Karnataka High Court

Sri Nitin Subramanian vs The Authorized Officer on 21 April, 2023

Bench: M.Nagaprasanna

                           1



       IN THE HIGH COURT OF KARNATAKA AT BENGALURU

           DATED THIS THE 21ST DAY OF APRIL, 2023

                          BEFORE

         THE HON'BLE MR. JUSTICE M. NAGAPRASANNA

          WRIT PETITION No. 2546 OF 2023 (GM-DRT)


BETWEEN:

SRI NITIN SUBRAMANIAN,
AGED ABOUT 29 YEARS,
S/O LATE RAMA IYER SUBRAMANIAN,
R/AT NO. 992, 4TH CROSS,
HMT LAYOUT,
BENGALURU - 560 097.
                                              ... PETITIONER

(BY SRI K.RAVI SHANKARA BHAT, ADVOCATE)

AND:

1.   THE AUTHORIZED OFFICER/
     ASSISTANT GENERAL MANAGER,
     CANARA BANK,
     (A BANKING COMPANY A
     GOVERNMENT OF INDIA ENTERPRISES)
     (EARLIER SYNDICATE BANK)
     VIDYARANYAPURAM BRANCH,
     NO. 962, BEL EMPLOYEES HOUSE,
     BLDG. CO- OPERATIVE SOCIETY,
     VIDYARANYAPURA ROAD,
     BENGALURU - 560 097.

2.   LOKESH HANUMANTHARAYA GOWDA,
                                  2



    AGED ABOUT 47 YEARS,
    S/O HANUMANTHARAYA GOWDA,
    NO. 4, 50/2, 'LAKSHMI',
    DODDABETTAHALLI LAYOUT,
    VIDYARANYAPURA POST,
    BENGALURU - 560 097.
                                                    ... RESPONDENTS

(BY SMT. NAYANA TARA B. G., ADVOCATE FOR R1;
    SRI SHARATH MULIA, ADVOCATE FOR R2)

     THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO SET-ASIDE THE
IMPUGNED ORDER DATED 30/11/2022 PASSED BY THE HONBLE
DEBT RECOVERY TRIBUNAL - I KARNATAKA AT BENGALURU ON I.A.
NO. 1739/2021, IN D.NO.1382/2021 AS PER ANNEXURE-A.


     THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON 30.03.2023, COMING ON FOR PRONOUNCEMENT
THIS DAY, THE COURT MADE THE FOLLOWING:-
                                ORDER

The petitioner is before this Court calling in question an order

dated 30-11-2022, passed by the Debts Recovery Tribunal-I,

Bangalore ('the Tribunal' for short), rejecting Interlocutory

Application No.1739 of 2021 in D.No.1382 of 2021 and has sought

a consequential direction to the Bank to consider the representation

made by the petitioner to clear the dues and close the account.

2. Heard Sri K. Ravi Shankara Bhat, learned counsel

appearing for the petitioner, Smt. B.G. Nayana Tara, learned

counsel appearing for respondent No.1 and Sri Sharath Mulia,

learned counsel appearing for respondent No.2.

3. Brief facts that lead the petitioner to this Court in the

subject petition, as borne out from the pleadings, are as follows:-

The petitioner is the grandson of one S.Krishnan (hereinafter

referred to as 'borrower-1' for short), the absolute owner of the

schedule property. Borrower-1 avails certain finance from the then

Syndicate Bank. The loan was not only availed by borrower-1 but

also his wife Smt. Bhuvana Krishnan (hereinafter referred to

'borrower-2' for short) who executed a reverse mortgage

agreement by deposit of title deeds of the schedule property on

08-09-2010. During subsistence of the loan as aforesaid, on

04-02-2012, the petitioner requests for grant of an educational loan

of Rs.7.5 lakhs. The loan comes to be sanctioned on the very

property that had already been mortgaged towards earlier finance.

The security offered for mortgage loan was also taken as security

for the educational loan. On 10-07-2012 borrower-1, the person

who had availed the loan dies. On 06-02-2017, the loan availed by

borrower-1 was classified as a non-performing asset. On

13-08-2018, on the ground that the loan had become sticky,

respondent No.1 initiates proceedings under the Securitisation and

Reconstruction of Financial Assets and Enforcement of Security

Interest Act, 2002 (for short 'SARFAESI Act'). The Bank issued a

demand notice under sub-section (2) of Section 13 of the of the

SARFAESI Act demanding repayment of entire finance - both

educational loan and reverse mortgage loan. In furtherance of the

aforesaid demand notice, a possession notice was issued upon the

borrowers on 24-06-2019. After issuance of the said notices,

borrower-2 dies on 15-01-2021. After the death of both the

borrowers, the petitioner makes a representation for settlement of

amount to the Canara Bank as by then the Syndicate Bank had

merged with Canara Bank. Pending consideration of the said

representation, the petitioner approaches the Tribunal by invoking

Section 17(4) of the SARFAESI Act by filing a petition and an

application seeking condonation of delay under Section 5 of the

Limitation Act. The Bank files its objections before the Tribunal.

The Tribunal rejects the application of the petitioner seeking

condonation of delay holding that the petitioner had invoked the

jurisdiction of the Tribunal after about 772 days and the Tribunal

under the Act, had no power to condone the delay as was sought

for. It is this order that drives the petitioner to this Court in the

subject petition.

4. The learned counsel appearing for the petitioner contends

that the Bank has played fraud on the borrowers, proceedings are

initiated against dead persons and the petitioner herein was not

aware of any of the proceedings and, therefore, the Tribunal ought

to have considered all those facts and ought to have entertained

the petition filed before it calling in question such fraudulent activity

of the Bank. He would submit that the petitioner even now is ready

and willing to clear entire dues according to him and regain the

property that is the secured asset at the hands of the Bank.

5. On the other hand, the learned counsel representing the

first respondent - Bank would vehemently refute the submissions to

contend that the petitioner is feigning ignorance of the proceedings

as he is completely aware of all the facts and has deliberately

approached this Court instead of knocking at the doors of the Debts

Recovery Appellate Tribunal against the order passed by the

Tribunal. It is her emphatic submission that the property

mortgaged has been sold to the auction purchaser, confirmation of

sale is already made and there is nothing left for redemption at the

hands of the petitioner. Therefore, the petitioner now seeks to

allege fraud against officials of the Bank, who have acted only in

accordance with law. She would submit that the petitioner is in fact

guilty of suppression of material facts and, therefore, the petition

should be dismissed with exemplary costs.

6. The learned counsel for the petitioner contesting the issue

would contend that the petitioner has alleged fraud and fraud would

undo everything. Therefore, this writ petition on such allegation of

fraud is maintainable and the Tribunal has not considered any of

these aspects. Mere availability of alternate remedy cannot mean

that this Court cannot entertain the petition in which the allegation

is fraud.

7. I have given my anxious consideration to the submissions

made by the respective learned counsel and perused the material

on record.

8. The afore-narrated facts are not in dispute. The petitioner

is the grandson of borrowers-1 and 2. Borrowers-1 and 2 on

08-09-2010, executed a reverse mortgage loan agreement. The

agreement is appended to the statement of objections filed by the

first respondent/Bank and the petitioner does not produce it. The

agreement is executed by both the borrowers. Therefore, both of

them are borrowers of the loan creating a mortgage in terms of the

said agreement. During the subsistence of the said loan, the

petitioner applies for educational loan. The communication from the

petitioner to the Bank dated 04-02-2012, reads as follows:

"From

Nithin Subramanian, No.992 4th cross 6th block, HMT Layout Vidyaranyapura, Bengaluru.

To The Sr Br Manager, Syndicate Bank, Vidyaranyapura, Bengaluru.

Respected Sir,

I hereby submit my application for Education Loan of Rs.20,00,000/-

My maternal grandfather has offered his residential house property as collateral security for the loan. The said property is already mortgaged for Reverse Mortgage loan by my grandfather. Further he has agreed to close the reverse mortgage loan for the purpose of my availing Education Loan.

His letter undertaking to close the Synd Reverse Mortgage Loan for sanction of Education loan is also enclosed.

I will also abide by the undertaking given by my grandfather.

In case my grandfather is unable to close the Reverse Mortgage loan, I request you to sanction Rs.7,50,000/- as Education loan after satisfying yourself about the sources I have to meet the difference of expenditure. My late father's friend Sri Prashanth Kalkunte has consented to be third party surety for the loan.

I requested you to sanction the Education loan early."

(Emphasis added)

The communication is unambiguous. The petitioner submits

loan application for education loan of `20,00,000/-. The petitioner

notices that maternal grandfather's property i.e., the residential

house property is already offered as collateral security for the loan

already availed. Therefore, undertaking of the maternal grandfather

was placed for sanction of educational loan. The petitioner also

undertook to abide by the undertaking given by the grandfather in

case the grandfather is unable to close the reverse mortgage loan

and sought sanction of `7.5 lakhs as educational loan to meet

difference of expenditure. He also communicated that one

Prashanth Kalkunte has consented for third party surety for the

loan. Later borrower-1 - S.Krishnan communicates to the Bank on

the same day i.e., 04.02.2012 and the said communication reads as

follows:

"From Mr.S.Krishnan, No.992, 4th cross, 6th block, HMT Layout, Vidyaranyapura, Bengaluru.

To The Sr Br Manager, Syndicate Bank, Vidyaranyapura, Bengaluru.

Dear Sir,

With reference to the application of my grandson for an Education Loan, I hereby undertake to offer my residential property at No.992, 4th cross, 6th Block, HMT Layout, Vidyaranyapura, Bengaluru as security for the loan.

I undertake to close the Reverse Mortgage loan before release of the Education Loan.

I also undertake to adhere to the terms and conditions of the loan sanctioned to my Grandson."

(Emphasis added)

Borrower-1 undertook to close reverse mortgage loan before

sanction of educational loan to the grandson, the petitioner. The

borrower-1 dies on 10-07-2012. Certain communications after the

death of borrower-1 is germane to be noticed. Borrower-1 during

his life time had executed a Will bequeathing the entire property to

his wife i.e., borrower-2. The Will so executed also contains

narration about the mortgage loan that was availed by the borrower

from the Syndicate Bank. The narration in the Will insofar as it is

germane to this lis reads as follows:

"I am the absolute owner of the residential property more fully described in the schedule hereunder, which is self acquired and self occupied by me and is my permanent primary residence and no one have any right or title or whatsoever in the property.

On my request Syndicate Bank, Central Processing Centre-I, Rajaji Nagar, Bengaluru-

560 010 has granted a loan facility for the purpose of closure of existing liabilities under the 'Reverse Mortgage Loan scheme'. I have also executed Loan Agreement and Deed of Simple Mortgage in respect of my residential property stated above as security to the said loan in favour of Syndicate Bank Central Processing Centre-I, Rajaji Nagar, Bengaluru-560 010 As per the said Agreement, the loan shall become due and repayable on the death of the borrower or last surviving borrower or completion of 10 years from the date of first disbursement, whichever is earlier, and/or happening of an event of default as mentioned in the said Agreement.

In order to give effect to the covenants contained in the said Agreement and Deed, I hereby bequeath the said property to my wife Mrs. Bhuvana Krishnan, absolutely but subject to the right/liberty of Syndicate Bank to recover its loan, interest and other dues/charges by sale of schedule mentioned property at the absolute discretion of the Bank, after my life time or after

the said loan has become due and payable, whichever is earlier.

I hereby appoint my daughter Smt. Sita Subramanian W/o. Sri R.Subramanian as the sole Executor of this WILL.

This will is irrevocable and I will have no right to revoke/modify/cancel or amend this Will at any point of time during my lifetime."

(Emphasis added)

Therefore, borrower-2 becomes the owner of the schedule

property, which was mortgaged to the Bank after the death of

borrower-1. Both the mortgage loan and education loan availed

became sticky as payments were not made. The Bank initiates

proceedings on 13-08-2018 by issuing a demand notice under

Section 13(2) of the SARFAESI Act. The notice was addressed to

both borrowers as per the records of the Bank. Though borrower-1

had died by then, borrower-2 was alive and was the owner of the

schedule property; was also the co-borrower as she also executed

agreement when the reverse mortgage loan was availed and the

Will executed clearly indicated that all the assets and liabilities

would be borne by borrower-2. Therefore, the notice cannot be

said to have been issued against a dead person alone, though the

Bank ought to have updated its system with regard to the status of

borrower-1. Merely on the ground that the name of borrower-1 is

indicated in the notice, it cannot be held to be illegal as is

contended and a fraud as is alleged.

9. Proceedings were taken further pursuant to issuance of

notice as outstanding liability as on the said date was

`21,62,451.18 according the said notice. None of them i.e., the

petitioner or borrower-2 has come forward to pay the amount. But,

borrower-2 addresses a communication to the Manager of

Syndicate Bank on 18-06-2019. The communication reads as

follows:

"June 18, 2019.

Mr. Anil Kumar, Manager, Syndicate Bank, Vidyaranyapura, Bengaluru, Karnataka - 560 097.

Dear Mr. Anil Kumar,

I, Bhuvana Krishnan am the wife of Late Shri S. Krishnan (henceforth referred to as "Husband"). We used to reside at the following

address (henceforth referred to as "Vidyaranyapura Property"):

No.992, 4th Cross, 6th Block, HMT Layout, Vidyaranyapura, Bengaluru, Karnataka - 560 097.

I would like to inform you that I have been continuously residing at the following address since April 16, 2015 (heceforth referred to as "New Delhi Address"):

160 DDA Flats, Lado Sarai, New Delhi - 110 030.

Please forward all official postal communication related to me, my Husband, and/or Vidyaranyapura Property directly to the New Delhi Address mentioned above only.

I would also like to acknowledge that Syndicate Bank, Vidyaranyapura Branch (henceforth referred to as "Bank"), under the provisions of SARFAESI Act 2002, is empowered to evict and/or subsequently sell/ auction the aforementioned Vidyaranyapura Property at current market value, in order to recover any out standing loans, mortgage related principal, accrued interests, and/or other dues/charges.

If the Bank chooses to do so its discretion, I would like to request the Bank to take the necessary steps in an expedited and transparent manner, and forward the proceeds to me only, in accordance with the last Will and Testament of my Husband (henceforth referred to as "Will"), subject to current banking regulations and/or any

applicable Local, State and Central Government laws.

Thanking you, Sincerely,

Bhuvana Krishnan (wife of Husband)

Witness:

Sushila Victor (sister of Bhuvana Krishnan)"

(Emphasis added)

Again the communication of borrower-2 is unambiguous. She

acknowledges that Syndicate Bank has the power to evict, sell and

auction the property, which was the subject matter of mortgage to

the Bank at current market value in order to recover any

outstanding loans, mortgage related principal and accrued interests.

In fact, borrower-2 permits the Bank to initiate proceedings in

accordance with law. This has a witness also who signs as sister of

borrower-2. After the co-borrower addresses the aforesaid

communication, the Bank issues possession notice on 24-06-2019.

By then, the amount that was due was `24,03,796.63.

10. After initiation of these proceedings, borrower-2 also dies

on 15-01-2021. After the death of borrower-2, the petitioner

addresses a communication narrating certain incidents and offering

to pay `40,00,000/- by way of one time settlement and also

undertook to arrange `15,00,000 within a week and the remaining

sum of `25,00,000 within a period of two months. He requests the

Bank to accept one time settlement and release the documents/title

deeds deposited by borrowers-1 and 2. Immediately thereafter,

the petitioner files an application before the Tribunal on

20.09.2021, two days after the submission of representation.

During the pendency of the proceedings before the Tribunal, the

Bank issues sale notice to bring the schedule property to sale and

e-auction was conducted on 15.01.2022. The 2nd respondent is

declared to be the successful bidder and the auction purchaser

immediately paid entire dues to the Bank which at that point in

time was `2,11,00,000/-. The Bank appropriated the amount of

`48,74,457/- towards the outstanding and credited the remaining of

the amount to the account of borrower-1.

11. After the sale of the property, the Bank issues a

communication to the guarantor and informed the guarantor and

the petitioner to remove all the articles in the mortgaged property

and the communication returned as 'addressee left', though the

petitioner was residing in the very same address. In the

interregnum on 30-11-2022, the Tribunal rejects the application of

the petitioner on the ground that the petitioner has knocked at the

doors of the Tribunal after a delay of 772 days in filing the

application and holding that the Tribunal could not condone the

delay. It is this order that is called in question.

12. In the light of the afore-narrated facts, it cannot be said

that the petitioner was not aware of any of the proceedings and

also cannot allege that there was fraud played by the officers of the

Bank. Merely because the Bank did not accept the paltry sum of

`40,00,000/- as against the entire loan amount close to `2.11

crores, the petitioner filed an appeal before the Tribunal under

Section 17(1) of the SARFAESI Act seeking setting aside of the

possession notice dated 24-06-2019 issued by the respondent/

Bank.

13. Section 17 of the SARFAESI Act requires an appeal to be

filed within 45 days of issuance of possession notice by the Bank.

The petitioner has admittedly filed an application in the year 2021,

i.e., on 20.09.2021, challenging the possession notice issued on

24-06-2019. Therefore, there has been a delay of 772 days and

the Tribunal has rejected the appeal on the ground of delay on the

reason that it cannot condone the said delay. The order is in tune

with the order of the Apex Court rendered in the case of BANK OF

BARODA AND ANOTHER v. PARASAADILAL TURSIRAM

SHEETGRAH PVT. LTD. AND OTHERS reported in 2022 SCC

OnLine SC 1006, wherein the Apex Court has held as follows:

"4. The Company along with one of its Directors filed a Civil Writ Petition No. 56410/2010 challenging the issuance of the notices under Sections 13(2) and 13(4) of the Act and sought a writ of mandamus restraining the Bank from taking any coercive action for the recovery of the amount. The Writ Petition was disposed of with the only direction that the entire dues will be paid back in four equal installments, and if the Company fails to pay up the dues within the time prescribed, the Bank shall be at liberty to proceed in accordance with law.

5. As the Company and its Directors failed to comply with the schedule as determined by the High Court, the Bank proceeded further and issued a sale proclamation which culminated in Respondent No. 7 being declared the successful bidder. A sale certificate was also issued in his favour.

6. The present proceedings commence with a challenge to the above referred sale certificate in an application under Section 17 of the Act by the Respondent Company and the Directors. It is important to mention at this stage that, the application under Section 17 was filed by the Company, its three Directors, being Sri Vinod Kumar, Smt. Gayatri Devi and Sri Rameshwar Prasad. The other Director Sri Rakesh Sharma,

who expired on 18.09.2012 was represented by his legal representatives.

7. After hearing the Company, its Directors and the legal representatives of the deceased Director, the DRT dismissed the Section 17 application on the ground that it was filed beyond the statutory period of limitation of 45 days. According to Section 17(1), the period of 45 days is mandated to commence from the date on which a measure under Section 13(4) has been adopted, which in the facts of the present case is the date when the secured asset is sold in favour of Respondent No. 7.

8. The above referred order was challenged in review. The DRT by its order dated 08.08.2016 allowed the review on the ground that Sri Rakesh Sharma had expired before the auction had taken place and that his legal representatives were not issued notice. It is rather strange that the DRT not only entertained the Review Petition, but has allowed the same on the aforesaid ground.

9. The order in review was challenged before the DRAT, which found no difficulty in allowing the appeal on the ground that there has never been an error apparent on the face of record for exercising the review jurisdiction. It is this order of DRAT that was challenged before the High Court in the Writ Petition filed by the Company, its Directors and also the legal representatives of the deceased Director. This very same ground was raised, that one of the Directors had expired and that his legal representatives were not given notice before the secured asset was brought to sale.

10. On the above referred question, the High Court admitted the Writ Petition and proceeded to grant the following interim order, which is the order impugned before us.

"In the aforesaid circumstances, it is provided that till further orders of this Court, the operation and implementation of the appellate order dated 02.12.2016 passed in Appeal No. 210 of 2016 shall

remain stayed and the Debts Recovery Tribunal shall proceed with the Securitization Application."

11. We are only concerned with the limited question as to whether the High Court was justified in passing the interim order as extracted herein above. This is a case where the Company, with its own independent identity, is contesting the proceedings. It is apparent that the Directors were also contesting the matter by filing the Section 17 application. Even the legal representatives of one of the deceased Directors were party to the application under Section 17. Further, DRAT came to the conclusion that the original order passed by the DRT has been arrived at after a detailed consideration and that there is no justifiable ground for invoking the review jurisdiction. For granting or refusing to grant an interim order, the above referred facts were more than sufficient.

12. The reason for providing a time limit of 45 days for filing an application under Section 17 can easily be inferred from the purpose and object of the enactment. In Transcore v. Union of India this Court held that the SARFAESI Act is enacted for quick enforcement of the security. It is unfortunate that proceedings where a property that has been brought to sale and third-party rights created under the provisions of the Act, have remained inconclusive even after a decade.

13. Though the Special Leave Petition was pending in this Court since the last five years, this Court at the stage of admission had granted a stay of the impugned order, the consequence of which would be that the High Court's interim order has not come into operation. The effect of the interim order passed by this Court is that the order of DRT upholding the dismissal of the application under Section 17 dated 26.11.2015 would continue to operate.

14. For the reasons stated above, we are of the opinion that the High Court was not justified in staying the operation of the order of the DRAT which came to the conclusion that

there was no error apparent on the face of record for the DRT to invoke the review jurisdiction and recall its order dismissing the application under Section 17 of the Act."

(Emphasis supplied)

In the light of the statute, its mandate and the judgment of

the Apex Court supra, no fault can be found with the order passed

by the Tribunal rejecting the appeal filed by the petitioner on the

ground of delay. None of the contentions of the petitioner would

touch upon any fraud that is alleged as the documents produced by

the respondent/Bank are unequivocal and cannot mean that the

Bank officials have played any fraud in the entire process. If fraud

has to be alleged and proved, it cannot be in a proceeding under

Article 226 of the Constitution of India, as the issue of fraud would

require evidence.

14. For the aforesaid reasons, I pass the following: