Kerala High Court

A.C.Babu vs The Kerala Financial Corporation on 6 June, 2024

Author: P Gopinath

Bench: P Gopinath

         IN THE HIGH COURT OF KERALA AT ERNAKULAM
                          PRESENT
          THE HONOURABLE MR. JUSTICE GOPINATH P.
  THURSDAY, THE 6TH DAY OF JUNE 2024 / 16TH JYAISHTA, 1946
                  WP(C) NO. 34214 OF 2019
PETITIONER:

         A.C.BABU,
         AGED 60 YEARS, S/O KURIAN CHACKO,
         ALACKAPARAMBIL HOUSE, MEENADOM P.O.,
         KOTTAYAM,
         *(REPRESENTED BY HIS POWER OF ATTORNEY HOLDER
         WINSON THOMAS, AGED 60, S/O DANIEL THOMAS,
         VARIKAMAKAL HOUSE, PULICHALKAVALA P.O.,
         CHANGANACHERRY TALUK, KOTTAYAM.)
         * 'REPRESENTED BY HIS POWER OF ATTORNEY HOLDER
         WINSON THOMAS, AGED 60, S/O.DANIEL THOMAS,
         VARIKAMAKAL HOUSE, PULICKALKAVALA P.O,
         CHANGANASSERY TALUK, KOTTAYAM ' IS DELETED FROM
         THE ADDRESS PORTION OF THE MEMORANDUM OF WRIT
         PETITION AS PER ORDER DATED 13-03-2024 IN IA
         1/2024 IN WP(C) 34214/2019.


         BY ADVS.
              LIJI.J.VADAKEDOM
              REXY ELIZABETH THOMAS
              RAJEEV JYOTHISH GEORGE
              TOM E. JACOB


RESPONDENTS:

    1    THE KERALA FINANCIAL CORPORATION,
         HEAD OFFICE, VELLAYAMBALAM, THIRUVANANTHAPURAM,
         PIN - 695 033,
         REPRESENTED BY ITS MANAGING DIRECTOR.


    2    THE BRANCH MANAGER,
         KERALA FINANCIAL CORPORATION CORPORATION,
         KATTAPPANA, IDUKKI DISTRICT - 685 506.
 W.P.(C) No.34214/2019
                               -:2:-

      3      SHAJIO K. THOMAS,
             KUNNUMPURATHU HOUSE, THAMPALACKADU P.O.,
             KANJIRAPPALLY, KOTTAYAM, PIN-686 513.


             BY ADVS.
                  M.R.VENUGOPAL (SR) (FOR KFC)
                  MANU ROY
                  DHANYA P.ASHOKAN(K/001671/2000)



       THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
06.06.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
 W.P.(C) No.34214/2019
                                   -:3:-




                            JUDGMENT

The petitioner purchased an extent of 19.82 Ares in

Survey No.176/1 of Peermade Village through Ext.P1 sale

deed. The said property originally belonged to the

3rd respondent, who had sold it to one Sabu K. Varghese in

the year 2011. The said Sabu K. Varghese sold the

property to Jose Mathew and Shajan through Ext.P3

document executed in the year 2014. The petitioner

purchased the property from the aforesaid Jose Mathew

and Shajan through Ext.P1 Sale Deed in the year 2014. It

appears that the 3rd respondent had availed a loan from the

Kerala Financial Corporation by mortgaging the property

and the subsequent transfers were subject to the said

mortgage. The petitioner has therefore approached this

Court seeking the following reliefs:

i. "Issue a writ of mandamus, or any other appropriate Writ or Order or direction directing the 1st and 2nd respondent to release the Original Title Deed of the property and the documents

related to the mortgage with respect to the property of 08.29 Ares, 09.31 Ares and 02.22 Ares in Sy. No. 176/1 of Peermade Village along with a residential building to the petitioner herein which is mortgaged with respondent No.2.

ii. Issue a writ of mandamus, or any other appropriate Writ or Order or direction directing the 1st and 2nd respondents- Kerala Financial Corporation to grant three months time to repay the arrears.

iii. grant such other reliefs which this Honourable Court may deem fit and proper in the interest of justice".

2. The learned counsel appearing for the petitioner

submits that the petitioner is entitled to redeem the

mortgage in the light of the law laid down by the Supreme

Court in Narayan Deorao Javle (deceased) through

LRs. v. Krishna and Others; AIR 2021 SC 3920. It is

submitted that this Court in Balasubramani P.N. and

Others v. UCO Bank and Others; 2022(6) KHC 353, has

also taken the same view following the law laid down in

Narayan Deorao Javle (Supra). It is submitted that the

provisions of Section 59 A of the Transfer of Property Act,

1882, also indicate that the term mortgagor includes

subsequent purchasers of the mortgage property. It is

submitted that this Court, in another decision, namely

Muhammed Sherieff K. S. v. Registrar of Co-operative

Societies and Others; 2016 (2) KHC 665, has also held

that subsequent purchasers are entitled to redeem the

mortgage property. It is submitted that the stand taken by

the Kerala Financial Corporation that, even if the

petitioner were to redeem the mortgage, the originals of

the title- deeds would be handed over only to the

3rd respondent cannot be sustained in law.

3. The learned Senior Counsel appearing for the

Kerala Financial Corporation, on the instructions of

Adv. S. Mohammed Ali Khan, would submit that there is no

privity of contract between the Kerala Financial

Corporation and the petitioner. It is submitted that the

petitioner is a total stranger as far as the Kerala Financial

Corporation is concerned, and the Kerala Financial

Corporation cannot be compelled to hand over the

originals of the title-deeds, which were deposited by the

3rd respondent, to the petitioner without a No Objection

from the 3rd respondent. It is submitted that on the

petitioner paying the amounts due to the Kerala Financial

Corporation and on the petitioner producing a No

Objection certificate from the 3rd respondent, the originals

of the title deeds can be returned to the petitioner.

4. The learned counsel appearing for the

3rd respondent would submit that the property was

originally purchased from the 3 rd respondent by one Sabu

K. Varghese on the undertaking that he would clear the

liability with the Kerala Financial Corporation and pay

certain amounts to the 3rd respondent. It is submitted that

the 3rd respondent was never paid any amount of money by

the aforesaid Sabu K. Varghese and instead he had sold the

property to the aforesaid Jose Mathew and Shajan. It is

submitted that the petitioner has purchased the property

from the aforesaid Jose Mathew and Shajan, and in such

circumstances, the petitioner cannot seek a direction from

this Court to the Kerala Financial Corporation to return the

original title deeds of the property deposited for the

purposes of creating a mortgage by the 3rd respondent.

5. Having heard the learned counsel appearing for

the petitioner, learned Senior Counsel appearing for the

Kerala Financial Corporation and the learned counsel

appearing for the 3rd respondent, I am of the view that the

petitioner is entitled to succeed. Sections 59A, 60 and 91

of the Transfer of Property Act, 1882, read as follows:

"59A. References to mortgagors and mortgagees to include persons deriving title from them.--Unless otherwise expressly provided, references in this Chapter to mortgagors and mortgagees shall be deemed to include references to persons deriving title from them respectively.

60. Right of mortgagor to redeem.--At any time after the principal money has become due, the mortgagor has a right, on payment or tender, at a proper time and place, of the mortgage - money, to require the mortgagee (a) to deliver to the mortgagor the mortgage-deed and all documents relating to the mortgaged property which are in the possession or power of the

mortgagee, (b) where the mortgagee is in possession of the mortgaged property, to deliver possession thereof to the mortgagor, and (c) at the cost of the mortgagor either to re-transfer the mortgaged property to him or to such third person as he may direct, or to execute and (where the mortgage has been effected by a registered instrument) to have registered an acknowledgement in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished:

Provided that the right conferred by this section has not been extinguished by act of the parties or by decree of a Court.

The right conferred by this section is called a right to redeem and a suit to enforce it is called a suit for redemption.

Nothing in this section shall be deemed to render invalid any provision to the effect that, if the time fixed for payment of the principal money has been allowed to pass or no such time has been fixed, the mortgagee shall be entitled to reasonable notice before payment or tender of such money.

Redemption of portion of mortgaged property.--Nothing in this section shall entitle a person interested in a share only of the mortgaged property to redeem his own share only, on payment of a proportionate part of the

amount remaining due on the mortgage, except only where a mortgagee, or, if there are more mortgagees than one, all such mortgagees, has or have acquired, in whole or in part, the share of a mortgagor.

                  xxxx                    xxxx            xxxx

                  91.         Persons      who       may         sue   for

redemption.--Besides the mortgagor, any of the following persons may redeem, or institute a suit for redemption of, the mortgaged property, namely:--

(a) any person (other than the mortgagee of the interest sought to be redeemed) who has any interest in, or charge upon, the property mortgaged or in or upon the right to redeem the same;

(b) any surety for the payment of the mortgage -debt or any part thereof;

or

(c) any creditor of the mortgagor who has in a suit for the administration of his estate obtained a decree for sale of the mortgaged property".

A combined reading of the aforesaid provisions indicates

that the petitioner, as the present owner of the mortgaged

property, also has a right of redemption under Section 60

of the Transfer of Property Act, 1882. In Narayan Deorao

Javle (Supra), the Supreme Court on a consideration of

the aforesaid provisions held as follows:

"11. The plaintiff has purchased property vide registered sale deed on 18.5.1964, much before the filing of the suit for foreclosure in the year 1965. The possession of the plaintiff was recorded in the revenue record after the purchase of the property, but still, the mortgagee chose not to implead the subsequent purchaser. The original mortgagor who has mortgaged the property had no subsisting title, interest or right in the property conveyed, therefore, the factum of compromise between the mortgagor and the mortgagee is ineffective and not enforceable against the purchaser i.e., the plaintiff. Once the plaintiff has purchased property, the equity of redemption is part of the title and as an owner, he could seek redemption of the suit land.

12. The learned counsel for the mortgagee could not point out any provision of law that can prove that the subsequent purchaser has to give notice to the mortgagee signifying purchase of the property, by a mortgagor. The factum of purchase coupled with the delivery of possession completes the title of the plaintiff over the land in question. Therefore, the decree obtained in such a suit is void.

xxxx xxxx xxxx

15. Still further, in terms of Section 91 of the Act, the plaintiff having stepped into the shoes of the mortgagor in respect of land purchased by him has a right to redeem the land mortgaged. In addition, the Order XXXIV Rule 1 of the Code provides that all persons having an interest either in the mortgage-security or in the right of redemption shall be joined as parties to any suit relating to the mortgage including suit for foreclosure. The original mortgagors i.e., defendant Nos. 1 and 2 denied the plaintiff's right to redeem the property though admitting they have borrowed Rs.1,000/- from the plaintiff. It was pleaded that the plaintiff was put in possession of the suit property for ten years and, therefore, plaintiff was required to resell the property to defendant Nos. 1 and 2. But the said defendant has not supported such plea in evidence. The defendant Nos. 1 and 2 entered into compromise with the mortgagee to pay the mortgage amount. The said mortgage amount was not paid which led to passing of the final decree. Thus, it is a case of collusion between the original mortgagors and the mortgagee so as to defeat the right of the plaintiff".

In Muhammed Sherieff K. S. (Supra) this Court held as

follows:

"68. Conclusion:

In the present instance, the petitioner, with other co-owners, has a registered sale deed, which has not been denied by the vendor despite an opportunity. In terms of Section 91 of the Transfer of Property Act, an alienee is entitled to subrogation. The petitioner will clear the entire mortgage loan, and the respondent bank, if not for its perceived problems, will get its money back.

69. In return, what is that the respondent bank must do? It has to close the mortgage loan and return the deposited title deeds to the petitioner, who clears the mortgage. The bank contends that it has no privity of contract with the petitioner.

And, tomorrow, the original borrower may sue it for the documents.

70. The original borrower, the 5th respondent, has not responded to the sale notice, though property is about to be brought for sale; the purchaser has come forward. He filed the writ petition arraying the vendor-borrower as a party, who, despite service of notice, has blissfully ignored the issue and refused to respond.

71. It is a case of subrogation by operation of law not requiring any written agreement as in

conventional subrogation. Further, we may, for a while, presume that the sale in favour of the petitioner and others is invalid. What follows? The petitioner and his co-purchasers, on their clearing the loan, only get the right of subrogation and charge over the property, which they have saved from an invidious sale.

72. If at all the bank apprehends an unlikely trouble from the defaulting creditor on the count of the original title deeds, it is always open for it to obtain an indemnity from the petitioner that he will indemnify the bank from the claims of the borrower-vendor".

In Balasubramani P.N. and Others (Supra) this Court,

after relying on Narayan Deorao Javle (Supra), held as

follows:

"9. The only question to be considered is whether the Bank was right in issuing Ext.P15/P18 communications refusing to consider the request made by the petitioners for one-time settlement, on the ground that the petitioners are neither the borrowers nor the guarantors and they have obtained the property by fraudulent means. On a reading of Section 91 of the Transfer of Property Act and Ext.P13 order of the Supreme Court and also taking into account the

fact that the petitioners were parties to the Original Application filed by the Bank before the Debts Recovery Tribunal, I am of the view that the Bank is not right in taking the view that the petitioners are not entitled to apply for one-time settlement. It is clear that on an earlier occasion, the Bank had taken the stand that the offer for one-time settlement made by the petitioners could not be accepted as the offer was too low. There is a complete change of direction and the Bank has, in Ext.P15, taken the stand that the petitioners have no right whatsoever to apply for one-time settlement. I am fortified in taking the view that the petitioners can apply for one-time settlement in the light of the law laid down by the Supreme Court in Javle (supra) and by this Court in Muhammed Sherieff (supra). It needs to be clarified at this juncture that this Court has not rendered any finding that the petitioners are actually entitled to settle the liability under one- time settlement. As observed by the Supreme Court in Bijnor Urban Co-operative Bank Limited (supra), the question as to whether the one-time settlement has to be granted and whether the Bank must settle for an amount less than the amount that may be received by sale of the mortgaged assets etc., is a matter to be decided by the respondent Bank. Such a decision is entirely within the commercial wisdom of the respondent Bank and this Court cannot issue any

direction to the respondent Bank to accept and grant to the petitioners a one-time settlement.

10. The contention taken by the learned counsel for the petitioners that the proceedings of the Recovery Officer were contrary to the provisions of the Second Schedule to the Income Tax Act does not appeal to this Court. It is clear from Ext.P5 that the petitioners had purchased the properties being fully aware of the fact that the property was mortgaged with the respondent Bank and after undertaking to clear the liabilities due to the respondent Bank, they cannot be heard to contend that they were unaware of the proceedings. They were parties to the Original Application. However, they choose to remain ex-

parte. They took no earnest efforts to pay the amount which they had promised to pay (in Ext.P5) to settle the liabilities of the respondent Bank. The contention regarding the failure to follow the mandate of Rule 11 of the Second Schedule to the Income Tax Act which has been made applicable to the Recovery of Debts and Bankruptcy Act is clearly untenable. It is clear from the provisions of Section 29 of the Recovery of Debts and Bankruptcy Act, 1993 that the provisions of the Second and the Third Schedules to the Income Tax Act, 1961 and Income Tax (Certificate Proceedings) Rules, 1962, as in force from time to time shall, 'as far as possible', apply with necessary modifications as if the said

provisions and the rules refer to the amount of debt due as determined under the provisions of the Act (Recovery of Debts and Bankruptcy Act), instead of to the Income Tax Act. It is clear from a reading of Rule 11 that an enquiry as contemplated in Rule 11 can apply only to properties of defaulters under the Income Tax Act and does not apply in respect of property which is the subject matter of mortgage to a Bank and in respect of which proceedings are initiated following a recovery certificate issued by the Debts Recovery Tribunal. This is because the property of an Income Tax defaulter is never a subject matter of any mortgage and if a third party claims any interest in the property, it is necessary for the Tax Recovery Officer to conduct an enquiry as to whether the property in question can be proceeded against for recovery of the amount due towards the Income Tax Department. However, in the case of a property that is mortgaged to secure a debt, any transfer of property is always subject to the mortgage and an enquiry as contemplated under Rule 11 is not required. The contention of the petitioners that the proceedings of the Recovery Officer through which the properties in question have been brought to sale are in violation of the procedure contemplated by the Second Schedule of the Income Tax Act, 1961 is devoid of any merits. It is held that the proceedings initiated by the

Recovery Officer to bring the properties in question to sale are in consonance with the provisions of Second Schedule to the Income Tax Act, 1961. This view draws sustenance from the law laid down by the Supreme Court in Paramsivan C.N. and anr v. Sunrise Plaza Tr. Partner and Ors; (2013) 9 SCC 460.

11. I see no merit in the contention taken by the learned counsel for the respondent Bank that since the original borrowers have been declared as willful defaulters, the petitioners also cannot be considered for a one-time settlement as I have found that the petitioners being subsequent purchasers of the mortgaged properties also have the right to apply for one- time settlement. In other words, the fact that the original borrowers are treated as willful defaulters cannot take away the right of the petitioners who are subsequent purchasers of the mortgaged properties to apply for one-time settlement".

In the light of the above and on the strength of the law laid

down by the Supreme Court in Narayan Deorao Javle

(Supra), this writ petition will stand disposed of directing

the Kerala Financial Corporation to permit the petitioner to

redeem the mortgage created by the 3rd respondent. It is

further directed that, on the petitioner redeeming the

mortgage, the Kerala Financial Corporation shall return

the originals of the title-deeds, deposited by the 3 rd

respondent, to the petitioner. It will be open to the

petitioner to also approach the Kerala Financial

Corporation for granting the benefit of any One Time

Settlement for the purposes of settling the liability.