Chief Manager & Authorized Officer vs District Magistrate And Ors

The challenge in the present petition is to an order passed by the District Magistrate, Bhopal on 14th May, 2018 whereby an application filed by the petitioner under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "the Act") was dismissed.

The claim of the petitioner is based upon mortgage affected by one Smt. Mallika Garg on 12.07.2013 of property described as E-2/28, Arera Colony, Bhopal. The learned District Magistrate held that from the report of Tahsildar, who was appointed as a Court Commissioner that one Rupesh Agrawal - respondent No.5 is residing in the property since the year 1985 whereas Smt. Mallika Garg and her husband Ankur Garg are residents of Ghaziabad (U.P.). It is also noticed that a Civil Suit dated 27.06.2012 is pending in which Bank is defendant No.5. The District Magistrate found that the Bank has advanced loan against the mortgage of the property though there was dispute pending before the Civil Court. The District Magistrate relied upon an order passed by the Hon'ble Supreme Court in the case of Harshad Govardhan Sondagar vs. International Assets Reconstruction Company Limited and others, (2014) 6 SCC 1. The learned District Magistrate held that by virtue of the aforesaid judgment, the person in possession is entitled to protect his possession in proceeding under Section 14 of the Act.

A perusal of the synopsis handed over by Mr. Naman Nagrath shows that the house in question was gifted to Smt. Mallika Garg on 22.03.2011 by her mother. On 27.06.2012, she instituted a Civil Suit for injunction and for possession from respondent Nos.5 to 7, said to be in possession as licensees. In the said suit, respondent Nos. 5 to 7 filed a counter claim, claiming a decree for permanent injunction and declaration that the gift deed dated 22.03.2011 be declared null and void. In the counter-claim, the stand of respondent Nos.5 to 7 is that house was constructed by Late Shri R.K. Agrawal from his own income and he was owner of the house. The defendant Nos.1 and 2 along with other children of Late Shri R.K. Agrawal inherited the house and, therefore, the gift is illegal, null and void. It is also pleaded that gift is illegal because the possession was not delivered and donee was not put in possession.

It was on 12.07.2013 when respondent No.3 mortgaged the property in favour of the Bank to take a loan of Rs.3 Crores whereas the amount due in terms of application under Section 13(2) of the Act is Rs.2,78,23,848/- as on 05.01.2016 along with future interest @ 13.50% w.e.f. 01.09.2015.

We find that the learned District Magistrate has completely overlooked the statutory provisions. After the judgment in Harshad Govardhan Sondagar's case, the Act was amended by Central Act No.44 of 2016 w.e.f. 01.09.2016. The amended provision of the Act provided remedy to the person in possession before the Debt Recovery Tribunal in view of sub-section (4-A) inserted in Section 17 of the Act, which reads as under:-

"17. Application against measures to recover secured debts.-

xxx xxx xxx

(4) xxx xxx xxx

(4-A) Where-

(i) any person, in an application under sub-section (1), claims any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy, __

(a) has expired or stood determined; or

(b) is contrary to Section 65-A of the Transfer of Property Act, 1882 (4 of 1882); or

(c) is contrary to terms of mortgage; or

(d) is created after the issuance of notice of default and demand by the Bank under sub-section (2) of Section 13 of the Act; and

(ii) the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) of clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act."

Therefore, the District Magistrate has ignored the statutory provisions conveniently.

Mr. Nagrath vehemently argued that there are serious disputes between the brother and sister which are pending before the Civil Court even before the mortgage of the property and that the respondent No.3 has misled the Bank while mortgaging the property in favour of the Bank.

We do not find that the action of respondent No.3 to mortgage the property in favour of the Bank and to avail a financial assistance from the Public Sector Bank can be a ground to deny the legitimate dues of the Bank to be recovered from the secured assets. If ultimately, the respondent Nos.5 to 7 succeed in their counter-claim they will have a claim against respondent No.3, but, as far as the Bank is concerned, the respondent No.3 having mortgaged the property on the basis of title from the gift executed from her mother, the Bank cannot be denied the legitimate right of recovering the amount from the secured assets.

Consequently, we find that the order passed by the District Magistrate is erroneous in law. The same is set aside. The matter is remitted back to the District Magistrate to pass a fresh order in accordance with law, expeditiously.

The writ petition stands allowed and disposed of.