Dismissed

Riad Shah N.S. v. State Bank of India SBI

Kerala HC6 Feb 2024OP (DRT)/7/2024

Case brief

AI extract

What is this about?

Home loan borrowers challenged a DRT final order, contending that as no title deeds were deposited and no security interest was created, the Tribunal had no jurisdiction under Section 19 of the RDB Act. The High Court held the RDB Act nowhere requires creation of security interest for DRT adjudication and dismissed the OP(DRT).

What the court decided

AI extract

Riad Shah N.S. Vs State Bank of India SBI — Banking and Recovery | Kerala HC (2024)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR.JUSTICE N.NAGARESH

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TUESDAY, THE 6^TH DAY OF FEBRUARY 2024 / 17TH MAGHA, 1945

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OP (DRT) NO. 7 OF 2024

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OA.617/2014 OF DEBT RECOVERY TRIBUNAL-2, ERNAKULAM PETITIONERS/DEFENDANTS 1 & 2:

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1 RIAD SHAH N.S. AGED 54 YEARS S/O LATE M.NADIR SHAH, T.C.9/238, 'SUSHAMA' O-C4 STREET, JAWAHAR NAGAR, THIRUVANANTHAPURAM, PIN - 695041

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2 RAJEENA RIAD AGED 48 YEARS W/O RIAD SHAH, T.C.9/238, 'SUSHAMA' O-C4 STREET, JAWAHAR NAGAR, THIRUVANANTHAPURAM, PIN – 695041

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BY ADV S.ABDUL RAZZAK

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RESPONDENTS/APPLICANT IN OA & 3RD DEFENDANT:

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1 STATE BANK OF INDIA SBI REP. BY AUTHORISED OFFICER, STRESSED ASSETS RESOLUTION CENTRE, CHANDRASEKHARAN NAIR STADIUM COMPLEX, PALAYAM VIKAS BHAVAN P.O. THIRUVANANTHAPURAM., PIN - 695033 2 M/S. MIR REALTORS(P) LTD., REPRESENTED BY MANAGING DIRECTOR M,M.BUILDING, KALABHAVAN ROAD, ERNAKULAM NORTH, PIN – 682017

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BY ADV TOM K.THOMAS

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THIS OP (DEBT RECOVERY TRIBUNAL) HAVING COME UP FOR ADMISSION ON 06.02.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

O.P.(DRT) No.7/2024

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N. NAGARESH, J.

O.P.(DRT) No.7 of 2024

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Dated this the 6^th day of February, 2024

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J U D G M E N T

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~ ~ ~ ~ ~ ~ ~ ~ ~

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The petitioners, who are first and second

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defendants in TA No.812/2016 (OA No.617/2014), have filed this OP(DRT) seeking to set aside Ext.P8 order and to declare that the 1^st respondent not being a secured creditor in the absence of security interest created by deposit of title deed under Section 58 of the Transfer of Property Act cannot either avail the jurisdiction or proceed against the petitioners under Section 19 of the RDB Act.

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The petitioners availed Home Loan from the 1^st respondent-Bank. The 2^nd respondent is a builder, who has entered into agreement with the petitioners. The petitioners would argue that the 2^nd respondent-Builder did not transfer

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O.P.(DRT) No.7/2024

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the title of the land to the petitioner which is essential to create security interest for the purpose of RDB Act by deposit of title deed. The petitioners would allege that the Bank has colluded with the Builder and the Bank paid the entire loan sanctioned to the Builder before creating the agreed security interest by deposit of title deed.

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The petitioners would contend that the Tribunal has no jurisdiction as no security interest is created in the loan transaction. The petitioners argued that Section 19(3-A) (a) provides that every applicant in the application filed under Section 19 of the Act, shall state particulars of the debt secured by the security interest over properties or assets belonging to any of the defendants and the estimated value of such securities.

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As there is no security interest involved in the matter, the Tribunal lacked jurisdiction to entertain the case. Furthermore, the Tribunal failed to consider the petitioner's contention that as per the agreement, the Bank will make disbursement to the Builder only after the borrower cum

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O.P.(DRT) No.7/2024

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purchaser has complied with all formalities as per the terms and conditions of the loan. The agreement contemplated creation of mortgage in favour of the Bank by deposit of title deeds in respect of the land and building. No title deeds were deposited and consequently, there is no security interest. The entire proceedings before the Debts Recovery Tribunal is therefore illegal and unsustainable.

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The 1^st respondent-Bank contested the OP(DRT) filing counter affidavit. The 1^st respondent submitted that the OP(DRT) can be entertained only when the court below has assumed a jurisdiction which it does not have or has failed to exercise jurisdiction which it does have. Ext.P8 final order passed by the Tribunal does not suffer from any of these infirmities.

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The 1^st respondent pointed out that it was the duty of the petitioners to pay the amounts due to the builder and get the sale deed executed. Only on execution and registration of sale deed, equitable mortgage can be created by deposit of title deed in the Bank.

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O.P.(DRT) No.7/2024

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The petitioners failed to make payment to the builder

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and consequently no sale deed was executed. The petitioners were bound to pay ₹37,59,053/- to the builder. The petitioners paid only ₹30 lakhs to the builder and refused to pay the balance amount. Therefore, the builder cancelled the allotment. There is no collusion between the Bank and the builder. The OP(DRT) is therefore without any force or merit and is liable to be dismissed, contended the Standing Counsel for the 1^st respondent.

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I have heard the learned counsel for the petitioner and the learned Standing Counsel representing the 1^st respondent.

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The challenge in the OP(DRT) is on Ext.P8 final order dated 29.11.2023 passed by the Tribunal in TA No.812/2016 (OA No.617/2014). The Bank filed the application under Section 19(1) of the Recovery of Debts and Bankruptcy Act, 1993 for recovery of a sum of ₹21,78,546/- together with future interest at the rate of 11.25% per annum with monthly rests plus penal interest at the rate of 2% per annum from the petitioners.

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O.P.(DRT) No.7/2024

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The Tribunal found that the 2^nd respondent-Builder executed guarantee agreement in favour of the Bank. The petitioners had also executed loan agreement agreeing to repay the loan in 240 EMIs. Admittedly, there is default in repayment of the loan.

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The Tribunal found that by Ext.A6 tripartite agreement, the 1^st petitioner had given consent to the Bank to disburse the loan amount directly to the 2^nd respondentBuilder. It was also agreed that the 1^st petitioner shall be under obligation to make payment of all the dues to the builder before taking possession of the property. Neither the 1^st petitioner nor the builder complied with the covenants in Ext.A6 Tripartite agreement. The Bank has produced all the loan documents to substantiate all their claims. Consequently, the Tribunal allowed the Bank to recover the sum of ₹21,78,546/- due under the Housing Loan account from the defendants personally and by sale of the properties attached. The Tribunal also passed orders on pendente lite and other interest payable.

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O.P.(DRT) No.7/2024

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The argument of the petitioners is that there is no security interest created by deposit of title deeds and therefore the Tribunal lacks jurisdiction to entertain the TA. It is to be noted that the agreement between the petitioners and respondents 1 and 2 contemplated payment of certain amount of purchase price by the petitioners. The petitioners defaulted in making full payment to the builder. Consequently, sale deed could not be executed.

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The petitioners were under an obligation to make payment of all the dues to the 2^nd respondent-Builder before taking possession of the property. The petitioners are now trying to take advantage of their own failure to make payments. In the circumstances, I am not inclined to agree to the legal proposition advanced by the petitioners that in the absence of creation of mortgage by deposit of title deeds, the Tribunal lacks jurisdiction to entertain the lis.

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The Recovery of Debts and Bankruptcy Act, 1993 is intended to provide for the establishment of Tribunals for expeditious adjudication and recovery debts due to the

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O.P.(DRT) No.7/2024

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Banks and financial institutions. The provisions of the Act do not indicate anywhere that in the absence of creation of

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security interest, the Tribunals cannot adjudicate disputes between Banks / financial institutions and borrowers.

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In the facts of the case, I do not find any merit in the OP(DRT). The OP(DRT) is therefore dismissed.

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Sd/-

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N. NAGARESH, JUDGE

aks/02.02.2024

O.P.(DRT) No.7/2024

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APPENDIX OF OP (DRT) 7/2024

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PETITIONER'S EXHIBITS

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Exhibit P1	PHOTOCOPY OF HOME LOAN DATED 09-3-2011	SANCTION	LETTER
Exhibit P2	PHOTOCOPY OF TRIPARTY 09-3-2011	AGREEMENT	DATED
Exhibit P3	PHOTOCOPY OF THE TERM DATED 09-3-2011	LOAN AGR	EEMENT
Exhibit P4	PHOTOCOPY OF 1ST OA NO. 12-12-2014	617/2014	DATED
Exhibit P5	PHOTOCOPY OF PETITI	ONERS' W	RITTEN
	STATEMENT DATED 30-9 617/2014	2015 IN	OA NO.
Exhibit P6	PHOTOCOPY OF PETIT AFFIDAVIT DATED 24TH MA	IONERS' Y 2017	PROOF
Exhibit P7	PHOTOCOPY OF THE PETITI NOTE FILED ON-LINE, DAT	ONERS' AR ED 03-4-2	GUMENT 023
Exhibit P8	PHOTOCOPY OF FINAL ORD	ER DATED	29-11-
	2023 IN TA.NO.8	12/2016	(OA
	NO.617/2014) BY DRT II	ERNAKULAM

Riad Shah N.S. v. State Bank of India SBI

Case brief

What is this about?

What the court decided

Riad Shah N.S. v. State Bank of India SBI

Case brief

What is this about?

What the court decided

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