Kerala High Court
Riad Shah N.S vs State Bank Of India Sbi on 6 February, 2024
Author: N.Nagaresh
Bench: N.Nagaresh
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE N.NAGARESH
TUESDAY, THE 6TH DAY OF FEBRUARY 2024 / 17TH MAGHA, 1945
OP (DRT) NO. 7 OF 2024
OA.617/2014 OF DEBT RECOVERY TRIBUNAL-2, ERNAKULAM
PETITIONERS/DEFENDANTS 1 & 2:
1 RIAD SHAH N.S.
AGED 54 YEARS
S/O LATE M.NADIR SHAH, T.C.9/238,
'SUSHAMA' O-C4 STREET, JAWAHAR NAGAR,
THIRUVANANTHAPURAM, PIN - 695041
2 RAJEENA RIAD
AGED 48 YEARS
W/O RIAD SHAH, T.C.9/238,
'SUSHAMA' O-C4 STREET, JAWAHAR NAGAR,
THIRUVANANTHAPURAM, PIN - 695041
BY ADV S.ABDUL RAZZAK
RESPONDENTS/APPLICANT IN OA & 3RD DEFENDANT:
1 STATE BANK OF INDIA SBI
REP. BY AUTHORISED OFFICER,
STRESSED ASSETS RESOLUTION CENTRE,
CHANDRASEKHARAN NAIR STADIUM COMPLEX,
PALAYAM VIKAS BHAVAN P.O.
THIRUVANANTHAPURAM., PIN - 695033
2 M/S. MIR REALTORS(P) LTD.,
REPRESENTED BY MANAGING DIRECTOR
M,M.BUILDING, KALABHAVAN ROAD,
ERNAKULAM NORTH, PIN - 682017
BY ADV TOM K.THOMAS
THIS OP (DEBT RECOVERY TRIBUNAL) HAVING COME UP FOR
ADMISSION ON 06.02.2024, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
O.P.(DRT) No.7/2024
:2:
N. NAGARESH, J.
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O.P.(DRT) No.7 of 2024
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Dated this the 6th day of February, 2024
JUDGMENT
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The petitioners, who are first and second
defendants in TA No.812/2016 (OA No.617/2014), have filed
this OP(DRT) seeking to set aside Ext.P8 order and to
declare that the 1st respondent not being a secured creditor
in the absence of security interest created by deposit of title
deed under Section 58 of the Transfer of Property Act cannot
either avail the jurisdiction or proceed against the petitioners
under Section 19 of the RDB Act.
2. The petitioners availed Home Loan from the 1 st
respondent-Bank. The 2nd respondent is a builder, who has
entered into agreement with the petitioners. The petitioners
would argue that the 2nd respondent-Builder did not transfer
the title of the land to the petitioner which is essential to
create security interest for the purpose of RDB Act by deposit
of title deed. The petitioners would allege that the Bank has
colluded with the Builder and the Bank paid the entire loan
sanctioned to the Builder before creating the agreed security
interest by deposit of title deed.
3. The petitioners would contend that the Tribunal
has no jurisdiction as no security interest is created in the
loan transaction. The petitioners argued that Section 19(3-A)
(a) provides that every applicant in the application filed under
Section 19 of the Act, shall state particulars of the debt
secured by the security interest over properties or assets
belonging to any of the defendants and the estimated value
of such securities.
4. As there is no security interest involved in the
matter, the Tribunal lacked jurisdiction to entertain the case.
Furthermore, the Tribunal failed to consider the petitioner's
contention that as per the agreement, the Bank will make
disbursement to the Builder only after the borrower cum
purchaser has complied with all formalities as per the terms
and conditions of the loan. The agreement contemplated
creation of mortgage in favour of the Bank by deposit of title
deeds in respect of the land and building. No title deeds
were deposited and consequently, there is no security
interest. The entire proceedings before the Debts Recovery
Tribunal is therefore illegal and unsustainable.
5. The 1st respondent-Bank contested the OP(DRT)
filing counter affidavit. The 1 st respondent submitted that the
OP(DRT) can be entertained only when the court below has
assumed a jurisdiction which it does not have or has failed to
exercise jurisdiction which it does have. Ext.P8 final order
passed by the Tribunal does not suffer from any of these
infirmities.
6. The 1st respondent pointed out that it was the duty of
the petitioners to pay the amounts due to the builder and get the
sale deed executed. Only on execution and registration of sale
deed, equitable mortgage can be created by deposit of title deed
in the Bank.
7. The petitioners failed to make payment to the builder
and consequently no sale deed was executed. The petitioners
were bound to pay ₹37,59,053/- to the builder. The petitioners
paid only ₹30 lakhs to the builder and refused to pay the balance
amount. Therefore, the builder cancelled the allotment. There is
no collusion between the Bank and the builder. The OP(DRT) is
therefore without any force or merit and is liable to be dismissed,
contended the Standing Counsel for the 1st respondent .
8. I have heard the learned counsel for the petitioner
and the learned Standing Counsel representing the 1st
respondent.
9. The challenge in the OP(DRT) is on Ext.P8 final order
dated 29.11.2023 passed by the Tribunal in TA No.812/2016
(OA No.617/2014). The Bank filed the application under Section
19(1) of the Recovery of Debts and Bankruptcy Act, 1993 for
recovery of a sum of ₹21,78,546/- together with future interest at
the rate of 11.25% per annum with monthly rests plus penal
interest at the rate of 2% per annum from the petitioners.
10. The Tribunal found that the 2nd respondent-Builder
executed guarantee agreement in favour of the Bank. The
petitioners had also executed loan agreement agreeing to
repay the loan in 240 EMIs. Admittedly, there is default in
repayment of the loan.
11. The Tribunal found that by Ext.A6 tripartite
agreement, the 1st petitioner had given consent to the Bank to
disburse the loan amount directly to the 2nd respondent-
Builder. It was also agreed that the 1st petitioner shall be
under obligation to make payment of all the dues to the
builder before taking possession of the property. Neither the
1st petitioner nor the builder complied with the covenants in
Ext.A6 Tripartite agreement. The Bank has produced all the
loan documents to substantiate all their claims.
Consequently, the Tribunal allowed the Bank to recover the
sum of ₹21,78,546/- due under the Housing Loan account
from the defendants personally and by sale of the properties
attached. The Tribunal also passed orders on pendente lite
and other interest payable.
12. The argument of the petitioners is that there is no
security interest created by deposit of title deeds and therefore
the Tribunal lacks jurisdiction to entertain the TA. It is to be
noted that the agreement between the petitioners and
respondents 1 and 2 contemplated payment of certain amount of
purchase price by the petitioners. The petitioners defaulted in
making full payment to the builder. Consequently, sale deed
could not be executed.
13. The petitioners were under an obligation to make
payment of all the dues to the 2nd respondent-Builder before
taking possession of the property. The petitioners are now
trying to take advantage of their own failure to make
payments. In the circumstances, I am not inclined to agree
to the legal proposition advanced by the petitioners that in
the absence of creation of mortgage by deposit of title deeds,
the Tribunal lacks jurisdiction to entertain the lis.
14. The Recovery of Debts and Bankruptcy Act, 1993 is
intended to provide for the establishment of Tribunals for
expeditious adjudication and recovery debts due to the
Banks and financial institutions. The provisions of the Act do
not indicate anywhere that in the absence of creation of
security interest, the Tribunals cannot adjudicate disputes
between Banks / financial institutions and borrowers.
In the facts of the case, I do not find any merit in the
OP(DRT). The OP(DRT) is therefore dismissed.
Sd/-
N. NAGARESH, JUDGE
aks/02.02.2024
APPENDIX OF OP (DRT) 7/2024
PETITIONER'S EXHIBITS
Exhibit P1 PHOTOCOPY OF HOME LOAN SANCTION LETTER
DATED 09-3-2011
Exhibit P2 PHOTOCOPY OF TRIPARTY AGREEMENT DATED
09-3-2011
Exhibit P3 PHOTOCOPY OF THE TERM LOAN AGREEMENT
DATED 09-3-2011
Exhibit P4 PHOTOCOPY OF 1ST OA NO. 617/2014 DATED
12-12-2014
Exhibit P5 PHOTOCOPY OF PETITIONERS' WRITTEN
STATEMENT DATED 30-9 2015 IN OA NO.
Exhibit P6 PHOTOCOPY OF PETITIONERS' PROOF
AFFIDAVIT DATED 24TH MAY 2017
Exhibit P7 PHOTOCOPY OF THE PETITIONERS' ARGUMENT
NOTE FILED ON-LINE, DATED 03-4-2023
Exhibit P8 PHOTOCOPY OF FINAL ORDER DATED 29-11-
2023 IN TA.NO.812/2016 (OA
NO.617/2014) BY DRT II ERNAKULAM
