TaxTMI 
TaxTMI 
2009 (7) TMI 1404
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....depositing certified copies of the title deeds. The very same owner of the property subsequently created another equitable mortgage over the very same property by depositing the original title deeds with Punjab National Bank, on 10.6.1989. Two banks had separately filed independent suits, which were transferred to the Debt Recovery Tribunals as per The Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and two separate orders were passed in their favour. When the Punjab National Bank took steps to put the property for sale, objection was raised by Indian Bank. The Debt Recovery Officer faced with the conundrum directed that the matter should be placed before the Presiding Officer of the Debt Recovery Tribunal. The contenti....
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....reating equitable mortgage and further Indian Bank had shown due diligence by obtaining sworn affidavit from the owner that the title deeds have been lost. Accordingly, it observed that from out of the sale proceeds of the mortgaged property, the debt in favour of the Indian Bank has to be met and thereafter the surplus can be applied towards the debt in favour of Punjab National Bank. This decision of the DRT was the subject matter of challenge in Appeal No. 8 of 2002 filed before the Debt Recovery Appellate Tribunal (DRAT) by the Punjab National Bank. 5. The DRAT, while reversing the judgment of the DRT, observed that Indian Bank had not taken proper care and caution while accepting the certified copies of the sale deed and the Will for ....
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....nal title deeds, it can be now taken to be well settled that there is no legal embargo for creation of the equitable mortgage by deposit of certified copies of original title deeds. At least this position appears to be well accepted so far as Madras High Court is concerned as apparent from several decisions such as 1993(1) LW 456 (M.A.V.R. Nataraja Nadar & Sons and 2 Ors. v. State Bank of India) and 1995(1) LW 516 (Raju Pillai and 4 Ors. v. V.P. Paramasivam and 7 Ors.). The only question, therefore, is notwithstanding the fact that a valid equitable mortgage had been created in favour of Indian Bank in anterior point of time, whether it can be postponed in favour of the subsequent mortgagee, namely, Punjab National Bank, by applying the pri....
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....ertified copies of the original title deeds. 12. In the present case, there is no dispute that the owner claims title by virtue of a sale deed of the year 1935 and a subsequent registered Will. However, at the time of creation of the equitable mortgage, dated 10.5.1989, the Indian Bank does not appear to have acted in a manner expected of a man of ordinary prudence. It is no doubt true that about two months after creation of such equitable mortgage, the Indian Bank had obtained an affidavit from the original owner that the original title deeds were lost. This, however, instead of fortifying the case of the Indian Bank on the question of negligence, in our opinion, it would only be a circumstance to prove that at the time of creation of equ....