The Debt Recovery Tribunal has the jurisdiction to incidentally examine property title to determine the existence of a valid security interest before upholding enforcement measures under the SARFAESI Act, especially when the underlying sale deed of the borrower is found to be void.

ORDER

1. Aggrieved against the order of the Learned Presiding officer, DRT-II, Chennai dated 27.11.2009 passed in SA No.119/2008, appellants, who lost their case before DRT, filed this appeal under Section 18 of the SARFAESI Act.

2. Brief facts leading to filing of aforesaid SARFAESI application are that, appellants are the joint owners of the property concerned in this case, by virtue of purchase from one Akbar Ali and Ms. Jarina Begam for a valid consideration through registered Sale Deed dated 16.6.2006. Possession Notice dated 17.10.2008 was pasted on the outdoor of the appellants’ premises. Appellants came to know from the notice that one Mr. T.M. Varardharajan and Smt. Mahalakshmi availed loan from the erstwhile respondent bank viz., Dena Bank and Mr. E.T. Balaraman was the guarantor for the loan so availed. The borrowers had obtained loan facilities from the respondent bank on the basis of some bogus documents. Appellants on the basis of their title deeds availed loan facility from the Bank of Maharashtra. When appellants have valid right and title over the subject property, sale of the property by the first respondent bank to the second respondent on the basis of proceedings initiated against the property of the appellants is illegal. Therefore, SA No.119/2008 was filed to stop all further proceedings pursuant to the Possession Notice dated 17.10.2018, auction sale, etc.

3. Learned Presiding Officer dismissed the SA on the ground that since issue involved in this case relates to title and interest over the property between two persons and that issue cannot be decided by the DRT. It was also found that there is no evidence produced to show that bank committed any irregularity and it followed the mandatory provisions while taking recourse under Section 13(4) of the SARFAESI Act. Thus, this appeal.

4. Learned Counsel for the appellants submitted that appellants are neither borrowers nor guarantors, but, are absolute owners of the subject property and they are third party to the ‘Lis’ involved in this case in the SARFAESI proceedings initiated by the first respondent bank against the second respondent.

5. It is further submitted that the property was originally owned by one Mr. Robert Rajasekaran, who executed a registered Power of Attorney deed in favour of one Mr. A.M. Nazeer. On the basis of the said power of attorney deed, he sold the property to Mr. Akbar Ali and Ms. Jarina Begam through registered sale deed dated 4.10.2004. Thereafter, the said Mr. Akbar Ali and Ms. Jarina Begam sold the property to the appellants on 16.6.2006. Appellants availed loan from Bank of Maharashtra by creation of equitable mortgage over their property on 6.9.2006.

6. It is further submitted that after executing power of attorney deed in favour of Mr. Nazeer, Mr. Robert Rajasekaran appears to have sold the property to Mr. T.M. Varadarajan on 25.11.2004 and on that basis, Mr. T.M. Varadharanan viz., the second respondent availed loan from erstwhile Dena Bank, which later got merged with Bank of Baroda and mortgaged the property on 29.12.2004.

7. It is his further submission that property was validly sold by the power agent of Mr. Robert Rajasekaran to Akbar Ali and Ms. Jarina Begam. Mr. Robert Rajasekaran has no right to sell the property to Mr. Varadarajan subsequent to the sale of Akbar Ali and Ms. Jarina Begam. Therefore, the sale held in favour of Mr. Varadarajan is illegal and invalid and on t