Simmi Dhawan v. Naveen Malhotra & Ors.

VI. Respondent No.7 – Bank of India – claiming to be mortgagee of a small part of the Garage

VII. Respondent No.8 – Tarun Chawla – claiming to be purchaser of Garage portion from respondent No.7 in proceedings under the SARFAESI Act

VIII. Respondent Nos. 9 and 10 – Mr. Jatin Jain and Ms. Neeru

3. Brief facts of the case that emerge from the pleadings are as follows: The suit property was originally owned by Smt. Padma Malhotra, mother of the JD, who gifted the same to the JD vide registered Gift Deed dated 12.11.2003. Thus, on the basis of the said Gift Deed dated 12.11.2003, JD took loan from M/s Indiabulls Housing Finance Limited (M/s Indiabulls) thereby mortgaging the suit property and depositing the original title documents with M/s Indiabulls Housing Finance Limited, including the registered Gift Deed dated 12.11.2003.

4. Under an Agreement to Sell dated 23.12.2013, the JD agreed to sell the suit property to the DH. As agreed under the said Agreement to Sell, out of the sale consideration, the DH paid money to M/s Indiabulls Housing Finance Limited, discharging the entire loan liability of the JD. Thus, M/s Indiabulls Housing Finance Limited returned all the original title deed documents deposited with it by way of mortgage to the JD.

5. The JD, despite having received the entire sale consideration, refused to specifically perform the Agreement to Sell with the DH and concluding the sale transaction. Thus, the DH filed a suit for specific performance in this Court, being CS(OS) 984/2014.

6. The JD also filed a suit for damages, bearing CS(OS) NO. 75/2017 against the DH before this Court. The said suit was taken up for final hearing along with suit of the DH, i.e., CS(OS) 984/2014. By way of the judgment and decree dated 07.05.2019, the suit of the JD was dismissed, while the suit of the DH was decreed, for execution of which, the present execution petition has been filed.

7. Though Smt. Padma Malhotra, mother of the JD, had gifted the suit property to him vide registered Gift Deed dated 12.11.2003, she subsequently vide Sale Deed dated 16.05.2011 sold the Ground floor and First floor of the suit property to JD. The said sale deed was thereafter deposited as a document of title for creating equitable mortgage of the Ground floor and First floor of the suit property in favour of respondent No.2, i.e., IDFC First Bank Limited. The respondent No.2 subsequently sold the Ground floor and first floor of the suit property to respondent Nos. 3 and 4 in proceedings under the SARFAESI Act.

8. By Sale Deed dated 07.06.2011, mother of the JD sold Second floor of the property to the JD. The said sale deed dated 07.06.2011 was deposited as a document of title with respondent No.5/Andhra Bank (now Union Bank of India) for creating equitable mortgage of the Second floor in its favour.

9. Vide Sale deed dated 17.10.2011, Smt. Padma Malhotra, mother of JD again sold Second floor of the property to JD. The said sale deed dated 17.10.2011 was deposited as a document of title with respondent No.2/IDFC First Bank Limited, for creating equitable mortgage of the Second floor in its favour.

10. On 02.01.2014, F.I.R. was filed by respondent No.2 claiming that it had been defrauded and cheated by JD, his mother and his sister. In the said FIR, it was stated by respondent No.2 that it had discovered that the JD, his mother and his sister had concealed the facts of pre-existing mortgage on the suit property and that they had already availed a loan against the suit property from M/s Indiabulls Housing Finance Limited in May, 2010.

11. Respondent No.2 initiated arbitration proceedings against the JD alleging default in the repayment of loan against the mortgage of the Second floor of the suit property. In the said arbitration proceedings, an arbitral award dated 10.12.2015 was passed in favour of respondent No.2 for money and JD was restrained from selling, disposing of, transferring, alienating or creating any third party interest in the Second floor of the suit property. Respondent No.2 has filed petition for execution of the said arbitration award dated 10.12.2015 in O.M.P (ENF.) COMM. No. 92/2016. Vide order dated 22.02.2017 in the said case, attachment of first floor and second floor of the suit property was ordered by this Court. The DH has filed her objections to the said execution of the award, claiming her rights in the suit property. The aforesaid petition for execution of the arbitration award dated 10.12.2015 is still pending in this Court.

12. In the aforesaid petition, an application was filed on behalf of respondent No.5/Andhra Bank (now Union Bank of India) for impleadment by submitting that the Second floor of the suit property was mortgaged to it since 03.02.2010. It had filed petition under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act) for issuance of Recovery Certificates for Rs.4,09,06,559/- and the same has been drawn in its favour. In the said application, the respondent No.5 contended that it has a priority of charge claiming mortgage since 03.02.2010, whereas respondent No.2 was claiming rights over the Second floor of the suit property since October 2011. However, the said application was withdrawn by respondent No.5 as not pressed, stating that it will take appropriate steps and file objections in the said petition.

13. Respondent No.2 also initiated another arbitration proceedings against the JD alleging default in repayment of loan against the mortgage of Ground floor and First floor of the suit property. An arbitration award dated 18.06.2016 was passed in favour of the respondent No.2, for execution of which, petition being O.M.P (ENF.) COMM. No.06/2017 has been filed in this Court. The DH has filed her objections to the execution of the said award, claiming her rights in the suit property. The aforesaid petition, i.e., O.M.P (ENF.) COMM. No.06/2017 is pending before this Court along with connected petition being O.M.P (ENF.) COMM. No. 92/2016.

14. Respondent No.2 issued E-auction Sale Notice dated 26.03.2018 seeking to sell the Ground floor and First floor of the suit property in terms of Section 13(4) of the SARFAESI Act, claiming to have already initiated proceedings against the JD under SARFAESI Act and taken possession of the Ground floor and First floor of the suit property on 12.03.2008.

15. The DH having come to know about the said E-auction notice, filed an appeal under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal (DRT) challenging the said sale auction, along with an application for interim relief seeking stay of the Eauction sale. The said interim application of the DH was dismissed by DRT vide its order dated 27.04.2018 holding that prima facie the DH had no locus to file the said appeal, there being only an Agreement to Sell in her favour.

16. The DH challenged the order of the DRT before the Debt Recovery Appellate Tribunal (DRAT). The DRAT dismissed the appeal vide order dated 30.01.2019 taking a prima facie view that the DH having no title in the property in question, cannot stall the auction under the SARFAESI Act. The DH thereafter challenged the order dated 30.01.2019 passed by the DRAT in W.P.(C) No.2408/2019 before this Court. During the pendency of the said writ petition, the suit of the DH for specific performance, being CS(OS) No. 984/2014 was decreed vide judgment and decree dated 07.05.2019, qua which the present execution petition has been filed.

17. The DH thereafter filed an application for amendment of her appeal under Section 17 of the SARFAESI Act.

18. The aforesaid writ petition filed by the DH herein, was disposed of vide order dated 11.09.2019 thereby directing that the DH should inform the DRT about the subsequent development of her having acquired the title in the suit property on granting of decree for specific performance.

19. The Ground floor and First floor of the suit property were sold by respondent No.2 by way of auction to respondent Nos. 3 and 4 herein under the SARFAESI Act and they have been put in possession of the same.

20. As regards Terrace/Third floor (front portion) of the suit property, respondent No.6/Punjab National Bank claimed that the same had been mortgaged in its favour against a loan taken from it by JD and his sister. Since the said borrowers failed to pay the amount due from them, physical possession of the same was taken by respondent No.6/Punjab National Bank under the SARFAESI Act.

21. Subsequently, E-auction Sale Notice dated 16.04.2015 was issued by respondent No.6 qua Terrace/Third floor (Front portion) of the suit property. The DH filed an application under Section 17(1) of the SARFAESI Act before the DRT challenging the said E-auction notice, which was not entertained by the DRT. Subsequently, respondent Nos. 9 and 10 purchased the Terrace/Third floor from respondent No.6 by way of auction under the SARFAESI Act.

22. As regards the Garage portion, respondent No.7/Bank of India claimed that the said portion was mortgaged with it against loan taken by DH. In view of the default by the JD in repayment of the said loan, respondent No.7 took possession of the same under the SARFAESI Act. The said portion was sold by respondent No.7 in auction and the same was purchased by respondent No.8, Mr. Tarun Chawla. Thus, physical and vacant possession of the same was given to respondent No.8 by respondent No.7, from where respondent No.8 is running a chemist shop. Submissions of Decree Holder

23. On behalf of the DH, it is submitted that the JD has played a fraud on the respondent banks, as DH had no right to create any charge or encumbrance in their favour with respect to respective portions of the suit property, as the entire suit property had already been mortgaged to M/s India Bulls. It is submitted that respondents have no rights, title or interest in the suit property or any part thereof. All actions taken by respondent No.2, respondent No.5, respondent No.6 and respondent No.7 under SARFAESI Act by taking possession and thereafter selling the respective portions to respondent Nos. 3 and 4, respondent No.8 and respondent Nos. 9 and 10 by auction under SARFAESI Act, are void and a nullity.

24. It is submitted by ld. Senior Counsel for the DH that Smt. Padma Malhotra having gifted the suit property on 12.11.2003 by registered gift deed, was no more its owner from that date. Therefore, she could not have thereafter executed sale deeds dated 16.05.2011, 17.10.2011 and 04.06.2011 or again convey title to anyone in any manner whatsoever.

25. It is further submitted on behalf of DH that the sale deeds dated 16.05.2011, 17.10.2011 and 04.06.2011 executed by mother of the JD in favour of JD, are outcome of fraud that was committed to fabricate and create another set of fictitious documents of title with respect to suit property. The said fictitious documents of title of suit property were used to obtain loan from the respondent banks. The said sale deeds were, thus, no documents of title in respect of suit property. No mortgage could have been created on the basis of the said purported sale deeds. Consequently, the purported mortgage claimed in their favour by respondent No.2, respondent No.5, respondent No.6 and respondent No.7 banks, are void and not valid, as the aforesaid sale deeds did not create/convey any rights in favour of any of them. None of them, thus, could take any action against the suit property under the SARFAESI Act. Therefore, the respondent banks could not have conveyed any right, title or interest in favour of respondent Nos. 3 and 4, respondent No. 8 and respondent Nos. 9 and 10.

26. It is further submitted that Section 13 of the SARFAESI Act can be invoked only by a secured creditor defined under the said Act with respect to a security interest created in favour of the said secured creditor. It is submitted that the purported sale deeds dated 16.05.2011, 17.10.2011 and 04.06.2011 are void and are not the documents of title of the suit property. Thus, the mortgages upon which the respondent banks are relying upon, are null and void and did not create security interest in their favour. Therefore, the respondent banks were not competent to invoke and take any action pursuant to and in terms of Section 13 of the SARFAESI Act. Therefore, all actions taken by them with respect to the suit property are null and void, including taking possession under the SARFAESI Act and auctioning the respective portions to the private respondents under the SARFAESI Act.

27. It is contended on behalf of DH that consequent upon the gift by Smt. Padma Malhotra to the JD vide Gift Deed dated 12.11.2003, the said gift deed was and is the only original title document of the suit property till date. The purported registered sale deeds dated 16.05.2011, 17.10.2011 and 04.06.2011 are not the original title papers of the suit property and no equitable mortgage could be created by deposit of the said sale deeds.

28. Admittedly, all original documents of title were deposited by the JD with M/s Indiabulls, which were subsequently returned on the discharge of the said loan of M/s Indiabulls to the JD. The JD has filed the same in this Court in CS (OS) No.984/2014 and the same are still lying in this Court.

29. The reliance on plea of being bona fide purchasers by respondent Nos. 3 and 4, 8, 9 and 10, is wholly misconceived. Since mother of the JD was not the owner, the subsequent sale deeds executed by her were not original documents of title. Therefore, no equitable mortgage came into existence creating any security interest in favour of the respondent Banks, and hence they could not convey any title in favour of the private respondents under the SARFAESI Act. It is settled law that fraud vitiates everything and the private respondents being victims of fraud, cannot take the plea of bona fide purchasers.

30. It is further submitted that SARFAESI Act does not apply to cases of fraud and applies only in cases where the creation of a security interest in a secured asset, is not in dispute. Section 34 of the SARFAESI Act bars jurisdiction of Civil Courts only in respect of matters which DRT or DRAT is empowered by or under the Act to determine. The DRT in the present case cannot examine the validity of the sale deeds executed subsequently by mother of the DH.

31. It is further submitted that DH is not an aggrieved person and shall not be entitled to any relief under Section 17 of SARFAESI Act, as DRT only has power to restore possession. Possession can be restored only to the person from whom it has been taken, and as possession has not been taken from DH, the DRT cannot order handing over possession to DH.

32. It is further submitted that the only remedy available with the DH is to file the present execution proceedings. The DH does not have any remedy available under the SARFAESI Act.

33. It is further submitted that the present matter does not require any trial, as all facts required for the adjudication in the present proceedings, are already admitted between the parties. No further evidence is required to be brought on record, as all the facts are undisputed. The execution and the objections in the present case is, thus, to be decided based only on the admitted facts.

34. Further, the objections raised on behalf of respondent Nos. 2 to 10 that they were not parties to the suit and the decree is not binding on them, has no merits. The scope of inquiry of the court in the execution proceedings is very wide.

35. In support of his submissions, ld. Senior Counsel for the DH has relied upon the following judgments: i. Aman Sharma And Anr. Vs. Umesh & Ors., (2022) 8 SCC 798 ii. Silverline Forum Pvt. Ltd. Vs. Rajiv Trust And Another, iii. Suraj Lamp And Industries Private Limited through Director Vs. State of Haryana And Another, (2009) 7 SCC 363 iv. Veena Singh (Dead) Through LR Vs. District SCC OnLine SC 593 v. Ritu Gupta & Anr. Vs. Usha Dhand & Ors., 2013 SCC OnLine Del 4628 vi. Sadanand Properties Pvt. Ltd. and Others Vs. Punjab National Bank and Others, 2010 SCC OnLine Del 404 vii. Sadanand Properties Pvt. Ltd. and Ors. Vs. Punjab National Bank and Ors., 2015 SCC OnLine Del 7179 viii. Ashok Kumar Raizada Vs. The Bank of Rajasthan & Anr., 2013 SCC OnLine Del 4961 ix. Gangabai Gopaldas Mohata Vs. Fulchand & Others., x. Ramachandra Vs. Laxmana Rao, 2000 SCC OnLine Kar 325 xi. Vijayalakshmi Leather Industries (P) Ltd. Vs. K. Narayanan & Ors., 2003 SCC OnLine Mad 59 xii. N.S.S. Narayana Sarma & Others Vs. Goldstone Exports (P) Ltd. & Others, (2002) 1 SCC 662 xiii. Mardia Chemicals Ltd. and Others Vs. Union Of India and Others, (2004) 4 SCC 311 xiv. Nahar Industrial Enterprises Limited Vs. Hong Kong and Shanghai Banking Corporation, (2009) 8 SCC 646 xv. Ranjan Kumar Das Vs. Punjab National Bank, 2015 SCC OnLine Ori 653

36. It is to be noted that none has appeared on behalf of respondent No.1/JD and he has been proceeded ex parte. Submissions on behalf of Respondent No.2/IDFC First Bank Limited (formally Capital First Limited)

37. On behalf of respondent No.2, it is submitted that the present execution petition is not maintainable and is liable to be dismissed. The JD had approached the respondent No.2 for availing loan facility by way of Home Loan against the suit property for an amount of Rs.6,62,35,911/- in the year 2011, while the DH has relied upon Agreement to Sell dated 23.12.2013 executed by the JD. The loan was availed by the JD prior to Agreement to Sell. Therefore, in view of Section 48 of the Transfer of Property Act, 1882, the present execution petition is liable to be dismissed.

38. It is further contended that the present execution petition is not maintainable against respondent No.2, as respondent No.2 was never party to the original suit being CS(OS) No.984/2014 adjudicated by this Court. The decree dated 07.05.2019 has been passed by this Court only against the JD and not against respondent No.2.

39. It is submitted that the Ground floor and First floor of the suit property has already been sold in accordance with the provisions of the SARFAESI Act to the auction purchasers vide Sale Notice dated 26.03.2018 and Sale Certificate dated 15.05.2018. It is submitted that sale of the property was effected much prior to the judgment dated 07.05.2019 passed by this Court. The DH was aware of the complete sale proceedings and had challenged the same before the DRT. Yet, she took no steps to submit this information before this Court and did not take steps to implead respondent No.2 bank herein in the civil suit.

40. It is further submitted that the DH has challenged the Sale Notice dated 26.03.2018 issued by respondent No.2 for auctioning of Ground and First floor of the suit property before the DRT for seeking stay of the said sale notice. The same was declined by the DRT vide order dated 27.04.2018. The DH had challenged the said order dated 27.04.2018 of the DRT by filing an appeal before DRAT. However, the appeal of the DH was dismissed by DRAT vide order dated 30.01.2019. It is submitted that DH is neither owner nor in the possession of the property in question.

41. It is further submitted that the present petition is barred by Principles of Res Judicata as provided under Section 11 of Code of Civil Procedure, 1908 (CPC), since the DH is urging the same facts and seeking the same relief, which have been urged by her before the DRT and DRAT. Hence, the present petition is liable to be rejected on this ground itself.

42. It is further submitted that the DH’s only remedy, if any, against respondent No.2, is under Section 17 of the SARFAESI Act since the sale of the Ground floor and First floor of the suit property were effected in compliance of the provisions of the SARFAESI Act and Rules made thereto.

43. It is further submitted that Section 34 of the SARFAESI Act expressly bars the jurisdiction of Civil Courts to entertain any suit or proceeding in respect of any matter which DRT or the Appellate Tribunal is empowered by or under the SARFAESI Act to determine. Thus, it is submitted that the present execution petition deserves to be dismissed.

44. In support of his submissions, ld. Counsel appearing on behalf of respondent No.2 has relied upon the following judgments:

I. Promila Ghai Vs. Oriental Bank of Commerce & Ors.,

II. Jagdish Singh Vs. Heeralal and Ors.,

MANU/SC/1126/2013

III. Sree Anandhakumar Mills Limited Vs. Indian Overseas

IV. Golf Technologies Private Limited & Anr. Vs. Axis

V. Radha Singh Vs. Madhusudan Tulsyan & Ors.,

45. On behalf of respondent Nos. 3 and 4, it is submitted that they are joint owners of entire Ground floor and First floor including room built up on Garage of the suit property. They are owners of the suit property by virtue of registered Sale Deed dated 14.06.2018 executed by respondent No.2 in their favour.

46. It is contended that respondent Nos. 3 and 4 were never arrayed as parties in the suit proceedings. Hence, the decree is not binding upon them.

47. It is submitted that they are bona fide auction purchasers, who have purchased the said property in public auction. Hence, the right of auction purchaser is different from any other claimant over the said property.

48. The suit property has been purchased by respondent Nos. 3 and 4 in a public auction under the provisions of SARFAESI Act. Hence, the adjudication of any claim in respect of the said property is barred by jurisdiction under Section 34 of the SARFAESI Act.

49. Even otherwise, the claim of the DH in respect of the said property before this Court, ought to be rejected as being barred under the Doctrine of Res Judicata, since the DH has exhausted her remedy available with her by filing the securitisation application under Section 17 of the SARFAESI Act. The prayers as claimed by the DH have already been declined by the DRT as well as DRAT. It is submitted that DH had filed writ petition, being W.P.(C) 2408/2019 before this Court. Despite clear directions by this Court in the said writ petition to appear before the DRT for redressal of the issues in the application filed by DH before the DRT, the DH in utter disregard to the directions passed by this Court and with mala fide and ulterior motive has chosen not to appear before DRT. Thus, vide order dated 06.03.2020, the Ld. DRT dismissed the application of the DH for nonprosecution.

50. It is further submitted that the DH in order to obtain favourable orders, concealed material facts from this Court in the suit proceedings and did not implead any of the respondents who are objectors in the present execution petition in the said suit. This was despite the fact that the DH knew fully well the claims of others over the suit property.

51. The Agreement to Sell between the DH and the JD in respect of the suit property took place in the month of December 2013. Whereas, the said property has been mortgaged with the respondent No.2 in the year 2011. Hence, the Agreement to Sell is null and void. Thus, it is contended that the judgment and decree has been obtained by the DH by playing fraud on the court and is a nullity and non-est in the eyes of law.

52. The respondent Nos. 3 and 4 are the bona fide purchaser of the suit property with valuable consideration, being the auction purchaser from respondent No.2. Thus, the respondents have stepped into the shoes of respondent No.2, who had its mortgagee rights over the said property since 2011, much prior to the alleged agreement to sell between the DH and JD.

53. It is submitted that the DH has not approached this Court with clean hands and has indulged in forum shopping. DH is trying to confuse the issue with ulterior motives and is not entitled to any order from this Court. The DH has committed fraud on this Court by not disclosing the material facts. Despite having full knowledge of the mortgage and subsequent sale to respondent Nos. 3 and 4, as well as the possession taken by them, the DH failed to disclose any of the facts to this Court that passed the decree dated 07.05.2019.

54. It is submitted that once security interest has been created in favour of the bank, any agreement to sell/transfer contrary to the provisions of the SARFAESI Act shall be void. Such an agreement to sell would not be enforceable.

55. It is submitted that the DH has elected to appear before the DRT by filing an application under Section 17 of the SARFAESI Act. Once having elected to appear before DRT, the DH cannot question the jurisdiction of the said forum. DRT is the appropriate forum. The DH cannot approbate from its stand. Once they have approached the DRT, they cannot come before this Court.

56. Even if it was to be held that this Court has the jurisdiction, then a trial would have to be conducted before this Court to determine the various questions with respect to the claims raised by different parties.

57. In support of his submissions, ld. Counsel for respondent nos. 3 and 4 has relied upon the following judgments:

I. National Insurance Co. Ltd. Vs. Mastan and Another,

II. M/s. Seemax Construction (P) Ltd. Vs. State Bank of

III. Milan Vrajlal Bhavani Vs. Yes Bank Ltd. and Others,

IV. Sadashiv Prasad Singh Vs. Harendar Singh and Others,

V. Authorised Officer, State Bank of India Vs. Allwyn Alloys

VI. M/s. Swadeshi Cement Ltd. & Ors. Vs. Union of India &

VII. Golf Technologies (P) Ltd. and Ors. Vs. Axis Bank Ltd. and Ors., MANU/DE/1802/2015

VIII. Punjab National Bank Vs. Surender Singh Bedi and

IX. Electrosteel Castings Limited Vs. UV Asset

Reconstruction Company Limited and Others, (2022) 2 SCC 573 Submissions on behalf of Respondent No.5/Andhra Bank (now Union Bank of India)

58. On behalf of respondent No.5 it is submitted that the issue of equitable mortgage of entire Second floor, front portion of the suit property, has been adjudicated in its favour, with permission to sell it for recovery of dues. Admittedly, the unregistered Agreement to Sell dated 23.12.2013 favouring the DH, is after 25.09.2013, the date on which petition, being O.A. No. 243/2013 was filed on behalf of respondent No.5 before the DRT. Thus, the rights of the DH are subject to Section 52 of the Transfer of Property Act, 1882 which deals with Doctrine of Lis Pendence.

59. It is submitted that DRT Act is a complete code and the proper course for the DH herein is to challenge the equitable mortgage in favour of respondent No.5 by filing objections before the DRT. This Court vide its order dated 11.09.2019 passed in W.P.(C) NO. 2408/2019 filed by the DH, has not stayed the DRT proceedings and has merely given right to DH to seek appropriate remedies, if DRT orders are adverse. It is contended that judgment dated 07.05.2019 in CS(OS) No. 984/2014 had been pronounced by that time and the same was taken note of by this Court in its order dated 11.09.2019 in W.P.(C) No. 2408/2019.

60. Section 34 of the SARFAESI Act bars the jurisdiction of the Civil Courts. As such, the only course available to the DH is to file objections under Rule 11 of Second Schedule of Income Tax Act before the ld. DRT.

61. It is submitted that the Agreement to Sell dated 23.12.2013 in favour of the DH is unregistered. The DH was having notice of the registered document viz. Registered Sale Deed dated 09.06.2011, by virtue of Section 3 of the Transfer of Property Act. The DH having notice of the registered document dated 09.06.2011, has failed in her duty of due diligence by inspection of record of Sub-Registrar Office. As such, the DH cannot claim her rights upon the Gift Deed dated 12.11.2003 alone.

62. The Agreement to Sell dated 23.12.2013 is an unregistered document and does not give any notice to the world at large, and does not break the protection of the Registration Act. Hence, respondent No.5 is having valid equitable mortgage coupled with priority of charge over the DH.

63. In support of his submissions, ld. Counsel appearing for respondent No.5 has relied upon the following judgments:

I. Sarvinder Singh and Ors. Vs. Vipul Tandon,

MANU/DE/2419/2022

II. Sha Champalal Oswal Vs. Peralu Achanna and Ors.,

64. On behalf of respondent no. 6, it is submitted that the Punjab National Bank granted/released the credit facility in the nature of over draft facility on 18.07.2011 to Smt. Parineeta Malhotra and Mr. Naveen Malhotra (JD herein), which were duly secured by way of equitable mortgage of the third floor, front portion of the suit property. They executed various loaning and security documents in consideration of the grant and sanction of credit facility.

65. Since the above named borrowers failed to adhere to the financial discipline, hence, the account was classified as Non- Performing Asset on 31.10.2013. The bank issued demand notice under Section 13(2) of the SARFAESI Act, 2002 dated 07.11.2013. Since the said borrowers did not comply with the demand notice, the Punjab National Bank took symbolic possession of the mortgaged property under Section 13(4) of the SARFAESI Act on 17.02.2014.

66. Subsequently, upon an application by the bank for appointment of Court Receiver, a Court Receiver was appointed who took actual and physical possession of the mortgaged property on 02.05.2014 and handed over the same to the Punjab National Bank on the same date.

67. Thereafter, in order to recover the outstanding amount from the borrowers, the Punjab National Bank sold the mortgaged property under the SARFAESI Act to respondent nos. 9 and 10. Thus, actual physical possession of the mortgaged property was handed over by the bank to respondent nos. 9 and 10.

68. It is further submitted that there is still outstanding amount to be recovered from the JD and Smt. Parineeta Malhotra.

69. It is further submitted that the respondent no. 6 was never made a party in the original suit, out of which the decree in the question arises. Thus, it is submitted that the present execution petition is not maintainable against respondent no. 6. Submissions on behalf of Respondent No.7/ Bank of India

70. On behalf of respondent no. 7, it is submitted that the garage portion of the suit property was mortgaged by the JD with Bank of India, East of Kailash Branch, New Delhi. On account of defaults in adhering to the terms as issued by the bank, the respondent bank initiated proceedings under the SARFAESI Act. Possession notice dated 22.12.2014 with respect to garage portion of the suit property under Section 13(4) of the SARFAESI Act read with Rule 8 of the Security Interest (Enforcement) Rules, 2002 was issued by the Bank of India to M/s Star Medicos India Private Limited, a company wherein the JD’s wife is a Director.

71. Subsequent to the above possession notice, actual physical and vacant possession of the garage portion of the said property was taken over by the Bank of India vide letter dated 26.12.2014. By public notice dated 13.05.2015, an e-auction of the garage portion of the property was announced. Subsequently, sale certificate dated 20.07.2015 was issued by the Bank of India in favour of respondent no. 8. Physical and vacant possession of the property was duly handed over to respondent no. 8. Thus, it is submitted that no cause of action has accrued in favour of the decree holder, which would entitle her to file and maintain the present execution petition, which is liable to be dismissed. Submissions on behalf of Respondent No.8/ Tarun Chawla

72. On behalf of respondent no. 8, it is submitted that he is the lawful owner and in peaceful, legal possession of the garage portion of the suit property since 20.07.2015 by virtue of sale certificate dated 20.07.2016 issued by Bank of India. It is submitted that the respondent no. 8 was the successful bidder in the e-auction undertaken by the respondent no. 7 under the SARFAESI Act.

73. It is further submitted that prior to the property being devolved upon respondent no. 8, the entire property in question was subject matter of litigation before this Court in CS No. 210/1983, titled as “Shri Roshan Lal Malhotra and Anr. Vs. Shri Inder Lal Malhotra and Ors.”, wherein Sh. Roshan Lal Malhotra (father of JD Navin Malhotra) sought partition of the said property. The said suit was compromised vide order dated 14.03.1983, whereby as per the family settlement between Sh. Roshal Lal Malhotra and Sh. Inder Lal Malhotra (both being brothers), front portion of the suit property along with garage portion was decided to be allotted to the HUF Sh. Roshan Lal Malhotra (father of JD herein).

74. It is submitted that perusal of the aforesaid order dated 14.03.1983 clearly indicates that Ms. Padma Malhotra was not the owner of the suit property and Roshan Lal Malhotra became owner of the suit property on the basis of compromise arrived between the parties. As such, there was no occasion for Ms. Padma Malhotra to execute the alleged gift deed in favour of JD.

75. It is submitted that Sh. Roshan Lal Malhotra vide sale deed dated 10.06.1999 sold the garage portion of the said property in favour of his daughter-in-law Smt. Parineeta Malhotra (wife of JD) and daughter Smt. Neeta Prakash (sister of JD). Thus, it is clear that the garage portion of the property belonged to the HUF of Roshan Lal Malhotra, who sold it to Smt. Parineeta Malhotra (daughter-in-law) and Smt. Neeta Prakash (daughter). In fact, the said sale deed was witnessed by the JD herein.

76. It is submitted that at the time of the alleged gift deed executed by Smt. Padma Malhotra, mother of JD, she herself was not having any title, right or interest in the garage portion of the suit property, as her husband Sh. Roshan Lal Malhotra had already sold the said garage portion to the daughter-in-law and the daughter, way back in the year

1999. Thus, it is prayed that the decree arising out of CS (OS) NO. 984/2014 in favour of the decree holder be declared as a nullity qua the garage portion of the suit property. Submissions on behalf of Respondent Nos. 9 and 10/ Mr. Jatin Jain and Ms. Neeru Jain

77. On behalf of respondent nos. 9 and 10, it is submitted that they are the bonafide auction purchasers of third floor (front portion) of the suit property from respondent no. 6, Punjab National Bank, in public auction carried out under the SARFAESI Act.

78. It is submitted that sale certificate dated 26.07.2018 was issued by the Punjab National Bank in favour of respondents 9 and 10 under the SARFAESI Act. The sale certificate issued by the PNB is uncontested by the decree holder. The decree holder has never challenged the same before any appropriate authority and has not objected to the sanctity of the said sale certificate in their favour. Thus, it is submitted that the bonafide rights of respondent nos. 9 and 10 have not been challenged by the decree holder, except making them parties in the present proceedings. If DH wants to challenge the rights of respondents 9 and 10, they will have to go through the trial, as sale in favour of respondents 9 and 10 is justified and unquestioned.

79. It is submitted that the front portion of the third floor of the suit property was owned by Mrs. Parineeta Malhotra, wife of JD. The same was mortgaged with the Punjab National Bank. The borrowers i.e. Mrs. Parineeta Malhotra and the JD herein failed to pay the amount due upon them. Hence, the bank took physical possession of the said portion of the suit property under SARFAESI Act and the same was sold to the respondents 9 and 10.

80. The respondent no. 6/Punjab National Bank had issued confirmed sale certificate dated 26.07.2018 in favour of respondent no. 9 and 10 jointly and had handed over the delivery and possession of the front portion at third floor of the suit property to them. It is submitted that the sale certificate dated 26.07.2018 was issued at the time when the suit of the DH, CS (OS) 984/2014 was pending adjudication. Neither the plaintiff nor the defendants of the said civil suit had raised any objection against the confirmed sale in favour of respondents 9 and 10.

81. It is contended that Supreme Court in a catena of judgments has noted that rights of an auction purchaser in the property purchased, cannot be extinguished except in cases where the said purchase can be assailed on the grounds of fraud or collusion. The decree holder has failed to show the creation of any fraud between the respondent nos. 9 and 10 and the Punjab National Bank. The respondents 9 and 10 had concluded the legal transaction with the Punjab National Bank after making complete due diligence. The legal transaction is completely confirmed and the decree holder has no right to pray for attachment of the portion of the suit property in their ownership and possession.

82. It is further submitted that the decree obtained in the absence of necessary parties is not executable. Thus, respondents 9 and 10 are not bound by the judgment and decree dated 07.05.2019. The respondents 9 and 10 have absolute right over the front portion of third floor of the property and they cannot be disposed by any action of attachment.

83. In support of his submissions, learned counsel appearing for respondents 9 and 10 has relied upon the judgment dated 08.01.2014 in the case of Sadashiv Prasad Singh Vs. Harender Singh and Ors., Civil Appeal Nos. 161-162/2014. Findings by this Court

84. After hearing all the parties, the facts that emerge clearly point out to the fact that multiple interests have been created in the suit property in favour of different parties with respect to different portions of the suit property.

85. On the one hand, the decree holder seeks execution of the judgment and decree dated 07.05.2019 passed in her favour in CS (OS) No. 984/2014 with respect to the suit property. The DH seeks title to the property on the basis of agreement to sell dated 23.12.2013 with JD, who showed his ownership of the suit property on the basis of registered gift deed dated 12.11.2003 executed by his mother Smt. Padma Malhotra in his favour.

86. On the other hand, there are conflicting claims by the various respondents professing interest in different portions of the suit property on the basis of proceedings undertaken under the SARFAESI Act. Respondent no. 2, 5, 6 and 7 being the banks assert their interest in different portions of the suit property on the basis of mortgage. When the JD and other borrowers along with him failed to honour the terms of the respective mortgages, the respective portions of the suit property were taken over by the respondent banks and put to public auction under the SARFAESI Act. Respondent nos. 3, 4, 8, 9 and 10 are the auction purchasers from the respondent banks in proceedings under the SARFAESI Act.

87. While the DH has based her claim on the basis of agreement to sell dated 23.12.2013, respondent no. 2/bank has traced its claim in portion of the suit property on the basis of mortgage of the year 2011. Thus, on the basis of the prior mortgage of the year 2011, respondent no. 2 sold ground and first floor of the suit property to respondents 3 and 4 under the SARFAESI Act. Respondent nos. 3 and 4 have based their claim in the suit property on the basis of sale certificate dated 15.05.2018 in their favour, which is prior to the decree dated 07.05.2019 in favour of the decree holder.

88. Similarly, respondent no. 5/Andhra Bank (now Union Bank of India) has also based its claim on the basis of mortgage of front portion of second floor of the suit property on 11.07.2011, i.e. much prior to agreement to sell dated 23.12.2013 in favour of DH. Furthermore, the respondent no. 5 had filed petition before the learned DRT on 25.09.2013 for permission to sell the front portion of second floor of the suit property, prior to the agreement to sell dated 23.12.2013 in favour of DH.

89. Similarly, respondent no. 6/Punjab National Bank has laid its claim on the basis of mortgage dated 18.07.2011 of front portion of third floor of the suit property. The demand notice issued by respondent no. 6 under Section 13(2) of the SARFAESI Act was issued on 07.11.2013. Thus, the aforesaid mortgage and the demand notice under the SARFAESI Act were prior to agreement to sell dated 23.12.2013 in favour of the DH. Respondents 9 and 10 are auction purchasers from respondent no. 6 bank under SARFAESI Act, which claims prior mortgage of the year 2011, much prior to agreement to sell of the year 2013 claimed by the DH. Respondent nos. 9 and 10 have based their interest in the suit property on the sale certificate dated 26.07.2018 issued by respondent no. 6 bank under the SARFAESI Act. The said sale certificate issued in favour of respondent nos. 9 and 10 is prior to the decree dated 07.05.2019 in favour of the decree holder.

90. Then again, respondent no. 7 bank has based its claim to the garage portion of the suit property, on the basis of mortgage, which ultimately led to issuance of possession notice dated 22.12.2014 under Section 13(4) of the SARFAESI Act, after which possession was taken by the respondent no. 7. Pursuant to public auction, garage portion was auctioned by respondent no. 7, wherein respondent no. 8 emerged as the highest bidder. Thus, sale certificate dated 20.07.2015 was issued by respondent no. 7 in favour of respondent no. 8, which is much prior to the decree dated 07.05.2019 in favour of the DH.

91. Even otherwise, the respondent no. 7 and respondent no. 8 trace the ownership to the garage portion of the suit property on the basis of sale deed dated 10.06.1999 executed by father of the JD in favour of JD’s wife and sister, to which JD was a witness. The said sale deed dated 10.06.1999 with respect to the garage portion of the suit property was much prior to the gift deed dated 12.11.2003 executed in favour of JD. Thus, respondent nos. 7 and 8 have put up a case that since the sale deed of the garage portion is of the year 1999 and much prior to the gift deed executed in the year 2003, in terms of provisions of Section 48 of the Transfer of Property Act, 1882, the property devolves upon respondent no. 7 and through respondent no. 7 to respondent no. 8 only. The said respondents have claimed that the gift deed dated 12.11.2003 executed by Smt. Padma Malhotra, mother of JD in favour of JD, is a nullity in the eyes of law, having been executed much later in time than the sale deed of the year 1999 qua the garage portion of the suit property.

92. Thus, it is seen that there are varying and diverse claims by different parties to different portions of the suit property. The respondents 2 to 10, who have based their claims on the basis of legal proceedings and legal documents in their favour, were not parties in the suit filed by the decree holder i.e. CS (OS) No. 984/2014. Rather, when respondent no. 8 herein sought to be party in the said suit filed by the decree holder, the same was opposed by the decree holder on the ground that he was stranger to the suit, as he was neither a party nor signatory to the Agreement to Sell and Purchase between the DH and the JD herein. Reply filed on behalf of decree holder to I.A. NO. 8291/2017 in the suit filed by her being CS (OS) No. 984/2014, opposing the impleadment of respondent no. 8 herein to the said suit is reproduced as under:-

93. Thus, it is clear that the conflicting claims and interests as asserted and professed by respondents 2 to 10 have not been adjudicated by this Court at the time of passing decree dated 07.05.2019 in favour of the decree holder in CS (OS) No. 984/2014. When there are conflicting claims set up by the respondents on the basis of legal documents and legal proceedings, then the issue with respect to their title and interest in the suit property would have to be essentially adjudicated by this Court in the present proceedings.

94. No order can be passed in favour of the decree holder merely on the basis of the decree, when varying claims of the respondents 2 to 10 are yet to be adjudicated by this Court. The contention raised on behalf of the decree holder that order be passed in her favour in the present proceedings on the basis of evidence on record, is not tenable and has to be rejected.

95. The said respondents were never made parties in the suit filed by the DH. This Court cannot ignore the assertions made on behalf of respondents 2 to 10 of valuable rights having been accrued in their favour on the basis of various proceedings carried out as per law. This Court would have to adjudicate and define the interests, rights and title of the respondents, if any, by carrying out detailed examination and trial.

96. The Executing Court is required to determine and decide all such issues that arise upon the objections raised during the execution proceedings. Thus, in terms of Order XXI Rule 101 of the Code of Civil Procedure, 1908 (CPC), any issues pertaining to right, title and interest claimed in the property in question, arising between the parties to the proceedings and that are relevant to the adjudication of the objections as raised to the execution of a decree, shall be determined by the Executing Court. No separate suit is required to be filed by the parties objecting to the execution of a decree and the Executing Court is deemed to have jurisdiction to decide such issues relating to right, title or interest in the property in question. Such a course of action is necessary to avoid multiplicity of proceedings and to cut down on any prolonged litigation between the parties who are claiming right, title and interest in the property, which is the subject matter of the execution. Such a determination of the conflicting claims of the parties over the property in question, which is subject matter of the execution proceedings, is germane in bringing finality to the conflicting claims.

97. Thus, Supreme Court in the case of Noorduddin Vs. Dr. K.L. Anand[1], held as follows:- “8. Thus, the scheme of the Code clearly adumbrates that when an application has been made under Order 21, Rule 97, the court is enjoined to adjudicate upon the right, title and interest claimed in the property arising between the parties to a proceeding or between the decree-holder and the person claiming independent right, title or interest in the immovable property and an order in that behalf be made. The determination shall be conclusive between the parties as if it was a decree subject to right of appeal and not a matter to be agitated by a separate suit. In other words, no other proceedings were allowed to be taken. It has to be remembered that preceding Civil Procedure Code Amendment Act, 1976, right of suit under Order 21, Rule 103 of 1908 Code was available which has been now taken away. By necessary implication, the legislature relegated the parties to an adjudication of right, title or interest in the immovable property under execution and finality has been accorded to it. Thus, the scheme of the Code appears to be to put an end to the protraction of the execution and to shorten the litigation between the parties or persons claiming right, title and interest in the immovable property in execution.”

98. In similar circumstances, wherein a decree for specific performance was in existence in favour of the decree holder and the issue involved dispossessing a person who was already in physical possession of the property, this Court in the case of Vateena Begum Vs. Shamim Zafar and Another[2]

99. Holding that an Executing Court has the authority to decide whether or not an objector is bound by the decree, by directing the parties to adduce evidence for such determination, if the Court deems it necessary, Supreme Court in the case of Silverline Forum Pvt. Ltd. Vs. Rajiv Trust and Another[3]

101. Whenever any party raises claims regarding title to the property in his possession and objects to his dispossession by the decree holder, the Executing Court has the competence to consider and determine all such issues and questions that may be raised. In the case of N.S.S. Narayana Sarma and Others. Vs. Goldstone Exports (P) Ltd. and Ors.5, Supreme Court, thus, held as follows:-

102. The objection raised on behalf of the respondents that this Court will have no jurisdiction to decide the various issues in view of bar under Section 34 of the SARFAESI Act, is totally erroneous and liable to be rejected. Under Section 34 of the SARFAESI Act, jurisdiction of the Civil Court is barred only in respect of matters which a Debt Recovery Tribunal or Appellate Tribunal, is empowered to determine in respect of any action taken or to be taken in pursuance of any power conferred by or under the SARFAESI Act. However, the DRT is not a Civil Court and cannot pass a decree determining the right, title and 2001 SCC OnLine SC 1388 interest of the parties to the property in question. The jurisdiction of the DRT is limited and circumscribed by the provisions of the SARFAESI Act. The DRT cannot undertake full-fledged trial in terms of the provisions of the CPC or the Evidence Act.

103. Thus, in the case of Nahar Industrial Enterprises Limited Vs. Hong Kong and Shanghai Banking Corporation and Other connected matters[6], Supreme Court held as follows:-

104. In view of the aforesaid detailed discussion, it is clear that no orders can be passed in favour of the decree holder at this stage. The various issues as raised on behalf of respondent nos. 2 to 10 would have to be adjudicated by this Court after receiving evidence upon trial. Issues would have to be framed by this Court and thereafter directions would have to be given to respondents 2 to 10 to file their evidence before this Court.

105. Considering that various conflicting claims as regards right, title and interest of the parties in the property in question have to be adjudicated by this Court, it is directed that respondents who are in physical possession of the respective portions of the property in question, shall maintain status quo as regards possession and title during the pendency of the present proceedings.

106. Accordingly, E.A. No. 909/2019, E.A. No. 359/2020, E.A. NO. 221/2021, E.A. No. 1071/2020, E.A. No. 668/2021 and E.A. NO. 1078/2021 are disposed of in terms of the aforesaid directions. Execution Petition 107/2019 & O.A. No. 69/2022 in CS (OS) 984/2014

107. List for directions before the Roster Bench on 27.07.2023.

JUDGE JULY 04, 2023/au/c