Madras High Court
Punjab National Bank vs Mrs.J.Samsath Beevi
on 2 March, 2010
DATED: 02-03-2010
While the first application is filed by the first defendant-Punjab National Bank, the second application is filed by the 10th defendant-auction purchaser, both seeking the rejection of the plaint under Order VII, Rule 11, CPC.
2. I have heard Mr.M.L.Ganesh, learned counsel for the applicant-bank in A.No.5583 of 2009 and Mr.R.Karthikeyan, learned counsel appearing for the applicant/ 10th defendant and Mr.R.Thiagarajan, learned counsel for the respondents/plaintiffs.
3. In pursuance of Certificates of Recovery issued by the Debts Recovery Tribunal, Chennai, in O.A.Nos.137 of 2003, 61 of 2003 and 287 of 2002, 3 banks viz., Punjab National Bank, Union Bank of India and State Bank of India, who are defendants 1 to 3 herein, brought certain items of properties, belonging to the borrowers and guarantors. After moving applications to set aside the Certificates of Recovery and the Certificates of sale, the plaintiffs herein have come up with the above suit, 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 illegal, invalid and non-est in the eyes of law; (d) For a declaration that the 3rd plaintiff has not created any valid mortgage in respect of 'C' schedule property morefully described in the plaint and consequently declare the Recovery Certificate issued in DRC No.119 of 2008 pursuant to the order made in O.A.No.137 of 2003, DRT-1, Chennai as illegal, invalid and non-est in the eyes of law; (e) For a declaration that the 4th plaintiff has not created any valid mortgage in favour of defendant on 30.4.2001 in respect of 'D' 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 as illegal, invalid and non-est in the eyes of law; (f) For a declaration that the 2nd plaintiff has not created any valid equitable mortgage in favour of the first defendant on 30.4.2001 in respect of 'E' 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 illegal, invalid and non-est in the eyes of law.
4. The 4th defendant is one Maharaja Timber Traders, represented by its Proprietor V.M.S.Jaffarullah. The 5th defendant-Maharaja Saw Mills Pvt. Ltd., is a company incorporated under the Companies Act, 1956, of which V.M.S.Jaffarullah was a Director. His wife is the first plaintiff. The second and 4th plaintiffs are the brothers of V.M.S.Jaffarullah and the third plaintiff is the wife of the second plaintiff. To put it in simple terms, one Mr.V.M.S.Jaffarullah is the Proprietor of the 4th defendant-concern and is a Director of the 5th defendant-company. His wife, 2 brothers and the wife of one of the brothers, have come up with the above suit, against 3 banks viz., Punjab National Bank, Union Bank of India and State Bank of India, who are arrayed as defendants 1 to 3, seeking to set aside the Certificates of Recovery issued by the Debts Recovery Tribunal in favour of the banks and the consequential sales made in favour of defendants 6 to 10 through the Recovery Officer of the Tribunal.
5. Since an application to reject the plaint, has to be considered only on the basis of the averments contained in the plaint and the documents relied upon by the plaintiff himself, let me 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 well as the Vijaya Bank. The plaintiffs never executed any valid promissory notes for the amounts lent by the defendants 1 to 3 or Vijaya Bank. They also never guaranteed the due repayment of the loans taken by defendants 4 and 5. Therefore there is no valid, enforceable and equitable mortgage created by the plaintiffs in favour of defendants 1 to 3. (iv) The defendants 1 to 3 and Vijaya Bank initiated certain recovery proceedings before DRT-I, Chennai impleading the plaintiffs also as defendants. But the plaintiffs were not put on notice about the alleged guarantees said to have been signed by the plaintiffs nor about the offering of their properties as security. (v) The details of the proceedings initiated by defendants 1 to 3 are as follows:-
Punjab National Bank OA.No.137 of 2003 For recovery of Rs.7.15 crores
Union Bank of India O.A.No.61 of 2003 For recovery of Rs.3.41 crores
State Bank of India O.A.No.287 of 2002 For recovery of Rs.2.08 crores
(vi) The summons sent by the Debts Recovery Tribunal were not received by the plaintiffs. But there was some manipulation in the signatures of the plaintiffs in the DRT proceedings and some one purported to have received the summons on behalf of the plaintiffs. Therefore, the plaintiffs were not aware of the proceedings. (vii) The plaintiffs were not aware of the proceedings, but when the properties were brought to sale, pursuant to a paper publication and advertisement in a Tamil Daily, one of the plaintiffs rushed to the Tribunal to find out the nature of the claims. The plaintiffs were informed by their relatives and friends that the properties of the plaintiffs are brought to sale pursuant to a paper notification appearing in all leading newspapers. Thereafter, the plaintiffs approached the DRT with available details and made a thorough search of the records through their Advocates and thereupon filed independent applications to set aside the ex parte Recovery Certificates. The applications to set aside the ex parte orders are pending. (viii) There appears to be a collusion between the defendants 1 to 3 and the defendants 4 and 5 and certain documents have been brought about to facilitate the defendants 1 to 3 to advance money to defendants 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 documents pertaining to one of the suit schedule properties were available with the third plaintiff and the other documents were seized pursuant to a search made by CBI at the respective residences of the parties. Even when the auction notice had been issued by the DRT for the sale of the property, the inspection of documents for intending purchasers were given only in the office of the CBI. But certified copies were made available. This makes it clear that no valid equitable mortgage was created in favour of the banks. (xi) The plaintiffs have no objections in respect of the proceedings initiated by defendants 1 to 3 against defendants 4 and 5. But they cannot proceed against the properties of the plaintiffs on the strength of the fraudulent Recovery Certificate.
(xii) Since the original documents are with the CBI, the banks cannot claim any right, title or interest either for mortgage or for charge under Section 100 of the Transfer of Property Act. There is no relationship of mortgagor and mortgagee between the plaintiffs and defendants 1 to 3.
(xiii) In O.A.No.137 of 2003 filed by the first defendant-Punjab National Bank, it is their claim that V.M.S.Jaffarullah executed promissory notes for Rs.150 lakhs and a hypothecation Agreement, hypothecating the book debts of the defendants 4 and 5. It is their further claim that the plaintiffs 1 and 2 executed a letter of guarantee on 24.4.1998 and also gave letters to the first defendant confirming the deposit of title deeds relating to the properties described in Schedules 'A' to 'E'. The loan was originally advanced by the Nedungadi Bank, which later merged with Punjab National Bank. But no original documents were deposited by the plaintiffs with the first defendant-bank. (xiv) The first defendant-bank itself filed an application in I.A.No.97 of 2006 and got an Advocate Commissioner appointed to verify the originals available in the Court of the Additional Chief Metropolitan Magistrate or with the Superintendent of Police, CBI. The Advocate Commissioner filed a report, which would show that the final order passed by DRT in O.A.No.137 of 2003 was a nullity. (xv) The plaintiffs state that V.M.S.Jaffarullah not only played fraud on the banks, but also fraud on Court in collusion and connivance with the Bank Officials. The entire proceedings initiated by the first defendant are 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) The defendants 4 and 5 schemed an idea and created fraudulent securities of the properties in favour of the banks, thereby committing fraud not only against the owners of the properties, but also against the Nationalised Banks. Therefore, Section 18 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, is not a bar for the present suit, since the entire transaction is alleged to be vitiated by fraud and collusion. (xix) The DRT-I, Chennai had blindly issued Recovery Certificates without applying its mind that there could not be a valid equitable mortgage, inasmuch as the originals were with the CBI. Though the plaintiffs moved applications before the DRT, for setting aside the ex parte orders, the Tribunal simply adjourned the proceedings and allowed the Recovery Officer to conduct the auction. (xx) The properties described in Schedules 'A' to 'E' were auctioned on 27.7.2009, 28.7.2009, 29.7.2009, 30.7.2009 and 31.7.2009 respectively. While Schedule 'A' was purchased by the 6th defendant, Schedules 'B' and 'D' were purchased by defendants 7 to 9 and Schedule 'E' was purchased by the 10th defendant. There were no bidders for Schedule 'C' property.
6. In the background of the averments of fraud, collusion, non execution of any negotiable instruments or letters of guarantee etc., it was contended by Mr.R.Thiagarajan, learned counsel for the respondent/plaintiff that the plaint cannot be rejected at the threshold and that the bar of jurisdiction of Civil Court under Section 18 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 will not apply. Therefore, the primary question to be considered is (i) as to whether the averments contained in the plaint are sufficient to overcome the bar of jurisdiction under Section 18 and (ii) as to whether the plaint would fall under any of the categories enumerated in Clauses (a) to (d) of Rule 11 of Order VII, CPC.
7. It is too long in the day to dispute the fact that fraud vitiates all solemn acts and that the jurisdiction of Civil Courts is not barred when serious allegations of fraud are made. In Cypress Semiconductor Technology India Pvt. Ltd., case (Application Nos.4144, 4145 and 4349 of 2007 in C.S. No.517 of 2007), I had an occasion to consider the issue, with reference to the very Section 18 of the Recovery 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 inS.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 meaningful manner. So is the dictum of the Apex Court in T.Arivandandam vs. T.V.Satyapal {1977 (4) SCC 467}. It was again reiterated by the Court in I.T.C. Ltd vs. Debts Recovery Appellate Tribunal {1998 (2) SCC 70}, by holding that clever drafting, creating illusions of cause of action are not permitted in law. The ritual of repeating a word or creation of an illusion in the plaint can certainly be unravelled and exposed by the Court while dealing with an application under Order VII, Rule 11(a).
9. A Court is obliged to see if the allegations of fraud and collusion made in the plaint, are themselves a product of "fraud and collusion" between the family members of the borrowers, so as to escape liability and save the secured assets, somehow or the other. In the recent past, there is a sudden spurt in the number of civil cases filed against the actions initiated by Banks and Financial Institutions, either under the 1993 Act or under the SARFAESI Act, 2002. All these cases fall under 3 or 4 categories viz., (i) cases filed by strangers claiming that their properties are brought to sale on the basis of forged documents or certified copies of documents submitted by borrowers to banks (ii) cases filed by guarantors claiming that they never signed letters of guarantee or offered their properties as securities
(iii) cases filed by close relatives of borrowers such as spouses, children, brothers and sisters, claiming that they have a share in the properties mortgaged by the borrowers and that they were never aware of and they never gave consent to the properties being offered as securities and
(iv) cases filed by third parties claiming that the properties were sold to them by the borrowers or guarantors by suppressing the creation of the mortgage and that they are bona fide purchasers for value without notice of the encumbrances.
10. It is not very difficult for a seasoned litigant or an intelligent lawyer to draft the plaint in such a manner as to make a secured asset, come within anyone of the above 4 categories, by a clever drafting of the plaint, thereby creating an illusion of fraud, collusion, misrepresentation and the like. Today, with the advancement of technology, the creation of an illusion and the creation of a virtual world are both possible. The moment the civil suit is taken on file, the proceedings before the Debts Recovery Tribunal 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 reading of the entire plaint shows that according to the plaintiffs, (i) the defendants 4 and 5 are the perpetrators of the fraud and (ii) the defendants 1 to 3 are the victims of the fraud. In addition, the plaintiffs claim that there was a collusion with the officials of the bank and that the plaintiffs were also the victims of fraud. But to show that there was any collusion between the defendants 4 and 5 and the officials of the bank, no specific allegations of any precision is made in the plaint. Even as per plaint averments, the defendants 4 and 5 availed facilities from 4 banks, 3 of which are parties to the suit. The allegations of collusion between defendants 4 and 5 and the officials of the bank are made in such general and vague terms in the plaint, that no credibility can be attached to the same.
13. As Justice Vivian Bose pointed out in Bishundeo Narain vs. Seogeni Rai and Jegarnath AIR 1951 SC 280, the parties pleading fraud must set forth full particulars and general allegations are insufficient even to amount to an averment of fraud, of which any court ought to take notice however strong the language in which they are couched may be. In Afsar Sheikh vs. Soleman Bibi{1976 (2) SCC 142}, the Supreme Court pointed out that "undue influence", "fraud", "misrepresentation" etc., are cognate vices and may, in part, overlap in some cases. But in law, they are distinct categories and are required to be pleaded, in view of Order VI, Rule 4, CPC, with specificity, particularity and precision. A general allegation in the plaint that the plaintiff was a simple old man of 90 years who had reposed great confidence in the defendant, was held in that case to be much too insufficient to make out a case of undue influence.
14. Therefore, I am of the view that the allegations of collusion between the defendants 4 and 5 and the officials of the banks, made in the plaint, fall hopelessly short of the requirements of Order VI, Rule 4, CPC. This is because, the plaintiffs themselves are not very clear about the nature of the collusion. In some places in the plaint, it is alleged that the creation of the mortgage and the fabrication of the letters of guarantee were fraudulent and collusive. In other places in the plaint, a different act of fraud viz., a fraud on Court is pleaded by stating that the suit summons were never received by the plaintiffs and that records 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 already filed applications before the Debts Recovery Tribunal, seeking to set aside the final orders and the auction sale conducted by the Recovery Officer. These applications, even according to the plaintiffs, are pending adjudication. Keeping these applications pending before the Tribunal, the plaintiffs have come up with the above suit.
17. But the fact that the plaintiffs have had knowledge of the proceedings before the DRT, even in the year 2005, is borne out by records. Even admittedly, Punjab National Bank filed O.A.No.137 of 2003, impleading the plaintiffs herein as defendants 2 to 5. After filing the said application, the bank also initiated proceedings under the SARFAESI Act, 2002. Immediately upon receipt of the notices under Section 13(2) of the SARFAESI Act, 2002, the plaintiffs herein filed writ petitions on the file of this Court, challenging those notices. While the first plaintiff herein filed W.P.No.8229 of 2005, the second plaintiff filed W.P.No.8367 of 2005 and the third plaintiff filed W.P.No.7934 of 2005.
18. In W.P.No.8229 of 2005 filed by the first plaintiff, it was stated by her in para 8 of the affidavit in support of the writ petition, as follows:-
"I submit that the respondent herein issued a demand notice dated 21.2.2004 through which the respondent herein demanded the petitioner to discharge the entire loan amount in full together with future interest within 60 days from the date of the said notice else threatened to proceed to enforce the securities for the realisation of the dues under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. In the said notice, the respondent has also stated they have already filed suit before the Debt Recovery Tribunal on 20.5.2003 and on receipt of the notice, the respondent was informed that they cannot initiate two parallel proceedings for the recovery of the same debt and the respondent remained silent and after 11 months they have issued a notice dated 14.2.2005 in which the respondent has referred the earlier notice dated 21.2.2004 and the respondent has demanded the petitioner to deliver possession of the secured assets before 12.3.2005 failing which the respondent will take possession of the secured asset on or before 12.3.2005."
19. In W.P.No.8367 of 2005, filed by the second 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 of Rs.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 of Rs.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.137of 2003."
Para 8 of the affidavit filed by the third plaintiff in support of the above writ petition contains the same averments as contained in paragraph 8 of the writ petitions filed by the plaintiffs 1 and 2.
21. The averments made by the plaintiffs 1 to 3 in the affidavits in support of the writ petitions filed way back in 2005, made two things very clear viz.,:-
(i) that the plaintiffs 1 to 3 were aware of the initiation of proceedings by the first defendant-bank in O.A.No.137of 2003 on the file of the DRT, at least in March 2005, when the writ petitions were filed; and
(ii) that they were not only aware of the proceedings before the DRT, but were also preparing to file a counter in O.A.No.137of 2003.
22. The above writ petitions filed by the plaintiffs 1 to 3 herein in the year 2005, contained a challenge only to the initiation of parallel proceedings both under the 1993 Act and under the SARFAESI Act, 2002. No challenge was made in those writ petitions, to the very initiation of the proceedings under the 1993 Act, on the ground that the plaintiffs never executed any letters of guarantee nor offered their properties as securities. No allegation of fraud or collusion either on the plaintiffs or on the Court was pleaded in those writ petitions. The plaintiffs did not even allege in those writ petitions that they never executed any documents or letters of guarentee. They did not also plead that even the summons issued by the DRT were not served on them. The plaintiffs could not have taken such a plea, since they had admitted in para 3 of their affidavits in support of the writ petitions that they had been advised to file detailed counters in O.A.No.137of 2003.
23. Therefore, the allegations of fraud and collusion made for the first time as an after thought, after 4 years of the filing of those writ petitions, cannot be taken for a pinch of salt.
24. Today the plaintiffs cannot be heard to contend that they never received the summons from the Debt Recovery Tribunal. Their claim in the plaint as though 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 brought to sale pursuant to a paper publication, one of the plaintiffs rushed to the DRT, made enquiries and came to know about the details of the proceedings. These averments are obviously false in the light of the averments made in the writ petitions filed in the year 2005, admitting knowledge about the proceedings pending before DRT.
27. While it may be possible for a person to explain inconsistencies between the pleadings made in a previous litigation and the pleadings made in a later litigation, it will not be permissible for the Court to allow a person to explain a false statement. In other words, an inconsistent plea stands on a different footing than a patently false plea and hence while the former is capable of being explained, the later is not. Today the plaintiffs have come up with a false case that they were not aware of the proceedings before the DRT, till paper publications were made for the sale of the properties. But in the writ petitions filed in 2005, they have claimed knowledge about those proceedings. Going one step further in building up a false case, the plaintiffs have not even whispered in their plaint, about the writ petitions filed by them earlier. Therefore, there is not even any scope for the plaintiffs to explain the averments made by them in the previous writ petitions.
28. As stated earlier, the plaintiffs filed the above writ petitions in March 2005. The plaint in the present suit was presented on 27.8.2009, after more than 4 years of the filing of the previous writ petitions. In the writ petitions, the plaintiffs have admitted to have had knowledge about the proceedings before the DRT. Therefore, the declaratory reliefs sought for by the plaintiffs that they never executed any letters of guarantee or mortgage by deposit of title deeds, are hopelessly barred by limitation even on admitted facts. Even if the plaintiffs are taken to have had knowledge at least from March 2005, about the claim made by the banks, the suit ought to have been filed within 3 years thereafter. But it was filed after 4 years. Therefore, even on the ground of limitation, though the same is a mixed question of law and fact, the plaint is liable for rejection, since from the date of filing of the writ petitions, a period of 4 years had elapsed before the present suit was filed.
29. Mr.R.Thiagarajan, learned counsel for the respondents/plaintiffs 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 Rs.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 applications for injunction and other interim reliefs. While the Division Bench directed the plaintiffs to render maximum cooperation for the early disposal of the application for rejection of plaint, the Supreme Court recorded an undertaking from the counsel for the plaintiffs that no adjournment would be sought for, in the application for rejection of plaint, on the ground that time was granted for compliance with the condition. Therefore, the disposal of this application has nothing to do with the above conditional order.
30. To summarise, the suit on hand is nothing but an abuse of the process of law and the plaint is liable for rejection for the following reasons:-
(i) The plaintiffs have admitted, in the writ petitions filed in March 2005 that they had knowledge of the proceedings initiated by the first defendant-bank before the DRT in O.A.No.137of 2003. Yet they have chosen to file the present suit only in August 2009. Therefore, the suit is barred by limitation even on admitted facts. (ii) The plaintiffs have completely suppressed in the plaint, the factum of having filed writ petitions in the year 2005 on the file of this Court. This suppression has been made, obviously with a view to enable them to take a stand that they were not aware of the proceedings before the DRT. Therefore, they have come to court with unclean hands and are also guilty of abuse of the process of court. (iii) The plaintiffs have admittedly initiated proceedings before the DRT for setting aside the sale and for setting aside the final orders. The plaintiffs were made parties to the original application before the DRT, even in the first instance. Since they were aware of the proceedings even in 2005, they must have taken steps to defend themselves in the original application, by raising all the contentions now raised in the present plaint. Allegations of fraud and collusion, if made by close relatives of borrowers such as spouses, children, parents and brothers and sisters, can be agitated even before the Tribunal, since the Tribunal is competent to decide all such issues. This is especially so when these relatives are arrayed as parties to the original application before the Tribunal, either on the ground that they are guarantors or on the ground that they had offered third party collateral securities. It is not as though the Tribunal is not competent to decide questions 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 additional documents by Mr.R.Thiagarajan, learned counsel for the plaintiffs, show that the role played by the plaintiffs herein vis-a-vis the borrower V.M.S.Jaffarullah, was never in doubt in the criminal complaint. While the bank made allegations against the plaintiffs also for producing fabricated documents and also obtaining loans from various banks, on the strength of the very same documents, the charge sheet filed by the CBI left out the plaintiffs. But a perusal of the charge sheet shows that the letters of guarantee and the memorandum of deposit of title deeds were not alleged to be fabricated. The charge sheet does not say that V.M.S.Jaffarullah forged the signatures of the plaintiffs in the letters of guarantee and in the memorandum of deposit of title deeds. The fulcrum of the charge sheet is that the documents of title relating to the properties were fabricated. In the absence of an allegation in the charge sheet filed by the CBI that the signatures of the plaintiffs were forged by V.M.S.Jaffarullah, the plaintiffs cannot take advantage of the custody of the documents with the CBI to claim that they had absolutely nothing to do with the banks. In any case, this question is a moot question in view of the fact that the properties have been brought to sale in pursuance of a certificate of recovery issued by the DRT. Once a property is brought to sale in execution of a decree, the question whether there was a valid mortgage or not recedes to the background, so long as the decree stands. Therefore, the criminal case initiated by the CBI and the custody of the title deeds with the CBI, can hardly save the plaintiffs of their liability and they cannot turn this error into account. Hence the applications for rejection of plaint are liable to be allowed.
31. Before parting with the case, it is appropriate to record what the Apex Court said in Ravinder Kaur vs. Ashok Kumar {2003 (8) SCC 259}, which was also quoted with approval in Gayatri Devi vs. Shashi Pal Singh {2005 (5) SCC 527}. It was observed that "the Courts of Law should be careful enough to see through such diabolical plans of the judgment debtors to deny the decree holders, the fruits of the decree obtained by them. These types of errors on the part of the judicial forums only encourage frivolous and cantankerous litigations causing law's delay and bringing bad name to the judicial system."
32. Therefore, the applications A.Nos.5583 of 2009 and 6508 of 2009 are allowed and the plaint in C.S.No.796 of 2009 is rejected. Consequently all other applications are dismissed. However there will be no order as to costs.
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