Liability of mortgagor is co-extensive with other mortgagors/guarantors: HC

Case Details: Phoenix Arc (P.) Ltd. v. Registrar - [2022] 138 taxmann.com 516 (Bombay)

Judiciary and Counsel Details

• • Dipankar Datta, CJ. & V. G. Bisht, J.
  • Rohit Gupta for the Petitioner.
  • Gautam Ankhad, Aditya Mehta, B.B. Sharma & Mohammed Ali Chunawala for the Respondent.

Facts of the Case

In the instant case, an application against measures to recover secured debts (Right to Appeal). The petitioner-ARC acquired debt of the original lender.

On default in repayment of the loan amount of Rs. 270 crores by the borrower, DRT issued a proclamation for the sale of the mortgaged property, which included property (flat) belonging to the guarantor/mortgagor.

The Mortgagor filed an appeal before the DRAT seeking stay of the scheduled sale. The Mortgagor deposited sum of Rs. 1.25 crores before the DRAT as a requirement of pre-deposit towards 25 percent of its alleged outstanding liability, which mortgagor asserted to be Rs. 5 crores on ground that its outstanding dues were to extent of Rs. 5 crores and that same was secured by equitable mortgage of a flat.

The DRAT by impugned order imposed stay on conducting public auction of mortgaged properties. The Petitioner challenged said order in the instant petition.

High Court Held

The Bombay High Court held that the liability of the mortgagor was not restricted to extent of Rs. 5 crores only and it was co-extensive with other mortgagors/guarantors and the amount due as determined by DRT was in excess of Rs. 270 crores. Thus, 25 per cent of Rs. 270 crores i.e., Rs. 67.57 crores was required to be pre-deposited by the mortgagor and the DRAT ought not to have accepted the sum of Rs. 1.25 crores, thus, the impugned order passed by DRAT was to be set aside.