SOUTH INDIAN BANK vs JOBY K. MATHEW on 7 May 2018

FINAL ORDER

This Original Application has been filed under Section 19(1) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (for short ‘the Act’) for recovery of a sum of Rs.22,51,616/- with interest on the sum of Rs.22,47,903/- @9.50% per annum with monthly rests from defendants 1 and 2 jointly, severally and personally and by sale of the OA schedule property. BRIEF FACTS OF THE CASE

1. The 1st defendant requested for a housing loan of Rs.20 lakhs from the Pala Branch of the applicant bank for purchase of a ready built residential building at a cost of Rs.29 lakhs. Having considered the request of the defendants, the applicant bank vide communication dated 03.12.2004 sanctioned a housing loan of Rs.20 lakhs and the 2nd defendant is the co-obligant to the loan transaction. The 3rd defendant is a stranger to the transaction, but he put forward some interest in the mortgaged property alleging that the 1st defendant entered into a joint venture agreement with him to develop and sell the property to prospective buyers and hence he is impleaded in the party array as a formal party without seeking any personal relief.

2. It is the case of the applicant that as security for the housing loan of Rs.20 lakhs granted to the 1st defendant, on 03.12.2004 defendants 1 and 2 executed demand promissory notice for Rs.20 lakhs, interest/penal interest/service charges agreement and letter of authority to charge interest as per RBI directives in favour of the applicant bank. The 1st defendant deposited sale deed No.3010/2004 of Erattupetta SRO dated 03.12.2004 relating to the OA schedule property with the applicant bank’s Pala Branch on 24.12.2004 and executed a letter confirming the deposit of title deeds on 27.12.2004 with the intention to create security thereon in favour of the applicant bank.

3. It is submitted by the applicant that the 1st defendant having defaulted repayment of the amount due under the account and the account having been classified as NPA, the applicant issued notice under S.13(2) of the SARFAESI Act to the parties on 25.01.2007 calling upon them to pay the amount of Rs.20,60,967/- due under the housing loan account as on 25.01.2007 within 60 days from the date of receipt of the notice. On receipt of the notice, the 1st defendant filed a suit – OS No.605/2007 before the Munsiff Court, Ernakulam for injunction – to be filed by the 3rd defendant herein claiming that the 1st defendant had entered into an agreement with him in respect of the schedule property. The Hon’ble Vacation Judge passed an order of interim injunction restraining the applicant bank and the 1st defendant from alienating the schedule property and from taking possession of the same. The interim injunction so granted was vacated by the Munsiff Court on 02.11.2007 and ordered to return the plaint for want of territorial jurisdiction for presentation before proper Court. The 1st defendant instigated the said Mohammed Sahir to file W.P.(C) No.25167/2007 before the Hon’ble High Court of Kerala which is pending.

4. It is urged by the applicant that it caused a legal notice to the defendants on 26.09.2007 recalling the amount due under the housing loan account; but defendants 1 and 2 did not respond to the said notice. As per the account maintained by the applicant bank, there is a balance of Rs.22,51,616/- with subsequent interest @9.50% per annum with monthly rests is to be recovered from the defendants and their assets and by sale of the application schedule property. Interest/compound interest has been charged at such rates and capitalized at such periodical rests as are permitted by and do not run counter to the directives of RBI. The interest on penal interest would come to Rs.243/- which is deducted from the balance in the account and there is a total debit of Rs.3,713/- towards penal interest in the account and the same is excluded in claiming future interest.

5. Though defendants 1 and 2 were duly served with summons, they neither appeared nor were they represented and thus they were set exparte on 05.03.2009.

6. The 3rd defendant filed written statement contending inter alia that earlier a suit was filed before Ernakulam Civil Court and later transferred to Erattupetta Court and the same is pending consideration and that the two proceedings will not lie with regard to the same subject matter. Hence the OA proceedings are premature and is liable to be rejected. It is the case of the 3rd defendant that he had entered into joint venture and agreed to purchase the property and the possession was also handed over, but now on development of portion of property it was understood that strangers had taken peaceful possession over the property. The 1st defendant’s title itself is in dispute and there is no proper charge over the property and the entire mortgage is disputed.

7. It is submitted by the 3rd defendant that he is the owner of the property and he alone has the right and authority over the property. This defendant has moved W.P.(C) No.25167/2007 before the Hon’ble High Court of Kerala and the same is pending consideration and that multiplicity of proceedings is illegal. The loan application is dated 04.11.2004 and the OA has been filed after three years on 14.11.2007 and is clearly time barred. The actual crux of the matter has been suppressed and the applicant bank approached the Tribunal with unclean hands and the OA is liable to be dismissed. The creation of security is not according to law. The document dated 27.12.2004 has been signed by the same pen that of 03.12.2004 and with the same motion. Even before creation of mortgage, the bank got the letter for mortgage which is against law and there is no mortgage at all. This is against the provisions of Ss.55 and 58 of the Transfer of Property Act. Therefore, there is no legal mortgage in this case and the OA is only to be dismissed.

8. It is contended by the 3rd defendant that the statement of account is not at all correct. There is no proper cause of action and there is no authorization or Power of Attorney filed by the officer concerned and hence the proceedings are against law. This defendant is ready for negotiation with the bank for settlement under S.89 before Adalath. At any rate the OA is not maintainable and the same is only to be dismissed.

9. The evidence on the side of the applicant bank consists of the proof affidavit of its Senior Manager (AW1) and Exts.A1 to A9. Despite sufficient opportunity granted, the 3rd defendant has not filed any counter proof affidavit nor adduced any documentary evidence to substantiate his case.

10. Heard arguments and perused the records of the case. The following points arise for my consideration:

(i) Whether the applicant is entitled to get the reliefs prayed for in the OA?

(ii) What order?

Findings:

Point No.1: In affirmative Point No.2: As per order

Reasons:

11. On a conspectus of the pleadings and evidence available on record, the Tribunal could find that the 1st defendant was sanctioned a housing loan of Rs.20 lakhs as per Ext.A1 sanction communication dated 03.12.2004 for purchase of a ready built residential building along with the property having an extent of 29.50 cents of land comprised in Re-Sy.Nos.41/2 and 41/3 in Block No.47 of Erattupetta Village, and the 2nd defendant is the co-obligant to the loan transaction. As security for the aforesaid loan, on 03.12.2004 defendants 1 and 2 executed Ext.A2 demand promissory notice for Rs.20 lakhs, Ext.A3 interest/penal interest/service charges agreement and Ext.A4 letter of authority to charge interest as per RBI directives in favour of the applicant bank. As collateral security for the housing loan granted to the 1st defendant, he deposited Ext.A5 original sale deed No.3010/2004 dated 03.12.2004 in respect of the OA schedule property with the applicant bank’s Pala Branch, which is a notified centre, on 24.12.2004 and executed Ext.A6 letter dated 27.12.2004 confirming the deposit of the aforesaid title deed with the applicant bank on 24.12.2004 with intent to create security thereon in favour of the bank.

12. A perusal of the materials on record would divulge the fact that after availing the housing loan, the defendants 1 and 2

committed default in repayment of the loan and despite the applicant bank sent notices dated 22.12.2006 and 22.01.2007, they did not care to repay the loan amount. Simultaneously, the applicant bank initiated SARFAESI proceedings and issued demand notice under S.13(2) of the SARFAESI Act to defendants 1 and 2 and on receipt of the same, defendants 1 and 2 caused the 3rd defendant in the OA to file a suit for injunction before the Munsiff’s Court, Ernakulam and obtained injunction against the bank from alienating the property and also from taking possession of the same; and the interim injunction so granted was vacated by the Munsiff Court on 02.11.2007. Thereafter, the 3rd defendant filed W.P.(C) No.25167/2007 before the Hon’ble High Court of Kerala seeking reliefs against the bank which according to him is pending.

13. Records indicate that the applicant bank issued Ext.A7 lawyer notice dated 26.09.2007 to defendants 1 and 2 calling upon them to repay the sum of Rs.22,08,608.92 due under the housing loan account together with interest from 03.09.2007; however, defendants 1 and 2 did not repay the loan. As per Ext.A8 statement of account produced by the applicant bank, an amount of Rs.22,51,616/- is due under the housing loan account as on 14.11.2007.

14. Insofar as the contention raised by the 3rd defendant with regard to limitation is concerned, evidently the security documents in respect of the housing loan were executed by defendants 1 and 2 on 03.12.2004 and the 1st defendant created equitable mortgage over the OA schedule property purchased with the funds sanctioned by the

bank on 24.12.2004. The OA was filed before the Tribunal on 15.11.2007 i.e., within three years from the date of execution of security documents and within 12 years from the date of mortgage. Therefore, it cannot be heard to contend that the OA is barred by limitation.

15. The claim put forth by the 3rd defendant over the mortgaged property is not strengthened by any cogent evidence and the mere allegation/averment of the 3rd defendant cannot be appreciated.

16. Having regard to the amount advanced, the interest and penal interest applied and the chronic default committed, I am of the view that the applicant bank is entitled to get pendente-lite and post- decree interest @9.50% per annum with monthly rests, as prayed for.

FINAL ORDER

17. The OA is allowed with costs. The applicant bank is allowed to recover the sum of Rs.22,51,616/- (Rupees twenty two lakhs fifty one thousand six hundred and sixteen only) with further interest on the sum of Rs.22,47,903/- (Rupees twenty two lakhs forty seven thousand nine hundred and three only) @9.50% per annum with monthly rests from 15.11.2007 till realization and also its costs from defendants 1 and 2 jointly, severally and personally and by sale of the OA schedule property.

18. The schedule to the OA shall be appended to this order.

19. The applicant bank shall file memo of costs within ten days from the date of this final order.

20. Recovery Certificate shall be drawn up and issued to the Recovery Officer in terms of the final order.

21. The Registry is directed to communicate copy of the order to the parties concerned by speed post or registered post with AD. [Dictated to the PS, transcribed by her, corrected by me and then pronounced in the open court on this the 7th day of May, 2018]

(S.V.GOWRAMMA)

Presiding Officer

A P P E N D I X Witness for Applicant: AW1: Jose Joseph Vettickatt, Senior Manager of the applicant bank.

Witness for Defendant(s): Nil

Exhibits on the part of the applicant

Ext.No. Date Particulars of documents

A1 03.12.2004 Loan sanction communication issued by the applicant to defendants 1 and 2. A2 03.12.2004 Demand promissory notice for Rs.20 lakhs executed by defendants 1 and 2 in favour of the applicant bank. A3 03.12.2004 Interest/penal interest/services charges agreement executed by defendants 1 and 2 in favour of the applicant bank. A4 03.12.2004 Letter of authority to charge interest as per RBI directives executed by defendants 1 and

2. A5 03.12.2004 Sale deed No.3010/2004 of Erattupetta SRO. A6 27.12.2004 Letter executed by the 1st defendant confirming the deposit of title deed with the applicant bank. A7 26.09.2007 Copy of lawyer notice issued to defendants 1 and 2 calling upon them to pay the amount due under the housing loan account. A8 … Certified copy of the statement of account relating to the housing loan. A9 … Statement showing the penal interest applied in the housing loan account and capitalization value thereof.

(PRESIDING OFFICER)

IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

Dated this the 7th day of May, 2018

Present: S.V.Gowramma, B.A., LL.B Presiding Officer

TA No.1296/2016 (OA No.216/2007) Between The South Indian Bank Ltd. …Applicant And Joby.K.Mathew & 2 others. …Defendants

FINAL ORDER