Subsequent Property Buyer Cannot Defeat Prior Mortgage Rights of Bank: DRT Delhi

Vanshika Singh & Anr Vs Punjab & Sind Bank (DRT Delhi)

The securitisation application was filed under Section 17(1) of the SARFAESI Act, 2002 challenging the measures initiated by the respondent bank in respect of a property located at D-362, D-Block, Upper Second Floor, Gali No. 13 & 14, Laxmi Nagar, Delhi. The applicants sought a declaration that the actions of the bank were illegal and arbitrary and requested that the proceedings be quashed.

According to the applicants, they had purchased the flat measuring approximately 43 square yards on 1 January 2016 through a registered sale deed from Rajesh Sandev. After purchase, the property was rented to a tenant through a registered rent agreement dated 8 January 2016. The applicants stated that they came to know about the bank’s proceedings only when a Receiver appointed by the Chief Metropolitan Magistrate visited the property to take possession under the SARFAESI Act. Upon enquiry, they learned that the property had been mortgaged by Rajesh Sandev to the respondent bank on 8 July 2015 for a loan of ₹26 lakh sanctioned to him and his firm.

The applicants contended that they were bona fide purchasers for value and had no knowledge of the mortgage at the time of purchase. They alleged that they were not borrowers or guarantors in the loan transaction and had never received notices under Sections 13(2) or 13(4) of the SARFAESI Act. According to them, the bank had not followed the procedure prescribed under the Act, including the requirement to mention the date on which the account was classified as a non-performing asset in the notice issued under Section 13(2). They also argued that the bank had waited an unusually long period before initiating action under the SARFAESI Act and alleged collusion between bank officials and the borrower.

The applicants further asserted that the property was free from encumbrances at the time of purchase and that the borrower had concealed the fact of mortgage while selling the flat. They also argued that the original sale deed executed in 2014 in favour of the borrower showed that only the ground floor and first floor existed at that time. According to them, their flat was located on the upper second floor and therefore was not part of the mortgaged property. They maintained that the bank could recover its dues only from the ground and first floors mentioned in the earlier title documents. On these grounds, the applicants sought quashing of the bank’s notices and recovery proceedings.

The respondent bank opposed the application and argued that it was an abuse of the process of law. The bank contended that the applicants were not bona fide purchasers and appeared to be acting in collusion with the borrower to defeat the bank’s claim. It submitted that a credit facility of ₹26 lakh had been sanctioned to M/s Apex Enterprises on 8 July 2015 and that Rajesh Sandev had mortgaged the entire property by depositing the original title deed along with the chain of title documents. The borrower and guarantor failed to meet their repayment obligations despite repeated communications from the bank, leading to classification of the account as a non-performing asset on 31 March 2016.

After the account became NPA, the bank issued a notice under Section 13(2) of the SARFAESI Act on 28 April 2016 demanding repayment from the borrower and guarantor. When the dues were not cleared, the bank initiated further proceedings and approached the Chief Metropolitan Magistrate under Section 14 of the SARFAESI Act for appointment of a Receiver to take possession of the mortgaged property.

After hearing the parties and examining the record, the Tribunal noted that Rajesh Sandev was the admitted owner of the property and that he had mortgaged the property with the bank on 8 July 2015. The applicants purchased the flat from him on 1 January 2016. Thus, the mortgage in favour of the bank existed prior to the sale of the flat to the applicants.

The Tribunal held that because the mortgage preceded the sale transaction, the bank’s charge over the property had priority. The applicants had argued that their flat was constructed after the mortgage and therefore should not be treated as part of the mortgaged property. However, the Tribunal found that there was no evidence to show that the flat was constructed after the mortgage or that it had been excluded from the mortgaged property.

The Tribunal further observed that the entire property, including roof rights, had been mortgaged with the bank. In such circumstances, any construction raised on the roof would also be deemed to be part of the mortgaged property. There was also no evidence to show that the borrower had obtained permission from the bank either to carry out construction on the roof or to sell any portion of the property after the mortgage was created.

The Tribunal concluded that when the entire property and its title deeds had been mortgaged with the bank, there was no occasion for the borrower to sell roof rights or constructions raised on the property without the bank’s consent. Consequently, the bank’s mortgage had priority over the subsequent sale deed executed in favour of the applicants.

In view of these findings, the Tribunal held that the application filed by the applicants could not be allowed. The securitisation application was therefore dismissed.

FULL TEXT OF THE ORDER OF DRT DELHI

This SA has been filed by the applicant against the respondent bank under Section 17(1) of the SARFEASI Act,2002 with the request that the action and measures initiated by the respondent bank in respect of the property bearing no.D-362, D-Block, Upper Second Floor, Gali no.13 & 14, Laxmi Nagar, Delhi-110092 be declared illegal and arbitrary and quash the same.

2. The brief facts of the case are that as per application, the applicants are in possession of property in question and the property in question is the residential accommodation owned by the applicants. It is submitted that the applicants purchased the said flat measuring about 43 Sq. Yds. from their own earning and savings on 01/01/2016 from Sh. Rajesh Sandev, S/o Sh. Darshan Lal Sandev vide registered sale deed dated 01/01/2016 duly executed by Sh. Rajesh Sandev and thereafter, the applicants have let out the said flat to one Sh. Gupta, on 08/01/2016 vide registered rent agreement dated 08/01/2016 and since then said tenant is in possession of the said flat under the tenancy of the applicants. It is submitted that the Ld. Receiver, who has been appointed by the Ld. C.M.M. (East), Karkardooma Court, came to the aforesaid flat of the applicants to take possession, as stated by the respondent bank. It is submitted that the applicant was apprised with the fact that the possession of the said property is required to be taken by the bank under the SARFAESI Act. It is submitted that the applicants had made enquiries with the respondent bank and thereupon, the applicants came to know that the property No.D-362, Gali No. 13 & 14, D-Block, Laxmi Nagar, Delhi-110092 had been mortgaged by Sh. Rajesh Sandev, on 08/07/2015 with the respondent bank and a sum of Rs.26,00,000/- was sanctioned to Sh. Rajesh Sandev and his firm/company. It is submitted that the applicants had made a complaint before SHO, P.S. Shakarpur, Delhi vide D.D. No.21-A dated 30/03/2017 and also to Deputy Commissioner of Police (East), Delhi on 01/04/2017. It is submitted that the applicants are the bonafide purchasers for consideration of immovable flat in question and the same is owned by applicants and whose actual and physical possession continues to remain with the applicants and continues to be enjoyed by the applicants through tenant namely Vishal Gupta. It is submitted that no interference in the rights, title, interest and/or possession of the applicant qua the flat in question is warranted or legally sustainable. It is submitted that the applicants were never informed about the mortgage of the property in question by his erstwhile purchasers i.e. Sh. Rajesh Sandev and his company or his son. It is submitted that the applicants have not received any notice under Section 13(2) r/w Rule 8 of the SARFAESI Act dated 28/04/2016 and under Section 13(4) of the SARFAESI Act and any action taken by the respondent bank in any manner whatsoever till the time Receiver reached to the property to take the possession of the said property, is illegal and unlawful and not as per the procedures laid under SARFAESI Act. It is submitted that the procedure adopted by the bank under SARFAESI Act is not as per the requirement prescribed in the Act. It is submitted that the notice U/s 13 (2) of the SARFAESI Act which was supposed to be served to the borrower namely Sh. Rajesh Sandev, do not contain the date of classifying the debt as non performing assets, which is required to be given as per the law. It is also stated by the respondent bank from the statement of account of Sh. Rajesh Sandev that he had not been paying any installment from disbursement of the loan amount and several installments were due against him, surprisingly, the debt was not was classified as non performing asset which required to be clone within the statutory period as described in RBI guidelines and in notice U/s 13 (2) of the SARFAESI Act issued by the bank, the date of classifying debts as NPA has not been mentioned by the bank. However, it is not clear as to why the bank has waited for such a long period to proceed against the borrower under the SARFAESI Act. It is submitted that from the practice of the bank officials, it appears that the loan was disbursed to the borrower with the collusions of bank officials with the borrower namely Rajesh Sandev. It is submitted that the bank officials has sent the notice U/s 13 (2) on 28/04/2016 again they have waited for long period to proceed further under the SARFAESI Act. It is submitted that from the act and conduct of bank officials, it appears that they must have hand in glove with the borrower, therefore, the bank officials have not acted under the settled procedure of SARFAESI Act. It is submitted that at the time of purchase, the property in question was free from all encumbrances as per the knowledge of applicants, the property in question was never charged, mortgaged and encumbered unto the respondent bank at any point of time. It is submitted that the proceeding under the SARFAESI Act initiated by respondent bank against the property in question are totally unwarranted, arbitrary and illegal and liable to be set aside. It is submitted that on the date of issuance of the notices, the respondent bank did not have any right, title or interest of whatsoever nature qua the property in question. It is submitted that the applicants are neither a borrower nor a guarantor. It is submitted that from the documents, it is clear that the applicants are bonafide purchaser of the said property and whose actual and physical possession continuously remain with the applicant since 01/01/2016_ It is submitted that the applicants had no notice or knowledge or information of the instant recovery proceedings till the time when notice was pasted outside the wall of the flat in question. It is submitted that the recovery proceedings qua the flat in question is not only bad, legal, nullis-juris, nonest in the eyes of law. It is submitted that the flat in question is not being owned or possessed by the said borrower/guarantor and therefore, any coercive step/proceeding initiated or sought to be initiated by the respondent bank against the flat in question are totally unwarranted and uncalled subject the for and would applicants to grave and irreparable loss and injury. It is submitted that the respondent bank has exceeded its jurisdiction and sought to initiate the recovery proceedings under SARFAESI Act without verifying the actual position. It is submitted that the issuance of the impugned notices by the respondent bank is in flagrant disregard to the manner provided by the provisions of the Act, the procedure, rules and regulations of practice under the Act as the bank has not issued any notice U/s 13 (2) & 13 (4) of the SRRFAESI Act to the applicant. It is submitted that the respondent bank has not adopted the settled procedure of classifying the debt as NPA within the statutory period as per RBI guidelines and to proceed under the SARFAESI Act within the statutory period. It is submitted that the impugned notices issued by the respondent bank is based on assumption and presumption without considering the facts of the case that the said flat in question is the only residential house owned by the applicants and whose continuous possession has remained with the applicant since 01/01/2016. It is submitted that as per the sale deed dated 23/04/2014, which was executed by Mr. Ramesh Baluni in favour of Rajesh Sandev, it is dearly mentioned in the said sale decd that Mr. Ramesh Baluni has sold “Built up ground floor portion, without roof rights (upto ceiling level), plinth/covered area measuring 35.95 sq. Mtr. i.e. 43 Sq. Yds. along with its whole of structure according to the site therein, consisting of two room set therein, and built up first floor portion with completely roof rights, with the rights to further/upper story construction upto the last storey, plinth/covered area measuring 35.95 Sq. Mtr. i.e. 43 Sq. Yds. along with its whole of structure according to the site therein, consisting of two room site with common entrance, passage and staircase fitted with electricity and water connection, a part of property bearing No.D-362, Out of Khasra No. 220, situated at Abadi of Gali No. 13 & 14, D-Block, Laxmi Nagar, Illaqa Shandara, Delhi to Sh. Rajesh Sandev, which clearly shows that at the time of execution of the said sale deed in favour of Rajesh Sandev, there was only ground floor and first floor construction and no other construction in the shape of flats and shops was there in the said property. It is submitted that as per the notice dated 28/04/2016 issued by the respondent bank to M/s Apex Enterprises and Rajesh Sandev, it is written that the loan of Rs.26 Lacs was given on 08/07/2015 against the equitable mortgage of property in question, which shows that the officials of the respondent bank after visiting/inspecting the site in question and after get fulfilled the necessary formalities, have disbursed the said loan amount to Rajesh Sandev. It is submitted that Mr. Rajesh Sandev has not disclosed the fact of raising constructions over the property in question in the shape of five floors/flats and two shops on ground floor to the respondent bank at the time of taking the said loan or the respondent bank never visited or inspected the property in question at the time of sanctioning the loan amount to Rajesh Sandev. It is not possible by way of any stretch of imagination that Mr. Rajesh Sandev has completed the construction work after taking the loan from the respondent bank on 08/07/2015, meaning thereby, at the time of taking the said loan from the respondent bank, the construction work was going there and the respondent bank have disbursed the loan amount to Mr. Rajesh Sandev under his collusion and thereafter, Mr. Rajesh Sandev have sold the flat in question to the applicants on 01/01/2016 vide sale deed and in the said sale deed, it is dearly mentioned by Mr. Rajesh Sandev that the property in question is free from all sorts of encumbrances, which clearly shows that firstly Mr. Rajesh Sandev has taken the said loan with the collusion of respondent bank’s officials and subsequently cheated the applicants by selling out the flat concealing the fact of mortgaging the property in question with respondent bank. It is submitted that as per the sale deed dated 23/04/2014, there was only ground floor and first floor and the respondent bank sanctioned the loan only on the basis of the said sale deed to Mr. Rajesh Sandev, meaning thereby, the respondent bank has right to recover his loan amount by taking possession only of ground floor and first floor of the said property in question but the flat of the applicants is situated on the upper second floor, which was never the part of the mortgaged property in question. It is submitted that the applicants have a prima facie case on merits and the proceedings initiated against the flat in question by the respondent bank are without jurisdiction and may be set aside. It is submitted that if the impugned notices and recovery proceedings got issued and initiated by respondent bank and further proceedings initiated by the respondent bank to auction or deal with the flat in question in any manner are not stayed, the applicants shall suffer irreparable loss and injury, which cannot be compensated in terms of money. Accordingly, it is prayed to set aside/quash the impugned notice under Section 13(2) of SARFAESI Act got issued by the respondent bank and further proceedings to auction or to deal with the flat in question and direct the respondent bank to handover the peaceful and vacant possession along with all the articles recovered from inside the flat in question to the applicants as the flat in question was never been the part of mortgaged property.

3. The respondent has filed reply to the SA. In the reply the respondent vehemently denied the allegations of the applicant and submitted that the present SA is an abuse of the process of law and has been filed by the applicant with the sole purpose of harassing and pressurizing the respondent bank to submit to illegal, unreasonable demands of the applicant. It is further submitted that the present application is devoid of any material basis or merits and fails to spell out the existence of any cause of action against the respondent bank and in favour of the applicant. The present SA is based on conjectures and surmises and thus liable to be dismissed. It is submitted that the present application is baseless, ill-founded and contrary to law. The applicant is trying to make the departure from the liabilities resting on her and the averments of the applicant are inconsistent with their own conduct. The applicant is not a bona fide purchaser of the property in question but appears to be in league with the borrower of the bank to cheat the public money and not at all entitled to the indulgence of this Hon’ble Tribunal. The sole intention behind the filing of the present S.A. is to adopt a dilator/ tactics to frustrate the lawful claim of the respondent bank. The applicant has no right, title and interest in the property in question and has no locus to file the present case under the provisions of the SARFAESI Act, 2002. The applicant seems to be in league with the borrower of the bank and wants to resist the claim of the bank on forged, fictitious and concocted title documents which seems to be prepared with the sole purpose to defeat the claim of the respondent bank. The said sale deed is otherwise executed after the charge has been created by the respondent bank in respect of property in question. It is submitted that the respondent bank has sanctioned a credit facility i.e. ODP Limit of Rs_26 Lacs to M/s Apex Enterprises vide Sanction Letter dated 08.07.2015 and other loan and security documents executed therein in favour of the respondent bank. Shri Rajesh Sandev was the mortgagor and guarantor of the said ODP Limit facility and has mortgaged Entire property bearing No. D-362, Khasra No_ 220, Gall No. 13 & 14, Laxmi Nagar, Delhi. The mortgage was created by the Rajesh Sandev by depositing the original title deed of the aforesaid property dated 25.04.2014 along with complete chain of the title documents in favour of the bank. Mis Apex Enterprises and Rajesh Sandev were failed to meet their obligation towards the respondent bank qua the aforesaid loan account. This was despite various communications, requests and reminders spirt& by the respondent bank, they miserably failed and neglected to pay and meet their liabilities towards the respondent bank. Therefore, their account has become r4PA 31.03.2016. The subject property is given to the respondent bank by way of creation of equitable mortgage of the same in favour of the respondent bank by the aforesaid guarantor and the said property has been kept as security interest with the respondent bank and are secured assets in the hands of respondent bank who is secured creditor of the same. After the account has become IPA, the respondent bank has taken measures under the provision of Section 13 (2) of SARFAESI Act 2002 and has issued a legal notice dated 28.04.2016 thereby demanded outstanding amount from the borrowers as well as from the guarantor. The borrower of the bank and guarantor did not make the payment, left with no option the respondent bank was constrained to take recourse under the SARFAESI Act. Eventually respondent bank filed an application under Section 14 of the SARFAESI Act, 2002 before the Ld. Chief Metropolitan Magistrate, Delhi for appointing a receiver to take the possession of the mortgaged property and the Ld.CMM has appointed the Receiver to take the physical possession of the subject property. It has been prayed that the present SA may be rejected.

4. The applicant has filed its evidence. The respondent bank has filed affidavit of evidence.

5. Heard the Ld. Counsel of applicant and also perused the record.

6. The main contention of the Ld. counsel of the applicant is that the applicant is neither the borrower nor the guarantor of the loan. It is submitted that Shri Rajesh Sandev was the owner of the subject property and the applicant has purchased the flat from Shri Rajesh Sandev vide registered sale deed dated 01.01.2016. Therefore, the respondent bank has no authority to proceed against the applicant. In para no. 14 (f) the applicant has submitted that the sale deed was executed by Shri Ramesh Baluni in favour of Rajesh Sandev on 23.04.2014 and in the said sale deed it was written that the subject property consists of built up ground floor portion without roof rights upto ceiling level plinth/covered area measuring 35.95 sq. mtrs. i.e. 43 sq.yds. along with its whole of the structure according to the side therein, consisting of two room set therein and build up first floor portion with completely roof rights with the right to further/upper story construction upto the last story, plinth/covered area measuring 35.95 sq.mtrs., therefore, it is clear that at the time execution of the sale deed there was only ground floor and the first floor and there was no construction in shape of flats and shops. It is submitted that Shri Rajesh Sandev and M/s Apex Enterprises has taken a loan of Rs.26 lacs on 08.07.2015 against the equitable mortgage of the subject property which shows that the officials of the respondent bank after visiting/inspecting the site in question and after get fulfilled the necessary formalities disbursed the loan to Rajesh Sandev. Mr. Rajesh Sandev has not disclosed the fact of raising construction over the said property in shape of five floors/flats and two shops on ground floor, therefore, the respondent bank has no right over the said flat. In this regard I have perused the record. From perusal of the record it is dear that admittedly Shri Rajesh Sandev was the owner of the subject property. As per own statement of the applicant, Shri Rajesh Sandev has mortgaged the property with the respondent bank on 08.07.2015. The applicant has _purchased the flat from Shri Rajesh Sandev on 01.01.2016, therefore, the mortgage in favour of the respondent bank is prior to the sale of the flat in favour of the applicant. The mortgage is of 08.07.2015 whereas the sale in favour of the applicant is of 01.01.2016. Therefore, the respondent bank will have priority over the charge. The main contention of the applicant is that the flat was constructed after mortgage of the property with the bank and sold to the applicant. Therefore, the flat cannot be part of the mortgage. But there is no evidence that the flat was constructed after mortgage of the property and the flat was kept out of the mortgage property. There is no evidence that the flat was not mortgaged with the bank. When the entire property along with roof rights has been mortgaged with the respondent bank, it will be deemed that if any construction has been made on the roof the same shall also deemed to be mortgaged with the bank. There is no evidence that the construction has been made with the permission of the bank and a permission has been taken from the bank for selling the flat constructed over the subject property. Therefore, merely because there is no mention of the upper first floor in the sale deed executed in favour of Shri Rajesh_.Sandev, it cannot be deemed that the flat constructed on the upper first floor was not mortgaged along with the entire property. When the entire property was mortgaged and the title deed of the same has been kept with the respondent bank, there is no occasion for selling the roof rights or constructions made on the roof. Therefore, it is clear that the mortgage of the respondent bank is prior to the sale of the flat in favour of the applicant and in such circumstances, the SA of the applicant cannot be allowed.

On the basis of above discussion, the TSA no.750/2022 is liable to be dismissed.

ORDER

TSA no.750/2022 stands dismissed.

Fie be consigned to record.