Code of
Civil Procedure, 1908 - Order 7 Rule 11(d) - Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 34
- Ownership Flats (Regulation of
the promotion of construction, sale, management and transfer) Act, 1963 (Maharashtra)
IN
THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY
ORIGINAL CIVIL JURISDICTION
CORAM
: NARESH H. PATIL ACTING C.J. & G.S. KULKARNI, JJ.
Pronounced
on : 26th October, 2018
APPEAL
NO. 360 OF 2017 IN NOTICE OF MOTION NO.1208 OF 2017 IN SUIT NO.62 OF 2017 Axis Bank Limited ...Appellant Versus Madhav Prasad Aggarwal & Ors.
...Respondents WITH APPEAL
NO.361 OF 2017 IN NOTICE OF MOTION NO.1207 OF 2017 IN SUIT NO.60 OF 2017 Axis Bank Ltd. ...Appellant Versus Manisha Saraf & Anr.. ...Respondents WITH APPEAL NO. 362 OF 2017 IN NOTICE OF MOTION NO.1206 OF 2017
IN SUIT NO.8 OF 2017 Axis Bank
Ltd. ...Appellant Versus Padma Ashok Bhatt & Ors.
...Respondents WITH COMMERCIAL
APPEAL NO. 171 OF 2017 IN COMM.NOTICE OF MOTION NO.323 OF 2017 IN COMM.SUIT
NO.192 OF 2017 Axis Bank
Ltd. ...Appellant Versus Om Project Consultants & Engineers
Ltd. & Anr. ...Respondents WITH
COMMERCIAL APPEAL NO. 172 OF 2017 IN COMM.NOTICE OF MOTION NO.377 OF 2017 IN COMM.SUIT
NO.450 OF 2017 Axis Bank
Ltd. ...Appellant Versus Niraj Dilip Jiwrajka & Ors.
...Respondents
Mr.
Rafique Dada, Senior Advocate with Mr.Karl Tamboly, Mr.Bhalchandra Palav,
Ms.Shreya Jha i/b. Cyril Amarchand Mangaldas, for Appellants in Com.Ap.171/17. Ms.Sapana
Rachure i/b. T.N.Tripathi for Official Liquidator in Com.Ap.171/17 and
ComAp.172/17, APP 361/17, 362/17.. Mr.Navroj Seervai, Senior Advocate with
Ms.Ankita Singhania, Mr.Adhish Sharma i/b. Khaitan & Khaitan, for
Respondent No.1 in Com.AP 171/17 and for Respondent no.3 in Com.AP 172/17. Mr.Karl
Tamboly with Mr.Bhalchandra Palav i/b. Cyril Amarchand Mangaldas, for the
Appellants in ComAP 172/17. Mr.Alok Mishra i/b. T.N.Tripathi & Co., for the
Official Liquidator. Ms.Naira Jejeebhoy with Danesh Mehta i/b. M.Mulla
Associates, for Respondent No.1 in COMAP 172/17. Mr.Sarosh Bharucha with
Ms.Naira Jejeebhoy, Ms.Khusboo Malvia, Ms.Siddha Pamecha I/b. M.Mulla
Associates, for Respondent in Comap 172/17. Mr.R.A.Dada, Senior Advocate in APP
360/17, Mr.Prasad Dhakephalkar, Senior Advocate in APP 361/17, Mr.Virag
Tulzapurkar, Senior Advocate in APP 362/17 with Mr.Karl Tamboly, Mr.Bhalchandra
Palav, Ms.Shreya Jha I/b. Cyril Amarchand Mangaldas, for the Appellants. Mr.Navroz
Seervai, Senior Advocate with Ms.Ankita Singhania, Mr.Adhish Sharma i/b.
Khaitan and Khaitan, for Respondent no.14 in APP 362/17 @ Darshana Bargode in
APP 171/18 for Respondent no.1, in Appeal no.172/17 for Respondent no.3. Mr.S.N.Vaishnav
with Ms.Nupur J.Mukherjee, Mr.Kunal S.Vaishnav, Ms.Kirtika Kothari i/b.
N.N.Vaishnav & Co., for Respondent No.1 in App 361 and 362 of 2017 and for
Respondent nos.1 and 2 in APP 360 of 2017.
J U D G M E N T
(Per
G.S. Kulkarni, J.):
1.
The point which falls for consideration in this batch of appeals is as to
whether the plaints against the appellant/defendantAxis Bank Limited (for short
'the Bank')
are required to be rejected under the provisions of Order 7 Rule 11(d) of the
Code of Civil Procedure, in view of the bar created by section 34 of the
Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (for short, “ Securitisation
Act”).
2. These
appeals arise from a common order passed by the learned Single Judge on five
Notice of Motions which were filed by the bank in the five Civil Suits in
question, invoking the provisions of Order VII Rule 11(d), seeking rejection of
the plaint qua the Bank. By the impugned order, the Notice of Motions are
rejected by the learned Single Judge.
3. The
contesting respondents in these appeals are the original plaintiffs (referred as
“plaintiffs”). The other respondents are the developers
M/s.Orbit Corporation Ltd. (for short, “Orbit”).
4. Succinctly
put, the material facts giving rise to the present appeal are as under :The plaintiffs
in these five suits have a common cause and interest. The plaintiffs case as
set out in the plaint is that they desired purchasing of luxurious flats in a
project known as 'Orbit Heaven' (for short “the
project”) which was being
developed by Orbit at Nepean Sea Road in Mumbai. The case of the plaintiffs is
that they have parted with huge amounts of money as paid to Orbit for purchase
of these flats. The amounts are substantial ranging in several crores.
Notwithstanding the fact that the plaintiffs merely have allotment letters
issued by Orbit and in two cases a Memorandum of Understanding (MOU), and
although none of the plaintiffs have a registered agreement/document for purchase
of the flats, the plaintiffs say that they have valuable rights on the project
property. It is not necessary to delve into the details of payment made by the
plaintiffs from time to time to Orbit, suffice it to state that the payment of
the amounts is not disputed by Orbit.
5. The
facts in each of the plaints are quite similar. The plaintiffs' prayers as made
in the plaints, are primarily against Orbit namely the plaintiff's interalia seeking specific performance of the
alleged agreements entered with them by Orbit for sale of the suit flats.
6. In
the year 2009 the bank had granted loan facilities to Orbit aggregating to a
principal sum of Rupees 150 Crores. To secure the said lending Orbit by
registered deed(s) of mortgage created security interest in favor of the bank
in the said project (land and the building), in which flats were proposed to be
sold to the plaintiffs.
7. The
case of the bank is that in or around January, 2016, Orbit committed defaults
in repayment of the amounts advanced by the bank. Despite repeated reminders,
Orbit failed and neglected to repay the interest and principal amount due under
the credit facilities. A notice dated 3 August 2016 was addressed to Orbit, its
guarantors and its mortgagors, recalling the credit facilities. Guarantees were
also invoked and the guarantors were called upon to pay entire outstanding amounts
due under the credit facilities. Despite these efforts, Orbit and its
guarantors/ mortgagors failed and neglected to pay the dues. Consequently, the
bank resorted to enforce the security interest created over the secured assets
which included the project, by issuing a notice dated 19 August 2016 under
Section 13(2) of the Securitisation Act to Orbit, seeking recovery of an amount
of Rs.161,03,92,020.26 as on 12 August 2016 together with interest. The bank
also issued public notices dated 10 August 2016 and 13 September 2016 interalia cautioning the public that all
charges/claims on the project shall be subject to the rights of the bank as
mortgagee. Some claims were received from plaintiffs, however, the bank by its
letter dated 4 October 2016 denied the said claims. As there was noncompliance of
the notice issued by the bank under Section 13(2) of Securitisation Act, by
Orbit, its guarantors and mortgagors, on 7 November 2016, the bank took
symbolic possession of the project, namely the semiconstructed Orbit Haven
Project. Thereafter an application was filed by the bank under Section 14 of
the Securitisation Act, before the learned Metropolitan Magistrate at Mumbai,
who passed an order dated 8 March 2017 allowing the bank to take forcible
possession of the suit project. Also an original application No.1453 of 2016
was filed by the bank before the Debt Recovery Tribunal at Mumbai, for recovery
of the said dues of Rs.165,96,91,559.26 payable by Orbit. In the said
proceeding, by an order dated 29 November 2016 interim reliefs were granted
against Orbit, its guarantors and its mortgagors.
8.
The plaintiffs in or about December 2016 to January 2017 claiming to be
allottees of the flats/ suit premises in the said project, filed the suits in
question (except Commercial Suit No.450 of 2017 which was filed on 1362017), interalia seeking a declaration that there is a
valid and subsisting agreement executed between plaintiff and Orbit in respect
of the suit premises and praying for specific performance of the agreement
between the plaintiffs and Orbit and praying for handing over vacant possession
of the suit premises to the plaintiff. An alternative prayer for damages
against Orbit is also made. We shall make a reference to the prayers as made in
each of the plaints in the later part of this judgment. Though there was no
privity of contract between the plaintiffs and the bank, however it appears
that as the project was mortgaged to the bank and as the plaints in these suits
disclose that measures under section 13(4) Securitisation Act, were adopted by
the bank, the bank stood impleaded as a defendant in these suits.
9. On
the above backdrop, the bank being aggrieved by its impleadment as a defendant
in the suit(s), moved notice of motions in question, in each of these suits,
invoking the provision of Order VII Rule 11(d) of the CPC, interalia contending
that the suit(s) as instituted against the bank were barred under the
provisions of Section 34 of the Securitisation Act and thus qua the bank the
plaint was liable to be rejected.
10. The
contention of the bank was of a statutory bar created by Section 34 of the
Securitisation Act, for the Civil Court to entertain the suits against the
bank. This principally for the reason that the project was a 'secured asset'
within the meaning of section 2(1) (zc) of the Securitisation Act, in view of
the registered equitable mortgage created in its favour, which would enable the
bank to realize the dues/ debt payable to it by Orbit. The bank contended that
the advances as made to Orbit were secured by a 'Registered Supplemental
Indenture of Mortgage' dated 17th September 2013, for the over draft
facility of Rs.30 Crores and by another Supplemental Indenture of Mortgage
dated 17th June
2015 for a over draft facility of Rs.17 Crores.
11. In
the notice of motions filed by the bank under Order 7 Rule 11(d) of the Code of
Civil Procedure 1908, the bank contends that a reading of the plaint
demonstrates that the cause of action to implead the bank is principally on the
project being mortgaged to the bank and the bank taking measures under Section
13(4) and 14 of the Securitisation Act, which according to the bank are being
indirectly questioned by the plaintiffs in the suits, despite a specific remedy
being available to the plaintiffs under Section 17 of the Securitisation Act namely
of a right to file an appeal before the Debts Recovery Tribunal (for short
DRT). It is contended that such a right is conferred on any person who is aggrieved by any of the measures
referred to in SubSection (4) of Section 13, taken by a secured creditor, by
making an application to the DRT. The bank contended that it would be the jurisdiction
of the DRT to determine as to whether any of the measures referred to in
SubSection (4) of Section 13, taken by the secured creditor for enforcement of
securities are validly taken. The bank contended that Section 34 of the
Securitisation Act barred the jurisdiction of Civil Court to entertain a suit
and proceedings in respect of any matter which the DRT or the Appellate
Tribunal were empowered to determine under the Securitisation Act. It was
contended that also Section 35 of the Securitisation Act provided for an
overriding effect of the Securitisation Act over other laws. The bank
accordingly contended that on a reading of the plaints, it was clear that the suits
were not maintainable against the bank, even considering the alleged case of
the plaintiffs on the so called allegations of fraud. Notice of Motions as
filed by the bank and as decided by the learned Single Judge, by the impugned
order, prayed for rejection of the plaint qua the bank.
12. The
plaintiffs resisted the bank's notice of motions interalia contending that the plaintiffs having
parted substantial amounts as paid to Orbit for purchase of the flats in the
said project, valuable rights in the project were created in favour of the
plaintiffs. The bank could not have advanced loan to Orbit by receiving
equitable mortgage of the project property. It was contended that due diligence
was not undertaken by the bank before extending the credit facilities. It was contended
that once the rights were created by Orbit in favour of the plaintiffs, the
project assets were not available to be mortgaged to the bank. The plaintiffs
contended that the plaintiffs charge on the suit property was a prior charge to
that of the bank's charge, which was required to be legally recognized. It was
contended that there was collusion between the officers of the bank and Orbit
in creating mortgage in respect of the project assets and thus the mortgage was
bad and illegal and not binding on the plaintiffs. It was contended that it could
not be overlooked that substantial amounts were paid by the plaintiff to Orbit
and consequently the bank cannot deal with the suit property without due
consideration to the rights created in favour of the plaintiffs. It was thus
contended that the plaintiffs were entitled to a decree of specific performance
of the agreement entered by them with Orbit and in these circumstances the bank
was a necessary party to the suit. It was contended that the cause of action
for the plaintiffs to file the suit was not the measures taken by the Axis Bank
under Section 13 of the Securitisation Act, but the plaintiffs entitlement to
have specific performance of the agreement against Orbit and for which the bank
was a necessary party, as it would be required to confirm the transfer of the said
flats in favour of the plaintiffs. It was also contended that the plaintiffs
were protected under the provisions of The Maharashtra Ownership Flats
(Regulation of the promotion of construction, sale, management and transfer)
Act, 1963 (for short “the MOFA”). Referring to the provisions of Section
4, 4A, 5 and 9 of the MOFA Act, it was contended that by virtue of these
provisions protection is granted to the purchasers of the flats being
constructed for the plaintiffs. In view of these provisions the bank cannot
claim any higher rights than that of the flat purchasers.
13. Considering
the rival pleas the learned Single Judge by the impugned order rejected the
bank's notice of motions interalia
holding that there were sufficient
averments in the plaint of collusion between the officers of bank and Orbit,
which supports a case of fraud as pleaded by the plaintiff and falling within
the exception as culled out in the decision of the Supreme Court in Maradia
Chemicals warranting trial. It is held that under the provisions of MOFA the
bank was under an obligation to undertake due deligence and the issues as
falling under MOFA cannot fall with the jurisdiction of the DRT.
Submissions
on behalf of the Bank/Appellants
14.
Mr.Rafiq A.Dada, Mr.Tulzapurkar, Mr.Dhakephalkar, learned Senior Counsel, and
Mr.Tamboli have represented the bank in these appeals.
Submissions
in Appeal no.360 of 2017
15.
Mr.Rafiq Dada, learned Senior Counsel appearing for the Bank in Appeal no.360
of 2017 contended that the plaint in its entirety is liable to be rejected
against the bank, in view of the specific bar created by Section 34 of
Securitisation Act, and a remedy being available to an aggrieved person/ plaintiffs,
against the bank under Section 17 of the Securitisation Act. Referring to the
decisions of the Supreme Court in Mardia
Chemicals Ltd. & Ors. Vs. Union of India & Ors.
(2004) 4 SCC 311 and Jagdish
Singh versus Heeralal & Ors.
(2014) 1 SCC 479 it is submitted that law in regard to the
jurisdiction of the DRT and the bar to the jurisdiction of the Civil Court as
created by Section 34 of the Securitization Act is well settled in these decisions.
It is submitted that in view of the mortgage of the project as created by Orbit
in favour of the bank, the bank has superior rights, and if the plaintiffs
contend that they have higher rights over the bank, then as a requirement of
law, it was necessary for the plaintiffs to invoke the jurisdiction of the DRT under
Section 17 of the Securitisation Act. It is then contended that the plaint is
required to be read in its entirety as framed against the bank and on such
reading of the plaint it is clearly revealed that the suit directly concerns
the security rights of the bank qua the project and the measures which are
adopted by the bank under the Securitization Act. It is submitted that
entertaining such a suit against the bank, would be defeating the legislative
intent of a remedy which being provided by Section 17 of the Securitisation
Act. It is submitted that by clever drafting of the plaint the bar as created
under section 34 of the Securitization Act cannot be defeated. It is submitted that
the plaintiff's contention that a case of fraud has been alleged in the plaint
against the bank is untenable as according to the bank, a plain reading of the
averments relating to fraud as made in the plaint, can by no stretch of
imagination and even remotely can be accepted and understood as a case of fraud
played by the bank, as per the requirement of the provisions of Order VI Rule 4
of the CPC. It is submitted that also there is no plea of fraud with regard to
the creating of security interest in banks favour. It is submitted that the
bare plea, that bank is handinglove with Orbit, is not sufficient to maintain
the suit against the Bank. On merits it is contended that an unregistered MOU
as entered by Orbit with the plaintiffs to purchase the flat would not create
any right of the plaintiff in the project so as to affect the security interest
of the bank. In any case, even going by the MOU once the plaintiffs have
concurred in the MOU and acknowledged the mortgage as made in favour of the
Axis Bank, it cannot be said that any fraud is played by the bank, so as to
carve out an exception for maintaining a civil suit on the Mardia principle
and overcome the bar created by Section 34 of the Securitisation Act. Referring
to the prayers in the plaint, it is pointed out that there is no prayer in the
alternative against the bank and the averments which are made against the bank
in the plaint are not in aid of any relief. It is submitted that there is no claim
for damages which is made against the bank and the only prayer for damages is
against Orbit. It is submitted that in any case the legality of the mortgage in
favour of the Axis bank cannot be decided by the civil court and it is only the
Debt Recovery Tribunal which can decide such issue and this position is
accepted by the learned Single Judge as observed in paragraph 13 of the
impugned order. It is submitted that the adjudication on priority of the rights
of the parties in the mortgaged property, can only be subject matter of
adjudication before the DRT and if the plaintiffs succeed to establish that
their rights are prior to that of the bank, only in that case the sale can be
confirmed in favour of the plaintiffs. It is next submitted that the
adjudicating machinery created under the Securitisation Act is the only remedy
provided by law for determination of all the issues qua the rights of the bank
in regard to the advances made. In the statutory scheme the bank cannot be
dragged into a prolonged litigation before the civil court, frustrating its
rights on the secured assets thereby causing a serious prejudice to the
financial interest of the bank and the security rights created in the said
assets in favour of the bank by the borrowers under registered. It is for these
reasons that the provisions of Section 17 of Securitisation Act confers a right
“in any person” to approach the DRT. Even the argument of
due diligence not being complied by the bank, is misconceived, as there is no claim
for damages against the bank. It is submitted that as there is no registered
agreement entered into between the plaintiffs and Orbit as per the requirement
of Sections 4 and 9 of the MOFA. Thus, MOFA was clearly not applicable. The
protection under Section 9 of the MOFA would be available only when there is an
agreement between the parties and the agreement is registered. It is submitted
that in the present case the MOU was executed on a stamp paper of Rs.100/and the
said agreement is neither registered nor stamp duty has been paid. It is next submitted
that as clear from the recitals of the MOU, the plaintiffs were aware that the
project is mortgaged by Orbit in favour of the Bank, however, despite such
awareness, no steps whatsoever were taken by the plaintiff to register the flat
purchase agreement between the plaintiff and Orbit. The validity of the
mortgage is also not questioned in the plaint, and thus, the plain consequence
of Sections 4 and 9 of the MOFA cannot be avoided, in the absence of a
registered agreement. Section 9 of the MOFA cannot be pressed into service in
vacuum and without any sequitur. In support of his submission, Mr.Dada has placed
reliance on the decision of Madras High Court in Arasa Kumar & Anr. Vs. Nallammal
& Ors.; 2004 (4) CTC 261 (ii) the
decision of the Supreme Court in Hansa
V. Gandhi Vs. Deep Shankar Roy & Ors.; (2013)
12 SCC 776 (iii) the decision of the Division Bench of
this Court in State
Bank of India Vs. Jigishaben B.Sanghavi & Ors.; 2011(3)
BCR 187 (iv) the decision of the Supreme Court in the
case Mardia Chemicals
Ltd. & Ors. Vs. Union of India & Ors.(supra)
Submissions
in Appeal No.362 of 2017
16.
Mr.Tulzapurkar, learned Senior Counsel for the bank in Appeal No.362 of 2017
has made the following submissions:
(I)
The plaint is clearly barred by the provisions of section 34 of the
Securitisation Act. The plaintiffs have no case to sustain the plaint against
the bank. It is difficult to believe that the plaintiffs are bonafide flat
purchasers as for years together the plaintiffs never demanded an agreement
from Orbit though extraordinary/substantial money of about 9 crores is claimed
to have been parted for the purported purchase of the flats. Referring to the
amended plaint in Suit No. 8 of 2017 by insertion of Rider No.4 (Page 115 of
the paperbook), it is submitted that the bank is casually roped in as a
defendant.
(II)
On the issue of fraud our attention is drawn to the averments as contained in
paragraphs 24(a) to (c) at page 105 of the paperbook which are the averments on
amendment. It is submitted that the only averment of a fraud is to be found in
paragraph 24(b) and there is no other averment. Paragraph 24(b) reads thus:
“24(b) The Defendant No.15 further knew
that the land and the building is required to be conveyed free of encumbrances
to the body of flat purchasers. Thus the mortgage and the loan obviously
appears to be fraudulently and in collusion and in connivance between Defendant
No.1 and Defendant No.15.”
(III)
It is submitted that the bank at all times has acted fairly , the mortgage as
created in favour of the bank at material times was disclosed, as clear from
the contents of the MOU/ agreement entered by Orbit with some other purchasers.
Reference in this regard is made to an agreement dated 31 July 2014 entered by
Orbit with Mr. Bhaderesh Mehta and Mrs. Heena Mehta, whereas in the case of the
present plaintiff, there was no agreement sought by the plaintiffs from the builder
much less any agreement as per the requirement of law/MOFA, requiring
registration and payment of stamp duty. It is submitted that there is not a
single letter from the plaintiff demanding an agreement from Orbit, which according
to the learned Senior Counsel is very peculiar and would speak volumes in
regard to the genuineness of the purported flat purchase transaction between
the plaintiffs and the Orbit. It is submitted that a plain reading of the
plaint would, in fact, creates an impression that the amount which was paid by
the plaintiffs to Orbit was not in respect of the transaction for purchase of
flats but was a money lending transaction. It is submitted that the suit was
instituted on 17 December 2016. It is submitted that the first payment is
stated to be made by the plaintiffs in the year 2009 and thus for a period of
eight years the plaintiff did not ask for an agreement from Orbit. By referring
to page 129 being an annexure to the plaint, by which the plaintiff shows the
details of the payments made of an amount of Rs.1,76,00,000/the dates being 16
April 2009, 28 April 2009, 16 May 2009 and 16 May 2009, it is submitted that no
receipts were issued by Orbit or taken by the plaintiff immediately. This
clearly shows that this is not a conduct of a bonafide purchaser. No bonafide
purchaser would wait for a receipt to be given at the sweet will of a
developer. It is submitted that the allotment letter also appeared to be
antidated and the same was procured later, this for the reason that payments
did not tally with the allotment letter. It is submitted that though the
allotment letter records that an agreement would be entered within six months, however,
no such agreement was executed. These were clear traits of a financial
transaction of loan being advanced to Orbit by the plaintiff and the deal was
far from a bonafide transaction for purchase of flat. It is further submitted
considered from this background this is a clear case of clever drafting of the
plaint whereby a plaint which otherwise is barred by law against the bank is
being impressed to be valid and that too by subsequently incorporating
amendments by making averments of fraud against the bank. A reference in this
regard is made to prayer clause (a) as amended. Learned senior counsel
referring to the provisions of the MOFA, contends that in the facts of the
case, the provisions of MOFA are wholly inapplicable to the bank and there is
no obligation on the bank towards the plaintiffs under any of the provisions of
MOFA. It is thus submitted that prayer clause (a) of the plaint which interalia prays for a decree that Orbit and the
bank shall jointly and severally be ordered to comply with all the obligations
under the MOFA is per se not maintainable. In this regard our
attention is also drawn to Section 4 of the MOFA which while giving an
overriding effect over the provisions of any other law interalia postulates that a promoter who intends to
construct or constructs a block or building of flats, shall, before he accepts
any sum of money as advance payment or deposit, enter into a written agreement
for sale with each of such persons who are to take or have taken, such flats,
the agreement to be registered under the Registration Act,1908 and to be in the
prescribed form. It is contended that when the mandate of the provision
requires that a written agreement should be entered into and registered on
receiving not more than 20% of the sale price of the consideration, and when in
the present case no such agreement being entered by Orbit and more particularly
after eight long years the suit being filed, takes the matter beyond a pale of
doubt, that it is not an agreement for purchase of a flat. The provisions of
MOFA thus can never be invoked by the plaintiff is the contention on behalf of
the bank. Further referring to Section 9 of the MOFA it is contended that this
provision is specific which provides that no promoter after he executes an
agreement to sell any flat, “mortgage
or create a charge on the flat or the land”,
without the previous consent of the persons who take or agree to take the
flats, and if any such mortgage or charge is made or created without such
previous consent 'after the
agreement referred to in Section 4 is registered', it shall not affect the right and
interest of such persons. It is thus contended that in the absence of a
registered agreement between Orbit and the plaintiffs, the plaintiffs cannot
claim a protection of section 9 of the MOFA. It is submitted that bank has
meticulously followed the law, there is no illegality which can be found in the
loan granted by the bank to Orbit and the measures as available to the bank
under the Securitisation Act being resorted on default in repayment of the advances
by Orbit. It is contended that in the fact situation, the rights of the
plaintiff in any case cannot be subservient to the rights of the bank as the
bank has followed the law by advancing the loan under a valid mortgage
agreement entered with Orbit. It is submitted that in any case the plaintiffs
would not succeed in getting any relief unless the mortgage as entered by the
bank with Orbit is declared to be unenforceable, for which the only forum to
assail any rights preventing the bank from resorting to the measures under
Securitisation Act was to approach the DRT under Section 17 of the
Securitisation Act. The DRT is not precluded from considering the arguments of
the plaintiffs under MOFA, while considering whether the measures as adopted by
the bank under Section 13 of the Securitisation Act, could be resorted or not.
A reference is made to Section 5(b), (c), 5A and Section 6 of the Banking Regulation
Act,1949 to submit that these provisions are clearly indicative of the kind of
business the bank can undertake. It is submitted that as regards the maintainability
of the appeal, the decision in Wander
Ltd. And Anr. vs Antox India P. Ltd., 1990 (supp) SCC 727 as
referred on behalf of the plaintiffs, is not applicable in the facts of the
present case as there can be no question, of a possible or a plausible view of
the court, in passing an order on an application under Order 7 Rule 11 (d) of
the CPC. It is then contended that ouster of jurisdiction has to be strictly construed.
It is next contended that the contention of the plaintiffs that Section
55(6)(b) of the Transfer of Property Act is applicable cannot be accepted as
the said provision is only applicable for refund of the money. It is submitted
that there is no money claim made against the bank. In support of his
submissions Mr. Tulzapurkar learned senior counsel for the bank has placed
reliance on the following decisions: (i) Punjab National Bank Vs. J.Samsath Beevi; 2010
(3) CTC 310 (ii) T. Arivandandam Vs. T.V.Satyapal, (1977)
4 SCC 467; (iii) Begum Sabiha Sultan Vs. Nawab Mohd.
Mansur Ali Khan, (2007) 4 SCC 343; (iv)
Ranganayakamma
& Anr. Vs. K.S.Prakash(Dead) By LRS & ors.,
(2008) 15 SCC 673; (v) Authorised Officer, Kotak Mahindra
Bank Ltd, Pune Vs. M/s.Brahmo ConstructionPvt.Ltd., Pune, 2015
(3) ABR 783; (vi) K.S.Dhondy Vs. Her Majesty The Queen
of Netherlands, 2013 (4) Mh.LJ 64;
(vii) Church
of Christ Charitable Trust & Educational Charitable Society vs. Ponniamman Educational
Trust, (2012) 8 SCC 706;
(viii) Hiralal
Parbhudas Vs. Ganesh Trading Co. & Ors., AIR
1984 Bom 218; (ix) National Chemicals and Colour Co.
& Ors. VS. Reckitt and Colman of India Ltd. & Anr.,
AIR 1991 Bom 76.
Submissions
in Appeal No.361 of 2017
17.
Mr.Dhakephalkar, learned Senior Counsel appearing for the bank has made the
following submissions:
(I)
It is submitted that Axis Bank is not a party to the agreement entered between
the plaintiffs and Orbit and only by virtue of clever drafting a case is sought
to be made out against the bank. Our attention is drawn to prayer clause in the
plaint (in Commercial Suit No.60 of 2017). It is submitted that the real prayer
is to prevent the bank from proceeding under the Securitisation Act. It is
submitted that such a relief against the bank only can be sought under Section
17 of the Securitisation
Act by approaching DRT. It is submitted that the only exception available to
the plaintiff to bring a civil suit against the bank is only when a clear case
of fraud is made out against the bank as per the Mardia principle.
Our attention is drawn to paragraphs 23 and 28 to contend that the averments as
contained in these paragraphs is the only case of fraud which is pleaded
against the bank. It is submitted that a plain reading of these averments can
never be accepted to be a case of a fraud as played by the bank in advancing
loan. The plaintiffs by merely saying that no public notice was given by the
bank before advancing of loan facilities, cannot amount to a fraud by the bank.
Our attention is drawn to the prayer clause in the plaint in Suit no.60 of 2017
and more particularly to prayer clause (c)(iii) which is a relief that the
plaintiffs have the first charge in respect of the suit property, it is submitted
that this only prayer, as made against the bank, clearly falls within the
jurisdiction of DRT under Section 17 of Securitisation Act.
Submissions
in Appeal Nos.171 of 2017 and 172 of 2017
18.
Mr.Tamboli, learned Counsel for the appellant/Axis Bank in Appeal Nos.171 of
2017 and 172 of 2017 would submit that the case of the plaintiffs against the
bank is completely on apprehension and presumption. It is submitted that the
due diligence cannot be measured in the manner suggested by the plaintiffs. It
is submitted that the averments in regard to the fraud as made in the plaint is
only a piece of clever drafting to bring the suit within the jurisdiction of
this Court, when the suit against the bank is barred by Section 34 of the Securitisation
Act. It is submitted that there is no obligation in any law for the bank to
have due diligence. In support of his submissions, reliance is placed on the
decisions in (i) Chandrakant
Kantilal Jhaveri Vs. Madhuriben Gautambhai, AIR
2011 Guj 27 and (ii) Sopan Sukhdeo Sable & ors. Vs.
Assistant Charity Commissioner & ors, (2004) 3 SCC 137.
Submissions
on behalf of the Plaintiff
19.
On behalf of the plaintiff, we have heard Mr. Navroj Seervai, learned senior
counsel, Mr.S.N.Vaishnav and Mr.Sarosh Bharucha, who have opposed these appeals
in supporting the impugned order.
(i)
It is submitted that the impugned order which is passed on an application under
Order 7 Rule (11) (d) of the Code of Civil Procedure 1908 is a discretionary
order and the learned single Judge has appropriately exercised the discretion
in rejecting notices of motions, filed by the bank. It is submitted that the
appellate Court would interfere in the impugned order only, when it would come
to a conclusion that the view taken by the learned single Judge is not a possible,
probable or a plausible view even, if it could not be an absolutely correct
view. The view taken by the learned single Judge is a probable and a plausible
view and thus the appeals, need not be entertained. To support this proposition
reliance is place on the decision of the Supreme Court in the case of Wander Ltd & anr vs Antox India P.Ltd. (supra). On merits, it is submitted that
it was not necessary for the plaintiffs to have a registered agreement as
contemplated by the provisions of MOFA Act. It is enough that there was some
agreement between the parties and that money was paid as a consideration for purchase
of flats. The plaintiffs having paid large amounts to Orbit Corporation for
purchase of flats in respect of which allotment letters were issued and/or MOU
executed, the plaintiff would nonetheless have appropriate protection under the
provisions of MOFA Act. In this regard reliance is placed on section 4A of the
MOFA and rule 10 of the MOFA rules. It is submitted that all these issues are
required to be gone into at the trial of the suit and for adjudication of these
issues bank is a necessary party. It is contended that DRT is not a civil court
and it cannot entertain proceedings for a relief of specific performance of the
agreement against Orbit Corporation, who has entered into a collusive mortgage
with the bank, without undertaking any due diligence. The bank is thus a
necessary party to the suit. Thus, the subject matter of the suit cannot be
decided by D.R.T. under section 17 of the Securitisation Act. It is submitted
that fraud is only one of the aspects and there are several other aspects which
would be relevant when an entitlement of a party to file a suit which is
subject matter of consideration.
(ii)
Referring to the plaint in Commercial Suit No.192 of 2017 it is submitted that
there are sufficient averments of fraud and/or collusion made in the plaint
against the bank and thus, applying the principles of law as laid down in the
decision of the Supreme Court in Mardia
Chemicals vs Union of India (supra),
the plaint against the bank is
maintainable and not barred by law. Referring to the provisions of section 13
(4) (b) of the Securitisation Act it is submitted that it would be an
obligation of the bank to complete construction of the project and recognize
the rights of the plaintiff. It is submitted that once the flats in the project
were sold to the plaintiff by issuance of allotment letters, the said project
could not have been mortgaged to the bank by Orbit. The bank also could not
have accepted such mortgage where third party rights were already created. The
bank ought to have taken inspection of the records and accounts of Orbit which
would have clearly revealed that flats were sold to the plaintiff. A reference
in this regard is made to Rule 10 of the MOFA Rules. Thus, with all knowledge about
the sale of the flats to the plaintiffs, a collusive mortgage was created in
favour of the bank by Orbit Corporation. It is submitted that section 9 of MOFA
Act also recognizes the rights of the flat purchasers. Attention of the Court
is also drawn to section 55 (6) (b) of the Transfer of Property Act, 1882 to
submit that the plaintiffs being the flat purchasers would have a prior charge
and hence there was a requirement of due diligence, before loan was advanced by
the bank to Orbit Corporation. It is submitted that there is no material to
accept the submission as advanced on behalf of the bank that the plaintiffs are
mere investors and not genuine flat purchasers. Referring to section 56 (b) of
the Transfer of Property Act, 1882, section 8 of the MOFA Act, it is next
submitted that the plaintiffs could have approached DRT under section 17 of the
Securitisation Act only if possession of the flats was to be with the
plaintiffs and not otherwise, as section 34 of the Securitisation Act would
recognize only possessory rights. It is submitted that contribution of the
plaintiff and other flat purchasers towards construction of the building was
about Rs.83 crores of rupees and thus, there was not only a legitimate
expectation of Orbit completing the project but also of putting the plaintiff
in possession of the respective flats which were being sold to the plaintiff.
Considering all these circumstances, the remedy of approaching the DRT was not
an appropriate remedy, and suit as filed against the bank was maintainable. It
is submitted that incidental reliefs can also be granted by a Civil Court and
thus the reliefs which are prayed are incidental to the main reliefs. The bank
would be a necessary party as and when a conveyance is required to be executed
by Orbit in case a decree for specific performance was to be granted. It is
thus, necessary that the bank is a necessary party to the suit.
20.
In support of the submissions Mr. Seervai has placed reliance on the decisions
in (i) Nahar Industrial
Enterprises Ltd vs Hongkong and Sanghai Banking Corporation, (2009) 8 SCC 646; (ii) Indian
Bank vs ABS Marine Products (P) Ltd.,
(2006) 5 SCC 72; (iii) Arasa
Kumar & anr vs Nallammal & ors.,
II
(2005) BC 127; (iv) Jagdish Singh vs Heeralal & ors. (supra); (v) Saleem Bhai & ors vs State of Maharashtra, 2002 (9) SCALE 22;
(vi) Chhotanben & anr vs Kiritbhai Jalkrushnabhai, 2018 SCC online SC 352;
(vii) Bhau Ram vs Janak Singh
& ors., (2012)
8 SCC 701; (viii) Gopal Srinivasan vs National Spot Exchange, 2016
(4) Bom C.R.492; (ix) National Spot Exchange vs P.D.Agro, 2015 SCC online Bom 6412;
(x) State Bank of India vs Jigishaben Sanghavi, 2011 (3) Bom.C.R.187;
(xi) Wander Ltd & anr vs Antox India P.Ltd., 1990 (supp) SCC 727;
(xii) Avitel Post Studioz Ltd vs
HSBC PI holdings; 2014
SCC online 929.
21.
In support of the submissions Mr.Vaishnava, learned Counsel for the plaintiffs
/respondents has placed reliance on the decisions in (i) Master Circular by Reserve Bank of India on Management of Advances.
Relevant para 8.2; (ii) Abdul Jabbar Ibrahim vs Serkop Builders & ors; 1985 Mh.L.J. 163
(Sec. 5 of MOFA).(Relevant para 9) (iii) G.Swaminathan vs Shivram Coop Hsg.Soc & ors (Sec. 5 of MOFA. (Relevant para 10), 1983 (2) Bom CR 548;
(iv) Delhi Development Authority vs Skipper Construction
Co.P.Ltd & ors. (Sec. 55 (6)
(b) of T.P.Act.Relevant para 29.),
(2000)
10 SCC 130; (iv) Popat and Kotecha Property vs SBI Staff Association, (2005) 7 SCC 510 (O.7
R.11 (d). Relevant 14 to 22 & 25); (v) Mayar
(HK) Ltd & ors vs Owners & parties Vessel M.V.Fortune Express & ors;
(2006) 3 SCC 100 (Relevant para 12), (vi) Kamala & ors vs K.T.Eshwara & ors; (2008) 12 SCC 661 (O.7 R. 11 (d) Relevant para 21), (vii) C.Natrajan vs Ashimbai & anr; (2007) 14 SCC
183 (viii) Roop
Lal Sathi vs Nachhattar Singh Gill,
(1982) 3 SCC 487 (O.7 R.11 (d) Only a part of plaint cannot
be rejected. Relevant para 20), (ix) Cauvery
Coffee Traders, Mangalore vs Hornor Resources (International) Co.Ltd; (2011)10 SCC 420 (Estoppel. Relevant
para 33 & 34), (x) Ramesh
B.Desai & ors vs Bipin Vadilal Mehta & ors; (2006) 5 SCC 638 (O.7 R.11
(d)and fraud.Para 15 on Order 7 R.11.Para 22 on fraud 8 to 13), (xi) Harshal Developers Pvt.Ltd Pune & anr vs Manohar Gopal
Bavdekar & anr; 2013 (1) Mh.L.J. 855 (Sec.4A over
rides section 4 of MOFA. Para 8 to 13.)
22.
In support of the submissions Mr.Sarosh Bharucha, learned counsel for the
respondents, has placed reliance on the decisions in Dwarka Prasad Singh & ors vs. Harikant Prasad Singh, (1973)
SCC 179; Rajanala Kusuma Kumari vs
The State of Telangana, 2018 SCC online Hyd 33; Ramniklal Tulsidas Kotak vs Varsha Builders, 1993
Mh.L.J. 323; Kasiser Oils
Pvt. Ltd. vs Allahabad Bank, MANU/WB/0713/2017 (High Court of
Calcutta); Preamble.Maha Ownership
Flats Act, 1963, Vishal N.Kalsaria vs Bank of India, (2016)
3 SCC 762; Sejal Glass Ltd vs
Navilan Merchants Pvt. Ltd. Civil
Appeal No.10802 of 2017.
Discussion
and Conclusion
23.
We have heard learned counsel for the parties. We have perused the record of
these appeals and the impugned order.
24. We
first deal with the submission as urged on behalf of the plaintiffs that these
appeals do not require interference as the impugned order passed by the learned
single judge exercising jurisdiction under the Order 7 Rule 11 (d) is a
discretionary order, and the view taken by the learned single judge being a
plausible view, the appellate court in such a situation would not interfere,
with the exercise of the discretion by the court, and substitute its
discretion. We do not agree.
25. This
submission as made on behalf of the plaintiffs that the impugned order is a
discretionary order, cannot be accepted. This for the reason that Rule 11 of
Order 7 of CPC does not confer a discretion on the court, moreover it creates
an obligation on the Court to reject the plaint if the requirements as set out
in the rule are satisfied. The provisions of Order 7 Rule 11 of CPC are
mandatory. The opening words of Rule 11 are material which say that “The plaint
shall be
rejected in the following cases”, this clearly indicates that it is an
obligation on the Court to reject a plaint in the event the requirement of
clauses (a) to (f) are satisfied. It also cannot be disputed that such an
application would require adjudication. Thus, when there is an adjudication by
the court in this context and if the requirements as provided in the different clauses
in the rule are satisfied, then, there is no occasion for any discretion to be
exercised by the Court and more so it is an obligation on the Court to reject
the plaint. In making these observations, we are also supported by the
following observations of the Supreme Court in Popat and Kotecha Property Vs. State
Bank of India Staff Association46.
“23. Rule 11 of Order VII lays down an independent
remedy made available to the defendant to challenge the maintainability of the
suit itself, irrespective of his right to contest the same on merits. The law ostensibly
does not contemplate at any stage when the objections can be raised, and also
does not say in express terms about the filing of a written statement. Instead,
the word 'shall' is used clearly implying thereby that it casts a duty on the
Court to perform its obligations in rejecting the plaint when the same is hit
by any of the infirmities provided in the four clauses of Rule 11, even without
intervention of the defendant. In any event, rejection of the plaint under Rule
11 does not preclude the plaintiffs from presenting a fresh plaint in terms of
Rule 13.”
(emphasis
supplied)
26.
A Division Bench of Calcutta High Court in “Allahabad Bank 46 (2005)7 SCC 510 Vs.
Shank's (Steel Fab Pvt.Ltd.& Ors.)”, AIR 2008 Cal
96 held
that the provision is mandatory and no discretion is left with the Court, as
can be seen from the following observations in paragraph 10:
“10. Order VII Rule 11(d) authorizes a
Court to reject a plaint, where the suit appears from the statements made in
the plaint to be barred by any law. In order to invoke Order VII Rule 11(d) of
the Code, the Court must restrict its scrutiny only to the averments made in
the plaint and at that stage, it cannot take into consideration the defence of
the defendant nor can it seek assistance of any evidence from the parties. If
it appears from the averments made in the plaint itself that the Court cannot
entertain the suit because of any bar created by law, the Court is left with no
other alternative but to reject the plaint by taking recourse to Rule 11(d). In
other words, at the time of invoking the jurisdiction under Order VII Rule
11(d) of the Code, the Court shall presume all statements made in the plaint to
be true and even if on that basis, it appears that the suit is barred by any
law for the time being in force, the plaint shall be rejected. The provision is
mandatory and no discretion is left with the Court.”
(emphasis supplied)
27.
In this context the submission as urged by the learned Senior Counsel for the
bank, that discretion is distinct from adjudication and once there is an
adjudication of such an application, there is no question of Court exercising
discretion under Order 7 Rule 11 of CPC, relying on the observations of the
Division Bench of this Court in the case “Hiralal Parbhudas Vs. Ganesh Trading Company & Ors.”(supra),
is well founded. The following observations of the Division bench in paragraph 21
of the decision would also support our conclusion:
“21. It was finally urged by Mr. Kale
that the discretion exercised by the Deputy Register under Section 56 of the
Act in the respondents' favour should not be lightly disturbed and the appellate
Court should therefore not disturb the judgment and order of the learned single
Judge. We ask ourselves. Pray where at all arises the question of discretion.
To start with, the Deputy Registrar did not exercise any discretion under
Section 56 in rejecting the appellants' application for rectification. It must
be remembered that the concept of discretion is distinct from that of
adjudication. When the Deputy Registrar rejected the appellants' application
for rectification on the ground that the two marks are not deceptively similar,
she did not use any discretion but adjudicated upon the rival contentions of
the parities. It would be trite to say that exercise of discretion can arise in
favour of a party when adjudication by the Registrar is against that party. In
the present case, the Deputy Registrar's adjudication was in fact in favour of
the respondents, with the result that there was no occasion for the Deputy Registrar
to exercise any discretion. If the Deputy Registrar had held that the two marks
were deceptively similar (which she did not) but that in exercise of her
discretion she did not consider it necessary to pass an order for
rectification, it could be said that the Deputy Registrar having exercised the
discretion in favour of the respondents, interference with such discretion was
not called for. Nothing of the kind can be said in the present case where in
fact the Deputy Registrar has held that the two marks are not deceptively
similar. In any event, this court having come to the conclusion that the two
marks are deceptively similar, this cannot be a case for the exercise of
discretion in favour of the respondents as their case is not founded on truth
and also in view of the uncontroverted evidence of actual deception perpetrated
and confusion caused.”
28.
Similar view was taken by the Division Bench in “National Chemicals and Colour Co.
& Ors. VS. Reckitt and Colman of India Ltd. & Anr.”(supra)
29.
The plaintiffs reliance on the decision in Wander Ltd. And Anr. vs Antox India P. Ltd. (supra) to
support the contention that an order passed by the Civil Court on an
application under Order 7 Rule 11(a) is a discretionary order, is not well
founded. In Wander Ltd.
(supra) the issue which fell for
consideration of the Court arose from an injunction order which was reversed by
the Division Bench of the High Court. It is in this context, the Court made the
observations in paragraph 14 of the judgment, that if the discretion was
exercised by the trial court reasonably and in a judicial manner, the fact that
the appellate court would have taken different view may not justify
interference with the trial court's exercise of discretion. These observations
in paragraph 14 were made by the court in the light of the principles referred
by Mr.Justice Gajendragadkar in “Printers
(Mysore) Private Ltd. v. Pothan Joseph”, AIR
1960 SC 1156 which was also a case of the Court
considering discretion to be exercised by the Court under Section 34 of the Arbitration
Act,1940 and the power to stay legal proceeding when there was an arbitration
agreement between the parties.
30. The
decision of the Division Bench in “Avitel
Post Studioz Ltd. & Ors. Vs. HSBC PI Holdings (Mauritius) Ltd.” (supra) which in the facts of the case referred
to the principles as laid down in Wander
Ltd. And Anr. vs Antox India P. Ltd.
(supra), is also not applicable as this was also a case where the Court was
considering an injunction order passed by the learned Single Judge, under
Section 9 of the Arbitration and Conciliation Act,1996.
31. Reliance
on behalf of the plaintiffs on the decision of the learned Single Judge of
Rajasthan High Court in “Sahina
w/o. Aslam vs. Returning Officer (Panchayat) Gram Panchayat Jhiwana; District Election
Officer Alwar, Jeenat”, 2017 LawSuit
(Raj) 569 is
also not well founded. This decision cannot be said to be an authority on the
proposition that the orders which would be passed by the Court under Order 7
Rule 11 of CPC, are discretionary orders. In this case, the Court refused to
entertain a second application under Order 7 Rule 11 of CPC, in view of
rejection of the first application filed on the same ground. It is in that
context the Court made an observation that the learned trial Judge has
exercised discretion in rejecting the second application. There was no
adjudication on the application. Further the decision of the learned Single
Judge of this Court in “Naginchand
s/o. Devichand Buccha vs. Vinod s/o.Tarachand Gupta” is of no assistance to the plaintiffs.
In this case the learned trial Judge had held that the issue of limitation is
mixed question of law and facts and therefore, rejected an application made under
Order VII Rule 11(d). We thus find no merit in the contention as urged on
behalf of the plaintiffs that the appeals do not warrant any interference as
the impugned order passed the learned single judge is a discretionary order
taking a possible view.
32. We
now proceed to examine the merits. As the issue which falls for consideration
arises under the provisions of Order 7 Rule 11 (d) of the Code of Civil
Procedure, 1908 namely as to whether the plaint against the bank is barred by
law, the same would be required to be determined by examining the plaint in its
entirety. A holistic and meaningful reading of the plaint is what is called for
and not a superficial or a perfunctory reading in segment or in parts, so as to
find out the real cause of action. There cannot be any compartmentalization, dissection,
segregation and inversions of the language of various paragraphs in the plaint
nor is it permissible to cull out a sentence or a passage and to read it out of
the context in isolation. The pleading needs to be construed as it stands
without addition or subtraction of words or change of its apparent grammatical
sense. No other pleading can be taken into consideration. The law in this
regard is well settled. [See Sopan
Sukhdeo Sable & ors vs Assistant Charity Commissioner & ors. (supra)]. The real object of Order 7
Rule 11 of the Code is to keep out of Courts irresponsible law suits. [See Popat and Kotecha Property (supra)]
33.
It is not in dispute that the project assets have been mortgaged by Orbit in
favour of the bank. The bank as a mortgagee thus has legal rights as conferred
under section 13 of the Securitization Act to realize its dues, on a default by
Orbit and its guarantors, in repayment of the money so advanced. The bank has
already resorted to enforce these legal rights by issuing a notice under
section 13 (2) and subsequently, taking measures under section 13(4) of the Securitization
Act. It is significant that the suits in question are principally filed seeking
specific performance of the alleged agreement to purchase flats between the
plaintiffs and Orbit, however, the suits are filed only after the bank adopted
the measures under the Securitization Act, to realize its dues from the
mortgaged property, in which security interest was created in the bank by
Orbit. In such a situation, if rights of the bank to resort to such measures
under the Securitization Act are to be contested or some other rights as
against the bank are required to be asserted by the plaintiffs, then the law
clearly confers a jurisdiction on the D.R.T. under section 17 of the
Securitization Act. On a plain reading of the said provision it is clear that 'any person' can invoke the remedy under section 17
of the Act. It is not in dispute that the bank is impleaded and brought into
picture only due to the mortgage of the project assets in its favour by Orbit
and for no other reason. The plaintiffs have no direct legal connection of any
nature or privity with the bank.
34. In
Mardia (supra),
the Supreme Court considering the rights of the secured creditors under section
13 (4) and the implications of the provisions of section 34 of the
Securitization Act, held that to a very limited extent, the jurisdiction of the
civil Court can be invoked, where for example the action of the secured
creditor is alleged to be fraudulent or his claim may be so absurd and
untenable, which may not require any probe whatsoever or to say precisely to
the extent the scope is permissible to bring an action in the civil court in
the cases of English mortgages. It would be apposite to note the observations
of the Supreme Court in paragraphs 50 and 51 of the decision which read thus :
“50. It
has also been submitted that an appeal is entertainable before the Debts
Recovery Tribunal only after such measures as provided in subsection (4) of
section 13 are taken and section 34 bars to entertain any proceeding in respect
of a matter which the Debts Recovery Tribunal or the Appellate Tribunal is
empowered to determine. Thus, before any action or measure is taken under
subsection (4) of section 13, it is submitted by Shri.Salve, one of the counsel
for the respondents that there would be no bar to approach the civil court.
Therefore. it cannot be said that no remedy is available to the borrowers. We
however, find that this contention as advanced by Shri Salve is not correct. A
full reading of section 34 shows that the jurisdiction of the civil court is
barred in respect of matters which a Debt Recovery Tribunal or an appellate Tribunal
is empowered to determine in respect of any action taken “or to be taken in
pursuance of any power conferred under this Act.”. That is to say the
prohibition covers even matters which can be taken cognizance of by the Debts
Recovery Tribunal though no measure in that direction has so far been taken
under subsection (4) of section 13. It is further to be noted that the bar of
jurisdiction is in respect of a proceeding which matter may be taken to a
tribunal. Therefore, any matter in respect of which an action may be taken even
later on, the civil court shall have no jurisdiction to entertain any
proceeding thereof. The bar of civil court thus applies to all such matters
which may be taken cognizance of by the Debts Recovery Tribunal, apart from
those matters in which measures have already been taken under subsection (4) of
section 13.”
“51. However, to a very limited extent
jurisdiction of the civil court can also be invoked, where for example the
action of the secured creditor is alleged to be fraudulent or his claim may be
so absurd and untenable which may not require any probe whatsoever or to say
precisely to the extent the scope is permissible to bring an action in the
civil court in the cases of English mortgages. We find such a scope having
been recognized in the two decisions of the Madras High Court which have been
relied upon heavily by the learned Attorney General as well appearing for the Union
of India namely, V.Narasimhachariar, AIR at pp 141 and 144, a judgment of the
learned single Judge where it is observed as follows in para 22 (AIR p.143)
“22. The remedies of a mortgagor against
the mortgagee who is acting in violation of the rights, duties and obligations
are twofold in character. The mortgagor can come to the court before sale with
an injunction for staying the sale if there are materials to show that the power
of sale is being exercised in a fraudulent or improper manner contrary to the
terms of the mortgage. But the pleadings in an action for restraining a sale by
a mortgagee must clearly disclose a fraud or irregularity on the basis of which
relief is sought. 'Adams vs Scott: (1859) 7 WR 213.249. I need not point out
that this restraint on the exercise of the power of sale will be exercised by courts
only under the limited circumstances mentioned above because otherwise to grant
such an injunction would be to cancel one of the clauses of the deed to which both
the parties had agreed and annul one of the chief securities on which persons
advancing moneys on mortgages rely. (See Ghose Rashbehary: Law of Mortgages Vol
II 4th Edn p.784.)”
(emphasis supplied)
35.
On the above backdrop, and having noted that the suits are filed only after the
bank has resorted to recover its dues from Orbit by taking recourse to the
provisions of Section 13(2) and 13(4) of the Securitisation Act, it would be
necessary to examine from the reading of the plaints, in each of the five
suits, so as to ascertain whether the plaint is barred against the bank under
the provisions of section 34 of the Securitisation Act. In so doing we would
examine as to what in reality is the cause of action pleaded against the bank
and as to what is the nature of the averments of 'a fraud' as made against the
bank in the plaint and the acceptability of these averments when tested on the
anvil of the provisions of Order VI Rule 4 of the CPC.
I.
Commercial Appeal No.360 of 2017 arising from Suit No.62 of 2017 (Madhav Prasad
Agarwal & anr vs Axis Bank Ltd)
36.
We set out the facts in some detail as the other plaints have somewhat similar
factual matrix.
37. This
appeal arises from the impugned order to the extent it deals with the
plaintiff's case in Suit No.62 of 2017. The plaintiffs in this suit are one
Madhav Prasad Aggarwal and Mrs.Sushma Madhav Aggarwal. Orbit is defendant no 1
and the bank is defendant no.2. The case of the plaintiff is that in the year
2009 the plaintiffs were looking out for suitable luxurious spacious
accommodation in the vicinity of Nepean Sea Road. Having received knowledge
that Orbit has launched a project namely 'Orbit Heaven' at Nepean Sea Road, the
plaintiffs approached the directors of Orbit. The plaintiffs exhibited their
interest to purchase a duplex apartment on the 16th
and 17th
floor consisting of five bedrooms of an
area approximately of 7608 sq.ft. and carpet area of 4169 sq.ft. and a terrace
area of approximately 2487 sq.ft. alongwith six car parking spaces at total
price of Rs.38.25 crores, and agreed to purchase from Orbit this duplex flat.
In pursuance of the concluded negotiations between the plaintiffs and Orbit, an
amount of Rs.21,03,75,000/was paid by the plaintiffs to Orbit towards part consideration
of the purchase price. This payment was acknowledged by issuance of a receipt
by Orbit. The amounts were paid by cheques between 3 August 2009 to 25 June
2010. A letter of allotment dated 26 June 2010 was issued for sale of the said
flat. The allotment letter recorded that the plaintiffs have agreed to pay Orbit,
the balance price as per the agreement for sale 'to be executed'. Thereafter, Orbit by its letter dated
23 December 2010 demanded from the plaintiffs an amount of Rs.1,91,25,000/. The
said amount was paid by the plaintiffs to Orbit. On 25 February 2011 a further
amount of Rs.1,91,25,000/was paid as demanded by Orbit. An amount of
Rs.9,84,938/was also paid as service tax on 20 July 2011.
In
or about 2013 the plaintiffs were informed by Orbit that it had obtained loan
from Axis Bank and that there was term loan agreement dated 21 January 2013, an
indenture dated 20 February 2013 under which the project property was mortgaged
to the bank. However, Orbit assured the plaintiffs that the rights of the
plaintiffs in the suit project shall not be diluted in any manner. It “appeared” to the plaintiffs that Orbit had informed
the bank about allotment of the said premises to the plaintiffs. By letter
dated 17 July 2013 the bank gave its no objection to the sale of the suit
premises to the plaintiffs. However, it appears that through inadvertence the
name of the first plaintiff was only mentioned as a purchaser of the duplex
flat. As there was misdescription of the flat in the said letter, the
plaintiffs approached Orbit for rectification. A memorandum of understanding
dated 20 August 2014 was executed between Orbit and the plaintiffs inter alia confirming the said allotment letter
dated 26 June 2010. The bank is not a party to the said MOU, also the said
document is not a registered document and is not adequately stamped as per
requirement of law.
38. The
plaintiff has stated that on 13 September 2016 the bank issued a public notice
in the Economic Times recording that the said project (Orbit Heaven) is
mortgaged to the Bank and informing that any person dealing with the said
property without the consent of the bank shall, do so, on its own risk and any
such dealing shall not in any manner alter/affect the rights of the mortgagee
bank over the said property. The plaintiffs by their letter dated 19 September
2016 replied to the said notice and recorded the facts, of the sale of one of
the flats to the plaintiffs and payments made to Orbit in that regard. The bank
replied by its letter dated 4 October 2016 interalia
stating that the letter of allotment
cannot be considered as sufficient document of any ownership right over the
mortgaged property. The plaintiffs thereafter noticed that on 7 November 2016 a
possession notice was affixed on the project site interalia announcing that the bank had taken
possession of the said project under Section 13(4) of the Securitisation.
39. On
the assertion that the said flat was sold to the plaintiffs by Orbit and
accordingly rights are created in favour of the plaintiffs, the suit in
question was filed interalia contending that the Orbit had agreed to
sell the premises under the provisions of MOFA, and the actions of Orbit and
the bank were contrary to the provisions of MOFA. The plaintiffs contended that
Orbit ought to have mortgaged the said property only after prior consent of the
plaintiffs and that due diligence ought to have been carried out by the bank to
ascertain the rights of the plaintiffs. The only averments as made in the
plaint against the bank (defendant no.2) can be found in paragraphs 16, 23 and
28 of the plaint which read thus:
16. The plaintiffs state that the
defendant no.2 issued a public notice in the Economic times dated 13th September 2016 whereby the defendant no.2 informed the public
that the residential project named Orbit Haven formerly known as Avasi House
has been mortgaged with the defendant no.2 and that any person dealing with the
said property without the consent of the 2nd
defendant
shall be doing so at their sole risk and that such dealing shall not in any
manner affect the rights of the 2nd
defendant
over the said property. Hereto annexed and marked Exhibit L is a copy of the
said public notice.”
“23. Without prejudice to the aforesaid
the Plaintiffs state that at the request of the Defendant No.1, the Defendant no.2
has already granted it's no objection for sale of the said premises in favour
of the 1st Plaintiff. The Defendant No.2 cannot now
back out from its commitment for the reasons alleged in the said letter dated 4th October,2016 or otherwise. In any event the Plaintiffs submit
that the mortgage created in favour of 2nd
Defendant,
is subject to the Plaintiffs' rights in the said premises. The Plaintiffs state
that the Defendant No.2 has advanced the loan and have taken the said property
as charge with the knowledge of the Plaintiffs rights in the said premises. [It
is obvious that prior to advancing loan of such a huge amount the Defendant
No.2 ought to have carried out due diligence and ought to have ascertained the
rights of the 1 st Defendant
and ought to have accepted the liability of the 1 st Defendant for allotment of the said
premises to the Plaintiffs.] Even the 2 nd
Defendant did not invite claims and objections of the public
by publishing public notice before granting loan for such a huge amount.
…..
28 . The Plaintiffs submit that the
Defendant No.1 and Defendant No.2 are hands in gloves and they have in connivance
and in conspiracy with each other attempted to deprive the Plaintiffs from
their valuable rights in the said premises.”
(emphasis supplied)
40.
On the above backdrop, the plaintiffs have prayed in the suit for relief of a
declaration that there is valid and subsisting agreement for sale of the flats
in favour of the plaintiffs and a further prayer for specific performance of
the agreement and in the event the relief of specific performance cannot be
granted, then, for a money decree and damages. The only relief as prayed
against the bank can be found in prayer clause (b) namely that in case, the
prayer for specific performance is allowed, the bank be directed to confirm the
sale of the suit premises in favour of the plaintiffs. Prayer clause (b) reads
thus:
“(b) That the Defendant No.1 may be
ordered and directed to specifically perform the said Agreement and to do all
such acts, deeds, things and matters and such other matters as per the
Plaintiffs' Agreement and sign, execute and register the Agreement for sale in
respect of suit duplex flat described in Exhibit “A” hereto as required under
the provision of Maharashtra Ownership Flat Act and to execute documents,
papers, letters, writings, affidavits and undertakings etc. as may be necessary
to and in favour of the Plaintiffs and the Defendant No.2 may be directed to
confirm the sale of the said premises to the Plaintiffs and the Defendant No.1
may be directed to hand over quiet, vacant and peaceful possession of the said
premises to the Plaintiffs within the time that may be fixed by this Hon'ble
Court and to do all such other acts, deeds, and things as may be necessary for
the specific performance of the Plaintiffs' Agreement.”
II.
Commercial Appeal No.361 of 2017 arising out of Suit No.60 of 2017 (Mrs.Manisha
Saraf vs M/s Orbit Corporation & anr)
41.
This appeal arises from the impugned order dealing with the plaintiff's case in
suit no.60 of 2017. The plaintiff is Mrs.Manisha Saraf. M/s. Orbit Corporation
is defendant no.1 and the bank is defendant no.2. The plaintiff in this case is
similarly situated like the plaintiffs in the above suit. The plaintiff
approached Orbit and its directors intending to purchase duplex flats on the 28th and 29th floors of the
said project consisting of a living room, five bed rooms and a attached terrace
aggregating 7,555 sq.ft saleable area, comprising 4,168 carpet area and a
terrace area of 2481 sq ft alongwith five car parking spaces, for an aggregate
sum of Rs.24 crores. In token of purchase of said duplex flats, the plaintiff
paid Rs.2,70,00,000/by cheque dated 25.7.2009 which issued by the plaintiff's
husband. A Memorandum of Understanding (MOU) dated 28.9.2009 was executed
between Orbit, the plaintiff and her husband Sanjay Saraf, as flat purchasers.
On a oral demand by Orbit, the plaintiff's husband made payment of an aggregate
sum of Rs.14,65,00,000/which was equivalent to 61% of the total consideration.
Thereafter by a gift/declarationcumconfirmation dated 3.11.2014 the plaintiff's
husband gifted his interest in favour of the plaintiff. A copy of the same is
not annexed to the plaint. The other contents and averments of the plaint are
quite similar to those as made in the plaint in other suit of Mr.Madhav
Agarwal, which we have in extenso referred above. In regard to the bank
(defendant no.2), the limited averments can be found in paragraph 22, 23 and 28
of the plaint which read thus:
“22. The plaintiff submits that neither
the defendant no.1 nor the defendant no.2 informed about creation of the
mortgage. The plaintiff came to know about the same only on publication of the
public notice in the Economic Times published dated 13th September 2016. The defendant no.1 demanded payment of sum of
Rs.1,00,00,000/on or about in March 2014 and at that time also the defendant
no.1 kept the plaintiff in dark about the creation of the mortgage in favour of
the 2nd defendant. Even thereafter also the defendant no.1 demanded from the
plaintiff further part payment towards the said purchase price and accordingly
the plaintiff paid an aggregate sum of Rs.25,00,000/in the month of September
2014 to the defendant no.1. The plaintiff states that the defendant no.1 has
violated rules and regulations of the Maharashtra Ownership Flats Act. The 1st defendant being promoter ought not to have mortgaged the said
project without written consent of the plaintiff.”
23. The plaintiff submits that the
mortgage created in favour of 2nd defendant
is subject to the plaintiff's rights in the said premises. The plaintiff states
that the defendant no.2 has advanced the loan and has taken the said property
as charge with the knowledge of the plaintiff's rights in the said premises. It
is obvious that prior to advancing loan of such a huge amount the defendant
no.2 ought to have carried out due diligence and ought to have ascertained the
rights of the 1st defendant
and ought to have accepted the liability of the 1st
defendant
for allotment of the said premises to the plaintiff. Even the 2nd defendant did not invite claims and objections of the public
by publishing public notice before granting loan for such a huge amount.”
28. The plaintiff submits that the
defendant no. 1 and defendant no.2 are hand in glove and they have in connivance
and in conspiracy with each other attempted to deprive the plaintiff from her
valuable rights in the said premises.”
42.
Although the plaint contains no specific prayers against the bank, however,
learned counsel for the plaintiff has referred to prayer clause (a) and prayer
clauses (ciii) to be relevant against the bank (defendant no.2). These prayers
read thus :
(a)
this Hon'ble Court be pleased to declare by an order and decree that there is a
valid and subsisting plaintiff's agreement dated 28th September
2009 for the said premises more particularly described in Exhibit A hereto and
the same is binding on the defendants; …. …..
(ciii):
It may be declared that the plaintiff is having first charge on the said
premises for payment of the said sum of Rs.22,81,19,396/together with interest
on Rs.14,65,00,000/at the rate of 9% per annum as per the particulars of claim
in Exhibit I hereto and Rs.51,55,00,000/as per the Particulars of claim in
Exhibit J hereto together with interest thereon @ 24% p.a. from the date of
suit till payment and/or realization as prayed in prayers (c) (i) and (ii)
above and in the event of the defendant would fail and neglect to pay the said
aggregate sum of Rs.74,36,19,396/and/ or interest or any part thereof within the
time to be fixed by this Hon'ble Court,the said premises to the plaintiff be
directed to be sold by an under decree and/or directions of this Hon'ble Court
and out of the net sale proceeds thereof payment be made to the plaintiff
towards the satisfaction of the plaintiff's claim.
III.
Commercial Appeal no.362 of 2017 in Suit no.8 of 2017.(Padma Ashok Bhatt vs M/s
Orbit Corporation & ors).
43. This
appeal arises from the impugned order dealing with the plaintiff's case in Suit
no.8 of 2017. The plaintiff is Mrs.Padma Ashok Bhatt. M/s Orbit Corporation is
defendant no.1.Defendant nos.2 to 14 are respective flat purchasers. The bank
is defendant no.15. In this case, the plaintiff says that the plaintiff agreed
to purchase flat no.2302 and 2402 at a total consideration of
Rs.12,45,00,000/and as part consideration had made a payment of
Rs.9,23,50,000/to Orbit. The plaintiffs' averments in relation to the
information received by the plaintiff, that the bank is taking measures under
the Securitisation Act are similar to the one pleaded in the other plaints and
as noted by us in the foregoing paragraphs. Orbit had issued
allotment/confirmation letter dated 16.11.2009 agreeing to sell the said flats
to the plaintiff for a modified consideration of Rs.17,34,00,000/for flat no.2302
and 2402. On 15.3.2015 an amount of Rs.3,21,00,000/had remained due and payable
by the plaintiff to M/s Orbit Corporation. The plaint recites the amount paid
by various other defendants who are similarly situated. As to what is the
relevance in impleading other flat purchasers as defendants is not known. The
averments as made against the bank (defendant no.15) are found in paragraph 16,
17, 18, 19, 24 (a) (b) and (c) and in paragraph 28 inserted by amendment which
read thus :
“16. Meanwhile the plaintiff and other
flat owners learnt that defendant no.15 have issued a public notice on 13th September 2016 in Economic Times informing public at large
that the project named Orbit Haven has been mortgaged. Hereto annexed and
marked Exhibit F is the public notice dated 13th
September
2016. On learning the same, the flat owners by their respective letters giving
the details of the allotment letter by defendant no.1 to them and the details
of the payment made each of them to the defendant no.1. Hereto annexed and
marked Exhibit G is the copy of letter dated 29th
September
2016 sent by plaintiff to defendant no.15.
17.
On receipt of the said letter, the defendant no.15 intimated that that they
would look into the matter and revert back in due course. Hereto annexed and
marked Exhibit H is the copy of the said letter dated 29th September 2016 issued by defendant no.15. The defendant no.15
ultimately by their letter dated 4th
October
2016 stated that they do not recognize any such transaction as there is a mortgage
created by defendant no.1 in their favour and that the allotment letter cannot
be considered as a sufficient document as an evidence of ownership over the
mortgaged property unless sufficient and documentary evidence such as
registration of sale deed prior to mortgage date submitted to the bank. The
defendant no.15 ultimately through their attorneys sent a letter dated 1st December 2016 that they be given a notice of any suit or
proceeding. Hereto annexed and marked Exhibit I is the copy of the said letter
dated 1st December 2016.”
18. The plaintiff states that defendant
no.15 claim to have advanced loan to the defendant no.1 around in the year
2013, which is much after the defendant no.1 agreed to sell the flats to most
of the purchasers. The defendant nos.2 to 5 has booked the flats in 2010 and
2011 and have got in registered in July 2014. The defendant no.1 neither
disclosed to the defendant nos. 2 to 5 nor intimated nor disclosed in the
agreement about any mortgage with the defendant no.15. Even when the agreement
was registered, there was no such endorsement with the office of SubRegistrar to
show that there was any such mortgage.”
19. The plaintiffs has learnt that the
defendant no.15 have not carried out any due diligence search while granting
loan to defendant no.1. Certainly, if the due diligence search would have taken,
it would show in the record of defendant no.1 that they have received
substantial money from various purchasers who have booked flats in Orbit Haven.
To the knowledge of the plaintiff, it seems that even public notice was issued
by defendant no.15 before advancing loan to the defendant no.1. It is common to
the knowledge of everybody that the moment the building construction start,
people book the flat to take advantage of reduced price and save themselves from
escalation in prices. It is also evident and common that an individual applies
for loan from the bank though due diligence search is carried out by the bank
whereas in the present case to the plaintiff's knowledge, no such due diligence
search at all has been carried out by defendant no.15 before advancing money as
is claimed by defendant no.15. In any event, the mortgage in favour of defendant
no.15 is with the rights and obligations created by defendant no.1 in favour of
the plaintiff which is also protected by law.
… … …
24. The plaintiff and Defendants no.2 to
14 have put in their hard earned money with a hope to get flats in the building
Orbit Haven and at the relevant time, the flat was booked and allotted to them there
was no mortgage of any nature whatsoever by Defendant No.1 and it was free from
all encumbrances and the title of the flat was marketable. The Plaintiff submit
that it seems that the Defendant No.1 in collusion with the officers of
Defendant No.15 Bank have mortgaged the said property in spite of having no
right to mortgage the same. It is also pertinent to note that the Defendant
No.15 have also not carried out any due diligent search as on enquiry by the
Bank with Defendant No.1 and from their records it would certainly disclose
that all the flats are sold and that no flat is available to be mortgaged with
the Defendant No.15. The Defendant No.15 Bank is also aware about the factum of
the flats being allotted by virtue of allotment letters as is also evident from
the fact that Flat No.2501 is not registered and to the knowledge of the
Plaintiff, there is only a letter of allotment/booking in respect of Flat
No.2501 and Defendant No.11 in their Public Notice have clearly stated that
they have mortgaged the suit property except the Flat Nos.2301, 2401 and 2501.
The Defendant No.15 were certainly aware about the preexisting rights of all
flat purchasers.
24(a) “The Plaintiff states that the
alleged mortgage as claimed by Defendant No.15 is contrary to law and it is
contrary to the provisions of Maharashtra Ownership Flats Act. The mortgage is
also unenforceable in law being contrary to the provisions of Section 9 of Maharashtra
Ownership Flats Act, as also several other flat purchasers including Plaintiff
have paid consideration for acquisition of their respective flats in excess of
20% prior to the purported mortgage. The Defendant No.15 did not take any
search of the flat purchaser's register as required to be mandatory maintained
by Defendant No.1 in which names and addresses of all flat purchasers alongwith
the flat numbers are required to be mentioned and also of separate Account in
Bank mandatorily required to maintained for any sum received by the Defendant
No.1. The Defendant No.15 knew it too well that the building to be constructed
by Defendant No.1 was for sale of the flats to various members of public under
the provisions of Maharashtra Ownership Flats Act. The Defendant No.15 thus
cannot claim to be that they are bonafidy mortgagee of the said property.
24(b) The Defendant No.15 further knew
that the land and the building is required to be conveyed free of encumbrances
to the body of flat purchasers. Thus the mortgage and the loan obviously
appears to be fraudulently and in collusion and in connivance between Defendant
No.1 and Defendant no.15.
24(c) Without prejudice to the aforesaid
and in alternative, it is submitted that the Defendant No.15 by claiming to be
mortgagee and permitting the Defendant No.1 to develop and construct the said property
subsequent thereto have assumed character of a promoter as defined under
Maharashtra Ownership Flat Act and is equally bound and liable to perform all
the obligations of the provisions of Maharashtra Ownership Flats Act and are
accordingly bound and liable to perform delivery of possession of the
respective premises free from all encumbrances and to perform all other
obligation towards the flat purchasers being Plaintiff and Defendants Nos.2 to
14. The purported mortgage is even otherwise contrary to Registration Act and
Stamp Act and is enforceable in law.” …. ….
28.
In any event, the Defendant No.1 have issued allotment letters/booking
letters and receipts from time to time when the respective flat purchasers
booked their flats. The plaintiff states that all the said payment receipts
show the contractual obligations upon the Defendant No.1 to complete sale of
the flat and hand over vacant and peaceful possession and also to enter into
Agreement as provided under MOFA. Merely because Defendant No.1 have not executed
a regular Agreement with some of the flat owners and have not registered the
same, would not permit them to mortgage the flats without the written consent
of the flat owners as the rights were already created in favour of the
plaintiff prior to the so called mortgage. The plaintiff states that there is
absolute collusion between the Defendant No.1 and the officers of Defendant
No.15 in allegedly mortgaging the said property. If the Defendant No.15 would
have verified the records, they would certainly be able to get the details from
Defendant No.1 that the flats are encumbered and that the Defendant No.1 have
sold the flats to the respective flat purchasers. The Plaintiff has always been
ready and willing to perform her part of contract and is still ready and
willing to perform her part of contract and obligation. The plaintiff further
state that the mortgage if any with Defendant No.1, cannot take away the
preexisting rights of the flat purchasers including Plaintiff protected by the
provisions of law.”
The
prayer in the plaint as made against the bank (defendant no.15) is prayer
clause (b) which read thus :
(b) that the plaintiff is also entitled
for a declaration that there is no legal, valid enforceable lien, charge or
mortgage in favour of defendant no.15 in respect of the building or any part
thereof known as Orbit Haven,situate at Darabshaw Lane, Napeansea Road, Mumbai400
036.
IV.
Commercial Appeal No.171 of 2017 in Suit no.192 of 2017 (Om Project Consultants
and Engineers Limited vs Orbit Corporation).
44. This
appeal arises from that part of the impugned order dealing with the plaintiff's
case in suit no.192 of 2017. The plaintiff is Om Project Consultants and
Engineers Limited. Defendant no.1 is Orbit Corporation Ltd and defendant no.2
is the bank. The case of the plaintiff is that Mr.Ratan Jindal Director of the
plaintiff is an old acquaintance of Mr.Sujit Agarwal as also Mr.Ravi Kiran
Agarwal Promoters of Orbit Corporation. In the year 2009, the promoters had approached
Mr.Ratan Jindal informing about the said project and in view of the long
association, the plaintiff decided to purchase duplex flat nos.3001 on the 30th and 31st floor. The
premises being allotted to Mr.Ratan Jindal consisted of five bed rooms
admeasuring 7344 sq.feet with six car parking spaces. Mr.Ratan Jindal in the
year 200910 made substantial payments amounting to Rs.20,75,75,000/in respect
of the said premises being more than 65% of the total agreed consideration for the
said premises. Later on in 2014, Mr.Ratan Jindal decided to acquire the said
premises through the family owned company of the plaintiff wherein Mr.Ratan
Jindal was himself a Director. Accordingly, the plaintiff on 30.5.2014 is
stated to have paid a further amount of Rs.2 crores to Orbit for the said
premises and further amount of Rs.27,22,00,000/was paid between the period
30.5.2014 to 14.7.2014 in respect of which a “consolidated receipt” dated
9.7.2014 was issued by Orbit. A separate receipt was issued in favour of the
plaintiff for Rs.2 crores paid on 30.5.2014. Thus, the total consideration of Rs.29,2,79,00,000/was
paid by plaintiff to Orbit which included an amount of Rs.1,02,79,000/as service
tax and Rs.78,00,000/as TDS. Thereafter, a Memorandum of Understanding (MOU)
dated 5.9.2014 was entered into between the plaintiff and Orbit for sale of the
said flats. Thus, almost 91% of the total consideration was paid, at which
stage, the plaintiff was informed at the time of signing of the MOU that M/s Orbit
Corporation had availed loan facility from the bank in 2013 for mortgaging the
said project including its receivables. The plaintiff has stated that the suit
premises were already allotted to Mr.Ratan Jindal Director of the plaintiff
well before creation of the mortgage in favour of the bank. The plaintiff learnt
about the bank's public notice dated 13.9.2016 of the mortgage of the suit
project in favour of the bank. The plaintiff responded to the said public
notice by its letter dated 9.11.2016 inter
alia recording that the suit
premises were allotted to the plaintiff well before the loan was availed by
Orbit Corporation. The plaintiffs state that the bank however did not respond
to the said letter and in fact went ahead by pasting a notice under section 13
(4) of the Securitisation Act at the said project. The averments made in the
plaint, relevant to the bank (defendant no.2) and the alleged act of fraud, stated
to be committed by the bank, are contained in paragraph 13,14,15,16, 17 and 22
of the plaint which read thus:
“13. The plaintiff company after the perusal
of the aforesaid public notice were surprised to read the contents thereof,
which was completely contrary to the assurance of defendant no.1 in respect of the
rights of the plaintiff company in respect of the said premises. The charge of
the plaintiff company over the said premises is paramount as the said premises
was allotted to Mr.Ratan Jindal in the year 2009, much before defendant o.1 had
availed the loan facility from the defendant no.2.
14.
The plaintiff company replied to the aforesaid public notice vide its
response dated 9th November
2016 categorically stating that the said premises was allotted to the plaintiff
well before the said loan was taken by defendant no.1 from defendant no.2. Copy
of the response dated 5th November
2016 is exhibited with the present suit as Exhibit 'G'.
15.
The defendant no.2 Bank did not pay any heed, whatsoever to the response
dated 9th November 2016 but on the contrary the
defendant no.2 has now affixed a possession notice at the site of the said
project inter alia stating that it has taken the symbolic possession
of the said project under section 13 of the Securitization and Reconstruction
of Financial Assets and Enforcement of Security Interest Act, 2002. Copy of the
said possession notice is exhibited with the present suit as Exhibit 'H'.
16.
It is a matter of common parlance and understanding that before granting
any loan facility, as was granted to defendant no.1 banks of repute such as
defendant no.2, conduct a detailed title search/due diligence on properties
intended to be mortgaged as security for such loan, however, it is apparent
that nothing of this sort had been done while the aforesaid loan had been
granted to the defendant no.1 by the defendant no.2”
17. It is apprehended by the plaintiff
company that certain employees of defendant no.2 bank are hand in glove with
the representatives of defendant no.1 organisation and the said loan has been
granted by the defendant no.2 bank for illegal and unlawful gains without any
proper scrutiny or title search/due diligence.” 22. No monetary compensation
shall be adequate in lieu of the specific performance of the said MOU. It is
further submitted that the defendant no.1 and defendant no.2 are hand in gloves
and they are in connivance with each other for depriving the plaintiff from
their valuable rights in the said premises.”
45.
The substantive prayer as made against the bank (defendant no.2) is prayer
clause (c) and an interim prayer is prayer clause (f). These prayers read thus:
“(c) the Defendant no.2 be specifically
directed to confirm the sale of the said premises to Plaintiff and Defendant
no.1 may be directed to hand over the vacant and peaceful possession of the
suit premises to the Plaintiff within the specific timeline as defined by this
Hon'ble Court and to do all such acts, deeds, things and such other matters as
per the said MOU;
… … …
(f) that the Defendant No.1 &
Defendant No.2 including its assignees, associates, servants, employees and
other persons acting on its behalf be restrained by and under an order of this
Hon'ble Court for taking possession of the said premises or any part thereof;”
V.
Commercial Appeal No.172 of 2017 arising
in Commercial Suit no.450 of 2017 (Axis Bank Limited vs Niraj Dilip Jiwrajka
& ors)
46.
The plaintiff is Mr.Niraj Dilip Jivrajka. Defendant no.1 is Orbit Corporation.
The bank is impleaded as defendant no.3. Defendant no.2 is another flat
purchaser. Defendant nos.4 and 5 are companies in whose favour security was
created by Orbit by way of second charge on paripassu
basis in respect of the project rights as
stated in paragraph 5 of the plaint. The case of the plaintiff is that in the
beginning of the year 2010 the plaintiff agreed to purchase from Orbit a flat
in the said project for a consideration of Rs.28.60 crores. An allotment letter
dated 3.3.2010 was issued in favour of the plaintiff. Out of the total
consideration, the plaintiff had already paid an amount of Rs.15 crores as on
3.3.2010. The plaintiff paid to Orbit the entire consideration of
Rs.28,60,00,000/which is not disputed by Orbit. Except the allotment letter,
there is no other document between the Plaintiff and Orbit. The only averments against
the bank are contained in paragraph 20 and 24 which reads thus :
“20. In the premises, it is submitted
that the plaintiff is entitled to a declaration that the allotment letter dated
3rd March 2010 constitutes a valid,
subsisting and binding contract between the plaintiff and the defendant
no.1.The plaintiff is entitled to an order directing the defendant no.1 to take
necessary steps so as to specifically perform its obligations under the
allotment letter including but not limited to completing construction of the
project and handing over possession of the suit property to the plaintiff free
from all encumbrances whatsoever. The plaintiff is also entitled to an order
directing the defendant nos.1 and 3 to 5 to jointly and/or severally comply
with all the obligations, under the Maharashtra Ownership of Flats (Regulation
of the Promotion of Construction, Sale, Management and Transfer) Act 1963 and
the Real Estate (Regulation and Development) Act 2016 including but not limited
to (i) the execution of the necessary agreement in terms thereof (ii) completing
the project (iii) to deliver vacant and peaceful possession of the suit
property to the plaintiff and(iv) to give clear and marketable title in respect
of the suit property free from all encumbrances whatsoever. The plaintiff
is also entitled to an order directing the defendant o.1 to indemnify the
plaintiff in respect of all claims, charges that may be made by anybody in
respect of the suit property and keep the same indemnified till registration of
the necessary agreements and conveyance of land in favour of any
organization/association that may be formed/constituted by the plaintiff with
the other persons who have purchased flats in the project.
24.
The plaintiff having purchased the suit property in the project prior to
the mortgage thereof by the defendant no.1 to the defendant no.3 the question
of the defendant no.3 having a first charge in respect of the suit property
does not arise. It appears that the defendant no.1 has not provided the
defendant on.3 with complete and accurate information in respect of the project
in which the suit property is comprised which would have enabled it to carry
out proper due diligence in respect of the security for the loan viz., the
project at the time of advancing monies to the defendant no.1 and executing the
documents in respect of the mortgage so created. If the defendant no.3 had carried
out the due diligence as required, it would have discovered the fact that the
plaintiff and other flat purchasers had already purchased various flats in the
project. The defendant no.1 having already sold the suit property to the
plaintiff was no longer the owner of the suit property, had no right, title or
interest therein and therefore could not have mortgaged the same to the defendant
no.3. Further the defendant no.1 also could not have further encumbered the
project in favour of the defendant nos.4 and 5. The plaintiff submits that
the defendant no.1 would have surely disclosed the allotment letter executed
between the plaintiff and defendant no.1 to the defendant no.3. The plaintiff
submits that the defendant no.3 has therefore not acted in a prudent manner
having express notice of the allotment letter. The defendant no.3 ought not to
be permitted to take advantage of its own lack of due diligence. Without
prejudice to the aforesaid in the event of the defendant no.1 not having
disclosed the allotment letter to the defendant no.3 then and in such event the
defendant no.1 cannot now take advantage of its own wrongdoing. Viewed from any
angle the defendant no.1 is legally bound to complete the transactions of sale
and specific performance of the allotment letter in favour of the plaintiff.”
47.
The only prayer against the bank (defendant no.3) is prayer clause (c) which
reads thus:
“(c.) that the defendant nos.1 and 3 to 5
be jointly and/or severally ordered and directed by this Hon'ble Court to comply
with all the obligations, under the Maharashtra Ownership of Flats (Regulations
of the Promotion of Construction, Sale, Management and Transfer) Act 1963 and
the Real Estate (Regulation and Development) Act 2016including but not limited
to (i) the execution of the necessary agreement in terms thereof (ii)
completing the project (iii) to deliver vacant and peaceful possession of the
suit property to the plaintiff and (iv) to give clear and marketable title.
48. In
the light of the averments/statements as made in the plaint and the prayers as
noted by us above, we now examine as to whether the plaint can be said to be
barred by the provisions of Section 34 of the Securitisation Act as contended
on behalf of the appellantbank.
49. It
is well settled that the jurisdiction of the Court to try suits of civil nature
is expressive as seen from the clear language of Section 9 of the Code of Civil
Procedure which is on the principle of Ubi
Jus Ibi Remedium. The exception
being suits of which their cognizance is either expressly or impliedly barred.
For these category of suits the Civil Court would lack jurisdiction to
entertain and try such suits. It is further well settled that the exclusion of
the jurisdiction of the Civil Court should be construed strictly. In Kamla Mills Vs. State of Bombay, AIR
1965 SC 1942 a Constitution Bench
(Seven Judge's Bench) of the Supreme Court considered the question as to when
and in what circumstances, can a suit of civil nature be said to be barred by a
Special Statute. The court in paragraphs 30 and 32 held as under:
“30. ... …. the question about the
exclusion of the jurisdiction of civil courts either expressly or by necessary implication
must be considered in the light of the words used in the statutory provision on
which the plea is rested, the scheme of the relevant provisions, their object
and their purpose. … … …
32. … … … Whenever it is urged before a
civil court that its jurisdiction is excluded either expressly or by necessary implication
to entertain claims of a civil nature, the Court naturally feels inclined to
consider whether the remedy afforded by an alternative provision prescribed by
a special statute is sufficient or adequate. In cases where the exclusion of
the civil courts' jurisdiction is expressly provided for, the consideration as to
the scheme of the statute in question and the adequacy or the sufficiency of
the remedies provided for by it may be relevant but cannot be decisive. But
where exclusion is pleaded as a matter of necessary implication, such
considerations would be very important, and in conceivable circumstances, might
even become decisive. If it appears that a statute creates a special right or a
liability and provides for the determination of the right and liability to be
dealt with by tribunals and specially constituted in that behalf, and it
further lays down that all questions about the said right and liability shall
be determined by the tribunal, so constituted, it becomes pertinent to enquire
whether remedies normally associated with actions in civil courts are
prescribed by the said statute or not.”
(emphasis
supplied)
50.
The objection as raised on behalf of the bank before the learned Single Judge
was of the plaint being barred by Section 34 of the Secrutisation Act. The bank
contended that qua any cause of action against the bank, the remedy of the
plaintiffs would be to invoke the provisions of Section 17 by approaching the
Debt Recovery Tribunal (DRT), this for the primary reason that there was no
privity of contract between bank and the plaintiffs. The privity of the bank
was only qua Orbit in view of the mortgage of the project assets in favour of
the bank by Orbit as a security of the loan advanced by it. The bank was merely
realising the security interest in the assets mortgaged to it by Orbit. To appreciate
the contention of the bank it would be appropriate to extract some of the
provisions of the Securitisation Act, relevant to the present controversy.
Following are the provisions:
“Section 2 (zf)
"security interest" means right, title and interest of
any kind whatsoever upon property, created in favour of any secured creditor
and includes any mortgage, charge, hypothecation, assignment other than those
specified in section 31;
(f) "borrower"
means any person who has been granted financial assistance by any bank or
financial institution or who has given any guarantee or created any mortgage or
pledge as security for the financial assistance granted by any bank or
financial institution and includes a person who becomes borrower of a securitisation
company or reconstruction company consequent upon acquisition by it of any
rights or interest of any bank or financial institution in relation to such
financial assistance;
(ha) “debt”
shall have the meaning assigned to it in clause (g) of section 2 of the
Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of
1993)
(k) "financial assistance"
means any loan or advance granted or any debentures or bonds subscribed or any
guarantees given or letters of credit established or any other credit facility
extended by any bank or financial institution;
(zc) "secured
asset" means the property on which security interest is
created;
17. Application against measures to
recover secured debts (1) Any person (including borrower),
aggrieved by any of the measures referred to in subsection (4) of section 13
taken by the secured creditor or his authorised officer under this Chapter, [may
make an application along with such fee, as may be prescribed] to the Debts
Recovery Tribunal having jurisdiction in the matter within fortyfive days from
the date on which such measures had been taken: [Provided that different fees
may be prescribed for making the application by the borrower and the person
other than the borrower.]
[Explanation.—For the removal of doubts,
it is hereby declared that the communication of the reasons to the borrower by
the secured creditor for not having accepted his representation or objection or
the likely action of the secured creditor at the stage of communication of
reasons to the borrower shall not entitle the person (including borrower) to make
an application to the Debts Recovery Tribunal under this sub section.]
1A … … …
(2) The Debts Recovery Tribunal shall consider
whether any of the measures referred to in subsection (4) of section 13 taken
by the secured creditor for enforcement of security are in accordance with the
provisions of this Act and the rules made thereunder.
(3) If, the Debts Recovery Tribunal,
after examining the facts and circumstances of the case and evidence produced
by the parties, comes to the conclusion that any of the measures referred to in
sub section (4) of section 13, taken by the secured creditor are not in
accordance with the provisions of this Act and the rules made thereunder, and
require restoration of the management or restoration of possession, of the
secured assets to the borrower or other aggrieved persons, it may by order, (a)
declare the recourse to any one or more measures referred to in sub section (4)
of section 13 taken by the secured creditor as invalid; and (b) restore the
possession of secured assets or management of secured assets to the borrower or
such other aggrieved person, who has made an application under Subsection 1, as
the case may be; and (c) pass such other direction as it may consider
appropriate and necessary in relation to any of the recourse taken by the
secured creditor under subsection (4) of section 13.
(4) If, the Debts Recovery Tribunal
declares the recourse taken by a secured creditor under subsection (4) of section
13, is in accordance with the provisions of this Act and the rules made thereunder,
then, notwithstanding anything contained in any other law for the time being in
force , the secured creditor shall be entitled to take recourse to one or more
of the measures specified under subsection (4) of section l3 to recover his secured
debt.
[(4A) Whether (i) any person, in an
application under subsection (1), claims any tenancy or lease hold rights upon
the secured asset, the Debt Recovery Tribunal, after examining the facts of the
case and evidence produced by the parties in relation to such claims shall, for
the purposes of enforcement of security interest, have the jurisdiction to
examine whether lease or tenancy,( a) has expired or stood determined; or (b)
is contrary to section 65A of the Transfer of Property Act,1882 (4 of 1882) ;
or (c) is contrary to terms of mortgage; or (d) is created after the issuance
of notice of default and demand by the Bank under subsection (2) of section 13
of the Act; and (ii) the Debt Recovery Tribunal is satisfied that tenancy right
or lease hold rights claimed in secured asset falls under the subclause (a) or
subclause (b) or subclause (c) or subclause (d) of clause (i), then
notwithstanding anything to the contrary contained in any other law for the
time being in force, the Debt Recovery Tribunal may pass such order as it deems
fit in accordance with the provisions of this Act.] … … ….
34. Civil
Court not to have jurisdiction:No civil court shall have jurisdiction
to entertain any suit or proceeding in respect of any matter which a Debts
Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act
to determine and no injunction shall be granted by any court or other authority
in respect of any action taken or to be taken in pursuance of any power
conferred by or under this Act or under the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993 (51 of 1993).
35. The
provisions of this Act to override other laws.The provisions of this
Act shall have effect, notwithstanding anything inconsistent therewith
contained in any other law for the time being in force or any instrument having
effect by virtue of any such law.”
(emphasis supplied)
51.
Section 13 of the Securitisation Act provides for enforcement of the security
interest and the measures which can be taken by the secured creditors. Section
13 begins with a non
obstante clause to provide that
“notwithstanding anything contained in section 69 or section 69A of the
Transfer of Property Act,1882, any security interest created in favour of any
secured creditor may be enforced, without the intervention of the Court or
tribunal, by such creditor in accordance with the provisions of this Act.”
Section 69 of the Transfer of Property Act provides for general power of sale
as conferred on the mortgagee. Section 69A of the Transfer of Property Act
provides for appointment of a receiver and such security interest would be
enforced in accordance with the provisions of Secrutisation Act.
52. In
Mardia (supra), the Supreme Court was
considering the challenge to the legality of the provisions of Sections 13, 15,
17 and Section 34 of the Securitisation Act. The Court examined the provisions of
Section 34 which bars jurisdiction of the Civil Court to entertain any suit or
proceedings, in respect of any matter which a Debt Recovery Tribunal or the
appellate Tribunal is empowered under the Secrutisation Act to determine, in
respect of any action taken or to be taken, in pursuance of any power conferred
by or under the Secrutisation Act or under the Recovery of Debts Due to Banks
and Financial Institutions Act,1993. The Court also examined the provisions of
Section 35 of the Secrutisation Act, which provides for the Act to have an
overriding effect all other laws, and as to why and in what circumstances it
was thought necessary by the legislature to provide for a non obstante clause in subsection (1) of Section 13 of
the Secrutisation Act. It was observed that the situation as prevailed in 1882
when the Transfer of Property Act was enacted, has undergone a seachange and
what was conceived to be correct in the situation then prevailing, may not be
so in the present day scenario. It was observed that functions of different
institutions including the banking and financial institutions have changed and
new functions have been introduced for financing the industries etc., and a new
economic and fiscal environment exits, after more than 100 years after the
enactment of the Transfer of Property Act was initially brought into force. The
Court referred to the report of Rajamannar Committee appointed by Government of
India which submitted its report in 1977 indicating the effect of the changed
situation and the efficacy of the provisions of the Transfer of Property Act.
The Court also examined the Narasimham Committee Report 1998 which advocates
for a legal framework which should clearly define the rights and liabilities of
the parties to the contract and provisions for speedy resolution of disputes,
being a sine qua non for efficient trade and commerce, especially for financial
intermediation. A reference is also made to the guidelines of the Reserve Bank
of India in relation to classifying the Non Performing Assets (NPA) and the
appropriate remedies available to the borrowers. The Court noted the adequate
safeguards which are available to the borrowers as provided under Section 13 of
the Act. The court also considered the contention that an appeal under Section
17 would be entertainable before the Debt Recovery Tribunal, only after such
measures as provided under subsection (4) of Section 13 are taken. The court
held that a full reading of section 34 shows that the jurisdiction of the civil
court is barred, in respect of matters which a Debt Recovery Tribunal or appellate
Tribunal is empowered to determine, in regard to any action taken or “to be
taken” in pursuance of any power conferred under Securitisation Act and thus
the prohibition under Section 34, covers even the matters which can be taken
cognizance by the Debt Recovery Tribunal though no measure in that direction
was taken under subsection (4) of Section 13. It was held that the bar of
jurisdiction of the civil court, applies to all such matters which may be taken
cognizance by the Debt Recovery Tribunal, apart from those matters in which
measures have already been taken under subsection (4) of Section 13. The Court however
held, that to a very limited extent jurisdiction of the civil court can also be
invoked, where the action of the secured creditor is alleged to be fraudulent
or their claim may be so absurd and untenable which may not require any probe,
whatsoever or to say precisely to the extent the scope is permissible to bring
an action in the civil court in the cases of English mortgages.
53. As
there was much discussion in this context from both the sides and more
particularly paragraphs 50 and 51 of the decision in Mardia Chemicals Ltd.(supra), it would be appropriate to note
the observations as made by their Lordships which read thus:
“50. It
has also been submitted that an appeal is entertainable before the Debt
Recovery Tribunal only after such measures as provided in subsection (4) of
Section 13 are taken and Section 34 bars to entertain any proceeding in respect
of a matter which the Debt Recovery Tribunal or the appellate Tribunal is empowered
to determine. Thus before any action or measure is taken under subsection (4)
of Section 13, it is submitted by Mr. Salve one of the counsel for respondents
that there would be no bar to approach the civil court. Therefore, it cannot be
said that no remedy is available to the borrowers. We, however, find that this
contention as advanced by Shri Salve is not correct. A full reading of section
34 shows that the jurisdiction of the civil court is barred in respect of
matters which a Debt Recovery Tribunal or appellate Tribunal is empowered to
determine in respect of any action taken "or to be taken in pursuance of
any power conferred under this Act". That is to say, the prohibition
covers even matters which can be taken cognizance of by the Debt Recovery Tribunal
though no measure in that direction has so far been taken under subsection (4)
of Section 13. It is further to be noted that the bar of jurisdiction is in
respect of a proceeding which matter may be taken to the Tribunal. Therefore,
any matter in respect of which an action may be taken even later on, the civil
court shall have no jurisdiction to entertain any proceeding thereof. The bar
of civil court thus applies to all such matters which may be taken cognizance
of by the Debt Recovery Tribunal, apart from those matters in which measures
have already been taken under subsection (4) of Section 13.
51.
However, to a very limited extent jurisdiction of the civil court can also
be invoked, where for example, the action of the secured creditor is alleged to
be fraudulent or his claim may be so absurd and untenable which may not require
any probe, whatsoever or to say precisely to the extent the scope is permissible
to bring an action in the civil court in the cases of English mortgages. We
find such a scope having been recognized in the two decisions of the Madras
High Court which have been relied upon heavily by the learned Attorney General
as well appearing for the Union of India, namely V.Narasimhachariar p.135 at
p.141 and 144, a judgment of the learned single Judge where it is observed as
follows in para 22:(AIR p.143)
"22. The remedies of a mortgagor
against the mortgagee who is acting in violation of the rights, duties and obligations
are twofold in character. The mortgagor can come to the Court before sale with
an injunction for staying the sale if there are materials to show that the power
of sale is being exercised in a fraudulent or improper manner contrary to the
terms of the mortgage. But the pleadings in an action for restraining a sale by
mortgagee must clearly disclose a fraud or irregularity on the basis of which
relief is sought: 'Adams v. Scott, (1859) 7 WR 213, 249. I need not point out
that this restraint on the exercise of the power of sale will be exercised by Courts
only under the limited circumstances mentioned above because otherwise to grant
such an injunction would be to cancel one of the clauses of the deed to which both
the parties had agreed and annul one of the chief securities on which persons
advancing moneys on mortgages rely. (See Ghose, Rashbehary, Law of Mortgages,
Vol.II, Fourth Edn., page 784).”
54.
In Mardia (supra) Supreme Court has also held that the proceedings under
Section 17 of the Securitisation Act in fact are not appellate proceedings and
it seemed to be a misnomer. It was observed that it is the initial action which
is brought before a forum as prescribed under the Securitisation Act, raising
from the grievance against the action or measures taken by one of the parties
to the contract. It is held that this is the stage of initial proceedings, like
filing a suit in civil court and as a matter of fact the proceedings under
Section 17 of the Securitisation Act are in lieu of a civil suit, which remedy
is ordinarily available, but for the bar under Section 34 of the Securitisation
Act.
55. In
M/s.Transcore Vs. Union of India &
Anr., (2008) 1 SCC 125 the Supreme Court again had an occasion
to examine the provisions of Securitisation Act as also referring to the
decision in Mardia
Chemicals Ltd.(supra). The
Supreme Court held that Securitisation Act was enacted to enforce the interest
in the “financial assets” which belong to banks or financial institutions by
virtue of contract between the parties or by operation of common law principles.
It was held that the Securitisation Act enables the banks and financial
institutions to realise long term assets, manage problems of liquidity, asset
liability mismatch and to improve recovery of debts by exercising powers to
take possession of securities, sell them and thereby reduce nonperforming assets
by adopting measures for recovery and reconstruction. One of the object of the
Act was recovery by nonadjudicatory process by enforcement of security
interest, on default of the borrower to repay the debt or failure to maintain
the appropriate margin. It was observed that it was for this reason Section 13(1)
and 13(2) of the Securitisation Act are imperative to enable banks and
financial institutions to enforce expeditiously without the intervention of the
court/tribunal, the security interest on the default of the borrower in
repayment and the account of the borrower becoming a non performing assets. It
was observed that powers conferred under Section 13(4) of the Securitisation
Act comprehend the power to take actual and physical possession of immovable
property. The Court in paragraph 41 and 43 has held as under:
“41. The heart of the matter is that NPA
Act proceeds on the basis that an interest in the asset pledged or mortgaged
with the bank or FI is created in favour of the bank/ FI; that the borrower has
become a Debtor, his liability has crystallized and that his account with the
bank/ FI (which is an asset with the bank/FI) has become substandard.
… … …
43. Keeping in mind the above
circumstances, the NPA Act is enacted for quick enforcement of the security.
The said Act deals with enforcement of the rights vested in the bank/ FI. The NPA
Act proceeds on the basis that security interest vests in the bank/FI. The NPA
Act proceeds on the basis that security interest vests in the bank/FI. Sections
5 and 9 of NPA Act is also important for preservation of the value of the
assets of the banks/ FIs. Quick recovery of debt is important. It is the object
of DRT Act as well as NPA Act. But under NPA Act, authority is given to the
banks/ FIs, which is not there in the DRT Act, to assign the secured interest
to securitisation company/ asset reconstruction company. In cases where the
borrower has bought an asset with the finance of the bank/ FI, the latter is treated
as a lender and on assignment the securitisation company/ asset reconstruction
company steps into the shoes of the lender bank/ FI and it can recover the lent
amounts from the borrower.”
56.
Adverting to the above position in law and the provisions of the Securitisation
Act, we now discuss whether the suits in question can be said to be
maintainable against the bank ? It is not in dispute that the substantial
amounts were advanced by the bank to Orbit. It is stated that the liability of
the Orbit towards Axis Bank is more than Rs.150 crores (i.e. term loan of Rs.85
crores, OD facilities of 130 crores and OD facilities of Rs.35 crores). These
amounts as advanced are secured in favour of the Axis bank by a registered
indenture of mortgage dated 28 February 2013 and subsequently by indenture of
mortgage dated 17 September 2013 and the indenture of mortgage dated 17 June
2015. Thus, a 'security interest' as clearly falling within the meaning and purview
of Section 2(zf) of the Securitisation Act, is created in favour of the bank in
regard to these advances made in favour of Orbit. It is also not in dispute
that the entire project in question (land and building) are the subject matter
of the said mortgage. Once there is a valid and legal mortgage in operation and
there is default on the part of Orbit in repayment of the said advances and the
account of Orbit becoming nonperforming assets (NPA), there can be no fault or
any impediment in law and/or any illegality on the part of the bank to take
recourse to the provisions of the Securitisation Act namely by issuing notice
under Section 13(2) and taking measures under Section 13(4) to enforce the security
interest and realise the amounts due and payable to the bank by Orbit, from the
mortgaged assets. The bank has resorted to these remedies and measures under
the Securitisation act by issuance of notice under Section 13(2) dated 19
August 2016 issued to Orbit and thereafter by taking recourse to Section 13(4)
and taking symbolic possession of the suit properties on 7 November 2016.
57. The
averments as made in the plaint clearly indicate that the plaintiffs decided to
purchase their respective flats on or about 20092010 and substantial payments
were made to Orbit as stated to be part consideration of the purchase price. It
is however astounding that despite parting with such huge amounts stated to be
the consideration for purchase of the flats, the plaintiffs remained satisfied
on a mere piece of paper namely allotment letters issued by Orbit and/or a
merely MOU. The Plaintiffs are not the category of persons who can be said to be
unaware of law or would have no means to seek legal advice. The plaintiffs
never felt that Orbit should follow the process of law as prescribed under the
MOFA and enter into a registered agreement with them. It is also quite clear
that in some of the cases even timely receipts in regard to payments were not
accepted and the receipts were passed on subsequently. Not even in one case
there is a registered agreement for purchase of flat as would usually and
normally happen in a case of a bonafide purchase transaction of a flat and more
so, when the flat in question is so valuable the price of which runs into
several crores of rupees, ranging between Rs.18 crores to Rs.38 crores.
58. When
it comes to purchase of flats and protection being conferred on the flat
purchasers in the State, the provisions of MOFA are attracted which is an
enactment to regulate promotion of construction, sale, management and transfer
of flats on ownership basis. It is worthwhile to note the preamble of the Act
so as to ascertain the intention of the legislature to have such an enactment.
The preamble of the MOFA reads thus:
“WHEREAS, It has been brought to the
notice of the State Government that, consequent on the acute shortage of
housing in the several areas of the State of Maharashtra, sundry abuses, malpractices
and difficulties relating to the promotion of the construction of, and the sale
and management and transfer of flats taken on ownership basis exist, and are increasing;
AND WHEREAS, the Government in order to,
advise itself as respects the manner of dealing with these matters appointed a committee
by Government Resolution in the Urban Development and Public Health Department
No. S. 24879599F, dated the 20th May 1960, to inquire into and report to the
State Government on the several matters referred to aforesaid with the purpose
of considering measures for their amelioration;
AND WHEREAS, the aforesaid Committee has
submitted its report to Government in June 1961, which report has been published
for general information;
AND WHEREAS, it is now expedient after
considering the recommendations and suggestions made therein, to make provision
during the period of such shortage of housing, for the regulation of the promotion
of the construction, sale and management and transfer, of fiats taken on a
ownership basis in the State of Maharashtra; It is hereby enacted in the
Fourteenth Year of the Republic of India as follows:.. … .”
The
notes on the clauses of the provisions of MOFA reads thus:
“Clause 4 This contains the provision for
compulsory registration of the agreement for sale of the flat.
…. ….. …
Clause 8 This clause provides for the
refund of the amount paid, with interest at the rate of 9 per cent per annum,
if the flat is not handed over by the date agreed upon or within further time allowed
to him for reasons beyond the control of the promoter or his agents.
Clause 9 – This clause provides that the
promoter shall not, without the previous consent of the flat purchasers,
mortgage or create a charge on the flat or the land after he has entered into an
agreement to sell a flat. If he nevertheless does create mortgage or a charge
without such consent after the agreement is registered it will not affect the
rights and interests of such flat takers.
59. In
the context of the present dispute, the relevant provisions of the MOFA are as
under:
2 Definitions:
(c) ["promoter"
means a person and includes a partnership firm or a body or association of
persons whether registered or not] who constructs or causes to be constructed a
block or building of flats [or apartments] for the purpose of selling some or
all of them to other persons, or to a company, cooperative society or other
association of persons, and includes his assignees; and where the person who
builds and the person who sells are different persons, the term includes both; …
… ...
4. Promoter
before accepting advance payment or deposit to enter into agreement and
agreement to be registered,
(1) [Notwithstanding anything contained
in any other law, a promoter who intends to construct or constructs a block or building
of flats all or some of which are to be taken or are taken on ownership basis,
shall, before he accepts any sum of money as advance payment or deposit, which
shall not be more than 20 per cent, of the sale price enter into a written
agreement for sale with each of such persons who are to take or have taken such
flats, and the agreement shall not be registered under 2[the Registration Act,
1908 (hereinafter in this section referred to as “the Registration Act”)] 3[and
such agreement shall be in the prescribed form.]
4[(1A) The agreement to be prescribed
under subsection (1) shall contain inter alias the particulars as specified in
clause (a); and to such agreement there shall be attached the copies of the documents
specified in clause (b) ( a) particulars
(i) if the building is to be constructed,
the liability of the promoter to construct it according to the plans and
specifications approved by the local authority where such approval is required under
any law for the time being in force ;
(ii) the date by which the possession of
the flat is to be handed over to the purchaser;
(iii) the extent of the carpet area of
the flat including the area of the balconies which should be shown separately;
(iv) the price of the flat including the
proportionate price of the common areas and facilities which should be shown
separately, to be paid by the purchaser of flat; and the intervals at which installments
thereof may be paid;
(v) the precise nature of the
organisation to be constituted of the persons who have taken or are to take the
flats;
(vi) the nature, extent and description
of the common areas and facilities;
(vii) the nature, extent and description
of limited common areas and facilities, if any;
(viii) percentage. of undivided interest
in the common areas and facilities appertaining to the flat agreed to be sold;
(ix) statement of the use for which the
flat is intended and restriction on its use, if any;
(x) percentage of undivided interests in
the limited common areas and facilities, if any, appertaining to the flat
agreed to be sold;
(b) copies of documents, –
(i) the certificate by an Attorneyatlaw or
Advocate under clause (a) of subsection (2) of section (3);
(ii) Property Card or extract of Village
Forms VI or VII and XII or any other relevant revenue record showing the nature
of the title of the promoter to the land on which the flats are constructed or are
to be constructed;
(iii) the plans and specifications of the
flat as approved by the concerned local authority.]
1[(2) Any agreement for sale entered into
under subsection (1) shall be presented, by the promoter or by any other person
competent to do so under section 32 of the Registration Act, at the proper registration
office for registration, within the time allowed under sections 23 to 26 (both
inclusive) of the said Act and execution thereof shall be admitted before the
registering officer by the person executing the document or his representative,
assign or agent as laid down in sections 34 and 35 of the said Act also within
the time aforesaid:
Provided that, where any agreement for
sale is entered into, or is purported to be entered into, under subsection (1),
at any time before the commencement of the Maharashtra Ownership Flats
(Regulation of the promotion of construction, sale, management and transfer)
(Amendment and Validating Provisions) Act, 1983, and such agreement was not presented
for registration, or was presented for registration but its execution was not
presented before the registration officer by the person concerned, before the
commencement of the said Act, then such document may be presented at the proper
registration office for registration. and its execution may be admitted, by any
of the persons concerned referred to above in this subsection, on or before the
31st December 1984, and the registering
officer shall accept such document for registration, and register it under the
Registration Act, as if it were presented and its execution was admitted,
within the time laid down in the Registration Act:
Provided further that, on presenting a
document for registration as aforesaid if the person executing such document or
his representative, assign or agent does not appear before the registering officer
and admit the execution of the document, the registering officer shall cause a
summons to be issued under section 36 of the Registration Act requiring the
executants to appear at the registration office, either in person or by duly authorised
agent, at a time fixed in the summons if the executant fails to appear in
compliance with the summons, the execution of the document shall be deemed to
be admitted by him and the registering officer may proceed to register the
document accordingly. If the executant appears before the registering officer
as required by the summons but denies execution of the document, the
registering officer shall, after giving him a reasonable opportunity of being
heard, if satisfied that the document has been executed by him, proceed to
register the document accordingly.]
SECTION 4A: EFFECT OF NONREGISTRATION OF AGREEMENT
REQUIRED TO BE REGISTERED UNDER SECTION
4 Where an agreement for sale entered
into under subsection 4, whether entered into before or after the commencement
of the Maharashtra Ownership Flats (Regulation of the promotion of construction,
sale, management and transfer) (Amendment and Validating Provisions) Act, 1983,
remains unregistered for any reason, then notwithstanding anything contained in
any law for the time being in force, or any judgment, decree or order of any Court,
it may be received as evidence of a contract in a suit for specific performance
under Chapter II of the Specific Relief Act, 1963, or as evidence of part
performance of a contract for the purposes of section 53A of the Transfer of
Property Act, 1882, or as evidence of any collateral transaction not required
to be effected by registered instrument.]
SECTION 8: REFUND OF AMOUNT PAID WITH
INTEREST FOR FAILURE TO GIVE POSSESSION WITHIN SPECIFIED TIME OR FURTHER TIME
ALLOWED. If
(a) the promoter fails to give possession
in accordance with the terms of his agreement of a flat duly completed by the
date specified, or any further date or dates agreed to by the parties, or
(b) the promoter for reason beyond his
control and of his agents, is unable to give possession of (he flat by the date
specified, or a further agreed date and a period of three months thereafter, or
a further period of three months if those reasons still exist, then, in any
such case, the promoter shall be liable on demand (but without prejudice to any
other remedies to which he may be liable) to refund the amounts already
received by him in respect of the flat (with simple interest at nine percent
per annum from the date he received the sums till the date the amounts and interest
thereon is refunded), and the amounts and the interest shall be a charge on the
land and the construction if any thereon in which the flat is or was to be
constructed, to the extent of the amount due, but subject to any prior
encumbrances.
SECTION 9: NO MORTGAGE ETC., TO BE CREATED
WITHOUT CONSENT OF PARTIES AFTER EXECUTION OF AGREEMENT FOR SALE
No promoter shall, after he execute an agreement
to sell any fiat, mortgage or create a charge on the flat or the land, without
the previous consent of the persons who take or agree to take the flats, and if
any such mortgage or charge is made or created without such previous consent
after the agreement referred to in section 4 is registered, it shall not affect
the right and interest of such persons.”
60.
It view of the above object and intention of the legislation, the above
provisions of the MOFA as referred during the course of arguments are required
to be considered in their application to the given facts, inasmuch as the
plaintiffs contend that the legislation provides for valuable rights referring
to Section 4, 4A, Section 5 and 9 of the MOFA.
61.
We find it difficult to accept the said contention as urged on behalf of the
plaintiffs that these provisions of the MOFA would in any manner assist the
plaintiffs. The plaintiffs who have parted with substantial amounts, are not
ordinary flat purchasers. For the reasons best known to them, the plaintiffs
never felt to have a benefit of a registered agreement of sale of their
respective flats which would require payment of proper stamp duty nor they
called upon Orbit to do so. This possibly in view of the nature of the
relations the plaintiffs stood with Orbit, the plaintiff thought it wiser to
remain in that position. In the context of the MOFA Act the nonregistration of
an agreement to purchase/sale of a flat in fact goes to the root of the matter.
Thus when we consider the argument of the applicability of the provisions of
MOFA and a protection as claimed by the plaintiffs under the provisions of the said
Act the basic compliance of the provisions MOFA would not only be germane but a
requirement and a mandate of law.
62. We
are unable to agree with the reasoning of the learned Single Judge on the
applicability of the MOFA. Admittedly there is no compliance of the provisions
of Section 4 of the Act which provides that a promoter who intends to construct
a building or flats which are to be taken or already taken on ownership basis,
shall before, he accepts any some of money as advance payment or deposit, which
shall not be more than 20% of the sale price, enter into a written agreement
for sale with each of such persons, who are to take or have taken, such flats,
and the agreement shall be registered under the Registration Act,1908.
Subsection 1A of Section 4 provides that the prescribed agreement shall contain
all particulars as specified in clause (a) and such agreement shall be attached
with the copies of the documents specified in clause (b) of the said provision.
In the present case admittedly there is no agreement entered between the
parties as prescribed under Section 4(1) and Section 4(1A) of the Act. In case
of one plaintiff there is merely on MOU which is also not registered as per the
provisions of the Registration Act.
63. Section
4A provides for effect of non registration of an agreement, this provision is
also not available to the plaintiff, as Section 4A speaks of 'an agreement for sale entered under
subsection (1) of Section 4' before
or after the commencement of the Maharashtra Ownership Flats (Regulation of
promotion of construction, sale, management and transfer) (Amendment and
Validating Provisions) Act,1983 and which remains unregistered for any reason.
It is only in such a situation notwithstanding anything contained in any law
for the time being in force, or in any judgment, decree or order of any Court,
it may be received as evidence of a contract in a suit for specific performance
under Chapter II of the Specific Relief Act,1963 or as evidence of part performance
of a contract for the purposes of Section 53A of the Transfer of Property
Act,1882, or as evidence of any collateral transaction not required to be
effected by registered instrument. We are afraid as to how the provisions of
Section 4 and 4A , exfacie, are of any avail to the plaintiffs.
64. Further
Section 9 of the MOFA which provides that no mortgage etc. be created without
consent of parties, after execution of agreement for sale, also can have no
application in the facts of the present case. This for the reason that
primarily there is no agreement for sale executed by Orbit in favour of the
plaintiffs to sell any of these flats and when no such agreement to sale is
executed, there was no embargo on Orbit not to mortgage the project to the bank
and to receive the term loans and the other borrowings. Conversely in such a
situation there was also no embargo on the bank to advance a loan and receive the
project assets as a mortgage/security for repayment of loan from Orbit. As
there was no registered agreement as prescribed under Section 4 of the MOFA,
there was no question of the rights of the plaintiffs/purported flat purchasers
being protected so as to legally override the charge created by the bank on the
project assets. In the absence of the basic compliance under MOFA by Orbit and
plaintiffs it cannot be presumed that the money which was received by Orbit
from plaintiffs was towards purchase of flats for the applicability of the MOFA.
In Hansa V. Gandhi
(supra), the Court examining the provisions
of Section 4 of the MOFA held that the agreement executed between the plaintiff
and the developer ought to have been registered with the SubRegistrar and in
the absence of such registered document, the plaintiff would not get any right
in the flat which he intended to purchase. In paragraphs 19 and 20 the Court
observed thus:
“19. It is a fact that the plaintiffs had
not entered into any formal agreement with regard to the purchase of the flats
with the Developer. The mere letter of intent, which was subject to several
conditions, would not give any right to the plaintiffs for purchase of the
flats in question till all the conditions incorporated in the letter of intent
were fulfilled by the plaintiffs i.e. the proposed purchasers. It is also a
fact that all the conditions, which were to be fulfilled, had not been
fulfilled by the plaintiffs.
20.
According to the provisions of Section 4 (1) of the Act, the agreement, if any,
executed between the plaintiffs on one hand and the developer on the another,
ought to have been registered with the subRegistrar. In absence of such a
registered document, the plaintiffs would not get any right in respect of the
flats, which they intended to purchase. Moreover, in absence of the registration,
the Subsequent Buyers could not have got an opportunity to inspect the
agreement and there could not be any presumption that the Subsequent Buyers
knew about the agreement.
(emphasis supplied)
65.
Thus, on the above conspectus it would not be correct to accept the case of the
plaintiffs of any protection was available to them, under the provisions of
MOFA and on that ground assert for impleadment of Axis bank as a defendant to
the suit.
66. Further,
even if the plaintiffs intend to rely on the provisions of Section 5 and 8 of
the MOFA, these provisions are of no avail against the bank. The plaintiffs
contention that in view of the specific provisions under Section 4 and 9 of the
MOFA , the plaintiffs would have a prior charge on the project as mortgaged to
the bank and thus the bank becomes a necessary party to the suit, is required
to be stated only to be rejected. As noted above it is quite clear that the
plaintiffs transaction to purchase the flat, if any, had become quite old
inasmuch as the amounts were paid by the plaintiffs to Orbit in or about 2009
or sometime thereafter. However, the fact remains that only after the plaintiffs
became aware of the bank enforcing its security interest by taking measures
under Section 13 of the Securitisation Act in the year 2017, the plaintiffs
woke up and instituted these suits. It is surprising that despite such large
amount being advanced, no steps whatsoever were taken by the plaintiffs, to
resort to any legal remedy against Orbit, prior to institution of this suit,
which a bonafide flat purchaser in the normal course would do. We see no
correspondence entered between the plaintiffs and Orbit or any other material
which would show that the plaintiffs had any grievance in Orbit not undertaking
completion of the project or not registering an agreement with the plaintiffs
for sale of the flats.
67. From
the MOU entered by one of the plaintiffs (Madhav Prasad Aggarwalplaintiff in
Suit No.62 of 2017) it is clear that this plaintiff was made aware about the
mortgage of the said project in favour of the bank and this was accepted in
totality by the said plaintiff. Thus there was a clear intention of the said
plaintiff not to get the agreement registered and/or to take any steps to
safeguard any of the legal rights which if at all had accrued to the plaintiff.
It is also astonishing as to why before the bank adopted measures under the Securitisation
Act, any of the plaintiff's for the longlong time available at their disposal,
did not feel the need to seek specific performance of the so called agreements,
entered by the plaintiffs with Orbit. This is surely very abnormal. This
conduct of the plaintiffs casts a serious doubt of the real intention of the
plaintiffs when we consider the plea of the bank for rejection of the plaint
under Order VII Rule 11(d) of the CPC.
68. It
is thus clear that the real cause of action to implead Axis bank as a party was
to prevent the bank from enforcing its security interest as created by Orbit on
the said project. This position is fortified by the fact, that in each and
every plaint, there are clear averments in regard to the plaintiffs' grievance
being echoed in regard to the measures taken by Axis bank under the
Securitisation Act.
69. In
support of the plaintiffs' contention that the bank would be required to be joined
in the conveyance in case the plaintiff succeed in their prayer for a specific
performance of the agreement against Orbit and thus, bank is a necessary party
to the suit, reliance is placed on the decision of the Supreme Court in Dwarkaprasad Singh & Ors. (supra). In our opinion, in the facts of
the present case, the said decision is certainly not applicable. This is not
the case where the bank is a purchaser of the property. We have already held
that considering the prayers as made in these suits, the relief revolving
around or in any manner touching the issue qua the legality of the bank
exercising rights under the Securitisation Act as a mortgagee of the project,
the civil court would have no jurisdiction. Thus when the adjudication of the
rights of the bank to create the mortgage is not within the scope and cannot be
subject matter of the suit, the bank cannot become a necessary party to the
suit merely on the relief of specific performance being sought by the plaintiff
against Orbit. We are of the clear opinion that if the plaintiffs wish to
assert their rights against the bank which has a security interest in the
project as recognized by the Securitisation Act, then the only remedy for the
plaintiffs was to take recourse under Section 17 of the Securitisation Act.
70. We
thus see much substance in the contention as urged on behalf of the bank, that
the averments as made in the plaint are sufficient to reach to a conclusion
that the plaint as against the bank is barred by the provisions of Section 34
of the Securitisation Act.
71.
We now consider whether the plaint(s) in any of these suits fall within the
exceptions as carved out in paragraph 51 of the decision of the Supreme Court
in Mardia Chemicals Ltd (supra), namely whether the case of the plaintiffs
as made out in the plaint is such that the action of the bank ( secured
creditor) can be said to be fraudulent or the bank's claim is so absurd and
untenable that it may not require any probe whatsoever, so as to hold that the
plaints in these suits are maintainable against the bank, by overcoming the bar
of Section 34 of the Securitisation Act.
72. In
the foregoing paragraphs we have categorically noted the averments in each of
the plaints as made against the bank, which the plaintiffs interalia say, are allegations of fraud as played
by the bank in granting loan to Orbit and accepting the mortgage of the project
assets. It is well settled that the parties pleading fraud must set forth full particulars,
general allegations are insufficient even to amount to an averment of fraud,
however strong the language in which such averments are couched (see Bishnudeo Narain Versus Seogeni Rai & Ors. AIR 1951 SC 280). The provisions of Order
VI Rule 4 postulate that when plaintiff alleges fraud the same is required to
be pleaded with specificity, particularity and precision.( See Afsar Saikh Versus Soleman BiBi (1976 (2) SCC 142).
73.
The bank would be justified in relying on the decision of the Single Judge of
Madras High Court in Punjab National
Bank, represented by its Manager Vs. J. Samsath Beevi & Ors.(supra) wherein the Court emphasized
that it is the duty of the Court to see that the allegations of fraud are not
thrown, just for the purpose of maintaining a Suit and ousting the jurisdiction
of the Tribunal and to keep the Banks and Financial Institutions at bay.
Referring to the decision of the Supreme Court in T.Arivandandam v. T.V. Satyapal the celebrated judgment of Krishna Iyer,
J. (supra) in I.T.C. Ltd. v.
Debts Recovery Appellate Tribunal52, the Supreme
Court held that clever drafting, creating illusions of cause of action are not
permitted in law. The ritual of repeating a word or creation of an illusion in
the plaint can certainly be unraveled and exposed by the Court while dealing
with an Application under Order 7, Rule 11. It is the obligation on the Court
to examine if the allegations of fraud and collusion made in the Plaint, are themselves
a product of “fraud and collusion”, so as to prevent any action being taken by
the bank on secured assets and whether the facts are such overwhelming so that
the mandate, object and intention of Section 34 read with Section 17 of the
Securitisation Act are required to be kept aside. The principles that
particulars of fraud are required to be pleaded as per the requirements of
Order VI Rule 4 of the CPC, the principles are succinctly elaborated in the
decision of the Supreme Court 52.1998
(2) SCC 70 in Ranganayakamma & Anr. (supra).
The Court held that when a fraud is alleged, the particulars thereof are required
to be pleaded. The plea of fraud cannot be general in nature. It also cannot be
vague.
74. Adverting
to the above principles we do not find any substance in the contention of the
plaintiffs that there is any case of fraud practised by the bank so that the
plaints in these suits against the bank be sustained, on the exception as
carved out in Mardia (supra). Ex facie allegations of collusion/fraud which have
been made in each of these plaints and as noted above, to say the least are so
vague, weak and ambiguous, to hold that these averments can at all be
considered to be averments of fraud as played by the bank against the
plaintiffs. We thus see much substance in the contention as urged on behalf of
the bank that by clever drafting and by making unsubstantiated allegations of
fraud, the bank has been impleaded as a party defendant to the suit. The bank
would thus be correct in its contention that in the absence of an
unsubstantiated plea of fraud against the bank, the plaint against the bank is
liable to be rejected following the principles as laid down in paragraph 51 in Maradia Chemicals Ltd (supra). The nature of the prayer clauses
as noted above in all these plaints also makes it clear that the principal
relief is of specific performance of the agreement against Orbit. There is no
case in the alternative of any damages or any mandatory claim being made
against the bank. Thus, the statements which are made in the plaint against the
bank cannot be said to be in aid of any relief prayed against the bank.
75. The
case as urged on behalf of the plaintiff that the bank ought to have undertaken
due diligence, is also of no avail as there are no registered agreements
between the plaintiffs and Orbit. In this situation, even if due diligence was
to be undertaken nothing could have been revealed to the bank qua the alleged
rights of the plaintiffs. The plaintiffs argument of 'due diligence' is very
casual, as they are unable to explain as to what would be the outcome of due
diligence, when there are no registered agreements. Such plea of the plaintiffs
is thus absolutely hollow as it leads plaintiffs nowhere.
76. In
the above context, the reliance on behalf of the plaintiff on the decision of
the Single Judge of this Court in Ramniklal
Tulsidas Kotak vs. Varsha Builders (supra)
which considered an issue pertaining to the validity of a “certificate of
title” issued by the advocates appended to the printed agreement of sale, is of
no avail. Paragraph 28 of the decision records the requirements which should be
borne in mind in attributing credence to such certificate. The Court emphasized
the need of issuance of a public notice by the advocates before issuing a
certificate of title. In the present case, there is no certificate of title as
issued by the advocates. Further as observed by us, even if the respondent was
to undertake any due diligence, nothing would have surfaced as there were no
registered agreements by Orbit entered with the plaintiffs and other flat
purchasers, which can be said to be neglected/overlooked by the bank, in
accepting mortgage of the project in advancing loans to Orbit.
77. The
learned Senior Counsel for the bank in these appeals, would be correct in their
contention referring to Section 5(b) and 5(c) and Section 6 of the Banking
Regulation Act 1949, that the business of the bank is primarily accepting for
the purpose of lending or investment, deposits of money from the public, interalia repayable on demand or otherwise and
withdrawal of cheque, draft, order etc. The banking company as defined is a
company which would transact business of banking, and thus, the plaintiffs
cannot expect the bank to undertake the work of a 'promoter', in view of the
specific definition of a“promoter”, as contained under Section 2(c) of the MOFA
namely who constructs a building or flats and for the purpose of selling them
to persons or cooperative society or association of persons, and thus the reliefs
which the plaintiffs can seek against the promoters/Orbit cannot be availed
against the bank in the civil suit in question.
78. As
regards the plaintiffs contention that in view of Section 9 of the MOFA the
plaintiffs would have prior rights to that of the bank qua the project as
mortgaged to the Axis bank, also cannot be accepted as noted above. In fact by
this plea the plaintiffs indirectly question the security interest of the bank
and the entitlement of the bank to resort to the measures under Section 13 of
Securitisation Act. The plaintiffs therefore necessarily should have availed of
a remedy under Section 17 of the Securitisation Act which permits “any person”
who is aggrieved by any of the measures referred to in subsection 4 of Section
13 taken by the secured creditor or his authorised officer, by making an
application to the Debts Recovery Tribunal against such measures. As held by
the Supreme Court in Mardia
Chemicals Ltd.(supra), the
proceedings in an appeal under Section 17 is that of a suit in the court of
first instance under the Code of Civil Procedure, as observed in paragraph 59
and 62 of the said decision.
79. In
supporting the contention that the bank would be required to be joined in the
conveyance in case the plaintiffs succeeds in obtaining a decree of specific
performance against Orbit, and thus, bank is a necessary party to the suit, the
plaintiffs rely on the decision of Supreme Court in Dwarkaprasad Singh & Ors. (supra). In our opinion, the reliance on
this decision in the facts of the present case is not well founded. This is not
the case where the bank is a purchaser of the property. We have already held
that considering the prayers as made in the suits in question, a relief that
the mortgage created in favour of the bank be declared as illegal, cannot be
granted by the civil court. Once the adjudication of the rights of the bank qua
the mortgage are outside the jurisdiction of the civil court, the bank does not
become a necessary party, merely on the relief of specific performance being sought
by the plaintiff against Orbit. In fact the plaintiffs are assuming a situation
that the bank has no mortgage rights on the the project and thus they can seek
a relief against the bank. Such a presumption is wholly baseless in the absence
of the plaintiffs making any plea to challenge the rights of the bank to
enforce its security interest by adopting proceedings before the DRT.
80. We
may thus observe that considering the expediency, prudence and wisdom of the
banking business and when in the facts of the case the dealings between the
bank and Orbit purely pertain to a banking business, the consequence of the
bank being dragged into this litigation is definitely not warranted. In fact
this would adversely affect the banks commercial interest to recover the debts
due and payable to it by adhering to the procedure as prescribed by law, namely
under the Securitisation Act. In the facts of the present case it would
definitely meet the ends of justice that the plaint against the bank although
it is one of the defendant needs to rejected. It is permissible for the Court
to reject the entire plaint so far as the bank is concerned which is one of the
defendants. In Mst.Phool
Sundari Vs. Gurbans Singh & Ors., AIR
1957 Raj 97 the Division Bench of Rajasthan High
Court comprising 'Wanchoo C.J.
& Dave J.' had an
occasion to consider the issue whether it is possible to reject the entire
plaint in so far as one of the defendants is concerned and in such a situation,
what would be a proper order under Order 7 Rule 11(a) or (d) of the Code of
Civil Procedure. Chief Justice Wanchoo speaking for the Bench, taking review of
law on the issue, in paragraph 9 and 14 observed thus:
“9. We have given our earnest
consideration to this matter and we do not see why where a plaint discloses no
cause of action against some of the defendants it cannot be rejected against
those defendants. We can understand that a plaint has to be rejected in toto in
the sense that a Court cannot reject one part of the plaint against all the
defendants and carry on with the rest of the plaint against them, but we
cannot understand why the Court cannot reject the entire plaint against a
particular defendant and carry on with the entire plaint against others.
In such a case, there is a total
rejection of the plaint so far as a particular defendant is concerned. There
being such a total rejection of the plaint so far as the particular defendant
is concerned, we are of the opinion that such an order would be open to appeal
as a decree.
…..
14.
We are, therefore, of opinion that in the first place, we do not see
anything in O.7 R.11(a) or (d) which forbids a Court from rejecting the plaint
as a whole against some of them. We are of the opinion that it is possible for
the Court to reject the entire plaint so far as some of the defendants are
concerned and that would be a proper order under O.7 R.11(a) or (d) and an
appeal would lie in view of the definition of “decree” in S.2(2).
In any case, we are further of opinion
that even if this is not possible, an order by which the suit practically fails
against some of the defendants amounts to a decree in favour of those
defendants against the plaintiffs within the meaning of that word in S.2(2),
Civil P.C. and an appeal lies.
In any view of the matter, therefore, the
order passed in this case was appealable. The plaintiff has not filed an appeal
Against it. We are not prepared to grant him the benefit of S.5 of the Limitation
Act and dismiss the revision. In view of the circumstances of this case, we
order the parties to bear their own costs of this Court.
(emphasis supplied).
81. A
similar view has been taken by the Supreme Court in Church of Christ Charitable Trust and Educational Charitable Society
Vs. Ponnoamman Educational Trust (supra),
the specific point for consideration before the Supreme Court was whether the
learned Single Judge of the High Court was justified in ordering rejection of
the plaint in so far as the first defendant/appellant therein was concerned. The
Court examining the provisions of Order 7 Rule 11 of CPC, held that the plaint
was rightly rejected against the first defendant. The Court in paragraph 9, 29
& 30 held thus:
“9. The points for consideration in this
appeal are:
(a) Whether the learned Single Judge of
the High Court was justified in ordering rejection of the plaint insofar as the
first defendant (the appellant herein) is concerned ? And
(b) Whether the Division Bench of the
High Court was right in reversing the said decision ?
29. Finally, the learned Senior Counsel
for the respondent submitted that in view of a decision of this Court in Roop
Lal Sathi V. Nachhatiar Singh Gill [(1982)3 SCC 487], rejection
of the plaint in respect of one of the defendants is not sustainable. We have
gone through the facts in that decision and the materials placed for rejection
of plaint in the case on hand. We are satisfied that the principles of the said
decision do not apply to the facts of the present case where the appellantfirst
defendant is not seeking rejection of the plaint in part. On the other hand,
the first defendant has prayed for rejection of the plaint as a whole for the
reason that it does not disclose a cause of action and not fulfilling the
statutory provisions. In addition to the same, it is brought to our notice that
this contention was not raised before the High Court and particularly in view
of the factual details, the said decision is not applicable to the case in hand.
30.
In the light of the above discussion, in view of the shortfall in the
plaint averments and statutory provisions, namely, Order 7 Rule 11, Rule 14(1)
and Rule 14(2), Forms 47 and 48 in Appendix A of the Code which are statutory
in nature, we hold that the learned Single Judge of the High Court has
correctly concluded that in the absence of any cause of action shown as against
the first defendant, the suit cannot be proceeded either for specific
performance or for the recovery of money advanced which according to the
plaintiff was given to the second defendant in the suit and rightly rejected
the plaint as against the first defendant. Unfortunately, the Division Bench
failed to consider all those relevant aspects and erroneously reversed the
decision of the learned Single Judge. We are unable to agree with the reasoning
of the Division Bench of the High Court.
82. Similar
view was taken by the Division Bench of this Court in K.S.Dhondy Vs. Her Majesty The Queen of Netherlands & Anr (Supra). Dr.Justice D.Y.Chandrachud (as
His Lordship then was) speaking for the bench held that the dismissal of the
suit against the first defendant was in order.
83. In
Sejal Glass Ltd. (supra) the Court was concerned with defendant's
application under Order VII Rule 11(a) that there was no cause of action
against defendant no.2 to 4 in the suit in question in the said decision. The
Supreme Court held that it cannot be a rule of law that once a part of a plaint
cannot proceed, the other part also cannot proceed, and the plaint as a whole
must be rejected under Order VII Rule 11. The Court recognized that in cases
where the plaint survives against certain defendants, against them Order VII
Rule 11 will have no application.
84. To
support the contention that the jurisdiction of the Civil Court is not
completely ousted, on behalf of the plaintiffs, reliance is placed on the
decision of the Supreme Court in Nahar
Industrial Enterprises Ltd. Vs. Hong Kong & Shanghai Banking Corporation (supra). In this case the Supreme Court
was considering an issue arising out of an order passed by the High Court
allowing the application of the bank, transferring the civil suit filed by the
appellant therein from the Court of Civil Judge, Ludhiana to Debt Recovery
Tribunal at Mumbai. The question which fell for consideration of the Supreme
Court was 'whether the High Court or Supreme Court has the power to transfer a civil
suit to Debt Recovery Tribunal; whether transfer of a civil suit from the civil
Court to Debt Recovery Tribunal could be tried as counterclaim. It is in this
context the Court examined the provisions of Section 9 of CPC and the Recovery
of Debts due to Banks and Financial Institutions Act,1993. The Court held that
the civil court indisputedly would have jurisdiction to try a suit and if the
suit is vexatious or otherwise not maintainable action can be taken in terms of
the Code. The Court also considered the decision in Mardia Chemicals Ltd. & Ors. (supra) and the observations as made in the said
decision that the jurisdiction of the civil court can be invoked in case of
fraud and misrepresentation. The Court held that the High Court could not have
transferred the suit from the civil court Ludhiana to the DRT, Mumbai. We are
afraid as to how this decision would assist the plaintiffs, when the question
in the present proceedings is completely distinct, namely whether the
jurisdiction of the civil court is barred in view of Section 34 of the
Securitisation Act, as a closer scrutiny of the plaints as framed against the
bank indicates that the issue as set up in the plaint against the bank are the
measures adopted by the bank under Section 13(4) of Securitisation Act.
85. The
reliance on behalf of the plaintiffs on the decision in Indian Bank Vs. ABS Maritime Products Pvt. Ltd. (supra) is also not well founded. In the
said case the issue before the Supreme Court was 'whether a civil suit filed
against the bank in Calcutta High Court for recovery of certain amount as
damages for nondisbursal of loan with interest, could be transferred to the
Debt Recovery Tribunal in view of Section 19 of the the Debts Due to Banks and
Financial Institutions Act. The plea of the bank was rejected by the High
Court. The contention of the bank was that the recovery proceedings initiated
by the bank against the respondent and the respondent's suit for damages, were
inextricably connected and although the suit of the respondent was prior to the
application of the bank filed before the Tribunal, it was required to be considered
as a counterclaim and should be transferred to the tribunal. The Supreme Court,
however, did not accept the plea of the bank and dismissed the appeals. It is
in this context the Supreme Court examined the powers of the civil court under
Section 9 of CPC and Sections 17 and 18 of the the Debts Due to Banks and
Financial Institutions Act, in holding that the civil court's jurisdiction is
barred only in regard to the application by bank or financial institutions for
recovery of its debt and that the jurisdiction of civil court is not barred in
regard to any suit filed by the borrower or any other person against a bank for
any other relief and it was held that the Calcutta High Court had jurisdiction
to entertain and try a civil suit filed by the borrower. It was held that there
is no provision in the Act for transfer of suits and proceedings, except section
31 which relates to suit/proceeding by a Bank or financial institution for
recovery of a debt. Thus this decision would not assist the plaintiffs, as in
the present case there are no proceedings which are filed by the bank before
the Debt Recovery Tribunal and the issue is of jurisdiction of the civil court
to entertain a suit after the bank has resorted to the measures under Section
13(4) of the Securitisation Act.
86. The
plaintiffs' reliance on the decision of the Division Bench of this Court in “Gopal Srinivasan vs National Spot Exchange” (supra) is also not well founded, as in
the facts of the said case, the Division Bench has come to a conclusion that it
was a case of mass illegalities, siphoning of moneys, fraud etc and such being
the allegations in the plaint, it was held that the plaint could not be
rejected against the appellant/ defendant. However, such is not the case in
these appeals before us.
87. The
Division Bench of this Court in State
Bank of India Vs. Jigishaben B.Sanghavi & Ors. (supra) was considering an appeal against
the dismissal of an application seeking rejection of the plaint under Order 7
Rule 11(d) of the CPC filed by the State Bank of India. The applicantState Bank
of India had contended that Section 34 of Securitisation Act created bar to the
maintainability of the suit against the State Bank of India. The plaintiffs in
the said case had raised a similar contention that there are no legal and valid
mortgage in favour of the bank, nor any security created in favour of the bank
as against rights of HUF of which plaintiffs were members. The Division Bench examining
the provisions of Securitisation Act and the principles of law as laid down in Mardia Chemicals Ltd. (supra),
held that Securitisation Act provides a comprehensive scheme. It was held that
the provisions of Securitisation Act explicitly were applicable to challenge
the measures taken under Section 13(4) of the Securitisation Act and the
challenge thus fell necessarily before the tribunal by an appeal under Section
17 after the measures are taken. It was held that once the measures were adopted
under Section 13(4), the statutory remedy is available not only to the
borrowers but to “any person”, aggrieved by the measures. Referring to the
Decision of the Supreme Court in Authorised
Officer, Indian Overseas Bank Vs. Ashok Saw Mills (supra), the Court observed that wide
powers were conferred upon the banks and financial institutions and any person
who is aggrieved by the measures taken under Section 13(4) can approach the
DRT. The Court observed that the intention of the legislation in making the
said provision was that the banks and financial institutions be vested with
stringent power for recovery of dues and safeguards have also been provided for
rectifying any error or wrongful use of such powers by vesting with the DRT powers
of adjudication into such issues and to declare any such action taken as
invalid and also to restore possession even though possession may have been
made over to the transferee. The Legislature by including subsection (3) in
Section 17 has vested the DRT with authority to even set aside a transaction
including sale and to restore possession to the borrower in appropriate cases.
It was observed that the action taken by a secured creditor in terms of Section
13(4) of the Securitisation Act is open to scrutiny and cannot only be set
aside, but even the status quo ante can be restored by the DRT. The Division Bench
accordingly, set aside the order passed by the learned Single Judge and
rejected the plaint against the bank. The observations of the Court in
paragraph 20 and 21A are required to be noted which read thus:
20. Where as in the present case, the
grievance by a third VBC 23 app244.108.12 person is that : (i) There was no
mortgage; (ii) There was no mortgage by the HUF; (iii) The mortgage, if any, is
illegal in relation to the share alleged to be that of the HUF; and (iv) No
action had been instituted against the HUF before the Tribunal; hese are all
grounds of challenge which, in substance, can be asserted before the Debts
Recovery Tribunal. These are matters which the Debts Recovery Tribunal is
empowered by or under the Act to determine. None of the grounds which are sought
to be urged in the plaint fall outside the province and jurisdiction of the
Debts Recovery Tribunal. Once we come to that conclusion, the necessary
corollary is that recourse to proceedings in the form of a civil suit is barred
by Section 34.
… …
21A These observations of the Supreme
Court emphasize that the exception which is carved out is a limited exception.
Like all exceptions, this exception must be strictly construed. A borrower or a
third party cannot be permitted to defeat or to render nugatory the provisions
of the Act merely by a stray reference to an allegation of fraud or, as in the
present case, by an averment in paragraph 15 of the plaint of "a
systematic fraud". The entirety of the plaint has to be construed.
Essentially, in the present case, the averments in the plaint are that: (i) The
HUF was a coowner/ tenant in common of the residential flat; (ii) The Bank has
taken recourse to proceedings for recovery to which the HUF was not a party;
(iii) The Plaintiffs had, in the course of the recovery proceedings, raised an
objection before the Recovery Officer to the tenability of the action taken by
the Bank; (iv) The Bank had taken recourse to its remedy under the
Securitization Act without awaiting the result of the objection raised by the Plaintiffs;
(v) The action under Section 13(2) was initiated in disregard to the provisions
of the Securitization Act; (vi) The mortgage executed by the Second, Third and
Fourth Defendants was defective because the original Share Certificates were
not with the Bank; (vii) The VBC 26 app244.108.12 First Defendant had no
security interest and no secured assets and, therefore, was not entitled to
invoke the provisions of Subsection (4) of Section 13 against the right claimed
by the HUF; (viii) A 'systematic fraud' was played by the First Defendant to
pressurise the Plaintiffs; and (ix) There was an absence of legal necessity
which would vitiate the mortgage alleged to have been created by the Second Defendant
as Karta of the HUF. The reliefs which are sought in the suit have already been
adverted to earlier. These averments, when construed in their entirety, would
reveal that the grievance which the Plaintiffs have in the suit is in respect
of the validity of the mortgage which is alleged to have been executed by the Second
Defendant as Karta of the HUF and of the tenability of the action adopted by
the Bank under the Securitization Act, so as to meet the interest of the HUF
claimed in the residential flat. The Plaintiffs as third parties have
sufficient recourse to challenge the lawfulness of the action of the Bank by
invoking their remedies under Section 17. Thus, clearly within the meaning of
Section 34, a suit in respect of any matter which the Tribunal is empowered by
or under the provisions of Section 17 to determine is barred. The suit,
therefore, in our view, was clearly barred by Section 34. The VBC 27
app244.108.12 stray reference to an allegation of fraud in paragraph 15 of the
Plaint is not sufficient to bring the case within the scope of the exception
carved out by the Supreme Court in Mardia Chemicals.”
88.
In “Jagdish Singh vs Heeralal & Ors.” (supra), the Supreme Court was
examining the issue arising out of an order passed by the High Court in a first
appeal whereby the Division Bench set aside the order passed by the trial court
holding that a civil suit which was filed by respondent nos.1 to 5 (therein)
before the Court of District Judge, Barwani, was not maintainable against the
bank in view of the provisions of Section 13 read with Section 34 of
Securitisation Act. The Supreme Court examining the ambit of the provisions of
Sections 17 and 34 of the Securitisation Act set aside the orders passed by the
High Court holding that the measures taken under Section 13 of Securitisation
Act dealt with the enforcement of the security interest without intervention of
the Court and any person aggrieved by any such measures referred in subsection (4)
of Section 13 has statutory right to appeal to the Debt Recovery Tribunal under
Section 17. It was held that Section 34 clearly bars jurisdiction of civil
court to entertain any suit or proceedings in respect of “any matter” which the
DRT or the appellate tribunal was empowered by or under Securitisation act to
determine, and the expression “in
respect of any matter” referred to
in Section 34 would take within its ambit the “measures” provided under subsection (4) of
Section 13 of the Securitisation Act. It was held that any grievance against
any measures taken by the borrower under subsection (4) of Section 13 of the
Securitisation Act a remedy is open to the aggrieved party to approach the DRT
or the appellate tribunal and not the civil court, as the civil court had no
jurisdiction to entertain any suit or proceedings in respect of the matter
which fall under Section 13(4) of the Securitisation Act and more particularly
when Section 35 provides for overriding effect over the other laws, if they are
inconsistent with the provisions of the Securitisation Act, which takes within
its purview Section 9 of the Code of Civil Procedure as well. It was held that
the bank had proceeded only against the secured assets of the borrowers on
which no rights of respondents therein have been crystallized, before creating
security interest in respect of the secured assets.
89. In
a recent decision of the Supreme Court in the case “Authorised Officer, State Bank of India vs. Allwyn Alloys
Pvt.Ltd. & Ors.”, (2018) 8 SCC 120 the
Supreme Court was considering the provisions of Section 13 and 34 of the
Securitisation Act and the powers of DRT to adjudicate on the issues arising
out of security interest created in respect of the bank. The Court held that
mandate of Sections 13 and 34 clearly bars filing of civil suit and no civil
court can exercise jurisdiction to entertain any suit or proceeding in respect
of any matter which the DRT or DRAT is empowered by or under the Securitisation
Act. The Supreme Court set aside the decision of the High Court which permitted
respondent nos.5 and 6 therein to approach the competent forum for adjudication
of their right, title and interest in the premises in question. It would be profitable
to note the observations of the Court in paragraphs 8 and 9 of the report.
Mr.Justice A.M.Khanwilkar speaking for the Bench observed as under:
“8. After having considered the rival
submissions of the parities, we have no hesitation in acceding to the argument
urged on behalf of the Bank that the mandate of Section 13 and, in particular, Section
34 of the Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act,2002 (for short 'the 2002 Act'), clearly bars filing
of a civil suit. For, no civil court can exercise jurisdiction to entertain any
suit or proceeding in respect of any matter which a DRT or DRAT is empowered by
or under this Act to determine and no injunction can be granted by any court or
authority in respect of any action taken or to be taken in pursuance of any
power conferred by or under the Act.
9.
The fact that the stated flat is the subjectmatter of a registered sale
deed executed by Respondents 5 and 6 (writ petitioners) in favour of
Respondents 2 to 4 and which sale deed has been deposited with the Bank along
with the share certificate and other documents for creating an equitable mortgage
and the Bank has initiated action in that behalf under the 2002 Act, is
indisputable. If so, the question of permitting Respondents 5 and 6 (writ
petitioners) to approach any other forum for adjudication of issues raised by
them concerning the right, title and interest in relation to the said property,
cannot be countenanced. … … ….”
90.
In the light of the above discussion, we are of the clear opinion that the
learned Single Judge was in an error in holding that the plaints against the
bank were not barred under Section 34 of the Securitisation Act and
consequently in rejecting the notices of motion and holding that the suits were
not barred against the bank.
91. We
accordingly set aside the impugned order and allow the notices of motion as
filed by the plaintiffs. Ordered accordingly. No costs.
92. Our
observations are limited in the context of the issues arising before us under
the provisions of Order VII Rule 11 of C.P.C.
93.
The learned Counsel Mr.Vaishnawa for the respondents seeks stay of the order.
The request is opposed by the other side. It is submitted that the next date of
suit is after four weeks. The request for stay is rejected.
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