Back
2015 Supreme(Mad) 1567
IN THE HIGH COURT OF JUDICATURE AT MADRAS
S. VIMALA, J.
Mark Pillai, Represented by his Power of Attorney, Maria Pauly – Appellant
Versus
Indian Bank, ARMB-II, represented by its: Assistant General Manager, Chennai & Others – Respondent
Civil Suit No. 768 of 2010
Decided On : 03-02-2015
Advocate Appeared:
R. Thiagarajan, Advocate.
The judgment establishes that a judgment or decree obtained by fraud is to be treated as nullity and can be questioned even in collateral proceedings.
Headnote:
fraud - property dispute - RDDBI Act - O.A.No.375 of 1997, DRC No.187 of 2001 - The judgment discusses the fraudulent compromise between the bank and the borrowers, the validity of the sale certificate, and the rights of innocent third-party purchasers. It also highlights the legal principles established in S.P.Chengalvaraya Naidu v. Jagannath and S.V.Subramaniam v. Cypress Semiconductor Technology India Private Ltd.
Fact of the Case:
The plaintiff seeks a declaration that they are not bound by the proceedings initiated by the bank and the 20th defendant in relation to the property, and challenges the legality of the compromise order and sale certificate. The plaintiff claims to be a bona fide purchaser for value and alleges collusion and fraud between the bank and the borrowers.
Finding of the Court:
The court finds in favor of the plaintiff, declaring that they are not bound by the proceedings and that the compromise order and sale certificate are not binding upon the plaintiff.
Issues: The issues revolve around the validity of the proceedings initiated by the bank, the fraudulent compromise, and the rights of the innocent third-party purchaser.
Ratio Decidendi: The court relies on legal principles established in S.P.Chengalvaraya Naidu v. Jagannath and S.V.Subramaniam v. Cypress Semiconductor Technology India Private Ltd. to support its decision.
Final Decision: The Civil Suit is decreed in favor of the plaintiff with costs.
1. The suit is filed for: (a) a declaration that the plaintiff is not bound by the proceedings initiated by M/s.Ravishankar Industries Private Limited (20th defendant) and the first defendant (Bank) in respect of the plaint schedule property in O.A.No.375 of 1997 or in the event of the Court holding that the plaintiff is not a bona fide purchaser, to direct defendants 4 to 19, 23, 25 and 26 (respondents 4 to 19, 23, 25 and 26) to pay such sum that may be due and payable in respect of the plot purchased by the plaintiff covered by the Debts Recovery Proceedings initiated as against the borrowers and guarantors by the first defendant and the properties covered therein and direct the first respondent to clear the encumbrance by executing a deed of disclaimer over the plaint schedule property; (b) a declaration that the purported compromise order, dated 21.11.2000, passed in O.A.No.375 of 1997, as merged with DRC No.187 of 2001 on the file of the Debts Recovery Tribunal, Chennai, is illegal, invalid and non-est in the eye of law and consequently not binding upon the plaintiff; (c) a declaration that the sale certificate issued in favour of the third defendant by the Recovery Officer, Debts Recovery Tribunal-I, Chennai, pursuant to DRC No.187 of 2001, dated 03.01.2007, is illegal, invalid and non-est in the eye of law and not binding upon the plaintiff and his property; (d) a permanent injunction restraining the first and third defendants from enforcing the rights derived pursuant to the sale certificate, dated 03.01.2007, issued subsequent to the purported compromise, dated 21.11.2000 as merged DRC No.187 of 2001 on the file of the Debts Recovery Tribunal-I, Chennai, as against the plaintiff or the suit property.
2. The brief averments in the plaint are as follows:-
The plaintiff purchased the suit property, by virtue of the sale deed, dated 17.02.2006, from M/s.Prakrithi Foundations Limited (D-23) for a sale consideration of Rs.9,24,000/-. The plaintiff availed financial assistance from the 24th defendant. The suit property, along with other properties, were purchased by the vendor of the plaintiff, from defendants 4 to 19. Defendants 4 to 19 had an agreement for sale with M/s.Palaniappa Estates (D-25) and defendants 4 to 19 gave a power of attorney in favour of Palaniappa Estates (D-25). D-25 applied for approval of plotting out the property into convenient house-sites and also obtained approval.
2.1. The plaintiff also paid a sum of Rs.30,76,000/- towards additional expenditure for the development of the suit property.
2.2. Towards mobilizing money for the purchase of the property, the plaintiff created a valid mortgage in favour of the M/s.Sundaram BNP Paribas Home Finance Limited (D-24) and the plaintiff availed a loan of Rs.23,76,000/- from D-24 for the purchase and development of the property. The loan is repayable with interest at 8.75% per annum and the amount is repayable in 120 monthly instalments. The plaintiff has been exercising his right of ownership over the suit property, i.e., Plot Nos.55 and 56, without any let or hindrance.
2.2. The plaintiff was not aware of the initiation of legal proceedings by the first defendant as against D-20. D-20 had borrowed loan from the Indian Bank, T.Nagar Branch, Chennai, and did not repay the amount to the Bank and therefore, the Bank initiated recovery proceedings in O.A.No.375 of 1997 for the recovery of a sum of Rs.59,33,67,968.42 with future interest at 20.75% per annum. In the proceedings before the Debts Recovery Tribunal, a compromise was entered into between the Indian Bank and the defendants, without reference to the guarantors and without reference to the property situated at Okkium Thuraipakkam and also without reference to the rights of third parties, who have acquired the property bonafide from defendants 4 to 19 and 23 / 25. There had been a collusion between the first defendant and the principal borrower, M/s.Ravi Shankar Industries Private Limited (D-20). T
