DRAT invalidated the fraudulent mortgage, upheld the bank's entitlement to recover dues from the borrowers, and exonerated the bona fide purchasers.
The Debts Recovery Appellate Tribunal 9DRAT), Delhi Bench headed by Justice Brijesh Sethi (Chairperson) addressed an appeal and observed that Defendant No. 3 committed fraud by mortgaging the property without requisite permissions and misrepresenting facts, rendering the mortgage invalid, while the bank retained the right to recover dues from Defendants 1, 2, and 3, excluding bona fide purchasers Defendants 4 and 5, who were advised to seek remedies against the fraudulent party.
The Debts Recovery Appellate Tribunal (DRAT), in its judgment dated 27th August 2024, addressed the appeal concerning an order passed by the Debts Recovery Tribunal (DRT)-I, Delhi, in a recovery matter involving Punjab National Bank (PNB) and M/S Kashmeena Carpets. The case arose from a suit filed by the erstwhile New Bank of India on 28th May 1993 for recovering ₹42,83,115 with interest, later transferred to the DRT after the enactment of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Following the merger of the New Bank of India with PNB, the latter became the applicant. The DRT, in its order dated 26th July 2016, allowed the recovery claim against Defendants 1 and 2 while dismissing it against Defendants 3, 4, and 5, leading to the bank's appeal.
The DRAT examined the allegations against Defendant No. 3, who had mortgaged property (Plot No. B-111, Sector 31, Noida) without obtaining requisite permissions from the Noida Authority. Despite the leasehold nature of the property requiring such permissions, Defendant No. 3 falsely claimed that the original title deeds were lost and fraudulently secured duplicate property documents, facilitating a transfer to Defendants 4 and 5, who were bona fide purchasers. Further complicating the matter, PNB issued a No-Objection Certificate (NOC) on 1st August 2001, despite holding the original title deeds, enabling the release of the mortgage lien and subsequent property transfer.
The DRAT upheld the findings of fraud and misrepresentation by Defendant No. 3 and held Defendants 1 and 2 jointly and severally liable for the outstanding dues. The tribunal rejected claims against Defendants 4 and 5, citing their bona fide purchaser status, but advised them to seek legal remedies against Defendant No. 3. Modifying the DRT's order, the DRAT directed that Defendant No. 3 also be held equally liable for repayment. The bank was authorized to recover its dues by selling the mortgaged property, with any shortfall recoverable from the personal assets of Defendants 1, 2, and 3.
The Appellate Tribunal emphasized the need for balancing public interest with procedural fairness, condoning procedural delays in filing the appeal due to demonetization. It acknowledged the fraudulent actions of Defendant No. 3 while maintaining the bona fide nature of Defendants 4 and 5's ownership. The judgment directed the bank to submit a revised statement of accounts and instructed the DRT to issue an amended recovery certificate, ensuring accountability for fraudulent actions while upholding the bank's right to recover public dues.
Mr. Anil Kumar Singh, Advocate represented the Appellant.
Mr. Gorang Goyal, Advocate appeared for Respondent No. 4 and Respondent No. .5
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