JUDGMENT
Pratibha Upasani, J. (Chairperson)
1. This appeal is filed by the appellant Indian Bank being aggrieved by the judgment and order dated 4.6.2002 passed by the learned Presiding Officer of Debts Recovery Tribunal- II, Mumbai in Original Application No. 3398/2000. By the impugned judgment and order, the learned Presiding Officer allowed the application filed by the Bank with costs against the defendant Nos. 1 and 3 to 6 and these defendants were jointly and severally ordered to pay to the applicant Bank an amount of Rs. 48,24,153.86 with interest at the rate of 18.5% per annum with quarterly rests from the date of the order of the original application till full realization. The learned Presiding Officer also gave declaration that subject to first charge of defendant No. 8 Rupee Co-operative Bank Ltd. in respect of outstanding of recovery certificate issued by Registrar of Co-operative Societies, Thane in ABN/TPCB/101/28 of 1987, the outstandings are secured by validly created mortgage (by defendant No. 3) of his flat No. 21, Roopshree Apartments, near Hotel Love Bird, Dr, Moses Road, Thane. He accordingly directed issuance of recovery certificate in the above stated terms. The Bank is aggrieved only with respect to Clause (c) of the operative portion of the order wherein declaration is given that the outstandings are secured by validly created mortgage by defendant No. 3 of his flat only subject to first charge of the Rupee Co-operative Bank Ltd. The appeal is restricted with respect to this aspect only.
2. Few facts, which are required to be stated, are as follows:
The applicant Bank i.e Indian Bank filed the application for recovery with respect to facilities granted to the defendant No. 1 who was principal borrower (Hemali Art Silk Mills Pvt. Ltd). The defendant Nos. 3 to 6, as also deceased defendant No. 2 were guarantors and the defendant No. 3 had also mortgaged his flat in favour of the Bank. The defendant No. 7 (The State Industrial and Investment Corporations of Maharashtra Limited) was holding the first charge on the immovable property over which the applicant had second charge. The defendant No. 8 (Rupee Co-operative Bank Limited) was clamming security on the same immovable property over which the defendant No. 7 had the first charge and defendant No. 8 had second charge.
The first defendant had executed demand promissory note in respect of OLC and it had also executed letter of continuity, agreement for demand cash credit and hypothecation of moveable property. Similar set of documents were executed in respect of DABP facility of Rs. 20 lacs and agreement for DALC hypothecation of goods under DALC was also executed on 24.7.1991.
Further, security for the repayment of the amount of all the facilities was given by 3rd defendant who created mortgage in favour of the applicant on 24.9.1991 of his flat being block No. 21, Roopshree Apartments, near Hotel Love Bird, Dr. Moses Road, Thane. The defendant No. 1 had deposited title deeds in respect of the flat with intention to create security. As further security for the repayment of the amount advanced under the three facilities, defendant No. 1 by obtaining sanction letter from MSFC created second charge in favour of the applicant on 25.8.1992 in respect of parcel of land bearing plot No. K-28, MIDC, Tarapur, Dist. Thane the first charge being that of 7th defendant. All these facilities were availed by the defendant No. 1 as per the case of the applicant Bank.
3. Since the defendant No. 1 committed defaults and failed in paying the outstandings despite of demands and notice, the original application came to be filed by the applicant Bank, wherein all the defendants appeared and contested the same. While the defendant Nos. 1 and 3 to 6 filed common written statement and denied their liability on various grounds. The defendant No. 7, Corporation also filed written statement and contended that it had lent and advanced term loan of Rs. 83 lacs to defendant No. 1 for setting up project. It was mentioned that as per order dated 28.4.1994 passed by the High Court (Coram : Justice Jhunjhunwala) receiver was appointed and defendant No. 1 had been appointed as an agent foe the Court Receiver. Thereafter that order came to be confirmed. The Court Receiver, however, was not appointed of the plant and machinery embedded in the earth. It was submitted that pursuant to the power vested in it by Section 29 of SFC Act defendant No. 7 had taken over possession of the mortgaged and hypothecated plants and machinery and sold the same by public auction and appropriated the net sale proceeds.
4. The defendant No. 8 Rupee Co-operative Bank Limited also filed written statement, which was considered by the Tribunal while disposing of the original application, It was admitted by the defendant No. 8 that the defendant No. 7 had first charge over immovable property of defendant No. 1 (Hemali Art Silk Mills Pvt. Ltd). The defendant No. 1 validly registered the charge on 30.11.1986 with the Registrar of Companies for sum of Rs. 30 lacs and the ROC had granted certificate of registration on the above said date. The defendants further contended that in view of the subsequent mortgage by the defendant No. 1 company with applicant namely Indian Bank that would be subject to this charge. It was also submitted that the defendant No. 1 had also executed mortgage deed on 30.10.1996 for a sum of Rs. 30 lacs and the said mortgage was lodged for registration and registration fee was also paid but the documentation remained under object for want of income tax clearance certificate under Section 23-A of the Income Tax Act, 1961. It was submitted that the applicant Bank ought to have found out whether there existed any encumbrance on the property. According to the defendant No. 8 the applicant Bank did not obtain title certificate from the solicitors and/or Advocates. According to the defendant No. 8 there was collusion between the applicant Bank defendant Nos. 1 to 6. According to the defendant No. 8 there was valid subsisting recovery certificate against the defendant Nos. 1 to 6.
5. After hearing all the sides and after going through the material placed before him, the learned Presiding Officer allowed the original application in favour of the applicant Bank and against the defendant Nos. 1 and 3 to 6 but while giving declaration he passed an order with respect to defendant No. 8 Rupee Cooperative Bank Ltd. that the defendant No. 8 had first charge in respect of the defendant No. 3’s property. This is what is hurting to the applicant Bank. Hence, this appeal.
6. I have heard Mr. Sharma for the appellants and Mr. Deogirikar for the respondent No. 8. I have also gone through the entire proceedings.
7. The evidence on record shows that defendant No. 3 Mr. Sanjay Ganatra had created mortgage of flat No. 21 to secure the outstandings. Memorandum of mortgage and also the declaration, both are dated 24.9.1991. Rupee Co-operative Bank Ltd., defendant No. 8 has assailed this fact by contending that it had already obtained recovery certificate from Assistant Registrar of Co-operative Societies and as such defendant No. 3 could not have mortgaged the flat in favour of the applicant Bank and, therefore, no relief can be granted in respect of the hypothecated properties. The defendant No. 7’s contention was that he had already sold the land and building mortgaged by the defendants under Section 29 of SFC Act. Further grievance of the defendant No. 7 is that in spite of doing this, they could not recover their dues from the sale proceeds and, therefore, contention was that there was no question of giving anything to the applicant Bank. On the other hand, the defendant No. 8 had also challenged this fact by contending firstly that the defendant No. 7 could not in law sell the property and had in fact not sold the same. Of course, this was between the defendant No. 7 and defendant No. 8 and this aspect has nothing to do with the present case at hand.
8. As far as question of security of flat No. 21 belonging to defendant No. 3 mortgaged in favour of the applicant Bank is concerned, that fact is proved from the memorandum of mortgage and original declaration. Mr. Deogirikar, the learned Advocate appearing for the respondent No. 8 Rupee Co-operative Bank Ltd. however, contended that the applicant Bank had not obtained title certificate at the time of creation of mortgage and that if had also not checked or verified the outstandings of defendant No. 8 and therefore no valid mortgage could be created by the defendant No. 3. On this point, the learned Presiding Officer held that for creation of equitable mortgage, it was not mandatory that title certificate was required to be obtained and that for creation for equitable mortgage what was necessary was present or future debt and deposit of title deeds with intention to secure the same by way of mortgage. The learned Presiding Officer observed that these necessary ingredients were very much present in the matter and, therefore, the mortgage created by the defendant No. 3 Mr. Sanjay Ganatra in favour of the applicant Bank i.e. Indian Bank was validly created. I am in agreement with this findings. It is admitted that recovery certificate issued by the Registrar of Co-operative Societies, Thane was very much in existence on the date of creation of mortgage and in view of Section 47(1)(b) and Section 48 of Maharashtra Cooperative Societies Act, 1960, it has to be accepted that there is statutory charge created by these sections over the said property. In fact these sections are pre-emptory in nature and have overriding effect over provisions contained in any other law. These sections state that any outstanding demands or dues payable by society or by any member in respect of any amount shall be first charge upon the member’s interest on the immovable property. There is also embargo on alienation of said property without permission from the society. In the present case at hand, as on the date of creation of mortgage by the defendant No. 3 in favour of the applicant Bank, recovery certificate admittedly issued by the Registrar of Cooperative Societies against the defendant No. 3. This is the position as is revealed. There was prohibition for the defendant No. 3 to create mortgage without permission and, admittedly, such permission was not obtained and as such mortgage created in contravention of Section 47(2) of the Maharashtra Co-operative Societies Act has to be held void as against the society. Thus, mortgage in favour of the applicant Bank will have to be upheld subject to charge of the defendant No. 8. There is nothing wrong in this finding which is in consonance with the provisions of Sections 47 and 48 of the Maharashtra Co-operative Societies Act, 1960. The applicant Bank cannot have any grievance on this count. It has to accept that the outstandings due to them from the defendants are secured by validly created mortgage by the defendant No. 3 of the said flat in question but it is subject to the first charge of the defendant No. 8 Rupee Co-operative Bank Limited. I therefore see no reason to interfere with the impugned order. Hence, following order is passed:
ORDER
Appeal No. 60/2002 is dismissed.