About Me

My photo

ADVOCATEMMMOHAN -  Practicing both IN CIVIL, CRIMINAL AND FAMILY LAWS,Etc.,

Wednesday, July 6, 2016

whether the suit for declaration and injunction by brothers of borrower, is maintainable against the registered deposit of title deeds infavour of Bank for obtaing loan as security after intiating proceedings under The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ? The 1st defendant's son is a partner in the aforesaid partnership Firm. The 1st defendant submitted original registered sale deed, dated 01.07.1984, bearing document No.2556 of 1984, registered in the office of Sub-registrar, Ongole, to the Bank and the Bank obtained report on 23.12.2010 through its panel Advocate regarding the clear and marketable title of the 1st defendant to the schedule property and it has also given a paper publication, dated 22.01.2011, indicating to accept such property as collateral security by way of mortgage to the loan sanctioned to M/s.Venkata Ramana Fruit Processing Unit, and as there were no objections, equitable mortgage was accepted by deposit of title deed bearing No.2556 of 1984, dated 01.07.1984, and the memorandum of deposit of title deeds was registered with Sub-Registrar, Ongole on 25.01.2011, vide document No.679 of 2011. - M/s.Venkata Ramana Fruit Processing Unit is a partnership Firm which has taken financial assistance for its business purpose from the appellant- Nationalised Bank. As a security for the loans advanced, the said Firm has mortgaged its properties as a primary security and the 2nd defendant, who is the 4th respondent herein, has offered the property covered by registered sale deed dated 01.07.1984, bearing document No.2556 of 1984 as a collateral security. From the counter affidavit filed by the Bank before the trial Court, it appears, before accepting such security of the 4th respondent, a paper notice was given inviting objections for mortgaging the suit schedule property, and as no objections were received, the Bank has accepted the security given by respondent No.4 herein and created equitable mortgage vide document No.679 of 2011, on 22.01.2011, by deposit of original title deed. = Under Section 17 of the Securitisation Act, against the measures taken under sub-section (4) of Section 13 of the Act, there is remedy of appeal to the Debts Recovery Tribunal. Such appeal is provided not only to the borrower, guarantor, but any person aggrieved of the measures referred to in sub-section (4) of Section 13 of the Act can avail the remedy of appeal. In any event, as the very ground for grant of injunction is based on Ex.P-13 and in view of the judgment of the Hon'ble Supreme Court in United Bank of India Vs. Satyawati Tondon (2 supra), such injunction cannot be allowed to be continued. As held by the Hon'ble Supreme Court, if such injunction as granted by the trial Court is allowed to stand, it will defeat the very object of the legislation enacted by Parliament for ensuring that there are no unwarranted impediments in recovery of debts, etc., due to banks, other financial institutions and secured creditors. in Mardia Chemicals Ltd. Vs. Union of India (1 supra) and United Bank of India Vs. Satyawati Tondon (2 supra) fully support the case of appellant to accept the bar under Section 35 and also the overriding effect of the provisions of the Securitisation Act given under Section 35, coupled with the remedy provided to the aggrieved parties under Section 17(2) of the Act. For the aforesaid reasons and in view of the provisions referred above, this Court is of the view that it is a fit case to allow the appeal by setting aside the orders of injunction granted by the trial Court.- Accordingly, the CMA is allowed and the order dated 06.02.2013, passed in I.A.No.6 of 2013 in O.S.No.169 of 2011 pending on the file of the learned III- Additional District Judge, Prakasam at Ongole, is set aside

HON'BLE SRI JUSTICE R. SUBHASH REDDY AND HON'BLE SRI JUSTICE A.V.SESHA SAI              

CIVIL MISCELLANEOUS APPEAL No.312 of 2013      

31-01-2014

Canara Bank, Khammam Branch, rep. by its Branch Manager......Appellant

Jetti Samba Siva Rao & others......Respondents.

For Appellant :M/s.Deepak Bhattacharjee, Advocate.

For Respondents 1 to 3 :Sri N. Subba Rao, Advocate.
For Respondent No.4 :   Sri  J.Prabhakar, Advocate.
       
<Gist:

>Head Note:

? CITATIONS:

1. (2004) 4 SCC 311.
2. (2010) 8 SCC 110.
3. AIR 2003 SC 2508.
4. AIR 1999 SC 2867.
5. (1996) 6 scc 433.

HON'BLE SRI JUSTICE R. SUBHASH REDDY        
AND
HON'BLE SRI JUSTICE A.V.SESHA SAI    

CIVIL MISCELLANEOUS APPEAL No.312 of 2013      

JUDGMENT : (Per Justice R. Subhash Reddy)  
        This civil miscellaneous appeal is filed under Order 43 Rule 1 of CPC by
the 2nd defendant in the suit in O.S.No.169 of 2011 pending on the file of the
learned III-Additional District Judge, Prakasam at Ongole, aggrieved by order
dated 06.02.2013, passed in I.A.No.6 of 2013.

2.      Respondents 1 to 3 herein are plaintiffs in the aforesaid suit.  They have
filed the said suit for declaration of their title to the plaint schedule
property and for consequential relief of permanent injunction restraining the
defendants (i.e. respondent No.4 and the appellant herein) from interfering with
their possession and enjoyment of schedule property either by means of
alienations or making the subject matter of said property towards recovery of
loans said to have been advanced to the Managing partner of Venkata Ramana Fruit 
Processing Unit.

3.      The appellant-Bank is a Nationalised Bank constituted under the Banking
Companies (Acquisition and Transfer of Undertaking) Act, 1970.  It is having
several branches all over India and one such branch is in Khammam District of
Andhra Pradesh.  M/s.Venkata Ramana Fruit Processing Unit, a partnership Firm,
approached the appellant-Bank in the year 2010, for financial assistance for its
business, by offering its properties as primary security and offered the
property of defendant No.1 (respondent No.4 herein) as collateral security,
apart from other properties.  The 1st defendant's son is a partner in the
aforesaid partnership Firm.  The 1st defendant submitted original registered
sale deed, dated 01.07.1984, bearing document No.2556 of 1984, registered in the
office of Sub-registrar, Ongole, to the Bank and the Bank obtained report on
23.12.2010 through its panel Advocate regarding the clear and marketable title
of the 1st defendant to the schedule property and it has also given a paper
publication, dated 22.01.2011, indicating to accept such property as collateral
security by way of mortgage to the loan sanctioned to M/s.Venkata Ramana Fruit
Processing Unit, and as there were no objections, equitable mortgage was
accepted by deposit of title deed bearing No.2556 of 1984, dated 01.07.1984, and
the memorandum of deposit of title deeds was registered with Sub-Registrar,
Ongole on 25.01.2011, vide document No.679 of 2011. 

4.      When M/s.Venkata Ramana Fruit Processing Unit became defaulter in  
repayment of loan obtained by them, the appellant-Bank initiated proceedings
under The Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 (hereinafter referred to as 'the Securitisation
Act') and issued demand notice and when they failed to pay the loan amount, the
bank has taken possession of the mortgaged properties including the suit
schedule property and gave paper publication on 21st of December 2012 in Eenadu
daily newspaper, Prakasam District Edition, to that effect, through its
authorized officer.

5.      Respondents 1 to 3/plaintiffs, defendant No.1 and one Sri Adinarayana are
brothers, Jetty Pullaiah and Thirupathamma are their parents.  It is the case of
respondent/plaintiffs that along with their brother and parents, they have
partitioned their properties by oral partition and subsequently incorporated in
Ex.P-13 list of properties.  It is their case that the land admeasuring Ac.0-25
cents in Sy.No.226 of Ongole, purchased under Ex.P-9 and the further extent of
Ac.0-25 cents in the same survey number purchased under Ex.P-10, were purchased  
out of the joint family funds and the same were partitioned into 5 equal parts
by forming ridges from East to West and the same are incorporated in Ex.P-13
Memorandum of agreement, as such, the 4th respondent/defendant No.1 has no  
exclusive right to mortgage such property to the appellant-Bank.  Pleading there
is title dispute as such the civil Court has jurisdiction, they approached the
civil Court.  Pursuant to taking possession by the petitioner-Bank under the
Securitisation Act, when further steps are being taken to sell the property to
recover the money due to them, they also filed an application for injunction to
restrain the respondent/defendants from interfering with their possession and
enjoyment either by means of alienation of the subject land or by taking steps
for recovery of loans advanced to Venkata Ramana Fruit Processing Unit.
6.      Respondent No.4/defendant No.1 and the appellant/defendant No.2 have
contested the matter by filing separate counter affidavits.  As per the
averments in the counter filed before the trial Court, it was the case of
respondent No.4/defendant No.1 that the said property, which is given as
collateral security for the loan granted to Venkata Ramana Fruit Processing
Unit, is exclusive property belonging to him and the claim of purchase under
Exs.A-9 and A-10 from joint family funds was denied.  Pleading that earlier
there was a partition in the year 1970, it was the case of defendant No.1 that
he had absolute right over the said property.

7.      Separate counter affidavit is filed by the petitioner pleading that the
suit schedule property is given as collateral security for the loan sanctioned
to M/s.Venkata Ramana Fruit Processing Unit and the said property which stood in
the name of respondent No.4/defendant No.1 is accepted as collateral security.
While pleading that it is the        self-acquired property of respondent No.4
herein and he was in exclusive possession and enjoyment of said property and
further pleading that the alleged memorandum of partition agreement dated
20.03.1985, is a forged and fabricated one.  It is further pleaded that the suit
is bad for mis-joinder and non-joinder of proper parties         as much as
M/s.Venkata Ramana Fruit Processing Unit is a partnership Firm, which has become
defaulter, is not made party.  Further disputing the maintainability of the suit
itself in view of the provision under Section 34 of the Securitisation Act,  it
is pleaded that they have alternative remedy by way of appeal under the
provisions of the Securitisation Act.

8.      In the interlocutory application, no oral evidence was let-in, but on
behalf of respondent/plaintiffs, Exs.P-1 to P-61 were marked.  The trial Court,
having referred to the contentions advanced by the parties, has recorded a
finding that as much as there is a clear title dispute between respondent No.4
herein on one hand and respondents 1 to 3 on the other with respect to the
property mortgaged to the appellant/defendant No.2, has held that the suit for
declaration of their right in respect of the property is maintainable.  Further,
referring to the documentary evidence on record, by relying on the memorandum of
partition agreement Ex.P-13, which shows division of properties under Exs.P-9
and P-10 into five shares and further recording a finding that if temporary
injunction is not granted, there is possibility of the appellate-Bank taking
steps for sale of plaint schedule properties under the Securitisation Act, has
granted temporary injunction as prayed for.  As against the same, this civil
miscellaneous appeal is filed.

9.      Heard Sri Deepak Bhattacharjee, learned counsel for appellant-Bank and Sri
N.Subba Rao, learned counsel for respondent/plaintiffs.

10.     It is contended by Sri Deepak Bhattacharjee learned counsel for appellant-
Bank that the appellant-Bank has advanced loan amount to M/s.Venkata Ramana  
Fruit Processing Unit and apart from mortgaging the properties of said Firm, the
4th respondent has given the suit schedule property as collateral security for
the loan amount and the said property stands on his name.  It is submitted that
son of 4th respondent is a partner in M/s.Venkata Ramana Fruit Processing Unit
and when the said Firm has defaulted in repaying the loan amount, steps were
taken under the Securitisation Act and the possession of secured assets was also
taken.  It is submitted that when they were taking steps for sale of said
property to recover the loan amount, respondents 1 to 3 herein have filed the
aforesaid suit by making false allegations and obtained injunction orders.  It
is contended by the learned counsel that in view of the provision under Section
34 of the Securitisation Act, Civil Court is not having any jurisdiction either
to entertain the suit or to grant injunction orders restraining the appellant-
Bank from taking action in pursuance of the power conferred under the said Act
for recovery of debts.  It is further contended that if the
respondent/plaintiffs are aggrieved of the steps taken under Section 13(4) of
the Securitisation Act, there is remedy of appeal under Section 17 of the Act to
the Debts Recovery Tribunal having jurisdiction in the matter and without
availing the remedy of appeal, by by-passing the same, respondents have
approached the trial Court and inspite of bar of suit, the trial Court has
granted injunction.  It is submitted that in view of the provision under Section
35 of the Securitisation Act, the provisions of said Act shall have effect,
notwithstanding anything inconsistent therewith contained in any other law for
the time being in force, and in that view of the matter, the trial Court should
not have entertained the suit and passed the impugned order.  The learned
counsel, in support of his argument, placed reliance on the judgments of Hon'ble
Supreme Court in Mardia Chemicals Ltd. & others Vs. Union of India & others1 and
in United Bank of India Vs. Satyawati Tondon & others2.

11.     On the other hand, it is submitted by Sri N. Subba Rao, learned counsel
appearing for respondents 1 to 3 that the total extent of    Ac.0-50 cents of
land covered by Exs.P-9 and P-10 was purchased with joint family funds and that
Ex.P-9 was executed in favour of their father whereas Ex.P-10 was executed in
the name of respondent No.4/defendant No.1.  It is further submitted that as the
suit property was purchased with joint family funds, same was orally partitioned
into 5 equal parts forming ridges from East to West and the same is incorporated
in the Memorandum of partition agreement under     Ex.P-13, as such, respondent
No.4 had no exclusive right to mortgage such property to the bank.  It is
submitted that as much as there is title dispute between the brothers, the suit
for declaration filed by them is maintainable.  It is submitted that having
regard to the nature of relief sought for, they cannot seek such relief by way
of appeal before the appellate forum under Section 17(1) of the Securitisation
Act.  The learned counsel, in support of his argument, has placed reliance on
the judgments of Hon'ble Supreme Court in Ramesh Chand Ardawatiya Vs. Anil
Panjwani3, in Chheda Singh Vs. Town Area Committee, Akbarpur & another4 and in  
Sankalchan Jaychandbhai Patel & others Vs. Vithalbhai Jaychandbhai Patel &
others5.

12.     Having heard learned counsel for the parties, we have also perused the
material on record and some of the copies of documents which are marked before
the trial Court.

13.     M/s.Venkata Ramana Fruit Processing Unit is a partnership Firm which has
taken financial assistance for its business purpose from the appellant-
Nationalised Bank.  As a security for the loans advanced, the said Firm has
mortgaged its properties as a primary security and the 2nd defendant, who is the
4th respondent herein, has offered the property covered by registered sale deed
dated 01.07.1984, bearing document No.2556 of 1984 as a collateral security.
From the counter affidavit filed by the Bank before the trial Court, it appears,
before accepting such security of the 4th respondent, a paper notice was given
inviting objections for mortgaging the suit schedule property, and as no
objections were received, the Bank has accepted the security given by respondent
No.4 herein and created equitable mortgage vide document No.679 of 2011, on
22.01.2011, by deposit of original title deed.  The appellant-Bank claims charge
over the property as a mortgagee until the entire loan amount is repaid.
Although it is the case of respondent-plaintiffs that the said property is joint
family property and the same was purchased with joint family funds and
subsequently there was oral partition which was reduced into writing as
memorandum of agreement under Ex.P-13, the same is denied by the 4th respondent,  
pleading that such document is a fabricated one.  When the partnership Firm
defaulted in paying the loan amount, steps were taken by the Bank under the
provisions of the Securitisation Act and they have taken possession of such
secured asset in exercise of power under Section 13(4) of the said Act.  When
further steps are being taken to sell such property to recover the loan amount,
at that stage, respondents 1 to 3 herein have filed the suit and obtained
injunction.

14.     Under Section 17 of the Securitisation Act, against the measures taken
under sub-section (4) of Section 13 of the Act, there is remedy of appeal to the
Debts Recovery Tribunal.  Such appeal is provided not only to the borrower,
guarantor, but any person aggrieved of the measures referred to in sub-section
(4) of Section 13 of the Act can avail the remedy of appeal.  Further, under
Section 34 of the Act, there is a bar from approaching the civil Court by way of
Suit.  The said provision under Section 34 of the Act 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 (51 of 1993)".
Further, Section 35 of the Act reads as under:
"35.    The provisions of this Act to override other laws:- The provisions of this
Act shall have effect, notwithstanding anything inconsistent therewith contained
in any other law for the time being in force or any instrument having effect by
virtue of any such law."

15.     In Mardia Chemicals Ltd. Vs. Union of India (1 supra), relied on by the
learned counsel for appellant-Bank, the Hon'ble Supreme Court has elaborately
considered the scope of provisions under Sections 13, 17 and 34 of the
Securitisation Act and held that with regard to steps taken under Section 13(4)
of the said Act, there is a bar provided under Section 34 of the Act from
approaching the civil Court.  Further, interpreting the provision under Section
17 of the Securitisation Act and the nature of proceedings therein, it is held
that in fact, it is not an appellate proceeding, but rather an initial action
which is brought before a forum prescribed under the 2002 Act, and is like a
suit in CPC in the Courts of first instance.

16.     In another judgment relied on by the learned counsel for appellant in
United Bank of India Vs. Satyawati Tondon (2 supra), the Hon'ble Supreme Court
has held in para 36, as under :
"36. We have heard the learned counsel for the appellant and perused the record.
Normally, this Court does not interfere with the discretion exercised by the
High Court to pass an interim order in a pending matter but, having carefully
examined the matter, we have felt persuaded to make an exception in this case
because the order under challenge has the effect of defeating the very object of
the legislation enacted by Parliament for ensuring that there are no unwarranted
impediments in the recovery of the debts, etc., due to banks, other financial
institutions and secured creditors."

17.     If the objects and reasons for enacting the Securitisation Act are looked
at, the said Act is brought into force to enable the banks and financial
institutions to realize long-term assets, manage problems of liquidity, asset
liability mis-match and improve recovery by exercising powers to take possession
of securities and sell them and reduce the non-performing assets by adopting
measures for recovery or reconstruction.  Coming to the facts of the case on
hand, it is to be noticed that the property which is the subject matter of
security, is covered by registered sale deed standing in the name of respondent
No.4.  His case is that respondents 1 to 3, who are plaintiffs, have no share at
all in the said property.  The whole claim of respondent No.4 is based on
documentary evidence under Ex.P-13 Memorandum of agreement, which is stated to  
have been a fabricated one as per the claim of respondent No.1.  Although it is
contended by the learned counsel for respondents 1 to 3/plaintiffs that as the
suit is for declaration of title and in view of the civil nature of dispute it
is only for the civil Court to decide the same, it is to be noticed that with
regard to the steps taken by the appellant-Bank in exercise of powers under
Section 13(4) of the Act, validity of such steps can definitely be looked into
by the authority under Section 17(2) of the Securitisation Act.  When possession
is taken under Section 13(4) of the Act, even if taking such possession is
illegal, it is for respondents 1 to 3/plaintiffs to approach the authority under
Section 17 of the Act, more particularly, in view of the bar under Section 34 of
the Act, this Court is of the prima facie view that the suit itself is not
maintainable.        In any event, as the very ground for grant of injunction is
based on Ex.P-13 and in view of the judgment of the Hon'ble Supreme Court in
United Bank of India Vs. Satyawati Tondon (2 supra), such  injunction cannot be
allowed to be continued.  As held by the Hon'ble Supreme Court, if such
injunction as granted by the trial Court is allowed to stand, it will defeat the
very object of the legislation enacted by Parliament for ensuring that there are
no unwarranted impediments in recovery of debts, etc., due to banks, other
financial institutions and secured creditors.

18.     Though the learned counsel for respondents Sri N.Subba Rao has placed
reliance on the judgments of Hon'ble Supreme Court in Ramesh Chand Ardawatiya
Vs. Anil Panjwani (3 supra), Chheda Singh Vs. Town Area Committee, Akbarpur &
another (4 supra) and in Sankalchan Jaychandbhai Patel & others Vs. Vithalbhai
Jaychandbhai Patel & others (5 supra), a perusal of the said judgments shows
that they would not render any assistance in support of his argument, whereas,
the judgments in Mardia Chemicals Ltd. Vs. Union of India (1 supra) and United
Bank of India Vs. Satyawati Tondon (2 supra) fully support the case of appellant
to accept the bar under Section 35 and also the overriding effect of the
provisions of the Securitisation Act given under Section 35, coupled with the
remedy provided to the aggrieved parties under Section 17(2) of the Act.  For
the aforesaid reasons and in view of the provisions referred above, this Court
is of the view that it is a fit case to allow the appeal by setting aside the
orders of injunction granted by the trial Court.

19.     Accordingly, the CMA is allowed and the order dated 06.02.2013, passed in
I.A.No.6 of 2013 in O.S.No.169 of 2011 pending on the file of the learned III-
Additional District Judge, Prakasam at Ongole, is set aside.  Consequently, the
said I.A. stands dismissed.  No order as to costs.
        Miscellaneous applications pending, if any, shall stand closed.
______________________  
R.SUBHASH REDDY, J    
_______________  
A.V.SESHA SAI, J
31st January 2014

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.