Madras High Court
Deenadayalan vs N.Sathish Kumar on 30 March, 2021
Author: Krishnan Ramasamy
Bench: Krishnan Ramasamy
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 30.03.2021
CORAM
THE HON'BLE MR. JUSTICE KRISHNAN RAMASAMY
S.A.Nos.1022, 1055 of 2019, 160, 161 of 2021
and Cross Appeal No.54 of 2020
and C.M.P.Nos.21997 & 22772 of 2019
Deenadayalan ... Appellant in
S.A.No.1022 of 2019
Vs.
1.N.Sathish Kumar
Rep by his General Power of Attorney,
N.Ashok Kumar
2.S.Dinesh
3.S.Umesh
4.L.Nagaraj
5.Bank of India,
Coonoor, Nilgiris District,
Rep. by its Branch Manager,
Coonoor, Nilgiris.
6.The Recovery Officer,
Debt Recovery Tribunal, Coimbatore. ... Respondents in
S.A.No.1022 of 2019
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Deenadayalan ... Appellant in
S.A.No.1055 of 2019
Vs.
1.S.Umesh
2.N.Sathish Kumar
Rep by his General Power of Attorney,
N.Ashok Kumar
3.S.Dinesh
4.L.Nagaraj
5.Bank of India,
Coonoor, Nilgiris District,
Rep. by its Branch Manager,
Coonoor, Nilgiris.
6.The Recovery Officer,
Debt Recovery Tribunal, Coimbatore. ... Respondents in
S.A.No.1055 of 2019
Bank of India,
No.27, Mount Road,
Coonoor,
Tamil Nadu – 643 102. ... Appellant in
S.A.No.160 of 2021
Vs.
1.S.Umesh
2.N.Sathish Kumar
Rep by his General Power of Attorney,
N.Ashok Kumar
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3.Dinesh
4.L.Nagaraj
5.Deenadayalan
6.The Recovery Officer,
Debt Recovery Tribunal,
Coimbatore. ... Respondents in
S.A.No.160 of 2021
Bank of India,
No.27, Mount Road,
Coonoor,
Tamil Nadu – 643 102. ... Appellant in
S.A.No.161 of 2021
Vs.
1.N.Sathish Kumar
Rep by his General Power of Attorney,
N.Ashok Kumar
2.Dinesh
3.S.Umesh
4.L.Nagaraj
5.Deenadayalan
6.The Recovery Officer,
Debt Recovery Tribunal,
Coimbatore. ... Respondents in
S.A.No.161 of 2021
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N.Sathish Kumar
Rep by his General Power of Attorney,
N.Ashok Kumar ... Appellant in
Cross Appeal No.54 of 2020
Vs.
1.Deenadayalan
2.S.Dinesh
3.S.Umesh
4.L.Nagaraj
5.Bank of India,
Coonoor, Nilgiris District,
Rep. by its Branch Manager,
Coonoor, Nilgiris.
6.The Recovery Officer,
Debt Recovery Tribunal, Coimbatore. ... Respondents in
Cross Appeal No.54 of 2020
Prayer in S.A.No.1022 of 2019:Second Appeal filed under Section 100 of the
Code of Civil Procedure, against the judgment and decree dated 11.04.2018
made in A.S.No.5 of 2017 on the file of the District Judge, Udhagamandalam,
The Nilgiris reversing the judgment and decree dated 09.11.2016 made in
O.S.No.35 of 2010 on the file of the Subordinate Judge, Udhagamandalam.
Prayer in S.A.No.1055 of 2019:Second Appeal filed under Section 100 of the
Code of Civil Procedure, against the judgment and decree dated 11.04.2018
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made in Cross Appeal No.5 of 2017 in A.S.No.5 of 2017 on the file of the
District Judge, Udhagamandalam, The Nilgiris reversing the judgment and
decree dated 09.11.2016 made in O.S.No.35 of 2010 on the file of the
Subordinate Judge, Udhagamandalam.
Prayer in S.A.No.160 of 2021:Second Appeal filed under Section 100 of the
Code of Civil Procedure, against the judgment and decree dated 11.04.2018
made in Cross Appeal No.5 of 2017 on the file of the District Judge,
Udhagamandalam, The Nilgiris in allwoing the appeal and reversing the
judgment and decree dated 09.11.2016 made in O.S.No.35 of 2010 on the file of
the Subordinate Judge, Udhagamandalam.
Prayer in S.A.No.161 of 2021:Second Appeal filed under Section 100 of the
Code of Civil Procedure, against the judgment and decree dated 11.04.2018
made in A.S.No.5 of 2017 on the file of the District Judge, Udhagamandalam,
The Nilgiris and reversing the judgment and decree dated 09.11.2016 made in
O.S.No.35 of 2010 on the file of the Subordinate Judge, Udhagamandalam.
Prayer in Cross Appeal No.54 of 2020:Cross Appeal filed under Order 41,
Rule 22 of the Code of Civil Procedure, against the judgment and decree dated
11.04.2018 made in A.S.No.5 of 2017 on the file of the District Judge,
Udhagamandalam, The Nilgiris in restraining the suit claim of the plaintiff to
2/3rd and in modifying the judgment and decree dated 09.11.2016 made in
O.S.No.35 of 2010 on the file of the Subordinate Judge, Udhagamandalam.
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In S.A.No.1022 of 2019
For Appellant : Mr.K.V.Sanjeev Kumar
For R1 : Mr.V.Raghavachari
For R2, R4 & R6 : No Appearance
For R3 : Mr.G.K.Muthukumar
For R5 : Mr.F.B.Benjamin George
In S.A.No.1055 of 2019
For Appellant : Mr.K.V.Sanjeev Kumar
For R1 : Mr.G.K.Muthukumar
For R2 : Mr.V.Raghavachari
For R3, R4 & R6 : No Appearance
For R5 : Mr.F.B.Benjamin George
In S.A.No.160 of 2021
For Appellant : Mr.F.B.Benjamin George
For R1 : Mr.G.K.Muthukumar
For R3, R4 & R6 : No Appearance
For R2 : Mr.V.Raghavachari
For R5 : Mr.K.V.Sanjeev Kumar
In S.A.No.161 of 2021
For Appellant : Mr.F.B.Benjamin George
For R1 : Mr.V.Raghavachari
For R3 : Mr.G.K.Muthukumar
For R2, R4 & R6 : No Appearance
For R5 : Mr.K.V.Sanjeev Kumar
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In Cross Appeal No.54 of 2020
For Appellant : Mr.V.Raghavachari
For R1 : Mr.K.V.Sanjeev Kumar
For R3 : Mr.G.K.Muthukumar
For R5 : Mr.F.B.Benjamin George
For R2, R4 & R6 : No Appearance
COMMON JUDGEMENT
S.A.No.1022 of 2019 has been filed by the 4th defendant/Auction
Purchaser in the suit challenging the common judgment and decree dated
11.04.2018 made in A.S.No.5 of 2017 on the file of the District Judge,
Udhagamandalam, The Nilgiris.
2.The plaintiff in the suit has filed the Cross Appeal No.54 of 2020 in
S.A.No.1022 of 2019 challenging the common judgment and decree dated
11.04.2018 made in A.S.No.5 of 2017 on the file of the District Judge,
Udhagamandalam, The Nilgiris, in restricting the suit claim of the plaintiff to
2/3rd and in modifying the judgment and decree dated 09.11.2016 made in
O.S.35 of 2010 on the file of the Sub-Judge, Udhagamandalam.
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3.S.A.No.1055 of 2019 has been filed by the 4th defendant challenging
the common judgment and decree dated 11.04.2018 made in the Cross Appeal
No.5 of 2017 on the file of the District Judge, Udhagamandalam, The Nilgiris.
4.S.A.Nos.160 & 161 of 2021 has been filed by the 5th defendant in the
suit challenging the common judgment and decree dated 11.04.2018 made in
Cross Appeal No.5 of 2017 and in A.S.No.5 of 2017 on the file of the District
Judge, Udhagamandalam, The Nilgiris.
5.There are four appeals and one cross appeal have been filed by either of
the parties to the suit against the common judgment and decree passed in
A.S.No.5 of 2017 and Cross Appeal No.5 of 2017 by the District Judge,
Udhagamandalam. Therefore, this Court would like to take up S.A.No.1022 of
2018 and Cross Appeal No.54 of 2020 first and dispose of the same.
6.The appellant in S.A.No.1022 of 2019 and S.A.No.1055 of 2019 would
be referred herein after as appellant or 4th defendant. The cross objector in
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Cross Appeal No.54 of 2020 would be referred herein after as plaintiff or cross
objector.
7.The appellant in S.A.Nos. 160 & 161 of 2021, would be referred herein
after as 5th defendant or the 5th respondent or the Bank. All other parties to these
second appeals would be referred with the same status as referred in the suit
before the Trial Court.
8.Before dealing with the main issue, it would be appropriate to narrate
the fact of the case, briefly as follows:
8.1.Originally the suit schedule property was owned by one Lakkay
Gowder. The said Lakkay Gowder died intestate. Long after the demise of
C.Lakkay Gowder, in the year 1968, his legal heirs entered into an oral partition
and they were in possession and enjoyment of their respective shares obtained
through the said partition. Thereafter, the terms and conditions of the oral
partition was drawn up in writing among the legal heirs by virtue of an
Unregistered Family Arrangement dated 11.10.1999. By virtue of the said
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family arrangement, Thiru L.Srikantiah, one of the son of Lakkay Gowder was
alloted with the suit schedule mentioned property as his share.
8.2.On 17.10.2002, the plaintiff entered into a sale agreement with
L.Srikantiah and his two sons to purchase 1.05 acres of agricultural land out of
the 1.16 ¼ acres. On 21.10.2002, L.Srikantiah along with his two son delivered
the possession of the said land to the plaintiff. Subsequently, they have also
executed a sale deed dated 17.02.2003, in favour of the plaintiff. Thereafter,
L.Srikantiah along with his sons, defendants 1 and 2 sold 4 ¾ cent of land to the
3rd defendant and L.Srikantiah retained the balance 6.5 cents with himself.
8.3.After the purchase of the suit schedule property, the plaintiff has been
cultivating the land continuously. The plaintiff used to cultivate, carrot, potato,
beetroot etc.
8.4.When the matter stand thus, the 4th defendant in the suit who is an
utter stranger to the property had come to Adasholai on 28.02.2010 claiming to
have purchased the suit 2nd schedule property by virtue of the public auction
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sale conducted by the 6th defendant, Recovery Officer. According to the 4th
defendant, the auction was conducted by the 6th defendant and through the said
auction, the 2nd suit schedule property was purchased by the 4th defendant.
Thus, he claimed the right over the property and requested the plaintiff to
handover the property. It is the case of the plaintiff that the 6th defendant
conducted the auction sale of the suit schedule property without title and cannot
bind the plaintiff.
8.5.It is the further case of the plaintiff that fraud has been played as if
the Shri L.Srikantiah deposited the title deed with the intention to provide
security to the loan of a third party. There was no such mortgage was created
by virtue of deposit of title deed to the third party by L.Srikantiah. Therefore,
the plaintiff filed the suit to declare the sale made by the Recovery Officer as
null and void and for other relief as sought in the plaint.
8.6.The case of the 5th defendant/Bank was that one Mahadevan obtained
IMFL loan for which, the L.Srikantiah, father of defendants 1 and 2 and one
Pappanna Gowder created the mortgage by way deposit of title deed as security
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for the said loan. Since, the said Mahadevan failed to repay the loan, the 5th
defendant filed O.A.Nos.47 & 49 of 2003 before the 6th defendant, Debt
Recovery Tribunal, Coimbatore.
8.7.The further case of the Bank was that summons were served in the
above two O.As. After receipt of the summons, L.Srikantiah entered
appearance through counsel and thereafter, filed a detailed counter admitting
the entire loan and creation of deposit of title deeds. Due to non appearance in
both the O.As, L.Srikantiah was set exparte and the DRT passed exparte
decreetal order on 24.04.2007. Subsequently, it was brought into the
knowledge that L.Srikantiah was passed away, therefore, the legal heirs were
impleaded themselves, they entered appearance through their counsel, however
they have failed to appear before the DRT. Therefore, they were set exparte and
the ex-parte order which was passed on 24.04.2007 was confirmed against the
Mahadevan, Pappanna Gowder and L.Srikantiah. Thereafter, proclamation of
sale was issued on 28.11.2008. Subsequently, the recovery certificate dated
26.12.2008 was issued to the defendants 1 and 2 and there was no contest made
by the them. Therefore, the Recovery Officer auctioned property and the same
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was sold to the 4th defendant. Further, they submitted that the mortgage was
created by L.Srikantiah by virtue of deposit of title deed of Unregistered Family
Arrangement with the Bank on 06.05.2000. Sale deed was executed in favour
of the plaintiff only in the year 2003. Hence, the sale of property to the plaintiff
is not valid and the plaintiff has no authority to the question the auction sale
conducted by the 6th defendant/Recovery Officer.
8.8.The case of the 4th defendant/Auction Purchaser was that the 5th
defendant/Bank made a tender sale notice on 28.11.2008 with regard to the sale
of the property through public auction. On seeing the same, the auction
purchaser examined the document and participated in the auction sale. The
presiding officer of DRT, Coimbatore issued Recovery certificate on
03.08.2007 against L.Srikantiah. Notice of demand was issued on 14.12.2007.
The 6th defendant, Recovery Officer has passed the order of attachment on
13.05.2008 and notice for drawing proclamation of sale was issued on
02.06.2008 and proclamation of sale was also issued on 28.11.2008. Since,
there was no contest, the Recovery Officer auctioned the property on
31.12.2008, the auction purchaser participated and paid the entire amount. The
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property was auctioned by the 6th defendant, after duly complying all the legal
provisions as applicable, therefore, he submitted that there is no fraud has been
committed as contended by the plaintiff in selling the property by the Recovery
Officer to the 4th defendant. Hence he prayed to set aside the judgment and
decree passed by the District Judge, Udhagamandalam in A.S.No.5 of 2017 and
restore the judgment and decree passed by the Trial Court in A.S.No.35 of
2010.
8.9.As far as the 1st defendant is concerned, he was set ex-parte before the
Trial Court. The case the 2nd defendant was that the property is the joint family
property and he admitted the fact that there was an oral partition on 11.10.1999
between his father and his father's brothers. The suit schedule property was
allotted through the said partition to his father. Thus, the property is a joint
family property. The 2nd defendant further stated that his father had not created
any mortgage as stated by the Bank for securing the loan of the 3rd party. If at
all, his father intent to provide security, he can mortgage his share alone. Since
it is the joint family property, beyond L.Srikantiah's share, he is not entitled to
mortgage any of the shares of the defendants 1 and 2. The O.A.No.47 of 2003
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was filed in June 2003 before DRT, Coimbatore after the death of his father
Shri L.Srikantiah. Subsequent to the death of his father, the O.A was filed and
decree was obtained. Thus, all other execution proceedings subsequent to the
decree were initiated against dead person. No proceedings can be initiated and
no decree can be passed against a dead person. Thus, the sale of the suit
schedule property is null and void and the same is liable to be set aside.
8.10.The case of the 3rd defendant was that, he purchased a portion of the
suit schedule property to the extent of 4¾ cents. Therefore, he is entitled for 4¾
cents. He also stated that no mortgage was created by depositing the title deed
of the suit schedule property by L.Srikantiah. The 6th defendant, Recovery
Officer without any proper title to secure the loan, has sold the same through
public auction. Thus the auction sale conducted by the Recovery Officer is void
and liable to be set aside.
9.Before the Trial Court, on behalf of the plaintiff, P.W.1 and P.W.2 were
examined and Ex.A1 to A21 were marked. On behalf of the 4th defendant,
D.W.1 to D.W.3 were examined and Ex.B1 to Ex.B14 were marked. Ex.B15 has
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been filed and marked before this Court in S.A.No.160 of 2021 by the 5th
defendant, Bank.
10.After hearing both the parties, the Trial Court dismissed the suit
holding that there was a valid deposit of title deed by virtue of Ex.B2 and B11.
The Trial Court also held that by virtue of Ex.B12, recovery certificate dated
26.12.2008, which was issued to the legal heirs of the L.Srikantiah, i.e
defendants 1 and 2, against which the defendants 1 and 2 have not preferred any
appeal thus, the Recovery Officer, 6th defendant, sold the suit property to the 4th
defendant, with proper title. Accordingly, Trial Court dismissed the suit.
11.Against the dismissal of the said suit, the plaintiff preferred appeal in
A.S.No.5 of 2017 and the 2nd defendant filed the Cross Appeal No.5 of 2017
before the District Court, Udhagamandalam,
12.The First Appellate Court, after analysing both the documentary as
well as the oral evidences, it held that there was a valid mortgage by way of
deposit of title deed by L.Srikantiah, through Ex.B2 and B11. It has also held
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that L.Srikantiah was passed away on 15.04.2003. The suit was filed subsequent
to the death of L.Srikantiah. All the proceedings in D.R.C.No.220 of 2007 and
in O.S.No.47 of 2003 was initiated against the dead person. The Recovery
Certificate, Public notice etc., have been issued in the name of L.Srikantiah.
Therefore, the auction sale was conducted against the dead person. Thus, the
First Appellate Court held that the decree and consequent auction proceeding to
recover the debt from the guarantor, against the dead person is void. Ex.A17,
final order of DRT dated 24.04.2007 was also passed against a dead person.
However, the First Appellate Court held that the suit schedule property is the
joint family property, therefore, the defendants 1 and 2 and his father
L.Srikantiah are co-parcener, thus, if at all there is any claim by the 5th
defendant Bank, they can conduct auction against the share of the L.Srikantiah
alone. As there are three co-parcener, L.Srikantiah is entitled to 1/3rd share
alone. The 1/3rd share alone can be considered as a valid mortgage and for
remaining 2/3rd share there was no valid mortgage against the share of the
defendants 1 and 2. Therefore, the First Appellate Court confirmed that the sale
of the 2nd suit schedule property to the extent of 1/3rd share is valid.
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13.Challenging the said common judgment and decree passed by the First
Appellate Court, the 4th defendant preferred Second Appeal in S.A.Nos.1022 &
1055 of 2018. The 5th defendant/Bank preferred Second Appeal in S.A.Nos.160
& 161 of 2021 and the plaintiff preferred the Cross Appeal No.54 of 2020
before this Court.
14.This Court admitted the Second Appeals in S.A.Nos.1022 & 1055 of
2018 and Cross Appeal No.54 of 2020 on 18.12.2020 and framed the following
substantial questions of law:
“S.A.Nos.1022 & 1055 of 2018
i)Whether the suit as framed is maintainable in view of the
Section 18 of the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993?
ii)Whether the mere deposit of copy of the title deed by
L.Srikantiah would create a valid equitable mortgage in the
absence of any document evidencing such deposit is with intention
to create an equitable mortgage?
Cross Appeal No.54 of 2020
i)Whether the Appellate Court was right in granting a
decree for partition in favour of the appellant having held that the
sale itself is bad?
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ii)When the plaintiff had purchased the property on
17.03.2003 and the alleged auction sale took place latter in point
of time and that too, against the dead person (L.Srikantiah died on
13.04.2002) is the Lower Appellate Court right in recognising the
auction sale alleged to have been held on 31.12.2008 under
Exhibit B4?”
15.On 04.03.2021, this Court admitted the Second Appeals in
S.A.Nos.160 & 161 of 2021 on the following substantial question of law:
“Whether a valid mortgage by deposit of title deed can
be created by depositing Xerox copy of the documents when
the original is not available with the depositor/mortgagor?”
16.In addition to the Substantial Questions of Law already framed by this
Court dated 18.12.2020, in the Cross Objection No.54 of 2020, this Court
framed the following additional Substantial Questions of Law on 11.03.2021:
“i. Whether the Courts below are right in restricting the
suit claim to 2/3rd especially after holding the auction sale dated
03.12.2008 and the same certificate under Exhibit B6 are null and
void?
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ii. Whether the mere deposit of copy of the title deed by
Srikantiaya would create a valid equitable mortgage in the
absence of any document evidencing such deposit is with intention
to create an equitable mortgage?”
Thereafter on 19.03.2021, the additional substantial questions of law
framed in Cross Appeal No.54 of 2020 on 11.03.2021 was recasted as follows:
i)Whether the Court below are right in restricting the suit
claim to 2/3rd especially after holding the auction sale deed
03.12.2008 and the possession certificate under Exhibit B6 are null
and void?
ii)Whether the mere deposit copy of the title deed by
L.Srikantiah would create a valid equitable mortgage in the
absence of any document evidencing such deposit is with intention
to create an equitable mortgage?
iii)Whether a valid mortgage by deposit of title deed can be
created by depositing Xerox Copy of the documents when the
original is not available with the depositor/mortgagor?”
Substantial Question of Law (i) in S.A.Nos.1022 & 1055 of 2018 -
Whether the suit as framed is maintainable in view of the Section 18 of the
recovery of Debts Due to Banks and Financial Institutions Act, 1993?
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17.The learned counsel for the appellant/Auction Purchaser as well as the
5th respondent, Bank raised the issue that there is a bar for the present suit under
Section 18 of the Recovery of Debt dues to Banks and Financial Institution Act,
1993, (herein after referred as 'the Act').
17.1.For better appreciation, it would be apposite to extract the provision
of Sections 17 & 18 of the Act, which reads as follows:
......
17. Jurisdiction, powers and authority of Tribunals.—
(1) A Tribunal shall exercise, on and from the
appointed day, the jurisdiction, powers and authority to
entertain and decide applications from the banks and
financial institutions for recovery of debts due to such banks
and financial institutions.
(2) An Appellate Tribunal shall exercise, on and from
the appointed day, the jurisdiction, powers and authority to
entertain appeals against any order made, or deemed to have
been made, by a Tribunal under this Act. 1
[17A. Power of Chairperson of Appellate Tribunal.—
(1) The Chairperson of an Appellate Tribunal shall exercise
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general power of superintendence and control over the
Tribunals under his jurisdiction including the power of
appraising the work and recording the annual confidential
reports of Presiding Officers. (2) The Chairperson of an
Appellate Tribunal having jurisdiction over the Tribunals
may, on the application of any of the parties or on his own
motion after notice to the parties and after hearing them,
transfer any case from one Tribunal for disposal to any other
Tribunal.]
“18. Bar of Jurisdiction. On and from the appointed
day, no court or other authority shall have, or be entitled to
exercise, any jurisdiction, powers or authority (except the
Supreme Court, and a High Court exercising jurisdiction
under articles 226 and 227 of the Constitution) in relation to
the matters specified in section 17:
1[Provided that any proceedings in relation to the recovery of
debts due to any multi-State co-operative Bank pending before
the date of commencement of the Enforcement of Security
Interest and Recovery of Debts Laws (Amendment) Act, 2012
(1 of 2013) under the Multi-State Co-operative Societies Act,
2002 (39 of 2002) shall be continued and nothing contained in
this section shall, after such commencement, apply to such
proceedings.]”
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17.2.A perusal of Section 18 of the Act would reveal that no Court or
other authority shall have, or be entitled to exercise, any jurisdiction, powers or
authority (except the Supreme Court, and a High Court exercising jurisdiction
under Articles 226 and 227 of the Constitution) in relation to the matters
specified in section 17 alone.
17.3.In the present case, the plaintiff filed the suit to declare the sale of
the 1st suit schedule property by the 6th defendant through the public auction as
null and void and not binding on the plaintiff. The plaintiff also sought for the
partition of the 1st suit schedule property. Apart from the above, the plaintiff
also alleged fraud against the 5th defendant Bank. A plea also made in the suit
with regard to the authority of the mortgagor to mortgage the entire suit
schedule property, for the third party loan. Obviously all these issue are not the
matters as specified in Section 17 of the Act, thus the same cannot be
adjudicated by DRT.
17.4.Though the issue with regard to the jurisdiction has been framed by
this Court, the learned counsel for the appellant/Auction Purchaser as well as
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the 5th respondent Bank, have fairly submitted that the issue of jurisdiction of
the Civil Court has already been decided by this Court in C.R.P.No.941 of 2011.
Further, they have stated that I.A.No.153 of 2010 in O.S.No.35 of 2010 was
filed to reject the plaint on the ground suit is barred under Section 18 of the
Recovery of Debt dues to Banks and Financial Institution Act, 1993. The said
application was dismissed by the Court below. Against which, the Civil
Revision Petition was preferred before this Court. The said Civil Revision
Petition was also dismissed. It would be appropriate to extract the relevant
portion of the order of this Court in C.R.P.No. 941 of 2011, which is reproduced
hereunder:
“21. I have already pointed out while discussing the facts
of the case that the respondent/plaintiff has filed the present suit
for declaration that the sale of the first schedule to the suit
properties, in public auction by the sixth defendant to the fourth
defendant, is null and void, unenforceable and not binding on
the plaintiff. Apart from the said relief, the plaintiff is also
seeking the reliefs of injunction and partition. It is the
categorical case of the plaintiff that the entire proceedings
before the DRT were made against a dead person, namely the
said L.Srikantiah and that the plaintiff was not a party to the
said proceedings before the DRT. It is also specifically stated in
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the plaint that the sale conducted was a fraudulent one and the
fifth defendant-Bank has not disclosed the earlier sale of the
property in favour of the plaintiff in the proclamation of sale.
Thus, it is the case of the plaintiff that the auction sale is illegal
and tainted by fraud and malafide, inasmuch as the conveyance
executed in favour of the plaintiff was very much anterior in
point of time, which was suppressed in the proclamation of sale.
It is also not in dispute that the plaintiff is neither a borrower
nor a party to the proceedings before the DRT. Thus, it is
evident from a reading of the plaint that the plaintiff has made
allegations of fraud, mala-fide and suppression of material
facts and further claimed that the entire proceedings before the
DRT were against a dead person. Further, the plaintiff claims
that the suit property was the joint family property consisting of
the said L.Srikantiah and his two sons and therefore, the surety
said to have been executed by the said L.Srikantiah will not
bind the sons.
22. When the above allegations are made in the plaint
with the prayers as stated supra, can it still be said that the
Civil Court has no jurisdiction to go into the matter and that its
jurisdiction is ousted, in view of Section 18 of the Act? The
answer to the said question would be in negative and this view
is in fact justified by a decision of a Division Bench of this
Court in almost an identical matter, reported in 2008 (1) CTC
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471 (Subramaniam.S.V. Vs. Cypress Semiconductor Technology
India Private Ltd)
23. In the abovesaid case also, the plaintiff therein was
not a party before the DRT and has alleged fraud played by the
parties to obtain orders from the DRT. The suit filed therein
also is to declare the order passed by the DRT and the Sale
Certificate issued by the same, as null and void and not binding
on the plaintiff and for permanent injunction. Thus, from the
above decision of the Division Bench of this Court, it is clear
that if the allegations of fraud, misrepresentation and mala-fide
are made, coupled with the further allegation of not following
due procedures, the Civil Court can entertain the suit, more
particularly at the instance of a person who is not a party in the
DRT proceedings. Further, in this case, the plaintiff questions
the right of the said L.Srikantiah to execute the surety for the
entire property by claiming that the property is joint family
property.
24......................................
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25. In my considered view, the scope of Section 34 of the
SARFAESI Act and Section 18 of the Recovery of Debts Due to
Banks and Financial Institutions Act, is not one and the same or
similar in its application. While Section 34 of the SARFAESI Act
contemplates ouster of Civil Court's jurisdiction to entertain
any suit or proceeding in respect of any matter which a DRT or
the Appellate Tribunal is empowered to determine under the
SARFAESI Act, Section 18 of the Recovery of Debts Due to
Banks and Financial Institutions Act contemplates the bar of
jurisdiction only in relation to the matters specified under
Section 17 of the Act therein. This aspect has already been
discussed in the earlier paragraph of this order. Therefore, the
above decision of the Apex Court, which was rendered while
considering the scope of Section 34 of the SARFAESI Act, will
not help the petitioner/fourth defendant, as I find that the scope
of the relevant provisions of the SARFAESI Act and the
Recovery of Debts Due to Banks and Financial Institutions Act,
as discussed supra, is not one and the same. Even otherwise, a
perusal of the factual aspects of the matter before the
Honourable Supreme Court in the Jagdish Singh's case (cited
supra) would show that there was no plea of fraud or
misrepresentation or failure to follow due procedures.
Therefore, I consider that the said decision in Jagdish Singh's
case (cited supra) is also factually distinguishable.”
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.........
31.It is well settled that for considering the application
under Order 7 Rule 11 CPC, only the plaint averments as such,
have to be taken into consideration to find out as to whether the
plaint is liable to be rejected for the grounds referred to in the
application under Order 7 Rule 11 CPC. As the plaint in this
case has referred to fraud, suppression of facts and invalid
proceedings before the DRT, as though they were initiated
against a dead person etc., it is for the plaintiff to establish the
same before the Trial Court, and therefore, whether there was
any fraud or not, etc., as alleged by the plaintiff, is not for this
Court to consider the same at this stage and decide based on
the counter allegations made by the petitioner/fourth defendant.
Therefore, other decisions relied on by the learned Senior
Counsel appearing for the petitioner in respect of all these
contentions, are not relevant to be referred to at this stage.
32.Considering all the above aspects, I am of the view
that the Trial Court is justified in rejecting the application filed
by the petitioner/fourth defendant for rejection of the plaint.
Accordingly, C.R.P(PD).No.2496 of 2011 fails and the same is
dismissed.”
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17.5.In view of the above finding in the C.R.P(PD).No.2496 of 2011, the
learned counsel for the respondents 4 and 5 as well as the appellant fairly
submitted that the SLP filed against the order of the Court is also dismissed.
Therefore, the issue of jurisdiction attained finality and the issue of jurisdiction
of Civil Court to entertain the present suit is no more res integra, as far as
present case is concerned.
17.6.Further, this Court pressed into service of a recent judgment of High
Court of Bombay at Nagpur Bench, in the case of Bank of Baroda vs. Gopal
Shriram Panda, wherein it was held as follows:
“22.3. A security interest may at times also involve the
common law rights of a citizen, who is not a party to its
creation. In such a circumstance, can it be said that merely
because a security interest has been created and it has to be
enforced in a particular Forum in a particular manner, the
citizen whose common law right has been infringed, would
have to approach the Forum which has no jurisdiction and
wherewithal to decide and enforce such violation.
The following could be considered as examples of this :-
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(a) In Vineeta Sharma Vs. Rakesh Sharma and others,
(2020) 9 SCC 1, the Hon'ble Apex Court, while considering
the amendment to Section 6 of the Hindu Succession Act,
1956, whereby a daughter was recognised as a coparcener,
has held that such recognition would give her right in the
coparcenary property by her birth in the coparcenary and not
from the date of death of her father or the amendment. In such
a matter if the male members of the family have already
created a security interest in such coparcenary properties in
favour of the Bank and for non payment of dues, if the same
are being sought to be taken possession of and sold by
auction, under Section 13 of the SARFAESI Act, can the
Special Forum, DRT herein, which is undertaking this
exercise, on being approached by the daughter who now due
to the amendment to the Hindu Succession Act, 1956, has a
share therein which stands recognised retrospectively by the
Apex Court, decide and determine the rights of such daughter
and grant a preliminary decree delineating her share and take
further action to separate her share ? If it cannot, then could
it be said that the Civil Court does not have the jurisdiction to
do so, in view of the bar created under Section 34 of the
SARFAESI Act ? But if it is so held then the daughter in spite
of having a right in the property duly recognised by law,
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would be left remediless, as she cannot go to the Civil Court
nor the Special Forum, the DRT, has any authority to
determine the extent of her right and grant her the relief
which she would be entitled to.
(b) Where the owner/borrower/guarantor has entered
into an agreement of sale of the property and has accepted
consideration resiles from the contract which is then put to
enforcement by instituting a suit for specific performance,
during the pendency of which if a security interest is created
by the owner by offering the property as an equitable
mortgage, and the property is then put to
auction, can the Tribunal in such a case upon the plaintiff
approaching it under Section 17, adjudicate the rights of the
plaintiff vis-a-vis the security interest and release the property
from further process under the SARFAESI Act ? If the security
interest in spite of the notice of the pendency of the suit is put
to auction for recovery of the dues of the Bank, how would the
principle of lis pendens in Section 52 of the Transfer of
Property Act, affect the situation ? This is more so, as by
filing a suit, the right of the plaintiff, has become crystallized.
What would happen to the suit for specific performance,
which in such a circumstance, on account of loss of the
subject property, would be rendered futile ?
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(c) Another case in point would be where two or more
persons hold title to the security interest and one of them has
a power of attorney of the other, for taking steps to get the
property mutated and do all activities necessary in that
regard including to get the property partitioned, without any
authority, mortgages the entire property with the Bank under
the power of attorney which is accepted by the Bank, which on
failure to repay is sought to be auctioned by invoking the
powers under Section 13 of the SARFAESI Act. Can the
Special Forum on the plea of the other co-owner enter into an
adjudication of the issue about the nature and scope of the
power of attorney and grant a declaration that the security
interest was not legal to the extent of the share of the other
co-owner ?
(d) Where on a prima facie demonstrable case, the
person who has created the security interest, was not having
any legal right in the property in respect of which security
interest is created.
..........
27. In view of what we have discussed above, our
considered opinion to the question as referred to is as under:-
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Question :
“Whether the jurisdiction of a Civil Court to decide all
the matters of Civil nature, excluding those to be tried by the
Debts Recovery Tribunal under Section 17 of the
Securitisation Act, in relation to enforcement of security
interest of a secured creditor, is barred by Section 34 of the
Securitisation Act ?
Answer :
The answer, looking to the nature of the question, in our view,
is in parts :-
(A) Jurisdiction of the Debts Recovery Tribunal, to
decide all matters relating to Sections 13 and 17 of the
SARFAESI Act, is exclusive.
(B) In all cases, where the title to the property, in
respect of which a security interest', has been created in
favour of the Bank or Financial Institution, stands in the
name of the borrower and/or guarantor, and the borrower
has availed the financial assistance, it would be only the DRT
which would have exclusive jurisdiction to try such matters,to
the total exclusion of the Civil Court. Any pleas as raised by
the borrowers or guarantors, vis-a-vis the security interest,
will have to be determined by the DRT.
(C) The jurisdiction of the Civil Court to decide all the
matters of civil nature, excluding those to be tried by the
Debts Recovery Tribunal under Sections 13 and 17 of the
SARFAESI Act, in relation to enforcement of security interest
of a secured creditor, is not barred by Section 34 of the
SARFAESI Act.
(D) Where civil rights of persons other than the
borrower(s) or guarantor (s) are involved, the Civil Court
would have jurisdiction, that too, when it is prima facie
apparent from the face of record that the relief claimed, is
incapable of being decided by the DRT, under Section 17 of
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the DRT Act, 1993 read with Sections 13 and 17 of the
SARFAESI Act.
(E) Even in cases where the enforcement of a security
interest involves issues as indicated in Mardia Chemicals
(supra) of fraud as established within the parameters laid
down in A. Ayyasamy (supra); a claim of discharge by a
guarantor under Sections 133 and 135 of the Contract Act
[Mardia Chemicals (supra)]; a claim of discharge by a
guarantor under Sections 139, 142 and 143 of the Contract
Act; Marshaling under Section 56 of the Transfer of property
Act [J.P. Builders (supra)]; the Civil Court shall have
jurisdiction.
(F) Examples as indicated in para 22.3, are illustrative
of the Civil Court's jurisdiction.
(G) The principles laid down in para 33 (i) to (ix) of
Sagar Pramod Deshmukh (supra) are in accordance with
what we have discussed and held above.
17.7.Therefore, the law has been settled, where civil rights of a person
other than the borrower or guarantor are involved, the Civil Court would have
jurisdiction.
17.8.In fine, this Court is of the view that in the present case, the plaintiff
is neither a borrower nor a guarantor, thus, his civil right can be decided by the
Civil Court, when it is prima facie apparent from the face of record that the
relief claimed is incapable of being decided by DRT, under Section 17 of the
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Act. In view of the above, this Court inclined to hold that there is no bar, for the
present suit filed by the plaintiff, under Section 18 of the Act. Accordingly, the
issue is answered in favour of the plaintiff.
Substantial Question of Law (ii) in S.A.Nos.1022 & 1055 of 2018 –
Whether the mere deposit of copy of the title deed by L.Srikantiah would
create a valid equitable mortgage in the absence of any document
evidencing such deposit is with intention to create an equitable mortgage?
Additional Substantial Question of Law Nos. (ii) and (iii) in Cross
Appeal No 54 of 2020 – (ii) Whether the mere deposit copy of the title deed
by L.Srikantiah would create a valid equitable mortgage in the absence of
any document evidencing such deposit is with intention to create an
equitable mortgage?
iii)Whether a valid mortgage by deposit of title deed can be created
by depositing Xerox Copy of the documents when the original is not
available with the depositor/mortgagor?”
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18.1.Mr.Benjamin George, learned counsel appearing for the 5th
defendant, Bank submitted that one Mr.Mahadevan borrowed IMFL loan (Term
loan and Cash Credit facilities) from the 5th defendant Bank. To secure the said
loan, the father of the defendants 1 and 2, L.Srikantiah deposited the notarized
copy of unregistered family settlement deed dated 11.10.1999 with the Bank on
06.05.2000. The documents relating to the deposit of title deed have been
marked as Ex.B2 and B11 through the 4th defendant. Since 4th defendant was
the Auction Purchaser, the photocopy of Exs.B2 and B11 were furnished to the
4th defendant and he filed the same before the Trial Court.
18.2.The learned counsel further submitted that originally the suit
scheduled property was owned by Lakkay Gowder, who is the father of
L.Srikantiah. After the death of the said Lakkay Gowder, his legal heirs entered
into oral partition in the year 1968. By virtue of the said oral partition,
L.Srikantiah got his share to the extent of 1.16 ¼ acres together with land and
building bearing Door No. 2/379 and 2/387 in R.S.No.169/1 at
Uthagamandalam. Subsequently, the oral partition drawn into writing on
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11.10.1999 among the legal heirs of the Lakkay Gowder, which was an
unregistered family settlement deed. The copy of the said deed was produced by
L.Srikantiah to the Bank to secure the loan of one Mahadevan on 06.05.2000.
18.3.Therefore, the learned counsel for the 5th defendant submitted that
there was a duly created mortgage by deposit of title deed by L.Srikantiah for
securing the loan of the said Mahadevan. As there was a default in repayment
of loan by the borrower, the 5th defendant initiated recovery proceedings after
due notice to the borrower and the guarantors. The 5th defendant Bank, filed
O.A.Nos.47 & 49 of 2003 against the borrower and the guarantors. L.Srikantiah
was arrayed as 3rd respondent in the above said two O.As, he entered appearance
through his Lawyer and filed his reply statement. The learned counsel further
submitted that L.Srikantiah also admitted the execution of the deposit of the
title deed for securing the debt of Mahadevan in the reply statement.
18.4.The learned counsel further submitted that, after filing the reply
statement, there was no representation on behalf of L.Srikantiah, therefore the
suit filed before DRT was decreed in ex-parte on 24.04.2007. Subsequently,
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they came to know about the demise of L.Srikantiah, the legal heirs were
impleaded and they have also filed the application to set aside the exparte
decree. The impleading application was allowed and subsequently the case was
posted for final hearing, but none appeared for the impleaded parties. Therefore,
once again exparte order dated 24.04.2007 was confirmed on 05.06.2008.
Thereafter, the legal heirs of L.Srikantiah have not preferred any appeal, thus,
the said order dated 24.04.2007 of DRT attained finality.
18.5.The proclamation of sale was issued to sell the property of
L.Srikantiah on 28.11.2008. Subsequent to the same the, auction sale was
conducted and the property was sold to the 4th defendant, Auction Purchaser.
The 6th defendant issued the sale certificate and the same was registered on
06.02.2009 and the sale certificate was marked as Ex.B5. Ex.B6, the possession
certificate was issued on 06.02.2009 in favour of the 4th defendant. Thereafter,
chitta was obtained by the auction purchaser on 12.02.2010 which was marked
as Ex.B7 and the Advocate Commissioner was appointed on 03.07.2009 to evict
the defendants 1 and 2 who are the legal heirs of L.Srikantiah. On 07.10.2009,
Advocate Commissioner filed the report with the undertaking of the 1st and 2nd
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defendants to vacate the suit schedule property within five months for which,
the Auction Purchaser also agreed and the same has been marked as Ex.B10.
18.6.The learned counsel for the Bank submitted that the security by way
of deposit of title deed was made in the year 2000. The sale deed said to have
executed, in favour of the plaintiff, in the year 2003. Therefore, the mortgage
was prior to the said sale, to the plaintiff. Thus, the auction conducted by the
Recovery Officer is valid, legal and the property was sold to the 4th defendant
in accordance with law and no fraud was played in the sale as contended by the
plaintiff. Mr.Benjamin George, learned counsel for the 5th defendant further
submits that on the side of the Bank the order of the DRT passed in O.A.No.47
of 2003 was produced before the Court. The genuinity of the execution of
security document by L.Srikantiah was proved and held as legal. Further, he
submits that once the execution of document was proved and held as legal by
one legal forum, the same fact need not be proved once again before the another
Court to adjudicate the same subject matter. Hence, he submits that once he
produced the order passed by the DRT in O.A.No.47 of 2003 before the Court
below, the same is the conclusive proof of the creation of mortgage by deposit
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of title deed, thus the same need not be proved once again.
18.7.In support of his contention, he referred the following judgments of
this Court as well as the Hon'ble Apex Court:
(i) Malini Srinivasan Vs. Canara Bank reported in 2009 2 LW 785.
(ii) State of Haryana & Others Vs. Navir Singh & another reported in
(2014) 1 SCC 105.
(iii) R.Arumugam Vs. United Bank of India & Others reported in
2017 SCC Online Mad 21820
(iv) Assam Co-operative Apex Bank Vs. Punjab National Bank &
Others reported in (2019) 1 Gauhati Law Reports 597
(v) M/s. Ride Master Rims Private Ltd Vs. ING Vysya Bank Ltd.,
reported in 2006 SCC Online Mad 683
18.8.By referring the above judgments, the learned counsel also
submitted that the mortgage can be created by producing the photocopy of the
document. In the present case, the deposit of title deed was made with the
intention to create the security. The deposit of the title deed made as security by
L.Srikantiah to secure the loan of one Mahadevan has been proved by virtue of
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Exs.B2 and B11. The Courts below have already dealt with this aspect in a
proper perspective and well reasoned judgment need not be interfered on this
aspect. Therefore, he submits that there was a valid deposit of title deed by
L.Srikantiah to secure the loan of one Mr.Mahadevan.
19.Mr.Sanjeev Kumar, learned counsel for the appellant/4th
defendant/Auction Purchaser submitted that since one Mahadevan failed to
repay his loan, the Bank has initiated the recovery proceedings before DRT
against L.Srikantiah and Papanna Gowder, who are the Guarantors for the
borrowing of Mahadevan. Based on the final order passed in O.A.No.47 of
2003, the Recovery certificate dated 03.08.2007 was issued in DRC.No.220 of
2007 to L.Srikantiah. On 26.12.2008, the Recovery Certificate was issued to all
the legal heirs of L.Srikantiah in DRC.No.245 of 2008. The legal heirs have not
challenged the same, thus, auction sale was conducted in accordance with law,
to recover the loan. In the said auction sale, 4th defendant participated, as he was
the successful bidder, the suit schedule property was sold to him by the 6 th
defendant. Therefore, it was the valid sale made by the Recovery Officer and
there was no illegality in the process of auction sale. Further, the learned
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counsel submits that he will adopt the arguments of Mr.Benjamin George,
learned counsel appeared for the 5th defendant/Bank and prayed to allow the
Second Appeals.
20.None appeared for the 1st defendant who is one of the legal heir of the
L.Srikantiah.
21.Mr.G.K.Muthukumar, learned counsel appearing for the 2nd defendant
submitted that the 2nd defendant is one of the son of L.Srikantiah. The
defendants 1&2 and L.Srikantiah jointly sold the 2nd suit schedule property to
the extent of 1.05 acres by virtue of the sale deed dated 17.02.2003 to the
plaintiff and 4 ¾ cents of land to the 3rd defendant out of 1.16 ¼ acres, being
obtained by virtue of the unregistered family settlement deed dated 11.10.1999.
21.1.The learned counsel further argued that the suit schedule property is
a joint family property. Subsequent to the partition, his father and defendants 1
and 2 are Co-parceners. The learned counsel submits that L.Srikantiah had not
created any security for securing the loan of the third party as stated by the
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Bank. There was no legal necessity to create the security of the joint family
property for a third party, borrower. In this regard, the Bank has not adduced
any evidence to substantiate the creation of security, by deposit of title deed by
L.Srikantiah. When a plea was made by the plaintiff that without any proper
title, the property was sold by the Recovery Officer, it is the duty of the Bank to
prove the genuinity of the creation of security by L.Srikantiah by adducing both
oral and documentary evidence and the same has not been proved by the Bank
in the manner known to the law. Further, he submits that L.Srikantiah has not
executed any mortgage in favour of the 5th defendant Bank to secure any third
party loan. The document which was referred by the Bank is a copy of an
unregistered family settlement deed, the original/photocopy of, deposit of said
unregistered family settlement deed said to have been handed over by
L.Srikantiah has not been produced before the Trial Court by the Bank. Hence,
there was no validly created mortgage by deposit deed by L.Srikantiah.
21.2.The learned counsel further submitted that the 5th defendant Bank
heavily relied on Exs.B2 and B11, photocopies of documents, which were filed
and marked by the 4th defendant. The 4th defendant is not a competent person to
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mark those documents, which has to be marked only through Bank Officials. In
the present case, D.W.3 Bank Manager was examined. No such documents
were marked through D.W.3, Bank Manager. When a plea was raised by the
plaintiff that there was no deposit of title deed, made by L.Srikantiah in favour
of the third party, it is the duty of the Bank to prove that there was a valid
mortgage but they have failed to prove the same. Further, by referring the
deposition of D.W.3, he submitted that D.W.3, Bank Manager admitted the
factum of death of L.Srikantiah on 13.04.2003 and the initiation of DRT
proceeding in the month of June 2003. Therefore, the suit was filed against the
dead person. Any action against the dead person is nullity, and hence, the entire
order passed by DRT in O.A.No.47 of 2003 is null and void.
21.3.Further by referring the deposition of D.W.3, the learned counsel
submitted that D.W.3 has stated at his cross examination that at the time of
receipt of the deposit of title deed, the Bank will enter into the memorandum of
agreement. In the present case, on behalf of the Bank no such document was
produced either before the Courts below or before the DRT in order to prove
that L.Srikantiah, deposited title deed with the intention to create a security
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thereon to secure the debt of Mahadevan. Therefore, there is no valid mortgage
by deposit of title deed. Further, even assuming that there is a valid deposit of
title deed, being karta of the joint family, L.Srikantiah can mortgage the
property only for the benefit of the family, he cannot create a security for the
borrowings of someone else for the IMFL loan as a guarantor. He has no
authority to give the Co-parcenery property as security to someone else loan,
which is not for any legal necessity to the family. Therefore, the learned counsel
submitted that there was no valid mortgage by virtue of deposit of title deed as
alleged by the Bank and the finding of the Courts below in this regard is liable
to be set aside. In addition to the above submission, the learned counsel
submitted that he will adopt the arguments of Mr.V.Raghavachari, learned
counsel for the plaintiff, as well.
22.Mr.Ragavachari, learned counsel appearing for the plaintiff/cross
objector submitted that the First Appellate Court rightly held that the decree
passed against the dead person is null and void. Though, it has held that the
property is the joint family property, it has wrongly held that the mortgage is
valid to the extent 1/3rd share of the L.Srikantiah.
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22.1.The learned counsel submitted that there was no valid mortgage by
deposit of title deed created by L.Srikantiah, and only the photocopy of Ex.B2
and Ex.B11 were filed by the 4th defendant along with his written statement.
The 4th defendant has not deposed anything about whether there is valid
mortgage or not and he is not a competent person to speak about the validity
and execution of Ex.B2 and B11.
22.2.The Bank supposed to have marked all the documents relating to the
deposit of title deed through their Officials. D.W.3, the Bank Official was
examined, he has not deposed anything about the execution of Exs.B2 & B11,
on the other hand, he deposed that at the time of handing over the documents by
the mortgagor to create mortgage by deposit of title deed, they used to enter into
a memorandum of agreement. But no such agreement was produced before the
Courts below. It is the duty of the Bank to prove the factum of creation of valid
mortgage but no document has been filed/marked through D.W.3 to prove the
validity of creation of mortgage. Thus, the title of the Bank in the suit schedule
property has not been proved. Therefore, the property was sold by the 6th
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defendant, Recovery Officer, without any valid title in favour of 4th defendant.
22.3.The learned counsel further submitted that the order in O.A.No.47 of
2003 was passed against the dead person. At the time of passing the exparte
order by the DRT in O.A.No.47 of 2003 on 24.04.2003, L.Srikantiah was not
alive, he passed away on 13.04.2003 itself. This fact was admitted by DW3 in
the cross examination. When such being the case, they supposed to have
impleaded the legal heirs. Even, as per the Ex.B15, copy of the DRT order filed
and marked before this Court by the Bank was passed on 26.12.2008
confirming the exparte order dated 24.04.2007. The decree was passed only
against the dead person. The decree against the dead person is void. Even
issuing the recovery certificate against the dead person is not correct, which was
rightly considered by the First Appellate Court, but wrongly held that the
auction purchaser is entitled 1/3rd share in the suit schedule property.
22.4.The learned counsel further submitted that the Ex.B2 is nothing but
a copy of an entry made by the Bank in the entry register about the details of the
persons entering into the Bank. Obviously this cannot be relied as document for
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creation of any mortgage by deposit of title deed. The entry register maintained
by the Bank will not prove the creation deposit of title deed. The entry register
was maintained by the Bank to note down the details of the visitor to visit the
Bank. Ex.B2 shows that L.Srikantiah visited the Bank to meet the Manager to
handover the title deed for executing equitable mortgage. Difference in colour
of paper, handwriting and inks in Ex.B2 would prove that it was created one for
the purpose to implicate L.Srikantiah in this case. Therefore, the Bank has failed
to establish its case with regard to the creation of mortgage, by L.Srikantiah by
way of deposit of title deed to secure the debt of Mr.Mahadevan.
22.5.The plaintiff's case is that without any title, 6th defendant sold the
property in public auction. The title should have been obtained by virtue of
creation of valid mortgage. There was no valid mortgage, thus, the 6th defendant
sold the suit schedule property without any title and the said sale is void ab
initio.
22.6.Both the Court below held that there was a valid mortgage by way of
deposit of title deed, simply by relying on Exs.B2 and B11, without looking into
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the aspect about the intention to create the mortgage on the part of the
mortgagor. The Courts below have failed to assign any findings, whether
L.Srikantiah had any intention to create security by way of equitable mortgage
or not. When the plaintiff question the validity of title of the Bank to sell the
property, the Bank should have come forward to adduce both oral and
documentary evidences to substantiate the genuineness of creation of security
by way of deposit of title deed of unregistered family settlement deed by
L.Srikantiah. The Bank have to prove that the said security was provided with
intent to create equitable mortgage to secure the loan of Mahadevan. However,
the Bank has not proved the same in the manner know to law. In the absence of
any such evidence the Courts below ought not to have come to the conclusion
that there is a valid deposit of title deed to secure the loan of Mr.Mahadevan.
The Exs.B2 & B11 were marked through Auction Purchasers. The Auction
Purchaser is not a competent person to mark those documents. In support of his
contention, he referred the following judgments:
(i) R.Janakiraman Vs. State reported in AIR 1967 SC 1634
(ii) K.J.Nathan Vs. S.V.Maruthi reported in 1964 6 SCR 727
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22.7.By referring the above judgments, the learned counsel submitted that
for the purpose of creation of mortgage in terms of Section 58 (f) of the
Transfer of Property Act, there are three criteria needs to be satisfied, which are
(i) debt, (ii) deposit of title deed and (iii) intention to create the mortgage to
secure the debt. The intention to create the mortgage is a question of fact. Thus,
it is the duty of the Court to find out whether there was any intention to
L.Srikantiah to create the equitable mortgage to secure the loan of Mahadevan.
The Courts below have not given any finding on this aspect though the
available evidence would be sufficient to deal with this aspect. Therefore, the
findings given by both the Courts below with regard to the validity of the
creation of mortgage is not correct and the same is liable to be set aside.
22.8.Further, he submitted that throughout the proceedings, the Bank
have not produced the unregistered family settlement deed either before the
Trial Court or before the First Appellate Court. Even at the time of argument,
the learned counsel appearing for the Bank submitted that they have received a
notrazied photocopy of the said deed but the same has not been produced before
the Court.
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23.Though the learned counsel entered appearance for the 3rd
defendant/4th respondent, thereafter, none appeared to make their oral
submissions.
24.Heard the learned counsel for the appellant/4 th defendant, cross
objector/plaintiff, 2nd defendant and the 5th respondent/5th defendant and perused
the materials available on records.
25.The suit property was originally owned by one Mr.Lakkay Gowder,
after his death, the legal heirs of the Lakkay Gowder entered into the oral
partition in the year 1969. Subsequently, the oral partition was drawn into
writing among the legal heirs of the Lakkay Gowder on 11.10.1999. The said
oral partition is an un-registered family settlement deed. The plaintiff in the suit
marked the copy of the un-registered family settlement deed as Ex.A2.
26.The case of the 5th defendant-Bank was that by virtue of the said un-
registered family settlement deed, 1.16 acres were allotted to one of the son of
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Lakkay Gowder, namely L.Srikantiah . The said L.Srikantiah mortgaged the
un-registered family settlement deed, by virtue of deposit of title deed to secure
the debt of one Mahadevan. The said mortgage was said to have been made on
06.05.2000. According to the Bank, the L.Srikantiah handed over the un-
registered family settlement deed as security for IMFL loan obtained by one
Mahadevan who is third party to the family. The further contention of the Bank
was that by merely handing over the copy of the un-registered family settlement
deed to the Bank, it will automatically amounts to the deposit of title deed to
secure the debt of Mahadevan.
27.As the original borrower failed to repay the IMFL loan to the Bank as
agreed, thus, the Bank made a demand to the guarantors for repayment of loan.
However, none of the guarantor had come forward to settle the dues of
Mahadevan. Therefore, the Bank has instituted recovery proceedings under
O.A.Nos.47 & 49 of 2003 and the exparte decree was passed by DRT on
24.04.2007. It was contended on the side of the Bank that the legal heirs of
L.Srikantiah, themselves filed the application to implead them in O.A.No.47
and 49 of 2003, and the said applications were allowed. However, at the time
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of final hearing, the advocate who appeared for the legal heirs reported no
instruction. Hence, the order dated 24.04.2007 passed against the borrower and
two guarantors including L.Srikantiah stand confirmed and based on the said
order the property was auctioned. The 4th defendant/Auction Purchaser
participated in the auction and his bid was confirmed and the suit schedule
property was sold for a sum of Rs.8,50,000/-, to fourth defendant.
28.During the course of argument, the learned counsel appearing for the
Bank also made a submission that the Bank need not prove the deposit of title
deed made by L.Srikantiah to secure the loan of L.Srikantiah for the reason that
by virtue of order dated 24.04.2007 in O.A.No.47 of 2008, the DRT held that
the creation of security by virtue of the deposit of title deed by L.Srikantiah is
valid. Against the said order, no one preferred any appeal, thus, the said order
reached finality.
29.Both the Courts below concurrently held that there was valid mortgage
by deposit of title deed created by L.Srikantiah in favour of Bank to secure the
debt of Mahadevan. The Courts below have merely relied on the copy of the
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extract of Ex.B2 and Ex.B11. These two documents are relating to the 5th
respondent Bank but the copy of the documents have been marked through the
auction purchaser. Though, on behalf of the Bank DW3 was examined, these
documents have not been marked by the Bank official. This is only a
photocopy of the document. The originals of these extract have not been
produced and marked. The auction purchaser is not a competent person to mark
and speak about Ex.B2 and Ex.B11. Only the Bank Officials are competent to
mark and speak about these document. When the plea of fraud was raised by
the plaintiff before the Civil Court, it is the duty of the Bank to prove the
validity of the creation of the mortgage. The Bank has not proved the same,
admittedly the Bank has not taken any steps to prove the same.
30.A perusal of Ex.B2, it does not reflect anything about the deposit of
un-register family settlement deed by L.Srikantiah to secure the loan of
Mahadevan. The Bank have also not produced the so called family settlement
deed said to have deposited in the Bank by L.Srikantiah, before the Courts
below. Further, in Ex.B2, it was written that L.Srikantiah visited the Bank for
handing over the deposit of title deed to the Manager. This would not be
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sufficient to prove that L.Srikantiah deposited the title deed with the Bank with
the intent to create the mortgage. Ex.B2 is only the extract of the copy of the
entry register of the Bank, there are different inks and in different point of time
the entries have been made. The Bank Manager or the other officials are not
available for the purpose of cross examination to prove about the genuinity of
the document as the same have not been marked through them. Therefore, these
documents have not been proved in the manner known to law. Ex.B11 is the
Bank register which was not marked through the Bank officials. In the absence
of marking these documents, through the Bank Officials, genuinity and entries
made therein are doubtful, and the same cannot be relied to support the case of
the Bank as well as the auction purchaser.
31.During the cross examination, DW3 deposed that the memorandum of
agreement would be prepared at the time of deposit of title deed. No doubt the
said memorandum of agreement is conclusive proof for the execution of
mortgage by deposit of title deed by L.Srikantiah to secure the loan of
Mahadevan. But the said document has not been produced either before DRT or
before the Tribunal. In the absence of such document no valid deposit of title
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deed can be created with the photocopy of an unregistered family settlement
deed. Thus, this Court unable to trace out any documentary or oral evidences
that would substantiate the contention of the Bank that there was a valid
deposit of title deed. The Courts below failed to analyse the available oral and
documentary evidences in a proper perspective. As discussed above the
available oral and documentary evidences would be sufficient to come to the
conclusion whether there was a valid mortgage by deposit of title deed or not.
From the above analysis of the oral and documentary evidences, this Court is of
the opinion that L.Srikantiah had not created any valid mortgage by virtue of
deposit of title deed as contended by the Bank to secure the debt of Mahadevan.
32.In the present case, the plaintiff was neither a guarantor nor the
borrower, thus, his grievance cannot be addressed before DRT proceedings.
Hence, the plaintiff herein filed the suit seeking the following relief:
“a. For a declaration that the alleged sale by public auction and
the sale certificate issued pursuant to the public auction by the
sixth defendant to the 4th defendant in respect of the first schedule
property are null and void, unenforcable and not binding on the
plaintiff.
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b. For an injunction restraining the defendants from
interfering or disturbing the peaceful possession and enjoyment
of the plaintiff in respect of the second schedule property
described in the plaint.
c. For partition of the first schedule property and allotment
and separate possession of the second schedule property forming
part of the property described in the first schedule, to the plaintiff
the same having been purchased by him
d. For costs of the suit.”
33.There was a plea of fraud has been raised against the Bank by the
plaintiff in the creation of mortgage by deposit of title deed by L.Srikantiah to
secure the debt of Mahadevan. The plaintiff also alleged that L.Srikantiah is
not entitled to mortgage the joint family property to secure the loan of 3rd party
in the capacity as karta. Further in the suit, the plaintiff also pleaded for
partition and for declaration to declare the sale as null and void.
34.Therefore, according to the plaintiff all these issues can be decided
only before the Civil Court and not by the DRT. The Auction Purchaser filed
the application to reject the plaint, however, the said application was dismissed.
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Subsequently, C.R.P.No.941 of 2011 was filed and the said C.R.P was also
dismissed holding that the issues raised by the plaintiff in the plaint cannot be
decided by the DRT and only the Civil Court can decide the same.
35.When this Court held that the issue raised by the plaintiff cannot be
adjudicated by DRT and it can be decided only by the Civil Court, the 5th
respondent Bank cannot take the stand that creation of the security by deposit of
title deed was already been established and decided by DRT in the exparte
proceeding, therefore, there is no need for the Bank to once again to prove
before the Civil Court. It is the duty of the Bank to prove the case that
L.Srikantiah created mortgage by handing over the copy of the unregistered
family settlement deed with the intention to secure the debt of Mahadevan.
36.The exparte order passed by DRT against a dead person in O.A.No.47
of 2003 is void and not binding against the third party in the Civil Court. Thus,
it is the duty of the Bank to establish that there was a valid mortgage by way of
deposit of title deed.
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37.In the present case, the plaintiff took a stand that the 6th defendant
auctioned the property without proper title and any such illegal action cannot
bind the plaintiff. Thus, it is the duty of the Bank to prove the validity of title
obtained from the mortgagor, in the third party civil proceeding before the Civil
Court.
38.Ironically, neither the 5th defendant-Bank nor the auction purchaser
has marked the copy of the un-registered deposit of title deed said to have
handedover by L.Srikantiah to the Bank with the intention to create the security
to secure the loan of Mahadevan. When there was a plea that the fraud has been
played with regard to the deposit of title deed and when the title of the
defendants 5 and 6 was disputed with regard to the suit schedule property, it is
the duty of the Bank to prove that there was no fraud and there was a valid
creation of mortgage by virtue of deposit of title.
39.On side of the Bank no steps have been taken to prove that there was a
valid deposit of title deed before the Courts below and the auction purchaser has
filed a copy of the Exs.B2 and B11. Ex.B2 is the extract copy of the register
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showing the creation of equitable mortgage. Ex.B11 is the extract copy of
register of loan said to have maintained in Bank. These two documents are the
photocopy of the document and no originals have been produced before the
Courts below. The Bank officials are the only competent person to speak about
Ex.B2 and B11. In the present case, these photocopy of the documents have
been marked through 4th defendant-auction purchaser. On behalf of the Bank,
D.W.3-Bank Manager was examined. No document was marked through him.
40.Even, a perusal of Ex.B2, it would appears to be an entry register
maintained by the Bank. Before entering into the Bank, one should mark his/her
entry in the register. Such entry register would not be sufficient to prove that
L.Srikantiah deposited the copy of the unregistered family settlement deed with
the intention to create the security for the loan obtained by the third party. Both
the Courts below by referring the Exs.B2 and B11, concurrently held that there
is a valid deposit of title deed. This Court unable to understand how both the
Courts below have come to the conclusion that there is a valid mortgage when
the original family settlement deed and memorandum of agreement evidencing
the deposit of title to secure the debt of R.Mahadevan were not filed and marked
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by the Bank inspite of the admission of D.W.3 at his cross examination that it
would prepare a memorandum of agreement at the time of deposit of title deed.
The copy of family settlement deed was filed as Ex.A2 by the plaintiff. It is the
contention of the Bank that L.Srikantiah created the valid mortgage by deposit
of title deed. The contention of the plaintiff is that there was no mortgage at all
as stated by the Bank. When such being the case, it is the duty of the Bank to
prove the validity of creation of mortgage by virtue of deposit of title deed by
L.Srikantiah and also the intention on the part the L.Srikantiah to create the
security to secure the debt of Mahadevan. It is the question fact to prove the
intention to create the mortgage. Thus, it is the duty of the Court to find out the
whether there was an intention on the part of L.Srikantiah to create the
mortgage by virtue of deposit of title deed to secure the IMFL loan of
Mahadevan. Both the Courts below desperately failed to deal with this aspect as
to whether there was an intention for L.Srikantiah to create the mortgage to
secure the debt of Mahadevan, though there are enough oral and documentary
evidence are available to decide this issue, as discussed above.
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41.A perusal of Ex.B11 would show that it is the extract of the copy of
the register maintained by the Bank. Certainly, the auction purchaser is not
competent to speak about the registered maintained by the Bank and only
D.W.3-Bank Manger is the competent person to speak about these documents.
Though he was examined, he had not come forward to mark these document
and to speak about the same. All these vital aspect have not been taken into
consideration by both the Court below and they have concurrently in a
mechanical manner held that there is a valid mortgage by way of deposit of title
deed by relying on Exs.B2 and B11. This Court is of the view that it is the duty
of the 5th defendant-Bank to prove the genuinity of creation of deposit of title
deed. Thus, this Court also find that there is a fault in the decision making
process by both the Courts below while arriving at a conclusion that there was a
valid mortgage by deposit of title deed without analysing the available evidence
in the proper perspective.
42.On behalf of the 5th defendant Bank, D.W.3 was examined. In his
cross examination he has stated as follows:
“mlkhdk; bfhLf;Fk; nghJ Mtzj;ij xg;gilt[ bra;jhy;
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; zh;t[ xg;ge;jk; jahh; bra;nthk; vd;why; rhpjhd;”
mjw;F xU g[hpeJ
43.Which means a memorandum of agreement for the deposit of title
deed would be prepared at the time of deposit of title deed. D.W.3 in his cross
examination stated that they have prepared the memorandum of agreement at
the time of depositing the title deeds. Thus, it is clear, it is the practice of Bank
to prepare the memorandum of agreement at the time of deposit of title deeds
which would be signed by both the parties. When such being the case, such
memorandum of agreement has not been filed any where and marked on the
side of the Bank in order to prove their stand that there is a valid mortgage by
deposit of title deed of L.Srikantiah. In the absence of production of said
memorandum of agreement, as deposed in the cross examination by D.W.3, the
Court at no stretch of imagination can come to the conclusion that there was a
mortgage by deposit of title deed.
44.The judgment in O.A.No.47 of 2003 may be relevant but it is not a
conclusive proof in a third party civil proceedings. There is a serious cloud over
in the filing of O.A.No.47 of 2003 and in passing the exparte order dated
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24.04.2007. According to D.W.3 the O.A was filed in the month of June 2003.
D.W.3 deposed in his cross examination stating that L.Srikantiah passed away
on 13.04.2003. Thus, O.A. itself filed against the dead person. According to 5 th
defendant the said L.Srikantiah engaged the Advocate and filed the reply
statement. Further, it was averred that L.Srikantiah admitted the execution of
deposit of title deed in reply statement. I am unable to understand when
L.Srikantiah passed away in the month of April 2003, how the dead person
would have engaged the Advocate and filed the reply statement admitting the
creation of mortgage by way of deposit of title deed in O.A filed in the month of
June 2003. That apart, at the time of passing exparte decree on 24.04.2007, the
Bank was well aware of the fact that L.Srikantiah was died. Though the Bank
contended that legal heirs, themselves have been impleaded in O.A.No.47 of
2003, in the year 2008, the entire proceedings subsequent to the passing of the
decree by DRT was proceeded only against the dead person. The proclamation
of sale was issued 28.11.2008, recovery notice was issued on 26.12.2008,
tender sale notice was issued on 28.11.2008, recovery certificate was issued
03.08.2007, notice of demand was issued on 14.12.2007, order of attachment
was issued on 13.05.2008 and Recovery Certificate on 03.08.2007. All these
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proceedings have been taken against the dead person. Therefore, any action
against dead person is null and void. When these type of illegal void acts
committed on the part of the Bank, it is the duty of the Bank to prove all the
actions taken against dead person are legal and valid but nothing has been
proved. All these aspect have not been considered by both the Courts below
while holding that there was a valid mortgage by virtue of deposit of title deed.
Therefore, this Court finds perversity on the judgment and decree passed by
both the Court below on the aspect of the finding that there was a validly
created mortgage by way of deposit of title deed by L.Srikantiah, thus, the said
finding is liable to be set aside.
45.The argument also put forth by all the learned counsel by referring
Section 58 (f) of the Transfer of Property Act. For the ready reference the said
provision is extracted hereunder:
“Where a person in any of the following towns, namely,
the towns of Calcutta, Madras 2 [and Bombay], 3 *** and in
any other town which the 4 [State Government concerned]
may, by notification in the Official Gazette, specify in this
behalf, delivers to a creditor or his agent documents of title to
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immoveable property, with intent to create a security thereon,
the transaction is called a mortgage by deposit of title -deeds.”
46.A perusal of the Section 58 (f) of the Transfer of Property Act, would
reveals that there are three criteria to be satisfied to create mortgage by way of
deposit of title deed which are as follows:
(i) debt,
(ii) deposit of title deed and
(iii) intention to create security for the debt
47.In the present case, to prove the creation of mortgage by deposit of
title deed, all these three criteria needs to be satisfied by the Bank. No steps
have been taken by the Bank to prove that there was deposit of title deed by
L.Srikantiah. Even based on Ex.B2 and B11, this Court unable to find anything
to satisfy the above requirements. As far as the 1 st criteria is concerned there
must be a debt, according to the Bank there was debt, but the plaintiff
contended that he has no knowledge about the money lent by the Bank to
R.Mahadevan.
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48.As far as 2nd criteria is concerned, the Bank has to prove that there was
a valid mortgage by deposit of title deed created by L.Srikantiah, in order to
prove the same, the Bank has supposed to have produced original copy of the
title deed. In the present case, even the photocopy of the unregistered family
settlement deed was not filed and marked by the Bank. According to D.W.3, at
the time of deposit of title deed, they used to prepare the memorandum of
agreement. Even the said document has not been filed by the the Bank to
establish that there was a valid mortgage by deposit of title deed. Hence, the 2nd
criteria also not satisfied by the Bank.
49.As far as, 3rd criteria is concerned, at the time of deposit of title deed,
guarantor has to express his intention to deposit the title deed for securing the
loan debt. Though D.W.3, Bank Manager deposed at his cross examination that
there was a memorandum of agreement for the deposit of title deed, the same
was not produced and marked by the Bank before the Courts below. Ex.B2 and
Ex.B11 would not be sufficient to prove the intention of the L.Srikantiah to
deposit the title deed for securing the debt of Mahadevan. Further, the Bank has
also not filed any other document to establish the intention of the guarantor to
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create the security
50.The Bank has not satisfied the 2nd and 3rd criteria as per the provision
under Section 58 (f) of the Transfer of Property Act. The Courts below have
also not dealt with this aspect. An analysis by this Court with the available
evidences, this Court finds that the Bank has not satisfied the 2 nd and 3rd criteria
of Section 58 (f) of the Transfer of Property Act. Therefore, the judgment of
both the Court is perverse on the aspect of holding that there was a valid
mortgage by deposit of title deed, and the same is liable to be set aside on this
aspect also.
51.The learned counsel appearing for the 5th defendant/Bank also referred
the following judgments in support of his submissions.
(i) The learned counsel referred the Paragraph Nos; 3 and 12 in the case
of Malini Srinivasan Vs. Canara Bank reported in 2009 2 LW 785, which
reads as follows:
“3.Learned Senior Counsel for the petitioner would submit
that the petitioner is neither a borrower not a guarantor; no valid
mortgage is created concerning the property in favour if the
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Bank; the entries in the Equitable Mortgage Register alone are
not sufficient to give legal validity to the alleged claim of the
Bank of an existence of an equitable mortgage; an unregister
mortgage deed cannot be called in evidence; the dates in the
Equitable Mortgage Register have been malafidely altered by the
Bank and they are incompatible; the petitioner is not an earning
member and, therefore, she is not in a position to deposit the
amount, as a condition precedent for hearing the appeal by
DRAT.
12.It is true that at page No.70 of Equitable Mortgage
Register, there is a material alteration of date from 23.10.1991 to
24.10.1991. But, in the same page, the date of deposit is clearly
stated as 23.10.1991 and the manager also certified that
mortgagor was present on 23.10.1991 and deposited the title
deeds. When the date of deposit was clear, the said material
alteration, which was probably due to a clerical mistake, cannot
be given much importance.”
51.1.In the above said case, the mortgage by deposit of title deed was
produced and proved by the Bank before the Court. Whereas in the present case
in hand, no such deposit of title deed has been produced before the Courts
below in order to prove the creation of the mortgage by deposit of title deed and
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the deposit of title deed itself in dispute. Therefore, this case will not be
applicable for the 5th defendant/Bank to substantiate their case.
(ii) Secondly the learned counsel referred the Paragraph Nos.14.2 and
14.3 in the case of State of Haryana & Others v. Navir Singh & another
reported in (2014) 1 SCC 105, which reads as follows:
“14.2. But the question is whether a mortgage by deposit of
title deeds is required to be done by an instrument at all. In our
opinion, it may be effected in a specified town by the debtor
delivering to his creditor document of title to immovable property
with the intent to create a security thereon. No instrument is
required to be drawn for this purpose. However, the parties may
choose to have a memorandum prepared only showing deposit if
the title deeds. In such a case also registration is not required.
But, in a case in which the memorandum recorded in writing
creates rights, liabilities or extinguishes those, the same requires
registration.
14.3. In our opinion, the letter of the Finance Commissioner
would apply in cases where the instrument of deposit of title deeds
incorporates the terms and conditions in addition to what flows
from the mortgage by deposit of title deeds. But in that case there
has to be an instrument which is an integral part of the transaction
regarding the mortgage by deposit of title deeds. A document
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merely recording a transaction which is already concluded and
which does not create any rights and liabilities does not require
registration.”
(iii) Thirdly, the learned counsel referred the Paragraph Nos.3.23 and
3.24 in the case of R.Arumugasamy Vs. United Bank of India & Others
reported in 2017 SCC Online Mad 21820, which reads as follows:
“3.23. The learned counsel for the petitioner relies on the
decision State of Haryana v. Narvir Singh, (2014) 1 SCC 105 at
special page 111, whereby amd whereunder, at paragraph 13, it
is observed as follows:
“13. This Court while relying on the aforesaid judgment
in the case of United Bank of India v. Lekharam Sonaram & Co.,
AIR 1965 SC 1591 reiterated as follows:
“7. ............It is essential to bear in mind that the essence
of a mortgage by deposit of title-deeds is the actual handing
over by a borrower to the lender of documents of title to
immovable property with the intention that those documents
shall constitute a security which will enable the creditor
ultimately to recover the money which he has lent. But, if the
parties choose to reduce the contract to writing, this implication
of law is excluded by their express bargan and the document will
be the sole evidence of its terms. In such a case the deposit and
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the document both form integral parts of the transaction and are
essential ingredients in the creation of the mortgage. It follows
that in such a case the document which constitutes the bargain
regarding security requires registration under Section 17 of the
Indian Registration Act, 1908, as a non-testamentary instrument
creating an interest in immovable property, where the value of
such property is one hundred rupees and upwards. If a
document of the character is not registered it cannot be used in
the evidence at all and the transaction itself cannot be proved by
oral evidence either.”
3.24. Also, in the aforesaid decision at paragraph 14.2. at
page 111, it is held as follows:
“14.2. But the question is whether a mortgage by deposit
of title deeds is required to be done by an instrument at all. In
our opinion, it may be effected in a specified town by the debtor
delivering to his creditor document of title to immovable
property with the intent to create a security thereon. No
instrument is required to be drawn for this purpose. However,
the parties may choose to have a memorandum prepared only
showing deposit if the title deeds. In such a case also
registration is not required. But, in a case in which the
memorandum recorded in writing creates rights, liabilities or
extinguishes those, the same requires registration.”
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(iv) Fourthly, the learned counsel referred the Paragraph Nos.48 in the
case of Assam Co-operative Apex Bank Ltd., v. Punjab National Bank &
Others reported in (2019) 1 Gauhati Law Reports 597, which reads as follows:
“48.Thus, in view of the discussions above, and in view of
the requirement of Section 58(f) of the Transfer of Property Act,
1882 that a person must hand over title deeds with the intention to
create a security, the petitioner-Bank must show such intention by
producing a admissible copy of (i) their mortgage register
maintained in normal course of ordinary business, or (ii)a
memorandum of deposit of title deeds, or (iii) take delivery letter
by the person making such deposit to create equitable mortgage
by deposit of title deeds. Thus, the prima facie conclusion of this
Court is that merely by holding the Sale Deed dated 1.5.1970, the
petitioner-Bank has not been able to demonstrate the creation of
an equitable mortgage of the immovable property of Hautley Tea
Estate by deposit of title deeds. Moreover, by its own conduct, the
petitioner-Bank not only recognized the existence of a subsequent
Sale Deed dated 9.1.1984, by which ATCPL transferred Hautely
Tea Estate to R-2, but also allowed advances on account of
Hautely Tea Estate to (i) Shew Prasad Nimodia, (ii) R-2 and (iii)
R-3 and R-4 Thus, by conduct, the petitioner-Bank has absolved
the said ATCPL, who is alleged to have created the initial
mortgage by recognizing others as owners of Hautley Tea Estate
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and by continuing to grant them advance on account of Hautley
Tea Estate even after R-3 had admittedly liquidated the entire
outstanding dues of Hautely Tea Estate as on 16.8.2001.”
51.2.As far as 2nd, 3rd and 4th case law referred by the learned counsel for
the 5th defendant/Bank is concerned the Hon'ble Apex Court and the High Court
of Guwahati have held that to create the mortgage by way of deposit of title
deed the mortgagor must handover the title deed with the intention to provide
the security for the debt. The said intention of the mortgagor to provide security,
in the present case, has not been proved by the Bank. It is the bounden duty of
the Bank to prove the said aspect of the case. Therefore, the law laid down by
the the Hon'ble Apex Court and the High Court of Guwahati will not apply for
the case in hand.
(v) Finally the learned counsel referred the Paragraph Nos. 6 and 17 in
the case of M/s. Ride Master Rims Private Ltd., v. ING Vysys Bank Ltd.,
reported in 2006 SCC Online Mad 683, which reads as follows:
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“6.The next question that would arise is as to whether
there could be a creation of equitable mortgage with Xerox Copy
of a particular document. In this connection reliance was placed
upon by the applicant/plaintiff in a case law reported in
R.Janakiraman v.State rep. by Inspector of Police, C.B.I., SPE.,
Madras, (2006) 1 SCC 697 : 2006 AIR SCW 754. In that case
original title deeds were not deposited. What were deposited
were not title deeds, but only a certificate copy issued by the Co-
opertive House Building Society, certifying that the appellant is
owner of the particular building and two receipts showing that
the appellant had paid some electric charges. The alleged
mortgage by deposit of title deeds was based upon Ex.P69 in that
case, which was also not produced. In that context it was held
that the equitable mortgage was also a make-believe and not real
one, inasmuch as no document of title was shown to have been
deposited.
17.In consideration of these aspects, I find that there is a
valid creation of equitable mortgage in favour of the Respondent-
Bank and therefore no injunction could be granted. Original
Application No.264 of 2006 is dismissed. Application No.3452 of
2006 is allowed. Interim injunction granted by this Court order
dated 20.3.2006 is vacated.”
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51.3.By referring above, the learned counsel for the 5th defendant
contended that the xerox-copy of the document would suffice to create the title
deed. This Court unable to accept the contention of the Bank that the
photocopy of the document is sufficient to create the valid mortgage. The Bank
should not have accepted the photocopy of the settlement deed for the purpose
of securing the debt. Lending money by receiving the photocopy of the
document would not be a good practice. According to the plaintiff, it was the
unregistered family settlement deed, the original will be available with only one
person. No doubt, only one original deed will be available. In the present case,
according to the Bank, they have obtained the photocopy of the unregistered
family settlement deed as a security to secure the debt of the third party. When
the original was not available, when the Bank taking the photocopy of the
document as security, in such case, the Bank should have necessarily entered
into a memorandum of agreement with the guarantor for depositing the
photocopy of the unregistered settlement deed with the intention to create the
security for the debt of the third party, but, in the present case, the Bank has not
at all entered any such memorandum of agreement. Further, nothing prevented
the Bank from obtaining the Revenue documents such as patta, Chitta and
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Adangal in order to prove the title of the guarantor. If the Bank was really
serious enough in obtaining the security for the loan, the Bank should have
obtained all these documents and entered into an memorandum of agreement.
As stated above the memorandum of agreement was not entered and produced
before the Court. Under such circumstance, the Bank wants the Court to make
believe of their case. Even, D.W.3, in his cross examination has admitted the
fact that at the time of depositing the title deeds, the Bank will enter into a
memorandum of agreement. However, no such agreement was produced by the
Bank. Thus, this Court unable to accept that mere handing over the photocopy
of the title deeds would suffice to create the valid mortgage by deposit of title
deed, in the absence of any other original supporting revenue documents and
memorandum of agreement to deposit the title deed. Thus, the above case will
not apply to the facts of the present case.
52.The learned counsel appearing for the plaintiff has referred the
following case laws in support of his contention.
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(i) Firstly, the learned counsel referred the Paragraph No.27 in the case of
Jananiraman vs. State reported in 2006 1 SCC 697, which states as follows:
“27. Equitable mortgage is created by depositing the
original title deeds. But in this case, the original title deeds are not
deposited. Not even the two documents referred in Ext. P-69 are
deposited. What are deposited (Exts. P-82 and P-83) were not title
deeds but only a certificate issued by the Swarnapuri Cooperative
House building Society Ltd., dated 1.2.1984 certifying that the
appellant is owner of Plot No.10. Swarnapuri Extension (Ext. P-
82) and two receipts issued by Tamil Nadu Electricity Board
showing that the appellant had paid some electricity charges (Ext.
P-83). PW 11 and PW 15 being experienced moneylenders, if
really were lending Rs.2,50,000 would have certainly insisted
upon the original title deeds or at least the documents mentioned
in Ext. P-69 being deposited. This shows that the equitable
mortgage was also a “make-believe” and not real.”
52.1.A perusal of the above judgment would show that the Bank should
have insisted for the original title deed. When they are lending a huge sum of
money they should have insisted for the original title deed. Failure to get the
original shows that the equitable mortgage said created was not real and it was
only a make-believe. The law laid down by the Hon'ble Apex Court in the
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above case will squarely apply for the case in hand. In the present case Ex.B2
and Ex.B11 were not marked through the Bank Officials. Even, if the Bank
marked Ex.B2, it is only a copy of the extract of the register maintained by the
Security guard at the time of entering into the Bank. By simply relying on the
entry in the said register and photocopy of the unregistered family settlement
deed marked by the 4th defendant, the Bank wants this Court to believe their
case. As deposed by D.W.3, the Bank Manager, the memorandum of agreement
entering the deposit of title deed has also not been produced by the Bank to
prove their case. Further, in the present case, there is no valid deposit of title
deed. Thus, the law laid down in the above case will squarely apply to the case
in hand.
(ii) Secondly, the learned counsel referred the Paragraph No.10 in the
case of K.J.Nathan Vs. S.V.Maruthi reported in 1964 6 SCR 727, which reads
as follows:
“10.The foregoing discussion may be summarized thus:
Under the Transfer of Property Act a mortgage by deposit of title
deeds is one of the forms of mortgages whereunder there is a
transfer of interest in specific immovable property for the purpose
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of securing payment of money advanced or to be advanced by way
of loan. Therefore, such a mortgage or property takes effect
against a mortgage deed subsequently executed and registered in
respect of the same property. The three requisites for such a
mortgage are (i) debt (ii) deposit of title deed; and (iii) and
intention that the deeds shall be security for the debt. Whether
there is an intention that the deeds shall be security for the debt is
a question of fact in each case. The said fact will have to be
decided just like any other fact on presumption of law that the
mere deposit of title deeds constitutes a mortgage, for no such
presumption has been laid down either in the Evidence Act or in
the Transfer of Property Act. But a court may presume under
Section 114 of the Evidence Act that under certain circumstances
a loan and a deposit of title deeds constitute a mortgage. But that
is really an inference as to the existence of one fact from the
existence of some other fact or facts.”
52.2.A perusal of the above judgment would show that there are three
requisite for a mortgage (i.e) (i) debt (ii) deposit of title deed (iii) Intention that
the deed shall be security for the debt.
52.3.The Hon'ble Apex Court in the above case held that it is a question
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of fact to find out whether there was an intention to create security for the debt.
Further, the said fact should be decided as any other fact on presumption rule
under Section 114 of the Evidence Act. This Court is unable to find anything to
arrive at such conclusion that there may be a valid mortgage even under
presumption Rule. The Bank wants this Court to believe Exs.B2 and B11. If
this Court believe those documents as it is, today, tomorrow anything can
happen in the Banking activities to hide their misdeeds.
53.As discussed above, in the present case, the Bank has deliberately
failed to prove the deposit of title deed was made with the intention to provide
the security for the debt. The three requisites for the creation of security as held
by the Hon'ble Apex Court has not been satisfied in the present case and this
aspect has been elaborately discussed by this Court already. In view of the
above discussion and finding of this Court, the findings of the Courts below that
there was a valid mortgage by way of deposit of title deed by virtue of ExsB2
and B11 is set aside and accordingly, the Substantial Question of Law No.ii
framed in S.A.No.1022 & 1055 of 2018 and Additional Substantial Questions
of Law No.ii and iii framed in Cross Appeal No.54 of 2020 are answered as
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follows:
(i)A mere deposit of photocopy of title deed by L.Srikantiah would not
create a valid equitable mortgage in the absence of other revenue documents
and memorandum of agreement evidencing the deposit of title deed as stated by
D.W.3 in his cross examination, to prove that the equitable mortgage, was
created with the intention to secure the debt.
(ii)The valid mortgage of deposit of title deed cannot be created only by
depositing the xerox copy of the title deed without any memorandum of
agreement, as admitted by the D.W.3, to reflect the intention of the mortgagor to
mortgage the property to secure the particular debt and other supporting
revenue records, as far as wherever the photocopy of the title deed produced in
the absence of non-availability of original in the case of partition.
Substantial Question of Law Nos. (i) in Cross Appeal in 54 of 2020-
i)Whether the Court below are right in restricting the suit claim to 2/3 rd
especially after holding the auction sale deed 03.12.2008 and the possession
certificate under Exhibit B6 are null and void?
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54.The challenge was made against the findings of the First Appellate by
the Cross Objector stating that the Court below held that the decree was passed
against the dead person. However, it held that that 1/3rd share of L.Srikantiah
has to be taken as a security for the loan, thus, the plaintiff is entitled only to the
extent of 2/3rd share in the suit schedule property.
55.Mr.K.V.Sanjeev Kumar, learned counsel appearing for the 4th
defendant/Auction Purchaser submitted that the Court below has wrongly held
that the plaintiff is entitled for 2/3rd share of the suit schedule property. The
entire suit schedule property was mortgaged by L.Srikantiah as Karta. The
learned counsel admits the fact that the suit schedule property is a joint family
property and L.Srikantiah as a Karta of the family is entitled to mortgage the
property for the benefit of the family members. Therefore, he submitted that the
First Appellate Court holding that the karta is not entitled to mortgage the
property to the extent of 2/3rd property and thereby decreeing the suit to the
extent of 2/3rd share of the property is illegal and the same is liable to be set
aside.
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56.Mr.Benjamin George, learned counsel appearing for the 5th
defendant/Bank submitted that both the Courts below held that there was a valid
mortgage by virtue of deposit of title deed. When, the Courts below held that
there was a valid mortgage by deposit of title deed, the question of restricting
the right of L.Srikantiah to the extent of 1/3rd share is not proper. Further, he
also reiterated that L.Srikantiah as a Karta of the family is entitled to mortgage
the suit schedule property in entirety including the share of the other family
members for their benefits. Therefore, he has also submited that the decreeing
the suit to the extent of 2/3rd share in favour of the plaintiff is not proper, which
is contrary to the finding of the Courts below. Hence, the finding of the First
Appellate Court is liable to be set aside is this regard.
57.Mr.Raghavachari, learned counsel for the plaintiff and
Mr.G.K.Muthukumar, learned counsel for the 2nd defendant submitted that, the
suit schedule property is a joint family property, the said fact has been admitted
by all the parties in these appeal proceedings. No doubt that the L.Srikantiah as
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a Karta of the family can mortgage the suit property on behalf of the other
family members for their benefit. In the present case, the suit schedule property
was mortgaged to and in favour of the Bank for securing the IMFL loan
obtained by one Mahadevan, who is a third party. The said Mahadevan is
noway connected with the family members of L.Srikantiah. The said mortgage
was not created for the benefit of the family members. It is not the case of
L.Srikantiah borrowed the loan by creating the security in favour of the Bank,
whereas, the loan was granted to the third party. Therefore, Sirkantiah is not
entitled to create the present mortgage on the share of the other coparcener.
Even assuming that there was a valid mortgage by L.Srikantiah to the extent of
his 1/3rd share, the First Appellate Court has categorically held that the decree
was passed against the dead person and all other execution proceedings were
initiated in the name of the dead person and the same is void. After coming to
the said conclusion, the Court below wrongly held that there was an valid
mortgage to the extent of 1/3rd share of Shri L.Srikantiah in favour of the Bank,
securing the IMFL loan. Therefore, he submitted that restricting the decree to
the extent of 2/3rd alone is not proper. Hence, the said finding is liable to be set
aside and prayed for to decree the entire suit schedule property in favour of the
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plaintiff.
58.Heard the learned counsel for the appellant/4 th defendant, cross
objector/plaintiff, 2nd defendant and the 5th respondent/5th defendant and perused
the materials available on records.
59.The First Appellate Court while passing the decree it has restricted the
suit claim to the extent of 2/3rd and passed the decree in favour of the plaintiff.
The Court below found that the suit schedule property is a joint family property
and there are three copaeceners to the suit schedule property. At the time of
mortgage the other two copaeceners are the majors and no consent was obtained
from them. Therefore, it was held that the mortgage created by L.Srikantiah is
valid to the extent of 1/3rd share of the suit schedule property.
60.The argument made on behalf of the plaintiff was that when the First
Appellate Court found that the auction sale was conducted against the dead
person, any decree against the dead person is null and void. After having held
with such conclusion, the Court below held that the Bank is still entitled to
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auction the suit schedule property to the extent of 1/3rd share, which is totally
contrary to the finding of the First Appellate Court.
61.To answer this issue, first the Court has to find out whether there is a
valid mortgage by virtue of deposit of title deed to secure the debt of
R.Mahadevan. This Court already came to the conclusion that there was no
valid mortgage by deposit of title deed by L.Srikantiah. If there is no valid
mortgage by L.Srikantiah to secure the debt of R.Mahadevan restricting the suit
claim to the extent of 2/3rd in favour of the plaintiff is not correct. The plaintiff
is entitled for the entire suit schedule property since he has has proved that he
has purchased the property by virtue of the sale deed dated 17.02.2003. The
said fact was admitted by Umesh and Dinesh, who are all the signatory to the
said sale deed. Further, the plaintiff has proved that he is the owner of 1.05
acres of the suit property and the defendant failed to prove that there was a valid
mortgage created by the L.Srikantiah in favour of the Bank to secure the IMFL
loan created R.Mahadevan.
62.Secondly, whether the decree was against the dead person? In the
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present case, as deposed by D.W.3, the suit was filed before DRT in the month
of June 2003, whereas, L.Srikantiah died in the month of April 2003. Hence, as
per the statement of D.W.3, Bank Official, at the time of filing the suit
L.Srikantiah was no more. The O.As were filed against the dead person. It was
pleaded by the learned counsel for the 5th defendant/Bank that L.Srikantiah
engaged the counsel and the learned counsel filed vakalat for L.Srikantiah and
also filed the reply statement and in the reply statement L.Srikantiah admitted
the creation of mortgage by virtue of deposit of title deed. On the face of it, all
these submissions cannot be accepted for the simple reason that when the suit
was filed after the death of the person, the question of engaging the counsel and
filing reply statement does not arise. Even the final decree was passed against
the dead person. Subsequent to the exparte decree dated 24.04.2007, all other
proceedings in O.A.No.47 of 2003 have been passed based on the decree dated
24.04.2007 including the issuance of recovery certificate dated 26.12.2008.
Ironically, Ex.B12, recovery certificate was issued for the recovery of loan
amount based on the decree in O.A.No.49 of 2003. The Court below also
heavily relied on Ex.B12. From a perusal of Ex.B12, it appears that notice was
not issued to the legal heirs of L.Srikantiah in D.R.C.No.220 of 2007. The
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notice was issued only against the borrower, Mahadevan and two guarantor viz.,
Papannana Gowder, L.Srikantiah. Therefore, even the Recovery Certificate was
issued against the dead person. Any decree and the execution proceedings
against the dead person is null and void. On this ground also the judgment and
decree passed by the First Appellate Court rejecting the decree to the extent of
1/3rd share of the suit schedule property is liable to be set aside.
63.Further the argument was put forth by the learned counsel for the 5th
defendant/Bank that as a Karta for the benefit of the family, L.Srikantiah is
entitled to mortgage the entire suit schedule property for the benefit of the
family. Accordingly, he mortgaged the property.
64.In the present case, the security said to have been provided by
L.Srikantiah for securing the IMFL loan obtained by one Mahadevan, cannot be
construed as that L.Srikantiah provided security for the benefit of the family.
The alleged security provided by L.Srikantiah will no way going to benefit his
family members. He said to have provided security for a third party loan, thus,
under no stretch of imagination the said security can be construed as provided
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by L.Srikantiah as karta for his benefit of the family members.
65.In view of the above, since there was no valid mortgage, the decree
was passed against the dead person and all other recovery proceedings have
been initiated only against the dead person, the question of provision of 1/3 rd
share in favour of Bank does not arise. Thus restricting the suit claim to the
extent of 2/3rd share after holding that the auction dated 03.12.2008 and the
possession certificate Ex.B6 are null and void, is not correct. Therefore, this
Court able to trace the perversity in the finding of the First Appellate Court in
this regard. Thus, the finding of the First Appellate Court that the auction
conducted by the 6th defendant is valid for 1/3rd share is liable to be set aside.
Accordingly, the same is set aside. In the result, this Court hold that the plaintiff
is entitled for the suit claim as prayed for and accordingly the above said
substantial question of law is answered in favour of the plaintiff.
Substantial Question of law (i) and (ii) in Cross Appeal No.54 of 2020
framed on 18.12.2020
i)Whether the Appellate Court was right in granting a decree for
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partition in favour of the appellant having held that the sale itself is bad?
ii)When the plaintiff had purchased the property on 17.03.2003 and the
alleged auction sale took place latter in point of time and that too, against the
dead person (L.Srikantiah died on 13.04.2002) is the Lower Appellate Court
right in recognising the auction sale alleged to have been held on 31.12.2008
under Exhibit B4?
66.The First Appellate Court has granted decree in favour of the plaintiff
to the extent of 2/3rd share. As this Court already found that there was no
creation of mortgage by L.Srikantiah, the decreeing the suit to the extent of 2/3 rd
is not proper. Granting the decree for partition in favour of appellant to the
extent of 1/3rd is also not proper particularly when the First Appellate Court
held that the sale itself is bad in law due to the reason that the decree as well as
the entire sale proceedings of the suit schedule property was initiated against
the dead person. When the initiation of O.A proceeding before the DRT,
obtaining the decree and the entire recovery proceeding consequent to the
decree are all against the dead person, the decree as well as the entire sale of
suit schedule property is void ab initio. Thus, decreeing the suit to the extent of
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2/3rd of the suit property by partition is not proper and the same is liable to be
set aside. Therefore, the plaintiff is entitled for decree for the entire suit
schedule property, as prayed for.
67.The D.W.3 in his cross examination had stated that L.Srikantiah was
passed away on 13.04.2003 and the suit was filed in the Month of June 2003.
Further, he admitted the fact that the suit was filed against the dead person. He
also admitted the fact that the sale was conducted against the dead person and
the sale against the dead person is null and void. In the present case, on perusal
of documents would show that the entire auction proceedings were initiated
from time to time against the dead person. The D.R.C.No.220 of 2007 was
issued against the dead person and legal heirs of the dead person have not been
served any notice. Thus, the finding of the Lower Court to recognise the
auction sale said to have held on 31.12.2008 under Ex.B4 after coming to the
conclusion that the decree and the sale was made against the dead person, is not
proper and the said finding is set aside. Accordingly, both the substantial
question of law are answered in favour of the plaintiff.
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68.In view of the above finding, the Cross Appeal No.54 of 2020 is
allowed, and S.A.Nos.1022 of 2019 is dismissed. In view of the finding in
S.A.No.1022 of 2019 and Cross Appeal No.54 of 2020, no further adjudication
is required in S.A.Nos.1055 of 2019 and 160 & 161 of 2021.
69.While passing the above judgment, in view of the above finding that
the there was no mortgage created by L.Srikantiah by virtue of deposit of title
deed in favour of the Bank and in view of the finding that the Bank sold the suit
schedule property without proper title, this Court feels that it would be
appropriate to compensate the innocent purchaser and direct the 5th
defendant/Bank to refund a sum of Rs.8,50,000/-, the amount paid by the 4 th
defendant in the auction sale. Hence, 5th defendant/Bank is directed to refund a
sum of Rs.8,50,000/-, the amount paid by the 4th defendant to purchase the
property through auction sale from the 5th defendant Bank, with 9% interest
from the date of payment i.e on 23.12.2008 till the date of refund to the 4 th
defendant. No costs.
30.03.2021
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List o Exhibit marked on the side of the 5th defendant, Bank:
Ex.B15 – Order passed by the Debts Recovery Tribunal, Coimbatore in
O.A.No.47 of 2003, dated 05.06.2008.
30.03.2021
Index:Yes/No
Internet:Yes/No
Speaking order/Non Speaking Order
rst
To:
1.The District Judge, Udhagamandalam.
2.The Subordinate Judge, Udhagamandalam.
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KRISHNAN RAMASAMY,J.
rst 95/96 S.A.Nos.1022, 1045 of 2019, 160, 161 of 2021 and Cross Appeal No.54 of 2020 and C.M.P.Nos.21997 & 22772 of 2019 30.03.2021 96/96