Settlement deed in favour of guarantor’s wife during pendency of OA and while property was under mortgage held void and insufficient to defeat recovery proceedings – M. Revathy Vs. State Bank of India and Ors. – DRT Chennai

This case concerns an appeal against the dismissal of a claim petition by M. Revathy, the wife of a guarantor (D. Mohanraj), in a debt recovery proceeding initiated by the State Bank of India. The Recovery Officer had dismissed her claim to property settled to her by her husband during the pendency of the Original Application (OA) and while the property was under mortgage. The DRT Chennai upheld this decision, finding that the settlement deed was unlawful as it occurred while the property was mortgaged to YES Bank and was likely intended to frustrate the recovery process. The court emphasized that the husband could not validly settle the property while it was under mortgage and that the wife, residing at the same address, should have been aware of the proceedings. Furthermore, the appellant’s reliance on Sections 52 and 53 of the Transfer of Property Act was rejected, and the bank’s reliance on Rule 16 of the Income Tax Act and Section 31B of the Recovery of Debts and Bankruptcy Act was upheld. The DRT directed the Recovery Officer to proceed with recovery in accordance with the law, dismissing the appeal and vacating any interim stay.

(Source：Ibclaw)