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TMI Blog2020 (4) TMI 730X X X X Extracts X X X X X X X X Extracts X X X X ..... her 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 short, "the borrower") had availed of financial credit from the Bank, for which the respondent No. 2 - Associated Trading Corporation Pvt. Ltd. (for short, "the guarantor") had offered its immovable property by way of mortgage to the Bank. The borrower committed default, as a result of which the Bank declared it as a NonPerforming Asset (for short, "NPA") and then proceeded to file O.A. No. 11/2008 before the DRT at Madurai. The Bank also issued notice for taking symbolic possession of the secured assets, on 13.5.2008 and after considering the reply of the guarantor, took symbolic possession of the secured assets on 15.10.2008. The guarantor filed a petition being SA No. 225/2008 before the DRT at Madurai, challenging the possession notice dated 15.10.2008 issued by the Bank under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, "the 2002 Act"), which came to be rejected by the DRT on 10.2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, the petition is liable to be dismissed. 5. Even though, R2 & R3 who are said to represent the R1 mill used to appear before in person before this Tribunal for all hearings, neither filed any counter statement nor did advance any argument. Similarly, the R5, who is represented by his counsel neither filed any counter statement nor did advance argument. 6. The petitioner bank has filed the original application OA No. 11/2008 against the Respondents 1 to 11 herein, who are the Defendants1 to 11, for recovery of sum of Rs. 25,49,19,820.41ps/ with future interest thereon. The contention of the petitioner bank with regard to creation of equitable mortgage over the OA 'B' Schedule mentioned properties by R4 company, in favour of the petitioner bank for the above said loan facilities availed by R1 company has been stoutly denied by R4 company, in its written statement, filed in the OA. There is no dispute with regard to sale of some of the OA 'B' Schedule mentioned properties in the eauction held on 28.02.17 under the SARFAESI proceedings initiated by the petitioner bank herein, to M/s. Tripower Enterprise Pvt. Ltd., Chennai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at R4 has preferred an appeal against order passed in SA 225/2008. But it was dismissed for want of compliance OD predeposit. 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 deeds by unauthorised persons. The record reveals that borrowers/guarantors availed loan from appellant bank decaded ago (i.e.) in the years 1990, relationship between bank and guarantor had taken and for loan of R1 company R4 company stood as guarantor and behind both companies the same person was the instrument. It can safely be presumed and inferred that loan was availed by common predecessor of respondents/defendants who floated various Companies according to need and convenience in such a background if OA filed in the year 2008 was kept pending even after 10 years, then bank had a right for recovery of money. In this background, bank had proceeded for sale of property in the year 2017 and bonfire auction purchaser has spent more than Rs. 60 crores on it. In such a situation, the memo of part satisfaction of IA should have been taken on record i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 submissions made by the learned counsel on either side, it could be seen that O.A. No. 11 of 2008 was filed by the 1st respondentBank for recovery of a sum of Rs. 25,49,19,820.41 together with future interest. Schedule 'B' in the Schedule of properties mentioned in O.A. No. 11 of 2008 was sold in eauction on 28.02.2017 for a sale consideration of Rs. 60,25,00,000/ under the SARFAESI proceedings to the auction purchaser, viz., M/s. Tripower Enterprises Private Limited and the sale certificate was also issued in their favour. However, the auction purchaser, is not a party either in the Original Application or in this Writ Petition. The 1st respondent also filed a memo for recording part satisfaction. 11. It is also not in dispute that the sale made in favour of M/s. Tripower Enterprises Private Limited by the 1st respondentBank has not been challenged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication. 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 Original Application, the order passed by the Debt Recovery Appellate Tribunal without considering the same cannot stand. If the Debts Recovery Tribunal, after trial, ultimately comes to the conclusion that there was no valid mortgage in respect of the Schedule 'B' property mentioned in O.A. No.11 of 2008, in that case, it would further complicate the dispute. The Appellate Tribunal, instead of setting aside the order passed by the Debts Recovery Tribunal, should have directed the Debts Recovery Tribunal to dispose of the appeal, within a time frame and further directed the Debts Recovery Tribunal to consider the application in I.A. No.995 of 2017 along with the Original Application. 15. In these circumstances, we are of the considered view that in the interest of justice, the Debts Recovery Tribunal should retain the documents marked as Exs.A110 to A114 till th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 equitable mortgage created on 12.4.1984. However, the Bank extended further loans to the borrower in 1990 and 1992, to which the guarantor was not a party. As a matter of fact, the equitable mortgage was not created by the authorised person of the guarantor nor it was party to the extensions of mortgage. In the proceedings before the DRT, it has been observed in order dated 9.6.2015 that the documents for extension of the alleged mortgage dated 12.4.1984, were signed by Mr. S. Balasubramaniam (personal guarantor/respondent No. 4). It is asserted that he was never a Director of the respondent No. 2 company/guarantor and was a stranger to it. It is urged that the jurisdiction of DRT under the 2002 Act is only supervisory over the actions initiated by the Bank under Section 13 of that Act. It cannot decide the substantial issues and disputes regarding the genuineness or validit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject 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 DRT since 2008. No prejudice would be caused to the appellant, especially when the question regarding the validity of the mortgage of title in respect of the stated properties itself would be decided in the original proceedings, namely, O.A. No. 11/2008. 8. The respondent No. 11 (A.R. Sridharan) has more or less raised the same objection, but additionally urged that the material facts were not brought to the notice of the DRT, namely, that the ancestors of respondent Nos. 11 (A.R. Sridharan) and 12 (A.R. Kannan) were the owners and in possession of land to the extent of 1.80 acres at Adampakkam Village at old Survey, which was known as Paimash No. 722/4. The factum of ownership of the respondent Nos. 11 and 12 has been decided in O.A. Suit No. 186/1976, filed by their father and after his demise, the same was pursued by them. The suit was decreed in their favour in respect of 1.80 acres land at Paimash N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat, 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, the guarantor had specifically urged that the person who created equitable mortgage in respect of subject property, was not an authorised person of the guarantor. This issue was considered by the DRT in its final order dated 10.2.2011 in the following manner: "(i) The Applicant is a Private Limited Company registered under the Company Act under the name and style of Associated Trading Corporation Pvt. Ltd. having the identification (SIN) No. U51909IN194) PTC000011. The Respondent 2 is the borrower company, who has availed various credit facilities from the 1st Respondent (Respondent Bank) to meet the business requirements since 1954. Therefore, it is clear that the Applicant is a Private Ltd. Company, a legal person in the eye of law, has filed the present Application challenging the Possession Notice dated 15.10.2008 issued u/s 13(4) of the SARFAESI Act, 2002 and prayed for other reliefs as aggrieved per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the Company up to 1996 prove that they are the people who are in charge, of the affairs of the Company and secured loans and the financial facilities, availed from the respondent Bank since the same are reflected in the Balance Sheets and the same would amount to acknowledgment of debts. Therefore, the Bank is entitled to enforce the securities, of mortgaged properties for the recovery of the outstanding dues. Hence, I am of the considered view that the Respondent Bank has the right to initiate action/measures under the SARFAESI Act, 2002. Accordingly, the demand notice dated 13.05.2008 u/s 13(2) of the Act has been issued to the borrower/guarantors. Hence, the Question No. 2 is answered in favour of the Respondent Bank." (emphasis supplied) The DRT clearly opined that the Bank had initiated measures under the 2002 Act by issuing a demand notice dated 13.5.2008 under Section 13(2) followed by possession not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 dated 10.2.2011 has attained finality with the dismissal of the appeal (filed by the guarantor) before the DRAT on 8.2.2013 albeit on the ground of failure to comply with the predeposit condition. The guarantor cannot be allowed to approbate and reprobate from the commitment made in successive proceedings before the DRT and the High Court, as referred hitherto. 13. Notably, even in the subsequent proceedings before the DRTIII at Chennai, bearing S.I.A. SR No. 581/2015 in S.A. No. 356/2014 filed by the guarantor, for grant of injunction to restrain the Bank from bringing the scheduled property to sale till the disposal of S.A. No. 356/2014, the guarantor raised the same issue about the validity of the subject mortgage. That was answered against the guarantor by the DRT vide order dated 2.2.2015, in the following words: "8. During the course of the submissions, the Ld. Counsel for the Petitioner/Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icles 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 submitted any of these issues at the time of hearing but had only submitted that no valid mortgage is created and that the land values had raised meteorically." (emphasis supplied) Even this decision has become final and must operate against the guarantor. The guarantor filed yet another application being I.A. No. 23/2018 in O.A. No. 11/2008 for impleadment of the appellant herein as the twelfth (12th) defendant in O.A. No. 11/2008, raising the same plea of validity of mortgage in question. That has been noted and negatived in paragraph 8 of the order of the DRT at Madurai, dated 15.2.2019 in the following words: "8. The petitioner company filed SA No. 225/2008 challenging the possession notice dated 15.10.08 issued by the Rbank. One of the contentions raised by the petitioner company is that there is no valid creation of mortgage over the properties, which are the subject matter of OA 'B' Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tertaining 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 that the direction for handing over of original documents would ostensibly appear to be in reference to an interim application in the pending O.A., but that course is inevitable in the fact situation of the present case. 16. The next question is: whether despite the decree of a Court of competent jurisdiction in favour of respondent No. 11 (A.R. Sridharan) concerning land bearing Paimash No. 722/4 admeasuring 1.80 acres, can the documents pertaining to that land be still made over to the appellant/auction purchaser, merely because sale certificate has been issued by the Bank in that regard? The sale certificate, as issued by the Bank, does make reference to land bearing survey No. 282, which inter alia, consists of old Paimash No. 722/4. Therefore, to the extent of land referred to in the decree dated 16.2.1990 passed by the Court of District Munsiff, Chengalpattu in O.S. No. 186/1976 in favour of the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion, 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 auction process had to be repeated as no fair offer was forthcoming. In other words, the subject application was filed by the Bank in anticipation that the auction would be concluded and by the time the application was decided, the sale certificate in favour of the highest bidder would have been issued. There is nothing wrong in Bank moving such application before the conclusion of the auction process and issuance of a sale certificate, in anticipation. No provision has been brought to our notice, which prohibits such a course to be adopted by the Bank. Accordingly, even this objection of the respondents is rejected. 19. Both sides have invited our attention to the decisions of this Court on the proposition whether the DRT is competent to answer the question regarding validity of the subject mortgage and also res judicata. We do not wish to dilate on the said decisions as the factum of validity of mortgage need not d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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