Dismissed

Rebello Sagaya Nathan v. Ugro Capital Ltd. and Zion Consultants and Ruby Joseph and Joseph Rebecca Elizabeth Susanna and Charles Anand Joseph

DRT1 Aug 2024SA/420/2024

Case brief

AI extract

What is this about?

Debts Recovery Tribunal dismissed a Section 17 application by a third party claiming loss of title due to alleged fraud in a borrower's sale of property. The court held the petition not maintainable as civil disputes regarding title and possession involving non-borrowers fall within Civil Court jurisdiction, not the Tribunal's.

What did the court decide?

Application dismissed as not maintainable.

Rebello Sagaya Nathan versus Ugro Capital Ltd. and Zion… — Banking and Recovery | DRT (2024)

SA No.420/2024

01.08.2024

IN THE DEBTS RECOVERY TRIBUNAL-III, CHENNAI

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Dated this the 01^st day of August, 2024

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Present: SHRI A. S. JAYACHANDRA Presiding Officer (In – charge)

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SARFAESI APPLICATION No.420 of 2024

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B. Rebello Sagaya Nahan S/o. Late Mr. M. Bernard Flat No. F-1, No.14/32, Somasundaram, 4^th Street, Ayanavaram, Chennai – 600 023.

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….Applicant

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-Vs-

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M/s. UGRO Capital Ltd., Represented by its Authorized Officer No. 8/17, Shafee Mohammed Road, Sunny Side, First Floor, West Block, Thousand Lights,

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Nungambakkam, Chennai – 600 006.

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Zion Consultants, Office No. 39,40, Kilpauk Garden Road, Kilpauk, Chennai- 600 010 .

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Ruby Joseph

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Joseph Rebecca Elizabeth Susanna

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Charles Anand Joseph

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The 3^rd & 5^th Respondent are having address at: G-109, Flat No.3, Abinayam Apartment, 2^nd Floor, Anna Nagar East, Chennai – 600 102 The 3^rd & 5^th Respondents are also at: F1, First Floor, Block No. 26, Somasundara 4^th Street, Ayanavaram Perambur, Chennai – 600 023. ….Respondents

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Counsels on record / appeared: Counsel for Applicant : M/s. L. Thiyagaiya

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Orders on maintainability

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A third party to the loan transaction challenges the measures initiated by the first defendant financial institution under Section 14 of the SARFAESI Act, which obtained an order of proper assistance dated 29.05.2024 in Crl.M.P. No.10058/2024 on the files of the Ld. CMM, Egmore, Chennai, which order is against defendants 2 to 5 in the proceedings before the Ld. CMM.

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In the present petition filed under Section 17(1) of the SARFAESI Act, the applicant contends that he is aggrieved by the said order and therefore files the instant petition.

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While scrutinizing the petition, the Registry noted the following:

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The applicant has paid 3^rd party fees only whereas claiming the right over the property, for that counsel has made an endorsement that the applicant is not a borrower, he is the owner of the property and the applicant still is in possession of the schedule mentioned property and the 2^nd to 5^th respondents are only borrowers

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Counsel has requested to place the matter before the Hon'ble Presiding Officer for maintainability, explanation may kindly be seen.

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However, the matter was directed to be numbered keeping open the question of maintainability. Heard Sh. Thiyagaiya, the Ld. Counsel for the applicant.

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The background :-

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From the facts pleaded, it is seen that the present applicant was the earlier title holder of the property in question. He also admits that the said property was sold in favour of third defendant on 05.07.2022, duly registered before SRO, Annanagar. The applicant further pleads that the purchaser did not pay the entire sale consideration but upon the misrepresentation, the sale was conveyed under the registered deed. The representations made by the purchaser i.e., the third defendant herein to this applicant at the time of

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01.08.2024

registration and thereafter were also set out. It is also pleaded that one MOU dated 30.08.2022 came to be executed between this applicant and third defendant to settle the outstanding amount by 06.10.2022, failing which the applicant would seek cancellation of the registered sale deed.

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It is also pleaded that this applicant came to know that the third defendant is a white collared offender after reading newspapers. This applicant brought to the knowledge of various authorities about the misdeeds of third defendant in not paying the full consideration of the sale amount.

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The applicant further submits that the officials of first defendant visited the premises in the month of October, 2023 with a demand notice and thereafter this applicant came to know that the third defendant had mortgaged the suit property in favour of the first defendant FI by deposit of title deeds under an instrument dated 19.12.2022 (after procuring the tainted sale deed from the applicant) and raised business loan of Rs.30.60 lakhs. The first defendant was knowing that the entire sale consideration was not paid by the third defendant. Thereafter, police complaints were lodged by the applicant and the matter was resolved. It is seen that the said letter by the third defendant dated 22.04.2024 is addressed to the Sub-inspector of the K-2 Ayanavaram Police Station, wherein the third defendant leased the house to one Adhimuthu and he had discharged the obligation and the said Adhimuthu vacated the house and handed over the keys to third defendant and there is no dispute between Adhimuthu and the third defendant (as per the English translation at page No.149 of the SA).

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However, this applicant submits that he sent a legal notice to the defendants 2 and 3 not to disturb his peaceful possession and enjoyment of the property, since the sale deed is incomplete. The balance sale consideration was not paid to him. Therefore, he pleads that the deposit of title deeds with defendant no.1 by the third defendant is null and void.

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It is also his case that he filed the Original Suit bearing No.OS 2675/2024 seeking a declaration before the competent Civil Court to declare the deposit of title deeds as null and void and the same is pending.

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In the above backdrop, the applicant approaches this Tribunal to set aside the measures initiated by the first defendant, which is noted above already.

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This Tribunal which is to render the finding on the maintainability of the petition had dispensed the notices to the defendants and the matter is heard from the applicant’s side.

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The Ld. Counsel for the applicant submits that the petition is maintainable since the applicant is the ‘aggrieved person’ under the measures initiated by the Defendant No.1. He submits that 17(1) enables any person aggrieved by the measures to approach the Tribunal. The applicant further submits that he is in possession and the matter is pending before the competent Civil Court and if the measures are allowed, the right, title and interest of the applicant will be in jeopardy.

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The Ld. Counsel relies on the following rulings:

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(i) Bank of Baroda Vs- Gopal Sriram Panda and connected matters reported in 2021 SCC Online 466 of the DB of the Bombay High Court;

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(ii) K.R. Vijayakumar – Vs.- D. Ponnuvel & Another reported in 2024 SCC Online Mad 877

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(iii) Punjab and Sind Bank –Vs.- Frontline Corporation Ltd. reported in 2023 SCC Online 470

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Having utmost regard to the point of law rendered by the Hon'ble High Courts and the ruling of the Hon’ble Supreme Court, the position of law is that : (A) Jurisdiction of the Debts Recovery Tribunal, to decide all matters relating to Sections 13 and 17 of the SARFAESI Act, is exclusive.

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(B) In all cases, where the title to the property, in respect of which a 'security interest', has been created in favour of the Bank or Financial Institution, stands in the name of the borrower and/or guarantor, and the borrower has availed the financial assistance, it would be only the DRT which would have exclusive jurisdiction to try such matters, to the total exclusion of the Civil Court. Any pleas as raised by the borrowers or

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guarantors, vis-a-vis the security interest, will have to be determined by the DRT.

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(C) The jurisdiction of the Civil Court to decide all the matters of civil nature, excluding those to be tried by the Debts Recovery Tribunal under Sections 13 and 17 of the SARFAESI Act, in relation to enforcement of security interest of a secured creditor, is not barred by Section 34 of the SARFAESI Act.

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(D) Where civil rights of persons other than the borrower(s) or guarantor (s) are involved, the Civil Court would have jurisdiction, that too, when it is prima facie apparent from the face of record that the relief claimed, is incapable of being decided by the DRT, under Section 17 of the DRT Act, 1993 read with Sections 13 and 17 of the CRA 29 of 2011.odt SARFAESI Act.

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(E) Even in cases where the enforcement of a security interest involves issues as indicated in Mardia Chemicals (supra) of fraud as established within the parameters laid down in A. Ayyasamy (supra); a claim of discharge by a guarantor under Sections 133 and 135 of the Contract Act [Mardia Chemicals (supra)]; a claim of discharge by a guarantor under Sections 139, 142 and 143 of the Contract Act; Marshaling under Section 56 of the Transfer of property Act [J.P. Builders (supra)]; the Civil Court shall have jurisdiction.

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(F) Examples as indicated in para 22.3, are illustrative of the Civil Court's jurisdiction.

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(G) The principles laid down in para 33 (i) to (ix) of Sagar Pramod Deshmukh (supra) are in accordance with what we have discussed and held above. (As held and answered by the DB of the Bombay High Court). In view of the above ruling, the point No.(c) answered by the Hon'ble DB of Bombay High Court is clear and distinct that the matters which are of civil nature as mentioned in para (c) above does not invite the jurisdiction of this Tribunal. The applicant has already approached the

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competent civil court and this Tribunal cannot interfere or assume the jurisdiction of the Civil Court.

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In the ruling of KR Vijayakumar (Supra), the Hon'ble Madras High Court had held in para 14 as under:

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“In the light of the discussion made earlier, the first respondent is very well entitled to insist for decree for specific performance based on the sale agreement, which was contracted ignoring provisions of Section 13 of sub-Section (13) of the said Act. Any decree passed in the suit will not affect the right of the second respondent bank to proceed against the secured asset. The right acquired by the decree holder is subject to the right of the mortgagee / secured creditor. The other contentions made by the learned counsel for the petitioner that the suit sale agreement was entered into as a security for loan transaction is a matter to be decided based on evidence and hence, parties shall be relegated to trial.”

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Thus the above ruling is distinguishable on facts and the ruling is not helpful to the applicant to maintain the petition before thisTribunal.

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The ruling of Punjab and Sind Bank (Supra) shows that the Hon'ble Supreme Court had held that the jurisdiction of the Civil Court is barred in respect of the matters, which DRT or the Appellate Tribunal alone is empowered to determine. It has also made it clear that the bar of jurisdiction is in respect of a proceeding, which matter may be taken to the Tribunal. At the same time, it also noted that the limited jurisdiction of the Civil Court can be invoked where the secured creditor is alleged to be fraudulent or the claim may be observed untenable. The relevant paragraphs are-

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23. It could thus be seen that this Court has held that the jurisdiction of the Civil Court is barred in respect of matters which a DRT or an Appellate Tribunal is empowered to determine in respect of any action taken “or to be taken in pursuance of any power conferred under this Act”. The Court has held that the prohibition covers even matters which may be taken cognizance of by the DRT though no measure in that direction has so far been taken under subsection (4) of Section 13 of the SARFAESI Act. It has

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been held that the bar of jurisdiction is in respect of which an action may be taken even later on, the Civil Court shall have no jurisdiction to entertain any proceeding thereof. The Court held that the bar of civil court thus applies to all such matters which may be taken cognizance of by the DRT, apart from those matters in which measures have already been taken under sub-section (4) of Section 13 of the SARFAESI Act.

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24. This Court has further held that, to a very limited extent jurisdiction of the Civil Court can also be invoked, where for example, the action of the secured creditor is alleged to be fraudulent or his claim may be so absurd and untenable which may not require any probe whatsoever or to say precisely to the extent the scope is permissible to bring an action in the Civil Court in the cases of English mortgages”.

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In the present case, there is a pleading that the transaction of the creation of security interest by the Defendant No.3 in favour of Defendant No.1 is fraudulent and null and void as pleaded. When the element of fraud is pleaded by a totally third party, who is not connected with the transaction arising under the SARFAESI Act has to necessarily move the competent Civil Court as per the very rulings urged by the Ld. Counsel for the applicant in Bank of Baroda (Supra) and Punjab and Sind Bank (Supra).

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For the aforesaid reasons, the SA filed by the person who lost the title to the property by the third defendant (borrower) cannot be maintained. Hence the following

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ORDER

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SA No.420/2024 stands dismissed as not maintainable.

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Sd/(A.S. JAYACHANDRA) PRESIDING OFFICER (In-charge)

Rebello Sagaya Nathan v. Ugro Capital Ltd. and Zion Consultants and Ruby Joseph and Joseph Rebecca Elizabeth Susanna and Charles Anand Joseph

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Rebello Sagaya Nathan v. Ugro Capital Ltd. and Zion Consultants and Ruby Joseph and Joseph Rebecca Elizabeth Susanna and Charles Anand Joseph

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