IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 18.12.2009 CORAM: THE HONOURABLE MR. JUSTICE ELIPE DHARMA RAO And THE HONOURABLE MR. JUSTICE M. VENUGOPAL W.P.No.11358 OF 2006 M/s. Bank of Baroda Ambattur Branch, Rep. By its Senior Branch Manager, Seven Star Complex, No.119, M.T.H. Road, Ambattur, Chennai-53. .... Petitioner Vs. 1. Mr. B. Pappa Mudaliar 2. The Registrar, DEBTS RECOVERY APPELLATE TRIBUNAL, Indian Bank Building, Ethiraj Salai, Egmore, Chennai – 08. .... Respondents PRAYER: Petition filed under Article 226 of the Constitution of India praying for the issuance of the writ of Certiorarified Mandamus in calling for the records of the impugned order in R.A.No.48 of 2005 dated 03.01.2006 passed by the second respondent/Debts Recovery Appellate Tribunal and to quash the same as arbitrary unfounded in law, illegal, unlawful and against the principles of natural justice. For Petitioner : Mr. Balamurugan For M/s. Ramalingam & Associates For Respondent : Mr. S.V. Jayaraman (Senior Counsel) For Mr. V. Venkatasamy O R D E R M.Venugopal,J. The petitioner/Bank has filed this writ petition praying for issuance of a writ of certiorari by calling for the records of the https://hcservices.ecourts.gov.in/hcservices/ impugned order in R.A.No.48 of 2005 dated 03.01.2006 passed by the second respondent/Debts Recovery Appellate Tribunal and to quash the same as arbitrary, unfounded in law, illegal etc. 2. The second respondent/Debts Recovery Appellate Tribunal while allowing the R.A.No.48 of 2005 in its order dated 03.01.2006 has inter alia opined that 'it is satisfied that the first respondent/appellant was a victim of circumstances, and his need for the amount to discharge the loan incurred in his daughter's marriage was exploited by the first defendant and the first respondent/appellant was made as a scape goat and the title deeds were handed over to Mr. N. Anand Sai with which certain documents were created, about which the appellant was not aware and in fact, the defendant nos.3 to 5 have given complaints to the police about the fraud committed by the first defendant with the connivance of the manager of the bank and that the first respondent/appellant also gave such complaint to the police and the appellant was also called upon for enquiry and that the manager of the respondent bank was also suspended, would go to show that there is some truth in the arguments advanced on behalf of the appellant, that his signatures were obtained in blank papers without even explaining contents of the documents and those peculiar circumstances make one has to believe the case of the first respondent/appellant is true and in the said view of the matter, it is inclined to accept the case of the appellant/first respondent that he was a victim of the circumstances and that he did not offer himself or his property as a surety for the loan requirements of the first defendant but however, the first respondent/appellant was liable to pay the admitted amount of Rs.2 lakh together with interest thereon etc., and resultantly has come to the conclusion that the first respondent/appellant had borrowed Rs.2 lakhs until which he is liable to pay simple interest together at 12% per annum from the date of borrowing and Recovery Certificate could be issued on the said amount and directed the writ petitioner/Bank to file a revised statement of accounts before the Debts Recovery Tribunal calculating interest at the contractual rate on Rs.2 lakhs from the date of borrowing, up to the date of filing of the original application and at the rate of 12% simple interest from the date of filing of the original application till 03.01.2006, i.e., the date of order of the Appellate Tribunal after giving credit to the amounts paid by the appellant i.e. Rs.4.78 lakhs and serve a copy of the same to the appellant, within 3 weeks from the date of receipt of the said order and the Debts Recovery Tribunal shall issue a fresh Recovery Certificate for the said amount and that the first respondent/appellant shall pay the amount, as shown in the revised statement of accounts, within 4 weeks from the date of receipt of the revised statement, failing which the amount shown as due in Recovery Certificate will carry simple interest at the rate of 12% p.a. from 03.01.2006 till the date of realisation and thus modified the order of decree passed by the Debts Recovery Tribunal-I, Chennai. https://hcservices.ecourts.gov.in/hcservices/ 3. The learned counsel for the writ petitioner/Bank submits that the impugned order in R.A.No.48 of 2005 dated 03.01.2006 of the second respondent/Debts Recovery Appellate Authority is illegal and an arbitrary one since the same has been passed brushing aside the tangible evidence available on record in the case and without considering the pleadings and documents and the circumstances placed before the Debts Recovery Tribunal-I, Chennai and that the impugned order, passed by the second respondent/Debts Recovery Appellate Authority, suffers from serious legal infirmities inasmuch as the same having been passed contrary to the provisions of law and as a matter of fact, the second respondent/Debts Recovery Appellate Authority has considered extraneous circumstances to arrive at a conclusion and allowed the appeal of the first respondent/appellant erroneously and moreover, the first respondent/appellant in substance agreed that he has offered his property as mortgage for the facility availed by the borrower and has executed the documents and the contention of the first respondent/appellant that he has not been aware of the purpose for which the documents have been executed is unsustainable in the eye of law and such a plea cannot be countenanced in law against the documentary evidence and indeed the finding rendered by the second respondent/appellate authority that the third party guarantors are victims of an alleged fraud committed by the borrower for availing the loan facility is neither based on any valid evidence nor any legal proceeding has initiated by the third party guarantors against the borrowers for the alleged fraud, if any, and significantly, the execution of the loan documents viz., Deed of Guarantee in favour of the petitioner/Bank is not in dispute and it is neither the contention nor the finding of the Debts Recovery Tribunal-I, Chennai that the writ petitioner/Bank was also party to the alleged fraud and in short the second respondent/appellate authority should not have allowed the appeal based on surmises and untenable contentions raised at the appellate stage and also that the first respondent/appellant has given complaint to the police after the final order has been passed by the Debts Recovery Tribunal-I, Chennai, and if at all the first respondent/appellant has been defrauded, it is for him to proceed against the borrower and the conclusion of the second respondent/appellate authority that the first respondent/appellant is liable to pay only a sum of Rs.2 lakhs with interest etc., is very much against the documentary evidence which stands proved on the admission of the first respondent/appellant and the same is against the contractual obligation of the first respondent/appellant to the writ petitioner/Bank and that apart, the second respondent/appellate authority based on the documents produced by the writ petitioner/Bank and on the basis of the agreements produced by the first respondent/appellant said to have been entered into between him and the borrowers should have held that the first respondent/appellant stood as guarantor for the loan facility availed by the first defendant and mortgaged his property and https://hcservices.ecourts.gov.in/hcservices/ deposited his title deeds and in short these aspects of the matter have not been either adverted to, or appreciated by the second respondent/appellate authority in a proper perspective which has resulted in miscarriage of justice and therefore, prays for allowing the writ petition in furtherance of substantial cause of justice. 4. Per Contra, the learned counsel for the first respondent submits that the petitioner/Bank has sanctioned a term loan of Rs.7.40 lakhs and a packing credit of Rs.4 lakhs to one Mr. Anand Sai, Proprietor of M/s. Maruthi Electronics, having units one at B20, Mugappair Industrial Estate, Chennai-50 and another at 263/2, Vanagram, Ambattur Industrial Estate, Chennai-58 on 28.09.1992 and for this loan one Mr.S. Murugesh, V.Loganathan and Smt. P. Rajalakshmi stood as guarantors and on 11.10.1993, the petitioner/Bank has sanctioned the term loan of Rs.17.60 lakhs to Mr. Anand Sai and two term loans have been availed by Mr. Anand Sai with the petitioner/Bank and when the first respondent approached Mr. Anand Sai of M/s. Maruthi Electronics through one Mr. Murali, a neighbour, for financial help the said Mr. Anand Sai has agreed to arrange loan from the petitioner/Bank provided the first respondent gives his property as collateral security and the first respondent has agreed to give his house property as collateral security for the loan to be availed and therefore, they have entered into an agreement to that effect on 02.09.1993 and the first respondent has handed over the original title deeds of his house property and other papers to Mr.Anand Sai on that day itself and that Mr. Anand Sai has interm handed over the same to the petitioner/Bank and on 11.10.1993 the first respondent along with Mr. Anand Sai went to the petitioner/Bank and the bank manager obtained the first respondent's signature in some documents which were blank at that time and after obtaining the signature, the first respondent/manager of the bank has given Rs.1.90 lakhs and informed that a sum of Rs.10,000/- has been taken as commission for sanctioning the loan and in all a sum of Rs.2 lakhs has been given as loan to the first respondent and that the manager has informed that the loan has to be repaid within a period of 3 years and to the shock and surprise of the first respondent, he came to know that he stood as a guarantor for the loan availed by Mr. Anand Sai to the petitioner/Bank and that he never knew that he stood as a guarantor for Mr. Anand Sai and that taking advantage of the position of the first respondent, Mr. Anand Sai with the connivance of the petitioner/Bank manager has committed a fraud and that the first respondent has been made as scape goat and that the first respondent has not received any notice from the petitioner/Bank before filing of the case to recover the amount against Mr. Anand Sai and other guarantors and that the petitioner/Bank has filed O.A.No.41 of 1997 before the Debts Recovery Tribunal-I, Chennai to recover the amount due to them against Mr. Anand Sai and others and all the guarantors have taken a plea that they are innocent, victim of circumstances and that they were unaware that they stood as guarantors for the loan availed by https://hcservices.ecourts.gov.in/hcservices/ Mr. Anand Sai with the petitioner/Bank. 5. Further, it is the contention of the first respondent/7th defendant that as a matter of fact O.A.No.41 of 1997 has been allowed by the Debts Recovery Tribunal-I, Chennai holding that the petitioner/Bank is entitled to the Recovery Certificate against Defendant Nos. 2,6 and 7 and discharge the defendants 3 to 5 from the liabilities as they have paid the claim amount and however, the first respondent has lodged a criminal complaint with CBI Chennai, against the petitioner's bank manager and Mr. Anand Sai and that he has been enquired by the CBI on 06.06.2005 and the first respondent has preferred R.A.No.48 of 2005 before Debts Recovery Tribunal, Chennai and the said appeal has been allowed with an observation that the first respondent was never informed, either by the principal Debtors or by the bank manager that a signature has been taken as guarantor for the loan availed by the first defendant and the signature of the first respondent has been obtained by playing fraud and misrepresentation and dissatisfied with the orders of the second respondent/appellate tribunal, the petitioner/Bank has filed the present writ petition and added further, the petitioner/Bank has not challenged the observation of the Debts Recovery Tribunal made in para 15 of the order passed in O.A.No.41 of 1997 dated 31.12.2004 and even in the present writ petition the said observation of the Debts Recovery Tribunal has not been challenged. 6. Continuing further, the learned counsel for the first respondent contends that the petitioner/Bank has not discharged the burden of proof and the petitioner/Bank has not pointed out as to how the order of the second respondent/appellate tribunal suffers from various legal infirmities and also it is relevant to point out that the alleged deposit of title deeds was not made when the first respondent was present in the bank along with Mr. Anand Sai and as such, the first respondent is not aware of the deposit of title deeds with the bank and in short, the learned counsel for the first respondent supports the order of the second respondent/appellate tribunal in all aspects and prays for dismissal of the writ petition. 7. It is relevant for this Court to point out that the writ petitioner/Bank has filed O.A.No.41 of 1997 as an applicant before the Debts Recovery Tribunal-1, Chennai as against 1 to 8 Defendants mentioned therein and the first respondent herein by name Mr. B. Pappa Mudaliar was arrayed as seventh defendant and the said Anand Sai was arrayed as the first defendant in the said O.A.No.41 of 1997. The Tribunal, has passed a final order on 31.12.2004, the operative part is extracted hereunder; "(a) The applicant bank is entitled for a Recovery Certificate against defendants 1,2,6 & 7 for recovery of a sum of Rs.55,55,830.66p in respect of Term Loan – II, Packing Credit and OD facilities from the date of OA till https://hcservices.ecourts.gov.in/hcservices/ the date of application with future interest @ 17% p.a. (seventeen percent simple interest) from the date of application till the date of realization with legal costs of the OA. (b) Defendants 3 to 5 are discharged from their loan liability as they have paid the OA claim amount of Rs.9,10,771/- during the course of the proceedings. Hence, the Registry of this Tribunal is directed to release the original title deeds pertaining to D3 to D5 directly, within four weeks from the date of this final order, through their counsel, after obtaining necessary acknowledgment and undertaking from them under intimation to the applicant bank. (c) It is further declared that in case of default of payment by the defendants 1,2,6 and 7 the applicant bank is at liberty to sell the other OA schedule properties and to adjust the sale proceeds towards the amount due. (d) If the sale proceeds are not found sufficient after defraying the expenses of such sale for the payment of all such amounts, the defendants 1,2,6 and 7 are jointly and severally liable to pay the amount of such deficiency with interest mentioned above until realisation and also from their assets in addition to the OA scheduled properties. (e) As regards the D8 is concerned, the D8 is only a proforma defendant and no claim is made against it" with such findings the Tribunal has directed the issue of Recovery Certificate accordingly. 8. It is also proper at this juncture to mention that the Debts Recovery Tribunal-I, Chennai in its final order in O.A.No.41 of 1997 dated 31.12.2004 in para 12 has observed as follows; "It is also a matter of record that in this matter the D1,D2,D7 and D8, although filed their written statements, but failed to file any Counter Proof Affidavit against the proof affidavit of the bank and in fact they are not contesting the case since then. The D1, D2, D6, D7 and D8 also did not cross examine the bank witness nor filed any rebuttal documents to oppose the OA claim of the bank against them or to substantiate the defense taken by them in their written statement. In this matter, the D8, the State Bank of India, is only a proforma party. Hence, no contra evidence is available in the record against the loan liability of the D1,D2,D6 and D7 are concerned in the present OA claim." 9. Continuing further, the Debts Recovery Tribunal-I, Chennai has observed the following at paras 15 and 16 of its final order in O.A.No.41 of 1997 which runs thus; "15. By perusal of this averments and the admission of the defendants 3 to 5, I feel that these defendants have not https://hcservices.ecourts.gov.in/hcservices/ disputed the originality of their signatures over the deed of guarantee and they have further impliedly admitted that they had voluntarily handed over their title deeds to the D1 for seeking private finance from him only and these title deeds were allegedly misused by the D1 for availing a personal loan facility from the applicant bank by producing them as guarantors without their express willingness and necessary consent. Further the D3 to D5 did not give sufficient evidence that what compelled them to go with the D1 to the bank office and to sign some papers without knowing the contents thereof and without knowing the implications of the same. If they were really innocent people, they should not have surrendered their title deeds with the bank officials or to Mr. Anand Sai, until and unless they were fully explained about the terms and conditions stipulated in the documents signed by them and without agreeing for the same. They did not make any complaint before the higher authorities of the bank that they were cheated or exploited by the D1 by producing them as a guarantor. They also failed to write any protest letter to the higher authorities of the bank or any higher public authorities and they are raising this issue only for the first time before this Court. 16. By perusal of their Counter Proof Affidavits and the documents annexed therewith, it is evident that they admittedly have taken some loan from Mr. Anand Sai, and that is why they voluntarily handed over their title deeds to him. In these circumstances, this Court cannot hold that the dendants 3 to 5 are fully strangers to the present loan transaction and only it can be inferred that perhaps they were cheated only. Perhaps the D1 misused his position and exploited them and they can be presumed as a victim for the alleged fraud committed by the D1 for availing the loan facilities for himself and for using them as guarantor. But the bank cannot be found fault with such act as the bank is also equally sufferer as the loan amount remains unpaid. Moreover, they have already deposited the OA claim amount in respect of the Term Loan- I. Hence, it can be held that the bank has produced sufficient proof that the defendants 3 to 5 visited the office of the bank, signed the deed of guarantee for the Term Loan-I voluntarily and also deposited their title deeds with the bank through the D1 for the purpose of creating equitable mortgage. Hence, the OA claim for the Term Loan-I can very well be decided against the defendants 3 to 5. However, it is also a matter of record that the bank has already received the full OA claim amount of Rs.9,10,771/- under the Term Loan-I as on the date of filing of the OA during the course of the proceedings in this Court and this amount is being kept by https://hcservices.ecourts.gov.in/hcservices/ the bank under the no-lien interest bearing account and the bank has not materialize the compromise. The bank, at the most is entitled for only pendente-lite and future interest on this Term Loan-I from the guarantors/defendants 3 to 5 which is the domain and discretion of this Court." 11. That apart, the Debts Recovery Tribunal-I, Chennai has also come to the conclusion that the defendants 3 to 5 have taken serious pains for settling this matter and also deposited an amount towards their loan liabilities in installments with a hope that a one time settlement with the bank and therefore, they deserve some sympathy for awarding pendente-lite and future interest. It has also been further held that the pendente-lite and future interest is to be restricted to the extent of the interest accrued on the amount deposited by D3 to D5 which is already kept in the interest bearing no-lien account of the applicant bank and the bank may appropriate this amount towards the loan liability of the Term Loan-I and in the result, the OA claim in respect of Term Loan-I stands fully satisfied and ultimately the guarantors/defendants 3 to 5 stands fully discharged under the Term Loan-I and the bank was directed to return their original title deeds to them immediately etc. Moreover, the Debts Recovery Tribunal has also held that the writ petitioner/Bank is entitled for 17% simple interest on Rs.55,55,830.66p in respect of Term Loan-II, Packing Credit and OD facilities against the defendants 1,2,6 and 7 from the date of filing of OA till the date of realisation with costs of the present proceedings. 12. A perusal of the O.A.No.41 of 1997 (as seen from the typed set of papers filed before this Court) presented before the Debts Recovery Tribunal-I, Chennai shows that the writ petitioner/Bank is the applicant and there are totally 8 persons who are arrayed as defendants including the first respondent as the 7th defendant. 13. At this juncture, this Court pertinently points out that the 7th defendant in O.A.No.41 of 1997 before the Debts Recovery Tribunal-I, Chennai has figured as an appellant in R.A.No.48 of 2005 before the second respondent/Debts Recovery Appellate Tribunal, Chennai and the writ petitioner/Bank has been shown as the only respondent to those proceedings and conspicuously , D1 to D6 and D8 namely State Bank Of India, Siru Thozhil Branch, Nungambakkam, Chennai-34 have not been shown as parties to the proceedings in R.A.No.48 of 2005 before the second respondent/tribunal. 14. In this connection, we deem it appropriate to make a relevant mention that persons who are necessary parties to the original application in O.A.No.41 of 1997 are also the necessary parties to R.A.No.48 of 2005. If necessary parties are not shown as parties in R.A.No.48 of 2005, then the R.A.No.48 of 2005, as framed https://hcservices.ecourts.gov.in/hcservices/ by the first respondent/appellant, showing only the writ petitioner bank as respondent, is not a properly framed one. Furthermore, if necessary parties are not joined in a particular proceeding before a competent authority, then, the order passed will be a nullity and has no binding effect. To bring a person as a party defendant is not a substantive right, but one of procedure and a Court/Tribunal has discretion in its proper exercise. In a writ of certiorari not only the Tribunal or Authority whose order is sought to be quashed but also the other parties in whose favour the said order is issued are necessary parties. 15. Indeed, the non-joinder of defendant nos.1 to 6 and 8 in O.A.No.41 of 1997 as necessary parties to the proceedings in R.A.No.48 of 2005 before the second respondent/Debts Recovery Appellate Tribunal is an infirmity. After all, parties are added in a pending proceeding before an appropriate forum to avoid plurality of proceedings. Also, it is to be borne in mind that the basic principle is that an individual is made a party in an original proceedings because there is a cause of action against him, and when causes of action are joined, the parties are also to be joined. If an enforceable right of persons are to be affected or likely to be affected, then, they must be influenced as necessary or proper parties as the tribunal deems fit and proper based on the facts and circumstances of a given case. 16. In the case on hand, it is useful to refer to the prayer made by the writ petitioner/Bank in O.A.No.41 of 1997 on the file of the Debts Recovery Tribunal-I, Chennai therein the bank has sought for a judgment and certificate (in the nature of decree) to be issued to the Recovery Officer against the respondent nos.1 to 7 therein jointly and severally, directing the Recovery Officer to recover from them the following; "(a) The sum of Rs.34,88,754/- (due under Term Loan-I and Term Loan_II) with the liability of Respondents 2 to 5 being limited to the sum of Rs.9,10,771/-