Ritu Gupta & Anr. vs Usha Dhand & Ors.
2013 Latest Caselaw 5286 Del

       IN THE HIGH COURT OF DELHI AT NEW DELHI

               CS (OS) 188 of 2011 & IA Nos. 6546-47 of 2011, 6970 of
               2011, 10405 of 2011, 12761 of 2011, 12763 of 2011

       RITU GUPTA & ANR                                 ..... Plaintiffs
                                   Through: Mr. Gaurav Mitra,
                                   Ms. Samreen, Mr. Vijayender Kumar
                                   and Ms. Megha Berniwal, Advocates

                          versus

       USHA DHAND & ORS.                             ..... Defendants
                                   Through: Mr.         Hashmat       Nabi,
                                   Advocate for Defendant No.4
                                   Mr. Sanjeev Gupta, Advocate for Bank
                                   of Baroda.
                                   Mr. Suresh Arora, Advocate for
                                   Syndicate Bank.
                                   Mr. Sarfaraz Khan, Advocate for UCO
                                   Bank.

       CORAM: JUSTICE S. MURALIDHAR

                          ORDER

19.11.2013

IA No. 6970 of 2011 (by Defendant 5 for condonation of delay)

1. For the reasons stated therein, the application is allowed. The delay in Defendant No.5 filing the written statement by is condoned.

IA Nos. 6546-47 of 2011 (Order VII Rule 11 CPC by Defendants 5 and 4)

2. These are two applications filed by the Defendant Banks, seeking rejection of the plaint on the ground that there is a bar under Section 34

of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act') to entertaining the suit.

3. The background to these applications is that the above suit has been filed by Ms. Ritu Gupta and Ms. Kavita Verma, Plaintiffs 1 and 2 against, Ms. Usha Dhand, Defendant No.1, Mr. Naveen Kapoor, Defendant No.2, Mr. Akash Deep Kapoor, Defendant No.3, PNB Housing Finance Limited ('PNBHFL'), Defendant No.4, Syndicate Bank, Defendant No.5, Sub-Registrar-VIII, Shakarpur, Delhi, Defendant No.6, Bank of Baroda ('BoB'), Defendant No.7 and UCO Bank, Defendant No.8 for a declaration that the Plaintiffs are the rightful owners of the property at J-2/9, Krishna Nagar, Delhi-110 051 measuring 114 sq. yds. ('the suit property'), by virtue of the registered Sale Deed dated 28th April 2010; that the Sale Deeds dated 23rd August 23rd August 2006, 28th August 2006, 18th October 2006, 27th November 2006 and 26th February 2007 executed by Defendant No.1 in favour of Defendants 2 and 3 are null and void and for decree of permanent and mandatory injunction to restrain the Defendants from dealing with the suit property.

4. The Plaintiffs claim to have purchased the suit property from Defendant No.1 by virtue of the aforementioned registered Sale Deed dated 28th April 2010, a copy of which has been enclosed with the list of documents filed with the plaint. The Plaintiffs rely on the statement made in the Sale Deed that the property is free from all encumbrances.

The Plaintiffs have also placed on record the chain of title documents pertaining to the purchase of the suit property by them and claim that they have become the lawful owners of the suit property by virtue thereof.

5. The Plaintiffs further state that after receiving the possession of the suit property from Defendant No.1 on 30th April 2010, they were shocked to know, on 26th August 2010, that Defendant No.4, PNBHFL, had taken symbolic possession of the property on that date, with the intention to sell it on 25th September 2010. It is stated that in order to safeguard their rights, the Plaintiffs filed an application before the Debt Recovery Tribunal-III ('DRT-III'), Delhi under Section 17 of the SARFAESI Act, in which an order was passed by the DRT on 3rd September 2010 restraining Defendant No.4 from proceeding to take possession of the suit property. It is stated that on 31st August 2010, the Plaintiffs were surprised to know that Defendant No.5, Syndicate Bank, was also planning to take possession of the suit property. Another application was filed before the DRT, in which a similar restraint order was passed in favour of the Plaintiffs. It is stated that Defendant No.4 relied on the registered Sale Deed dated 23rd August 2006, purportedly executed by Defendant No.1 in favour of Defendants 2 and 3. It was stated that on the basis of the said Sale Deed, a mortgage by deposit of title deeds was created by Defendants 2 and 3 in favour of Defendant No.4 for securing financial assistance. On its part, Defendant No.5, Syndicate Bank, relied on another registered Sale Deed dated 26th February 2007 in respect of the same suit property purportedly executed

by Defendant No.1 in favour of Defendant No.3. It was stated that this registered Sale Deed was deposited with Defendant No.5 for securing the financial assistance. It is pointed out that Defendant No.4 has, itself, filed an appeal in the Debt Recovery Appellate Tribunal (DRAT) against Defendants 2, 3 and 5.

6. The Plaintiffs state that, on inquiring with the office of the Sub- Registrar, on or about 10th December 2010, they learnt that Defendant No.1 had executed a number of sale deeds in favour of Defendants 2 and 3 in respect of the same suit property. It is alleged that, in connivance with the officials of various banks, Defendants 1, 2 and 3 availed of loans by creating mortgages by deposit of title deeds. It is submitted that each of the sale deeds, the details of which have been set out in para 12 of the plaint, constituted a sham transaction between the mother (Defendant No.1) and her two sons (Defendants 2 and 3) for fictitious sums, when, in fact, there was no delivery of possession of the suit property to Defendants 2 and 3. It is alleged that the only purpose of the five fraudulent Sale Deeds was to obtain loans from the banks. It is averred in para 13 of the plaint that a fraud was played upon the Plaintiffs, which was evident from the fact that in the sale deed executed in favour of Defendant No.1 by her predecessor-in-title, Smt. Krishna Devi, Defendant No.3 was a witness. It is averred that the deeds constituting the chain of title in relation to the suit property have remained with the Plaintiffs. These were never given to the banks

and there was no mortgage deed also executed. In para 14, it has been averred as under:

"14. It is submitted that the alleged sale deeds as referred to in para 12 above are false and fabricated by the Defendants and have been executed in connivance with one another in order to secure loans from various banks in further connivance with officials of such banks and to defeat the valuable rights of the Plaintiffs in the said property."

7. In para 15 of the plaint, it is averred that the Plaintiffs are the bonafide purchasers for valuable consideration and that their ownership could be proved beyond doubt with all the original link documents as well as the original deeds in their favour.

8. Summons in the suit was directed to be issued on 28th January 2011. As far as the interim relief was concerned, the Court noted in its order of that date that the Plaintiffs had interim protection from the DRT. However, liberty was granted to them to approach the Court if there was a new cause of action in that regard.

9. Defendant No.7, BoB, filed IA No. 3994 of 2011 seeking its impleadment. IA No. 6546 of 2011 was filed by Defendant No.5 Syndicate Bank and IA No. 6547 of 2011 was filed by Defendant No.4 PNBHFL under Order VII Rule 11 of the Code of Civil Procedure, 1908 ('CPC') seeking rejection of the plaint. BoB was impleaded as Defendant No.7 on 7th July 2011. By the same order, the Court directed Defendant No.7 to maintain status quo with regard to the suit property

and also restrained the Plaintiffs from selling, alienating, transferring or parting with the possession of the suit property. UCO Bank was impleaded as Defendant No.8 on 14th November 2011.

10. The main point urged in these applications is that since the recovery proceedings have been initiated by the banks pursuant to notices issued to Defendants 2 and 3 under Section 13(2) of the SARFAESI Act and the consequential proceedings were pending before the DRT, there was a bar under Section 34 of the SARFAESI Act on the Court to entertain the present suit. Learned counsel for the banks also referred to the order dated 19th January 2011 passed by the DRAT in the appeal filed by the Plaintiffs, whereby the order passed by the DRT requiring the Plaintiffs to deposit a sum of Rs. 5,00,000 as a pre-condition for their applications to be considered was set aside. By the said order, the DRAT remanded the matter to the DRT for passing a fresh reasoned order. It is submitted that inasmuch the Plaintiffs availed of the remedy under the SARFAESI Act by filing the aforementioned application they ought to have pursued that remedy. It, however, appears that the Plaintiffs, for the reasons best known to them, withdrew the application, with liberty to approach this Court, when, in fact, this Court lacked jurisdiction to entertain the suit.

11. Reliance is placed by learned counsel for the Banks on the decision dated 30th October 2013 of the Supreme Court in Civil Appeal No. 9771 of 2013 (Jagdish Singh v. Heeralal) in which it has been held that the expression "in respect of any matter" referred to in Section 34

of the SARFAESI Act would take in the measures provided under Section 13(4) thereof and consequently "if any aggrieved person has got any grievance against any measures taken by the borrower under sub-section (4) of Section 13, the remedy open to him is to approach the DRT or the Appellate Tribunal and not this Court." In the process, the Supreme Court referred to the decisions in Mardia Chemicals v. Union of India (2004) 4 SCC 311, Central Bank of India v. State of Kerala (2009) 4 SCC 94, United Bank of India v. Satyavati Tondon (2010) 8 SCC 110 and Authorised Officer, Indian Overseas Bank v. Ashok Saw Mill (2009) 8 SCC 366. The Supreme Court also considered the decisions in Nahar Industrial Enterprises Limited v. Hongkong Shanghai Banking Corporation (2009) 8 SCC 646 and Indian Bank v. ABS Marine Products Pvt. Ltd. (2006) 5 SCC 72. Learned counsel for the Banks also relied on the decision in V. Thulasi v. Indian Overseas Bank III (2011) BC 556(DB). It is submitted that the jurisdiction of the civil court could be invoked "only when the action of the secured creditors is alleged to be fraudulent or his claim is so absurd and untenable". It is submitted that in the present case the fraud has been committed not by the Banks but by the vendor of the Plaintiffs and the Plaintiffs themselves. Learned counsel for the Banks also relied upon the decision in Ishar Dass Malhotra v. Dhanwant Singh AIR 1985 Delhi 83, which held that the mortgage by deposit of title deeds is like any other mortgage and there is a transfer of interest in the property mortgaged to the mortgagee. Consequently, the question of a subsequent purchaser having bought the property subject to a mortgage by deposit of title deeds bonafide, with or without notice, is of no

relevance. A subsequent sale deed could, therefore, not have priority over a mortgage by deposit of title deeds created before the sale.

12. Learned counsel for the Plaintiffs, on the other hand, relied on the decisions in Mardia Chemicals v. Union of India (supra) and Nahar Industrial Enterprises Limited v. Hongkong Shanghai Banking Corporation (supra). Reliance was also placed by the Plaintiffs on the decision dated 31st October 2011 of the Division Bench of this Court in RFA (OS) No. 69 of 2011 (Ram Prakash Mehra v. Union of India) and Sadanand Properties Pvt. Ltd. v. Punjab National Bank MANU/DE/0383/2010.

13. The above submissions have been considered. At the outset, it must be noted that Section 34 of the SARFAESI Act has been interpretated in several decisions. In Mardia Chemicals v. Union of India (supra), it was clarified in para 51 that "to a very limited extent jurisdiction of the civil court can also be invoked, where for example, the action of the secured creditor is alleged to be fraudulent or their claim may be so absurd and untenable which may not require any probe, whatsoever or to say precisely to the extent the scope is permissible to bring an action in the civil court in the cases of English mortgages." This principle was reiterated in Nahar Industrial Enterprises Limited v. Hongkong Shanghai Banking Corporation (supra). Therefore, it is not entirely accurate to state that, after the proceedings under the SARFAESI Act have commenced, in no circumstance can the jurisdiction of the civil Court be invoked. The decision in Jagdish Singh v. Heeralal (supra)

did not involve any allegation of fraud by any of the parties and, therefore, the decision is distinguishable on facts. Further, there can be no doubt that a mortgage by deposit of title deeds is recognised in law, and if validly made, would bind the subsequent bonafide purchaser as well. The position, however, would be different when the title deeds forming the basis of such mortgage are themselves questioned as being fraudulent. This has been recognised in Ram Prakash Mehra v. Union of India (supra) and Sadanand Properties Pvt. Ltd. v. Punjab National Bank (supra). In V. Thulasi v. Indian Overseas Bank III (supra), the Court found on facts that the Plaintiff had not made out a case of fraud.

14. In the present case, not only has fraud been pleaded, but even the Defendant Banks do not dispute the fact that the Sale Deeds executed by Defendant No.1 in favour of her sons in respect of the same property are prima facie bad in law.

15. Learned counsel appearing for PNBHFL submitted that the Sale Deed dated 23rd August 2006, which was deposited with it by way of mortgage, was only in respect of the ground floor and was for a sale consideration of Rs. 30,00,000. On the other hand, the Plaintiffs purchased the entire building by the Registered Sale Deed dated 28th April 2010, nearly four years later, for just Rs. 27.40 lacs. He accordingly submitted that if, at all, it was the Sale Deed by which the Plaintiffs purchased the suit property, the said sale deed to be fraudulent, and, in any event, the validity of the Sale Deed dated 23rd August 2006 was not vitiated.

16. The specific case of the Plaintiffs is that the bank officials have colluded with Defendants 1, 2 and 3 and that is why there have been as many as five Sale Deeds within a short span of time between 23rd August 2006 and 26th February 2007 in respect of the same property. Learned counsel for the Plaintiffs has pointed out various features of the Sale Deeds, which, according to him, throw serious doubts on their validity. He also pointed out that a criminal complaint has been filed which is under investigation.

17. Without expressing any final view on the above contentions of the parties, the Court, prima facie, is satisfied that the pleas urged by the parties raises triable issues. Prima facie, it also does appear that the Sale Deeds executed by Defendant No.1 in quick succession in respect of the same property are of doubtful validity and that the plea that they are vitiated on account of fraud would require evidence to be led by the parties before a final view can be taken in the matter. The Court is of the view that the case falls within the exceptional category pointed out by the Supreme Court in Mardia Chemicals v. Union of India (supra), with the caveat that it is premature for the Court to express any view as to which of the parties has been party to the fraud that prima facie appears to have been committed.

18. Consequently, the plaint cannot be rejected at this stage on the basis of Section 34 of the SARFAESI Act. The applications are accordingly dismissed.

CS(OS) No. 188 of 2011 & IA Nos. 10405 of 2011, 12761 of 2013 & 12763 of 2013

19. Written statement be filed within four weeks. Replication be filed within four weeks thereafter. List before the Joint Registrar on 17th April 2014 for admission and denial of the documents. By that date, the parties will file their affidavits by way of admission/denial and produce the originals of the documents relied upon by them respectively.

20. List before the Court on 18th July 2014 for framing of issues and for arguments on the pending applications.

S. MURALIDHAR, J.

NOVEMBER 19, 2013 tp