dofp2024_00392 — The Tribunal held that sureties involved in HBA cases cannot be held liable for lapses committed by HBA (House Building Advance) sanctioning authorities and the officials involved in the fraudulent execution of mortgage deed. However, the authorities who sanctioned the HBA (official Respondents herein) are at liberty to exercise the option of recovering the unpaid HBA amount from the officials involved in the said fraudulent act after fixing the responsibility for the same

DoFP

The Tribunal held that sureties involved in HBA cases cannot be held liable for lapses committed by HBA (House Building Advance) sanctioning authorities and the officials involved in the fraudulent execution of mortgage deed. However, the authorities who sanctioned the HBA (official Respondents herein) are at liberty to exercise the option of recovering the unpaid HBA amount from the officials involved in the said fraudulent act after fixing the responsibility for the same — The chunk is discussing the original documents required during the process of sanctioning a House Building Advance (HBA) loan, including the mortgage deed and periodic certificates for maintenance, t... — Facts: The Applicant, herein, is a Junior Scientific Officer in the Quality Assurance Establishment, Pune under the Additional Director, Ministry of Defence Production (R-4 herein). He stood as surety i.e. executed surety bond, for a House Building Advance (HBA) taken by his colleague, K.P. Telang in the year 1998 from Government. Shri Telang, absconded from service with effect from 13-2-2007. Respondents ordered recovery of ₹ 4.5 lakhs in one instalment from the Applicant being a surety of the absconded borrower, Telang. The recovery is ordered on the ground that a surety can be held responsible for payment of the loan taken if the borrower dies or becomes insolvent or at any time cases to be in the service of Government, the whole or unpaid amount together with interest shall be recovered from surety in one instalment. Aggrieved by the action of Respondents in recovering of ₹ 4.5 lakhs with interest thereon, the Applicant filed this application to quash and set aside the impugned orders, dated 3-7-2014, 24-7-2014, 27-11-2014, 26-12-2014 and 22-1-2015 and freed the Applicant from payment as surety. The Tribunal heard both sides. The basic issue is, whether the recovery of the amount lent to Telang who is absconding from 2002 and hence dismissed is the proper way to collect the HBA lent to Shri K. Telang from the Applicant who stood as surety to Telang. The documents related to this case sent to the Counsel for Respondents by the Defence Production Department, New Delhi contains all relevant documents except the original sale deed for the property. Rule 8
(a)
Note V prescribes that "in case the Government servant does not repay the balance of the advance due to Government on or before the date of his retirement, it shall be open to the Government to enforce the security of the mortgage at any time, thereafter, and recover the balance of the advance due together with the interest and cost of recovery by sale of the house or in such other manner as my be permissible under law. Rule 5 (6) of the HBA stipulates that the liability of the surety will continue till the house built / purchased is mortgaged to the Government or till the advance together with interest due thereon is repaid to Government, whichever is earlier. The said rule "An advance required for purchase / construction of a new flat shall be paid" is reproduced verbatim in the judgment. Rule 9
(b) of the HBA Rules make it mandatory upon the Heads of the Department to exercise due diligence in the matter of processing HBA loan applications which is reproduced verbatim in the judgment. O.M. No. 1/17015/11/95/H.III, dated 1-4-1996 on the subject of "Original documents like allotment letter, cash receipts, etc., is to be deposited till execution of mortgaged". Important points in this OM reads: These documents will remain in custody of the Head of the Departments till the mortgage deed is executed and deposited along with original documents of title; In case other than sanction of HBA under self-financing scheme, etc., referred to in this OM, the existing requirement of submission of registered mortgage deed together with the original documents of title of the Head of the Department within a minimum period of 3 months remains unchanged". Rule 7 (b),
(c) and
(d) prescribed a number of safeguards to ensure that the Government keeps a check on the maintenance of the house and provides that the loanee should furnish periodic certificates to that effect. That rule is reproduced in the judgment for clarity. Relevant instructions are issue from time to time reiterating the rules. From the above rule, it reveals that "the process of sanction of HBA to Government employees is quite rigorous and certain degree of precaution is mandatory to ensure that the HBA sanctioned to Government employees is repaid and no loss is caused to the exchequer. Provision of surety under Rule 5 is one such precaution". After analyzing the sequence of mortgage by Telang who is now absconding and he was allowed to execute the mortgage bond months after cancellation of mortgage deed reveals there is unpardonable lapse on the part of the officials-in-charge of execution of mortgage bond and it appears the officials colluded with Telang in the act of fraud on the Government. The Insurance Policy certificate is not called for by the officials as mandated under Rule 7
(b) and annual certificate of maintenance as provided for under Rule 7
(b) of the rules is not demanded from the person. Further analyzing the case, the Tribunal came to the conclusion that the Applicant cannot be held liable for recovery of the unpaid HBA.

DoFP

The Tribunal held that sureties involved in HBA cases cannot be held liable for lapses committed by HBA (House Building Advance) sanctioning authorities and the officials involved in the fraudulent execution of mortgage deed. However, the authorities who sanctioned the HBA (official Respondents herein) are at liberty to exercise the option of recovering the unpaid HBA amount from the officials involved in the said fraudulent act after fixing the responsibility for the same — The chunk is discussing the original documents required during the process of sanctioning a House Building Advance (HBA) loan, including the mortgage deed and periodic certificates for maintenance, t... — Facts: The Applicant, herein, is a Junior Scientific Officer in the Quality Assurance Establishment, Pune under the Additional Director, Ministry of Defence Production (R-4 herein). He stood as surety i.e. executed surety bond, for a House Building Advance (HBA) taken by his colleague, K.P. Telang in the year 1998 from Government. Shri Telang, absconded from service with effect from 13-2-2007. Respondents ordered recovery of ₹ 4.5 lakhs in one instalment from the Applicant being a surety of the absconded borrower, Telang. The recovery is ordered on the ground that a surety can be held responsible for payment of the loan taken if the borrower dies or becomes insolvent or at any time cases to be in the service of Government, the whole or unpaid amount together with interest shall be recovered from surety in one instalment. Aggrieved by the action of Respondents in recovering of ₹ 4.5 lakhs with interest thereon, the Applicant filed this application to quash and set aside the impugned orders, dated 3-7-2014, 24-7-2014, 27-11-2014, 26-12-2014 and 22-1-2015 and freed the Applicant from payment as surety. The Tribunal heard both sides. The basic issue is, whether the recovery of the amount lent to Telang who is absconding from 2002 and hence dismissed is the proper way to collect the HBA lent to Shri K. Telang from the Applicant who stood as surety to Telang. The documents related to this case sent to the Counsel for Respondents by the Defence Production Department, New Delhi contains all relevant documents except the original sale deed for the property. Rule 8
(a)
Note V prescribes that "in case the Government servant does not repay the balance of the advance due to Government on or before the date of his retirement, it shall be open to the Government to enforce the security of the mortgage at any time, thereafter, and recover the balance of the advance due together with the interest and cost of recovery by sale of the house or in such other manner as my be permissible under law. Rule 5 (6) of the HBA stipulates that the liability of the surety will continue till the house built / purchased is mortgaged to the Government or till the advance together with interest due thereon is repaid to Government, whichever is earlier. The said rule "An advance required for purchase / construction of a new flat shall be paid" is reproduced verbatim in the judgment. Rule 9
(b) of the HBA Rules make it mandatory upon the Heads of the Department to exercise due diligence in the matter of processing HBA loan applications which is reproduced verbatim in the judgment. O.M. No. 1/17015/11/95/H.III, dated 1-4-1996 on the subject of "Original documents like allotment letter, cash receipts, etc., is to be deposited till execution of mortgaged". Important points in this OM reads: These documents will remain in custody of the Head of the Departments till the mortgage deed is executed and deposited along with original documents of title; In case other than sanction of HBA under self-financing scheme, etc., referred to in this OM, the existing requirement of submission of registered mortgage deed together with the original documents of title of the Head of the Department within a minimum period of 3 months remains unchanged". Rule 7 (b),
(c) and
(d) prescribed a number of safeguards to ensure that the Government keeps a check on the maintenance of the house and provides that the loanee should furnish periodic certificates to that effect. That rule is reproduced in the judgment for clarity. Relevant instructions are issue from time to time reiterating the rules. From the above rule, it reveals that "the process of sanction of HBA to Government employees is quite rigorous and certain degree of precaution is mandatory to ensure that the HBA sanctioned to Government employees is repaid and no loss is caused to the exchequer. Provision of surety under Rule 5 is one such precaution". After analyzing the sequence of mortgage by Telang who is now absconding and he was allowed to execute the mortgage bond months after cancellation of mortgage deed reveals there is unpardonable lapse on the part of the officials-in-charge of execution of mortgage bond and it appears the officials colluded with Telang in the act of fraud on the Government. The Insurance Policy certificate is not called for by the officials as mandated under Rule 7
(b) and annual certificate of maintenance as provided for under Rule 7
(b) of the rules is not demanded from the person. Further analyzing the case, the Tribunal came to the conclusion that the Applicant cannot be held liable for recovery of the unpaid HBA.

Original Rule Text

Original Rule Text