TMI Blog2020 (4) TMI 730X X X X Extracts X X X X X X X X Extracts X X X X ..... outstanding dues and also admitting on affidavit the factum of existence of subject mortgage in favour of the Bank, the question of showing any indulgence to the guarantor (by the High Court) did not arise. The guarantor cannot be allowed to raise the same plea repeatedly on every occasion/in every proceeding. Notably, the auction sale stands concluded and followed by issuance of sale certificate in favour of the appellant. Resultantly, the Bank is under legal obligation to handover the title deeds or original documents being Exhibits A110 to A114 to the appellant for completion of the formalities of sale - the High Court should have been loath in entertaining the writ petition filed by the guarantor, raising the same plea ad nauseam. The reason weighed with the High Court, in our opinion, is flimsy and untenable. That cannot be countenanced at the instance of the guarantor. The inevitable effect of entertaining the stated plea of guarantor will entail encouraging vexatious plea and procrastination of the concluded auction sale by delaying handing over of title documents to the highest bidder, in whose favour sale certificate has already been issued. Whether despite the decree o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C) No. 30392/2019) - - - Dated:- 24-4-2020 - A.M. Khanwilkar And Ajay Rastogi JJ. For the Petitioner(s) : Mr. A. Radhakrishnan, AOR For the Respondent(s) : Mr. Sanjay Kapur, AOR, Ms. Aswathi M.k., AOR, Mr. S. Gowthaman, AOR JUDGMENT A.M. Khanwilkar, J. 1. Leave granted. 2. This appeal takes exception to the judgment and order dated 6.9.2019 passed by the High Court of Judicature at Madras (for short, the High Court ) in Writ Petition No. 11522/2019, whereby the High Court reversed the order dated 29.3.2019 passed by the Debts Recovery Appellate Tribunal (for short, the DRAT ) at Chennai in M.A. No. 90/2018 allowing the application filed by the respondent No. 1 State Bank of India (for short, the Bank ) before the Debts Recovery Tribunal (for short, the DRT ) at Madurai being I.A. No. 995/2017 in O.A. No. 11/2008, directing return of original documents Exhibits A110 to A114 deposited by the Bank before the DRT in O.A. No. 11/2008. In other words, the High Court affirmed the order of the DRT rejecting subject application. 3. Shorn of unnecessary factual matrix, suffice it to observe that the respondent No. 3 M/s. Rukmini Mills Ltd. (for sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejected the application for the following reasons: 4 . it was decided that the property absolutely belonged to them and that therefore, any mortgage created in respect of their property is illegal and void and that the petitioner bank has itself stated in para 5 6 of the counter proof affidavit that D 10 D 11 have been added as parties to the OA, since they claim over a part of the B schedule property mortgaged by D 4 company and that in order to avoid multiplicity of proceedings, D 8 to D 11 have been added as parties to the Original Application for better adjudication of respective claim over the mortgaged properties. The Ld. Counsel for R 10 further contended that the marked documents cannot be returned unless final order is passed in the main OA and that if the documents are handed over to the auction purchaser, before passing of final order, it will create more problems and multiplicity of proceedings and that therefore, the petition is liable to be dismissed. 5. Even though, R 2 R 3 who are said to represent the R 1 mill used to appear before in person before this Tribunal for all hearings, neither filed any counter statement nor did advance any argument. Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner bank is entitled for recovery of sum of ₹ 25,49,19,820.41ps/ and with future interest thereon. Further the documents, which are sought for by the petitioner bank, have already been marked as Exh.A 110 to A 114. Therefore, passing an order in this petition for return of the above mentioned documents to the petitioner bank would cause prejudice, at this stage, to decide the vital issue as to whether valid mortgage has been created over some of the OA B schedule properties by R 4 company. In view of the foregoing reasons, this petition stand dismissed. The Bank carried the matter in appeal before the DRAT at Chennai by way of M.A. No. 90/2018. The DRAT, however, reversed the decision of the DRT and observed thus: 7. On careful perusal of pleadings of parties and submission of counsel of parties and record, it becomes clear that R4 has preferred an appeal against order passed in SA 225/2008. But it was dismissed for want of compliance OD pre deposit. On 09.06.2015, in OA 11/2008 by way of IA 357, 3544448, 359, Mr. Balasubramanian and Mr. Thiagarajan brought some facts on record regarding objections pertains to signature of memorandum of deposit of titles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue on merits after hearing of parties according to law without being influenced by this order at all. Simply in view of the fact that bank had a recovery of a sum of ₹ 60 crores and defaulters are not willing and has no capacity of sum of ₹ 60 crores and defaulters are not willing and has no capacity of such payment, impugned order is set aside. DRT will return the documents to the bank for further proceedings and presiding Officer will adjudicate the OA after hearing both parties according to law. 11. Impugned order is set aside. Accordingly, the DRAT allowed the application preferred by the Bank and directed return of the original documents Exhibits A110 to A114 to the Bank. 5. Feeling aggrieved, the guarantor filed a writ petition before the High Court, being Writ Petition No. 11522/2019. The High Court, after considering the factual matrix, was pleased to restore the order passed by the DRT, rejecting the application preferred by the Bank. For doing so, the High Court observed as follows: 10. On a careful consideration of the materials available on record, the judgment relied upon by the learned counsel appearing for the 1st respondent and the subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the conclusion of the trial in the Original Application pending before the Debts Recovery Tribunal. The original documents were marked as Exs.A110 to A114 in O.A.No.11 of 2008. The Debts Recovery Tribunal, while disposing of the application, observed that the Original Application has reached the stage of inquiry and therefore, the Tribunal was of the view that the issue as to whether there was valid creation of equitable mortgage over the Schedule B property mentioned in the O.A. No.11 of 2008 has to be decided only in the Original Application, along with the issue as to whether the 1st respondent Bank is entitled for recovery of the amount with future interest. 14. That apart, when the documents were marked as Exs.A110 to A114 before the Debts Recovery Tribunal the documents cannot be allowed to be returned even before the disposal of the Original Application. The Debt Recovery Appellate Tribunal without considering the case of the parties had set aside the order of the Debts Recovery Tribunal finding that the sale made in favour of the auction purchaser has become final. When the core issue is with regard to creation of mortgage, the same can be decided only in the Origi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the public auction, was also rejected. Similarly, the guarantor had unsuccessfully challenged the auction concluded in favour of the appellant. In all these proceedings, the very contention about the mortgage in question being invalid and created by incompetent persons was raised and negatived. According to the appellant, the guarantor on affidavit had admitted the factum of mortgage in question created in favour of the Bank, and one of its Directors had also offered to pay the outstanding dues of ₹ 350.12 lakhs, if some more time for payment was granted. Considering all these aspects, contends the appellant, the High Court should not have shown any indulgence to the guarantor and the writ petition filed by it ought to have been rejected. Further, the High Court misdirected itself by taking into account matters disregarding the consistent opinion recorded against the guarantor by the DRT and the DRAT and in certain proceedings, by the High Court and even this Court. 7. The guarantor, on the other hand, would urge that it had not taken any loan from the Bank. The borrower had been borrowing money from the bank against the security by deposit of title deeds and equi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocedural irregularities committed by the Bank and not decide the disputed question about the existence or validity of the mortgage itself, unlike in proceedings under the Recovery of Debts and Bankruptcy Act, 1993 (for short, the 1993 Act ). Reliance is placed on E. Subbulakshmi vs. State of Tamil Nadu through Secretary to Government Ors. (2017) 1 SCC 757 and M.D. Frozen Foods Exports Private Limited (supra). It is then urged that there is no warranty of title in a Court auction, much less in a public auction, wherein the doctrine of caveat emptor applies. Reliance is placed on The Ahmedabad Municipal Corporation of the City of Ahmedabad vs. Haji Abdulgafur Haji Hussenbhai (1971) 1 SCC 757 (paragraph 3) to buttress the argument that it is imperative for the purchaser to ascertain and satisfy himself about the title of the property. It is then urged that the order passed by the DRT which was subject matter of challenge before the High Court was only an interlocutory order, for which reason this Court should be loath to interfere, especially when the High Court has only remanded the matter with direction to expeditiously dispose of the main proceedings pending before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the appellant, Mr. Tushar Mehta, learned Solicitor General for the respondent No. 1 (the Bank), Mr. V. Giri, learned senior counsel for the respondent No. 2 (the guarantor) and Mr. Gopal Sankaranarayanan, learned senior counsel for the respondent No. 11. 10. Considering the fact that the guarantor had filed writ petition before the High Court assailing the order passed by the DRAT, dated 29.3.2019, allowing the application filed by the Bank for return of original documents, we must first address the argument of the appellant (auction purchaser) that the guarantor cannot be allowed to approbate and reprobate and moreso, in view of the unambiguous affidavit admitting the mortgage and offer given by its Director to pay the outstanding dues of the Bank in the earlier proceedings including the findings recorded by the DRT/DRAT against it in relation to the plea of validity of the mortgage in question. 11. For that, we may first refer to the decision of the DRT, in earliest point of time, on the petition moved by the guarantor being S.A. No. 225/2008 challenging the possession notice dated 15.10.2008 issued by the Bank under Section 13(4) of the 2002 Act. In these proceedings, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot satisfied so far. Therefore, taking into consideration of the documents submitted by the Respondent Bank, I am of the considered view that the aforesaid financial asset has been created in favour of the Respondent Bank. The Respondent Bank in the course of proving their claim on the mortgage has produced additional documents, Form 8 dated 26.04.1984 and other documents dated 07.03.1985, 04.03.1985, 29.04.1988 and 27.09.1988 along with random of Balance Sheets, with Director s Report and Auditors. Report periodically filed before ROC from the year 1985 to 1996. But it is pertinent to note that Mr. Balasubramanian and Mr. Kumarappan, who have signed these documents as Directors, no proof is submitted that they are the Directors as per the records of ROC. However, the Ld. Counsel for the Respondent Bank would argue that the Balance sheets have been periodically filed by the company with ROC have been signed by Mr. Balasubramanian and Mr. Kumarappan and the same have been accepted by the ROC and kept in the records. (Relevant documents produced by the Respondent Bank. Therefore, it is claimed by the Ld. Counsel for the Respondent Bank that the periodical balance sheets filed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he guarantor (the applicant therein) had not disputed the correctness of the aforementioned finding of fact recorded by the DRT. Mr. M. Shanmugham (respondent No. 7 s deceased father), Mr. S. Balasubramaniam (respondent No. 4), Mr. S. Kumarappan (respondent No. 5) and Mr. S. Thiagarajan (respondent No. 8) were the Directors of the guarantor company. One of them Mr. S. Thiagarajan (respondent No. 8) had even filed affidavit before the DRT on 27.1.2011 stating that the guarantor company was willing to pay the sum of ₹ 350.12 lakhs within the time frame fixed by the DRT to be minimum six months. These facts clearly belie the claim of the guarantor. The guarantor cannot be permitted to resile from the admission of its liability. Similarly, the guarantor had filed a detailed counter affidavit in Writ Petition No. 710/1997, admitting the mortgage of the property with the Bank, but had alleged fraud and fabrication of documents by the respondent No. 11 (A.R. Sridharan). That, however, cannot come to the aid of the guarantor who had otherwise admitted its liability and the mortgage in question, in particular. 12. As aforesaid, the finding/opinion recorded by the DRT vide order d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndeed been created by the petitioner/applicant vide its order dated 10.2.2011 passed in SA No. 225/2008, which was carried in appeal but was not prosecuted owing to non payment of the ordered pre deposit and wherein also the Hon ble DRAT vide its order dated 28.1.2013 had upheld the findings of the Hon ble DRT, Madurai and insisted for a pre deposit of 50% of the amount demanded, which was not complied upon and hence the appeal failed. 10. This concludes that the mortgage in favour of the respondent bank is held to be valid and this Tribunal while examining the present application has only felt that the petitioner is running litigation and thwarting the lawful demands of the bank by taking advantage of its own latches, which were also dealt in detail by the Hon ble DRT, Madurai. The contention of the petitioner that no valid security interest is created and that the Memorandum of Association and the Articles of Association of the Private Limited Company are not empowering the mortgagors is also discussed by the Ld. Presiding Officer, DRT, Madurai taking into the consideration the concept of Doctrine of Indoor Management. However the Ld. Counsel did not inform this Tribunal or su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also admitting on affidavit the factum of existence of subject mortgage in favour of the Bank, the question of showing any indulgence to the guarantor (by the High Court) did not arise. The guarantor cannot be allowed to raise the same plea repeatedly on every occasion/in every proceeding. Notably, the auction sale stands concluded and followed by issuance of sale certificate in favour of the appellant. Resultantly, the Bank is under legal obligation to handover the title deeds or original documents being Exhibits A110 to A114 to the appellant for completion of the formalities of sale. 15. Thus understood, the High Court should have been loath in entertaining the writ petition filed by the guarantor, raising the same plea ad nauseam. The reason weighed with the High Court, in our opinion, is flimsy and untenable. That cannot be countenanced at the instance of the guarantor. The inevitable effect of entertaining the stated plea of guarantor will entail encouraging vexatious plea and procrastination of the concluded auction sale by delaying handing over of title documents to the highest bidder, in whose favour sale certificate has already been issued. It is a different matter tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k to fulfil its obligation of handing over the original documents to the auction purchaser. Admittedly, the appellant is party to the O.A., as well as, in the application filed by the Bank for return of documents. The Bank has supported the stand taken by the appellant. We find no infirmity in the appellant having approached this Court instead of the Bank, the applicant before the DRT. Even the appellant could have itself approached the DRT for this very relief. Taking any view of the matter, the objection under consideration is of no avail to the contesting respondents. 18. It was faintly urged by the contesting respondents that the Bank had filed the application in question for return of original documents, on 11.11.2016, even before the auction sale in which the appellant turned out to be the highest bidder was conducted on 28.2.2017, or the sale certificate issued on 29.4.2017. This argument, in our opinion, is an argument of desperation. The same overlooks the factual matrix and the background in which the subject application was moved by the Bank on 11.11.2016. By that time, the Bank had already commenced the auction sale process. It is a different matter that the aucti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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