IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 26.10.2009 CORAM THE HON'BLE MR. JUSTICE G.RAJASURIA O.A.Nos.1019,1020,932, 933, 934 and 935 of 2009 and Application Nos.4961 of 2009 in C.S.No.796 of 2009 ORDER
Compendiously and concisely, the relevant facts, which are absolutely necessary for the disposal of the above applications would run thus:
a) The applicants/plaintiffs filed the suit seeking the following reliefs:
– for a declaration that the purported sales held on 22.07.2009, 23.07.2009 and 24.07.2009 in respect of the suit schedule properties covered by the auction notice dated 27.06.2009 in respect of the A to E schedule mentioned properties are illegal, invalid and nonest in the eyes of law and consequently restrain the first defendant acting through the Recovery Officer, Chennai-1 from confirming or executing or registering the sale deeds in favour of the defendants 6 to 10 in respect of the suit schedule “A” to “E” schedule properties.
– for a declaration that the first plaintiff has not created any valid equitable mortgage on 23.04.1998 in favour of Punjab National Bank, Mylapore Branch, in respect of suit schedule mentioned “A” property situated at Door No.3, W Block, Anna Nagar, Chennai 600 040 morefully described in the plaint “A” Schedule property and consequently declare the Recovery Certificate issued in DRC No.119/2008 pursuant to the order made in O.A.No.137/2003, DRT-I, Chennai as illegal,invalid and non-est in the eyes of law;
– for a declaration that the second plaintiff has not executed on 23.04.1998 in respect of suit schedule mentioned “B” property situated at S.No.57, Gerugambakkam Village, Sriperumbudur Taluk, Kancheepuram District morefully described in the plaint “B” Schedule property and consequently declare the Recovery Certificate issued in DRC No.119/2008 pursuant to the order made in O.A.No.137/2003, DRT-I, Chennai as illegal,invalid and non-est in the eyes of law;
– for a declaration that the third plaintiff has not created any valid mortgage in respect of suit schedule mentioned “C” property situated at Plot No.4390, presently, W Block, Door NO.27, Anna Nagar, Chennai 600 040 morefully described in the plaint “C” Schedule property and consequently declare the Recovery Certificate issued in DRC No.119/2008 pursuant to the order made in O.A.No.137/2003, DRT-I, Chennai as illegal,invalid and non-est in the eyes of law;
– for a declaration that the fourth plaintiff has not created any valid mortgage in favour of defendant on 30.04.2001 in respect of suit schedule mentioned “D” property situated at S.No.57, Gerugambakkam Village, Sriperumbudur Taluk, Kancheepuram District morefully described in the plaint “D” Schedule property and consequently declare the Recovery Certificate issued in DRC No.119/2008 pursuant to the order made in O.A.No.137/2003, DRT-I, Chennai as illegal,invalid and non-est in the eyes of law;
– for a declaration that the second plaintiff has not created any valid equitable mortgage in favour of the first defendant on 30.04.2001 in respect of suit schedule mentioned “E” property situated at Door No.168, Sydenhams Road, Periamet, Chennai 600 003 morefully described in the plaint “E” Schedule property and consequently declare the Recovery Certificate issued in DRC No.119/2008 pursuant to the order made in O.A.No.137/2003, DRT-I, Chennai as illegal,invalid and non-est in the eyes of law;
and for costs.
(extracted as such)
b) The same applicants/ plaintiffs also filed these applications for obtaining the following reliefs:
O.A.No.1019 of 2009 to appoint a Receiver to manage the petition A Schedule property
Application No.4961 of 2009 to direct the first and fourth respondent to put the applicant in possession of the petition A schedule property.
O.A.No.1020 of 2009 to grant an interim injunction restraining the respondent No.4 or any person or persons claiming through them from encumbering, alienating or dealing with petition schedule property by way of mortgage, lease, joint venture charge or putting some third party in possession morefully described in the petition A schedule property.
OA No.932 of 2009: – to grant an order of interim injunction restraining the first defendant or any one authorised by it or the Recovery Officer, DRT-I, Chennai from executing and registering the sale deed or deeds in favour of the 6th defendant, 7 to 9 and the 10 the defendant respectively pursuant to the auction held on 22.07.2009, 23.07.2009 and 24.07.2009 pursuant to the auction notice dated 27.06.2009 issued by the Recovery Officer in DRC No.119 of 2008 in O.A.No.137 of 2003, DRT-I, Chennai
OA No.933 of 2009:- to grant an interim injunction restraining the defendants 6 to 10 or any person or persons claiming through them from interfering with the plaintiffs/applicants peaceful possession and enjoyment of the suit schedule properties morefully described in the schedule appended to the Judges Summons.
OA No.934 of 2009:- to stay the confirmation of sale in favour of the sixth defendant and defendants 7 to 9 and the 10th defendant respectively pursuant to the auction notice dated 27.6.2009 and also stay all further consequential proceedings before the Recovery Officer, in DRC No.119 of 2008 in O.a.No.137 of 2003, DRT-I, Chennai
O.A.No.935 of 2009 to grant an interim injunction restraining the defendants 6to 10 or any person or persons claiming through them from encumbering, alienating or dealing with petition schedule properties by way of mortgage, lease, joint development charge or otherwise morefully described in the schedules here under detrimental to the interest of the plaintiffs/applicants.
(extracted as such)
2. The gist and kernel, the pith and marrow of the case of the plaintiffs could be set out thus:
1. The plaintiff’s did not create any equitable mortgage by depositing the original title deeds or even copy of the title deeds relating to the suit properties.
2. The husband of the first plaintiff and his relatives defrauded the plaintiffs while borrowing loan from the Punjab National Bank by projecting as though the plaintiffs herein are creating equitable mortgage by depositing title deeds of their respective properties.
3. The plaintiffs at no point of time authorised the borrowers of the loan from the Punjab National Bank to act on their behalf.
4. The plaintiffs also did not execute any guarantee agreement or any other documents to stand as guarantors guaranteeing the prompt repayment of the loans.
5. The Punjab National Bank without adhering to the procedure contemplated under law initiated proceedings before the DRT, which without adopting the procedure contemplated under law issued the recovery certificate under the DRT Act.
7. The Recovery Officer without adhering to the procedure, effected sales of the properties described in the schedule to the plaint, except the C Schedule of the property.
8. If status quo is not ordered to be maintained then certainly, the interest of the plaintiffs would be prejudiced.
3. Denying and refuting, challenging and impugning the averments/allegations in the plaint as well as in the averments contained in the affidavits of the plaintiffs, the defendants filed their counters, the gist and kernel of them would run thus:
a. The suit is not maintainable for the reason that there are laches on the part of the plaintiffs and it is barred by limitation. It is also barred by law, so to say, in view of Section 34 of the DRT Act.
b. The catena of decisions of the Hon’ble Apex Court would mandate that suits of this nature should not be entertained.
c. The plaintiffs had full knowledge about the mortgage created by them and the proceedings were taken by the Punjab National Bank against them. They were also in receipt of DRT notice but they remained deliberately and voluntarily exparte. Subsequently, they also filed an application to get the delay condoned for getting set aside the issuance of the recovery certificate and such an application is pending before the DRT.
d. In the meanwhile, they have chosen to approach this court suppressing the fact that they themselves had filed a writ petition earlier, which was dismissed.
e. The third party purchasers are bona fide purchasers for valuable consideration without notice of any alleged defect in the proceedings or in the creation of mortgage by the plaintiffs in favour of the Bank.
f. If those purchasers are prevented from acting upon their purchases, certainly, they would be prejudiced.
g. The “C” Scheduled property which is yet to be sold, if restrained from being sold, then again, the bank would be put to discomfiture, and it would not be able to recover the huge amount in connection with the debt.
h. The Punjab National Bank, lodged a complaint with CBI, whereupon, CBI registered the case and after investigation laid the charge sheet and in such a case, the persons, who defrauded the bank cannot be shown any mercy and no equity also can be extended in their favour.
i. The plaintiffs are none but the close relatives of the borrowers. So to say, the first plaintiff is the wife of V.M.S.Jaffarullah, who is the proprietor of the fourth defendant and Director of the fifth defendant, the second plaintiff is the elder brother of V.M.S.Jaffarullah, the third plaintiff is the wife of second plaintiff and the fourth plaintiff is the younger brother of V.M.S.Jaffarullah. Simply because CBI dropped action as against the plaintiffs that does not mean that they have been exonerated to the effect that they never stood as guarantors or they never created equitable mortgages. According to the learned counsel for the Bank, the Bank is intending to file protest petition so as to see that the plaintiffs are roped into the criminal case.
Accordingly, the defendants pray for the dismissal of the applications.
4. Heard both sides.
5. For convenience sake, the parties are referred to here under according to their litigative status and ranking in the suit.
6. The points for consideration are as follows:
1. Whether there is any ex facie and prima facie case to interfere in the matter on the ground that some fraud or serious irregularities occurred in getting issued the Recovery certificate?
2. Whether there are any laches or suppression of facts on the part of the plaintiff in approaching the court?
3. Whether the applicants/plaintiffs are entitled to the reliefs as prayed for in these seven applications?
7. The learned counsel for the plaintiffs’ would develop his argument by pointing out that even as per the averments of the D1-Punjab National Bank, no legal authority including DRT could hold that valid equitable mortgages by depositing of title deed were created for the reason that absolutely there is no iota or shred, shard or jot of evidence to demonstrate that even as per their version, the real original title deeds were deposited with the Bank or at least certified copies of those deeds were deposited with explanatory declaration that the original title deeds got lost, etc. and in such a case, the DRT was not justified even in passing an exparte order; the bank was not justified in getting issued such a recovery certificate by misrepresentation and fraud.
8. Whereas the learned counsel appearing for the Punjab National Bank, would submit that if the guarantors and the mortgagees like the plaintiffs herein are allowed to approach the court after long lapse of time in this fashion, then the provisions of the DRT Act would be set at naught and all the proceedings of the DRT could be negatived, pooh-poohed, belittled, slighted and discarded and there would be spate or deluge of suits under one pretext or other and there will be no end to it.
9. The learned counsel for D1 Bank would set forth and put forth that after coming to know of the equitable mortgages created by the defendants even as early as in the year 2005, the plaintiffs kept quiet and subsequently, proceedings went on before DRT and recovery certificate was issued and the recovery officer also conducted sales and even the writ petitions filed by the plaintiffs were dismissed and in all those proceedings, absolutely, there were no whisper on the side of the plaintiffs about such alleged fraud or forgery in the creation of mortgages in favour of the bank.
10. At this juncture, it is just and necessary to refer to the decisions cited on the side of the plaintiffs relating to creation of equitable mortgage by deposit of title deeds. Certain excerpts from those precedents would run thus:
1. AIR 1982 Andhra Pradesh 272 (Kanigalla Prakasa Rao vs. Nanduri Ramakrishna Rao and others)
4. …………………….” The owners of property who have so their documents of title will, therefore, be not in a position to deliver such original documents with intent to create an equitable mortgage. It will be rather anomalous if such persons can validly execute registered documents of sale, lease and mortgage, but will not be entitled to raise any monies by creating an equitable mortgage. If the original title deeds are lost, we do not see why the owner of the property should not be in a position to an equitable mortgage. The mortgagee in such cases has only to be vigilant in accepting such representation made to him and should make the necessary enquiries before agreeing to advance any monies on the basis of registration extracts of documents of title or copies of documents. That seems to be the underlying principle behind S.78 of the Transfer of Property Act which provided that if the conduct of a prior mortgagee amounted to gross neglect, the mortgage in his favour will be postponed to the subsequent mortgagee.”
2. AIR 1974 Madras 16 (V.61, C.8) (Angu Pillai and others vs. M.S.M.Kasiviswanathan Chettiar and others)
“16. The decision of the Rangoon High Court in AIR 1933 Rang 299 upon which the trial Judge relied was overruled by a Full Bench of the Rangoon High Court in Chidambaram Chettyar v. Aiz Mean, AIR 1938 Rang 149 (FB). This Full Bench decision unfortunately does not appear to have been brought to the notice of the trial Judge. The Full Bench has reviewed the English and Indian authorities and has pointed put that in order to create a valid mortgage, it is not necessary that the whole, or even the most material of the documents of title to the property should be deposited; nor that the documents deposited should show a complete or good title in the depositor and it is sufficient if the deeds deposited bona fide relate to the property or are material evidence of title or are shown to have been deposited with the intention of creating a security thereon.
17. Mr.Sivamani, appearing for the respondent in this appeal, relied on a decision of a Bench of this Court in Venkataramayya v. Narasinga Rao (1911) 21 Mad LJ 454 in support of his argument that even the deposit of sale deed in certain circumstances would not be sufficient to create an equitable mortgage. In that case, the debtor deposited a sale deed in the name of his father who had made a gift of the property in favour of his grandson by a deceased son. The property was admittedly the self acquired property of the father of the first defendant in that case. The question arose whether the deposit of that sale deed was sufficient to constitute a valid equitable mortgage. The Bench pointed out that the only document that was deposited did not show any kind of title in the depositor to the property as it was not a sale deed in his name but was a sale deed in the name of his father and that, therefore, no valid equitable mortgage was created. This decision is not applicable to the facts of the instant case, for here, the documents in question though not complete in themselves for holding title in favour of the plaintiff’s father, are undoubtedly documents relating to the property or in respect of the property showing prima facie title to the same. The hundi towards the purchase price, the agreement by the previous owner of the site to convey the site and the tax receipt in the name of the plaintiffs father are undoubtedly documents in respect of or relating to the property in question and are, as such, documents of title within the meaning of Section 58 of the Transfer of Property Act.”
3. AIR 2002 Madras 378 (M.M.T.C.limited vs. S.Mohamed Gani and another)
18. ……………………”In order to prove the existence of an equitable mortgage, the following requisites are necessary:1. A debt, 2. a deposit of title deeds and 3. an intention that the deeds shall be security for the debt. The debt may be an existing debt or a future debt. The debt may be an existing debt or a future debt. Insofar as the deposit of title deeds is concerned, physical delivery of document is not the only mode of deposit and even the constructive delivery has been held sufficient. It is sufficient if the deeds deposited bona fide relate to the property or are any material evidence of title and are shown to have been deposited with an intention to create a security thereon. The essence of the whole transaction of equitable mortgage by deposit of title deeds is the intention that the title deeds shall be the security for the debt. Whether the said requisite intention is available in a given case is a question of fact and has to be ascertained after considering the oral, documentary and circumstantial evidence. It is true the mere fact of deposit does not raise the presumption that such an intention existed. Such an intention cannot be presumed from the possession since the mere possession of the deeds is not enough without evidence as to the manner in which the possession originated, so that an agreement may be inferred. Even the mere possession of the deeds by the creditor coupled with the existence of a debt need not necessarily lead to the presumption of a mortgage. The mere fact that the documents were coming from the custody of the plaintiff is not by itself sufficient to prove an intent to create a security. But in a given case unless and until the defendants satisfactorily explain how the documents came to the plaintiffs custody the said fact would be insignificant and have a great bearing”.
(emphasis supplied)
4. AIR 1977 Calcutta 343 (Saradindu Mukherjee vs, Amiya Kumar Basu).
“7. ……………………There is nothing in writing to show that the lease deed was deposited with the plaintiff in order to secure all advances made subsequently. It is well established that mere deposit of title deeds with the creditor by the debtor will not constitute an equitable mortgage unless it is proved that the said title deeds had been deposited with the intention of creating a mortgage.
……… ………………………………………………………………………………………………………………………………………… We also hold that the plaintiff failed to prove by any cogent evidence that the defendant had kept the said title deeds with the plaintiff with an intention of creating a security in respect of the property on which the lease deed was taken by the plaintiff……………………”
(emphasis supplied)
11. A mere reading and poring over of those precedents, would ex facie and prima facie, make the point clear, that in order to create a valid equitable mortgage by deposit of title deed, there should be deposit of original title deed or if certified copy is deposited for creation of such mortgage, there should be clear declaration that the originals got lost, etc.
12. I would also like to point out that even if there is any prior creation of mortgage by deposit of title deeds with some other creditor then that fact should be disclosed to the subsequent lender of money and accordingly, second equitable mortgage can be created. But, my above discussion supra and also a plain poring over of the records available, would disclose that the Bank, it appears has not followed such a procedure. Even the copy of the CBI charge sheet as enclosed in the typed set of papers, would reveal that by furnishing false and forged title deeds of the suit properties, the alleged equitable mortgages were created. When the finding of the Investigating Agency itself is that by furnishing false and forged title deeds, such equitable mortgages were created, the question arises as to whether the bank de hors initiating criminal action, also by relying on such equitable mortgages, initiate civil proceedings for recovering the debt.
13. The learned counsel for the defendant Bank cited the decision reported in 2009(2) CTC 1 (The Committee representing RBF Nidhi Limited vs. Vipanchi Investments Pvt.Ltd.). However this decision in no way highlights that even if a fabricated or forged document of title is deposited, it would amount to creation of valid mortgage and a mere perusal of the decision would display and demonstrate that the facts involved in the cited case are entirely different from the facts and circumstances of this case and it is quite obvious.
14. At this juncture, I recollect and call up the following maxims:
(i) Ex turpi causa non oritur actio (Out of a base (illegal or immoral) consideration, an action does (can) not arise.
(ii) Ex dolo malo non aritur actio – (Out of fraud no action arises; fraud never gives a right of action. No court will lends its aid to a man who founds his cause of action upon an immoral or illegal act.
(iii) Ex nudo pacto non oritur actio : No action can arise from a bare agreement.
These three maxims would highlight and spotlight the fact that out of illegal act no legal cause of action arises for filing suits. If the agreements or the documents turned out to be void ones, the party to it cannot enforce them. While holding so, I also recollect up and call up the following maxims in favour of the bank.
1. Nemo allegans suam turpitudinem audiendus est
– No one testifying to his own way is to be heard as a witness.
2. Nullus commodum capere potest de injuria sua propria: No one can take advantage by his own wrong.
3. Nul prendra advantage de son tort demesne: No one shall take advantage of his own wrong.
The gist and kernel of the above maxims are that the person who committed fraud cannot capitalise his own fraud.
15. No doubt on the plaintiffs’ side, there are jurisprudential points to the effect that out of a void contract or illegal contract no legal cause of action would arise, but on the other hand the jurisprudential view in favour of the defendants, is that the person who committed fraud cannot capitalize his own fraud. These are all serious issues, which could be dealt with at the time of considering the one other application for rejection of plaint, viz. Application No.5583 of 2009.
16. The learned counsel for D1- Bank today brought to the knowledge of this court the pendency of this application, which he has filed three days ago, so to say, after hearing substantially these seven applications by this court. He would insist upon to take that application for disposal before deciding these seven applications, at the first instance. Whereas the learned counsel for the plaintiffs’ in these seven applications would submit that already in these seven applications arguments have been advanced almost completely and pending hearing of Application No.5583 of 2009, if the status quo is not ordered and sale, which is going to be held tomorrow, i.e., on 27.10.2009, relating to the C schedule property, if not stayed, then certainly, the purpose of the plaintiffs’ having approached this court would be in vain and the plaintiffs rights have to be protected.
17. I could see considerable force in the submission made by the learned counsel for the applicants/plaintiffs for the reason that even though this suit has been pending for a pretty long time along with these seven applications, the application for rejecting the plaint has not been filed by D1 Bank much earlier and in fact in the last hearing substantial hearing of these seven applications was over and today these applications have been posted only for clarifying certain points. Hence, I am of the considered view that the hearing of these seven applications need not be deferred till that application for rejection of plaint is heard. Undoubtedly, while granting interim relief, this court also has to see, ex facie and prima facie, whether the suit is maintainable, subject to deciding finally on merits the application under Order VII Rule 11 of CPC.
18. At this juncture, I would like to refer to the following decisions:
1. 2005(11)SCC 520 (Bank of India vs. Abhay D.Narottam and others)
“9. It is not necessary for us to determine the import of Section 125 of the Companies Act as we are of the opinion that the appeal must be dismissed on a much more basic ground. “Mortgage” has been defined in Section 58(a) of the Transfer of Property Act, 1882 as a transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, etc. Without a transfer of interest there is no question of there being a mortgage. The same principle would apply to charge under section 100 of the Transfer of Property Act. Section 100 provides that all the provisions which apply to a simple mortgage shall, so far as may be, apply to such charge. The definition of simple mortgage in Section 58(b) of the Act merely speaks of the procedure and describes that species of mortgage.
10.As far as the land is concerned, we agree with the learned Judge that a mere undertaking to create a mortgage is not sufficient to create any interest in any immovable property.”
2. 2006 (1) SCC 697 (R.Janakiraman vs. State rep.by Inspector of Police, CBI, SPE, Madras)
21. ………………………..”It is clear to us that the bar imposed by sub-section (1) of Section 92 applies only when a party seeks to rely upon the document embodying the terms of the transaction. In that event, the law declares that the nature and intent of the transaction must be gathered from the terms of the document itself and no evidence of any oral agreement or statement can be admitted as between the parties to such document for the purpose of contradicting or modifying its terms. The sub-section is not attracted when the case of a party is that the transaction recorded in the document was never intended to be acted upon at all between the parties and that the document is a sham. Such a question arises when the party asserts that there was a different transaction altogether and what is recorded in the document was intended to be of no consequence whatever. For that purpose oral evidence is admissible to show that the document executed was never intended to operate as an agreement but that some other agreement altogether, not recorded in the document, was entered into between the parties.”
3. 2007(8) SCC 361 (Syndicate Bank vs. Estate Officer & Manager, APIIC Ltd., and others)
“29. Each case will have to be considered on its own facts. A jurisprudential title to a property may not be a title of an owner. A title which is subordinate to an owner and which need not be created by reason of a registered deed of conveyance may at times create title. The title which is created in a person may be a limited one, although conferment of full title may be governed upon fulfilment of certain conditions. Whether all such conditions have been fulfilled or not would essentially be a question of fact in each case. In this case a right appears to have been conferred on the allottee by issuance of a valid letter of allotment coupled with possession as also licence to make construction and run a factory thereon, together with a right to take advances from banks and financial institutions subject, of course, to its fulfilment of condition may confer a title upon it in terms of Section 58(f) of the Transfer of Property Act, but the question would be whether such a right is assignable”.
4. 2008(2) MLJ 169 (S.V.Subramaniam vs. Cypress Semi conductor Technology India Private Ltd.,rep.by its Director, Bangalore and others)
“11. . . . . . . . .
(d). Section 17 of the 1993 Act relates to “jurisdiction, powers and authority of Tribunals, as quoted hereunder:
“Section 17. Jurisdiction, powers and authority of Tribunals (1) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions.
(2) An appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act.”
On the other hand, Section 18 of the 1993 Act imposes a “bar of jurisdiction”, which reads as follows:
“Section 18. Bar of jurisdiction On and from the appointed day, no Court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under Articles 226 and 227 of the Constitution) in relation to the matters specified in Section 17.”
From the aforesaid provisions, it would be evident that there is no total ouster of jurisdiction of the civil Court. The ouster is by virtue of Section 18 of the 1993 Act, which sets out that no Court or other authority can try matters of recovery of debts. Insofar as the reliefs which do not pertain to debts, on a plain reading of Section 17 of the 1993 Act, are concerned, there can be no doubt that the civil Court will still retain the jurisdiction Centurion Bank Ltd. v. Indian Lead Ltd., 2000(100) Comp.cas.537.
. . . . . .
. . . . . .
(h) In the present case, as the plaintiff is neither the Bank/financial institution nor the borrower, the provisions of Section 17 of the 1993 Act are not attracted. It is not the case of the Bank that they filed an application for recovery of its debt from the plaintiff. The plaintiff who is not a party before the DRT, has only alleged fraud played by the parties to obtain orders from the DRT and therefore, in view of the decisions of the Supreme Court, as referred to above, we hold that the present suit is not barred by the provisions of Section 18 of the 1993 Act.”
5. 2008(4) L.W.897 (M.V.Janardhan Reddy vs. Vijaya Bank and another)
“25. It is true that the Recovery Officer confirmed the sale in favour of the appellant. But as we have already noted, in view of condition imposed by the Company Court, Recovery Officer did not have the power to confirm sale. An order passed by an officer having no authority of law has no effect. It neither creates any right in favour of a party for whom such order is made nor imposes any obligation on the opposite party against whom it was passed.”
6. 2009(4) CTC 74 (SC) (Nahar Industrial Enterprises Ltd. vs. Hong Kong & Shanghai Banking Corporation)
“151. A civil suit may also be maintainable before Original Side of the High Court in terms of the statutes under which the High Courts are constituted or in terms of the provisions of the letters patent. An intra court appeal is available against a decree passed by a learned Single Judge of a High Court in a suit filed before it.”
19. The following decision has been cited on the side of the D1-bank.
(2009) 4 MLJ 1110 (B.Poornima and M.Harish vs. State Bank of Travancore)
5. ………………………….” Under Section 19 (20), the Tribunal, after giving the applicant and defendant an opportunity of being heard, is empowered to pass interim order or final order, including the order of payment of interest to meet the ends of justice as quoted as here under:
“The Tribunal may, after giving the applicant and the defendant an opportunity of being heard, pass such interim or final order including the order of payment of interest from the date on or before which payment of the amount is found due upto the date of realisation or actual payment, on the application as it thinks fit to meet the ends of justice.”
Therefore, it will be evident from Section 19(20), that the Tribunal can pass interim order to meet the ends of justice.”
A mere perusal of those precedents referred to supra would enable this court to comprehend that the Hon’ble Supreme Court has laid down the law that on flimsy grounds, the person who is liable to discharge the bank loan or the guarantor concerned should not be allowed to approach the civil court so as to delay the proceedings. The Hon’ble Supreme Court used a strong terminology “bank loan dodgers” and highlighted that such persons should not be encouraged by the Civil Court. Wherefore, in the light of the decision of the Hon’ble Apex Court, I would like to spotlight that if this court is made to believe at this stage of passing interim order in the interim applications that bank loan dodgers are trying to delay the proceedings by filing these sort of applications, naturally, that has to be considered and consequently such interim applications have to be rejected, but, in this case, to the risk of repetition and pleonasm and without being tautologous, I would like to point out that there is something to be explained by D1- the Punjab National Bank relating to the alleged creation of equitable mortgages by the plaintiffs, in view of the alleged statement given by Smt.Sandhya Ravi Mohan, Branch Manager of D1-Punjab National Bank before the CBI dated 29.08.2005 and it contains the following version:
“M/s.Maharaja Timber Traders represented by its proprietor Shri.V.M.S.Jafarullah and others availed credit facilities by submitting forged/fabricated title deeds of their immovable properties and fraudulently offered them as collateral security to Nedungadi Bank Ltd.(presently Punjab National bank), Mylapore Branch, Chennai and caused a total loss of Rs.259.94 lakhs to the above Bank.”
20. The learned counsel for the plaintiff relying on the said version extracted supra would develop his argument that the stand of the D1 Bank itself is that by depositing forged and fabricated title deeds of the suit property, virtually, the guarantors created the mortgages in favour of the said Bank and caused total loss.
21. As such, taking into consideration the allegations/averments made by the plaintiffs and also the findings of the CBI investigation, ex facie and prima facie, I am of the view that these applications cannot be thrown out on the sole ground as canvassed by the learned counsel for the Bank that the suit itself is not maintainable. However, I hasten to add, de hors this ex facie and prima facie finding for the disposal of these applications, the application under Order VII Rule 11 of CPC shall be dealt with on merits, considering additional facts.
22. The learned counsel for the plaintiffs would submit that even if there is no valid creation of equitable mortgages by deposit of title deeds, nonetheless, if D1-Bank wants to proceed as against the plaintiffs, who are the alleged guarantors then, certainly, the bank should have got attached the personal properties, viz., the suit properties of the plaintiffs’ as per Section 25 of the DRT Act coupled with Rule 48 of Schedule II of the Income Tax Act, 1961.
23. It is ex facie and prima facie clear that if the D1-Bank wants to rely upon the fact as contended by them in their counter that the suit properties were attached and sold as per Schedule II of the Income Tax Act,1961 then, they must be in a position to show or demonstrate that the properties were attached. Whereas on the plaintiffs’ side it has been vehemently contended that absolutely, there is no attachment of the suit properties effected by recovery officer and in such a case, the procedure adopted by the recovery officer is illegal in selling the properties and the plaintiffs should be protected of their rights over the suit properties. The learned counsel for the D1-Bank would submit by producing a photocopy of the proceedings dated 19.05.2009 of the recovery officer that in stricto sensu, the procedure adopted for attaching and sale of the suit properties of the plaintiffs have been adopted and it is not open for the plaintiffs to challenge it here and it is open for them to challenge it only before the DRT as per law as the Hon’ble Apex Court also held that DRT alone could set aside the sale and give back the properties to the person concerned, who seeks for setting aside the sales. As of now, I could see in the records placed before me that no communication or order sent as per Form No.DRO-4, Attachment of Immovable Property as per Sections 25 to 29 of the RDDBFI Act, 1993 r/w Rule 48 of the Second Schedule to the Income Tax Act, 1961 What was communicated as per Order dated 19.05.2009 is only a communication relating to sale; but attachment is entirely a different process. In the counter, the bank would plead that the properties were attached and sold but there is nothing to indicate or exemplify that such attachment was effected as per the records available before me. However, the learned counsel for the D1-Bank would correctly and appropriately highlight the fact that if there is valid creation of equitable mortgage, no attachment is required.
24. The learned counsel for the plaintiffs also is having no difference of opinion on such a proposition for the reason that if there is a valid creation of mortgage, attachment would be redundant. It is the contention of the plaintiffs there are no proper creation of valid mortgages at all. The bank cannot also put forth an argument that even de hors such alleged non creation of mortgages, the guarantors’ properties were sold properly, because the suit properties were not attached as claimed by them in their counter. This is also a significant point on which this court wants to rely on in passing this order.
25. The one other point, which has been brought to the knowledge of this court is that even though CBI registered an FIR as against various persons including the plaintiffs, they subsequently dropped the plaintiffs. The learned counsel for the D1- Bank would submit that D1 is going to file a protest petition. As of now, the plaintiffs have been dropped from the criminal case by the CBI concerned and that fact also lends support to the plaintiffs while seeking interim order so as to protect the further deterioration or erosion of their rights.
26. The learned Advocates for the purchasers would virtually adopt the arguments of the learned counsel for the D1-Bank and they further have cited the following decisions.
1. 1994 AIR (SC) 853 (S.P.Chengalvraya Naidu vs. Jagannath)
2. 2009(6) SCC 160 (Abdul Rahim and others vs. SK.Abdul Zabar and Others)
“19. A suit for cancellation of transaction whether on the ground of being void or voidable would be governed by Artcile 59 of the Limitation Act. The suit, therefore, should have been filed within a period of three years from the date of the knowledge of the fact that the transaction which according to the plaintiff was void or voidable had taken place. The suit having not been filed within a period of three years, the suit has rightly been held to be barred by limitation.”
3. 1996(7) SCC 767 (Noorul Hoda vs. Bibi Raifunnisa)
6. ” …………………… The starting point of limitation is the date of knowledge of the alleged fraud. When the plaintiff seeks to establish his title to the property which cannot be established without avoiding the decree or an instrument that stands as an insurmountable obstacle in his way which otherwise binds him, though not a party, the plaintiff necessarily has to seek a declaration and have that decree, instrument or contract cancelled or set aside or rescinded.
……………………………………………………………………..It would thus be clear that the word ‘person’ in Section 31 of the Specific Relief Act is wide enough to encompass a person seeking derivative title from his seller. It would, therefore, be clear that if he seeks avoidance of the instrument, decree or contract and seeks a declaration to have the decrees set aside or cancelled he is necessarily bound to lay the suit within three years from the date when the facts entitling the plaintiff to have the decree set aside, first became known to him”.
4. 2009-2L.W. (SC) 108 ( Janatha Textiles and others vs. Tax Recovery Officer and another)
“18. It is an established principle of law that in a third party auction purchasers’s interest in the auctioned property continues to be protected notwithstanding that the underlying decree is subsequently set aside or otherwise. This principle has been stated and re-affirmed in a number of judicial pronouncements by the Privy Council and this Court. ”
Placing reliance on those precedents, they would develop their arguments that the third party purchasers’ interest in the properties purchased by them in the auction sales conducted by the recovery officer should be protected even if those sales are to be set aside. At present, this court is not faced with a situation and this court also is not going to, in this order now set aside the sales already effected by the Recovery Officer and as such, their rights are not going to be affected substantially now.
27. Relating to the limitation point raised by the defendants, I would tentatively observe that in this case, the plaintiffs plea is that they did not create any mortgage and that they did not execute any guarantee document in favour of the Bank and in such a case, it is not known as to why, when they are challenging the very recovery certificate issued only in the year 2008, based on such, alleged documents executed by the plaintiffs in favour of the Bank, should ex facie and prima facie be termed as barred by limitation.
28. The question whether the plaintiffs ought to have filed the suit within three years from the date of knowledge of such alleged mortgage and guarantee is a serious point, which need not be decided at this stage, in view of the ratiocination adhered to above by me.
29. The learned counsel for the D1-Bank as well as the Advocates for the purchasers would vehemently argue by drawing the attention of this court to the writ petition filed by the plaintiffs, which was dismissed. A mere perusal of the affidavit accompanying the writ petition would clearly display and demonstrate that earlier in the year 2005, the writ petition was filed by the plaintiffs’ challenging the validity of the SARFAESI Act and they have not highlighted anything about the alleged fraud committed by the first plaintiff’s husband and his relatives.
30. Relating to suppression of facts relating to the previous writ petitions, the learned counsel for the plaintiffs would submit that merely because in the writ petition itself, they did not challenge the voidity of the alleged mortgages and the guaranteeship they are precluded from filing the suit. As such, mere non-prayer in the earlier writ petition or not setting out all those details about the voidity of the alleged guaranteeship and the mortgage, cannot be taken as a ground to throw away these applications at this stage itself.
31. Concerning the contentions of the defendants that suppression of material facts in the plaint as well as in the affidavits in addition to this suit being barred by limitation, I would observe that certainly there are laches on the part of the plaintiffs. I recollect the following maxim:
Vigilantibus et non dormientibus jura subveniunt – The laws aid those who are vigilant, not those who sleep upon their rights.
Based on that alone, whether the interim applications seven in number could be dismissed, is the short question that arises. I am of the considered view that because of the laches and the conduct of the defendants, naturally they have to be imposed with certain conditions and they cannot take as a matter of course that they can get interim order without any condition. Hence, I am of the view that at least to the extent of half of the amount as mentioned in the recovery certificate issued by DRT, the plaintiffs’ should be ordered to furnish security either as Bank guarantee or deposit of cash in this court on or before 16.11.2009 as otherwise, the benefit extended as per this order shall stand vacated.
32. I am of the firm view that no Receiver need be appointed for the reason that proceedings are pending before the DRT and also before this court and there are serious issues to be decided and moreover third party purchasers also are in possession of the respective properties purchased by them and this court can only restrain the purchasers, viz., defendants 4, 6 and 10 from alienating or encumbering in any manner further the property without the permission of this court, pending disposal of the suit.
33. Accordingly the following order is passed:
The sale intended to be conducted in respect of the “C” Schedule property of the plaint can be conducted by the Recovery Officer but no sale certificate shall be issued and the sale shall not be confirmed and no possession of it there under shall also be taken. Regarding the other items of the suit properties, the purchasers who are in possession shall not encumber or alienate the properties in any manner, without the permission of this court pending disposal of the suit. Accordingly, the plaintiffs’ shall furnish security to the extent of half of the amount as mentioned in the recovery certificate issued by DRT either as Bank guarantee or deposit of cash in this court on or before 16.11.2009 as otherwise, the benefit extended as per this order shall stand vacated automatically.
34. The learned counsel for the Bank would make an extempore submission that since DRT is seized of the matter, DRT may be directed to pass order without referring to the observations made by this court in this order. I could see considerable force in the submission made by the learned counsel for the D1-Bank and accordingly the DRT is at liberty to deal with the application pending before it, without referring to this court’s order.
Vj2
