UCO BANK vs Ms Veer Industries Partnership Firm on 5 October 2026

ORDER

1. 1. The appellant filed O.A. bearing No.78/2026 titled as **UCO Bank V M/s Veer Industries Jain and others** (hereinafter referred to as '**Original Application**') which is stated to be pending before DRT-I, Delhi. The respondent no.5/Usha Rani Jain being a third-party filed an application bearing I.A. No.1662/2026 for recall/review/modification of the order dated 12.02.2026 passed by the DRT-I, Delhi (herein after referred to as '**DRT**') qua the property being built-up residential floors, ground plus three floors in property bearing no. C-519, Yojna Vihar, Shakarpur, Delhi (hereinafter referred to as '**the subject property**').

2. 2. The relevant facts are that the respondent no 1 (the defendant no.1 in the Original Application) with the respondent no 2 and 3 (the defendant no. 2 and 3 in the Original Application) as its partner approached the appellant for grant of cash credit working capital limit and the appellant had sanctioned a working capital cash limit of Rs.250 lacs to the respondent no 1 vide sanction letter dated 29.03.2014. The loan was also secured by hypothecation of stocks, goods, receivable etc. lying and stored at the factory site of the respondent no 1 at 421-F, Plot no.48, Gali No.8, Friends Colony, G.T. Road Shahdara (hereinafter referred to as '**the mortgaged property**') and the collateral security was also created of equitable mortgage by deposition of original title deeds of the mortgage property by the respondent no 2 being the absolute owner. The respondent no 1 also executed various loan agreements/security/guaranteed documents dated 19.05.2014. The respondents no.2 and 3 stood as personal guarantors by execution of necessary documents. The Cash Credit Limit was enhanced to Rs.400 lacs vide sanction letter dated 24.08.2015. The necessary documents were also executed by the respondent no.1 to 3. The CC Limit was further increased to Rs.470 lacs vide sanction letter dated 18.11.2016 on execution of necessary documents by the respondents no 1 to 3. The CC Limit was further increased to Rs.575 lacs on execution of requisite documents by the respondents no 1 to 3. Thereafter, CC Limit was increased to Rs.800 lacs on execution of necessary documents by the respondents no 1 to 3. The CC Limit on the request of respondent no.1 was reduced to Rs.675 which included CC Limit of Rs.575 lacs and BG Limit of Rs.100 lacs vide sanction letter dated 26.09.2019 on execution of requisite documents. The appellant further modified the credit limit of the respondent no.1 and sanctioned the CC Limit of Rs.575 lacs with additional term loan facilities of Rs.115 lacs and also enhanced the BG Limit from Rs.100 lacs to Rs.225 lacs. Accordingly, the appellant has sanctioned the total of Rs.915 lacs in favour of the respondent no 1 vide sanction letter dated 30.12.2020 on execution of requisite documents. The appellant ultimately has enhanced the CC Limit from Rs.800 lacs to Rs.925 lacs inclusive of BG Limit of Rs.225 lacs and GECL Term Loan of Rs.115 lacs totally Rs.925 lacs vide sanction letter on execution of documents. The officials of the appellant used to visit the factory site of the respondent no 1 but on 03.07.2025 during the visit found that no store was lying at the factory site of the respondent no.1 which the respondent no 1 and other respondents have failed to explain. The respondents have committed default with the appellant. The respondents no 1 to 3 had diverted funds from CC Loan account bearing no.06080510000168 maintained with the appellant to their separate housing loan account maintained with the respondent no 4 and continuously transferred a monthly EMI of Rs.8,23,354/- from the CC account of the appellant into the housing loan account maintained with the respondent no 4 from 05.07.2024 and as such had transferred crore of rupees to the respondent no 4. The respondents no 1 to 3 as such have used the CC Limit for constructing and building the residential property i.e. the subject property. The CC account was classified as NPA on 02.12.2025. The appellant issued the demand notice dated 12.12.2025 under section 13(2) of the SARFAESI Act and called the respondents no 1 to 3 to clear the outstanding dues of Rs.9,46,11,273.52 inclusive of interest. The appellant being aggrieved filed the present Original Application for recovery of Rs.9,19,58,548/- against the respondents no 1 to 3. The appellant also claimed the interim relief in para-7(a) and 7(b) for passing an order restraining the respondent no.4/defendant no.4 and respondents no 1 to 3 from dealing, selling, transferring, alienating or creating any third-party interest in the subject property and the

--- mortgaged property with permission to sell these properties for satisfaction of outstanding.

3. DRT vide order dated 12.02.2026 after hearing argument on behalf of the appellant allowed the interim prayer as per para-7(a) and 7(b) of the Original Application and the respondents were restrained from selling, alienating, transferring or creating any third-party interest in respect of the mortgage properties/hypothecated assets-stocks till further order of DRT. The relevant portion of order dated 12.02.2026 is reproduced as under:

**7. Looking into the facts & circumstances of the OA, prayers at para no. 7(a)(b) of OA is allowed to the extent that the defendants are restrained from selling, alienating, transferring or creating and third party interest in respect of the mortgaged properties/ hypothecated assets, stocks till further orders of this Tribunal.**

4. The respondent no.5 being aggrieved vide order dated 12.02.2026 filed interim application bearing I.A. No.1662/2026 for seeking review/recall/modification of the order dated 12.02.2026 qua the subject property. The respondent no.5 pleaded that the respondent no.5 was neither the borrower, nor the guarantor, nor the mortgagor of the appellant and not involved with the appellant in any manner. The subject property belongs to the respondent no.5 being the lawful owner in possession since 10.12.1991 vide conveyance deed dated 19.06.1997 executed by DDA in favour of the respondent no 5. The respondent no 5 mortgaged the subject property with the respondent no 4 since 09.11.2011 for securing credit facilities sanctioned by the respondent no 4 and renewed and enhanced from time to time. The respondent no 5 is maintaining the loan account with the respondent no.4 without any default in repayment. The respondent no 5 to liquidate outstanding dues of the respondent no 4 intended to dispose of the subject property and accordingly, collaborated one Kunal Verma for re-development of the property floor wise. The appellant does not have any legal right, title or interest in the subject property and as such the order dated 12.02.2026 passed by DRT, is liable to be recalled.

5. The appellant filed reply to the application and pleaded that the respondent no 5 is a stranger to the Original Application and as such cannot seek review/recall/modification of the order dated 12.02.2026 passed by DRT in respect of the subject property. The appellant still has to recover the remaining dues from

--- the respondents no 1 to 3 even after selling the mortgage property to the highest bidder M/s Aadvik Geomin Private Limited in the public auction held on 15.04.2026 for a sum of Rs.6,00,17,000/-. The respondent no 5 is guilty of latches by not becoming a party in the present O.A. The respondent no 4 is the wife of the respondent no 2 who is managing partner of the respondent no.1 and is in hand-in-glove with the respondent no 2. The CC loan account of the respondent no 1 with the appellant has become NPA on 02.12.2025 with more than Rs.9 crores recoverable from the respondents no 1 to 3 and due to this reason, the appellant has sought attachment of the immovable properties. The officials of the appellant visited the factory site of the respondent no 1 on 03.07.2025 and found no stock was lying at the factory site of the respondent no 1 which could not be explained by the respondents no 1 to 3. The respondents no 1 to 3 after availing the credit limits of Rs.925 lacs have committed theft of the hypothecated stocks which is a serious criminal offence. The respondents no 1 to 3 also shifted their business operation from manufacturing activity to trading activity. The respondents no 1 to 3 have diverted the CC loan A/c No.06080510000168 maintained with the appellant to separate housing loan account with respondent no 4 for raising construction on the subject property. The respondents no 1 to 3 have taken the credit from respondent no 4 by creating an EMTD of the subject property in favour of the respondent no 4. The property was constructed and developed from the diversion of CC Limits granted by the appellant and due to this reason, the appellant has sought attachment of the subject property for the recovery of pending dues as claimed in the Original Application as the value of the mortgaged property was not sufficient to recover the entire dues of the appellant bank. The appellant in the reply also mentioned various facts as stated in different paragraphs of the Original Application. It was prayed that the application may be dismissed.

6. DRT vide order dated 01.08.2026 (hereinafter referred to as '**impugned order**') allowed the application bearing no.1662/2026 by observing that the respondent no 4 has validly mortgaged the subject property with the respondent no 4 and the respondent no 1 has failed to establish that it has any right, title and interest over the subject property. DRT accordingly, modified the interim order dated 12.02.2026 to the extent that the interim relief granted by para-7(b) of the O.A. towards the subject property was recalled which was ordered to be read after modification as under:

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**7. Looking into the facts & circumstances of the OA, prayers at para no. 7(a) of OA is allowed to the extent that the defendants are restrained from selling, alienating, transferring or creating and third-party interest in respect of the mortgaged properties/ hypothecated assets-stocks till further orders of this Tribunal.**

7. Sh. Rajesh Rattan, Advocate for the appellant argued that the respondent no 1 is a partnership firm with respondents no 2 and 3 as its partner. The respondent no 1 has availed the Cash Credit Limit, Term Loan Limit and Bank Guarantee Limits for the manufacture of copper wire, cables, etc which was enhanced to Rs.925 lakhs vide sanction letter dated 30.03.2024. The credit limits were secured by hypothecation of stocks, goods, receivables lying and stored at the factory site of the respondent no 1 and equitable mortgage by deposit of title deeds of the property bearing no.421-F, Plot No.48, Gali No.8, Friends Colony G.T Road, Shahdara, Delhi by the respondent no 2 who was the owner of the said property, as collateral security. Sh. Rajesh Rattan further argued that the officials of the appellant visited the site of the factory unit of the respondent no 1 on 03.07.2025 and found that all the hypothecated stocks were removed by the respondents no 1 to 3 and they could not give any explanation and in utter violation of sanction terms of credit limits also shifted their business operations. The respondents no 1 to 3 have diverted huge amount from the CC loan account bearing no.06080510000168 maintained with the appellant which was sanctioned for their business operations to a separate loan account maintained with the respondent no 4. The respondents no 1 to 3 have continuously transferred EMI of Rs.8,23,354.00 from the CC Account of the appellant to their separate loan account maintained with the respondent no 4 from 05.07.2024 till 05.09.2025. It was further argued that the respondents no 1 to 3 have taken a separate loan from the respondent no 4 for constructing and developing the subject property and mortgaged the subject property with the respondent no 4. It was vehemently argued that the respondents no 1 to 3 have used the loan amount granted by the appellant in repaying the loan taken by them from the respondent no 4 and also referred the statement of CC Loan Account reflecting transfer of funds to separate loan account with respondent no 4.

7.1 It was further argued that the appellant vide recall notice dated 04.12.2025 had also taken legal proceedings under the SARFAESI Act. The appellant has prayed for the attachment of the subject property though the same was mortgaged with the

--- respondent no 4. The respondent no 5 despite being aware of the interim order dated 12.02.2026 filed the present application under disposal without being impleaded as necessary party. It was prayed that the present appeal may be allowed and the impugned order be set aside.

8. Sh. Ravi Data, Advocate for the respondents no 1 to 3 besides mentioning factual position argued that the appellant has failed to establish nexus between the alleged debit entries in the cash credit account and acquisition/construction of the subject property. It was further argued that there is no material on the record to establish that the title of the subject property was created from the funds out of the cash credit limit sanctioned by the appellant in favour of the respondents no 1 to 3. The subject property was never mortgaged in favour of the appellant and further no charge has ever been created in favour of the appellant. The appellant cannot treat the subject property as security even if there are outstanding dues against the respondents no 1 to 3 out of their loan account. There was no diversion of funds as alleged by the appellant. Sh. Data also argued that there was no material to establish any fraud and conspiracy among the respondents. It was prayed that the present appeal be dismissed.

9. Sh. Sanjeev Bhandari, Senior Advocate for the respondent no 5 argued that the subject property is owned by the respondent no 5 and the subject property was never mortgaged with the appellant and no security interest has ever been created in favour of the appellant. The respondent no 5 is having the registered title in respect of the subject property since 19.06.1997 and was mortgaged with the respondent no 4 since 09.11.2011. The respondent no 5 is not the borrower of the respondent no 4 but only the mortgagor or guarantor of the respondent no 4. The appellant has not made any averment against the respondent no 5 in O.A. The respondent no 4 is having custody of the original documents pertaining to the subject property pursuance to the creation of mortgage. It was further argued that the subject property was not offered as collateral security to the appellant. The respondent no 5 did not use the funds from the cash credit limit sanctioned in favour of the respondent no 1 to 3 for acquiring or constructing the subject property. There was no nexus between the alleged diversion as claimed by the appellant and the subject property. It was prayed that the present appeal be dismissed and the impugned order be upheld.

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10. Sh. Jishnu Bhardwaj, Advocate for the respondent no 4 argued that the allegations as made by the appellant against the respondent no 4 are misconceived and no relief can be granted against the respondent no 4. The respondents no 1 to 3 and the respondent no 5 approached the respondent no 4 on 29.07.2023 for grant of loan against the subject property and a loan of Rs.8 crore was sanctioned vide sanction letter dated 22.08.2023 on execution of documents on 24.08.2023. The loan facility was secured by deposit of titled documents creating an equitable mortgage over the subject property which is owned by the respondent no 5 and at present there is no outstanding dues against the respondents no 1 to 3 and respondent no 4. The subject property was never offered as security for loan facility allegedly advanced by the appellant. It was prayed that the present appeal be dismissed so far relief is sought to interfere with the right of interest of respondent no.4 in respect of the subject property.

11. It is reflecting that the appellant has filed Original Application bearing no.78/2026 titled as **UCO Bank V M/s Veer Industries Jain** which is pending before DRT-I, Delhi wherein the respondent no 5 was not impleaded as one of the parties. The respondent no 5 is the owner of the subject property which has been mortgaged with the respondent no 4. The respondents no 1 to 3 had availed the CC loan facility and also mortgaged the immovable property bearing no.421-F, Plot No.48, Gali No.8, Friends Colony G.T Road, Shahdara, Delhi measuring 433.50 sq. yards and the said property was put to auction and sold by the appellant under the SARFAESI Act to the highest bidder, namely, M/s Aadvik Geomin Private Limited in public auction held on 15.04.2026 for a sum of Rs.6,00,17,000/-. However, the outstanding dues against the respondents no 1 to 3 were stated to be more than Rs.9 crores as such the entire outstanding dues could not be recovered by selling the mortgaged property. The respondent no 5 is developing the subject property with one Kunal Verma. The respondents no 1 to 3 have not committed any default in the repayment of the loan stated to have been taken from the respondent no 4.

12. The appellant primarily contended and also argued by Sh. Rajesh Rattan, Advocate for the appellant argued that the respondent no 1, a partnership firm, availed enhanced Cash Credit Limit, Term Loan Limit and Bank Guarantee Limits of Rs. 925 lakhs vide sanction letter dated 30.03.2024 and credit limits were secured by hypothecation of stocks, goods, receivables lying and stored at the

--- factory site of the respondent no 1 and equitable mortgage of the mortgaged property by the respondent no 2. It was also contended on behalf of the appellant that the respondents no 1 to 3 have diverted huge amount from the CC loan account bearing no.06080510000168 maintained with the appellant to the respondent no 4 in a separate loan account and transferred EMI of Rs.8,23,354.00/- from the CC Account of the appellant to separate loan account maintained with the respondent no 4. Accordingly, the counsel for the appellant argued that the respondents no 1 to 3 have used the loan amount granted by the appellant in repaying the loan granted by the respondent no 4 and also referred the statement of CC Loan Account to reflect transfer of funds to separate loan account with respondent no 4. The appellant has already recalled loan vide recall notice dated 04.12.2025. However, contentions and arguments advanced of the appellant are without any legal basis particular in view of facts that the respondent no 5 is actual owner of the subject property and never mortgaged the subject property with the appellant. The subject property had never been subject of cash credit limit and loan transaction sanctioned in favour of the respondents no 1 to 3 by the appellant. If the respondents no 1 to 3 had transferred loan amount for satisfaction of the loan taken by the respondents no 1 to 3 from the respondent no 4 then no liability in shape of attachment can be fastened on the respondent no 5 qua the subject property. The subject property is under development by the respondent no 5 with Kunal Verma but without any involvement in cash credit facility granted by the appellant in favour of the respondents no 1 to 3. It is correct that the respondents no 1 to 3 had committed default in repayment of loan amount but the appellant has already initiated appropriate legal proceedings against the respondents no 1 to 3 as stated by the counsel for the appellant and in case of default by the respondents no 1 to 3, no liability can be fastened on the respondent no 5 qua the subject property. There is no legal force in the argument advanced on behalf of the appellant that the respondent no 5 was not a party to OA and as such cannot file application as order dated 12.02.2026 passed by the DRT directly affected the subject property which is owned by the respondent no 5 and never mortgaged with the appellant. Accordingly, contention and arguments advanced on behalf of the appellant cannot be legally accepted.

13. There is factual and legal force in argument advanced by Sh. Ravi Data, Advocate for the respondents no 1 to 3 that the appellant has failed to establish nexus between the alleged debit entries in the cash credit account and acquisition/construction of the subject property and nothing on record to establish that the title of the subject property was created from the funds out of the cash credit limit sanctioned by the appellant in favour of the respondents no 1 to 3. Sh. Ravi Data rightly argued that the subject property was never mortgaged in favour of the appellant and no charge has ever been created in favour of the appellant which is also not disputed on behalf of the appellant and further the subject property cannot be treated as security because of the fact that there are outstanding dues against the respondents no 1 to 3. Sh. Sanjeev Bhandari, Senior Advocate for the respondent no 5 also rightly argued that the respondent no 5 is owner of the subject property and was never mortgaged with the appellant but mortgaged with the respondent no 4 since 09.11.2011. It is also correct that the respondent no.5 has not taken loan from the respondent no 4 and only the mortgagor or guarantor with the respondent no 4. There is nothing on record to reflect that the respondent no 5 used the funds from the cash credit limit sanctioned in favour of the respondent no 1 to 3 for acquiring or constructing the subject property. Sh. Jishnu Bhardwaj, Advocate for the respondent no 4 also rightly stated and argued that the respondents no 1 to 3 and the respondent no 5 were granted a loan of Rs.8 crore vide sanction letter dated 22.08.2023 which was secured by creating an equitable mortgage over the subject property owned by the respondent no 5.

14. DRT was justified in passing the impugned order and has considered necessary facts while passing the impugned order. The arguments advanced on behalf of the appellant are misconceived and without any legal and factual basis and cannot be accepted. The appellant cannot be permitted to recover outstanding dues against the respondents no 1 to 3 by attachment of the subject property which is admittedly owned by the respondent no 5 and has never been subject of cash credit facility and other loan transactions granted in favour of the respondents no 1 to 3 by the appellant and no charge has ever been created in favour of the appellant qua the subject property. There is illegality and infirmity in the impugned order which may warrant any interference by this Tribunal. The present Appeal is without any basis, hence dismissed along with any application if pending.

Sd- ----- **(Dr. Justice Sudhir Kumar Jain)** **Chairperson**

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