IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23RD DAY OF OCTOBER, 2019 BEFORE THE HON' BLE MR. JUSTICE B. VEERAPPA REGULAR SECOND APPEAL No.390/2012 (RES) BETWEEN:
PUNJAB NATIONAL BANK A BODY CORPORATE CONSTITUTED UNDER THE BANKING COMPANIES (ACQUISTION & TRANSFER OF UNDERTAKINGS ACT, 1970) HAVING ITS HEAD OFFICE AT NO.7, BHIKAIJI CAMA PLACE, NEW DELHI-110066.
WITH ITS REGIONAL OFFICE AT MAKERS TOWERS, 7TH FLOOR, CUFFE PARADE, COLABA, MUMBAI-400005.
NOW ASSET RECOVERY MANAGEMENT BRANCH, DALAMAL HOUSE, J.B. MARG, NARIMAN POINT, MUMBAI-400021.
REPTD. BY ITS SENIOR MANAGER.
... APPELLANT (SRI S.P. SHANKAR, SENIOR COUNSEL A/W SRI VARADARAJ R. HAVALADAR, ADVOCATE) AND:
1. M/S G. R. DEVELOPERS A PARTNERSHIP FIRM, HAVING ITS ADMINISTRATIVE OFFICE, AT NO.142 1ST FLOOR, G.R. PLAZA, D.V. GUNDAPPA ROAD, BASAVANAGUDI, BANGALORE-560004.
REPTD. BY ITS MANAGING PARTNER MR. C.R. GOPAL KRISHNA, 2. M/S SUMAN MOTELS LIMITED A COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE AT INDIA PRINTING HOUSE, NO.42 AMBEDKAR MARG, WADALA, MUMBAI-400031.
REPTD. BY ITS MANAGING DIRECTOR.
3. INCOME TAX DEPARTMENT TAX RECOVERY OFFICER, RANGE-12, BANGALORE.
... RESPONDENTS (BY SRI ANANTHA MANDAGI, SENIOR COUNSEL FOR SRI G. VIKRAM, ADVOCATE FOR R1;
SRI JEEVAN J. NEELARAGI, ADVOCATE FOR R3;
VIDE ORDER DATED 26.7.2012 SERVICE OF NOTICE ON R2 IS HELD SUFFICIENT) ....
THIS REGUAL SECOND APPEAL IS FILED UNDER SECTION 100, READ WITH RULE 1 OF CPC., AGAINST THE JUDGMENT AND DECREE DATED:02.01.2012 PASSED IN R.A.NO.168/2011 ON THE FILE OF THE PRESIDING OFFICER, FAST TRACK COURT AT DEVANAHALLI, AND CIVIL JUDGE (SR. DN.) & JMFC, DEVANAHALLI, DISMISSING THE APPEAL AND CONFIRMING THE JUDGMENT AND DECREE DATED: 24.03.2011 PASSED IN O.S.NO.1440/2006 ON THE FILE OF THE SENIOR CIVIL JUDGE & JMFC, DEVANAHALLI.
THIS REGUAL SECOND APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ARE COMING ON FOR PRONOUNCEMENT OF JUDGMENT THIS DAY, THE COURT DELIVERED THE FOLLOWING:
JUDGMENT This appeal is filed by the 3rd defendant against the judgment and decree dated 2.1.2012 made in R.A.No.168/2011 on the file of the fast track court at Devanahalli dismissing the appeal and confirming the judgment and decree dated 24.3.2011 made in O.S.No.1440/2006 by the Civil Judge (Sr.Dn.) and JMFC., Devanahalli decreeing the suit filed by the plaintiff (respondent No.1 herein) with costs declaring that the plaintiff is entitled to the vacant possession of the suit schedule second property from the defendants (appellant, respondent Nos.2 and 3 herein) within a period of three months from the date of the judgment and directing the 2nd respondent to pay a sum of Rs.25,000/- per month as damages from 30.6.2003 till the date of delivery of possession of the suit schedule property to the plaintiff-respondent No.1 herein.
I Facts of the Case 2. The 1st respondent, who is the plaintiff before the trial Court filed O.S.No.1440/2006 for possession of the suit schedule second property and damages contending that it is a partnership firm having its registered office at Basavanagudi, Bangalore and engaged in developing layouts, constructions, multistoried buildings and other allied business having vast experience in the said field. It is further contended that the plaintiff had undertaken a massive project of developing a layout in the name and style of ‘Greek Agora’ in Sy.Nos.61/2, 61/3, 44, 45 and 46 situated at Byanahalli, Jala Hobli, Bangalore North Taluk after converting the said lands and obtaining the approval of the layout plan from the Town Planning Authority. It formed several sites in the suit schedule properties in order to allot the same to the general public. In order to attract elite class, it was in search of an agency to run the club and to provide recreation facility to the prospective purchasers of the sites formed in the suit schedule first property. At that time, defendant No.1- respondent No.2 herein being a company registered under the Companies Act, approached the plaintiff- respondent No.1 herein in the year 1997 and offered to run the club in the suit schedule second property representing that it had vast experience of more than 18 years in constructing the hotels, clubs, resorts and running the club by providing facilities and maintaining them on long term basis.
3. It is further case of the plaintiff that in pursuance of the said negotiation, both respondent Nos.1 and 2 entered into a Lease Deed dated 26.3.1997 with the terms and conditions mentioned therein. Respondent No.2 by its resolution dated 4.11.1996 decided to enter into a Lease Deed and also authorised Javid Akthar to execute the Lease Deed as well as to perform the formalities. Accordingly, respondent No.1 and respondent No.2 entered into a Lease Deed dated 26.3.1997 with terms and conditions mentioned therein. Earlier to that an Agreement dated 12.2.1997 was in existence and there was a Clause in the subsequent Lease Deed dated 26.3.1997 stating that the Lease and Development Agreement dated 12.2.1997 has to be read conjointly with the Lease Deed dated 26.3.1997 along with the terms and conditions mentioned therein. Respondent No.2 had taken the suit schedule second property on lease for a period of 99 years on the rent of Rs.100/- per month which excludes electricity and water charges. Accordingly, respondent No.2 paid an amount of Rs.9,900/- towards the rent for the entire lease period by way of cheque drawn on Bank of India, Malleshwaram Branch, Bangalore in favour of respondent No.1-plaintiff.
4. It is the further case of the plaintiff- respondent No.1 that there is a condition in the said two Lease Agreements that defendant No.1/respondent No.2 had to maintain the schedule property in good and tenantable condition and has to attend all periodical repairs from time to time for the use and enjoyment of the suit schedule second property and there was also a condition that if there is any deviation or failure to perform the terms of the lease it would enable the plaintiff-respondent No.1 to terminate the lease as mentioned in Clause-21 of the Lease Deed. The plaintiff-respondent No.1 also undertook a stand that Clauses 26 and 29 reserve a right to re-enter the suit schedule property for the non-performance of any of the terms of the Lease Deed and the Lease and Development Agreement dated 12.2.1997. The plaintiff-respondent No.1 herein further contended that inspite of entering into Lease Agreements dated 12.2.1997 and 26.3.1997 and the terms and conditions mentioned therein, defendants, respondent Nos.2 and 3 have neglected and violated the said terms and conditions. In view of the above, because of non-providing service to the plot owners as agreed, they started complaining the respondent No.1-plaintiff regarding lack of service and improper management of the club by respondent No.2- defendant No.1. Even defendant No.1-respondent No.2 had not paid any income tax and other levy payable by it and thus had violated Clause 20 of the said Lease Deed. Even defendant No.1-respondent No.2 had failed to perform the obligations cast on it under the Lease Deed and hence it had no right to continue as a lessee of the schedule premises. The Income Tax Authority- respondent No.3 had declared defendant No.1- respondent No.2 as the defaulter for not paying the income tax and proceedings were also initiated against it since there was due for a sum of Rs.59.06 Crores.
5. It is the further case of the plaintiff that Defendant No.2-respondent No.3 attached the suit schedule property on 6.1.2003. This callous and negligent attitude of respondent No.2-defendant No.1 has embarrassed respondent No.1-plaintiff and lot of inconvenience. As per Clause 21 of the Lease Deed and violation of the terms and conditions of the Lease Deed, the right of defendant No.1-respondent No.2 to continue as a lessee ceased. The plaintiff-respondent No.1 issued a letter dated 8.8.2003 to the Recovery Officer of defendant No.2-respondent No.3 with a request to deliver back the possession of the suit schedule property by clarifying the terms and conditions entered into between itself and respondent No.2-defendant No.1 and also about the notices exchanged between the plaintiff-respondent No.1 and defendant No.1- respondent No.2.
6. It is the further case of the plaintiff- respondent No.1 that defendant No.1-respondent No.2 forged the signature of its Managing Partner – C.R. Gopal Krishna on an indemnity bond and an undertaking alleged to have executed by I.D.B.I. and the said undertaking is to the effect that as long as the loans borrowed by the defendant No.1-respondent No.2 from the I.D.B.I are repaid, the plaintiff-respondent No.1 will not terminate the lease in favour of defendant No.1- respondent No.2. Though no such indemnity bond was executed by the plaintiff’s Managing Partner, defendant No.1-respondent No.2 forged the signatures and committed a grave offence of forgery.
7. The further case of plaintiff-respondent No.1 is that it is under utter shock and surprise that defendant No.3-appellant herein without any notice and an opportunity of being heard has seized the suit schedule property on 1.8.2003 for the amounts due to them and has kept the premises under the lock and key, which has caused much embarrassment to the reputation of the plaintiff-respondent No.1 and the site owners are agitating for the lack of facilities. The Association of the site owners wrote a letter to the plaintiff-respondent No.1 complaining about the lack of facilities, who had suffered much humiliation due to the acts of defendant No.1-respondent No.2 and also due to the breach of the terms and conditions of the Lease Deed dated 26.3.1997 and the Agreement dated 12.2.1997. Therefore, the plaintiff-respondent No.1 was constrained to issue a legal notice dated 10.6.2003 under Section 106 of the Transfer of the Property Act terminating the lease of the schedule premises with effect from 30.6.2003. The property leased to defendant No.1-respondent No.2 includes club and open space measuring about 2,23,000 sq.ft. in various survey numbers mentioned supra and defendant No.1- respondent No.2 is a tress-passer from the date of termination of the Lease i.e., 30.6.2003 and is bound to compensate the plaintiff-respondent No.1 at the rate of Rs.25,000/- per month for the alleged use and occupation of the schedule premises.
8. It is further contended that defendant Nos.2 and 3 i.e., respondent No.3 and appellant herein though did not have any right over the suit schedule property have attached the property under misconception under the Lease Deed dated 26.3.1997. The plaintiff- respondent No.1 has assigned only the leasehold rights to defendant No.1-respondent No.2 herein, in the suit schedule second property and nothing more than that. It is the further case that the defendant No.3-appellant herein has no right or authority to attach and seize the property belonging to the plaintiff-respondent No.1 and in the event of defendant No.3 - appellant herein having any claim against defendant No.1-respondent No.2, it has to be worked out between them interse and not to attach the plaintiff’s-respondent No.1 property to its detriment. The residents and other members of the layout are deprived of the recreational facilities since defendant No.1-respondent No.2 had closed the club and for this reason, the plaintiff-respondent No.1 has been put to lot of embarrassment. It is the further case of the plaintiff that defendant Nos.2 and 3 i.e., respondent No.3 and appellant herein are made as parties to the suit since they have attached the suit schedule second property without notice and to the detriment of its interest. Therefore, the suit came to be filed for the relief as sought for.
II The appellant-3rd defendant filed written statement 9. In response to the summons issued, defendant No.1-respondent No.2 though served was placed exparte. Defendant No.2-respondent No.3 herein appeared through its advocate, but failed to contest the suit. Defendant No.3-appellant herein filed the written statement and denied the plaint averments contending that the suit of the plaintiff for the relief sought for, is not maintainable and is liable to be dismissed. Defendant No.3-appellant herein further has contended that it had granted credit facility to defendant No.1- respondent No.2 herein i.e., M/s. Suman Motels Limited by way of term loan to an extent of 300 lakhs on the terms and conditions prescribed in the loan documents by it including repayment of the said facility with interest and costs and security for such facility , inter- alia, by way of mortgage of the lease hold property. It is further contended that in terms of the sanction, defendant No.1-respondent No.2 herein has created security of mortgage in favour of defendant No.3- appellant herein – Bank in respect of the properties described in the second schedule of the Lease Deed by delivering and depositing the title deeds with M/s. IDBI on 21.5.1988 along with other properties. M/s. HBI has given consent to defendant No.3 having paripassu charge over the said properties for the term of Rs.300 Lakhs plus interest etc. The creation of mortgage over the leased property is valid and permissible under the Lease Deed and therefore, defendant No.3 is a mortgagee of the suit schedule property. It is also pertinent to note that defendant No.1 extended the mortgage security by way of deposit of title deeds over the Mussori of defendant No.1 as per the memorandum of deposit of title deeds dated 24.9.1998 whereunder defendant No.1-respondent No.2 herein has confirmed the earlier equitable mortgage dated 21.5.1998 for securing the due repayment, discharge and deduction by defendant No.1 of the term loan of Rs.300 lakhs, etc. The creation of mortgage over the leased property is valid and permissible under the lease deed and therefore, the 3rd defendant is the mortgagee of the landed properties described in the schedule to the plaint, who is the holder of security interest Defendant No.1 has extended the mortgage security by way of deposit of title deeds over the Mussori property of defendant No.1 as per the memorandum of deposit of title deeds whereunder the 1st defendant has confirmed the earlier equitable mortgage dated 21.5.1998 for securing the due repayment. Further, with a view to recovery its dues and to protect its security interest since defendant No.1 committed breach, the 3rd defendant exercised the statutory power under the Securitization Act by giving statutory notice to defendant No.1 and its Directors vide notice dated 22.4.2003.
10. Since defendant No.1 and its Directors did not comply with the demands made in the statutory notice dated 22.4.2003, the 3rd defendant issued further letter/notice dated 16.7.2003 to defendant No.1 and its Directors intimating that the possession of the secured assets/detailed in the said notice would be taken and follow up action would be pursuant for sale of the same.
As such, the action on the part of the 3rd defendant was in concurrence of the IIBI and also as follow up action of the 3rd defendant is taking possession interalia of the lease properties as the same is evidenced by the documents like, statutory notice, possession notice, panchanama, inventory, etc. It is further contended by the 3rd defendant that it has taken possession of the schedule properties at Bangalore on 1.8.2003 in exercise of statutory rights under the Securitization Act. It is further contended that, the 3rd defendant along with HBI as secured creditors, has filed recovery application against defendant No.1 before the Debts Recovery Tribunal-II at Mumbai under the provisions of Recovery of Dues to the Banks and Financial Institutions Act, 1993 in O.A.No.939/2011 and the recovery application is still pending adjudication and therefore, the suit filed by the plaintiff is not maintainable and the Court has no jurisdiction to entertain the suit.
11. It is further contended by the 3rd defendant that the Lease Deed contains the provisions for invoking the Arbitration Clause to work out the differences, if any, between the plaintiff and defendant No.1, but instead of invoking such arbitration clause, the plaintiff has chosen to file the suit. It is further contended that the 1st defendant has not raised the issue of arbitration. In the circumstances, the 3rd defendant has got every reason to believe that plaintiff and defendant No.1 with malafide intention and ulterior motive to cheat and defraud the secured creditors, comprised the 3rd defendant, who has colluded and connived to file this false, concocted and untenable suit. The said object of the plaintiff and defendant No.1 is to cause hardship to 3rd defendant and the suit filed by the plaintiff is liable to be dismissed on the ground of malafide intention and collusiveness. It is further contended that the plaintiff is not entitled to any relief as sought in the prayer and no judgment and decree can be granted in favour of the plaintiff by directing the 3rd defendant or any other defendants to hand over the possession of the suit schedule property to the plaintiff, etc., and sought for dismissal of the suit.
III Issues framed by the Trial Court 12. Based on the aforesaid pleadings, the Trial Court framed the following issues:
1. Whether the plaintiff is entitled for possession of the suit schedule second property from the defendants?
2. Whether the plaintiff proves that the 1st defendant has to pay an amount of Rs.25,000/- per month as damages from 30.06.2003 till the date of delivery of possession for illegal use and occupation of the suit schedule property?
3. Whether the 3rd defendant proves that this suit is not maintainable without making HBI as a part to this suit?
4. Whether the 3rd defendant proves that this suit is not maintainable in view of the arbitration clause in the Lease Deed?
5. Whether the 3rd defendant proves that this suit is not maintainable in view of the 3rd defendant already taken action in the debts recovery tribunal at Mumbai as contended in para 15 of the written statement?
6. Whether the plaintiff is entitled for the decree as prayed for?
7. To what order or decree?
IV Parties Examined 13. In order to prove its case, plaintiff examined one witness as P.W.1 and got marked the documents Exs.P.1 to P.14 and Ex.C1. The defendants examined D.W.1 and D.W.2 and marked the documents Exs.D.1 to D.20.
14. The Trial Court, considering both oral and documentary evidence, by the judgment and decree dated 09.11.2007 dismissed the suit as not maintainable, against which, the plaintiff preferred R.A.No.26/2008 on the file of the Prl. District and Sessions Judge, Bengaluru Rural District, Bengaluru, which was also dismissed on 09.09.2008. Aggrieved by the same, the plaintiff preferred RSA No.2344/2008 before this Court which came to be allowed on 30.07.2010 by setting aside the judgment and decree passed in R.A.No.26/2008 dated 09.09.2008 and O.S.No.1440/2006 dated 09.11.2007 and remanded the matter to the Trial Court to record findings on issue Nos.1,2 and 6 after hearing the parties on the said issues and thereafter to dispose off the suit in accordance with law. Since the matter was remanded only for limited purpose of recording findings on issue Nos.1, 2 and 6, the Trial Court was impressed upon to dispose of the suit itself within three months from the date of receipt of a copy of the judgment and decree, subject to cooperation by both the parties.
V Suit Decreed 15. Being aggrieved by the said Judgment and decree, the present appellant-3rd defendant filed SLP (Civil) No.30106/2010 before the Hon’ble Supreme Court. The Hon’ble Supreme Court, by the Order dated 16.11.2010, dismissed the SLP. In pursuance of the remand order made by this court and confirmed by the Hon’ble Supreme Court, the Trial Court, considering both oral and documentary evidence on record, decreed the suit and recorded a finding that, the plaintiff is entitled to possession of the suit schedule second property from the defendants and the plaintiff has proved that the 1st defendant has to pay an amount of `25,000/- per month as damages from 30.06.2003 till the date of delivery of possession of the suit schedule property to the plaintiff firm.
VI Appeal by 3rd defendant Dismissed 16. Aggrieved by the said judgment and decree, the 3rd defendant filed R.A.No.168/2011 which came to be dismissed by the judgment and decree dated 02.01.2012 confirming the judgment and decree passed by the trial Court.
17. Being aggrieved by the concurrent findings of fact recorded by the Courts below, the appellant/defendant No.3 did not deter from preferring the present Regular Second Appeal as a last ditch attempt.
VII Substantial Question of Law.
18. This Court, while admitting the appeal on 06.11.2012, framed the following substantial questions of law.
“Whether the Courts below are justified in decreeing the suit ignoring the conditions stipulated in clause-19 of Ex.P.13 to the effect that in no case the property constructed by the lessees on the demised property should go back to lessor?”
19. I have heard the learned counsel for the parties to the lis.
VIII Arguments Advanced by the Learned Senior Counsel for Appellant 20. Sri S.P.Shankar, learned Senior Counsel for the appellant /defendant No.3 contended that the Lower Appellate Court erred in confirming the judgment and decree passed by the Trial Court when the plaintiff/1st respondent had miserably failed to prove that the defendant No.1 (lessee-M/s Suman Motels Ltd.,) had become commercially insolvent and the 1st defendant failed to provide service to the plot holders and further failed to prove the forging of signature of Managing Partner of plaintiff by the official of defendant No.1. On that ground alone, the judgment and decree passed by the Courts below are liable to be set-aside.
21. The learned Senior Counsel further contended that the Courts below committed serious error of facts and law in as much as having regard to the terms of Ex.P.1-Lease Deed and clause 16 of Ex.P.13-Lease and Development Agreement. The defendant No.1 was coupled with interest, particularly as it had spent more than Rupees One Crore to construct the club house and it was being run by providing service to the plot holders, which fact also has been admitted specifically by P.W.1, thereby the lease in favour of defendant No.1 was irrevocable or interminable. On that ground also, the impugned judgment and decree cannot be sustained and are liable to be set-aside. The learned Senior Counsel further contended that the Courts below failed to appreciate that the plaintiff had miserably failed to establish the ground for terminating the lease, as the plaintiff has not placed any evidence to show the alleged breach of terms set out in Ex.P.9. He further contended that both the Courts below misunderstood the scope of mortgage security of the defendant No.3/appellant bank, which is a lease-hold interest, but the Courts below have found and held that the defendant No.1 mortgaged the lessor’s (plaintiff) right in the suit schedule second property. He further contended that the Courts below failed to appreciate that although the appellant bank in paragraph 13 of the written statement pleaded that the property had been proceeded with and enforced in O.A.No.939/2001 filed before the Debts Recovery Tribunal, Mumbai, the plaintiff did not take any action in the matter by intervening in such debt recovery case. The said case has been decreed with right to the appellant to enforce the security of suit schedule property in execution of the same. Consequently, the appellant cannot be prejudiced by passing a decree for possession in favour of the plaintiff.
22. The learned Senior Counsel further contended that the lower appellate Court erred in dismissing the application for additional evidence filed by the appellant under Order 41 Rule 27 of Code of Civil Procedure in R.A.No.168/2011 in as much as the judgment of the Debts Recovery Tribunal, Mumbai in the said O.A.No.939/2001 has rendered only during the pendency of the First Appeal and therefore the first appellate Court ought to have admitted such additional evidence. The rejection of such application is contrary to law and liable to be set-aside. He further contended that the lease is for a period of 99 years. There is profit sharing between the lessor and lessee under Ex.P.1 r/w Ex.P.13. Right of re-entry prematurely is not reserved under Ex.P.1. Further, Ex.P.1 r/w Ex.P.13 makes the lease permanent and incapable of termination. Therefore, the impugned judgment and decree passed by the Courts below has to be set-aside.
23. It is further contended that legal importance of Ex.P.1 read with Ex.P.13 when seen in context of admissions of P.W.1 (lessor), it depicts that the lessee constructed club house on the suit schedule property by investing more than Rs.One crore. It would enable the Court to reverse the concurrent errors of law committed by the Courts below. The quit notice (Ex.P.9) is incurably invalid and it does not validly terminate the lease under Ex.P.1. There is no clear gap of fifteen days from the date of receipt of Ex.P.9 to the date of expiry of termination of lease. Quit notice is dated 10.06.2003, posted on 12.06.2003 as per Ex.P.10, served on lessee on 16.06.2003 vide Ex.P.11. The time gap between 16.06.2003 to 30.06.2003 is less than fifteen days, while one day is to be excluded to infer the valid termination of notice. There is time gap from 17.06.2003 to 30.06.2003, less than fifteen days. Therefore, quit notice Ex.P.9 is invalid. He further contended that Ex.P.1 is a registered document and it is to be read with clause 30 of Ex.P.13. Clause 29 of Ex.P.13 makes lessor and lessee as partners in business. Clauses 18 and 19 of Ex.P.13 would make the lessee owner of the super structure and the same would never revert to the lessor. The said aspect of the conditions were not considered by the Courts below, thereby passed erroneous judgment and decree which is impermissible.
24. It is further contended that under Ex.P.12, lessee mortgaged its right, title and interest in the leased property in favour of IIBI and the benefit of such mortgage is extended to the loan of Punjab National Bank. Charge on the mortgage property is registered with R.O.C. vide Ex.D.19 to the knowledge of lessor and implied public notice under Company Law. The bank loan has been utilized for construction of club house on the suit schedule property. The provisions of Section 108(j) of the Transfer of Property Act, 1882 authorizes the lessee to mortgage the suit schedule property pursuant to the powers reserved in clause 23 of Ex.P.1 read with Ex.P.13. The said lease holder interest is the property of the lessee and such a right can be mortgaged. He further contended that the judgment made in RSA No.2344/2008 dated 30.07.2010 is sub- silentio in regard to statutory provisions of Sections 13(2), 13(4), 17 and 34 of Securitization Act. Thereby, the impugned judgment and decree is rendered in ignorance of statutory law. Therefore, he sought to allow the Regular Second Appeal.
25. In support of his contentions, learned Senior Counsel for the appellant relied upon the following judgments.
(i) Siva Yogeshwara Cotton Press, Davanagere and others vs. M. Panchaksharappa and another reported in AIR 1962 SC 412.
(ii) Ram Sarup Gulla (Dead) by LRs vs. Bishen Barain Inter College and others reported in AIR 1987 SC 1242.
(iii) Mardia Chemicals Ltd., and others vs. Union of India and others reported in (2004) 4 SCC 311.
(iv) United Bank of India vs. Satyawati tondan and others reported in (2010)8 SCC 110 (v) Rajkumar Shivare vs. Assistant Director, Directorate of Enforcement and another reported in (2010)4 SCC 772, (vi) Agarwal Tracom Pvt. Ltd., vs. Punjab National Bank and others reported in AIR 2017 SC 5562.
IX Arguments advanced by the learned Senior Counsel for Respondent No.1- Plaintiff 26. Per contra, Sri Ananth Mandagi, learned Senior Counsel for respondent No.1/plaintiff sought to justify the impugned judgment and decree passed by the Courts below. He contended that, the Lease Deed Ex.P.1 dated 26.3.1997 and Lease and Development Agreement dated 12.02.1997 executed between the owner and the tenant does not transfer any right or ownership, but it is only a temporary lease as contemplated under clause 21 of the Lease Deed which states that the lessees covenant with the lessors that they will promptly perform all the terms of the agreement dated 12.02.1997 and/or his lease and in case of breach of any of the terms of the agreement dated 12.02.1997 and/or this Lease Deed or if the lessees at any time hereafter are adjudged insolvent under the insolvency law, the lessors have the authority to terminate the lease and this lease shall cease. The same was admitted by D.W.1 in his cross-examination that it is true that the agreement shown to him was the agreement dated 12.02.1997 which was scrutinized by him at the time of sanctioning loan to the 1st defendant.
The said document is marked as Ex.P.13. It is true that the property was given to the 1st defendant as he had agreed to perform various obligations as mentioned in paragraph-16 of the document. It is true that as per Ex.P.1, one of the obligation of the 1st defendant is not only construction of club house, but also to maintain the club house as per the terms and conditions mentioned therein. He also admitted in his cross examination that, it is true that at the time of sanctioning and releasing of loan in favour of the 1st defendant, he was aware of clause 21 on Ex.P.1. It is true that as per clause 21 of Ex.P.1, plaintiff/lessor is not liable to answer any liabilities of 1st defendant to either banks or any financial institutions. He also admitted that, it is true that there is no privity of contract between the plaintiff and 3rd defendant to discharge the loan in question. It is true that as per clause 31 of Ex.P.1 the notice of termination of the lease has to be issued by the plaintiff/lessor only to the lessee/defendant No.1 and none else. He also admitted that it is true that as per clause 32 of Ex.P.1 the lessee/defendant No.1 without obtaining written consent from the lessor/plaintiff, the defendant No.1 cannot give lease hold right in favour of anybody.
27. The learned Senior Counsel also pointed out that, D.W.1 has admitted in categorical terms that, it is true that on 01.08.2003, the 3rd defendant took possession of the schedule property under Securitization Act. The 1st defendant is not running the club from 01.08.2003. It is true that because of non- performing of the obligations by the defendant No.1 as mentioned in Ex.P.1 the plaintiff issued the termination notice dated 10.06.2003 as per Ex.P.9. It is true that generally in a loan transaction wherever loan is raised under equitable mortgage of deposit of title deed, the original title deeds have to be deposited to the loan in the bank. It is true that the schedule property was originally not mortgaged with the 3rd defendant and the 3rd defendant is not in custody of original title deeds of the suit schedule property and the original Sale Deed. It is true that Ex.P.13 is the only document executed by the 1st defendant in favour of the 3rd defendant by accepting paripasu charge in respect of the loan in question. As per Ex.P.13, the second schedule at page No.8-part ‘A’ does not contain the mortgage of original Lease Deed dated 26.03.1997. He would further contend that both the Courts below held that termination is valid. Therefore, possession must follow. In view of the above, there is no substantial question of law involved in the present appeal and this Court cannot interfere with the concurrent findings of fact, exercising powers under Section 100 of the Code of Civil Procedure.
28. The Learned Senior Cousel further contended that the tenancy month shall be English calendar month and shall commence from 1st day of every English calendar month and shall end on the last day of the same month. That on the expiry of the lease period or an earlier termination of the lease, the lessee shall vacate and deliver back vacant possession of the second schedule property in the condition in which it is let out. It is also stated that the lessee shall be at liberty to assign the leasehold rights in second schedule property comprised in the lease only after obtaining prior sanction in writing of the lessors to respectable and responsible persons which sanction shall not be unreasonably withheld, provided that the lessees shall always remain liable for carrying out all the terms and conditions, responsibilities and obligations cast upon them by virtue of this agreement. Admittedly, in the present case, before obtaining the loan from the 3rd defendant bank, the 1st defendant has not obtained any prior permission from the lessor/plaintiff.
29. He would further contend that Ex.P.1 read with Ex.P.13 produced by the plaintiff are Xerox copies of documents and not originals. The same is admitted by D.W.1 in the cross-examination as already stated supra. He would further contend that the transaction between the lessee and the bank is fake as the owner is not a party in Ex.D.13. It is only a make believe and not real.
30. The provisions of Section 108(j) of the Transfer of Property Act, 1882, reads as under:
108. Rights and liabilities of lessor and lessee:-
(j) the lessee may transfer absolutely or by way of mortgage or sub- lease the whole or any part of his interest in the property, and any transferee of such interest or part may again transfer it. The lessee shall not, by reason only of such transfer, cease to be subject to any of the liabilities attaching to the lease;
Nothing in this clause shall be deemed to authorize a tenant having an untransferable right of occupancy, the farmer of an estate in respect of which default has been made in paying revenue, or the lessee of an estate under the management of a Court of Wards, to assign his interest as such tenant, farmer or lessee;
31. He further contended that, both the Courts below considering the oral and documentary evidence on record, answered issue No.3 in the negative holding that the defendant failed to prove that the suit is not maintainable without making IDBI /IIBI as parties to the suit and also held that the defendant failed to prove that the suit is not maintainable, in view of the Arbitration clause in the Lease Deed.
32. He would further contend that considering the substantial question of law framed in earlier RSA No.2344/2008, this Court while disposing of the appeal has answered substantial question Nos.1, 2, 3 and 5 in the negative holding that the trial Court and the First Appellate Court were not justified in constructing Clause 34 of Ex.P.1 – a Lease Deed, as an arbitration clause; that the 1st respondent-defendant No.3 having not filed an application accompanied by the Agreement providing for arbitration, the suit not could have been dismissed on the ground that the agreement between the parties provides for arbitration; further that in the absence of a privity of contract between the plaintiff and defendant No.3, the suit could not have been dismissed on the ground that defendant No.3 has invoked the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and merely because defendant No.3 has invoked the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the jurisdiction of the Civil Court will not be taken away.
33. The learned Counsel for the 1st respondent- plaintiff further contended that while answering the 3rd and 5th substantial questions of law, this Court has observed that the trial Court has held that as the matter was pending before the Debt Recovery Tribunal in respect of the possession taken over by the Bank from the 1st respondent, the Civil Court will have the jurisdiction and in arriving at the finding, the learned Judge has taken note of the provisions contained in Sections 34 and 35 of the Securitization Act and as far as the said finding is concerned, before going into Section 34 of the aforesaid Act, it is necessary to consider as to whether there was any privity of estate between the plaintiff -1st respondent and 2nd respondent-defendant No.1 as lessor and lessee respectively and between the plaintiff-1st respondent and the 3rd defendant-appellant herein. He would further contend that considering the provisions of Sections 105 and 108 of the Transfer of Property Act, this Court has held that the definition of ‘Lease’ under Section 105 of the said Act does not refer to transfer of any estate but it refers to transfer of right to enjoy the property and there is no privity of estate between the mortgagee and the rightful lessor.
34. He would further contend that the bank could not have filed an appeal. He further contended that in view of the provisions of Sections 105 and 108 of the Transfer of Property Act, it cannot be said that the lessee has the right or power to mortgage the entire property to the 3rd respondent-Bank i.e., a person cannot transfer more than what he possesses and therefore in respect of the relief that is sought by the plaintiff, it cannot be said that the appellant cannot seek remedy in Civil Court merely because the 3rd respondent-Bank has invoked the provisions of Securitization Act and more so in the absence of any privity of contract between the plaintiff and the 3rd defendant-Bank.
35. The learned Counsel would further contend that while answering Issue Nos.3, 4 and 5 in the second appeal, this Court remanded the matter to the trial Court to record its findings only on Issue Nos.1, 2 and 6. He would further contend that though against the said order, Special Leave Petition was filed before the Hon’ble Supreme Court in SLP (Civil) No.30106/2010, the same came to be dismissed on 16.11.2010. The appellant again cannot reopen the findings of fact recorded by this Court which was confirmed by the Hon’ble Supreme Court in the appeal stated supra. Admittedly, the lessee has not come to the Court. The learned Counsel would further contend that the appellant can urge only issue Nos.1 and 2 and it cannot go beyond remand order.
36. The learned Counsel would further contend that as per Ex.P.9 dated 10.6.2003 – termination notice has been issued under Section 106 of the Transfer of Property Act by the plaintiff to respondent No.1-tenant, but the tenant did not contest the suit. Section 106 of the Transfer of Property Act was amended with effect from 31.12.2002 which provides for issue of notice for termination of lease by 15 days expiring within the end of the month of tenancy. Ex.D.1 is the reply sent by the tenant which is not in dispute and therefore, the appellant cannot urge the same before this Court for the first time in the present appeal. Both the Courts below concurrently have recorded findings of fact against the appellant and as such, the same cannot be interfered by this Court exercising power under Section 100 of the Code of Civil Procedure.
37. In support of his contentions, learned Senior Counsel relied upon the following judgements:
i) R. Janakiraman –vs- State reported in (2006) 1 SCC 697 with regard to ‘make- believe’ and not real. (para-26 and 27) ii) State of Andhra Pradesh –vs- Star Bone Mill & Fertiliser Co., reported in (2013) 9 SCC 319 with regard to paramount title;
iii) Hope Plantations Ltd –vs- Taluk Land Board, Peermade reported in (1999) 5 SCC 590 (para-26) iv) Jamnadas –vs- J.J. Fareet reported in AIR 1980 sc 1605 (PARA-18) v) B. Arvind Kumar –vs Government of India reported in (2007)5 SCC 745 (para-11) Therefore, he sought to dismiss the Regular Second Appeal.
X Consideration 38. I have given my thoughtful consideration to the arguments advanced by the learned Counsel for the parties and perused the entire material on record carefully.
39. It is an undisputed fact that the plaintiff/1st respondent filed a suit for possession and damages against the present appellant-3rd defendant directing the 2nd defendant to hand over possession of the suit schedule second property to it and to pay a sum of Rs.25,000/- per month as damages from 30.6.2003 till the date of delivery of possession of the suit schedule property for illegal use and occupation of the suit second schedule property. The trial Court dismissed the suit on 9.11.2007 on merits as not maintainable against which an appeal was preferred by the plaintiff in R.A.No.26/2008 which was also dismissed on 9.9.2008. Challenging the said both judgments and decrees passed by the Courts below, plaintiff filed second appeal i.e., RSA No.2344/2008 before this Court and this Court by the order dated 30th July 2010 allowed the appeal and remanded the matter only with regard to issue Nos.1, 2 and 6. After remand, the trial Court considering the entire material on record decreed the suit and the appeal filed by the 3rd defendant before the Appellate Court came to be dismissed.
40. The material on record clearly depicts that there was an agreement between the plaintiff-firm and 1st defendant on 12.2.1997 to run the club in the suit second schedule property on a long term basis. After negotiation, the plaintiff and defendant No.1 entered into a Lease Agreement on 26.3.1997 and as per the terms of the Lease Deed, the defendant has taken on lease the suit second schedule property for a period of 99 years on the monthly rent of Rs.100/- in respect of plot No.1 with specific measurement. Accordingly, respondent No.2 paid an amount of Rs.9,900/- towards the rent for the entire lease period by way of cheque. As per the terms of the Lease Deed and the Agreement, the defendant has to run the club and maintain the suit schedule property in a good and tenantable condition and has to attend all the periodical repairs of the buildings from time to time. Defendant No.1 has also agreed that if there is any deviation or failure to perform the terms of the lease, it would enable the plaintiff- respondent No.1 to terminate the lease as mentioned in Clause-21 of the Lease Deed. The plaintiff-respondent No.1 has also undertook a stand that Clauses 26 and 29 of the Lease Deed reserve right to re-enter the suit schedule property for the non-performance of any of the terms of the Lease Deed and the Agreement.
41. It is further alleged that defendant No.1- respondent No.2 has forged the signature of its Managing Partner – C.R. Gopal Krishna on an indemnity bond and an undertaking alleged to have been executed by I.D.B.I. and hence, defendant No.1 has committed an offence of forgery. The 3rd defendant-
appellant herein has seized the suit schedule property on 1.8.2003 without notice to the plaintiff-respondent No.1, which has caused embarrassment and humiliation to the plaintiff.
42. Exs.P.1 and P.13, which are Sale Deed and Lease Agreement dated 12.2.1997 and 26.3.1997 respectively are not at all disputed by the defendants. In order to ascertain the case of the parties, nature of the lease and terms and conditions of the lease, both these documents have to be read conjointly. As per Ex.P.13 – Lease and Development Agreement, it is agreed by the lessors that the lease Deed is for 99 years on a monthly rent of Rs.100/- in respect of plot No.1 with specific measurement. It is also agreed between the parties that after the Lease Deed is executed, the lessee shall be at liberty to assign the lease hold rights of the said plots comprised in the lease only after obtaining prior sanction in writing of the lessors to respectable and responsible person.
43. On perusal of the terms of the Ex.P.13 the Lease and Development Agreement dated 12.2.1997 and Ex.P.1 – Lease Deed dated 26.3.1997, one of the terms is that the lessors have authorized the lessees to mortgage the said plots along with club building to financial institutions, banks, non-banking financial companies to generate finance for the development of the said plots. “Section 108 of the Transfer of Property Act permits for creating a mortgage by way of security only in so far as the interest of the lessee in the leased property is concerned, but not beyond that. What was permitted under the Lease Deed was only the mortgage of the lease hold rights, but not mortgaging of the property of the lessor.”
44. D.W.1 in his cross-examination at para-27 has admitted the terms and conditions of the Lease Deed and the Agreement entered into between the plaintiff-firm and defendant No.1. He has also admitted that defendant No.1 had agreed to perform various obligations under the Lease Deed and Agreement. He has also further admitted in the cross-examination that if there is any violation of the terms and conditions of the Lease Deed and the Lease and Development Agreement, the plaintiff is authorized to terminate the lease; there is no privity of contract between the plaintiff firm and defendant No.3-Bank; when the possession of the suit schedule property was taken on 1.8.2003 under the Securitization Act, defendant No.3 was not running the club since then; that because of non-performance of the obligation under the Lease and Development Agreement and the Lease Deed by Defendant No.1, plaintiff has issued the termination notice on 10.6.2003 as per Ex.P.9.
45. D.W.2, who is examined on behalf of defendant No.3 has also admitted the terms and conditions of the Lease Deed and the Agreement between the plaintiff-firm and defendant No.1. He has also admitted that the income tax authorities had initiated recovery proceedings against defendant No.1 and at present, the club is not being run. D.W.2 also has admitted that loan granted by defendant No.3-bank is on the basis of the mortgage of deposit of Title Deeds, but defendant No.3-bank is not having the custody of the original Title Deeds. On careful scrutiny of the terms and conditions of the Agreement and Lease Deed, Exs.P.1 and 13, what was performed was only a mortgage of the lease hold rights, but not mortgaging of the property of the lessor.
46. As per Exs.P.3 and 4, defendant No.2 has initiated the recovery of the income tax dues against defendant No.1. As per clause 25 of Ex.P.13 all the Government and Municipal Taxes, Assessments, etc., will be levied in respect of the suit schedule property and the buildings therein shall be borne by the lessees and on failure to pay the same, the lessor is entitled to terminate the lease. Defendant No.1 having failed to pay the necessary income tax to the Government, defendant No.2 had initiated recovery proceedings, which is a clear cut violation of Clause 20 of Ex.P.1. Therefore, the termination of the lease by the plaintiff- firm is proper. Infact, D.W.1 in his cross-examination has admitted that defendant No.1 is not performing its obligation under the Lease Deed.
47. Admittedly defendant Nos.2 and 3 are not parties either to the Lease Deed or the Agreement (Exs.P.1 and 13). The plaintiff is the lessor and defendant No.1 is the lessee of the suit schedule property. The entire suit is based on the Lease Deed and Agreement entered into between the plaintiff and defendant No.1. As per the provisions of Section 105 of the Transfer of Property Act, a lease is a transfer of right to enjoy such property which is the subject matter of the lease. Admittedly, in the present case, there is no privity of contract between the plaintiff and defendant No.3 as held by this Court in RSA No.2344/2008 and while remanding the matter, this Court in the said appeal has held that a mere transfer of possession by a mortgager to the mortgagee cannot create privity of estate between the mortgagee and the original owner. The rights claimed by defendant No.3-Bank i.e., the present appellant is whatever that was being enjoyed by defendant No.1 as a lessee and subject to whatever obligations, defendant No.1 had as a lessee. Admittedly, defendant No.1 was not a owner and could not have given property as a security.
48. Both oral and documentary evidence on record clearly depict that the 1st defendant has violated the terms and conditions of the Agreement and Lease Deed. Merely because the suit schedule property has been mortgaged by defendant No.1 in favour of defendant No.3, defendant No.3 cannot resist the suit for ejectment against the lessee –defendant No.1. A mortgagee would not be regarded as assignee of lessee’s entire interest and the remedy of the mortgagee is to enforce his mortgage and not to resist the suit for ejectment against defendant No.1. Admittedly in the present case, defendant No.1 has violated the terms and conditions of the Lease Deed and the Agreement. It is admitted by the defendant No.3 that it has not verified the original documents which have been given to the IDBI Bank by defendant No.1 which has been admitted by D.W.1 in his cross-examination that the original Deeds of the property of which the loan has been granted are not available with the 3rd respondent-Bank. Admittedly the lease between the plaintiff firm and defendant No.1 firm is for 99 years at the rate of Rs.100/- per annum and the plaintiff firm has legally terminated the lease as per the provisions of the Transfer of Property Act. Since the suit is for ejectment of the tenant, notice of termination has to be issued as per Section 106 of the Transfer of Property Act and the material documents on record clearly depict that the plaintiff has complied with all the statutory requirements by issuing notice for termination of tenancy. Therefore, the contention of the learned Counsel for the appellant –defendant No.3 that the termination of notice dated 10.6.2003 issued under Section 107 of the Transfer of Property Act is bad in law, since the manufacturing process was going on in the lease hold property, cannot be accepted.
49. The trial Court has recorded a finding that it is also not in dispute that defendant Nos.1 and 2 have not contested the suit and hence, question of issuing statutory notice under the provisions of Section 80 of the Code of Civil Procedure against defendant No.2 would not arise at all, as held by the Hon’ble Supreme Court in the case of State Of A.P. & Ors vs M/S. Pioneer Builders, A.P reported in AIR 2007 SC 113 wherein it has been held that if no objection is taken, the requirement of statutory notice is deemed to be waived and the same has been discussed and answered by this Court in RSA No.2344/2008 and this Court in the said RSA has held that the suit against defendant No.2 is maintainable, and the said finding has reached finality.
50. After the matter was remanded by this Court stated supra, the trial Court considering the entire material on record has recorded a finding that the plaintiff is entitled for possession of the suit schedule second property from the defendants and the plaintiff has proved that defendant No.1 has to pay a sum of Rs.25,000/- per month as damages from 30.6.2003 till the date of delivery of possession for illegal use and occupation of the suit schedule property. It was further held that the plaintiff is entitled for a decree as prayed for. Accordingly, the trial Court by the judgment and decree dated 24th March, 2011 decreed the suit with costs.
51. On appeal filed by the 3rd defendant-present appellant, the Lower Appellate Court after framing the points for determination as contemplated under the provisions of Order 41 Rule 31 Code of Civil Procedure has recorded a finding that the present appellant has not made out any sufficient ground to allow the application filed under Order 41 Rule 27 of the Code of Civil Procedure and considering the evidence of P.W1 and D.W.1 and material documents, has come to the conclusion that the plaintiff has made out a case. It is further held that on the basis of the Lease Deed Ex.P.1 and Lease and Development Agreement – Ex.P.13 executed between the plaintiff and defendant No.1, defendant No.1 – Company can obtain loan only on the security of the lease hold rights in respect of the suit schedule second property and no right has been conferred under the agreements Ex.P.1 and Ex.P.13, on the security of the suit schedule ‘B’ land belonging to the plaintiff-Company. It is further held that though the 3rd defendant Company obtained possession of the suit ‘B’ schedule property under the provisions of the Securitization Act for recovery of loan, the 3rd defendant Company at the time of sanction of the loan to the 1st defendant Company, has not particularly obtained any consent agreement from the plaintiff Company with regard to the ‘B’ schedule property is concerned.
52. The Lower Appellate Court further held that the terms and conditions mentioned in Ex.P.13 clearly indicates that the defendant has no right to confer to the 3rd defendant – bank under the law for obtaining suit schedule property belonging to the plaintiff’s company for recovery of loan. The right to recover the loan of Rs.300 lakhs from the 1st defendant granted by the 3rd defendant Bank on the security of the building proposed to be constructed on the suit schedule second property and other immovable properties for providing other services is always accrued, but in the present case, the 1st defendant having constructed the building on the land belonging to the plaintiff-Company on the basis of the lease agreement for a period of 99 years, the 3rd defendant Bank granted loan to defendant No.1 only on the basis of the lease agreement as per Exs.P.1 and 13, do not confer right to defendant No.1 to mortgage the loan along with ‘B’ schedule land is concerned and thereby the 1st defendant has violated the terms and conditions of the Lease and Development Agreement and Lease Deed. Therefore it was held that it is not possible under law for the 3rd defendant – bank to refrain the plaintiff-company from exercising its right for recovery of possession of the suit schedule ‘B’ property being the owner of the same.
53. The Lower Appellate Court has further held that as per the terms and conditions of the agreement Ex.P.13, defendant No.1 has been assigned only with the responsibility of making payment of any fees, charges or any other responsibility only by itself. Though the 1st defendant appeared before the trial Court, has not denied the averments made by the plaintiff in the plaint and also has not proved that it has paid the tax to the 2nd defendant-Company. The Appellate Court further held that the application filed under Order 41 Rule 27 of the Code of Civil Procedure clearly depicts that while adducing the evidence and proof in the trial Court, the 3rd defendant will not be able to produce the document which presently has been produced along with the interim application or will not be able to give valid evidence by making use of the said document at the time of examination of the witness and that he had no other legal hurdles to such non submission/presentation of the documents and admittedly, the said additional documents have been obtained only after completion of trial which clearly indicates that it is only after thought, the application is filed before the Appellate Court. Therefore, the application came to be rejected.
54. The Lower Appellate Court further has recorded a finding that defendant No.2 being an Income Tax Department of Government Organisation, notice issued for payment of tax due on the basis of presumption of law i.e., under Section 114(G) of the Evidence Act in view of the presumption that the services rendered by the Government Department will be in accordance with law, until it is proved that the said services are not in accordance with law. Defendant No.2 having issued notice to defendant No.1-Company for payment of tax due, clearly indicates that there is violation of terms by defendant No.1 as agreed at Exs.P.1 and 13 and therefore, there is violation of the Lease and Development Agreement at Ex.P.13 between the plaintiff and defendant No.1. Therefore, the Appellate Court was of the considered opinion that the trial Court considering both oral and documentary evidence has rightly decreed the suit. Accordingly, the Appellate Court by the impugned judgment and decree dated 2nd January, 2012 while rejecting the application filed under Section 41 Rule 27 of the Code of Civil Procedure, has dismissed the appeal by confirming the judgment and decree of the trial Court.
55. The Hon’ble Supreme Court in the case of R.Janakiraman –vs- State represented by Inspector of Police, CBI, SPE, Madras reported in (2006) 1 SCC 697 while considering the provisions of Section 58 of the Transfer of Property Act, 1882 with regard to equitable mortgage at paragraphs-26 and 27 has held as under:
“26 (iii) The creation of an equitable mortgage by depositing documents other than title deeds is not valid or permissible. We extract below the contents of Ext. P-69:
“On this day, 24-5-1986, I have deposited with you on 23-5-1986, the undermentioned title deeds belonging to my property namely (1) one plot with terraced house site bearing (S. No. 8/3) Plot No. 10, in Swarnapuri Extension, Salem-636 004, with intent by it in respect of the amount due to you under the pronote executed by me for Rs 2,50,000 with interest at 24% per annum thereon.
Equitable mortgage in favour of M/s Satramdas Mahesh Kumar and M/s Pahlaprai Sons, 43-D, First Agaharam, Salem.
(R. Janakiraman) Signature Details of title deeds handed over for the purpose of equitable mortgage abovesaid:
Copy of the sale deed in my favour dated….
Copy of the loan sanction from the Railway Board.
Copy of the sale deed given because original is with the Railways.
Dated: 24-5-1986 at Salem (R. Janakiraman) Signature sd/: Narayanaswamy”
27. Equitable mortgage is created by depositing the original title deeds. But in this case, the original title deeds are not deposited. Not even the two documents referred in Ext. P-69 are deposited. What are deposited (Exts. P-82 and P-83) were not title deeds but only a certificate issued by the Swarnapuri Cooperative House Building Society Ltd., dated 1-2-1984 certifying that the appellant is owner of Plot No. 10, Swarnapuri Extension (Ext. P-82) and two receipts issued by Tamil Nadu Electricity Board showing that the appellant had paid some electricity charges (Ext. P-83). PW 11 and PW 15 being experienced moneylenders, if really were lending Rs 2,50,000, would have certainly insisted upon the original title deeds or at least the documents mentioned in Ext. P-69 being deposited. This shows that the equitable mortgage was also a “make- believe” and not real.
Admittedly, Ex.D.13 Lease and Development Agreement does not creat any right on defendant No.1 to mortgage the suit schedule property to obtain loans about 300 Crores which clearly indicates that there is collusion between defendant No.1 and defendant No.3-Bank and on that ground alone, the appeal filed by the appellant is liable to be dismissed.
56. The Hon’ble Supreme Court while considering the provisions of Sections 54, 55(1)(a) to 55(1)(c) and 55(2) and Section 90 of the Evidence Act, 1872 in the case of State of Andhra Pradesh and Others –vs- Star Bone Mill and Fertiliser Company reported in (2013)9 SCC 319 at paragraphs-14 and 15 has held as under:
“ 14. Admittedly, the High Court erred in holding that the sale deed dated 11- 11-1959, must be considered in the light of the provisions of Section 90 of the Evidence Act, instead of the period mentioned therein, thereby treating the appeal as a continuation of the suit. Therefore, the period of 30 years mentioned therein, has been calculated from 1959, till the date of the decision of the appeal i.e. 22-3-2004 [ City Civil Court Appeal No. 72 of 1989, decided on 22-3-2004 (AP)] . This view itself is impermissible and perverse, and cannot be accepted. The courts below have not given any reason, whatsoever, for the said lease deed to be treated as having been executed on 21-5-1943, under Section 90 of the Evidence Act and, thus, for believing that the land belonging to the Forest Department, which had in turn, given it to M/s A. Allauddin & Sons on lease.
15. Section 90 of the Evidence Act is based on the legal maxims: nemo dat qui non habet (no one gives what he has not got); and nemo plus juris tribuit quam ipse habet (no one can bestow or grant a greater right, or a better title than he has himself). This section does away with the strict rules, as regards the requirement of proof, which are enforced in the case of private documents, by giving rise to a presumption of genuineness, in respect of certain documents that have reached a certain age. The period is to be reckoned backward from the date of the offering of the document, and not any subsequent date i.e. the date of decision of suit or appeal. Thus, the said section deals with the admissibility of ancient documents, dispensing with proof as would be required, in the usual course of events in a usual manner.
57. In the case of Hope Plantations Ltd. –vs- Taluk Land Board, Peermade and Another reported in (1999)5 SCC 590 the Hon’ble Supreme while considering the provisions of Section 11 of the Code of Civil Procedure at paragraph-26 has held as under:
“ 26. It is settled law that the principles of estoppel and res judicata are based on public policy and justice. Doctrine of res judicata is often treated as a branch of the law of estoppel though these two doctrines differ in some essential particulars. Rule of res judicata prevents the parties to a judicial determination from litigating the same question over again even though the determination may even be demonstratedly wrong. When the proceedings have attained finality, parties are bound by the judgment and are estopped from questioning it. They cannot litigate again on the same cause of action nor can they litigate any issue which was necessary for decision in the earlier litigation. These two aspects are “cause of action estoppel” and “issue estoppel”. These two terms are of common law origin. Again, once an issue has been finally determined, parties cannot subsequently in the same suit advance arguments or adduce further evidence directed to showing that the issue was wrongly determined. Their only remedy is to approach the higher forum if available. The determination of the issue between the parties gives rise to, as noted above, an issue estoppel. It operates in any subsequent proceedings in the same suit in which the issue had been determined. It also operates in subsequent suits between the same parties in which the same issue arises. Section 11 of the Code of Civil Procedure contains provisions of res judicata but these are not exhaustive of the general doctrine of res judicata. Legal principles of estoppel and res judicata are equally applicable in proceedings before administrative authorities as they are based on public policy and justice.
58. The Hon’ble Supreme Court in the case of Jamnadas –vs- J.J. Farrei reported in the AIR 1980 SC 1605 while considering the provisions of Section 28 of the Bombay Rents, Hotel and Lodging House Rates Control Act, at paragraph-18 has held as under:
“18. The decisions referred to above will show that that the plaintiff/ landlord of the land is entitled to claim the relief for possession of his land and in effect the decree for possession of the land would mean that the land should be delivered to him without the structures. Apart from the relief under the lease deed, the plaintiff is entitled to succeed as he has established that there was default of payment under the provisions of the Bombay Rent Act. The jurisdiction of the Small Cause Court to grant an effective decree for possession of the land cannot be denied. Equally untenable is the contention of the respondent that as the plaintiff has sought two reliefs one under the Bombay Rent Act and another under the Contract, the entire plaint must be rejected. As we have already observed so far as the relief of possession of the premises i.e. the land, is concerned, it is exclusively within the jurisdiction of the Small Cause Court. In asking for the relief for possession of the land, the plaintiff is entitled to incidental and consequential reliefs such as for taking possession of the plot without the structures. The prayer in the plaint asking for possession of the land including the structures would not take the suit out of the competence of the Small Cause Court. In this view it is not necessary for us to go into the question as to whether the terms in the contract regarding the forfeiture can be enforced by the Small Cause Court. It is sufficient for the purpose of this suit to hold that the plaintiff is entitled to seek for possession of the land which is the premises in the suit, and in getting possession of the land, he is entitled to ask for possession of the land without any superstructures. In this connection reference may be made to the nature of the relief which the plaintiff is entitled to. In Ramchandra Raghunath Shirgaonkar v. Vishnu Balaji Hindalekar [AIR 1920 Bom 87 : 22 Bom LR 948 : 58 IC 323] it was held that the ordinary rule of law is that the tenant must give up vacant possession of the land demised at the end of the term and that if he builds on the land of the tenancy he builds at his own risk. At the end of the term he can take away his building but if he leaves it there, it becomes the landlord's property. The court further held that the tenant who had been in possession of land for a large number of years and built a costly and substantial house on the land of the tenancy with the knowledge of the landlord, is entitled to some compensation.
59. The Hon’ble Supreme Court in the case of B. Arvind Kumar –vs- Government of India reported in (2007)5 SCC 745 while considering the provisions of Sections 106, 107 and 111 of the Transfer of Property Act at paragraph-11 has held as under:
“11. To decide the duration of the lease, the deed has to be read as a whole. The deed dated 30-9-1921 does not specify any duration, but permits the lessee to hold the land forever subject to the right of the lessor to resume the land by giving one month's notice. There is no grant in perpetuity. The right of the lessor to resume the land by giving a month's notice, is unconditional at the absolute will and discretion of the lessor, whenever he desires. These terms indicate that though the instrument was termed as a lease, it only granted permissive occupation terminable at the will of the owner, and therefore, at best a tenancy at will. The absolute discretion to resume the land at any time without assigning any reason, and absence of any express grant in perpetuity and absence of any consideration, militates against the instrument being construed as a lease in perpetuity. The learned counsel for the appellant submitted that courts have taken the view that existence of a mere provision for forfeiture for non- payment of rent or other specified breach, in a deed granting permanent lease, will not make the lease non- permanent. Such line of decisions, may not assist the appellant as a provision for determination of the lease for a specified breach, is in no way comparable to reservation of an absolute right to resume at will without assigning any reason, in a lease without consideration. We, therefore, affirm the finding that Ext. P-1 is not a lease in perpetuity. We, however, desist from examining the further question whether the lease itself was invalid for want of consideration, as such a contention was not raised in the written statement nor urged before the trial court or the High Court.
60. The learned Counsel for the appellant also relied upon the dictum of the Hon’ble Supreme Court in the case of Ram Sarup Gupta –vs- Bishun Narain Inter College reported in AIR 1987 SC 1242 wherein while relying upon the provisions of Section 60(b) of the Easements Act has held that the licence being irrevocable, the licenser or the transferee from him could not revoke it or evict school. Admittedly, in the present case, the plaintiff has executed only the lease hold rights to defendant No.1 for a period of 99 years. Since the 1st defendant has violated the terms and conditions of the agreement, the plaintiff - firm has legally terminated the lease as per the provisions of the Transfer of Property Act and mortgaged the property belonging to the plaintiff without his consent and when he has no right in respect of suit ‘B’ schedule property to mortgage in favour of the 3rd defendant-Bank, the plaintiff can very well maintain the suit for recovery of possession of the suit schedule property. The judgments relied upon by the learned Counsel for the appellant has no application to the facts and circumstances of the present case.
61. The Hon’ble Supreme Court in the case of Jagadish Singh –vs- Heeralal and Others reported in 2013 AIR SCW 6378 while considering the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act at paragraphs-22 and 23 has held that the statutory interest is being created in favour of the secured creditor on the secured assets and when the secured creditor proposes to proceed against the secured assets, sub-section (4) of Section 13 envisages various measures to secure the borrower’s debt. One of the measures provided by the statute is to take possession of secured assets of the borrowers, including the right to transfer by way of lease, assignment or realizing the secured assets. But in the present case, the plaintiff executed the Lease Deed and the Agreement for a period of 99 years in favour of the 1st defendant and the 1st defendant cannot take the loan from the 3rd defendant- Bank on mortgaging the suit schedule ‘B’ property for obtaining the loan. The 3rd defendant-Bank without ascertaining whether the 1st defendant, who is a lessee under the plaintiff has accrued the right to pledge the property, has granted the loan. Therefore, the judgment relied upon by the learned Counsel has no application to the facts and circumstances of the present case.
62. It is also relevant to state at this stage that while reading the provisions of Section 108 of the Transfer of Property Act, it clearly depicts that the lessee may transfer absolutely or by way of mortgage or sub-lease the whole or any part of his interest in the property, and any transferee of such interest or part may again transfer it. The lessee shall not, by reason only of such transfer, cease to be subject to any of the liabilities attaching to the lease. Therefore the judgments relied upon by the Senior Counsel for the appellant has no application to the facts and circumstances of the present case.
63. In the judgment relied upon by the learned Counsel for the appellant in the case of Santosh Hazari –vs- Purushottam Tiwari (deceased) by L.Rs., reported in (2001)3 SCC 179 with regard to substantial question of law, the Hon’ble Supreme Court has held that the ‘Substantial’ in context means having substance, essential, real, of sound worth, important or considerable – such question need not, however, be one ‘of general importance’. Admittedly, in the present case, both the Courts have concurrently held that the 1st defendant being the lessee under the plaintiff has no right to execute the mortgage deed based on Exs.P.1 and 13 Agreement and Lease Agreement and no right is confirmed on the 1st defendant to mortgage the suit schedule ‘B’ property in favour of the 3rd defendant- Bank. Therefore, the judgment relied upon by the learned Counsel has no application to the facts and circumstances of the present case.
64. Learned Counsel further relied upon the judgment of the Hon’ble Supreme Court in the case of Santakumari and Others –s- Lakshmi Amma Janaki Amma (D), by L.Rs., and others reported in AIR 2000 SC 3009 wherein it has been held that the sale or mortgage of conditional sale, vendor heavily indebted – executing sale to get back property sold in execution – purchaser on the same day executing agreement to sell the property to close relative of vendor after 10 years – both documents executed immediately one after other and were also registered simultaneously one after other – shows that the intention was to reconvey property to vendor – transaction was mortgage by conditional sale. The said judgment has no application to the facts and circumstances of the present case. Admittedly in the present case, there is no sale or mortgage by the plaintiff in favour of defendant No.1. What was executed was only Exs.P.1 and 13 Agreement and Lease Agreement for a period of 99 years to run the club and to maintain the schedule property in good and tenable conditions and what was permitted was only the mortgage of the lease hold rights and the said Exs.P.1 and 13 will not confer any title or do not authorize the 1st defendant to execute the mortgage in favour of the 3rd defendant. Therefore, the said judgment has no application to the facts and circumstances of the present case.
65. The another judgment relied upon by the learned Counsel for the appellant with regard to precedent and law declared, has absolutely no application to the facts and circumstances of the present case.
66. The another judgment relied upon by the learned Counsel for the appellant in the case of United Bank of India vs. Satyawati Tondon and others reported in (2010)8 SCC 110 that remedies are available under the provisions of Sections 17 and 18 of the SARFAESI Act is not applicable to the present case. Admittedly, it is not the case of the appellant/ 3rd defendant - Bank that the plaintiff has borrowed the loan by mortgaging the suit ‘B’ schedule property or by depositing title deeds. The present case, entire by revolves upon only Ex.P.1- Lease Deed and Ex.P.13 -
Lease and Development Agreement between the plaintiff and 1st defendant. The 1st defendant has misused the Lease Deed and approached the 3rd defendant - Bank for loan. The 3rd defendant – Bank, without ascertaining the title of the 1st defendant in respect of the property in question, only on the basis of the Lease Deed and Lease and Development Agreement as per Exs.P.1 and P.13, proceeded to sanction loan based on lease hold rights which is impermissible, in view of the provisions of Section 108(g) of the Transfer of Property Act. Therefore, the said judgment has no application to the facts and circumstances of the present case.
67. The another judgment relied upon by the learned counsel for the appellant in the case of Rajkumar Shivhare vs. Assistant Director, Directorate of Enforcement and Another reported in (2010)4 SCC 772 has no application to the facts and circumstances of the present case. Admittedly, RSA No.2344/2008 filed by the plaintiff came to be allowed by the judgment and decree dated 30.07.2010 and the matter was remanded to the Trial Court only to record its findings on Issue Nos.1,2 & 6. Against the said judgment and decree, the 3rd defendant-appellant - Bank filed SLP (Civil) No.30106/2010 before the Hon’ble Supreme Court, which came to be dismissed on 16.11.2010. In the said judgment, the question of law (ground) No.1 with regard to maintainability of the suit and ground No.3 with regard to law declared by the Hon’ble Supreme Court in the case of Mardia Chemicals Limited and others vs. Union of India and others reported in (2004)4 SCC 311 and ground No.8 where the suit for possession by the 1st defendant against the 1st respondent-lessor, respondent No.2-lessee as well as Income Tax Department and the petitioner-Bank is infact a suit in collusion between respondent Nos.1 and 2, lessor and lessee have been considered. The appellant cannot reopen the findings of fact confirmed by this Court in RSA No.2344/2008 as well as by the Hon’ble Supreme Court in SLP (Civil) No.30106/2010 and admittedly, lessee is not before the Court, throughout.
68. For the reasons stated above, the question of law framed by this Court has to be answered in the affirmative holding that the Courts below are justified in decreeing the suit considering the conditions stipulated in clause-19 of Ex.P.13 in the peculiar facts and circumstances of the present case.
69. By the terms and conditions of Ex.P.1-Lease Deed and Ex.P.13 Lease and Development Agreement, it clearly depict that the 1st defendant has no right to execute the mortgage deed in favour of the third respondent-Bank, in view of the provisions of Section 108(g) of the Transfer of Property Act. Therefore, no substantial question of law is involved in the present Regular Second Appeal to interfere with the concurrent findings of fact recorded by the Courts below, in exercise of power under Section 100 of the Code of Civil Procedure.
Accordingly, the Regular Second Appeal is dismissed as devoid of merits.
Sd/- Judge Nsu-Pages 1-18, 39-80 kcm-Pages 19-38, 81 to end.