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TMI Blog2010 (3) TMI 1055X X X X Extracts X X X X X X X X Extracts X X X X ..... it, praying for the following reliefs:- (a) For a declaration that the purported sales held on 22.7.2009, 23.7.2009 and 24.7.2009 in respect of the suit schedule properties covered by the auction notice dated 27.6.2009 in respect of A to E schedule mentioned properties are illegal, invalid and non-est in the eyes of law and consequently restrain the first defendant acting through the Recovery Officer, Chennai-1 from confirming or registering the Sale Deeds in favour of the defendants 6 to 10; (b) For a declaration that the first plaintiff has not created any valid equitable mortgage on 23.4.1998 in favour of Punjab National Bank, Mylapore Branch in respect of 'A' schedule property and consequently declare the Recovery Certificate issued in DRC No.119/2008 pursuant to order made in O.A.No.137 of 2003, DRT-1, Chennai as illegal, invalid and non-est in the eyes of law; (c) For a declaration that the 2nd plaintiff has not executed on 23.4.1998 in respect of 'B' schedule property morefully described in the plaint and consequently declare the Recovery Certificate issued in DRC No.119/2008 pursuant to the order made in O.A.No.137 of 2003, DRT-1, Chennai is ille ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first take a look at the plaint averments. They proceed on the following lines:- (i) The property described in Schedule 'A' belongs to the first plaintiff. The property described in Schedule 'B' belongs to the second plaintiff. The third plaintiff is the owner of the property described in Schedule 'C' and the fourth plaintif is the owner of the property described in Schedule 'D'. (ii) The plaintiffs never signed any negotiable instruments such as promissory notes or letters of undertaking or letters of guarantee for any loan advanced by the defendants 1 to 3 to the 5th defendant nor did they guarantee the repayment of the loan taken by defendants 4 and 5. The aforesaid V.M.S. Jaffarullah is understood to have fabricated certain fictitious, bogus and fraudulent documents, on the basis of which he also secured financial assistance from defendants 1 to 3 by offering the suit schedule properties as securities, on the strength of the fabricated documents. (iii) The 4th and 5th defendants have also forged the signatures of the plaintiffs in the negotiable instruments and on the purported letters of guarantees in favour of defendants 1 to 3 as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts 4 and 5. Therefore, any purported security offered by defendants 4 and 5 without reference to the real owners and without their consent, will not bind the plaintiffs or their properties. Though this aspect was brought to the notice of the DRT-I, the Recovery Officer brought two items of properties to sale in favour of defendants 7 and 8 on 12th and 13th July 2009. The 6th defendant purchased the property on 27.7.2009 and defendants 6 to 9 purchased on 30.7.2009, pursuant to the auction held at the instance of the Punjab National Bank, in favour of the 6th defendant. (ix) The entire transactions are vitiated by fraud, material irregularities and illegality and as such, in the absence of any valid equitable mortgage as required under Section 58(f) of the Transfer of Property Act or any valid guarantee, the Recovery Officer cannot issue a Recovery Certificate as against these properties. The defendants 4 and 5 have signed and obtained summons sent by the DRT-I, without the knowledge of the plaintiffs. The plaintiffs were not aware of the proceedings. Upon coming to know about the illegality, the plaintiffs approached the Banks to get to know the details. (x) The original d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re only on the strength of the instruments manipulated, fabricated and tinkered by V.M.S.Jaffarullah and Bank Officials and as such, the first defendant is not entitled to fasten any liability on the basis of the alleged mortgages. (xvi) The aforesaid V.M.S.Jaffarullah, representing the defendants 4 and 5 availed financial assistance from defendants 1 and 3 and gave personal guarantee as the Director of 5th defendant. In that process, he manipulated the signatures of the plaintiffs as guarantors and alleged to have created instruments in favour of State Bank of India on 31.10.2001. He also created equitable mortgage in favour of the Bank on 31.10.2001 by forging the signatures of the plaintiffs and offering copies of the title deeds. Since there was deliberate default by 5th defendant, the State Bank of India (3rd defendant) filed O.A.No.287 of 2002 and secured an ex parte decree. (xvii) Though the plaintiffs were made parties, they were not informed about the proceedings by V.M.S.Jaffarullah as a result of collusion and connivance. None of the original documents was deposited with any of the defendants 1 to 3 when they advanced monies to the defendants 4 and 5. (xviii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of Debts due to Banks and Financial Institutions Act, 1993. By an order dated 17.7.2007, it was held by me, following various decisions of the Apex Court, that when serious allegations of fraud are made, the Civil Court's jurisdiction will not stand ousted. The said order was confirmed by the Division Bench in O.S.A. Nos.211 to 214 of 2007, by a decision reported in S.V.Subramaniam vs. Cypress Semiconductor Technology India Pvt. Ltd {2008 (2) MLJ 169}. The Special Leave Petitions preferred against these orders were also dismissed by the Apex Court. Therefore, on the principle of law that a suit is maintainable in cases where serious allegations of fraud are made out ex facie, there cannot be a controversy. 8. But at the same time, the Court has a duty to see, if such allegations of fraud are thrown, just for the purpose of maintaining a suit and ousting the jurisdiction of the Tribunal and to keep the Banks and Financial Institutions at bay. If by clever drafting, the plaintiff creates an illusion of a cause of action, the Court is duty bound to nip it in the bud. To find out if it is just a case of clever drafting, the Court has to read the plaint, not formally, but in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or under the SARFAESI Act, 2002, gets slowed down. This results in two consequences viz., (i) out of frustration, the banks agree for one time settlements or (ii) third party rights get created by taking advantage of the situation. Therefore, the Courts have a greater responsibility to scan the pleadings and see if the allegations of fraud and collusion made in the plaint are actually a product of fraud and collusion between the borrowers and those making such claims. 11. In the case on hand, the plaintiffs, are close relatives of the borrower. The plaintiffs admit that V.M.S.Jaffarullah, the Proprietor of the 4th defendant and the Director of the 5th defendant borrowed monies from the defendants 1 to 3 as well as from the Vijaya Bank. The first plaintiff is the wife of V.M.S.Jaffarullah. The second and fourth plaintiffs are the brothers of V.M.S.Jaffarullah. The third plaintiff is the wife of the second plaintiff. The plaintiffs admit categorically in the plaint that the defendants 4 and 5 borrowed loans from defendants 1 to 3. They even go to the extent of saying that the defendants 4 and 5 perpetrated a fraud on the banks and availed financial assistance. 12. A meaningful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds were created as though summons were received. 15. In Nagubai Ammal vs. B.Shama Rao {AIR 1956 SC 593}, the Supreme Court pointed out that there is a fundamental distinction between a proceeding which is collusive and one which is fraudulent. Collusion in judicial proceedings is a secret arrangement between two persons that the one should institute a suit against the other in order to obtain the decision of a judicial tribunal for some sinister purpose. In such a proceeding, the claim put forward is fictitious, the contest over it is unreal and the decree passed therein is a mere mask having the simplitude of a judicial determination and worn by the parties with the object of confounding third parties. But when a proceeding is alleged to be fraudulent, what is meant is that the claim made therein is untrue, but that the claimant managed to obtain the verdict in his favour by practising fraud on the Court. 16. No act of fraud or collusion is made in the plaint against the officers of the banks, in the matter of service of summons by the Debts Recovery Tribunal. Before the Tribunal, the plaintiffs remained ex parte and a final order came to be passed and the plaintiffs have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he affidavit in support of the writ petition, as follows:- 2. I submit that respondent bank has initiated proceedings before the Debt Recovery Tribunal, Madras Bench in O.A.No.137 of 2004 for the recovery of the sum of ₹ 2,75,32,209/- as on 20.5.2003 together with interest at the rate of 20% from 20.5.2003 till realization while seeking for other reliefs as against the Principal Borrower and the guarantors. 3. I submit that the said proceedings is pending before the said Tribunal and I have been advised to file a detailed counter in O.A.No.137 of 2003. In para 8 of the affidavit in support of the writ petition, the second plaintiff has made the very same averments as contained in para 8 of the affidavit filed by the first plaintiff in her writ petition. Since para 8 of that writ petition is extracted above, it is not repeated here. 20. In the writ petition W.P.No. 7934 of 2005 filed by the third plaintiff,it was stated by him in paras 2 and 3 of the affidavit in support of the writ petition, as follows:- 2. I submit that respondent bank has initiated proceedings before the Debt Recovery Tribunal, Madras Bench in O.A.No.137 of 2004 for the recovery of the sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough by manipulation they are shown to have been served with summons, is belied by the averments in paragraphs 2 and 3 of the affidavits in support of the writ petitions. 25. In Gautam Sarup vs. Leela Jetly {2008 (7) SCC 85}, the Supreme Court pointed out that an admission made in a pleading is not to be treated in the same manner as an admission in a document. An admission made by a party to the lis is admissible against him proprio vigore. A categorical admission in a pleading cannot be resiled from, but in a given case, it may be explained or clarified. But there must be scope for offering such an explanation. In the case on hand, there is absolutely no scope for the plaintiffs either to resile from or to explain what they stated in the affidavits in support of their earlier writ petitions. 26. In para 7 of the plaint, the plaintiffs have claimed that summons sent by the DRT were not received by them and that their signatures in the summons were manipulated. They have also claimed that they were not aware of the proceedings before the DRT and that they were kept in the dark. In the same paragraph viz., para 7, the plaintiffs have claimed that only when the properties were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that in the application for injunction, pending suit, this Court passed a conditional order on 26.10.2009, directing the plaintiffs to furnish security to the extent of half the amount mentioned in the Recovery Certificate. As against the said order, the plaintiffs filed appeals in O.S.A. Nos.376 to 382 of 2009. Those appeals were disposed of by a common order dated 16.11.2009, directing the plaintiffs to deposit a sum of ₹ 2.75 crores to the credit of the suit within 8 weeks. Even while doing so, the Division Bench directed the plaintiffs to cooperate in the early disposal of the application for rejection of plaint. As against this order, the plaintiffs filed Special Leave Petitions in SLP(Civil) Nos.1973 to 1979 of 2010. They were also dismissed on 1-2-2010 after giving 2 months time to the plaintiffs to deposit the amount. Based upon these orders, the learned counsel for the plaintiffs contended that the plaint cannot be thrown out, since the plaintiffs have time to comply with the conditional order. 30. But unfortunately for the plaintiffs, the Division Bench as well as the Supreme Court segregated the application under Order VII, Rule 11 CPC, from the applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons relating to non execution of documents or letters of guarantee. That the Tribunal is competent even to set aside a transaction including sale and to restore possession to the borrower in appropriate cases, was made clear by the Apex Court in Authorised Officer, Indian Overseas Bank vs. Ashok Saw Mill {CDJ 2009 SC 1434}. Though that decision was under the SARFAESI Act, 2002, the powers of the Tribunal are in no way lesser under the 1993 Act, than under the SARFAESI Act. Therefore, the plaintiffs who were made parties by the first defendant-bank to the proceedings before the Tribunal, on the plea that they executed letters of guarantee and also created a mortgage of their properties, ought to have agitated all these issues only before the Tribunal, where they have filed applications for setting aside the recovery certificate and the sale. (iv) The only basis on which the plaintiffs seek to maintain the present suit is that the original title deeds are in the custody of the CBI and that therefore, there was no valid creation of an equitable mortgage. But the copy of the FIR filed by the first defendant-bank before the CBI and the charge sheet filed by the CBI, filed as additio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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