SARFAESI Application No. 23/2007. Case: Bank of Rajasthan Ltd. Vs Authorised Officer, State Bank of India and Ors.. Chennai Debt Recovery Tribunals

Case NumberSARFAESI Application No. 23/2007
JudgesE. Jacob R. Daniel, M.A., M.L., D.C.F.Sc., Presiding Officer
IssueCode of Criminal Procedure, 1973 (CrPC) - Sections 195, 195(1)(b)(ii); Recovery Of Debts Due To Banks And Financial Institutions Act, 1993 - Section 19; Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002 - Sections 13, 13(1), 13(2), 13(4), 13(4-A), 13(6), 17, 17(1), 37
Judgement DateFebruary 25, 2009
CourtChennai Debt Recovery Tribunals


E. Jacob R. Daniel, M.A., M.L., D.C.F.Sc., Presiding Officer

1. This application is filed by the Bank of Rajasthan Ltd. the applicant herein to set aside the Tender Notice dt. 20.1.2007 published by the 1st respondent bank in respect of the subject property and to declare that the 1st respondent did not have the legal right or authority in law to take any steps against the subject property under the provisions of SARFAESI Act.

1.1 The case of the applicant, in brief, is as follows:--

The applicant had given certain financial facilities, namely, bank guarantee facilities to the 2nd respondent and the 3rd respondent had deposited the title deeds of the subject property at New Door No. 34, (Old No. 3-B) Balu Mudali Street, Thondiarpet, Chennai-600033 with an intention to create equitable mortgage thereon in favour of the applicant, on 19.1.2001. Memorandum of entry evidencing the creation of mortgage of the said property in favour of the applicant was recorded on 17.03.05. The 3rd respondent vide declaration dt. 14.5.2003 and 1.12.2005 confirmed that the applicant would continue to hold the title deeds already deposited with the applicant on 19.1.2001 in respect of the subject property, as security for the enhanced limits sanctioned to the 2nd respondent by the applicant. The property was secured to the applicant in respect of the financial facilities granted to the 2nd respondent and also in respect of the financial facilities granted to M/s. C.D. Bullion, a partnership firm, in which the 3rd respondent is the managing partner.

1.2 It is also contended by the applicant that the beneficiaries of the bank guarantee facilities, i.e. State Bank of India and MMTC invoked the bank guarantees and payments were made by the applicant to the beneficiaries. As the 2nd respondent defaulted in making payments under the said Bank guarantee to the applicant, the account of the 2nd respondent was declared as Non-Performing Asset (NPA) on 21.5.2006. Subsequently notice under sec. 13(2) of the Securitisation Act was issued to the 2nd respondent on 22.6.2006 by the applicant and on 30.8.2006, the applicant took possession of the subject property and published the Possession Notice in the 'New Indian Express' and 'Thina Mani' dt. 16.9.2006. On 20.1.2007, the applicant was shocked to see a Tender Notice published by the 1st respondent in the 'New Indian Express with respect to the subject property which is exclusively mortgaged to the applicant, whereby the 1st respondent bank with an intention to sell the subject property, had invited tenders from interested public. The sealed tenders have been called for on or before 29th January 2007 and the auction was proposed to be held on 31.11.2007. Hence, the applicant vide letter dt. 22nd January 2007 addressed to the 1st respondent objected to the said Tender Notice and called upon the 1st respondent to withdraw the said notice immediately.

1.3 The applicant has further contended that even assuming whilst denying that the applicant does not have exclusive charge, the 1st respondent has not approached it for any consent and no consent was given by the applicant to the 1st respondent. As on 22.6.2006, a sum of Rs. 118.78 lakhs with interest is payable by the 2nd respondent to the applicant. The act of the 1st respondent is clearly illegal, malafide and without authority. Therefore the same deserves to be struck down.

The 1st respondent has filed a reply statement contending that the applicant has not by any document substantiated that they have a valid security interest created in their favour over the subject property. The SARFAESI Appeal does not contain any schedule disclosing the details of the property over which the applicant claims that security interest is created in their favour, under the provisions of the SARFAESI Act. Further, in various paragraphs of the application, the property is described as situated in Chennai-600033. The 1st respondent is not proceeding against any property situated in Chennai-600033 and the auction is only against the property that is situated in Chennai-600021, which is secured in their favour by virtue of mortgage created by the 3rd respondent herein. On this ground alone, the above appeal is liable to be dismissed with an exemplary cost.

2.1 The 1st respondent has denied that this Tribunal has jurisdiction to entertain the present application. The entire cause of action arose at Erode where the 2nd he and 3rd respondents reside and at Coimbatore where the respondent is carrying on the business. Even according to the contentions of the appellant, the 2nd and 3rd respondents availed the facilities at Erode. Therefore this Hon'ble Tribunal has no jurisdiction to entertain this application. The 1st respondent has also denied that the application is filed within the period of limitation.

2.2. The 1st respondent has contended that it was not aware of the alleged financial facilities said to have been given to the 2nd respondent by the applicant. The 3rd respondent could not have created any equitable mortgage in favour of the applicant as alleged. The 3rd respondent, as the absolute owner of the subject property covered in the Sale Deed dt. 20.10.1994 had mortgaged the same with the State Bank of India, Coimbatore Main Branch to secure credit facility availed by them The mortgage was created by depositing the original title deed and the same was confirmed by execution of a memorandum by the 3rd respondent. The alleged memorandum of entry evidencing the alleged mortgage relied on by the appellant is self serving and does not in any manner substantiate the alleged mortgage in their favour. The contentions that the 3rd respondent acknowledged the deposit of title deeds for the enhanced limit has been denied.

2.3 The 1st respondent has also contended that on the request of the 3rd respondent, as Proprietor of the 2nd respondent, State Bank of India, Coimbatore Main Branch had sanctioned a metal (Gold) Loan, Bank Guarantee and Cash Credit facilities by sanction letter dt. 28.3.2005. The 2nd respondent had been enjoying the facilities with the State Bank of India, Coimbatore Branch, even before and the said sanction was only for the enhanced limits. The sanctioned terms were duly agreed by the 3rd respondent as the proprietor of the 2nd respondent and his wife Mrs. Pushbha, being the guarantor to the facilities. The facilities were availed against the security of the subject property owned by the 3rd respondent and necessary documents were executed to secure the facilities availed. The security of the immovable property was created by deposit of the original title deeds and confirmed by a letter executed by the 3rd respondent.

2.4 As the 3rd respondent...

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