AXIS BANK vs M.B NAGAKUMRA & ORS (MYSORE) on 15 December 2025

FINAL ORDER

1. The Application was filed before the Debts Recovery Tribunal-I, Bengaluru on 24.03.2016 Under Section 19 (1) of the Recovery of Debt And Bankruptcy Act, 1993 and numbered as OA No. 716/2016, seeking for issuance of a Recovery Certificate for Rs. 19,26,988/- (Rupees nineteen lakh twenty-six thousand nine hundred and eighty-eight only). Subsequently, owing to bifurcation of jurisdiction vide Government of India Gazette Notification dated 30.01.2017, the Application (OA No. 716/2016) was transferred from Debts Recovery Tribunal -I, Bangalore to this Tribunal and renumbered as TA No. 1205/2017.

2. It is the case of the Applicant that Defendant No.1 is the builder and owner of the project known as “Premier Metropolis,” under which the construction of the subject flat was undertaken.

Defendant Nos. 2 and 3 are the borrowers who intended to purchase the flat under the said project. Defendant Nos. 2 and 3, with a desire to purchase the Schedule “C” flat, availed a Power Home Facility loan of Rs. 24,48,000/- (Rupees Twenty-Four Lakh Forty-Eight Thousand Only).

3. Further, Defendant Nos. 1 to 3 and the Applicant Bank entered into a Tripartite Agreement dated 04.10.2008. In terms of the said Tripartite Agreement, Defendant Nos. 2 and 3, being the borrowers, mandated and authorized the Applicant Bank to disburse the sanctioned loan amount directly to Defendant No.1. Despite execution of the Home Loan Agreement and the Tripartite Agreement, Defendant Nos. 1 to 3 have, till date, failed to furnish the sale deed and have not complied with the terms and conditions of the Tripartite Agreement. Owing to the non- compliance of the said agreement, the Applicant cancelled the Tripartite Agreement. Defendant No.4 is the purchaser who purchased the flat from Defendant No.1 even when the said flat agreed to be under security in favour of Applicant bank.

4. Defendant Nos. 1 to 3 played fraud upon the Applicant. Defendant No.1 created a charge over the Schedule ‘A’ property in favour of the Karnataka State Finance Corporation (KSFC). Due to default and classification of the account as NPA, KSFC initiated proceedings under the SARFAESI Act and published a sale notice in The Times of India on 26.11.2015 for sale of the secured asset through e-auction. Defendant Nos. 2 and 3 did not disclose these facts to the Applicant. Upon coming to know of the same, the Applicant filed an impleading application in W.P. No. 1763 of 2015 (GM-KSFC). The Hon’ble High Court of Karnataka permitted KSFC to proceed with the auction, excluding the properties over which the Applicant held a charge. The schedule-mentioned property is one such property, and the charge of the Applicant was not objected to either by KSFC or by Defendant Nos. 1 to 3.

5. Furthermore, despite the subsisting charge, Defendant Nos. 1 to 3, acting in collusion, sold the flat described in Schedule ‘C’ property to Defendant No.4 under a Sale Deed dated 27.03.2015. The said sale, made during the existence of the charge created in favour of the Applicant, is in breach of the terms and conditions of the Home Loan Agreement and is not binding on the Applicant. Defendant Nos. 1 to 3 had expressly undertaken and assured the Applicant that they would not transfer, alienate, encumber, or assign any rights or interests in the property contrary to the terms of the agreement; however, they proceeded to execute the sale deed in clear violation of their contractual obligations.

6. It is also the case of the applicant that, in view of the above loan, the Defendants executed necessary loan documents in favour of the Applicant bank including agreeing to create mortgage over the schedule properties to secure the loan.

7. It is the case of the Applicant that the Defendants, despite availing the credit facility, after agreeing with the Terms and Conditions for the loan, failed in complying with the same, resulting in defaults and consequentially turning the loan accounts as Non-Performing Asset (NPA).

8. In the above circumstances, the Applicant approached this Tribunal by filing this TA seeking issuance of Recovery Certificate for the amount due in the account.

9. Summons were issued to the Defendants, and Defendant Nos. 1, 2, and 4 entered appearance through counsel by filing vakalats, with Defendant No. 1 filing its written statement and proof affidavit, while Defendant Nos. 2 and 4 failed to file their written statements within the stipulated time, resulting in the closure of their right to file the same on 26.05.2022, and Defendant No. 3 having been set ex parte on 02.03.2022, and thereafter, on 14.07.2022, the proceedings recorded that an evidence affidavit of Defendant No. 4 dated 11.06.2018 had been filed and served on the other side, although no corresponding recording of the Defendant’s evidence appeared in the proceeding sheet, and even though Defendant No. 1 filed a written statement and evidence affidavit, but they failed to adduce any documentary evidence to support their contentions.

10. The Applicant had let in evidence through AW-1, who filed Proof Affidavit reiterating the contentions taken in the TA and also produced Exhibits A-3 to A16, got the same marked in evidence.

11. In the written statement, Defendant No. 1 contended that he had not applied for any credit facility from the applicant and that no sanction letter dated 22.10.2008 existed. The Defendant admitted that Defendant Nos. 1 to 3 had entered into a tripartite agreement. He stated that, due to the non-compliance of the terms of the tripartite agreement, the applicant bank cancelled the said agreement executed between them. If the agreement was cancelled, then there was no question of repayment of the loan amount. The Defendant denied the contentions raised by the applicant regarding the alleged fraud committed by Defendant Nos. 1 to 4 and further stated that there was no breach of contract. He also asserted that the applicant bank had not issued any notice to Defendant No. 1 and that the case put forth by the applicant was a fabricated story.

12. Heard the Ld. Counsels for both sides and considered the contentions as taken in the TA in the light of documentary evidence and the proof affidavit.

13. The following issues arise for consideration in this matter: i) Whether the applicant succeeded in proving the TA claim as against the Defendants? ii) If so, to what extent?

Both these issues are gone into and decided together.

14. The contentions raised by Defendant No. 1 are untenable and contrary to the material placed on record. The denial of having applied for any credit facility is baseless, as the Tripartite Agreement and the Agreement of Sale clearly bear the signatures and acknowledgment of Defendant No. 1 along with Defendant Nos. 2 and 3. The loan in question was in fact sanctioned on 03.10.2008 in favour of Defendant Nos. 2 and 3, which is duly supported by the applicant’s official records. The mere denial by the Defendant does not invalidate or cast doubt upon the documentary evidence placed on record.

15. Further, the admission by the Defendant No.1 that Defendant Nos. 1 to 3 entered into a tripartite agreement reinforces the fact that the credit facility was duly availed and acted upon. The contention of the Applicant and Defendant No.1

that cancellation of the tripartite agreement does not extinguish the underlying loan obligation; the borrowers and the builder remain liable to repay the outstanding dues irrespective of the arrangement for disbursement or repayment through a third party.

16. The applicant has placed on record copies of the legal notice along with the postal acknowledgements, demonstrating that the notices were duly addressed and sent to the Defendants at their recorded addresses.

17. The consideration of Defendants case as put forth in the written statement filed by Defendant No. 4 along with the documents produced leads to the inference that the 4th Defendant is a Bonafide purchaser. A bona fide purchaser for value without notice is one who purchases property in good faith, for valid consideration, and without knowledge of any prior defects or disputes affecting the title, and the equitable rights of such a purchaser deserve protection, as the law does not intend to penalize an innocent buyer who has acted with due diligence and without collusion. The materials on record indicate that Defendant No. 4 had no notice—actual or constructive—of the alleged liability or mortgage at the time of purchase, and upon perusal of the registered sale deed, the registered memorandum of deposit of title deeds, and the encumbrance certificates, it is evident that Defendant No. 4 satisfies the criteria of a bona fide purchaser, rendering the sale in his favour valid.

18. The evidence tendered by the Applicant remains uncontroverted and undisputed. The evidence put forth by the Applicant is found admissible and are sufficient to prove the averments made in the TA, and the defaults committed by the Defendant Nos.1 to 3 in repaying the loan amount due. The liability of the Defendant Nos.1 to 3 and the loan amount due are also proved by the above documents. However, no personal liability can be casted on Defendant No.4 as he is neither signatory to the loan documents nor they received any payment from the bank.

19. Hence in view of the above findings this Tribunal comes to the conclusion that the TA is liable to be allowed.

20. The TA has been filed within the period of limitation. There is no capitalization of penal interest. Since the credit facility was availed for a housing loan, pendente lite and future interest are

awarded at 8.00% per annum (simple interest). The prayer for interest with monthly rests and for penal interest for the future period is hereby declined.

21. In the result, TA.No.1205/2017, is allowed,

i) The Applicant is allowed to recover an aggregate sum of Rs. 19,26,988/- (Rupees nineteen lakh twenty six thousand nine hundred and eighty eight only) with pendente lite and future interest of 8.00% p.a. (simple) from the date of filing of the TA till the realization, from the Defendant Nos. 1 to 3 after giving credit to all the amounts recovered and received during the pendency of the OA if any, and allow the same to be recovered by proceeding against Defendant No. 2 and 3 jointly and severally and their assets.

ii) Defendant No. 4 is not personally liable for the dues of the Applicant Bank.

iii) The applicant bank is allowed cost of the proceedings for which Applicant to file cost memo within seven days from the date of receipt of the order.

iv) The Recovery Certificate to be drawn in terms of this order and transferred to Recovery for execution.

v) Interim application pending, if any, stands disposed of in terms of this final order.

22. Communicate a copy of the order to the parties concerned in terms of Section 19(21)(i) of the RDB Act, read with Rule 16 of DRT (Procedure) Rules, 1993. (Dictated to PY directly on the Computer, after its transcription, corrected and pronounced by me in the open Court on this the 15th day of December, 2025) Sd/- (T. RAJESH) PRESIDING OFFICER

ANNEXURES WITNESSES EXAMINED FOR THE APPLICANT BANK: AW-1: Sri. Prabhanjan H, Legal officer, of Applicant Bank. Exhibits on the part of the Applicant:

Exhibit Nos. Date Particulars of Documents A1 -- Evidence affidavit A2 -- List of Documents A3 & A4 -- Application for power homes A5 03.10.2008 Sanction letter A6 04.10.2008 Home loan agreement A7 -- Power of attorney A8 -- Tripartite agreement A9 18.12.2015 Order in W.P. No. 1763 of 2015 A10 24.04.2008 Agreement of sale A11 -- Encumbrance certificate A12 & A13 -- Foreclosure and statement of account A14 09.03.2016 Legal notice

A15 & A16 -- Postal receipt and status

Witness Examined for the Defendants: -Nil - List of Documents Exhibited for the Defendants: -Nil -

Sd/- (T. RAJESH) PRESIDING OFFICER