SYNDICATE BANK vs AARTI CHARI & Ors. on 29 December 2020

JUDGMENT

Date of Decision: 29.12.2020 R. S. KULHARI, CHAIRPERSON

1. This appeal has been preferred under section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of the Security Interest Act,

(hereinafter referred to as “The SARFAESI Act”) against the order dated 02.05.2019 passed by the Presiding Officer, DRT, Jabalpur, whereby the securitization application filed by the respondent no. 1 was disposed off.

2. The facts in nutshell are, that the appellant-Bank granted certain credit facilities to the respondents no. 2 & 3 on 25.03.2009, to which the borrowers created mortgage over their immovable property by depositing the title deed with the Bank. The respondent no. 1 had purchased the same property from the respondents no. 2 & 3 vide sale deed dated 16.08.2010. As the borrowers did not maintain the financial discipline, the account was classified as NPA and the Bank issued demand notice dated 12.01.2017 demanding a sum of Rs. 13,61,478.06. Since the borrowers did not pay any amount against the demand raised by the Bank, therefore, the possession notice dated 04.05.2017 was issued under section 13(4) of the SARFAESI Act and the same was published in the newspapers on 09.05.2017.

3. It is averred that the appellant-Bank obtained the order dated 18.01.2018 from the District Magistrate under section 14 of the SARFAESI Act and taken the physical possession of the mortgaged property on 08.03.2018 through the District Administration.

4. The respondent no. 1 challenged the order of the DM by filing the Writ Petition No. 4276 of 2018 before the Hon’ble High Court praying that the Bank be directed to receive the entire outstanding from the petitioner of the loan account of the respondents no. 2 & 3 and return the original title deed and other documents in respect of the property mortgaged with the Bank. The said Writ Petition was dismissed by the Hon’ble High Court vide order dated 16.04.2018.

5. Thereafter, the respondent no. 1 filed securitization application before the Tribunal below with the prayer to direct the Bank to accept the entire outstanding amount in the loan account as on 12.01.2017 and return the original title deed to the applicant with no dues certificate as well as appropriate compensation. The Tribunal below vide impugned order disposed off the said S.A. holding that the respondent no. 1 is entitled to receive the original title deed and issuance of NOC subject to the payment of Rs. 13,61,479/- with interest @ 11.60% compounded with monthly rests w.e.f. 01.01.2017 to 30.09.2017 and simple interest @ 7% w.e.f. 01.10.2017 to 10.05.2019 in the loan account on or before 10.05.2019. Being aggrieved by the said order, the present appeal has been filed.

6. The respondents no. 2 and 3 have not appeared despite service of notice, as they were also proceeded ex-parte before the Tribunal below.

7. Learned counsel for the appellant submitted that the respondent no.

was having knowledge of the proceedings from the date of possession, but the S.A. was filed with a delay of more than one year. Thus, the Tribunal below has erred in condoning the delay.

8. On merits of the case, it was contended that the Hon’ble High Court has dismissed the Writ Petition No. 4276 of 2018 filed by the respondent no. 1 on the similar ground holding that there was no merit in the writ. Hence, the S.A. filed by the respondent no. 1 is barred by principle of res-judicata. The next argument was that the Tribunal below has wrongly allowed the interest @ 7% from 01.10.2017 to 10.05.2019, whereas even if, the right to redeem the property was given to the respondent, the respondent should have been directed to pay all the outstanding including the expenses and the interest at the contractual rate. The last contention was that in any case, the documents deposited by the owners of the property i.e. borrowers, should have been directed to be given to the owners only and the respondent no. 1 was not entitled for getting the original document as well as no dues certificate from the Bank.

9. On the other hand, the learned counsel for the respondent no. 1 contended that the Tribunal below has rightly condoned the delay by imposing cost of Rs. 5000/-. Although, a Writ Petition was filed before the

Hon’ble High Court, but the same was not dismissed on the basis of merits of the case and it was dismissed considering the provisions of the SARFAESI Act, wherein any party aggrieved by the action of the Bank is entitled to challenge the proceedings of the Bank.

10. It was further contended that the respondent no. 1 was always ready and willing to pay the outstanding of the Bank. As such, one letter was written on 21.08.2017 after issuance of possession notice, but the Bank has not taken any effective action, therefore, there was no fault on the part of the respondent no. 1. Further, the respondent no. 1 has got issued a demand draft no. 166673 dated 17.08.2017 for Rs. 13,61,469/-, which indicates that the amount of the respondent no. 1 has been held up in the shape of demand draft, thus otherwise also, the bank is not entitled to charge the interest at the contractual rate. Moreover, no specific ground with regard to the interest has been taken in the appeal, therefore, the Bank is not entitled to get this relief also.

11. Lastly, it was canvassed that the condition no. 10 of the sale deed executed in favour of the respondent no. 1 demonstrates that the borrowers i.e. sellers of the property, have authorized the respondent no. 1- purchaser to get the original document along with no dues certificate after depositing the outstanding amount and pursuant to it, the respondent no. 1 was regularly depositing the EMI after execution of the sale deed on 16.08.2010 and the Bank has never objected to such deposit made by the respondent no. 1. Therefore, the Tribunal below has rightly directed the Bank to deliver the document to the respondent no. 1.

12. Having heard the learned counsels for the parties and considering the material available on record, it is apparent that the respondents no. 2 and 3 had sold the mortgaged property to the respondent no. 1 on 16.08.2010 during the currency of the mortgage and nothing is on record to show that such sale was informed to the Bank. However, the Bank has not denied the factum of deposit of EMI by the respondent no. 1. It is also a matter of record that the respondent no. 1 challenged the proceedings alleging that the demand notice and the possession notice were not served and she was willing to deposit the outstanding amount and it has been stated on behalf of the respondent no. 1 that the amount as quantified and directed by the Tribunal below has already been deposited by the respondent no. 1 in the loan account.

13. The contention of the Bank that the application for condonation of delay was wrongly allowed, is not tenable. Although, there was delay in challenging the process of the Bank, but it can be condoned by the Tribunal considering the plausible reason and may also impose the cost, but normally the litigant should not be deprived from getting the matter adjudicated on merits. Thus, the Tribunal below has rightly condoned the delay by imposing the cost of Rs. 5000/- and no interference is called for on this aspect.

14. With regard to the contention of res-judicata, although it is true that the respondent no. 1 has filed Writ Petition before the Hon’ble High Court and that was dismissed, but in the order itself, the Hon’ble High Court has observed that “on due consideration of the facts, as also the SARFAESI Act, no writ can be issued.” Thus, the merits of the matter were not pondered over by the Hon’ble High Court and was pleased to dismiss the Writ Petition in view of the provision of the SARFAESI Act. Hence, the dismissal of the Writ Petition will not come in the way of the principle of res-judicata and the respondent no. 1 has rightly challenged the proceedings of the Bank by filing the S.A.

15. Coming to the issue of applicability of rate of interest, though it appears that the appellant has not categorically taken the ground in the appeal against awarding the lesser amount of interest, but has stated in ground no. V that the guarantor is liable to pay the whole outstanding. Further, this issue has been raised before the Tribunal below, who has reduced the interest after considering the objections of both the parties. Further, if any erroneous finding has been recorded by the Tribunal, which can be looked into even without specifically mentioning in the appeal, as any appropriate relief may be granted in the facts and circumstances of the matter.

16. The contents of the impugned order reveal that the Tribunal below has awarded the interest @ 7% per annum simple for certain period under the pretext that the respondent no. 1 has conveyed her willingness to pay the outstanding w.e.f. 01.10.2017, but mere conveying the willingness is not binding upon the Bank to pass the order on such prayer. The Bank had to consider all the aspects including right of redemption, delivery of documents and issuance of no dues certificate. But in any case, even if, the respondent no. 1 was willing, the amount remained with herself only. There is no proof on record that the original draft was delivered to the Bank and the same was encashed in the loan account or in any account of the Bank. Even it was argued on behalf of the respondent no. 1 before the DRT that a copy of the demand draft was sent with the letter dated 21.08.2017. Thus it is clear that the Bank cannot get the photocopy of the draft encashed. Further, the draft issued in the name of any person is valid only for a period of three months, therefore, the respondent no. 1 was free to get the draft cancelled during that period or even thereafter.

17. It is also to be noted that the condition no. 10 of the sale deed, which is relied upon by the respondent no. 1, goes to show that the respondent i.e. purchaser of the property was required to liquidate the whole outstanding due from the borrowers/sellers of the property. The term “outstanding” not only denote the principle amount, but also include the expenses and interest thereon. The Tribunal below has not considered all these aspects in right perspective and has arbitrarily fixed the interest @ 7% without assigning any reason, as to what were the grounds for allowing the interest at such rate. If had there been no fault on part of the respondent in depositing the amount or had the respondent already deposited the amount, then there was no question of levying any interest for the relevant period, but no such evidence has been furnished on behalf of the respondent no. 1 that original draft was handed over to the Bank and the Bank had received the proceeds of the said draft. Therefore, the order impugned is liable to be modified to the extent that the Bank is entitled to charge the interest on the outstanding amount at the contractual rate on reducing balance method after adjusting the amount already deposited by the respondent no. 1 from time to time.

18. In so far as the issue of delivery of original title deed and no dues certificate is concerned, admittedly, the possession was taken from the respondent no. 1, who had purchased the property way back on 16.08.2010. She has deposited the EMI after purchase of the property. The factum of outstanding loan in the name of the sellers was clearly mentioned in the sale deed, particularly at paragraph no. 13, wherein it has been stated that the purchaser shall be entitled to get the original document after deposit of outstanding dues. Further, the respondents no. 2 and 3 had neither refuted this contention before the Tribunal below nor before this Appellate Tribunal and have chosen to remain absent from the proceedings. It is also to be clarified that once the Bank is proceeded under the SARFAESI Act against the secured asset, the aggrieved person has to challenge the sale before the DRT under the provisions of the SARFAESI Act and the civil suit in this regard is prohibited under section 34 of the SARFAESI Act. Thus, the Tribunal below has rightly directed the Bank to handover the documents to the respondent no. 1 after taking Indemnity Bond to indemnify the Bank in case the respondents no. 2 & 3 raise any claim in this regard.

19. In view of the above, the appeal is partly allowed and the impugned order is modified to the extent that the respondent no. 1 shall pay the outstanding amount along with expenses and interest at the contractual rate on reducing balance. The Bank shall convey the outstanding after adjustment of amount already deposited by the respondent no. 1 within 15 days from today. The respondent no. 1 shall deposit the amount within 15 days thereafter. In case of clearance of the outstanding in view of the observations made above, the Bank after taking the indemnity bond from the respondent no. 1 shall deliver the original documents of the property to the respondent no. 1, as also no dues certificate and handover the possession of the property within 15 days after closure of the account. Rest of the findings of the Tribunal are upheld.

20. The appeal is disposed off in the above terms with no order as to costs.

21. A copy of this judgment be supplied to the parties as well as to the DRT concerned and be also uploaded on the e- DRT portal. CHAIRPERSON Date: 29.12.2020 VN GIRI