ORDER

1. The issue in this appeal is whether the appellant Bank had a prior charge in respect of properties claimed to belong to Respondent 2 Company. There are two properties in question. The first property is Flat No. B-2, Neelkanth Complex, Sahar Road, Vile Parle (E), Bombay (hereinafter referred to as "the flat"). The second property is certain land at Anjaneri (hereinafter referred to as "the land").

2. Respondent 2 had been granted certain overdraft facilities by the appellant Bank in 1989. In consideration for the grant of such facility, Respondent 2 undertook to create an equitable charge of the flat in favour of the appellant Bank. Undisputedly at that point of time Respondent 2 was not the owner of the flat. All it had in its possession was an agreement executed by the owner to sell the flat to Respondent 2. This agreement was deposited with the appellant Bank by way of security by Respondent 2.

3. Respondent 2 also took a loan from the appellant Bank of about Rs 35 lakhs and undertook to create a mortgage by deposit of title deeds of the said land. Pursuant to this undertaking, no mortgage was in fact executed by Respondent 2.

4. Defaults were committed by Respondent 2 i