellate} .Tribunal^{to entertaina} proceeding o, "'^{Z'ppui't-"i"' s":t!9::.77 and 18 of the} Giiieesi^{Act by a'ny personaggrieved..by the measures} initiated under^{sectiin! iinau 6ianyoth.erprovisions of th'e} Act as opposea^{to ipersonfiling a suit beforea Civil Courtin} iiiiirt bi urv^{im,,,oiiuble prop-ertv w.hich.incidentallv happens} to be a secured^{uitii'-in-ti"iatte'r situation'the personcould} ;p;;";r;;^{civit ciJiu''i t""x a dectara-toryor other retief in} respect of^{tne seciiei iiiet' sucn a relief cannot be grantedby} the Debts a"ro'"iliiunal^{or the Appetlate Tribunalas they} ire not a Civit^{Court acting under Section 9 of CPC"'}

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In the^{instant case, the applicant admittedlyfiled OS} No.O7/2020 on^{the file of learnedPrincipalSenior Civil ludge'} TirupatifordeclarationoftitleinrespectofsuitScheduleproperty which is incidentally^{the sA schedule property against which the} Secured creditor^{i.e., the 1st respondent bank has initiatedmeasures} under the SARFAESI^{Act and the same is pendingadjudication'The} 1't respondent bank^{and its borrower-2nd respondent herein are also}

9>-."}) t"'

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SA No.334/2022

parties to the suit among others. Hence the case of the appticant is squarely covered under the above two cited judgements *n,.n tu. the jurisdiction of the Debts Recovery Tribunal out of the cases illustrated therein.

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In the case of Kanaiyalat Lalchand case (supra) relied upon by the applicant in support of the contention that the DRT has jurisdiction to deal with the subject matter, the Hon,bte Supreme Court held in parc 22 that action under Section 14 of the Act constitutes an action taken after the stage of Section 13(4), and therefore, the same would fall within the ambit of Section fZlf; of the Act. Thus, the Act itself contemplates an efficacious remedy for the borrower or any person affected by an action under Section 13(4) of the Act, by providing for an appeat before the DRT.

¶86

The applicant in the present case is neither the borrower nor guarantor/mortgagor but a third party to the Ioan transaction between the respondents I and 2. She, being aggrieved by the measures initiated by the 1st respondent bank against the schedure property, has filed the present SA. Initiation of Securitization measures is not onry the grievance of the appricant. The basis for filing the present SA is alleged fraud played by the 2na respondent in availing the loan and depositing the tiue deed of the property belonging to her with 1st respondent bank. The applicant is agitating her right of tiue over the subject property and seeking permanent injunction on the file of learned principal Senior Civil Judge, Tirupati by filing OS No.O7/2020 which is pending adjudication. In the cited judgement of Kanaiyalat Latchand sachdev case, the Hon,ble Supreme Court held that efficacious remedy of appeal under Section 17 of the SARFAESI Act is available even after the staoe " of 2*.. (y''1"'""

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SA No.334/2022

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Sec.13(4) measures of a secured creditor and it was not the case of appellants therein about civil rights of title to the property. Hence, the cited^judgement is not of help to the applicant.

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It is settled principle of law that the Debts Recovery Tribunals have no jurisdiction to investigate into the case where fraud is involved. Since alleged fraud is involved in the present case, unless the right of applicant in the subject property is decided by the learned Civil Court in the pending OS, the applicant has no ground to seek any direction to restrain the 1st respondent bank from continuing its recovery proceedings.

¶91

In view of the above discussion, I find that the applicant failed to make out any valid ground to declare the action of 1st respondent bank in taking physical possession of the SA schedule property pursuant of advocate commissioner warrant dated 10,11.2022 in Crl.MP No.86/2022 and accordingly, the SA is liable to be dismissed.

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Point No.fiil:-

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