KAMIREDDI ATCHUTHAMBA Vs. STATE BANK OF INDIA
LAWS(APH)-2019-8-10
HIGH COURT OF ANDHRA PRADESH
Decided on August 13,2019

Kamireddi Atchuthamba Appellant
VERSUS
STATE BANK OF INDIA Respondents


Referred Judgements :-

SIDDHI VEGETABLE OIL PRODUCTS AND ORS V. GOVERNMENT OF AP AND ORS [REFERRED TO]
UNITED BANK OF INDIA LIMITED VS. LEKHARAM SONARAM AND CO [REFERRED TO]


JUDGEMENT

M. Seetharama Murti, J. - (1.)This writ petition, under Article 226 of the Constitution of India, is filed by the petitioners challenging the order, dated 08.12.2017, of the Debts Recovery Appellate Tribunal, Kolkata, passed in Appeal No.17 of 2014/245, whereby the order, dated 13.01.2014 of the Debt Recovery Tribunal, Visakhapatnam, in SA.no.303 of 2012 was confirmed. A request was also made to set aside the same and consequently direct the respondents to desist from proceeding against the flats purchased by the petitioners viz., Flat Nos.2A, 3A, 5A & 5B of Sri Raj Enclave Apartment constructed in RS.nos.4/1 & 4/2 of Gavaravaram village, Sanivarapurpet Panchayat, Eluru.
(2.)We have heard the submissions of Sri N. Subba Rao, learned counsel, appearing for the writ petitioners and of Sri C. Subodh, learned standing counsel appearing for the 1st respondent bank. There is no representation for the 2nd respondent. We have perused the material record.
(3.)The case of the petitioners is this: - 'The petitioners purchased from the 2nd respondent, who is the owner of the above said flats ('subject flats', for brevity), for valid considerations, under registered sale deeds, dated 02.07.2012, bearing document nos.2401/2012 to 2404/2012. They had obtained copies of encumbrance certificates and other material as well as opinion of an advocate before purchasing the subject flats. The encumbrance certificates obtained by them do not reflect any mortgage over the subject flats. The petitioners were under the bona fide impression that there are no encumbrances on the property. Being in possession of the flats, the petitioners developed their respective flats by making improvements. While so, the 1st respondent bank initiated action under the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, ['the SARFAESI Act', for short]. In the notice issued under Section 13(2) of the said Act, it was stated that the 2nd respondent obtained a loan by mortgaging the property, which was sold to the petitioners. There is no valid mortgage deed subsisting as per the records of the Sub Registrar. As per the circular instructions of the Reserve Bank, equitable mortgage is required to be registered with the Registrar concerned in order to prevent the mortgagors from selling the mortgaged properties and acting detrimental to the interests of the bankers. No such registered mortgage was obtained by the 1st respondent bank. For the said lapse, the 1st respondent bank is disentitled to recover money by proceeding against the flats purchased by the petitioners, who are bona fide purchasers. The 1st respondent bank having failed to follow the procedure in the above regard initiated proceedings against the petitioners, while the petitioners are in possession and enjoyment of the properties pursuant to their sale deeds. After issuance of notice under Section 13(2), the same was published, on 15.10.2012, indicating that M/sSai Krishna Enterprises obtained a loan from the 1strespondent bank and that the 2nd respondent and others stood as guarantors for the said loan. Soonafter the publication of the said notice, the petitioners submitted representations and informed all the facts including the fact that the encumbrance certificates obtained prior to their purchases, on 18.06.2012, do not indicate the existence of any mortgage and that the mortgage deed, if any, in favour of the bank is not valid and that for the faultof the bank, the petitioners cannot be penalised. When the 1st respondent bank failed to consider the said representation, thepetitioners filed SA.no.303 of 2012 before the DRT. In the said SA, it is also contended that though the bank said that it has taken symbolic possession, the petitioners are in continuous possession and enjoyment of their respective flats and that the 1st respondent bank issued a demand notice to the borrower but not affixed any notice on the properties. The petitioners also contended that under Section 53(1) of Transfer of Property Act, the rights of the petitioners, who are bona fide purchasers,are not hampered and that their rights are not affected. However, the Tribunal dismissed the SA of the petitioners erroneously holding that the petitioners could not point out any irregularities or illegalities committed by the 1st respondent bank in the entire proceedings initiated under the provisions of the SARFAESI Act and the rules made under the said Act and that the contentions of the petitioners are devoid of merit and that the 1st respondent bank is entitled to have recourse to the measures under the SARFAESI Act. Aggrieved thereof, the petitioners preferred aforestated appeal before the DRAT. The appellate Tribunal erroneously dismissed the said appeal holding that the Tribunal recorded categorical findings that the property was mortgaged with the bank as security and that despite the said fact, the property, which is a mortgaged property, was purchased by the petitioners and finally confirmed the finding of the DRT that the borrower and the petitioners have colluded and defrauded the bank and got the sale deeds executed and that the petitioners are not bona fide purchasers. Aggrieved thereof, the present writ petition is filed. There is no valid mortgage obtained by the 1st respondent bank in respect of the subject flats. The 1st respondent bank failed to obtain a registered mortgage as required under law. The finding of the Tribunal and the appellate Tribunal that the petitioners are not bona fide purchasers is incorrect as the petitioners purchased their respective flats for valuable considerations after obtaining encumbrance certificate, which do not disclose any mortgage over the said flats. The Tribunal and the appellate Tribunal ought to have seen that for the fault of the bank in not obtaining a registered mortgage deed, the petitioners cannot be penalised and faulted. The Tribunal and the appellate Tribunal erroneously held that there is collusion between the borrower and the petitioners, who are the purchasers of the flats, while, in-fact, there was collusion between the banker and the 2nd respondent. The said aspect is evident from the fact that the bank is not proceeding against the 2nd respondent but is only proceeding against the flats of the petitioners. Mere deposit of title deeds without any valid mortgage by a registered document does not create any rights in favour of the 1st respondent bank to enforce the mortgage against the subject flats. These petitioners brought to thenotice of the 1st respondent bank that there are other substantial properties owned by the principal borrower but the 1st respondent bank did not take steps to proceed against the said properties; and the bank is proceeding only against the subject flats of these petitioners. These petitioners paid Rs.5.00 lakhs each, pending adjudication of the appeal, pursuant to the orders of this Court. Mandatory provisions of SARFAESI Actare violated. There are no findings that the notices under Sections 13(2) and 13(4) of theSARFAESI Act were served on the borrowers and guarantors. Reliance was placed merely on the averments in the counter of the 1st respondent bank without further proof of the pleadings in the said counter. The order of the appellate tribunal is not a reasoned order and is liable to be set aside.'
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