Patna High Court - Orders
The Regional Manager Central Bank Of ... vs Sri Kishor Kumar Sharma & Ors on 18 April, 2014
Author: Navin Sinha
Bench: Navin Sinha, Vikash Jain
IN THE HIGH COURT OF JUDICATURE AT PATNA
Letters Patent Appeal No.185 of 2013
======================================================
1. Mukesh Golcha S/O Sri Mulchand Golcha R/O Forbesganj Rice Mills,
P.O.+P.S.- Forbesganj, District- Araria
.... .... Appellant/s
Versus
1. Kishore Kumar Sharma S/O Late Madheshwar Prasad Sharma R/O
Village & Post- Kurkari, P.S.- Paliganj, District- Patna, At Present R/O
Amrita Apartment, Flat No.- 401, Arah Garden Road, Bailey Road, P.S.-
Rupaspur,Distt.- Patna- 800014
2. Meena Devi W/O Kishore Kumar Sharma R/O Village & Post- Barhauna,
P.S.- Chandi, District- Patna
3. Smt. Sangeeta Kumari W/O Rajesh Kumar Sharma R/O At & P.O.-
Madhopur, P.S.-Maner, Distt.- Patna
4. Anjana Kumar D/O Late Ram Keshwar Prasad Singh R/O Village &
P.O.- Nagma, P.S.- Kurtha, District- Jehanabad
5. The Zonal Manager Union Bank Of India, Zonal Office, Fraser Road,
Patna
6. The Regional Manager Union Bank Of India, Regional Office, Fraser
Road, Patna
7. The Senior Legal Officer Union Bank Of India, Regional Office, Fraser
Road, Patna
8. The Senior Debt Recovery Manager Union Bank Of India, Regional
Office, Fraser Road, Patna
9. The Branch Manager Union Bank Of India, S.T.B. Exhibition Road,
Patna
10. The Union Of India Through The Secretary Finance Department,
Government Of India, New Delhi
11. The Registrar Debts Recovery Tribunal, Patna Bench, Patna Through
The State Of Bihar, Patna
12. The Recovery Officer Debts Recovery Tribunal, Patna
13. The Regional Manager Null Central Bank Of India, Regional Office,
Patna
14. The Chief Branch Manager Central Bank Of India, Main Branch, New
Dakbunglow Road, Patna
15. The Vice-Chairman Patna Regional Development Authority, Patna
Nagar Nigam, Patna
16. Smt. Sheoraj Devi W/O Sri Vishwanath Sinha R/O G.I. Road, Dehri On
Sone, District- Rohtas
.... .... Respondent/s
======================================================
with
Letters Patent Appeal No.833 of 2013
IN
Civil Writ Jurisdiction Case No. 11553 of 2008
======================================================
1. The Zonal Manager Union Bank Of India Zonal Office Of Union Bank
Of India, Frazer Road, Patna Represented Through The Branch Manager,
Union Bank Of India, S.T.B., Exhibition Road, Patna
Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 2
2. The Regional Manager, Union Bank Of India Regional Office, Patna
Represented Through The Branch Manager, Union Bank Of India, S.T.B.,
Exhibition Road, Patna
3. The Senior Legal Officer, Union Bank Of India Regional Office, Patna
Represented Through The Branch Manager, Union Bank Of India, S.T.B.,
Exhibition Road, Patna
4. The Senior Debt Recovery Manager, Union Bank Of India Null Regional
Office, Patna Represented Through The Branch Manager, Union Bank Of
India, S.T.B., Exhibition Road, Patna
5. The Branch Manager, Union Bank Of India S.T.B., Exhibition Road,
Patna
.... .... Appellant/s
Versus
1. Sri Kishore Kumar Sharma S/O Late Madheshwar Prasad Sharma
Resident Of Village + P.O.- Kurkuri, P.S. Paliganj, District- Patna, At
Present Resident Of Amrita Apartment Flat No. 401 Arrah Garden Road,
Bailey Road, Patna-14, P.S. Rupaspur, District- Patna
2. Meena Devi W/O Kishore Kumar Sharma Vill.+ P.O.- Madhopur, P.S.-
Maner, District- Patna
3. Smt. Sangeeta Devi W/O Rajesh Kumar Sharma At And P.O.-
Madhopur, P.S.- Maner, District- Patna
4. Anjana Kumari D/O Late Ram Keshwar Prasad Singh Vill. + P.O.-
Nighma, P.S.- Kurtha, District- Jehanabad
5. The Union Of India, Through The Secretary, Finance Department,
Government Of India, New Delhi
6. The Registrar, Debts Recovery Tribunal, Bench- Patna Through The
State Of Bihar, Patna
7. The Recovery Officer, Debts Recovery Tribunal, Patna
8. The Regional Manager, Central Bank Of India Regional Office, Central
Bank Of India, Patna
9. The Chief Branch Manager, Central Bank Of India, Main Branch, New
Dakbunglow Road, Patna
10. The V.C. (P.R.D.A.), Patna Nagar Nigam, Patna
11. Mr. Mukesh Golchha S/O Not Known To The Petitioner Resident Of
Village Forbes Ganj, Rice Mill, P.O. Forbes Ganj, P.S. Forbes Ganj,
District- Araria
12. Smt. Sheoraj Devi Wife Of Sri Vishwanath Sinha, Resident Of G.I.
Road, Dehri On Sone, P.O. Dehri On Sone, District- Rohtas
.... .... Respondent/s
======================================================
with
Letters Patent Appeal No.942 of 2013
IN
Civil Writ Jurisdiction Case No. 11553 of 2008
======================================================
1. The Regional Manager Central Bank Of India , Regional Office, Block B,
2nd Floor, Mauryalok Complex, Dak Bunglow Road, Patna 800001
Represented Through Its Regional Manager/Assistant General Manager
2. The Chief Manager, Central Bank Of India, Main Branch, New Dak
Bunglow Road, Patna
Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 3
.... .... Appellant/s
Versus
1. Sri Kishor Kumar Sharma Son Of Late Madheshwar Prasad Sharma
Resident Of Village And P.O. Kurkuri, P.S. Paliganj, District Patna At
Present Resident Of Amrita Apartment Flat No. 401 Array Garden Road,
Bailey Road, Rupaspur, Patna - 800014
2. Meena Devi Wife Of Rajesh Kumar Sharma At And P.O. Madhopur P.S.
Maner District Patna
3. Smt Sangeeta Devi Wife Of Rajesh Kumar Sharma At And P.O.
Madhopur P.S. Maner District Patna
4. Anjana Kumari Daughter Of Late Ram Kishwar Prasad Singh Village
And P.O. Nighma, P.S. Kurtha, District Jahanabad
5. The Union Of India Through The Secretary Finance Department
Government Of India, New Delhi
6. The Registrar Debt Recovery Tribunal, Bench - Patna Through The State
Of Bihar, Patna
7. The Recovery Officer Of Debt Recovery Tribunal, Patna
8. The Zonal Manager, Union Bank Of India, Zonal Office Of Union Bank,
Frazer Road, Patna
9. The Regional Manager, Union Bank Of India, Regional Office, Patna
10. The Senior Legal Officer, Union Bank Of India, Regional Office, Patna
11. The Senior Debt Recovery Manager, Regional Office, Union Bank Of
India, Patna
12. The Branch Manager, Union Bank Of India, S.T.B. Branch Exhibition
Road, Patna
13. The V.C. (P.R.D.A.) Patna Nagar Nigam, Patna
14. Mr. Kukesh Golchha Son Of Not Known Resident Of Village
Farbesganj, Rice Mill, P.O. Farbesganj, P.S. Farbisganj, District Araria
15. Smt. Sheoraj Devi Wife Of Sri Vishwanath Sunhat Resident Of G.I.
Road Dehri On Sone, P.O. Dehri, P.S. Dehri On Sone, District Rohtas
.... .... Respondent/s
======================================================
Appearance :
(In LPA No.185 of 2013)
For the Appellant/s : Mr. Mukund Jee
For UBI : Mr. H. K. Sharan
For CBI : Mr. Bimlendu Mishra
For Private Respondent : Mr. Y. V. Giri, Sr. Advocate with
Mr. Nikhil Agrawal
For Union of India : Mr. Anshuman Singh
(In LPA No.833 of 2013)
For the Appellant/s : Mr. H. K. Sharan
For Private Respondent : Mr. Y. V. Giri, Sr. Advocate with
Mr. Nikhil Agrawal
For CBI : Mr. Bimlendu Mishra
For Auction Purchaser : Mr. Mukundjee
For Union of India : Mr. Anshuman Singh
(In LPA No.942 of 2013)
For the Appellant/s : Mr. Bimlendu Mishra
For Private Respondent : Mr. Y. V. Giri, Sr. Advocate with
Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 4
Mr. Nikhil Agrawal
For Auction Purchaser : Mr. Mukundjee
For UBI : Mr. H. K. Sharan
For Union of India : Mr. Anshuman Singh
======================================================
CORAM: HONOURABLE MR. JUSTICE NAVIN SINHA
and
HONOURABLE MR. JUSTICE VIKASH JAIN
CAV ORDER
(Per: HONOURABLE MR. JUSTICE NAVIN SINHA)
14 18-04-2014The three appeals arise from order dated 29.11.2012 allowing C W J C No.11553 of 2008 filed by respondents 1 to 4 (hereinafter referred to as ‗the respondent purchasers'). L P A No.185 of 2013 has been filed by the respondent ―auction purchaser‖. L P A number 833 of 2013 has been filed by the respondent United Bank of India (hereinafter referred to as ‗U B I ‗). L P A No.942 of 2013 has been filed by the respondent Central Bank of India (hereinafter referred to as ‗C B I ‗).
The Learned Single Judge held that the builder M/s Uttam Ghar Developers Pvt. Ltd (hereinafter referred to as ‗the builder') or the respondent purchasers had no knowledge of the mortgage and were not made aware that the construction was being raised on lands mortgaged to the two Banks. The building plan had been duly sanctioned by the Patna Regional Development Authority. The constructions were raised and the respondent purchasers put in possession by the builder in 2001-2002 before the Banks filed O A applications under The Recovery of Debts Due to Banks and Financial Institutions Act,1993 (hereinafter called ‗the D R T Act' ) before the Debt Recovery Tribunal (hereinafter called ‗the D R T') in 2002 and 2004 respectively. The Banks took no steps to inform the Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 5 builder about non-repayment of the loans and also did not take any steps to stop construction. The builder and the respondent purchasers were the real affected and contesting parties but were not impleaded and heard before the D R T. The value of the mortgaged properties had escalated since the time of mortgage. The debts of the two Banks could well be recovered from the nine flats in the owners/mortgagers share (hereinafter referred to as the ‗guarantor'). The final order dated 5.12.2002 granting certificate of recovery in the O A No. 27 of 2002 filed by U B I including the auction sale dated 2.7.2008 in Recovery Proceedings 169 of 2002 as also the final order dated 6.8.2009 in O A No.6 of 2004 filed by C B I issuing certificate for recovery were set aside. The D R T was directed to implead the builder and respondent purchasers as parties in both applications, issue notice to them and decide matters afresh confining the issue for recovery by the two Banks only to the nine flats and six parking spaces in the guarantor/ owners share.
Respondent Smt. Sheoraj Devi, the guarantor mortgaged her entire lands measuring 6 kathas 16 dhurs and 12 dhurkies situated at khata no.123, Tauzi no.5536, Thana no.19 in the prime area of Danapur in Patna town, to the C B I on 22.1.1998 and the U B I on 12.7.1999 respectively by deposit of two separate Title deeds for loan of 45 lacs and 150 lacs respectively taken by the proprietor of M/S Amrita Sales Enterprises from each of the Banks respectively. No repayment of the loan was made whatsoever. The guarantor soon thereafter on 20.4.2000 entered into a collusive agreement with the builder for construction of an apartment complex upon the mortgaged Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 6 lands consisting of the owners share for nine flats with six parking space and builders share. This was done without the knowledge and permission of the two Banks obviously with the intention to avoid the mortgage and fraud the Banks. The development agreement stated that the property was not encumbered, charged or mortgaged, etc. The title deeds would remain with the builder. Notwithstanding a public notice by the U B I, a separate notice by the U B I to the builder, notice issued by the D R T as also the injunction ordered by it, constructions continued and flats sold to purchasers.
O A No. 27 of 2002 was filed by U B I before the D R T. The guarantor also entered appearance. Injunction regarding construction was ordered on 16.8.2002. Certificate for recovery was issued on 5.12.2002 for Rs.1,27,74,527.25p leading to orders for auction sale in Recovery Proceedings No. 169 of 2002 and the purchase of eight flats out of nine in the guarantor/owners share, by the auction purchaser. No Appeal was filed under Section 20 of the D R T Act against the injunction or Recovery Certificate. A Miscellaneous Appeal was filed on 21.8.2006 to set aside the certificate for recovery ordered on 5.12.2002 as being without notice which was dismissed on 17.6.2008. The guarantors share of flats were attached on 11.9.2006 and auction sold on 2.7.2008 to the auction purchaser. Another O A No. 6 of 2004 was filed by C B I. The guarantor again appeared and filed written statement. Certificate for Recovery was issued on 6.8.2009 for Rs.75,95,866/-. No appeal was filed under Section 20 of the D R T Act. Recovery Proceeding No.154 of 2009 were filed by the C B I and were pending when the order under Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 7 appeal came to be passed.
The builder petitioned the D R T in Appeal No.1 of 2005 against the auction sale by U B I which was dismissed on 6.12.2006. C W J C No. 15606 of 2004 was filed by the builder on 10.12.2004 against the same but allowed to be dismissed for non- prosecution on 26.11.2007. The present writ petition was then filed on 5.8.2008 by the respondent purchasers from the builders share. The guarantor/ owner did not appear in the writ petition despite notice at the address mentioned by her in the development agreement and also before the D R T. She has also not appeared in appeal despite notice at the same address and also paper publication.
Learned Counsel for the U B I submitted that the guarantor mortgaged 3.41 kathas of lands by deposit of Title deeds for loan of 80 lacs increased to 150 lacs taken by M/s. Amrita Sales Enterprises. During subsistence of the guarantee, while nothing had been repaid, the guarantor on 12.4.2000 entered into a development agreement with the builder for construction of an apartment complex on the lands without the permission or knowledge of the Bank. The Bank on being made aware made a paper publication on 22.2.2002 in the daily ―Dainik Jagran‖ for the benefit of the general public not to purchase any flats constructed on the lands and that any person purchasing would do so at his own risk. On 14.3.2002 the Bank wrote to the builder that the development agreement wrongly stated that the property was not encumbered as it stood mortgaged to the Bank on 21.7.1999 also referring to the paper publication dated 22.2.2002 asking the builder not to sell any flats without the permission of the Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 8 Bank and that any sale/ purchase would be at the risk of the purchaser. The matter was also informed to be Patna Regional Development Authority by letter dated 5.2.2002. The Patna Regional Development Authority had also made inquiry from the builder by its letter dated 14.3.2002.
O A No. 27 of 2002 was filed before the D R T by the U B I on 9.4.2002 for recovery of Rs.1,32,84,679.25 with interest up to 30.3.2002 along with future interest as no repayment whatsoever had been made. An application for attachment before judgment was filed under Section 19 (25) of the D R T Act. After the hearing the guarantor and others the application for attachment was allowed on 16.8.2002. The Tribunal, after perusing the construction photographs directed status quo to be maintained and ordered restraining alienating/sale/mortgage/otherwise creating any sort of encumbrance upon the lands subject to mortgage with the Bank and also in relation to construction of flats etc. made thereon till further orders were passed. The order was also directed to be published in a daily news- paper for the interest/knowledge and information of public at large. The publication was done on 5.9.2002 in the daily ― Dainik Jagran‖. No appeal was filed against the Order dated 16.8.2002 under Section 20 of the D R T Act. Reliance was placed on [2001] 6 SCC 569 [Punjab national bank v. O. C. Krishnan] and A I R 2004 M P 1 (Kowa Spinning Ltd. Debt Recovery Tribunal) [F B].
The guarantor in her written statement acknowledged the development agreement with the builder. The D R T ordered issuance of certificate for recovery on 5.12.2002 and certificate Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 9 prepared on 12.12.2002. No appeal under Section 20 had been filed against the Certificate for Recovery. The Tribunal observed that that the construction had escalated after the interim order. Recovery Proceeding 169 of 2002 was instituted on 16.12.2002 and demand notice issued to the guarantor on 3.1.2003. Orders for settling sale proclamation were issued on 21.4.2003. Valuation report was submitted on 12.7.2003 and orders for sale proclamation issued on 11.7.2004. M. A. 27 of 2006 was filed by the guarantor on 21.8.2006 for setting aside the recovery certificate falsely contending that that at no point of time she had been apprised of the pendency of the proceedings before the D R T. The application was dismissed by a reasoned order on 17.6.2008. On 11.9.2006, eight flats bearing numbers 104, 105, 204, 205, 304, 305, 404 and 405 along with six parking space in the share of the guarantor/owner were attached. The builders Appeal No. 1of 2005 before the D R T was dismissed on 6.12.2006. The writ petition against it was dismissed for non- prosecution on 26.11.2007. On 14.5.2008 the guarantor/owner appeared before the Recovery Officer through respondent purchaser no.1 holding power of attorney on her behalf and tried to prevent the sale. The objection was rejected on 14.5.2008. No appeal was preferred against the order under Section 30 of the D R T Act. The attached flats were put on auction sale on 2.7.2008. The auction purchaser was the highest bidder. The respondent purchasers are said to have purchased flats Nos. 401, 402, 403 and 203 and have no concern with the auctioned flats in the guarantors/ owners share. The respondent purchasers have been set up to file the writ petition by Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 10 proxy thereafter. On 24.9.2010 possession of six out of eight flats auctioned were given to the auction purchaser with the help of the administration. Possession of Flat nos. 304 and 405 could not be given because of the writ petition filed by the respondent purchasers.
Reliance was placed on Section 48 of the Transfer of Property Act to submit that the liability created by the mortgage could not be avoided by the respondent purchasers relying on A I R 1985 Delhi 83 ( Sh. Ishar Dass Malhotra V. Sh. Dhanwant Singh) Learned Counsel for the C B I submitted that on 22.1.1998 loan of Rs. 15 lacs, subsequently enhanced to Rs. 49 lacs on 5.11.1998 was sanctioned to M/s. Amrita Sales Enterprises. Smt Sheoraj Devi as guarantor gave equitable mortgage by deposit of Title deeds for the remaining area of 3 kathas 8dhurs and 6 dhurkies of the same plot. On 30.9.2001 the loan account was declared NPA as no repayment whatsoever was made. On 4.2.2004 the Bank filed O A no.6 of 2004 for recovery of Rs.75,95,866/-. Smt. Sheoraj Devi appeared after notice and filed her written statement acknowledging the mortgage and offering to deposit the market price of the mortgaged lands. She did not appear at the stage of arguments. Certificate was then drawn up on 6.8.2009 for Rs.75,95,866/- with future interest @9% from 1.1.2004 till date of payment. The Bank then filed Recovery Proceedings No.154 of 2009 which remains pending before the D R T. Relying on Section 70 of the Transfer of Property Act, illustration (b), it was submitted that by principle of Accession to the mortgaged property, the flats constructed on the mortgaged lands were amenable to the mortgage.
Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 11
Learned Counsel for the auction purchaser referring to pleadings in paragraph 6 of the writ petition along with I.A. No. 8605 of 2010 filed by the respondent purchasers submitted that the respondent purchasers were concerned with Flats 401, 402, 403 and 203 only. They have no concern with the Flats purchased in the auction sale from the owner/guarantors share. The auction purchaser makes no claim against the respondent purchasers. It was reiterated that possession of two out of eight flats purchased in auction sale had not been delivered.
Learned Senior Counsel for the respondent purchasers submitted that they are bonafide purchasers for value. They took necessary precautions by verification of the approved building plan. They were not aware or informed that the construction had been made on mortgaged property. The construction had been completed, ownership transferred and possession of the Flats given to them prior to the institution of the two O A's before the D R T. The charge could not be over the builders share from which they had made purchase. If the Banks had any charge, it could be only over the owner/ guarantors share of Flats belonging to Smt. Sheoraj Devi. It is acknowledged that the respondent purchasers have no concern with the flats falling in the owner/guarantors share purchased by the auction purchaser in the Recovery Proceedings initiated by the U B I. But if they do not object to the auction sale it will prejudice them in the O A filed by the C B I if any more Flats are auction sold as only nine flats fell in the owners share of which eight have been auction sold already for recovery of U B I dues only. The sale of eight Flats in the Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 12 owners share was grossly undervalued. It is required to be set aside. A fresh auction of the owner/guarantors share alone will fetch adequate price to liquidate the dues of both Banks.
The D R T has no jurisdiction over the builders share of Flats as it cannot be stated to be the subject matter of debt or mortgage. Reliance was placed on A I R 1961 SC 1570 ( Bishan Das v. State of Punjab) and 2008 (2) P L J R 793 ( Emarat Co-operative Housing Society v. State of Bihar) contending that bonafide constructions put up on another's lands can neither be termed trespass nor would the construction ipso facto vest in the owner of the lands. The Banks were required to first proceed against the loanee and his property and only thereafter against the guarantor. Reliance was placed on A I R 1987 SC 1078 (Union Bank of India v. Manku Narayana) and 2009 (1) P L J R 619 (Shyam Kishore Prasad v. Bank of Baroda). If the property auctioned was undervalued as per present prices, the Court could direct fresh auction relying on was 2011(2) P L J R (SC) 122 (Kerala Finance corporation V. Vincent Paul). Reliance was placed on (2011)1 SCC 429 ( J. P .Builders v. Ramadas Rao) to invoke the principle of marshalling for sale in satisfaction of mortgage. Availability of alternative statutory remedy was not an absolute bar to a writ petition was urged relying on (2007) 9 SCC 593 (Popcorn Entertainment v. City Industrial Development Corporation).
The builder was not made party to the writ petition as no relief was claimed against it. Since the constructions were composite made by the same builder over one common area of lands belonging to one person/owner, a single writ petition was maintainable against the two Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 13 O A's. If the matter is remitted to the D R T with regard to the O A filed by the C B I, any fresh order by the D R T will only lead to a fresh writ petition by the respondent purchasers creating multiplicity of cases. On facts Article 226 was the only appropriate remedy. The Appeal being a continuation of the writ the appellate Court was fully competent to go into all issues once and for all.
We have applied our mind to the facts and considered the respective submissions on behalf of the parties.
The guarantor created two separate mortgages with two different banks for different areas of lands, over loan for two different amounts, by deposit of two separate title deeds. Two separate O A applications were filed by the two Banks. No application had been filed by the C B I under Section 19 (2) of the D R T Act for joining the earlier proceedings instituted by the U B I. The cause of action in each O A was separate and could not have been clubbed in a single writ petition. The writ petition therefore ought to have been dismissed on this ground alone or confined to one O A only.
The entire lands were mortgaged by the guarantor to the two Banks by deposit of title deeds on 22.1.1998 and 21.7.1999. No repayment whatsoever was made by M/S Amrita Sales Enterprises. As early as 12.4.2000 the guarantor entered into a development agreement with the builder. The agreement declared that the lands were free of encumbrance, debts or mortgage. The builder was to retain the documents of title relating to the property. A part of the construction would fall to the owner's share and the rest would be sold by the builder to outsiders. The builder was authorised to sell, Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 14 transfer and convey the premises to the purchasers. Significantly, the development agreement did not state that the builder had examined the original title deeds or that possession of the same had been given to him. The two title deeds had already been deposited with the two Banks and their remaining in custody of the builder simply did not arise to the knowledge of the owner/guarantor and the builder. The owner/guarantor and the builder were both aware and conscious of the mortgaged nature of the property and yet deliberately colluded to violate the law by intentional suppression and surreptitious creation of third party rights by raising constructions and sale. A fraud was deliberately perpetrated and played by the guarantor and the builder with full awareness both against the Banks and the purchasers. There had been no occasion for the builder to examine the title deeds which were already deposited with the two Banks. A professional builder would be more circumspect to examine the original title deeds before investment. A presumption would arise against him that he acted with full awareness of the nature of fraud being committed by him with regard not only to the Banks but with public money also while he made profit by selling to unsuspecting persons. In (2004) 8 SCC 733 (Friends Colony Development Committee v. State of Orissa) it was observed :
―25.......The cases of professional builders stand on a different footing from an individual constructing his own building. A professional builder is supposed to understand the laws better and deviations by such builders can safely be assumed to be deliberate and done with the intention of earning profits and hence deserve to be dealt with sternly so as to act as a deterrent for future. It is common knowledge that the builders enter into underhand dealings. Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 15 Be that as it may, the State Governments should think of levying heavy penalties on such builders and therefrom develop a welfare fund which can be utilised for compensating and rehabilitating such innocent or unwary buyers who are displaced on account of demolition of illegal constructions.‖ Aware of the fraud and its consequences, the guarantor appeared before the DRT in both O A applications, acknowledged the mortgage and the development agreement and then with no defence available abandoned the proceedings. No appeal was filed against injunction under Section 20 of the D R T Act. The appeal against certificate issued for recovery was dismissed. Objections were purported to be filed under Section 29 of the D R T Act at the time of auction but no appeal was filed under Section 30 of the D R T Act. In the development agreement and also before the D R T she disclosed her address as G. T. Road, Dehri-on-Sone. Despite notice issued on the same address she did not appear before the writ court or in this appeal though paper publication had also been done.
The builder filed Appeal No. 1 of 2005 before the D R T after certificate was issued. It was rejected on 6.12.2006. It then filed CWJC No. 15606 of 2006 and allowed it to be dismissed for non- prosecution. The present writ petition has then been filed by the respondent purchasers from the builder. We have no reason not to believe that the respondent purchasers have now been set up for proxy litigation by the builder. If the respondent purchasers claim to be unwary purchasers duped by the builder they can have their remedies against the builder both in civil and or criminal proceedings but cannot avoid the consequences of the mortgage on grounds of Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 16 their innocence.
The U B I as early as 22.2.2002 published a public notice in the ―Dainik Jagaran‖ that the property was mortgaged for loan to M/S Amrita Sales Enterprises and that a development agreement had wrongly been signed between the owner/guarantor and builder warning the general public not to purchase flats in the construction. The Bank on 14.3.2002 wrote to the Managing Director of the builder enclosing a copy of the paper publication disputing the recitals in the development agreement that that the property was not encumbered or mortgaged stating that it was mortgaged to the Bank on 12.7.2009. This information was also given to the Patna Regional Development Authority on 5.2.2002. The query in this regard by the Patna Regional Development Authority dated 14.3.2002 to the builder remained unanswered.
The D R T on 16.8.2002 passed orders of injunction with regard to construction after examining construction photographs filed by the Bank. The final order of the D R T dated 5.12.2002 in O.A. No. 27 of 2002 notices that at this stage it had been brought to attention that construction was going on at a fast pace to overreach the mortgage and orders of the D R T . The averment of the purchasers that possession of constructed flats had been given to them in 2001-2002 even before institution of the O.A. applications is therefore difficult to accept if not complete falsehood .
It is difficult to uphold the conclusion of the learned Single Judge that the builder and the respondent purchasers had been Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 17 always unaware of the mortgage. The Learned Single Judge also held that the recovery and attachment proceedings had to be confined to the guarantor's/owner's share only. It is an admitted position that the auction sale held pursuant to O.A. No. 27 of 2002 by U B I in Recovery Proceedings No. 169 of 2002 and consequent purchase by the auction purchaser relate to eight flats out of nine in the guarantor's/owner's share only. The purchasers on their own stand had no cause of action in the writ petition arising out of O.A. No. 27 of 2002. In view of the conclusion and the admitted facts there was no occasion to allow the claim against the U B I and the writ petition ought to have been dismissed against it on the same reasoning. The plea of raising a larger question leaves us satisfied that the respondent purchasers have been set up by the builder for proxy litigation.
The D R T Act was enacted for expeditious adjudication and recovery of debts due to Banks and Financial Institutions. The statement of objects and reasons recites that Banks and Financial Institutions were experiencing considerable difficulty in recovering loans and enforcement of securities. The existing procedure had blocked significant portion of funds in unproductive assets. Section 19 provides for laying of claims before the Tribunal by a Bank or Financial Institution. Section 19(2) provides of clubbing of cases if a loan has been taken by a person from more than one Bank. Section 20 provides for appeal to the Appellate Tribunal. Section 21 dealing with procedure for appeal provides for deposit of 75% of the debt due as determined under Section 19. Section 22 provides the procedure Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 18 and powers of the Appellate Tribunal. Section 24 deals with limitation in its application to the Tribunal. Section 25, 26, 27 and 28 provide for modes of recovery, issuance of certificates, stay of recovery etc. Section 29 provides that the procedure under the Income Tax Act shall be applied at the stage of recovery proceeding under Section
28. An appeal lies under Section 30 against the same. Section 34 provides that the provisions of the Act shall have overriding effect notwithstanding anything inconsistent in any other law or instrument.
The D R T Act is therefore a complete code by itself containing adequate alternative statutory remedies. Recourse cannot be had directly under Article 226 of the Constitution. Availability of alternative statutory remedy though not a complete bar to discretionary equitable jurisdiction, there are well known exceptions to it if the orders are in violation of the principles of natural justice, completely without jurisdiction to name some of the limited grounds. Such is not the case presently.
In O.A. No. 6 of 2004 filed by the C B I The guarantor had entered appearance and filed her written statement acknowledging the mortgage as also the development agreement with the builder offering to pay the dues but absented from the proceedings. No appeal was filed under Section 20 of the D R T Act against the recovery certificate issued on 6.8.2009. Recovery Proceeding no.154 of 2009 still remains pending. Alternative statutory remedy is available against the proceedings under Sections 25 to 28 under Section 29 and also the remedy of appeal under Section 30. It is difficult to uphold the view of the learned Single Judge that the Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 19 guarantor or the builder were the real contestants and in whose absence the O.A. proceedings were vitiated. The purchasers at no point of time approached the Tribunal or this Court with any grievance during the pendency of the proceeding before the D R T. The objection regarding non maintainability of the writ petition on account of availability of alternative statutory remedy was raised before the Learned Single Judge but has not been considered.
Section 70 of the Transfer of Property deals with accessions to mortgaged property and is quoted below.
70. Accession to mortgaged property.-- If, after the date of mortgage, any accession is made to the mortgaged property, the mortgagee, in the absence of a contract to the contrary, shall, for the purposes of the security, be entitled to such accession.
Illustrations
(b) A mortgages a certain plot of building land to B and afterwards erects a house on the plot. For the purposes of his security, B is entitled to the house as well as the plot.
The owner/guarantor had given power of attorney to the builder. The construction consisted of the owner and builders share. We have already held that the builder was fully aware of the mortgage and that the construction was to be raised by him on mortgaged lands. It was not a bonafide construction raised by the builder unaware of the mortgage. In A I R (37) 1950Travencore- Cochin 78 (Anthony Ouseph v. M. George) (DB) considering Section 70 it was held as follows :
―2.......Under law the defendants have no right to compel the plaintiff who has become the absolute owner of the site in question to purchase the building standing thereon. On the other hand it is Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 20 his right to get possession of the site after removal of the buildings.....‖ In AIR Allahabad 772 (Nannu Mal v. Ram Chander) (FB) interpreting Section 70 of the Transfer of Property Act it was held:
―My conclusion is that the building being an accession has become part of the security and cannot be removed by the defendants and can be put up for sale by the plaintiffs.....‖ In O. C. Krishnan (supra) on the issue of alternative statutory remedy in financial matters under the D R T Act it was observed as follows:-
―6.The Act has been enacted with a view to provide a special procedure for recovery of debts due to the banks and the financial institutions. There is a hierarchy of appeal provided in the Act, namely, filing of an appeal under Section 20 and this fast-track procedure cannot be allowed to be derailed either by taking recourse to proceedings under Articles 226 and 227 of the Constitution or by filing a civil suit, which is expressly barred. Even though a provision under an Act cannot expressly oust the jurisdiction of the court under Articles 226 and 227 of the Constitution, nevertheless, when there is an alternative remedy available, judicial prudence demands that the Court refrains from exercising its jurisdiction under the said constitutional provisions. This was a case where the High Court should not have entertained the petition under Article 227 of the Constitution and should have directed the respondent to take recourse to the appeal mechanism provided by the Act.
In (2010) 8 SCC 110 (United Bank of India v. Satyawati Tondon) again on the issue of alternative remedy in matters regarding recovery of dues to Banks under the D R T Act it has been Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 21 observed :
―43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.‖ Similar view has been taken in (2006) 9 SCC 252 (State Bank of India v. Allied Chemical laboratories), (2009) 9 SCC 478 (Industrial Investment Bank of India v. Biswanath Jhunjhunwala). This has been followed in (2013) 10 SCC 83 (General Manager, Sri Siddeshwara Cooperative bank Ltd. v. Ikbal), (2013) 10 SCC 652(T. P. Vishnu Kumar v. Canara Bank) and (2014)1 SCC 479 (Jagdeesh Singh v. Hiralal).
A similar claim by third party like the respondent purchasers, upon mortgaged property alleged before adjudication by the D R T, the issuance of Recovery Certificate and Recovery Proceedings followed by auction of the mortgaged properties fell for consideration in (2012) 8 SCC 305 (Nitin Gunwant Shah v. Indian Bank).Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 22
Disapproving abuse of the legal process by the third party claimant it was held :-
32. Section 29 of Act 51 of 1993 declares that the provisions of the Second and Third Schedules to the Income Tax Act, 1961 apply with necessary modifications for the recovery of the amounts due under Act 51 of 1993:
―29. Application of certain provisions of Income Tax Act.--The provisions of the Second and Third Schedules to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962, as in force from time to time shall, as far as possible, apply with necessary modifications as if the said provisions and the rules referred to the amount of debt due under this Act instead of to the income tax:
Provided that any reference under the said provisions and the rules to the ‗assessee' shall be construed as a reference to the defendant under this Act.‖
33. The Second Schedule to the Income Tax Act read with the Income Tax (Certificate Proceedings) Rules, 1962 (for short ―the 1962 Rules‖), prescribes the procedure for recovery of the amounts due pursuant to a certificate issued under Section 222 of the Income Tax Act. Part III of the Second Schedule prescribes the procedure for the attachment and sale of immovable property. Rule 92 thereof enables the making of the Rules. In the purported exercise of the powers granted thereunder, the Income Tax (Certificate Proceedings) Rules, 1962 were made.
34. Rules 39 and 40 of the 1962 Rules recognise that the property which is brought to sale towards the recovery of the amounts due under the certificate could be in the occupation of either the defaulter or persons other than the defaulter either claiming through the defaulter or independently.
Rule 40 more specifically deals with the property brought to sale being in the occupation of ―a tenant or other person entitled to occupy‖.
35. Rule 41 deals with resistance to the delivery of possession of the property in execution of the recovery certificate. It stipulates that the purchaser is entitled to make an application to the Tax Recovery Officer complaining of resistance.
Thereupon the Recovery Officer is obliged to investigate the matter and adjudicate whether the resistance was justified or not.
Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 23
36. Both Rule 39 and Rule 42 stipulate that where the Recovery Officer is satisfied that the resistance is not justified he shall take necessary steps for putting the purchaser in possession of the property. On the other hand, under Rule 43, if the Recovery Officer comes to the conclusion that the resistance is justified, the application of the purchaser is required to be dismissed.
37. Rule 47 stipulates that any person other than the defaulter against whom an order under Rule 42 is passed is entitled to file a civil suit to establish his right for possession of the property.
38. The scheme of the above provisions clearly establishes an alternative procedure for the eviction of a person (third party to the proceedings) in occupation of a property which is brought to sale pursuant to a recovery certificate issued under the 1993 Act. We have already taken note that there is a possibility of a person other than the judgment- debtor being in possession of the property of the judgment-debtor which is recognised even under Order 21 of the Civil Procedure Code and under Rule 98. It provides for the eviction of such persons in an appropriate case where it is found that the person in possession is not legally entitled for the same. The Rules under the Income Tax Act which are adopted for the purpose of the recovery of debts due to the financial institutions and banks under the 1993 Act also provide a similar authority of law. The law further provides under Rule 47 that any person so evicted is entitled to file a separate suit to establish his legal claim. Obviously, such a right is acknowledged in recognition of the fact that an enquiry of the claim of the third party under the Rules is summary in nature by a Quasi-Judicial Forum and therefore, an examination of the issue by a Judicial Forum would adequately protect the interests of such third party or the purchaser, as the case may be.‖ Remedy of Appeal against the above is available under section 30 of the D R T Act. Bishan Das (supra) relied upon by the respondent purchaser related to construction of a Dharamshala on Government lands and subsequent forcible dispossession contrary to the law. It has no relevance to the present controversy. Vincent Paul Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 24 (supra) concerned sale of hypothecated property under Section 29 of the State Finance Corporation Act. The Court gave directions for sale of properties till such time that the State of Kerala did not frame rules or guidelines in the form of executive instructions for sale of properties. It has no relevance in view of the statutory provisions of the D R T Act. Ramadas Rao (supra) was distinguished on its own facts at para 78 of the judgment approving the exclusivity of debt proceedings only under the D R T Act holding that the principle of marshalling would not apply to a party which does not want to fulfil its obligations. The reliance on Manku Narayan (supra) by learned Senior counsel for respondent purchaser is indeed very unfortunate as it has been overruled in(1992) 3 SCC 159 (State Bank of India v. M/s.Indexport Registered). Emarat Co-operative Housing Society (supra) did not relate to mortgage of the lands and construction raised thereupon without knowledge and consent of the mortgagee. It therefore has no application to the facts of the present case. Shyam Kishore Prasad (supra) does not take note of Satyawati Tondon(supra) and in any event no questions of mortgage and raising of construction on mortgaged property including creation of third party rights were involved. Popcorn Entertainment (supra) has no application to the facts of the present case in view of the statutory provisions of the D R T Act and came to be delivered on its own facts.
The writ petition is dismissed in its challenge to O.A. No. 27 of 2002/ Recovery Proceedings No. 169 of 2002 filed by the U B I. LPA No. 833 of 2013 and LPA No. 185 of 2013 filed by the UBI and the auction purchaser are allowed. The auction purchaser is directed to Patna High Court LPA No.185 of 2013 (14) dt.18-04-2014 25 be put in immediate possession of the remaining two flats from the eight purchased by him. The citations on behalf of the U B I are not considered necessary for discussion in view of settled law and undisputed facts.
The order under appeal setting aside the order in O.A. No. 6 of 2004 is unsustainable and is set aside. Recovery Proceeding No. 154 of 2009 filed by the C B I shall proceed in accordance with law. L P A No. 942 of 2013 is also allowed.
(Navin Sinha, J.) Vikash Jain, J. I agree.
(Vikash Jain, J.) Patna High Court The 18 th April,2014 SNKumar/- (NAFR)