The first charge holder has superior rights over subsequent purchasers, affirming the validity of the Bank's claim over the mortgaged property.

JUDGMENT

JUSTICE R. D. KHARE, CHAIRPERSON

1. The present appeal has been preferred by the appellant under section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “the SARFAESI Act, 2002”) against the orders dated 25.09.2017 and 06.08.2018, whereby the S.A. No. 182/2016 and the review application no. 10 of 2017 have been dismissed by the Tribunal below.

2. The brief facts giving rise to this appeal are that Sanjay Kumar Gohari and Shakuntala Kumari were granted some financial assistance by the respondent-Bank and the borrower had created a mortgage over the property bearing House No. 551 Jha/19, Ram Nagar, Kanpur Road, Alambagh, Lucknow on 29.07.2005 as security to the said loan. Necessary documents were executed to that effect. Later-on, the property so mortgaged was sold by Shakuntala Kumari to the appellant on 22.02.2010 and the sale deed was executed.

3. It transpires that the borrowers did not repay the loan amount, therefore, the respondent-Bank initiated the recovery proceedings under the SARFAESI Act, 2002 and the auction sale notice dated 18.02.2013 was published in the newspapers and the property was sold and sale certificate was issued on 09.05.2013 in favour of the respondent no. 3. Thereafter, the respondent-Bank moved an application under section 14 of the SARFAESI Act before the District Magistrate, Lucknow on 15.02.2014, which was allowed on 07.07.2014. Pursuant to it, the ACM, Lucknow passed an order dated 24.02.2016 for taking physical possession of the property in question on 26.02.2016, which was accordingly affixed. Subsequently the appellant visited the office of the respondent-Bank, where he was informed that the property in question had been mortgaged by Sanjay Gohari and Smt. Shakuntala Kumari as security for a loan of Rs. 5.00 lacs on 29.07.2005 and the account had become NPA for want of non-repayment of the loan and all the documents pertaining to the said loan were handed over by the Bank to the appellants.

4. It also transpires that the appellant moved an application before the District Magistrate on 25.02.2016 requesting therein that the ex-parte order dated 07.07.2014 may be recalled and a criminal case may also be got registered, in which the District Magistrate passed an order directing the ACM-III to make a proper inquiry into the matter and take action in accordance with law. Thereafter, the appellant moved an application dated 07.03.2016 before the Senior Superintendant of Police Lucknow for necessary action by lodging FIR against the borrower, but he could not be successful. When it came to the knowledge of the appellant, he approached the DRT for setting aside the entire proceedings of the Bank on the ground that he had purchased the property in question from Shakuntala Kumari, which is alleged to have been mortgaged with the Bank. The Tribunal below vide impugned order dismissed the securitization application of the appellant on the ground that the respondent-Bank has got first charge over the secured asset. Against the said order, the appellant has filed a review application no. 10/2017, which has also been rejected vide order dated 06.08.2018. Being aggrieved by both the orders impugned, the present appeal has been filed by the appellant.

5. Learned counsel for the appellant submitted that the appellant had not taken any loan from the respondent- Bank nor had executed any loan documents pursuant thereto or stood as guarantor and further that no relief was claimed by the respondent-Bank against the appellant, therefore, the order impugned against the appellant is not sustainable, as on the basis of the oral prayer of the borrower, the appellant was made party in the proceedings.

6. The learned counsel for the respondent-Bank has relied upon page no. 11 of its reply, which is order dated 12.02.2016 passed in O.A. No. 438/2015. The said order records that the defendant no. 2, who was the borrower, obtained loan from the re