$~2, 3 & 4
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 31st October, 2011
+ RFA (OS) 69/2011
RAM PRAKASH MEHRA ..... Appellant
Through: Mr.Jagjit Singh, Advocate
versus
UNION BANK OF INDIA & ORS. ..... Respondents
Through: Mr.Gautam Gupta for Aditya Madan,
Advocate for R-1
Mrs.Mala Goel and Mr.Yashpal Singh,
Advocates for R-6
RFA (OS) 70/2011
POONAM MALHOTRA ..... Appellant
Through: Mr.Jagjit Singh, Advocate
versus
UNION BANK OF INDIA & ORS. ..... Respondents
Through: Mr.Gautam Gupta for Aditya Madan,
Advocate for R-1
Mrs.Mala Goel and Mr.Yashpal Singh,
Advocates for R-6
RFA (OS) 71/2011
HARSH ARORA ..... Appellant
Through: Mr.Jagjit Singh, Advocate
versus
RFA (OS) 69/2011, 70/2011 & 71/2011 Page 1 of 18
UNION BANK OF INDIA & ORS. ..... Respondents
Through: Mr.Gautam Gupta for Aditya Madan,
Advocate for R-1
Mrs.Mala Goel and Mr.Yashpal Singh,
Advocates for R-6
CORAM:
HON'BLE MR. JUSTICE PRADEEP NANDRAJOG
HON'BLE MR. JUSTICE S.P.GARG
1. Whether the Reporters of local papers may be allowed
to see the judgment?
2. To be referred to Reporter or not?
3. Whether the judgment should be reported in the Digest?
PRADEEP NANDRAJOG, J. (Oral)
1. Three suits pertaining to the basement, ground floor
and second floor of property bearing Municipal No.S-455,
Greater Kailash, Part-I, New Delhi, seeking a declaration that
Sh.Krishan Gopal Sharma was neither the owner nor had any
right to create a mortgage on 21.12.1989 in respect of property
No.S-455, Greater Kailash, Part-I, New Delhi and as a
consequence declare void the notice (undated) issued by the
Union Bank of India under Sub-Section 4 of Section 13 of the
Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act 2002 and decree for
injunction to restrain the bank from proceeding further with the
sale of the property have been held to be barred by virtue of
Section 34 of the Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act 2002.
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2. Section 34 of Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest Act 2002
reads as under:-
“34. Civil Court not to have jurisdiction
No civil court shall have jurisdiction to entertain any
suit or proceeding in respect of any matter which a
Debts Recovery Tribunal or the Appellate Tribunal is
empowered by or under this Act to determine and no
injunction shall be granted by any court or other
authority in respect of any action taken or to be taken
in pursuance of any power conferred by or under this
Act or under the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993.”
3. A bare perusal of the language of Section 34 noted
above would reveal that it bars the jurisdiction of a civil court, to
entertain a suit, in respect of any matter which the Debts
Recovery Tribunal or the Appellate Tribunal constituted under
the Act is empowered to so determine. Thus, our job is to see
whether the subject matter of the suit(s) filed by the appellants
embraced a subject matter belonging to the jurisdiction of the
Debts Recovery Tribunal.
4. Since acts of omission or commission give birth to
litigation, we note the relevant facts.
5. DLF Housing & Construction Pvt. Ltd. (hereinafter
referred to as „DLF‟) obtained a license from the Municipal
Corporation of Delhi to develop a parcel of land in South Delhi
and sell plots therein. The developed land was named Greater
Kailash Part-I and Greater Kailash Part-II and the plot of land
bearing No.S-455 Greater Kailash Part-I was sold by DLF, under a
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sale deed dated 4.6.1964, in favour of Sh.Jai Narain Seth and
Sh.Sharan Jeet Singh who became the free-hold owners of the
land in question.
6. On 5th February 1966 Jai Narain Seth sold his half-
share in Plot No.S-455 Greater Kailash Part-I to his co-owner i.e.
Sharan Jeet Singh. The sale deed stands registered as
Document No.1144, Additional Book No.1, Vol. No.1471 at pages
153 to 155 and the date of registration is 19th February 1966.
7. On 9th June 1989 by and under a sale deed of even
date Sharan Jeet Singh sold the land to Rajesh Khurana and the
sale deed is registered as Document No.5026, Additional Book
No.1, Volume No.6437 at pages 152-201 dated 9th June 1989.
8. Rajesh Khurana obtained a sanction from the
Municipal Corporation of Delhi to construct a building on the plot
and completed construction and obtained completion certificate
No.332/CC/90 dated 12th March 1991 from the Municipal
Corporation of Delhi. The building constructed consisted of a
basement, a ground floor with mezzanine, a first floor and a
second floor.
9. Thereafter, under different sale deeds executed on
different dates in the months of February and March 1992 and
August 1991, Rajesh Khurana sold different portions of the
property to different persons and ultimately the three appellants
purchased the basement, the ground floor and the second floor
respectively.
10. This is the line of title flowing, commencing from DLF
and the first purchasers under DLF being Jai Narain Seth and
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Sharan Jeet Singh. Title is derived by the appellants in the
manner aforesaid and suffice would it be to state that having
executed the sale deed dated 5th February 1966 conveying his
half share in the land to his co-owner Sh.Sharan Jeet Singh, as
per the appellants, Jai Narain Seth was left with no right, title or
interest in the land.
11. On 21st December 1989, one Krishan Gopal deposited
a sale deed executed on 5th January 1979, bearing registration
No.1144, Additional Book No.1, Volume No.1471 at pages 45-47
with the Sub-Registrar Delhi in respect of a loan granted by the
Union Bank of India to S.K.Trading Company of which Krishan
Gopal Sharma was alleged to be the proprietor thereof. It may
be highlighted that the registration particulars as per sale deed
dated 5th January 1979 are the same as are of the sale deed
dated 5th February 1966 whereunder Jai Narain Seth conveyed
his half share in the plot to the co-owner Sh.Sharan Jeet Singh.
12. There being default in the loan advanced to
S.K.Trading Company, the bank proceeded under Section 13 of
the Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act 2002 and as per the
mandate of sub-section (2) thereof left an undated notice at the
building on 11th May 2001 recording therein that Krishan Gopal
Sharma, as owner of the property had mortgaged the same to
the Union Bank of India and there being outstanding dues, the
bank would be proceeding to sell the mortgaged property.
13. Attempts by the appellants to satisfy the bank that it
had been cheated by Krishan Gopal Sharma failing in the bank
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to withdraw the notice issued, resulted in the three appellants
filing three identical suits praying for identical decrees, in
relation to different portions of the building purchased by them.
14. Without issuing summons in the suit, at the ex-parte
hearing, i.e. the very first day when the suits were listed before
Court, the learned Single Judge held that the bar of Section 34 of
the Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act 2002 rendered the plaints
to be rejected.
15. Clause (f) of sub-section (1) of Section 2 of the
Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act 2002 defines a „borrower‟
as under:-
“(f) “borrower” means any person who has been
granted financial assistance by any bank or financial
institution or who has given any guarantee or created
any mortgage or pledge as security for the financial
assistance granted by any bank or financial institution
and includes a person who becomes borrower of a
securitisation company or reconstruction company
consequent upon acquisition by it of any rights or
interest of any bank or financial institution in relation
to such financial assistance;
16. A bare perusal of the definition of the word „borrower‟
would show that a borrower would be a person who has been
granted financial assistance by a bank or a financial institution
or a person who has given guarantee or created a mortgage or
pledge as security for the financial assistance granted and
would include a person who becomes borrower of a
securitization company or reconstruction company consequent
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upon acquisition by it of any rights or interest of any bank or
financial institution in relation to such financial assistance.
17. Under the General Law of Devolution of Interest upon
death of a person, a borrower would include the legal
representative of a person who would be a borrower as per the
definition of the said word in the statute.
18. Section 13 of the Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest Act 2002
governs the procedure to be followed in enforcing a security. It
reads as under:-
“13. Enforcement of security interest
(1) Notwithstanding anything contained in section 69
or section 69A of the Transfer of Property Act, 1882,
any security interest created in favour of any secured
creditor may be enforced, without the intervention of
court or tribunal, by such creditor in accordance with
the provisions of this Act.
(2) Where any borrower, who is under a liability to a
secured creditor under a security agreement, makes
any default in repayment of secured debt or any
instalment thereof, and his account in respect of such
debt is classified by the secured creditor as non-
performing asset, then, the secured creditor may
require the borrower by notice in writing to discharge
in full his liabilities to the secured creditor within sixty
days from the date of notice failing which the secured
creditor shall be entitled to exercise all or any of the
rights under sub section (4).
(3) The notice referred to in sub-section (2) shall give
details of the amount payable by the borrower and the
secured assets intended to be enforced by the secured
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creditor in the event of non-payment of secured debts
by the borrower.
(3A) If, on receipt of the notice under sub-section (2),
the borrower makes any representation or raises any
objection, the secured creditor shall consider such
representation or objection and if the secured creditor
comes to the conclusion that such representation or
objection is not acceptable or tenable, he shall
communicate within one week of receipt of such
representation or objection the reasons for non-
acceptance of the representation or objection to the
borrower:
PROVIDED that the reasons so communicated or the
likely action of the secured creditor at the stage of
communication of reasons shall not confer any right
upon the borrower to prefer an application to the
Debts Recovery Tribunal under section 17 or the Court
of District Judge under section 17A.
(4) In case the borrower fails to discharge his liability
in full within the period specified in sub-section (2), the
secured creditor may take recourse to one or more of
the following measures to recover
his secured debt, namely:–
(a) take possession of the secured assets of the
borrower including the right to transfer by way of
lease, assignment or sale for realising the secured
asset;
(b) take over the management of the business of the
borrower including the right to transfer by way of
lease, assignment or sale for realising the secured
asset:
PROVIDED that the right to transfer by way of lease,
assignment or sale shall be exercised only where theRFA (OS) 69/2011, 70/2011 & 71/2011 Page 8 of 18
substantial part of the business of the borrower is held
as security for the debt:
PROVIDED FURTHER that where the management of
whole of the business or part of the business is
severable, the secured creditor shall take over the
management of such business of the borrower which
is relatable to the security for the debt.
(c) appoint any person (hereafter referred to as the
manager), to manage the secured assets the
possession of which has been taken over by the
secured creditor;
(d) require at any time by notice in writing, any
person who has acquired any of the secured assets
from the borrower and from whom any money is due
or may become due to the borrower, to pay the
secured creditor, so much of the money as is sufficient
to pay the secured debt.
(5) Any payment made by any person referred to in
clause (d) of sub-section (4) to the secured creditor
shall give such person a valid discharge as if he has
made payment to the borrower.
(6) Any transfer of secured asset after taking
possession thereof or take over of management under
sub-section (4), by the secured creditor or by the
manager on behalf of the secured creditor shall vest in
the transferee all rights in, or in relation to, the
secured asset transferred as if the transfer had been
made by the owner of such secured asset.
(7) Where any action has been taken against a
borrower under the provisions of sub-section (4), all
costs, charges and expenses which, in the opinion of
the secured creditor, have been properly incurred by
him or any expenses incidental thereto, shall be
recoverable from the borrower and the money which is
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received by the secured creditor shall, in the absence
of any contract to the contrary, be held by him in
trust, to be applied, firstly, in payment of such costs,
charges and expenses and secondly, in discharge of
the dues of the secured creditor and the residue of the
money so received shall be paid to the person entitled
thereto in accordance with his rights and interests.
(8) If the dues of the secured creditor together with all
costs, charges and expenses incurred by him are
tendered to the secured creditor at any time before
the date fixed for sale or transfer, the secured asset
shall not be sold or transferred by the secured
creditor, and no further step shall be taken by him for
transfer or sale of that secured asset.
(9) In the case of financing of a financial asset by more
than one secured creditors or joint financing of a
financial asset by secured creditors, no secured
creditor shall be entitled to exercise any or all of the
rights conferred on him under or pursuant to sub-
section (4) unless exercise of such right is agreed
upon by the secured creditors representing not less
than three-fourth in value of the amount outstanding
as on a record date and such action shall be binding
on all the secured creditors:
PROVIDED that in the case of a company in liquidation,
the amount realised from the sale of secured assets
shall be distributed in accordance with the provisions
of section 529A of the Companies Act, 1956:
PROVIDED FURTHER that in the case of a company
being wound up on or after the commencement of this
Act, the secured creditor of such company, who opts
to realise his security instead of relinquishing his
security and proving his debt under proviso to sub-
section (1) of section 529 of the Companies Act, 1956
(1 of 1956), may retain the sale proceeds of his
secured assets after depositing the workmen’s dues
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with the liquidator in accordance with the provisions of
section 529A of that Act:
PROVIDED ALSO that the liquidator referred to in the
second proviso shall intimate the secured creditors the
workmen’s dues in accordance with the provisions of
section 529A of the Companies Act, 1956 and in case
such workmen’s dues cannot be ascertained, the
liquidator shall intimate the estimated amount of
workmen’s dues under that section to the secured
creditor and in such case the secured creditor may
retain the sale proceeds of the secured assets after
depositing the amount of such estimated dues
with the liquidator:
PROVIDED ALSO that in case the secured creditor
deposits the estimated amount of workmen’s dues,
such creditor shall be liable to pay the balance of the
workmen’s dues or entitled to receive the excess
amount, if any, deposited by the secured creditor with
the liquidator:
PROVIDED ALSO that the secured creditor shall furnish
an undertaking to the liquidator to pay the balance of
the workmen’s dues, if any.
Explanation : For the purposes of this sub-section,–
(a) “record date” means the date agreed upon by the
secured creditors representing not less than three-
fourth in value of the amount outstanding on such
date;
(b) “amount outstanding” shall include principal,
interest and any other dues payable by the borrower
to the secured creditor in respect of secured asset as
per the books of account of the secured creditor.
(10) Where dues of the secured creditor are not fully
satisfied with the sale proceeds of the secured assets,
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the secured creditor may file an application in the
form and manner as may be prescribed to the Debts
Recovery Tribunal having jurisdiction or a competent
court, as the case may be, for recovery of the balance
amount from the borrower.
(11) Without prejudice to the rights conferred on the
secured creditor under or by this section, the secured
creditor shall be entitled to proceed against the
guarantors or sell the pledged assets without first
taking any of the measures specified in clauses (a) to
(d) of sub-section (4) in relation to the secured assets
under this Act.
(12) The rights of a secured creditor under this Act
may be exercised by one or more of his officers
authorised in this behalf in such manner as may be
prescribed.
(13) No borrower shall, after receipt of notice referred
to in sub-section (2), transfer by way of sale, lease or
otherwise (other than in the ordinary course of his
business) any of his secured assets referred to in the
notice, without prior written consent of the secured
creditor.”
19. The amended Section, with the amendments carried out in
light of the decision of the Supreme Court reported as 2004 (4)
SCC 311 Mardia Chemical Ltd. & Ors. vs. UOI & Ors., vide sub-
section (2) thereof, obliges the secured creditor to serve a
notice upon the borrower to discharge full liability within 60 days
failing which the secured creditor would be entitled to take
recourse to sub-section (4) of Section 13 i.e. take possession of
the secured asset and sell the same. Vide sub-section (3A) the
borrower has a right to represent against the proposed action. If
aggrieved, a right of appeal has been conferred under Section
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17 of the Securitization and Reconstruction of Financial Assets
and Enforcement of Security Interest Act 2002 and we note the
same. It reads as under:-
“17. Right to appeal
(1) Any person (including borrower), aggrieved by any
of the measures referred to in sub-section (4) of
section 13 taken by the secured creditor or his
authorised officer under this Chapter, may make an
application alongwith such fee, as may be prescribed
to the Debts Recovery Tribunal having jurisdiction in
the matter within forty-five days from the date on
which such measure had been taken:
PROVIDED that different fees may be prescribed for
making the application by the borrower and the
person other than the borrower.
Explanation : For the removal of doubts, it is hereby
declared that the communication of the reasons to the
borrower by the secured creditor for not having
accepted his representation or objection or the likely
action of the secured creditor at the stage of
communication of reasons to the borrower shall not
entitle the person (including borrower) to make an
application to the Debts Recovery Tribunal under this
sub-section.
(2) The Debts Recovery Tribunal shall consider
whether any of the measures referred to in sub-
section (4) of section 13 taken by the secured creditor
for enforcement of security are in accordance with the
provisions of this Act and the rules made thereunder.
(3) If, the Debts Recovery Tribunal, after examining
the facts and circumstances of the case and evidence
produced by the parties, comes to the conclusion that
any of the measures referred to in sub-section (4) of
section 13, taken by the secured creditor are not in
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accordance with the provisions of this Act and the
rules made thereunder, and require restoration of the
management of the business to the borrower or
restoration of possession of the secured assets to the
borrower, it may by order, declare the recourse to any
one or more measures referred to in sub-section (4) of
section 13 taken by the secured creditors as invalid
and restore the possession of the secured assets to
the borrower or restore the management of the
business to the borrower, as the case may be, and
pass such order as it may consider appropriate and
necessary in relation to any of the recourse taken by
the secured creditor under sub-section (4) of section
13.
(4) If, the Debts Recovery Tribunal declares the
recourse taken by a secured creditor under sub-
section (4) of section 13, is in accordance with the
provisions of this Act and the rules made thereunder,
then, notwithstanding anything contained in any other
law for the time being in force, the secured creditor
shall be entitled to take recourse to one or more of the
measures specified under sub-section (4) of section 13
to recover his secured debt.
(5) Any application made under sub-section (1) shall
be dealt with by the Debts Recovery Tribunal as
expeditiously as possible and disposed of within sixty
days from the date of such application:
PROVIDED that the Debts Recovery Tribunal may, from
time to time, extend the said period for reasons to be
recorded in writing, so, however, that the total period
of pendency of the application with the Debts
Recovery Tribunal, shall not exceed four months from
the date of making of such application made under
sub-section (1).
(6) If the application is not disposed of by the Debts
Recovery Tribunal within the period of four months as
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specified in sub-section (5), any part to the application
may make an application, in such form as may be
prescribed, to the Appellate Tribunal for directing the
Debts Recovery Tribunal for expeditious disposal of
the application pending before the Debts Recovery
Tribunal and the Appellate Tribunal may, on such
application, make an order for expeditious disposal of
the pending application by the Debts Recovery
Tribunal.
(7) Save as otherwise provided in this Act, the Debts
Recovery Tribunal shall, as far as may be, dispose of
the application in accordance with the provisions of
the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 and the rules made thereunder.”
20. Suffice would it be to state that the right of appeal has
been conferred upon any person and includes the borrower if
the grievance relates to a measure referred to in sub-section (4)
of Section 13.
21. Any person referred to in Section 17 would obviously
include a person other than the borrower and the question
would be whether this „any person‟ would include persons
placed in the position as the appellants find themselves i.e.
persons having no concern with the financial assistance given by
the bank.
22. Now, borrower as defined in the Act means not only the
person who has been granted financial assistance but includes a
person who has given a guarantee or created a mortgage and
since the definition of the word „borrower‟ is wide enough to
encompass persons other than the one who has availed the
financial assistance, „any person‟ referred to in Section 17 in
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whom the right of appeal is vested would obviously be a person
other than a borrower. (Borrower being a person defined in the
definition of the word „borrower‟).
23. Thus, at first blush it would appear that the view taken by
the learned Single Judge is correct, but we find that in para 51 of
the decision in Mardia Chemicals (Supra), fraud is one area,
where the Supreme Court has recognized continued vesting of
jurisdiction in a Civil Court.
24. On the facts of the instant case, Explanation-II to Section 3
of the Transfer of Property Act 1882 needs to be considered.
We note the same:-
“Explanation II. – Any person acquiring any immovable
property or any share or interest in any such property
shall be deemed to have notice of the title, if any, of
any person who is for the time being in actual
possession thereof.”
25. By the time the mortgage was created on 21.12.1989,
possession of the plot was with Rajesh Khurana and issue would
arise pertaining to his possessory rights being a deemed notice
of his interest in the property to the bank when the mortgage
was created on 21.12.1989 by Krishan Gopal Sharma.
26. The bank claims the mortgage being created on 21 st
December 1989 by deposit of the sale deed dated 5.1.1979,
registration particulars whereof, as noted by us herein-above,
would prima-facie evidence that it could not be so registered as
Document No.1144, Additional Book No.1, Volume No.1471, the
particulars of registration which it bears, for the reason these
are the registration particulars of the sale deed dated 5th
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February 1966 executed by Jai Narain Seth in favour of Sharan
Jeet Singh.
27. A serious issue, pertaining to a serious fraud arises on the
facts stated herein-above and we dwell no further lest we
prejudice either party at the trial as our endeavour is to note the
rival facts and see whether an issue pertaining to a fraud of a
serious kind arises for consideration in the suits filed by the
appellants.
28. Indeed, if the appellants prove at the trial, the sale deed
dated 5.2.1966 the same would evidence Jai Narain Seth being
left with no title in the subject property. With reference to the
registration particulars of the sale deed dated 5.1.1979, which
are the same as those of the sale deed dated 5.2.1966, upon
proof thereof, the apparent fraud could be brought to light and
this may include either lack of due diligence or complicity of an
officer of the bank inasmuch as a proper due diligent search of
the record of the Sub-Registrar Delhi would have made known to
the bank that the sale deed dated 5.1.1979 was a fraudulent
document.
29. The appellants are not claiming any title through the
borrower i.e. Krishan Gopal Sharma, in whose favour exists the
sale deed dated 5.1.1979 inasmuch as the sale deeds relied
upon by the appellants would evidence that the executant of the
sale deed dated 5.1.1979 i.e. Jai Narain Seth was left with no
title in the land on 5.2.1966. The appellants claim title through
Sharan Jeet Singh.
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30. We allow the appeals and set aside the impugned order
dated 31.5.2011. CS(OS) No.1405/2011, CS(OS) No.1406/2011
and CS(OS) No.1407/2011 are restored for adjudication on
merits and since the appeals restore the suit, plaint(s) which
were rejected being held to be barred by law, we direct 50%
Court Fee paid in appeal to be refunded to the appellants and
for which the Registry would issue the necessary certificate.
31. Since the three suit plaints were rejected ex-parte without
notice to the bank, we impose no costs.
32. The last mantra. Nothing stated by us herein above would
be treated as an expression on the merits of the rival claims.
We have noted the facts and reflected thereon to highlight the
issue of fraud which is surfacing and hence requiring a trial
before a Civil Court.
PRADEEP NANDRAJOG, J.
S.P.GARG, J.
OCTOBER 31, 2011
mm / dk
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