by Mr. C.A.V.Balasubramanian
An article form Our Building & Construction July 2014
It reminds us of
Bernard Shaw’s
remark ”
When a man wants to murder a tiger, he calls it sport, when the tiger wants to
murder him, he calls it ferocity.”
Gross Negligence by Bank Officials :
The recent judgment Dt.01-10-2013 in CP No. 28/2013 in DRC
No. 16/2010 by Debt Recovery Tribunal (DRT) is an eye opener to all. It was shocking news that
after 8 years of peaceful possession, my residential plot of 4300 Sq. ft at Coimbatore purchased in
December 2004 was brought to public auction in Aug 2012 by Canara Bank to recover its bad loan of Rs.73
Lakhs.
How my land could be brought to public auction by bank when
I have not borrowed or guaranteed any loan and original documents of title with
me?
The seller of the land had availed overdraft facility of
Rs.30 lakhs by mortgaging property of 4862 sq .ft located at Adayar, Chennai
had defaulted .
The bank initiated SURFAESI proceedings and obtained order
in 2007 to attach and sell the mortgaged property. The Bank officials instead
of selling the mortgaged property, moved DRT in 2012 to attach my land presuming that
defaulter is still the owner and that value of mortgaged property is not
sufficient to fully recover the dues. Instead of obtaining Encumbrance Certificate (EC)
at Coimbatore where my property is registered, Bank manager relied on an EC
obtained by someone not by Bank officials at Chennai Computer Center.
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| C.A.V.Balasubramanian |
The said EC for 23 years but deliberately broken in two
parts , one for 6 years and another for 17 years.
The logic and reason for such broken period is not disclosed
by bank. The said EC obtained at Chennai REGINET Service Centre did not show the sale of land made to
me in December 2004 and hence the bank could even conclude and recommend to DRT for attaching
my property.
Importantly Bank manager at that point of time did not know
the whereabouts of
the original documents of title while recommending DRT for
its attachment. Moreover, the material fact of non-availability of originals was never disclosed to the
auction bidders. This case is thus another practical example for Gross Negligence.
The Bank officials are often too hurry to sanction loans to
achieve targets, ignoring
realistic appraisal, proper verification of title and fair
valuation of the security and monitoring by periodical inspection and
review.. If a critical analysis is made, worrying aspects of many irregularities do surface.
Land grabbing :
DRT on the strength of Bank ‘s recommendation , had also
attached and auctioned
and sold the land without verifying and tracing out the
original document of title . This is the crux of the problem that Bank and DRT had no respect to the law.
Are the Bank exceeding their power and acted in bad faith
and unfair in so doing ?
Respect the Law:
The auction purchaser who respects the law, had even
questioned the bank about
selling the land to him without the original document of
title. He obtained the Encumbrance certificate subsequently in December 2012 from sub-registrar of Vadavalli, Coimbatore
and to his surprise noted that the very same property he has purchased does not belong to the
defaulter.
Hence he filed a petition with DRT in January 2013 with a
claim that the Bank is duty bound to clear the encumbrance or to get refund of amounts paid by
him with interest. Thereafter, he brought the above illegal sale to my attention and after collecting the
facts from him, I could file a petition in DRT to claim that my land was sold illegally and without
application of mind.
Judgment:
It took about 8 months and after fixing several hearings,
both the petitions were heard and
a combined judgment pronounced by RO-DRT. The judgment
confirmed that the defaulter did not have any title to the property at the time of attachment made by DRT
and consequently attachment stands raised and auction sale held null and void and therefore, the sale
certificate stands cancelled.
The registrar of properties at Coimbatore was directed to
raise the attachment and
to cancel auction sale certificate and directed the Bank
manager to refund the money to the auction purchaser
with interest.
Bank having absolute power should display good faith and
fair play:
The Recovery of Debts Due to Banks and Financial Institution
Act,1993 (RDDB ACT) as amended by The Enforcement of
Security Interest & Recovery of Debts Laws ( Amendment Act 2004 ) was enacted for expeditious
adjudication and recovery of debts by establishing Debts Recovery Tribunal ( DRT).
The recovery
officers (RO) are appointed by the central Govt. under a presiding
officer. Thus banks have absolute and more drastic powers to recover bad loans
under the above
said Act. Bank can identify property of the defaulter even
if the same were not mortgaged
and request the RO for attachment and public auction for
effecting recovery.
This is similar to the powers of Income Tax Officer to
attach and auction any property of
a tax defaulter to recover the tax dues.
The only remedy available is that any third party or the
auction buyer can make application to set aside the sale within 30 days of the
sale, if the defaulter has no saleable interest in the specified
property. It may be recollected that the Supreme Court in Mardia Chemicals Ltd V Union of India
stated that Banks namely lenders owe a duty to act fairly and in good faith. Possessing more
drastic powers for speedier recovery on NPAs (Non-Performing Assets) calls for exercise of higher degree
of good faith and fair play. What must be kept in mind is that the law should not be in derogation of the
rights which are guaranteed to the people under the Constitution.
Judicial Reform:
“In the heated atmosphere of a court of law, the cold truth
is sometimes obscured. “ Nani A. Palkhivala. DRT keeping the facts of the above case, has recently
issued a circular stating that henceforth EC must be obtained from the particular registrar where the
property is located and EC obtained from other centers are not acceptable. I have verbally requested DRT to
record in sale notice about the original document of title, in case they were not available with the
Bank instead of declaring at the time of issuing order of confirmation of sale by RO-DRT.
Lesson to all concerned :
Law respects the peaceful possession and frowns at forceful
dispossession
of a person who may have lost the right to continue by which
he acquired the possession. In the absence of such provisions of Specific Relief Act, 1963,
violence, chaos and disorders would become inevitable.
The person who has been proved to take law into his own
hands for dispossessing the other party has not been given any right to appeal or review.
1. The seller is bound to disclose all material facts of the
property being sold. Omission to make such a disclosure shall be fraudulent. It is mandatory to
have an indemnity clause in the sale agreement that seller would indemnify the buyer in case of any
encumbrances of the specified property. 55(1)(c) of Transfer of Property Act,1882 (TPA). The auction buyer is to be more
careful to note that the Sale certificate issued by RO-DRT is not a sale agreement and in case of auction buy there is
no indemnity clause. This is like he buys” as is where is” basis meaning the buyer’s acceptance may absolve the seller from
his liability of possible defect in the property .
2. It is the original deed of transfer that is the document
of title. To hold that a copy of a deed of transfer is also a document of title would amount to facilitating fraud. As per
Section 58 (f) of TPA, the idea of ownership based on title is especially one of the better right to remain in
possession and to re-obtain it ,if dispossessed without due process of law . Hence the document amounts to conclusive proof of
such transfer. Hon’ble
Apex court opined,”Record-ofright( Revenue Records) is not a document of title.
3. An Encumbrance Certificate (EC) is not a document of
title. It is an extract of the entries in the Indexes relating to Book No.1 in the Register maintained by registrar of
properties.
4. Title deeds therefore become important documents,
instruments and devices and need to be safeguarded as much as the property itself is to be looked after.
5. Last but not least every buyer of immovable property before
buying must consult an advocate and take expert opinion not only for verifying the title to property but
also to ensure the credibility of the seller which many often we tend to
neglect.
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