(Delivered by Justice U.C. Srivastava) Heard Shri Ravi Kant, Senior Advocate & Shri M.C. Chaturvedi, Senior Advocate assisted by Shri Rohan Gupta, Advocate, Shri Arindam Mukherjee, Advocate & Ms. Gargi Tuli, Advocate on behalf of petitioner, Shri Ravindra Singh, Advocate on behalf of respondent nos. 2 & 3, Shri Ashish Mishra, Advocate on behalf of respondent no. 4, Shri Ashish Singh, Advocate on behalf of private respondent nos. 5 to 9 and learned standing counsel for the State.
New Age Hotels and Resorts Pvt. Ltd. through its authorized signatory, Sanjay Janghu is before this Court with the following prayer:-
"(i) issue a writ, order of direction in the nature of Certiorari to call for the entire records and files including the file noting of the matter pertaining to M/s Surprise Hotel Pvt. Ltd., and M/s New Age Hotels and Resorts and quash the impugned letters dated 07.10.2014 issued by Respondent No. 3 and letter dated 21.07.2015, issued by respondent no. 4 (Annexure Nos. 11 & 12 to the writ petition).
(ii) issue a writ, order or direction in the nature of Mandamus, commanding the respondent nos. 1, 2, 3 and 4 not to interfere in the peaceful possession of the petitioner over the property in question".
(iii) Issue a writ, order or direction in the nature of Mandamus, commanding the respondents, initiating the vigilance/criminal investigation in respect of affairs of respondent nos. 3 and 4 in relation to the transaction pertaining to the petitioner and respondent nos. 5 to 8.
(iv) issue such other and further writ, order or direction which this Hon'ble Court may deem fit and proper in the nature and circumstances of the present case;
(v) award costs of the petition to the petitioner".
The factual matrix of the case in brief is that M/s Surprise Hotel Pvt. Ltd. is a private limited company incorporated under the Companies Act. The predecessor in interest of respondent Nos. 6 to 8, Jai Prakash Dubey (since deceased) was the promoter and Director of this company along with his brother respondent no. 9, Dhananjay Kumar Dubey. The company was in need of financial assistance for the running of its business and to meet this requirement Shri Jai Prakash Dubey sold a piece of land in plot bearing Khasra Nos. 692M & 693M measuring 9128 sq. ft. situated in village Ahmadpur Karach (near Shankar Ashram Hardwar Roorkee Road) Pargana -Jawala Pur, Tehsil- Haridwar, District Saharanpur (now Haridwar) and he also leased the remaining 15872 sq. ft. area of this plot in favour of the aforesaid company for a period of thirty years by two registered deeds dated 07.05.1986.
The company availed financial assistance in the form of term loans of Rs. 62.50 lakhs and Rs. 26 lakhs from respondent no. 4, the Pradeshiya Industrial and Investment Corporation of U.P. Ltd. (In short "PICUP") by creating equitable mortgage of the entire area of the aforesaid land and it also availed financial assistance of Rs. 44.8 lakhs from respondent no. 2, U.P. Financial Corporation (In short "U.P.F.C.") by creating joint equitable mortgage of the entire area of the aforesaid land along with respondent no. 5, PICUP. Shri Jai Prakash Dubey and his brother respondent no. 9, Dhananjay Kumar Dubey stood guarantor for the financial assistance availed by the company by executing an agreement for loan, undertaking and bond of guarantee. The company however, failed to keep its promise to repay its loan with the result proceedings under section 29 of the State Financial Corporation Act, 1951 (In short the "Act") were initiated by respondent no. 2, U.P.F.C. for itself and on behalf of respondent no. 4, PICUP as its agent against the borrower company. In the said proceedings, the mortgaged assets of the company, i.e. free hold right in land bearing Khasra nos. 692M and 693M, measuring 9128 sq. ft. and all lease hold rights in the remaining land measuring 15872 sq. ft., were sold by public auction to the petitioner, New Age Hotels and Resorts Pvt. Ltd. for Rs. 1.85 crores and after the entire auction money being paid possession of the mortgaged assets was also delivered to the petitioner company. The aforesaid auction proceedings were challenged by the borrower company which went up to the Hon'ble Apex court and ultimately held in favour of the petitioner-auction purchaser and thus these proceedings have become final.
The dispute arose after about 19 years of the auction-purchase proceedings when respondent no. 2, the U.P.F.C. and respondent no. 4, the PICUP entered into One Time Settlement scheme with respondent nos. 5 to 8 in regard to their balance outstanding dues for Rs. 11 lakhs and 49 lakhs only. In reference to the aforesaid settlement, they have issued letter dated 07.10.2014 and letter dated 21.07.2015, i.e. annexure nos. 11 and 12 to the writ petition. In letter dated 07.10.2014, the respondent no. 2 has proceeded to acknowledge the settlement of its huge dues Rs. 36,29,64,350.71 towards the borrower company of the corporation under O.T.S. Scheme for a meager sum of Rs. 11 lakhs only and has also proceeded to mention the manner in which settled amount was to be paid. In letter dated 21.07.2015, which is referred to M/s Surprise Hotel Pvt. Ltd. and issued by Shri A.K. Agarwal, Manager (Technical), PICUP, the respondent no. 4 has acknowledged that borrower company M/s Surprise Hotel Pvt. Ltd. has availed Rs. 62.50 lakhs and Rs. 26 lakhs as term loans and has paid the entire dues by way of O.T.S. and now there is nothing due towards the amount in question and it has also made a mention in the letter that the borrower company may contact legal division of the PICUP for being provided photocopies of title deeds including lease deed, and further, the lease/legal rights if any available to PICUP shall stand released in favour of M/s Surprise Hotels Pvt. Ltd./ guarantors and legal heirs of promoters /guarantors. Aggrieved by these letters, petitioner has filed the present writ petition.
Learned Senior Counsel, appearing for the petitioner has argued before us that borrower company has availed the loan in question by creating equitable mortgage of the entire area of plot bearing Khasra nos. 692M and 693M i.e. 25,000 sq. ft. situated at village Ahmadpur Karach (near Shankar Ashram Hardwar Roorkee Road) Pargana -Jawala Pur, Tehsil- Haridwar, District Haridwar in favour of both the financial corporations by depositing title deeds of the land in question and both directors of the company have stood guarantors for the loan by executing agreement of loans, under taking and bond of guarantee. The learned Senior Counsel has further argued that after the land in question being mortgaged and directors of the company having stood guarantor for the repayment of loan by executing agreement of loan, undertaking and guarantee bond, if the company has defaulted in making repayment of loan and corporations have proceeded to sell the mortgaged assets and in furtherance thereof have sold the mortgaged assets to the petitioner in public auction under section 29 of the State Financial Corporation Act, 1951, and the said auction has been confirmed upto Hon'ble Apex Court, the assets so sold have vested in the petitioner with all rights as if transfer had been made by the owner of the property as provided under sub-section (2) of section 29 of the Act, and it is now not open to borrower company/guarantors/legal heirs of promoters/directors and even the financial corporations to claim any right in the sold assets by saying that Jai Prakash Dubey had created only lease right in the piece of land measuring 15872 sq. ft. for thirty years and the borrower company had mortgaged the same right to the financial corporations and in the given situation petitioner has acquired the same right in the land.
The learned Senior Counsel has submitted that in the case in question transfer shall be deemed to have been made not only by the corporations but by the guarantor also who has given his personal guarantee and that guarantor being director and promoter of the borrower company, the land so transferred shall be vested in the purchaser with full rights and free from all encumbrances. He has submitted that this was the reason that when value of the mortgaged assets was assessed by the corporations before putting the same to sale, the full market value of land measuring 15872 sq. ft. was taken into account treating the land as free hold land and not as lease hold property and was also sold at the same value. He has submitted that after selling the entire land treating as free hold property, coupled with delivery of possession, and petitioner having enjoyed the same for considerably long time by getting its name entered in the municipality and regularly paying the taxes, it is now not open to corporations to say that they have sold lease hold rights for the residual period of lease in the land measuring 15872 sq. ft. and ownership of the land still vests in the actual owner to whom the land shall be reverted back after the expiry of thirty years period of lease.
Learned Senior Counsel has submitted that corporations have sold the entire mortgaged assets, free from all encumbrances, and after the sale they have no right to say that only lease hold rights in land measuring 15872 sq.ft. have been sold and the same rights have vested in the petitioner. He has submitted that once the free hold rights in land, including the piece of land measuring 15872 sq. ft., have been sold, free from all encumbrances, and the land has vested in the purchaser with absolute rights under section 29(2) of the Act, corporations are stopped from saying that only lease hold rights in the land measuring 15872 sq. ft. have been transferred to the petitioner for the residual period of lease commencing from 07.05.1986 to 06.05.2016, and after the expiry of this period the land shall automatically stand reverted to the original owner.
As regards the letters impugned in the present writ petition, the learned senior counsel has submitted that corporations, after selling the mortgaged assets, have no right to settle their balance outstanding dues with borrower for a petty amount Rs.11 lakhs and Rs.49 lakhs only by entering into One Time Settlement Scheme and providing title deeds of the mortgaged assets and releasing the lease rights in the land in favour of borrower/guarantors and legal heirs of guarantors/promoters. He has submitted that after having transferred the mortgaged assets with all rights therein to the petitioner there has been nothing left with corporations in the assets which they could release and surrender and, in view of this, the letters having a mention therein releasing title deeds and surrendering lease rights in the land to the borrower/guarantors and legal heirs of guarantors/promoters is absolutely illegal and needs to be quashed and directives need to be issued to respondents not to interfere in the peaceful possession of petitioner over the assets in question in the garb of these letters.
Learned counsel appearing on behalf of U.P.F.C., PICUP and respondent no. 5 to 8 have vehemently opposed the aforesaid contentions of the learned Senior counsel of the petitioner company by saying that borrower company was not the absolute owner of the entire area of land, i.e. 25000 sq. ft., mortgaged with the corporations. They have submitted that borrower company had free hold rights in the peace of land measuring 9128 sq. ft. and only lease hold right in the other piece of land measuring i.e. 15872 sq.ft. , as owner of the land had given the land to company on lease for a period of thirty years commencing from 07.05.1986 to 06.05.2016. They have submitted that borrower company had mortgaged the land with same rights to the corporations because it could have mortgaged that rights only it had and nothing more. Further, they have submitted that if borrower company had free hold rights in the piece of land measuring 9128 sq. ft. and in the remaining piece of land measuring 15872 sq. ft. it had lease hold rights only and had mortgaged the land with same rights to the corporations, it could not be possible for corporations from any stretch of imagination to have free hold rights in the entire area of land mortgaged to them nor they could have transferred the land with that right to petitioner by invoking the guarantee given to them by the guarantor Jai Prakash Dubey under section 29 of the Act nor the petitioner could claim such rights on account of sale made in its favour.
In regard to sale of the mortgaged assets with reference to section 29 of the Act, the learned counsel have submitted that section 29 gives rights to a financial corporation to transfer, by way of lease or sale the property of an industrial concern, which is under any liability under an agreement, makes any default in repayment of any loan or advance or any installment thereof, or otherwise fails to comply with the terms of its agreement and realize its dues. They have submitted that section 29 does not empower the corporation to transfer any such right which it does not have itself. They have submitted that transfer of an immovable property is governed by the Transfer of Property Act and it clearly speaks that one can not pass better title on transfer than what he has. Thus, they have submitted that there is no dispute in regard to transfer of piece of land measuring 9128 sq. ft. as borrower company had absolute free hold right in it and after the transfer of this piece of land being made by the corporation the land vested in the petitioner with absolute free hold rights. However, it did not happen so with the remaining piece of land measuring 15872 sq. ft. because borrower company had only lease hold rights in it and had mortgaged the same rights to the corporations, and the corporations having lease hold rights only in the land, they could have transferred the land with nothing more than this right. They have thus submitted that after the sale of mortgaged assets being made to petitioner under section 29 of the Act, petitioner acquired only lease hold rights in the land measuring 15872 sq. ft. for the residual period of lease commencing from 07.05.1986 to 06.05.2016 and not the free hold rights like in piece of land measuring 9128 sq. ft.
Learned counsel have submitted that there would be no effect of this fact on the transfer that Jai Prakash Dubey (since diseased) who was promoter and director of the borrower company also had stood surety for the loan sanctioned to the company. They have submitted that transfer of immovable property being governed by the provisions of Transfer of Property Act and not by any other law, notwithstanding Jai Prakash Dubey having given guarantee for the repayment of loan, land measuring 15872 sq. ft. being transferred to petitioner by the corporation and the corporation having lease hold right only in the land, the land would be vested in petitioner with lease hold right only and not with free hold right. They have submitted that section 29 cannot confer better title on petitioner than what corporation has, and once the legal position that has been so emerging is that corporations had lease hold right only in the piece of land for the residual period of lease, petitioner would get the same right only in land and nothing more on the reason that transfer has been made under section 29 of the Act. They have submitted that section 29 does not have over riding effect over the general law of transfer.
The learned counsel have further submitted that as per general principle of law, one cannot transfer a better title then he has and vice-versa a transferee cannot get better title than what he has purchased.
They have submitted that sale deed dated 15.07.1996, executed between U.P.F.C. and petitioner would go to show that petitioner has purchased all free hold rights in the piece of parcel of land measuring 9128 sq.ft. and lease hold rights in the piece of parcel of land measuring 15872 sq. ft. in the plot bearing Khasra nos. 692M and 693M, situated in village Ahmadpur, Karach (near Shankar Ashram Hardwar Roorkee Road) Pargana -Jawala Pur, Tehsil- Haridwar, District Haridwar. They have submitted that recital of the property purchased by the petitioner, as given in annexure no. 1 of the sale deed, makes it clear that petitioner has purchased free hold rights in 9128 sq. ft. of the land and in the remaining piece of the land i.e. 15872 sq. ft., it has purchased lease hold rights only and not free hold rights and, therefore, in view of what petitioner has purchased, it can claim only lease hold rights in the piece of land measuring 15872 sq. ft., and not free hold rights taking advantage of section 29 of the Act.
In reference to letter dated 07.10.2014 of U.P.F.C. and letter dated 21.07.2015 of PICUP, both issued to respondent no. 5, M/s Surprise Hotel Pvt. Ltd., the learned counsel have submitted that there is nothing wrong in these letters, so that the same may be questioned on the premises that corporations have no right to settle their balance outstanding dues with the borrower company under OTS scheme, release title deeds and issue No Dues certificate after having received the money settled under OTS scheme. They have submitted that even after the sale of mortgaged assets to petitioner by the corporation, the dues of both corporations did not satisfy and some outstanding remained unpaid for which recovery both corporations were pursuing hard by initiating recovery proceedings against the borrower. They have submitted that pursuant to aforesaid proceedings a proposal was received from the borrower company for the settlement of balance outstanding dues which was duly considered by both the corporations under their prevalent OTS scheme and the settlement was made and settled amount was received.
They have further submitted that since settlement of balance outstanding dues was made as per prevalent OTS Scheme of the corporations, and pursuant thereto settled amount has been paid by the borrower company and letters impugned have been issued by the corporations acknowledging acceptance of proposal under OTS scheme and issuing No Dues certificate by mentioning therein that borrower may collect photostat copies of title deeds, including lease deed, from the legal division of the corporation (PICUP) and further, the lease/legal right, if any, available to corporation shall stand released in favour of borrower company/guarantor/legal heirs of promoter /guarantor. They have submitted that petitioner have no right to challenge the settlement of balance outstanding dues between creditor and borrower under OTS Scheme by saying huge balance outstanding dues had been settled for a petty amount. They have submitted that petitioner have nothing to do with the balance outstanding dues of the corporations and actions taken by the corporations in this regard under the OTS scheme. They have further submitted that since borrower company had only lease hold rights in the piece of land measuring 15872 sq. ft. and had mortgaged the land with same rights to the corporations and both corporations having transferred the same rights to petitioner after borrower company failed to repay the dues, the position of petitioner in the land became of a lessee for the residual period of lease commencing from 07.05.1986 to 06.05.2016, and after the expiry of this period, the land automatically stood transferred /reverted back to lessee, and in view of this, if the PICUP has made a mention in the no dues certificate dated 21.07.2015 that the lease /legal rights, if any, available to it in the land shall stand released in favour of M/s Surprise Hotel Pvt. Ltd. / guarantor and legal heirs of promoters /guarantors then there is nothing wrong in it so that petitioner may challenge the same saying illegal.
After respective arguments have been heard, the accepted position that has been so emerging is that Jai Prakash Dubey (since deceased), who was predecessor in interest of respondent no. 6 to 8, formed a Private Ltd. Company, namely, M/s Surprise Hotel Pvt. Ltd. He was the promoter and Director of the company with his brother respondent no. 9, Shri Dhananjay Kumar Dubey. The company was engaged in the hotel business and in order to promote the business of the company, Jai Prakash Dubey sold a piece of land measuring 9128 sq. ft. in plot bearing Khasra nos. 692M and 693M, situated in village Ahmadpur Karach (near Shankar Ashram Hardwar Roorkee Road) Pargana-Jawala Pur, Tehsil- Haridwar, District Haridwar and leased out another piece of the same plot and Khasra nos. measuring 15872 sq.ft. with the company for a period of thirty years commencing from 07.05.1986. The company was sanctioned term loans of Rs. 62.50 lakhs and Rs. 26 lakhs by PICUP and Rs. 44.8 lakhs by U.P.F.C. against the mortgage of aforesaid plot for the running of its business. In the course of time the company became defaulter impelling both corporations to initiate proceedings against it under section 29 of the Act. In the said proceedings, U.P.F.C. put the mortgaged assets of the borrower company to sale by way of public auction in which petitioner being the highest bidder purchased the mortgaged assets for Rs. 1.85 crores. It is also an accepted position that outstanding dues of both the corporations at the time of sale were more than the sale amount. After the sale of the mortgaged assets, petitioner took possession of the land and started running business of hotel there from in the name of Hotel Classic Regency. This much is also accepted position that auction proceedings had been dragged into litigation which went up to Hon'ble Apex Court and ultimately decided in favour of petitioner. Thus, so far as sale of mortgaged assets is concerned, it has become final between the parties.
There is no dispute between the parties in regard to sale of piece of land measuring 9128 sq.ft., the dispute is with regard to another piece of land measuring 15872 sq.ft. in which, as per respondents saying, borrower company had lease hold rights only and it mortgaged the same rights to the corporations and corporations have also sold the same rights to the petitioner in proceedings under section 29 of the Act. However, the contention of petitioner is otherwise, as according to it, it is not a case in which borrower having lease hold rights in the property had mortgaged the property with same right to corporations. The contention of the petitioner is that lessor of the leased land being promoter and director of borrower company and having stood guarantor for the loan sanctioned to company by executing agreement of loan, undertaking and bond of guarantee, free hold rights in the entire land measuring 25000 sq.ft. have been sold by the corporation to the petitioner under section 29 of the Act free from all encumbrances and the land has been vested in petitioner with the same rights. To appreciate the respective arguments advanced from both the sides, it would be necessary to see section 29 of the Act which is produced herein below:-
"29. Rights of Financial Corporation in case of default.-(1) Where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any instalment thereof [or in meeting its obligations in relation to any guarantee given by the Corporation] or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the [right to take over the management or possession or both of the industrial concerns], as well as the [right to transfer by way of lease or sale] and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation.
(2) Any transfer of property made by the Financial Corporation, in exercise of its powers [***] under sub-section (1), shall vest in the transferee all rights in or to the property transferred [as if the transfer] had been made by the owner of the property.
(3) The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods.
(4) [Where any action has been taken against an industrial concern] under the provisions of sub-section (1), all costs, [charges and expenses which in the opinion of the Financial Corporation have been properly incurred] by it [as incidental thereto] shall be recoverable from the industrial concern and the money which is received by it [***] shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto.] (5) [Where the Financial Corporation has taken any action against an industrial concern] under the provisions of sub-section (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall sue and be sued in the name of [the concern]."
A plain reading of sub-section (1) of section 29 would go to say that where any industrial concern, which is under a liability to the financial corporation under any agreement, makes any default in repayment of any loan or advance or any installment thereof or otherwise in meeting its obligations in relation to any guarantee given by the corporation or fails to comply with the terms of its agreement with the financial corporation, the corporation shall have a right to take over the management or possession or both of the industrial concern as well as the right to transfer by way of lease or sale and realize the property pledged, hypothecated or assigned to the financial corporation.
Sub-section (2) says that any transfer of property made by the financial corporation, in exercise of its powers shall vest in the transferee all rights in or to the property transferred as if the transfer had been made by the owner of the property. Sub-section (2) clearly speaks that in the event of any transfer being made by a corporation under sub-section (1), the property so transferred shall vest in the transferee with all rights in or to the property as if the transfer had been made by the owner of the property.
The photostat copy of lease deed dated 07.05.1986, executed between Shri Jai Prakash Dubey and M/s Surprise Hotel Pvt. Ltd. has been appended to the petition as annexure no. 2. A perusal of this deed would go to say that Jai Prakash Dubey, who was the Director and promoter of the company, had executed the deed enabling the company to secure loan from the corporation for running of its business.
A mention made in clause (7) of the lease deed is very relevant to decide as to with what intention this deed has been executed. Clause (7) of the lease deed reads as below:-
"(7) The lessor further agreed that so long any money remains due and payable under the mortgage deed that may be executed by the lessee in favour of the corporation and the lessor shall not terminate or determine the lease for any reason whatsoever and the terms of these lease shall automatically stand extended till such time and all the moneys are paid in full to the corporation by the lessee under the said mortgage deed referred to hereinabove (or under any law for the time being in force"
The aforesaid mention made in clause (7) of the deed that lessor shall not terminate or determine the lease for any reason whatsoever and the terms of these lease shall automatically stand extended till such time and all the moneys are paid in full to the corporation by the lessee under the said mortgage deed referred to hereinabove makes it clear that purpose behind executing the deed was to ensure repayment of loan of the corporation and this was the reason lessor was not only stopped from terminating or determining the lease for any reason whatsoever so long any money remains due and payable under the mortgage deed that may be executed by the lessee in favour of the corporation but it was also provided that terms of lease shall automatically stand extended till such time all the moneys are paid in full to the corporation by the lessee under the mortgage deed. From this, it is explicit that sole purpose of lessor behind executing the lease in favour of borrower company was to ensure repayment of loan to be secured from the corporation.
We have also perused the records of the corporations regarding proceedings initiated under section 29 of the Act and it is reflected from the records that U.P.F.C. had obtained the report of valuer before effecting the sale of the mortgaged assets. In the said report of the valuer the entire area of the mortgaged land, i.e. piece of parcel of land measuring 9128 sq.ft. in which the borrower company has free hold rights and another piece of parcel of land measuring 15872 sq. ft. in which it has lease hold rights, had been valued at Rs. 50 lakhs @ Rs. 200 sq.ft., and in so doing the entire land had been treated as free hold. This again would go to show that corporations have sold the mortgaged assets to the petitioner treating entire land as free hold land and not the piece of land measuring 9128 sq.ft. as free hold land and another piece of land measuring 15872 sq.ft. as lease hold land. The valuer while assessing the value of entire land at the rate of Rs. 200/- per sq.ft. has not done so at his whim but has done the same as per Sale of Asset Guidelines of the corporation, a copy whereof has been appended to the rejoinder affidavit of the petitioner filed in reply to the counter affidavit of respondent no. 4. In the said Sale of Asset Guidelines, the mode has been given as to how the land belonging to any industrial concern required to be put to sale under section 29 of the Act would be valued for the purpose of sale. In these guidelines there has been a mention about valuation of land under the heading 'Internal Valuation Guidelines' in clause 12(2)(A)(iii) which runs as under:-
(iii) Lease Hold Land:-"There has been some confusion over the valuation of land which is available to the unit on lease. if the lease is given by Government Department (like to D.I. Etc), Some Government Corporation (like 'UPSIDC' Etc.) or Government Industrial Development Authorities (like NOIDA, Greater NOIDA etc.) then the valuation of the land should be done on the basis of current rates, irrespective of the remaining period of lease. However, if the lease is from the private person/bodies the remaining period of lease would be an important factor in evaluating the land. Following discount may be taken for balance lease period available:-
Perpetual lease - Full value More than 60 years - -do-
30-60 years - 25 % discount 10-30 years - 50% discount Less than 10 years - 90% discount However, it is important to find out as to who is the lessor/title holder of the land. If a partner/proprietor/promoter director (whose personal guarantee has been taken)/guarantor is the lessor/title holder of land, the land be considered to be available as free hold if it is assigned /mortgaged to the corporation (as by invoking the personal guarantee the land can be attached and sold freely). In such cases full market value of the land can be taken in the valuation".
From the sale of Asset Guidelines it is clear that if the land available to the unit is on lease from private person/bodies, the remaining period of the lease would be an important factor in evaluating the land and discount has to given for the balance lease period in the manner provided in the Guidelines, while assessing the valuation on which the land may be sold. It has been specifically provided in the Guidelines that if the lessor/title holder of the land is partner/proprietor /promoter/director of the borrower company, the land so assigned/mortgaged to the corporation shall be treated to be available to the corporation as free hold land and can be attached and sold freely on the full market value by invoking the guarantee given to the corporation.
From the above, it is clear that if the land which is to be put to sale is on lease from private person who is promoter/director/guarantor of the borrower also, the valuation of the land would be made on its market value treating the land as free hold land, as by invoking the personal guarantee the land can be attached and sold freely as free hold land.
The present case fully falls on the above lines as in the present case also the land mortgaged to the corporations by the borrower company was on lease from a private person and the lessor of the land was none other but a promoter/director/guarantor of the company, who had given personal guarantee for the repayment of the loan, wherefore it shall be treated to be available to the corporations as free hold land and may be attached and sold freely to realize the dues of the corporations. This is the reason that when valuation of the land was to be made by U.P.F.C. for putting the same to sale under section 29 of the Act, the market value of the entire land was taken into account and the entire land was valued at Rs. 200/- per sq.ft. without giving any discount to the piece of land measuring 15872 sq.ft. for the balance period of lease treating the land as free hold land. Since, when corporations have evaluated the entire land on full market value treating it to be a free hold land have sold the same as such, it is now open to them to say otherwise that they had free hold right in the piece of land measuring 9128 sq.ft. and lease hold right in the piece of land measuring 15872 sq.ft. and have transferred the same rights to the petitioner.
From the conjoint reading of section 29(1) & (2) of the Act & clause (7) of the lease deed and mode of valuation of land as given in Sale of Asset Guidelines, it is explicit that mortgaged assets of the borrower company was sold to petitioner treating it as free hold land and, after the transfer, the land vested in petitioner with same right, and thus on account of transfer, petitioner has become absolute owner of the land so sold to him and it is now being wrongly said by the respondents that petitioner has acquired free hold right in the piece of land measuring 9128 sq.ft. and the remaining piece of land measuring 15872 sq.ft. has been acquired by it with lease hold rights only for the balance period of lease commencing from 07.05.1986 to 06.05.2016. The land after being transferred to petitioner under section 29 of the Act has vested in petitioner with absolute right and it is now not open to respondents to claim any right in the piece of land measuring 15872 sq.ft. on the premises that borrower company had mortgaged lease hold rights only in the land to the corporations and therefore, corporations have transferred the same rights to petitioner and petitioner after having purchased the mortgaged assets acquired lease hold rights only in the piece of land measuring 15872 sq.ft. for the remaining period of lease commencing from 07.05.1986 to 06.05.2016, and after the expiry of period of lease the land has reverted back to the lessor/legal heirs of lessor.
In the aforesaid facts of the case, when lessor of the land measuring 15872 sq.ft. was none else but promoter/director/guarantor of the borrower company, the land mortgaged with the corporation would be treated to have been sold to petitioner with free hold right irrespective of the fact it was leased to borrower company for a period of thirty years, and in this situation of the matter, if the land has been transferred to petitioner by the corporations under section 29 of the Act treating the land as free hold land, the entire land would be treated to have been transferred with free hold rights and not with lease hold rights irrespective of the fact that in the piece of land measuring 15872 sq. ft. only lease hold rights had been mortgaged to the corporations, as in such a case corporations cannot be permitted to blow hot and cold together.
This view of ours finds full support from the decision of the Hon'ble Supreme Court which has been rendered in the case of Rajasthan State Industiral Development and Investment Corporation & Anr. vs. Diamond and Gem Development Corporation Ltd. & Anr. reported in AIR 2013 SC 1241. The Hon'ble Apex Court in this case in para 9 and 10 of its judgement has said as below:-
"I. Approbate and Reprobate:
Para-9. A party cannot be permitted to "blow hot-blow cold", "fast and loose" or "approbate and reprobate". Where one knowingly accepts the benefits of a contract, or conveyance, or of an order, he is estopped from denying the validity of, or the binding effect of such contract, or conveyance, or order upon himself. This rule is applied to ensure equity, however, it must not be applied in such a manner, so as to violate the principles of, what is right and, of good conscience.
Para-10. Thus, it is evident that the doctrine of election is based on the rule of estoppel the principle that one cannot approbate and reprobate is inherent in it. The doctrine of estoppel by election is one among the species of estoppels in pais (or equitable estoppel), which is a rule of equity. By this law, a person may be precluded, by way of his actions, or conduct, or silence when it is his duty to speak, from asserting a right which he would have otherwise had."
From the case law noted above, it is clear that if the corporations have assessed the entire land at the market rate and have sold the same on its full value to the petitioner treating the land as free hold land, now they are not allowed to take another stand saying they had lease hold right only in the land measuring 15872 sq. ft. and sold the same right to the petitioner under section 29 of the Act, as they are stopped from taking all together a different they have taken earlier at the time of transfer by evaluating the land on its full market rate treating the land as free hold land.
There would be no any effect on the nature of sale from the description of sold property given in sale deed dated 19.07.1986, executed between U.P.F.C. and petitioner. A mention has been made in the sale deed that property which is being sold to the petitioner is free hold right in the piece of parcel of land measuring 9128 sq.ft. and lease hold right in an other piece of parcel of land measuring 15872 sq. ft. in plot bearing Khasra Nos. 692M & 693M, situated in village Ahmadpur, Karach (near Shankar Ashram Hardwar Roorkee Road) Pargana -Jawala Pur, Tehsil- Haridwar, District-Haridwar. The mention made in the sale deed to the effect that lease hold right in the piece of land measuring 15872 sq. ft. is being sold shall be read as free hold right because corporation (U.P.F.C) has sold the land under section 29 of the Act by invoking personal guarantee given by the lessor of the land, Jai Prakash Dubey (since deceased). In such a case where corporation has proceeded to sell the property on lease from a private party, who has been a guarantor also, and the sale has been made invoking the guarantee, transfer so made shall be treated to be of free hold land irrespective of what has been recited to be sold in the sale deed. Thus, judging the case from this angle also, after the sale of land being made by the corporation to the petitioner under section 29 of the Act, respondents can not claim any interest in the piece of land measuring 15872 sq.ft. saying they have sold lease hold rights only in the piece of land measuring 15872 sq. ft. for the residual period of lease and the land has reverted back to lessor/legal heirs of the lessor after the expiry of period of lease i.e. 06.05.2016.
As regards settlement of balance outstanding dues between both corporations and the borrower company under OTS scheme, it is not in dispute that mortgaged assets of the borrower company were sold to petitioner for Rs. 1.85 crores only while the outstanding was much more than this amount. It is also not in dispute that from the money received in the auction sale of the mortgaged assets the entire outstanding dues of the corporations were not satisfied and some outstanding remained due for which recovery efforts were being made by both corporations. Both corporations have settled the balance outstanding dues with the borrower company for Rs. 11 lakhs and Rs. 49 lakhs under the OTS scheme. The petitioner has no right to challenge the settlement of balance outstanding dues of the corporations with the borrower company under OTS scheme as it is the prerogative of corporations as to at what amount they are settling the dues. It has nothing to do with the action of corporations making settlement of huge dues for a petty amount as it is a matter between creditor and borrower and petitioner having no concern with the same has no right to interfere in it. The Act of settlement of balance outstanding dues between corporations and borrower company under OTS scheme being not a matter concerned with the petitioner, latter has no right to question the action of corporations saying they have settled huge balance outstanding dues for a petty amount. However, as it appears, the concern of the petitioner is with the letter dated 21.07.2015 issued by Shri. A.K. Agarwal, Manager (Technical), PICUP which he has written to the borrower company. In the said letter there is a mention of term loans of Rs. 62.05 lakhs and Rs. 20 lakhs taken by the borrower company and that the entire amount have been paid by way of OTS scheme and now there is nothing due towards the above mentioned loans. The petitioner have no concern with this mention also. Their concern is about that part of letter in which it has been said that borrower company may collect the photostat copies of title deeds including lease deed and the legal/ lease right, if any, available to PICUP in the land shall stand released in favour of M/s Surprise Hotel Pvt. Ltd./ guarantors and legal heirs of promoters /guarantors. This really offends petitioner, as once corporations after having sold the mortgaged assets to the petitioner as free hold land and delivered possession, and also having released the original title deeds to the petitioner, corporations have no right to return photostat copies of title deeds, including lease deed to the borrower company nor they have right to mention that their lease /legal right, if any, in the mortgaged assets shall stand released in favour of borrower company/promoter or guarantor or legal heirs of promoter/ director of the borrower company. After having sold the mortgaged assets, corporations are stopped from claiming any legal/lease rights in the land so sold by saying they had sold lease hold rights only in the land for the residual period of lease and after the expiry of that period the land reverted back to lessor. Respondents 5 to 8 can also not claim any rights in the land on the above premises because corporations have sold the land under section 29 of the Act, invoking the guarantee given by the lessor treating the entire land as free hold land.
Before concluding our discussions we would like to mention few words about earlier litigation drawn between the parties and the stand taken by both corporations therein. It is reflected from the record that respondent no. 5 through Smt. Laxmi Dubey, respondent no. 6 herein had challenged the auction-sale proceedings initiated by the corporations under section 29 of the Act in this Court by way of filing writ petition no. 27324 of 1995. In the said proceedings respondent no. 5 had challenged the action taken by the corporations mainly on two grounds, firstly, the value on which the property was sold and secondly, the competence of the corporations to execute the sale. This petition was dismissed by this Court on 30.04.1996 with Rs. 5000/- as cost to be paid to U.P.F.C. by the respondent no. 5 for indulging in frivolous litigation. Respondent no. 5 had filed special leave petition against the order of this Court in the Hon'ble Apex Court being petition for special leave to appeal (civil) no. 8483 of 1997) and this petition was also dismissed on 28.04.1997. After losing this battle another round of litigation began between Vibhas Chand Mishra and D.K. Dubey and others by way of filing of original suit no. 98 of 1996 in the court of Civil Judge (Junior Division) Haridwar and in the said suit one Vibhas Chand Mishra had set up his lease right in property in question. This suit was also dismissed with cost and first appeal being civil appeal no. 46 of 2010 and second appeal no. 131 of 2013 filed in the Court of District Judge, Haridwar and High Court of Uttarakhand at Nainital by the said Vibhas Chand Mishra were also dismissed. The above proceedings were vehemently opposed by the corporation saying they had full right to proceed under section 29 of the Act against the borrower company by putting the mortgaged property to sale to realize their dues.
It is further reflected that after losing the second round of battle respondent No. 5 has again started challenging the proceedings initiated by both corporations under section 29 of the Act by filing objection under section 47, C.P.C. This proceeding was initiated by Shri D.K. Dubey, respondent No. 9 herein and his application was also rejected against which a civil revision no. 121 of 2014, D.K. Dubey versus M/S New Age Hotel and Resort and others has been filed and the same is presently pending in the Court of IIIrd Additional District Judge, Haridwar. In the said proceeding, D.K. Dubey had made an application seeking amendment in the objection filed under section 47, C.P.C. by way of making an amendment application under Order 6 Rule 17 C.P.C., and by way of this he again wanted to challenge the action /sale proceedings by reopening the case on the premises that Jai Prakash Dubey (since Deceased) had given the piece of land measuring 15872 sq. ft. to respondent no. 5 on lease for a period of 30 years, therefore, the respondent no. 5 had only lease hold right in the said piece of land and had mortgaged the said piece of land to both corporations with same right which corporations could have transferred to petitioner company under section 29 of the Act for the remaining period of the lease only and petitioner company could also get only this much right in the land and not anything more. The amendment application was vehemently opposed by the petitioner company and it was rejected on 12.02.2016. It is reflected that against the said order of rejection Shri D.K. Dubey had filed writ petition no. 874 of 2016 in the Uttarakhand High Court at Nainital and the same has been dismissed as withdrawn on 05.04.2016. In all above proceedings drawn between the parties the stand which had been taken by both corporations was that they had full right to proceed against the borrower company under section 29 of the Act and had sold the mortgaged assets treating the same as free hold land which they were fully competent. When corporations have taken this plea in the earlier litigations drawn between the parties and their plea has been affirmed, now they have no right to say that they had lease hold right only in the piece of land measuring 15872 sq. ft. and had sold the same right to the petitioner company and after the execution of sale deed the petitioner company acquired the same right for the remaining period of lease and property stood reverted back to original lessor /legal heir of the lessor after the expiry of the period of the said lease. Therefore, act of respondent no. 4 herein issuing No Dues certificate dated 21.07.2015 in favour of respondent no. 5 and by mentioning therein that lease /legal right, if any, available to PICUP shall stand released in favour of M/s Surprise Hotels Pvt. Ltd./ guarantors and legal heirs of promoters /guarantors is wholly illegal, unjust and unwarranted and needs to be quashed.
In view of the aforesaid discussion, petition is partly allowed and the letter dated 21.07.2015 issued by respondent no.4, so far as it relates to providing Photostat copies of title deeds, including lease deed and releasing lease /legal rights in favour of borrower company, guarantor /legal heirs of promoter/guarantor is hereby quashed and respondent no.1 to 4 are commanded not to interfere in the peaceful possession of petitioner over the property in question in the garb of aforesaid letter.
There shall be no order as to costs.
Order Date :-25.05.2016 Bhanu