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2025 Supreme(Online)(DRAT) 359
DEBT RECOVERY APPELLATE TRIBUNAL
Justice Anil Kumar Srivastava, CJ
State Bank of India, Kakinada, East Godavari Dist. A.P. – Appellant
Versus
K S BHAGWAN PROP of Ms K VENKANNAH, Chuurch Square, Jagannaickpur, Kakinada, East Godavari Dist. A.P. – Respondent
APPEAL No. 01 of 2018 | O.A. No. 519 of 2002
For the Appellants/Petitioners: Mr. Soudip Pal Chowdhury, Ms. Saswati Sikder
For the Respondents: Mr. A.K. Dhandhania, Mr. Prosit Deb, Ms. Sanchita Sarkar
The validity of equitable mortgage hinges on the scope of authority granted in the Power of Attorney, and failure to challenge mortgage creation does not negate liability.
Headnote:(A) Debt Recovery Tribunals Act, 1993 - Sections regarding recovery of debts and equitable mortgage - The Appellate Tribunal allowed the appeal against dismissal of O.A. against deceased defendant’s legal heirs and confirmed liability on defendant no.1, ordering recovery of Rs.18,38,306.50 with 10% interest. (Paras 1-44)
(B) Equitable Mortgage - Creation and validity - The Tribunal ruled that equitable mortgage was validly created as the Power of Attorney conferred sufficient authority to effectuate the mortgage, and dismissal against other defendants for non-liability was erroneous. (Paras 40-41)
(C) Rate of Interest - The Tribunal held that the DRT exercised discretion in awarding 10% interest pendente lite and post-decree appropriately, in accordance with precedent. (Paras 41-43)
| Table of Content |
|---|
| 1. background of the case and procedural history. (Para 1 , 2) |
| 2. nature of credit facilities and guarantor claims. (Para 3 , 4 , 5) |
| 3. defendant's admissions and claims regarding mortgage. (Para 6 , 7) |
| 4. final judgment and order on appeal. (Para 8 , 40 , 43) |
| 5. debates surrounding the validity of the mortgage. (Para 14 , 18 , 19) |
| 6. examination of power of attorney's implications. (Para 21 , 22 , 23) |
| 7. legal interpretation of power of attorney. (Para 24 , 26 , 28 , 29) |
| 8. court's findings on the allegations concerning the mortgage. (Para 30 , 31 , 32 , 33) |
| 9. conclusion on the validity of equitable mortgage. (Para 39 , 42) |
The Appellate Tribunal
Instant appeal has arisen against the judgement and order dated 04.10.2017 passed by the learned DRT Visakhapatnam in O.A. No. 519 of 2002 [State Bank of India, Kakinada Vs. K.S. Bhagwan, Proprietor of M/s K.Vekannah& seven others] whereby learned DRT has allowed the O.A. for recovery of an amount of Rs. 18,38,306.50 along with 10% interest per annum pendente lite and future against defendant no.1, K.S. Bhagwan. However, O.A. was dismissed against defendant no.2, since deceased, represented by legal heir defendant no.5 to 8, and defendant no.3. O.A. was also dismissed against defendant no.4, Life Insurance Corporation of India, as unnecessary to the present O.A. proceeding.
2. Initially a suit being OS No. 200 of 1987 was filed by the bank before the Subordinate Judge, Kakinada. Said Suit was transferred to DRT, Bangalore on 11.10.1996. Thereafter, the suit was transferred and re-transferred to various DRTs in the State of Telangana and Andhra Pradesh. Ultimately, DRT Visakhapatnam heard the matter and delivered the impugned judgement and order dated 04.10.2017.
3. As per pleading of the appellant bank, it is stated that defendants have availed credit facilities since long. In 1984 the firm was reconstituted and defendant no.1 became the sole proprietor of the firm. Credit facilities were enhanced by the bank in favour of defendant no.1 and defendant no.2 and 3 stood guarantors of the said loan giving collateral security by way of creating equitable mortgage of the properties at schedule A to C belonging to the defendant no.2 and 3. Irrevocable Registered Settlement Deed dated 24.04.1957 was already with the bank. Subsequently, in May, 1986 credit facilities were enhanced. Bank extended the equitable mortgage on the strength of the Power of Attorney of defendant no.2 and 3. Defendant no.1 wrote three letters for himself and defendant no.2 and 3 to the bank for confirming deposit of Registered Settlement deed on 10.05.1985 whichwould cover the enhanced credit facilities as security and for the amount due to the bank from the defendant no.1. In the said letter defendants have admitted that they were called by the bank on 20.05.1986 and they admitted that equitable mortgage of schedule properties A to C so created on 10.05.1985 shall also continueas security for the enhanced credit facilities. Later defendant no.1 suspended his business. Loan account became irregular. Legal notice was issued demanding outstanding dues. Defendants did not clear up the dues. Hence the Suit filed before the Civil Court, Kakinada which was transferred to DRT.
4. Defendant no.2 contested the O.A. proceeding before DRT by filing written statement of defence wherein it is stated that he separated from the family since 1964. Since he was residing far away place, he has given general Power of Attorney to defendant no.1 for managing his properties. Defendant no.2 alleged that scope of the power of attorney was limited and the same did not empower defendant no.1 to mortgage the property for availing credit facilitiesin favour of a firm wherein he was the sole proprietor. It is further stated that defendant no.2 did not even know the fact of enhancing the credit facilities granted in favour of defendant no.1. It is further stated that it is not true that defendant no.2 stood as a guarantor. Defendant no.2 did n
