INDIAN BANK Vs. CITY HOSPITALS
LAWS(DR)-2007-4-4
DEBTS RECOVERY APPELLATE TRIBUNAL
Decided on April 23,2007

Appellant
VERSUS
Respondents

JUDGEMENT

K. Gnanaprakasam, J. (Chairperson) - (1.) THE OA filed by the appellant/applicant Bank before the DRT -II at Chennai, was dismissed against defendants 4 and 5 by its order dated 27.9.2006. Aggrieved by the same, this appeal has been filed. I have heard the learned Advocates for the appellant and the respondents.
(2.) THE principal question involved in this appeal is whether the Power of Attorney executed by the Managing Director of the 4th defendant company to give any guarantee or provide any security without a special resolution of the company is valid under law. The appellant's case is that the defendants 3 to 5 through their power agent the 2nd defendant in the OA, deposited the title deeds relating to their immovable properties on 26.8.1990, with the appellant's Anna Nagar Branch, Madras, with an intention to create equitable mortgage. The defendants 3 to 5 have also executed Memorandum of deposit of title deeds on 28.8.1990, confirming the deposit of title deeds on 26.8.1990, and the creation of equitable mortgage and, therefore, the defendants 4 and 5 are liable and the order passed by the DRT otherwise is not proper and valid. The learned Advocate for the 4th defendant has pointed out that the Power of Attorney executed by the Managing Director of the 4th defendant company, viz. Dr. T.M. Paul, in favour of the 2nd defendant in the OA, giving power to mortgage the schedule mentioned properties to raise loans in Banks and financial institutions, among other powers, is not valid under law. Dr. T.M. Paul, who claims to be the Managing Director of the company was not authorised by the company by a special resolution to give guarantee or provide any security of the property as required under Section 370 of the Companies Act, which states, "No company (hereinafter in this section referred to as "the lending company") shall - (a) make any loan to, or (b) give any guarantee or provide any security, in connection with a loan made by any other person to, or any other person by, any body corporate, unless the making of such loan, the giving of such guarantee or the provision of such security has been previously authorised by a special resolution of the lending company. This section clearly postulates that unless it is authorised by the special resolution of the lending company, no company can make any loan or give any guarantee or provide any security. Admittedly, the 4th defendant company has not passed any resolution authorising Dr. T.M. Paul, to give General Power of Attorney to mortgage the property and to raise loans in Banks and financial institutions. Though the General Power of Attorney is a registered one, in the teeth of Section 370 of the Companies Act, the Managing Director of the company, in the absence of any special resolution, cannot give Power of Attorney to create a mortgage or encumber the property for the purpose raising loan and, therefore, the Power of Attorney said to have been given by Dr. T.M. Paul, on behalf of the 4th defendant company is not valid.
(3.) THE learned Advocate for the 4th defendant has further submitted that the property set out in the Power of Attorney is situated at Ernakulam and Dr. T.M. Paul, Managing Director of the 4th defendant company was residing at Cochin, but whereas the Power of Attorney was executed at Madras, Saidapet in Chengleput District Sub -Registrar, Office, Central Madras, and the same is invalid under law. Of course, Dr. T.M. Paul, has ingeniously inserted his address at if he is residing at Madras and there is an inter lineation in the Power of Attorney, which reads, "Presently staying in No. 31, Chitaranjan Road, Teynampet, Madras." was intentionally made by Dr. T.M. Paul, to create a jurisdiction to execute a Power of Attorney at Madras, as the Power of Attorney otherwise cannot get registered. Section 33 of the Registration Act, 1908, clearly states that the following powers of attorney shall alone be recognised namely - (a) if the principal at the time of executing the Power of Attorney resides in any part of India, in which this Act is for the time being in force, a Power of Attorney executed before and authenticated by the Registrar or Sub -Registrar within whose district or sub -district the principal resides; (b) if the principal at the time aforesaid resides in any other part of India in which this Act is not in force a Power of Attorney executed before and authenticated by any Magistrate; (c) xxx xxx xxx where it has been held in unequivocal terms that the Power of Attorney will be recognised, if the principal at the time of executing the Power of Attorney resides in any part of India in which the Power of Attorney executed before the authenticated by the Registrar or Sub -Registrar within whose district or sub -district the principal resides.;


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