WP(C).No.1377/05, CM.1025/05 & RP.39/05


Date of decision:  March  03, 2005.




Narender Jain                                                                ... ......Petitioner


                                                                                   Mr.Madan Bhatia,

Sr.Adv. with                                           Mr.Nageshwar Pandey,Advocate.




Union Bank of India

& Ors.                                                                        ..........Respondents.



Sr.Advocate with

                                                                                   Mr.Aditya Madan, Advocate for

                                                                                   respondent No.1/Bank.

                                                                                   Mr.Rahul Garg, Advocate

                                                                                   for respondent No.2.


 Manmohan Sarin, J (ORAL)


1.                  Petitioner has filed the present writ petition, assailing the orders dated 17th December, 2004 and 19th January, 2005 in case bearing No.112/203, titled Union Bank of India Vs.A.I.International, passed by the Chief Metropolitan Magistrate, under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, hereinafter referred to as SARFAESI Act. Further, direction is sought for restraining respondent No.1 from  interferring with possession of property bearing NO.R-29, Inderpuri, New Delhi.


2.                  Petitioner claims to have entered into an Agreement to Purchase the property vide an Agreement to Sell and Purchase dated 22nd May, 1998, from respondent No.2, Sh.Jagdeep Singh Sahni for a sum of Rs.81 lacs. Petitioner claims to have paid on varying dates a total sum of Rs.75 lacs. Petitioner received possession of the property on 7th July, 1998.


3.                  Respondent No.1 Union Bank of India had filed an application under Section 14 of the  SARFAESI Act before the Chief Metropolitan Magistrate for taking possession of property bearing No.R-29 Inderpuri, New Delhi. It is the case of respondent No.1 that respondent No.2 had created an equitable mortgage by deposit of title deeds, in respect of the aforesaid property for securing the loan granted to it by respondent No.2.


4.                  The Chief Metropolitan Magistrate upon hearing the petitioner and perusing the set of documents, as produced before it, appointed a Receiver to take possession of the property. The Receiver was given the authority to break open the locks and was permitted to take assistance of police officials and submit his report on 28th January, 2005. Respondent No.1 in its application had pleaded that the demand notice, as required to be given to respondent No.2 to discharge its liability, has also been issued. The present petitioner moved an application, appearing at page 42 of the paper book, to stay the operation of the order dated 17th December, 2004 for a period of 15 days to enable the applicant to prefer an appeal before the Debt and Recovery Tribunal. Petitioner wanted to impugn the order/decisions given to the Bank for taking over of possession under the  SARFAESI Act. The said application after hearing counsel for both the parties was dismissed by the Chief Metropolitan Magistrate as not maintainable, holding that the property in question was the subject matter of an equitable mortgage in favour of the Bank. It was also observed by the Chief Metropolitan Magistrate that the owner of the property had not executed any Sale Deed in favour of the petitioner- applicant and there was only an Agreement to Sell. The Chief Metropolitan Magistrate, however, noticed that the loan was given by the Bank on the strength of a Sale Deed in 1999 i.e., after the execution of the Agreement to Sell.


4.                  It may also be noted that the petitioner had preferred a suit for permanent injunction in the District Courts. During the course of hearing of the writ petition, petitioner made a statement that he has withdrawn the said suit to pursue the remedy of the writ petition.


5.                  On 27th January, 2005, when the writ petition came up for admission, it was urged by the senior counsel for the petitioner that the Agreement to Sell had been entered into by the petitioner with respondent No.2 much before the grant of loan in 1999. The date of the agreement was 22nd May, 1998. Pursuant thereto, petitioner also received possession of the property in part performance, upon payment of the substantial portion of the sale consideration. Mr.Bhatia, therefore urged that the Bank's right as a mortgagee would be that of a transferee. Petitioner's possession would remain protected under Section 53-A of the Transfer of Property Act and petitioner could not be dis-possessed. The question that arose for consideration was whether under Sections 13 and 14 of the  SARFAESI Act, respondent-Bank could proceed under the said Act or Section53-A of the Transfer of Property Act would come in its way?


6.                  Notice was, accordingly, issued to the respondents, who appeared and dis-possession of the petitioner was also stayed in the meanwhile. Respondent No.1 moved a review petition bearing No.39/2005. Notice was given to the petitioner and reply thereto has also been filed. In the review petition, respondent No.1 submitted that petitioner had made misrepresentation in the writ petition and the said averments were contrary to the documents filed by petitioner and writ petition was liable to be dismissed. Respondent No.2, who also appeared, submitted that petitioner was falsely claiming payment of Rs.75 lacs. In fact, the payment made was only Rs.31 lacs and the receipt appearing at page 22 of the paper book for Rs.44 lacs in cash was a fabricated one and no amount of consideration was received by respondent No.2 thereunder.


7.                  The question, which comes up for consideration before the Court is whether the loan and the creation of equitable mortgage had been done prior to the Agreement to Sell in favour of the petitioner or the same was done subsequent to the Agreement to Sell and receipt of possession by the petitioner. Mr.Bhatia sought to lay considerable emphasis on the order passed by the Chief Metropolitan Magistrate on an application moved by the petitioner for granting stay. The same being, Loan in this case was given by bank on the strength of sale deed in 1999 that is after execution of the agreement to sell Mr.Bhatia submitted that this was the finding by the Chief Metropolitan Magistrate and the Court need not go beyond it. In case, there was any doubt, the matter ought to be remanded to the Chief Metropolitan Magistrate for re-determination. Learned Senior counsel then referred in detail to the reply given to the review petition and the documents produced by the petitioner along with it. He submitted that the affidavit of respondent No.2 appearing at page 123 of the paper book has referred to creation of an equitable mortgage of the property by deposit of Lease Deed, while the Chief Metropolitan Magistrate has referred to as a Sale Deed.     The above    submission cannot  advance the case of the petitioner, especially on account of a mis-description of Sale Deed as a Lease Deed, when the very said document refers to the Sale Deed, by virtue of which the petitioner has acquired the property at Inderpuri. Therefore, it is apparent that the intention of the deponent was to create an equitable mortgage by deposit of the earlier mentioned Sale Deed and not the Lease Deed, as erroneously mentioned.


8.                  Both the parties have taken me through the documents, which had been filed before the Chief Metropolitan Magistrate. Reference be next made to the letter addressed to the Chief Manager, Union Bank of India. This letter by respondent No.2 clearly records that the equitable mortgage was created by deposit of title Deeds in respect of property bearing No.R-29, Interpuri, New Delhi on 18th January, 1996. Mr.Bhatia has attempted to urge that there were four Sale Deeds, by which respondent No.2 had acquired the property in question. These were Sale Deeds bearing registration Nos.8617, 8814, 9499 and 6848. Mr.Bhatia submitted that the intimation given to the Sub Registrar by respondent No.2 of the creation of equitable mortgage covers only Sale Deed Nos.8617 and 8814. This was on the basis of letter dated 17th August, 1999. This he submitted demonstrated that at best the equitable mortgage was created in respect of half the share of the undivided property. Accordingly, the order of taking over possession could not be passed in respect of the entire property.


9.                  Mr.Bhatia further submitted that the very jurisdiction for taking action under Section 14 of the  SARFAESI Act  was missing. Secured Asset in Section 2(z)(c) means the property of which security interest is created. In case, the equitable mortgage was created only in respect of two Sale Deeds, as noted above, the entire property cannot be called a secured asset, especially, when it was an undivided share. He submitted that the averments made by the petitioner in paras 30 and 32 of the petition have remained unrebutted. Petitioner had averred that no material had been shown that there had been  deposit of title deed by way of equitable mortgage in favour of respondent No.1 by respondent No.2, after the advancing of loan in 1999. The documents, which were filed by respondent No.2, copies of letters addressed to the Sub-Registrar on 17th August, 1999 i.e., two title deeds in respect of the property, had been deposited by way of equitable mortgage on 18th January, 1996 and 27th August, 1996. He submitted that it was the petitioner's case that the equitable mortgage  created on 18th January, 1996 stood terminated when the fresh loan of agreement was made for the advancement of the loan in 1999. Learned senior counsel also urges that this was a case of novation of loan in 1999, when 1996's loan came to an end. In these circumstances, learned senior counsel urged that the impugned order is liable to be quashed or in the alternative the matter be remanded to the Chief Metropolitan Magistrate to adjudicate upon whether there was an equitable mortgage in respect of the loan granted in 1999.


10.                Mr.Bhatia relies on a decision in K.J.Nathan Vs.Maruthi Rao and Ors reported at AIR 1965 Supreme Court 430 to urge that there could be no presumption raised by simple deposit of title deeds that an equitable mortgage had been created.

                     Mr.Bhatia also informs that a complaint for cheating had been lodged by the petitioner against respondent No.2.


11.                Mr.A.S.Chandhiok, learned senior counsel for respondent-Bank, in opposition to the writ petition, submits that petitioner's bona fides were in question. Petitioner's assertion that he paid Rs.75 lacs out of Rs.81 lacs of sale consideration is disputed by respondent No.2. Respondent No.2 in his affidavit has averred that petitioner had paid only a sum of Rs.31 lacs and the sum of Rs.44 lacs, alleged to be paid in cash for which a receipt has been produced, is a fabricated one. Mr.Chandhiok submits that from the documents filed by the petitioner himself in the writ petition, it was apparent that deposit of title deeds for creation of equitable mortgage was done in 1996. The confusion, which the petitioner has sought to create regarding two Sale Deeds being deposited by way of creation of equitable mortgage was totally misplaced and contrary to facts. Respondent No.1 Bank has produced the original record in Court, photocopy of which has been placed on record, showing that the Sale Deed with 1/4th share in each were deposited by the petitioner with respondent-Bank in 1996. Reference in this connection may be made to the letter dated 14th July, 1999, signed by respondent No.2. The said letter is reproduced for facility of reference:-


The Chief  Manager,

Union Bank of India,

Karol Bagh, New Delhi.




                     I/We have created an Equitable Mortgage in favour of your Bank by deposit of title deeds on 18.1.1996 in respect of my/our properties situated at R-29, measuring 200 sq.yds., Inder Puri Naraina, New Delhi owner-Sh.Jagdeep Singh Sahni, Sale Deed No.8617, Khasra No.216-Sale Deed No.88, 25,118 & 80 as and by way of security for the financial facilities granted to Mr.Mrs./M/s.1.M/s. A.I. International 2) M/s. Orimone Apparels P Ltd.


                     I/We hereby confirm that the said mortgage of the above property is valid, subsisting and shall continue as security for the Bank's dues against



2.M/s.Orimano Apparels P Ltd.


                     Further I/We confirm that the letter of guarantee dt.4.2.99 executed by me/us is in full force and effect and that I/we continue to be liable to your Bank in accordance with the terms thereof.


                                                                                                        Yours faithfully,



                                                                                           (Jagdeep Singh Sahni)



12.                From the aforesaid letter, Mr.Bhatia sought to urge that reference was made to only one Sale Deed bearing registration No.8617. This above contention is misplaced.  As submitted by Mr.Chandhiok the aforesaid letter also mentions Sale Deeds Nos.88,25, 118 and 80. The original Sale Deeds have been seen, which were deposited. The Sale Deeds on their  respective  first pages carry the number 80 dated 22nd November, 1991, 118 dated 30th October, 199125 dated 8th November, 1991  and 88 dated 29th November, 1999. The aforesaid numbers, it has been explained, are given when the documents are presented to the Sub-Registrar for registration. It is these numbers, which have been referred to as the Sale Deeds while registration number of all the respective Sale Deeds are 8617, 8814, 9499 and 6848 on the respective dates, as noted earlier.


13.                From the foregoing, it would be seen that there is no merit in the contention that equitable mortgage by way of deposit of title deeds was created only in respect of 1/4th or 1/2nd share. Coming to the next submission that the loan was granted in 1999, petitioner has failed to show that there was constructive delivery as recognized by the law in respect of Sale Deeds for the purposes of creation of equitable mortgage. It is in this connection that reliance was placed by Mr.Bhatia on the observations of the Chief Metropolitan Magistrate in the impugned order. The compilation of original documents, which had been shown in Court for the grant of loan, shows that respondent No.2 had approached respondent No.1-Bank on 10th November, 1994 for granting working limit capital and term loan. In the event, credit limit of Rs.70 lacs, FOB Limit of Rs.70 lacs and Term Loan of Rs.35 lacs were sanctioned with the requirement of creation of mortgage in respect of the aforesaid property. Respondent No.2 had duly accepted the same. Subsequently, respondent No.2 approached the Bank for enhancing the limits in April, 1995 and even had offered an additional property as security. Respondent No.2 had also sought the release of the aforesaid property from equitable mortgage created. The Bank had declined the same on 11th June, 1998. It is the petitioner's case that no new loan was sanctioned in 1999, rather the documents were executed on 14th June, 1999 and it was only the continuance of the existing mortgage created in 1996. The aforesaid version of the respondent Bank finds support from Annexure 1 appearing at page 48, wherein respondent No.2 had confirmed the following:


                     We hereby confirmed that the siad mortgage of the property is valid, subsisting and shall continue as security for the Bank's dues against M/s.A.I.International.


                     The up shot of the foregoing discussion is that the petitioner has failed to prima facie establish that the equitable mortgage was created in 1999 after the Agreement to Sell and Purchase had been entered into by him with respondent No.2 on 22nd May, 1998.


                     The documents, as produced on record and before the Chief Metropolitan Magistrate demonstrate that the equitable mortgage was created on 18th January, 1996 for the loan then granted and the same was confirmed to be renewed and continued on 14th July, 1999. In these circumstances, petitioner cannot urge that he was a bona fide purchaser for consideration prior to the creation of equitable mortgage. The rights of the respondent-Bank are not that of a transferee, rather equity is in favour of mortgagee. In these circumstances, I find no ground to interfere in the exercise of writ jurisdiction. The petition has no merit and is dismissed.  This order also disposes of review petition No.39/2005.


                     The expression of opinion is on a prima facie view of the matter for deciding whether the writ petition ought to be entertained  in the exercise of writ jurisdiction. This shall not affect the disposal of the criminal complaint, filed by the petitioner against respondent No.2,  or the investigation to be done on merits.


March  03, 2005                                                                                                                                                                                                                                                                                                                                       Manmohan Sarin,J.