Debt Recovery Appellate Tribunal - Madras
Mrs. S.L. Sannabhadti vs Bank Of Baroda And Ors. on 6 August, 2003
Equivalent citations: II(2004)BC208
ORDER
A. Subbulakshmy, J. (Chairperson)
1. The Bank filed Original Application (OA) against the defendants for recovery of the amount due to it and the application was allowed and Recovery Certificate was ordered to be issued as prayed for in the application. Aggrieved against the Order the 4th defendant has preferred this appeal.
2. According to the applicant Bank, the 4th defendant has created equitable mortgage by deposit of title deeds and the 4th defendant is also liable for the suit claim and the application was allowed as against the 4th defendant also. The 4th defendant in her reply statement has contended that she has not created any equitable mortgage and she did not deposit her title deeds and she never handed over the documents of the title deeds to the applicant Bank and she is not liable for the suit claim. She further states that she has also not issued any personal guarantee and she is the absolute owner in possession of her property. She further contended that the 2nd defendant approached the 4th defendant with a request to give the title deeds relating to her property and she gave, her title deeds belonging to the B-Schedule property to the 2nd defendant only to show them to the Bank and the 2nd defendant handed over the documents to the applicant Bank and accordingly the title deeds arc with the Bank and the applicant Bank refused to return the documents and the 4th defendant wrote letter to the applicant Bank and the applicant Bank wrote that the title deeds would be returned if the 2nd defendant cleared the overdues.
3. The appellant 4th defendant filed Suit before the City Civil Court, Bangalore, for injunction and that Suit was dismissed. The finding of the City Civil Court was that the mortgage was created by the 4th defendant. The plaintiff preferred appeal before the High Court of Karnataka as against the judgment and decree passed by the City Civil Court dismissing the suit in OS-6457/1995 filed by the plaintiff for injunction. The first appeal was disposed of by the High Court of Karnataka holding that the matter has to be decided by the DRT which has got jurisdiction to try this case and it bars the jurisdiction of the Trial Court to entertain the suit in that regard and while deciding the matter the suit ought to have been dismissed on the ground of jurisdiction by the Trial Court but the Trial Court dismissed the suit on merits also and since that Court has no jurisdiction to try this case and the findings of the Trial Court in that view of the matter did not call for interference and the appeal filed by the plaintiff has to be dismissed, however, as the present plaintiff the appellant is also a party before the DRT and the matter in controversy has to be decided by the jurisdictional Court, the dismissal of the present Suit will not come in the way of deciding the contentions of the present appellant-plaintiff by the DRT uninfluenced by the findings given by the Trial Court or dismissing the appeal by this Court and with these observations the appeal was dismissed. It has also been observed by the High Court that "the observations made during the course of the Order will not come in the way of the DRT to decide the contentions of the appellant-plaintiff who is defendant before the DRT in deciding the matter between the parties."
4. Counsel for the appellant submitted that when the High Court has observed like this the PO, DRT, has disposed of the OA without deciding the matter independently by the DRT with regard to the case of the 4th defendant and the PO, DRT, has found that there is already a finding to the effect that the mortgage created in favour of the applicant Bank is invalid and the applicant is a party to the proceedings and the 4th defendant was the plaintiff and in the light of that judgment it is not open to the 4th defendant to question the mortgage and thus the mortgage by deposit of title deeds is established. When the High Court has given a specific direction to the DRT to decide independently being uninfluenced by the findings of the City Civil Court, the PO, DRT has not given any independent finding and instead of that the PO, DRT, has held that there is already a finding to that effect that the mortgage created in favour of the applicant Bank is valid. The PO, DRT, has to decide independently with regard to the case of the appellant but the PO has not done so. The PO, DRT has mainly relied upon the finding of the City Civil Court and has given the finding as against the appellant. The High Court has clearly barred the DRT to give any effect to the finding of the City Civil Court and directed to decide independently with regard to the case of the 4th defendant since the City Civil Court has no jurisdiction to decide that matter. The PO, DRT, has not decided the matter independently with regard to the case of the 4th defendant. The PO, DRT has followed the finding of the City Civil Court and has decreed the OA as against the 4th defendant also. So the case of the 4th defendant has to be done in detail and independent finding has to be given for the case of the 4th defendant. ,
5. Both the Counsel represented that instead of sending the matter back to the Tribunal to give independent finding with regard to the case of the 4th defendant, the merits of the case with regard to the 4th defendant can be decided in the Appellate Forum itself and they are advancing arguments in this Appellate Forum with regard to the case of the 4th defendant. In order to prevent prolonging of the proceedings for a long time and at the request of Counsels for both sides, I feel that the matter can be disposed of in this Appellate Forum itself with regard to the case of the 4th defendant by giving independent finding to the case of the 4lh defendant.
6. Counsel for the appellant submitted that the appellant the 4th defendant never deposited her title deeds with the Bank and she never intended to create equitable mortgage to the Bank and she did not hand over the title deeds to the Bank and she has also not executed any documents to that effect and so she is not liable or the suit claim. The Memorandum of Letter with regard to the deposit of title deeds was perused and that Memorandum was not at all signed by the appellant and it was signed only by the Bank Official and the witness. When the appellant is not a signatory to the Memorandum with regard to the deposit of title deeds, it can be hardly believed that the appellant only with the intention to create equitable mortgage deposited her title deeds to the Bank. It is the case of the respondent Bank that the appellant gave her title deeds to the Bank only with the intention to create equitable mortgage deposited her title deeds to the Bank. It is the case of the respondent Bank that the appellant gave her title deeds to the Bank only with the intention to create equitable mortgage and the Legal Adviser of the Bank has also given legal opinion with regard to these title deeds in September, 1992 itself and afterwards only equitable mortgage was created and the documents were deposited by the appellant with the Bank only with the intention to create equitable mortgage. The Manager of the Bank has been examined as AW-1 and his evidence is that the 4th defendant is not a guarantor to any of the facilities. He says that the mortgage in respect of the B-Schedule property is confined only to the Packing Credit facility. But to connect the deposit of title deeds with this loan transaction, no documents are available with the Bank for creating equitable mortgage.
7. Counsel for the respondent Bank of Baroda submitted that the Bank is not in the habit of getting the signature of the mortgagor in any of the documents and the Bank used to receive only the title deeds from the party and that itself shows creation of equitable mortgage and no documents are executed by the mortgagors. The contention of the Counsel for the respondent Bank is quite unacceptable. There must be some connecting link with regard to the mortgage created by the mortgagor by documents. It is a loan transaction pertaining to the Bank. In the Bank loan transaction matters, all loan transactions must be supported by documentary evidence. In the absence of any documentary evidence it is very difficult to sustain the case of the Bank with regard to fixing the liability on a particular individual. Even in respect of mortgage by deposit of title deeds, there must be some connecting document to create the equitable mortgage. Normally, in all matters relating to deposit of title deeds the Memorandum of Letter creating equitable mortgage by deposit of title deeds is signed by the mortgagor which only forms that mortgage has been created and the mortgagor has deposited the title deeds with the intention to create equitable mortgage. That only will prove the creation of equitable mortgage. The element is completely absent in this case. The 4th defendant has categorically submitted in her evidence that she has not given the documents to the Bank and the 2nd defendant only handed over the documents the applicant Bank for purpose of scrutiny and in 1993 she demanded Bank her document from the Bank and then only she learnt about the misuse of the document by the 2nd defendant.
8. Counsel for the respondent Bank submitted that it is the case of the respondent Bank that the 4th defendant handed over her documents to the 2nd defendant in 1993 whereas legal advise pertaining to this document has been obtained in September, 1992, and so, it is evident that the documents were available with the Bank even in the year 1992 and the appellant only has handed over the documents to the Bank with intention to create equitable mortgage. The appellant has not averred anything in her Reply Statement that she handed over the documents to the 2nd defendant in 1993. She has stated that she handed over her title deeds to the 2nd defendant only for scrutiny and not with the intention to create equitable mortgage.
9. It is significant to note that even in the sanction letter there is no mention about the mortgage. The loan was sanctioned much earlier to the obtaining of the legal opinion regarding those documents. Even though the legal opinion was obtain in September, 1992 since the loan was also sanctioned earlier to that legal opinion and there is also no mention in the sanction Order with regard to the creation of equitable mortgage and since there is also no document to evidence creation of equitable mortgage, it is very difficult to sustain the case of the respondent Bank that equitable mortgage was created in favour of the respondent Bank. From the mere fact that legal opinion was obtained in September, 1992, that will not establish that the appellant deposited her title deeds with the Bank with the intention to create equitable mortgage and the Bank came into possession of the mortgaged title deeds in the year 1992. As I have already indicated, even in the sanction letter there is no indication with regard to the creation of mortgage. Further, the Memorandum which is being relied upon by the respondent Bank for creation of equitable mortgage is not at all signed by the appellant. It is signed simple by the Bank Official and it is a self-serving statement and no reliance can be place don the Memorandum and that will not establish that the deposit of title deeds was made by the appellant with the intention to create equitable mortgage.
10. Counsel for the respondent Bank submitted that when the title deeds are available with the Bank the presumption can be drawn and Illustration (c) of Section 114 of the Evidence Act will establish that the act has been regularly performed. Section 114, Illustration (c) of the Evidence Act states that "Judicial and official acts have been regularly performed." From the mere fact that the Bank is in possession of the title deeds, unless there is some connection link to establish equitable mortgage, from the mere availability of the title deeds with the Bank, it cannot be concluded that the appellant alone deposited her title deeds with the intention to create equitable mortgage. Reliance has been placed upon by the Counsel for the respondent Bank in K.J. Nathan v. S.V. Maruthi Rao and Ors., AIR 1965 SC Page 430, and the Counsel for the respondent Bank submitted that for mortgage by deposit of title deeds, only three requisites are required namely debt, deposit of title deed and intention that the deeds shall be security for the debt and if these three things are established, there is creation of equitable mortgage and in this case all these three ingredients have been established and so it can be safely concluded thai equitable mortgage has been created in this case. It is only the custody of the documents are available with the Bank. With regard to the appellant depositing the title deeds with the Bank with intention to create equitable mortgage, that has not been established by any of the documentary evidence and it has also not been established that the appellant deposited her title deeds with the intention to create equitable mortgage. The Law of Mortgage suggests that how the intention to create such a security could be established. It is stated that "The intent to create such a security may he established by written documents, alone or coupled with parole evidence; by parol evidence only that the deposit was made by way of security; or by the mere inference of the agreement drawn from the very fact of the deposit."
11. In the Supreme Court decision cited supra, the Appeal Court has held that--
"Under the Transfer of Property Act, a mortgage by deposit of title deeds in one of the forms of mortgages whereunder there is a transfer of interest in specific immovable property for the purpose of securing payment of money advanced or to be advanced by way of loan. Such a mortgage of 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) an 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 presumptions and on oral, documentary or circumstantial evidence. Though there is no presumption of law that the mere deposit of title deeds constitutes a mortgage, 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. Nor the fact that at the time the title deeds were deposited there was an intention to execute a mortgage in itself negatives, or is inconsistent with, the intention to create a mortgage by deposit of title- deeds to be in force till the mortgage deed was executed. The decisions of English Courts making a distinction between the debt preceding the deposit and that following it can at best be only a guide; but the said distinction itself cannot be considered to be a rule of law for application under all circumstances. Physical delivery of documents by the debtor to the creditor is not the only made of deposit. There may be a constructive deposit. A Court will have to ascertain in each case whether in substance there is a delivery of title deeds by the debtor to the creditor. If the creditor was already in possession of the title deeds, it would be hyper-technical in insist upon the formal ity of the creditor delivering the title deeds to the debtor and the debtor re-delivering them to the creditor. What would be necessary in those circumstances is whether the parties agreed to treat the documents in the possession of the creditor or his agent as delivery to him for the purpose of the transaction."
12. In the decision cited supra, the finding was that the acknowledgement by the borrower with regard to the deposit of title deeds was couched in clear and unambiguous terms and the Ist defendant acknowledged in express terms that a mortgage by deposit of title deeds was effected and it was found that if there was no oral evidence adduced in this case the said documentary evidence prima facie would establish that the 1st defendant borrowed a sum of Rs. 16,500/- from time-to-time from the plaintiff and effected a mortgage by deposit of title deeds on 10.5.1947 as security for the repayment of the said amount and Ex. A19 contains a clear admission by the 1st defendant that he effected a mortgage by deposit of title deeds in favour of the plaintiff. It was decided on such documentary evidence that mortgage by deposit of title deeds was created in favour of the plaintiff by the 1st defendant and there is clear admission in the document Ex. A19 and as there was clear acknowledgement with regard to the deposit of title deeds in clear and unambiguous terms, it was found that mortgage by deposit of title deeds was made.
13. In the case on hand, there is nothing in evidence to show that the appellant handed over the documents to the Bank only with the intention to create equitable mortgage. None of the documents filed on the side of the Bank reveal with regard to the creation of equitable mortgage. Even the Memorandum which is the essential document to prove that mortgage, it is not signed by the mortgagor and it is signed only by the Bank. As I have already indicated from the legal opinion obtained in 1992 and the loan being sanctioned much earlier to the obtaining of the legal opinion, that obtaining of legal opinion will not prove that there was creation of equitable mortgage. As observed by the Apex Court, there must be clear and unambiguous terms with regard to the creation of equitable mortgage. There is nothing in evidence to show that the appellant handed over the title deeds to the Bank only with the intention to create equitable mortgage. There is also no proof that the 4th defendant is the guarantor for this loan transaction.
14. It appears from the submissions made by both Counsels that the appellant is related to the 2nd defendant and the appellant is also permanently residing at Bombay and she handed over the documents only to the relative 2nd defendant for scrutiny purposes and those documents have been missed by the 2nd defendant as if the appellant has created equitable mortgage with those documents. In the absence of any specific proof that the appellant alone handed over the documents to the Bank with the intention to create equitable mortgage, it is very difficult to sustain the case of the respondent Bank that the appellant alone deposited her title deeds with the intention to create equitable mortgage. Mere custody of the documents with the Bank will not establish equitable mortgage unless it is coupled with some proof with regard to the creation of equitable mortgage. The burden is also heavily upon the Bank which wants a mortgage decree in respect of this mortgage, to establish that how the Bank came to be possessed of these document title deeds in legal manner and the appellant alone deposited her title deeds with the intention to create equitable mortgage. The applicant Bank has not discharged that burden of proof to prove that the appellant only handed over the title deeds to the Bank for creation of equitable mortgage. There is nothing in evidence to link the alleged equitable mortgage with this loan transaction. Except the vague contentions raised by the applicant Bank and the custody of the documents with the Bank which has not been proved that how the Bank came to be possessed Of the documents and in a legal manner with regard to the creation of equitable mortgage, it is very difficult to accept the contention of the Bank that equitable mortgage has been created in this case. If it has been established by some legal proof with regard to the possession of the documents by the Bank with regard to the creation of equitable mortgage, then, of course Section 114 of the Evidence Act can be drawn and it can be presumed that there is deposit of title deeds by mortgage. It is the specific case of the appellant that she handed over her title deeds to the 2nd defendant only for some scrutiny purpose and those documents have been misused by the 2nd defendant and she never went to the Bank and she never handed over the title deeds to the Bank.
15. Under such circumstances, I find that the applicant Bank is not entitled to avail the benefit of presumption under Section 114 of the Evidence Act. On a careful scrutiny of the entire evidence, oral as well as documentary evidence, I am clearly of the view that there is no deposit of title deeds by the appellant and she never created equitable mortgage by deposit of title deeds by any clear and unambiguous terms. Absolutely there is no documentary proof for this. Even the oral evidence do not support the case of the applicant Bank. For the foregoing discussion, I find that the 4th defendant appellant cannot be held liable for the Suit claim and the appellant is entitled to succeed in this appeal.
16. Appeal allowed. Decree passed as against the 4th defendant appellant is set aside. The Recovery Certificate ordered to be issued as against the 4th defendant is also set aside.
17. It is submitted by both Counsels that while passing the Order under Section 21, the appellant was directed to deposit Rs. 10 lakhs. That matter was taken in Writ Petition before the High Court and the High Court has passed Order stating that for deposit of that amount the mortgaged property can be sold and that amount can be deposited. On that direction the property was sold in auction and the entire amount is kept under No Lien Account with the Bank. Since it has been held by this Appellate Forum that there is no mortgage by deposit of title deeds, the appellant is entitled for return of that amount. The Bank is directed to return the sale amount of Rs. 16.03 lakhs being the sale proceeds of the mortgaged property to the appellant.