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Equitable Mortgage – Importance of Deposit of Title Deed for Priority between two Mortgages

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On 12.4.2006, the petitioner filed OA in 2006 before the DRT, Mumbai, for Rs.2,12,55,129/- from the borrower company M/s.Aggarwalk Silk to which Ramchandra Aggarwal gave personal guarantee in favour of the erstwhile assignor SBI and mortgage of the property.  The loan was granted on the basis of authority letter to collect original title deed and original lodgment receipt.

On 21.4.2006, the respondent No.1 PNB granted various credit facilities to the borrower M/s. Atex Worldwide and secured by mortgage by deposit of title deeds by Ramchandra Aggarwal in favour of PNB.

On 5.3.2007, the DRT issued recovery certificate against borrower M/s. Aggarwal Silk.

On 6.11.2008, the DRT passed an order that the PNB has charge over the suit property.

The petitioner ARCL filed an application under Section 19(25) of the RDDB Act for modification of the order dated 6.11.2008.

On 9.1.2012, the DRT allowed the ARCL application and held that the mortgage in favour of erstwhile assignor SBI was valid prior in time to the mortgage in favour of PNB.

On 6.11.2019, the DRAT set-aside the order dated 9.1.2012 holding that the SBI was negligent at the time of creation of mortgage by not insisting on the original title deeds.  As a result, the mortgage of ARCL was cancelled.

Writ Petition NO.763 of 2020 of Asset Reconstruction Company (India) Limited   Vs.  Punjab National Bank and another

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