A bona fide purchaser's rights prevail against an improperly created mortgage lacking necessary permissions, and res judicata does not bar a subsequent suit seeking different relief.

JUDGMENT :

ANU SIVARAMAN, J.

The defendant No.6 is before this Court in this appeal, assailing the legality and correctness of the judgment and decree dated 08.12.2009, passed in O.S.No.1024/2002 on the file of IX Additional City Civil and Sessions Judge at Bengaluru (hereinafter referred to as 'the trial Court' for short).

2. We have heard Shri. Gururaj Joshi, learned counsel appearing for the appellant and Shri. Nataraju T, learned counsel appearing for respondent No.1.

3. For the sake of convenience, the parties are referred to as per the rankings before the trial Court.

4. Brief facts of the case are as follows:-

The plaintiff/respondent No.1 instituted O.S.No.1024/2002 for declaration that the mortgage created by defendant No.5/respondent No.6 herein- Jaswinder Singh in respect of defendant No.6 - Karnataka State Financial Corporation ('KSFC' for short) is invalid and not binding upon him and the schedule property and also sought for permanent injunction.

The property in question was initially allotted by the Bangalore Development Authority ('BDA' for short) to defendant No.5. The defendant No.5 constructed a building comprising of ground and first floor on the allotted site. Subsequently, on 10.01.1994, the BDA executed an absolute sale deed in favour of defendant No.5. On 10.02.1994, the plaintiff purchased the first floor of the property in question from defendant No.5 through a registered sale deed for valid consideration. The ground floor was purchased by the plaintiff’s brother - Jaikumar Radhakrishnan for a valid sale consideration of Rs.7,50,000/- and later, the same was sold to the plaintiff for a consideration of Rs.9,00,000/- through a registered sale deed dated 15.06.1995. The khata has been duly transferred to the plaintiff's name. The plaintiff has been in peaceful possession and enjoyment of the property through the aforementioned sale deed.

On 05.11.1999, an individual, claiming to be an officer of defendant No.6, approached the plaintiff's brother and informed him that defendant No.1 had offered the schedule property as collateral security for the loan advanced to defendant No.1, creating a mortgage in favour of defendant No.6 through deposit of title deeds. It was further revealed that defendants No.1 and 5 had failed to repay the loan, prompting initiation of proceedings under Section 31(1)(a) of the State Financial Corporation Act, 1951 ('the SFC Act, 1951' for short). The plaintiff contends that the mortgage created by defendant No.5 is illegal, invalid and constitutes fraud upon the plaintiff, as the defendant No.5 had explicitly undertaken at the time of allotment, not to mortgage the property except to certain institutions like the Government or Banks and that too, for the purpose of obtaining loans for construction.

The plaintiff claims that the action of defendant No.5 amounts to fraudulent conduct and that the mortgage, having been created without plaintiff's knowledge or consent, is void. The plaintiff sought a decree to protect his rightful ownership and possession of the schedule property. The plaintiff also prayed for a declaration that the mortgage is invalid and that the title to the property remains unaffected by the alleged action of defendant No.5.

5. The trial Court based on the pleadings, framed the following issues for its consideration:-

i. Whether the plaintiff proves that the mortgage created by the 5^th defendant in favour of 6^th defendant is invalid and not binding upon him?

ii. Whether the plaintiff is entitled to the declaration sought for?

iii. Whether the plaintiff is entitled to the permanent injunction sought for?

6. In order to substantiate his claim, the plaintiff examined himself as PW-1 and got marked 15 docume