S. Ravindra Bhat, J.

CAV. 398/2014

Learned counsel for the caveator has put in appearance. Cav. 398/2014 accordingly stands discharged.

C.M. NO. 5795/2014

Allowed, subject to all just exceptions.

W.P.(C) 2789/2014, C.M. NO. 5794/2014 (for stay)

1. This proceeding under Article 226 of the Constitution of India questions an order of the Debts Recovery Appellate Tribunal (DRAT) dated 21.03.2014 in Appeal No.443/2010. The impugned order rejected the petitioners’ appeal against an order of the Debts Recovery Tribunal (DRT).

2. The first respondent (hereafter referred to as “the bank”) had advanced amounts towards working capital (Rs. 3.75 crores) and term loan facility of Rs. 95 lakhs tothe second respondent (hereafter referred to as “the borrowers”). The third and fourth respondents were guarantors to these loan facilities. On 30.06.2008, the loan became a Non-Performing Asset (NPA) and the bank initiated proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDBFI), through OA No. 44/2008. It was alleged that a sum of Rs. 33.39 lakhs was outstanding as against the term loan advanced and Rs. 99.57 lakhs was due and payable in respect of the cash credit account. The latter facility, i.e. cash credit advance was secured by mortgage of a property, being K-17, Hauz Khas, New Delhi. The term loan was secured by mortgage of property no. 47-B, Kalu Sarai, Hauz Khas, New Delhi (hereafter referred to as “the suit property”).

3. The petitioners claim that in May 2007, the guarantors approached them for the sale of the suit property. The total consideration agreed upon was Rs. 95 lakhs of which Rs. 5 lakhs was paid on 13.05.2007. A further amount of Rs. 15 lakhs was paid on 31.05.2007. It is alleged that the guarantors never told the petitioners that the property was mortgaged. The petitioners alleged that this information was gathered from the Manager of the bank which sanctioned them a loan of Rs. 95 lakhs. It was alleged that this loan was not disbursed on the ground that the borrower had not cleared the outstanding dues. The petitioners alleged that the sums were appropriated and three cheques totalling Rs. 63 lakhs were issued to the borrower/vendor. In these circumstances, on 30.10.2007, by three separate sale deeds, the suit property was conveyed to the petitioners.

4. On 12.02.2008, the bank issued notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter called “SARFAESI Act”); a copy of this notice was served upon the first petitioner as well. In this notice, a sum of Rs. 31,16,796/- was demanded from the borrower. On 05.11.2008, the bank issued a notice under Section 13(4) of the SARFAESI Act in respect of the suit property at Kalu Sarai. In these circumstances, the petitioners approached DRT under the SARFAESI Act contending that as third-party innocent purchasers, they had perfected title over the property and that the amounts deposited and given to the borrowers were meant to be paid to the respondent bank to fully discharge the borrower’s liability. It was urged that in these circumstances, the bank could not proceed further with the action under the SARFAESI Act as far as the suit property was concerned.

5. During pendency of the proceedings, the DRT declined to grant any interim relief which led to the petitioners approaching the DRAT unsuccessfully and later this Court, by way of writ proceedings. On 18.05.2010, the Court disposed of the writ petition, noticing some of the petitioners’ contentions, especially the one to the effect that the notices issued under Section 13(2) of the SARFAESI Act were defective.

6. After the above order, the DRT Delhi considered the pleadings and materials before it as well as the submissions of the parties and by an order of 05.10.2010, dismissed the application under the SARFAESI Act by the present writ petitioners. The latter, therefore, approached the DRAT, whi