Mohinuddin Maqdum Sayyad vs Sumaraj Sea Foods Pvt. Ltd. And 3 ...
2021 Latest Caselaw 16461 Bom

                                         IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                                   ORDINARY ORIGINAL CIVIL JURISDICTION


                                                    INTERIM APPLICATION NO.636 OF 2021
                                                                    IN
                                    COMMERCIAL EXECUTION APPLICATION NO.108 OF 2017
                                                                    IN
                                             COMMERCIAL SUMMARY SUIT NO. 144 OF 2016


                        Mohinuddin Maqdum Sayyad                ...        Applicant/Plaintiff/Decree Holder
                                             Vs.
                        Sumaraj Sea Foods Pvt. Ltd. & Ors....          Defendants/Judgment Debtors
                                         and
                        Axis Bank Ltd.                          ...    Respondent / Objectionist


                        Mr. Nandlal Agrawal for the Applicant.
                        Mr. Chetan C. Agrawal a/w. Ms. Nikita Banatwala for Respondent no. 4.


                                                                     CORAM : A. K. MENON, J.

                                                                     DATE       : 29th NOVEMBER, 2021.


                        P.C. :

1. By this interim application the applicant-judgment creditor seeks to

set aside an order passed by the Commissioner for Taking Accounts on 16 th

February, 2021, to stay/suspend further proceedings in execution till final

disposal of the interim application and dispense with service of notice upon

respondent nos. 1 to 3. Respondent nos. 1 to 3 are the judgment debtors and

respondent no. 4 is Axis Bank Limited who claims a security interest in

property that is subject matter of execution.

           Digitally
           signed by
           RAJESHWARI
RAJESHWARI RAMESH


RAMESH     PILLAI
PILLAI     Date:
           2021.11.30
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           +0530

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2. The facts in brief are that the applicant is a judgment creditor having

obtained an ex-parte decree on 5 th January, 2017 in the above suit. He has

levied attachment on residential and commercial properties. This court has

vide an order dated 19 th March, 2018 permitted sale of only the residential

property and accordingly a warrant of sale is been issued by the Sheriff of

Bombay on 23rd April 2018. The Sheriff was directed to sell right title and

interest of defendant nos. 1 to 3 in the residential flat.

3. Pursuant thereto on 28th May, 2018 notice was issued by the

Commissioner for Taking Accounts, High Court Bombay to persons having

any claim or charge in respect of the flat. 30 th July, 2018 was the date fixed

for lodging claims. On or about 17th /18 th July, 2018 Axis Bank filed an

affidavit claiming that the flat was equitably mortgaged to the bank. The

bank claimed that it was a secured creditor having paramount charge of the

property and sought deferment of the public auction. Thereupon the

applicants Advocate took search of the record and proceedings of this court

and apparently did not find any claim filed by Axis Bank.

4. The only application by the bank was for deferring auction of the

attached property. Thereafter an affidavit was filed on behalf of the plaintiffs

annexing therewith a copy of a notification issued by the State on 1 st October,

2013 wherein the State notified the requirement of registering the creation of

an equitable mortgage. This was subject matter of a hearing before the

Commissioner. The Commissioner after taking into consideration the

16-ia-636-2021.odt rrpillai submissions made by the parties has concluded that the claim of Axis Bank

would have to be included in the sale proclamation. Thereupon an appeal

came to be filed by the applicants under Rule 586 of the Bombay High Court

(Original side rules) by way of Chamber Summons no 928 of 2019. On 4 th

September, 2019 the court set aside the order dated 25 th February, 2019

passed by the Commissioner and directed the Commissioner to hear the

matter afresh and consider the applicability and consequences flowing from

notification dated 1st October 2013 and pursuant to section 84A of the

Registration Act, 1908. Axis Bank was expected to be heard since it had

raised an objection to the sale and it was on 16 th February, 2021 that the

matter was heard afresh by the Commissioner and after hearing parties and

considering the notification the Commissioner concluded that it is necessary

to the include the claim of Axis bank as part of sale proclamation. The order

of the Commissioner is thus called into question by the applicants.

5. On behalf of the respondent no. 4 bank the learned counsel Mr. Chetan

Agarwal has submitted that the bank is a secured creditor as required under

the The Securitisation and Reconstruction of Financial Assets and Enforcement

of Security Interest Act, 2002 (SARFAESI Act). It is the banks duty to enter

particulars of the mortgage created in the Central Registry as provided under

the Act and this has been done. It was contended that the duty of notifying

and registering creation of mortgage by title deeds is that of the mortgagor

and not the mortgagee bank.

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6. Inviting my attention to section 89B of the Registration Act it was

submitted on behalf of the bank that a mortgagor who creates a mortgage by

depositing title deeds under 58 F is required to file notice of intimation of

having mortgaged the property within 30 days of the mortgage. Thus the

bank disclaimed any responsibility of registering the mortgage and submitted

that by virtue of the SARFEASI Act it is entitled to proceed to sell the flat and

recover its dues.

7. Mr. Nandlal Agarwal learned counsel on behalf of the applicant has

refuted the bank's contentions and submitted that the bank not having

registered the creation of the mortgage mandated under the Registration Act

as amended cannot take advantage of their own wrong The banks claim

cannot be shown as an encumbrance and the Commissioner was wrong in

having observed the banks claim is likely to be included. He invited my

attention to the order passed by the learned Commissioner and stated that

even the Commissioner has recorded the fact that the decree holder had

conducted a search on 2nd February 2020 on the CERSAI portal and did not

find any property such as flat being recorded in the Central Registry as being

secured to Axis bank. He submitted that the Registration Act was amended by

the Registration (Maharashtra amendment) Act 2010 and in section 17 after

sub clause 1 a further clause (f) has been added whereby an agreement

relating to deposit of title deeds is required to be registered. That provision

read with Section 89 and 89B would require the bank to have registered this

mortgage if at all. He has placed reliance on the fact that written submissions

16-ia-636-2021.odt rrpillai were filed on behalf of the decree holder before the Commissioner but the

Commissioner has not taken into consideration the submissions in the right

spirit.

8. According to the learned counsel for the applicant the bank has not

made any prayer seeking the encumbrance to be disclosed and hence no relief

can be granted as is now done by the Commissioner. The effect of the

registration under section 23 of the SARFAESI Act has been questioned since

according to the plaintiff search showed that no property was registered in

the Central Registry. Thus a factual dispute is sought to be raised as far as

registration is concerned. It is further contended by Mr. Agarwal that

assuming that the registration under the SARFAESI Act is in place it would

not dilute the mandatory requirement of law namely section 17 of the

Registration Act as amended that the SARFAESI Act and section 20(4) clearly

envisages that the Act would be in addition to not in derogation of the

provision of the Registration Act, Thus it is contended that the bank cannot

prevent sale of the property by public auction.

9. The request for deferment of the sale cannot be accepted. The

plaintiff as a decree holder is entitled to recover the decretal amount by

executing the decree and he has been permitted to sell the flat that having

been done it is not possible to accede to the request to treat the flat as

encumbered. Mr. Nandlal Agarwal therefore prayed that the order of the

Commissioner be set aside.

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10. I have heard both learned counsel in support and in opposition. I find

that the bank has filed a compilation of documents in which the bank has

included a copy of the affidavit filed by it before the Commissioner. In that

affidavit it is contended that the bank had advanced a housing loan of

Rs. 3,53,69,166/- for the purpose of purchase of th flat which is subject

matter of attachment. That flat is equitably mortgaged to the bank and a

Memorandum of Entry dated 29 th November, 2013 is duly registered with

the sub-registrar, Kurla No. 4. That the subject property is clearly mentioned

therein and therefore the mortgage will operate as a prior charge, security of

the bank and the bank thus has paramount charge of the property.

11. The objections thus raised on behalf of the judgment creditor therefore

cannot be considered. The bank has also relied upon board resolution issued

by the Board of Directors of Sri Siddhi Freezers & Exporters Pvt. Ltd.

authorising the creation of mortgage. The bank has placed reliance on

Memorandum of Entry which evidences that on 29 th November, 2013, the

loan applicant Rajesh Ramu Chandan had deposited with the bank

documents of title. These documents are listed in a schedule to the

Memorandum of Entry and that includes the original registered agreement

dated dated 12th November, 2013 between G.A. Builders Private Limited

(G.A. Builders) and Mr. Rajesh Ramu Chandan, registration receipt, stamp

duty receipt, Index II and NOC of the builders, the flat members described

therein as 1302 on the 13th floor of the building. The bank has also provided

proof of having paid the stamp duty on 23nd November, 2013 and a challan

16-ia-636-2021.odt rrpillai in that respect as also a copy of an order dated 26 th September, 2018 passed

by this court in Chamber Summons no. 1094 of 2017 in Execution

Application no. 83 of 2012 in which two rival claims of financial institutions

one a bank and NBFC were called into question. The court decided in favour

of the bank which had a prior claim over the mortgage flats as against the

attachment levied by the NBFC. Relying upon these it is contended by Mr.

Chetan Agarwal that the loan was sanctioned upon the purchase of the flat

itself and this aspect cannot be overlooked. A charge under SARFAESI is

therefore attracted, the loan was availed of in October/November, 2013 and

as of 11th February 2021 there was outstanding of 3,12,81,424/-. The flat is

obviously encumbered right from the inception and therefore the attachment

cannot result in sale and sale proceeds being handed over to the applicant.

12. The issue is fairly narrow. The question that arises is whether the bank

has a claim over the property that is attached and whether the sale can now

proceed without the consent of the bank since the flat is said to be secured

assets and the bank secured creditor. According to the bank the flat is the

only available as security for recovery of the loan amount which is over Rs. 3

crores today. Mere attachment by the Sheriff of Bombay at the instance of

the original plaintiff-the applicant in the Execution Application cannot

deprive the bank of its rights. In this respect I had occasion to consider the

plaintiffs contentions that the amendment to the Registration Act. In its

submissions the affidavit the bank has submitted that the equitable mortgage

has been registered while considering the Maharashtra Act 10 of 2012 it is

16-ia-636-2021.odt rrpillai obvious that an agreement relating to deposit of title deed would have to be

registered. The question is whether the present claim of the bank is on the

basis of an agreement or a simple deposit of title deeds.

13. There is also no ambiguity as far as the applicability of 89A or 89B of

the Registration Act as amended are concerned. Section 89 requires every

court passing a decree or order to send a copy of the decree or order with a

memorandum describing the property in the manner required under Section

21 of the Act to the registering authority within whose jurisdiction the

property is situated. The intention being to enable the registry to make note of

a claim in respect of a property. That every person who has mortgaged

property is also required under section 89 B to inform the fact of having

mortgaged the property to the Registering Officer under section 2 The

obligation of so registering the property is that of the mortgagor.

14. In the course of arguments, Mr. Nandlal Agrawal has raised a serious

dispute as to whether the bank advanced monies toward the housing loan at

all. According to him, it was a personal loan granted to the borrower. No

home loan at all has been granted. He said the bank has therefore deliberately

not disclosed documents pertaining to the loan transactions despite several

requests. Faced with this, Mr. Chetan Agrawal undertook to provide these

documents. Inspection was offered of some documents and post that, an

additional compilation of loan documents has been filed, which inter alia

consists of a Home Loan Application Form dated 18 th November 2013. It

16-ia-636-2021.odt rrpillai shows the name of the applicant as Rajesh Ramu Chandan and Mrs.

Saubhagyalata Chandan, spouse of Rajesh Chandan as co-applicant. The loan

application is signed by both these persons. Although this document also

discloses the property details as Flat No.D3-1302, RNA Continental, being the

subject attached property.

15. In support thereof, Mr. Chetan Agrawal has pointed out that a Power

Home Sanction Letter had also been issued on 22 nd November 2013, wherein

the transaction is reflected. I have therefore perused the compilation in some

detail. The Power Home Sanction Letter indicates that the loan was bearing

interest at a floating rate linked to base rate. The base rate has been specified

and the loan amount is shown as Rs.3,71,65,498/- with insurance and

Rs.3,60,00,000/- without insurance. EMIs are also specified separately. The

Sanction Letter is also signed by the bank, Rajesh Ramu Chandan,

Saubhagyalata Chandan and the guarantor Sri Siddhi Freezers and Tran

porters Private Limited by a Director, who appears to be Rajesh Ramu

Chandan.

16. Apart from the fact that the documents disclosed payment of stamp-

duty of an amount of Rs.19,33,400/- by online payment for franking, it

appears that creation of mortgage is also reflected on the website of the Credit

Information Bureau (India) Limited (CIBIL). The bank is relying upon a

Memorandum of Entry dated 29th November 2013, which is said to be a

record of equitable mortgage by the title-deeds. This is a document recording

that Rajesh Ramu Chandan, son of Ramu Chandan, has deposited with Mr.

16-ia-636-2021.odt rrpillai Ujwal Upadhyay, Manager of Axis Bank, the documents listed in the annexure

to this memorandum. The memorandum is not signed by the borrower.

Stamp-duty appears to have been paid in a sum of Rs.70,740/-. It details the

facilities as "Mortgages Power Home" in an amount of Rs.3,53,69,166/-,

however a further Declaration-cum-Confirmation Deed is executed, by

which the borrower-mortgagor Rajesh Ramu Chandan has declared that the

property is mortgaged. Thus, a memorandum does exist which records

creation of a mortgage, although the memorandum of deposit itself is not

signed by the borrower. It merely records the deposit. The memorandum at

hand by itself is not an "agreement". It reflects the bank having accepted

deposit of title-deeds. It inter alia records the fact that the mortgagor stated

while depositing the documents of title that deeds being deposited with intent

to create a charge.

17. The compilation also contains (a ) a disbursal receipt of payment of

Rs.3,42,60,000/- by the Axis Bank to one G.A. Builders Private Limited and an

RNA Group Company, (b) a home loan agreement setting out particulars of

the loan transaction. The schedule described as the property in question and

the home loan facility for a sum of Rs.3,53,69,166/-. There are various other

documents such as PDC, covering letters etc.. The original Articles of

Agreement dated 12th November 2013 between GA Builders Private Limited

and Rajesh Ramu Chandan as purchaser is also on record. Thus, it appears

that Rajesh Ramu Chandan is the sole purchaser of the flat although his

spouse Saubhagyalata is the co-applicant in the loan transaction.

16-ia-636-2021.odt rrpillai

18. This brings me to consider the contention of Mr. Nandlal Agarwal that

by virtue of the Maharashtra Amendment to the Registration Act and the

incorporation of Section 89B registration was compulsory. In this respect a

fair reading of Section 89B reveals that the obligation is on mortgagor to file

the notice of intimation of having mortgaged the property by giving details of

his name, address and name and address of the mortgagee, date of mortgage

and amount of mortgage debt, rate of interest payable and list of documents

deposited and description of the immovable property. Such intimation is to be

given to the registering officer in the local limits of whose jurisdiction whole

or any part of the property is situated.

19. Section 89B(2) provides that if such a notice is not filed before the

registering authority and the mortgagor enters into any transaction in

relation to or affecting the immovable property with a third party, such

transaction shall be void and the third party shall be entitled to refund of any

amount paid by him alongwith 12% interest so as to compensate him for

damages suffered. Such amount shall be a charge on the property. However

proviso to Section 89 clarifies that nothing in Section 89B shall apply to the

"instruments of agreement relating to mortgage by title deeds" which are duly

registered in accordance with provisions of the Act.

20. Section 89C provides for punishment in the event of failure to file

such intimation. Thus it is seen that the amendment does not contemplate

16-ia-636-2021.odt rrpillai any change in the position as far as registration of the instrument of

agreement relating to mortgage by title deeds is concerned. That obligation is

not contemplated by the amendment Act, but the principal Act. On facts it

appears that the Memorandum as appearing in the present case does not

appear to fit the description of "instruments of agreement relating to

mortgage by deposit of title deeds" and does not appear to be fitting the

description in the newly inserted provision of section 17(f) since the

Memorandum does not appear to be signed by the mortgagor.

21. There is of course a newly introduced provisions of Section 89A which

requires every Court passing a decree or order of interim attachment to send

a copy of the decree or order together with the memorandum describing the

property to the registering officer.

22. The Memorandum prima facie does not comply with the definition of

agreement under section 2(e) of the Contract Act, 1872 which in Section 2(e)

defines an agreement as follows :

2(e) Every promise and every set of promises, forming the

consideration for each other, is an agreement.

This would require at least two parties, the person making the proposal and

the person accepting the proposal. In the present case the memorandum is

executed only by the bank. In State of Haryana and Ors vs. Narvir Singh and

Ors and connected matters1 the Supreme Court observed that if a simple

Memorandum is prepared to evidence handing over title deeds it does not 1 (2014) 1 SCC 105

16-ia-636-2021.odt rrpillai require registration, but if the Memorandum is constitutive of the transaction

it would be registrable. In the present case the Memorandum does not

appear to be constitutive of the transaction since it is not even signed by the

borrower and therefore it is not possible to hold that the memorandum was

compulsorily registrable. In any event these are aspects which are not

relevant for the purpose of the present application since it is limited to a

challenge to the requirement of disclosing the banks security interest. On

facts it is evident that the bank has advanced the loan for purchase of the flats

and it cannot be deprived of its right to proceed against the flat. It is for the

borrower to contest the claim of the bank.

23. My attention is also been invited by Mr. Nandlal Agarwal to the

decision of the Madras High Court in T.K. Sathiyanarayanan vs. S.

Jaganathan 2 in which Mr. Agarwal has sought to stress upon the observation

that an unregistered mortgage deed is inadmissible in evidence. What this

decision also holds is that while a mortgage may be assailed, the

unregistered document can still be used to establish loan/debt and in the

present case I have no doubt that the bank had advanced the loan for

purchase of the flat which is now sought to be sold.

24. Besides under Rule 3 of the Securitisation and Reconstruction of

Financial Assets and Enforcement of Security Interest (Central Registry) Rules

2011 a Central register is to be maintained for recording registration of

transactions relating to security interest created over properties. Mr. Chetan

2 CDJ Law Journal MHC 2298

16-ia-636-2021.odt rrpillai Agarwal had relied upon the fact that such registration has been made and he

has invited my attention to the encumbrance recorded in the central register.

According to Mr. Chetan Agarwal if the search had been taken by the

judgment creditor - applicant his security interest in favour of the bank

could have been ascertained. Mr. Nandlal Agarwal however relied upon

search report obtained by his client which did not indicate any such

encumbrance. To my mind the search report relied upon by the applicant

appears to be a result of a query based on incomplete information about the

property as evident from the search report itself. Exhibit A to the affidavit

dated 10th December, 2019 filed on behalf of the bank is a document

described as "Addition of Security Interest Acknowledgment Report issued

by the Central Registry" on 3 rd December, 2019. As against this Mr. Agarwal

has relied on a report described as Search Result for matching property dated

2nd February, 2020 which sets out that no property registered in the Central

Registry matches the search criteria. It appears therefore that the search

criteria entered by the applicant did not match with that of the property. In

any event report relied upon by the bank is of the year 2019 and there is no

reason to doubt the same.

25. What really, in my view, clinches the issue is the fact that the

contention of the applicant that no disbursal has been made by the bank to

the borrower, is not correct, since the account statement of the Power Home

Loan account is also forming part of the compilation and that clearly indicates

description of the property, the product being power home loan, name of the

16-ia-636-2021.odt rrpillai applicant, borrower and co-borrower, rate of interest, date of disbursal,

period of the loan and also clearly indicates debit of Rs.3,53,69,166/- on 28 th

November 2013 and several other debits towards stamp-duty and other

charges and interest from time to time. Mr. Nandlal Agrawal sought to

contend that this is merely an account statement of the bank account, which

contention cannot be accepted since this is clearly, in my view, a statement of

the home loan account. Besides, if it was a simple savings bank account or a

current account it would show an opening balance. In the present case,

there is no opening balance except for a debit, as aforesaid. It also

contemplates penal interest, bouncing of cheque charges etc. The account title

itself shows the loan agreement number. At the foot of the account as of 11 th

November 2021, it shows a debit balance.

26. In the circumstances, I am not inclined to accept the applicant's

contentions that the impugned order is liable to be set aside. As far as the

provisions of the amended Act are concerned, the obligation is clearly on the

mortgagor, as aforesaid. In the circumstances, the application cannot succeed

and I pass the following order :-

(i)        Interim Application is dismissed.

(ii)       No order as to costs.

                                                              (A. K. MENON, J.)





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