Bombay High Court
Suresh Lachhmandas Raheja Ig vs Ferrani Hotels Pvt. Ltd. And ... on 26 November, 2010
Bench: Dr. D.Y. Chandrachud
PNP 1 APP270-26.11.sxw
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGNAL CIVIL JURISDICTION
APPLICATION UNDER RULE 133 OF THE BOMBAY
HIGH COURT (ORIGINAL SIDE) RULES
IN
APPEAL NO.270 OF 2007
IN
NOTICE OF MOTION NO.3899 OF 2006
IN
SUIT NO.3190 OF 2006
Suresh Lachhmandas Raheja ig ..Applicant.
(Orig. Plaintiff/ Orig.
Respondent No.1.)
versus
Ferrani Hotels Pvt. Ltd. and others ...Respondents.
(Orig. Defendants /Orig.
Appellants)
......
Mr. R.A. Dada, Senior Advocate with Mr. Zubin Behramkamdin, Mr.
Vivek Vashi. Ms. Anusha Jagdeesh i/b Bharucha & Partners for the
Applicant.
Mr. I.M. Chagla, Senior Advocate with Mr. H. Jagtiani, Mr. Naval
Agarwal, Mr. S. Bhole and Mr. B. Zaveri i/b Kanga & Co. for
Respondent No.1 / Original Defendant.
Mr. Chetan kapadia with Mr. Mayur Khandeparkar i/b Mahimtura &
Co. for Respondent No.2. / Original Defendant No.1.
......
CORAM : DR.D.Y.CHANDRACHUD, J.
26 November 2010.
ORAL JUDGMENT :
1. These Applications come up before the Court under Rule
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133 of the Bombay High Court (Original Side) Rules. Rule 133 reads
thus :
"R.133 Adjournment of matter to Judge - Any party desiring to
have any question decided by the Prothonotary and Senior
Master, whether disputed or not, adjourned to a Judge, may
apply to the Prothonotary and Senior Master for such
adjournment within four days from the passing of the order
complained of. If the application is within time, the
Prothonotary and Senior Master shall adjourn the matter and
put it on the board of the Judge in Chambers. If the party
makes the application after the said period of four days, the
Prothonotary and Senior Master may adjourn the matter to the
Judge in Chambers if he is satisfied that the party had
sufficient cause for not making the application in time."
2. By an order dated 17 January 2008 a Division Bench of this
Court in Appeal 270 of 2007 directed the Plaintiff to furnish security
to the extent of Rs.200 Crores to the satisfaction of the Prothonotary
and Senior Master. Initially by an order dated 29 January 2008 the
Prothonotary merely accepted a security bond and undertaking of the
First Respondent. This order was set aside by a Learned Single
Judge on 1 July 2010. While construing the order of the Division
Bench, the Learned Single Judge directed the Plaintiff to furnish
security consisting of tangible assets of the value of Rs.200 Crores to
the satisfaction of the Prothonotary and Senior Master. The order of
the Learned Single Judge was confirmed in appeal by the Division
Bench on 29 July 2010. A Special Leave Petition against the order of
the Division Bench directing the furnishing of security was dismissed
on 4 October 2010. The Plaintiff moved an interim application before
the Supreme Court seeking an extension of time by a period of
twelve weeks to furnish security. The Supreme Court by an order
dated 16 November 2010 extended time by a period of two weeks.
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3. Before the Prothonotary and Senior Master the Plaintiff relied
on valuation reports of two valuers - (i) A.V. Shetty & Associates and
(ii) Perfect Valuations and Consultants. The Plaintiff offered by way
of security a total of thirteen flats which are owned by the two sons
of the Plaintiff, Mr. Rahul Raheja and Mr. Ashish Raheja. One set of
seven flats has been converted into a single flat while another set of
six flats has similarly been converted into a single unit. The
valuation which was placed on the flats by A.V. Shetty & Associates
was Rs.90.07 Crores and Rs.143.78 Crores. The second valuer, Perfect
Valuations and Consultants valued the flats at Rs.92.65 Crores and Rs.
147.90 Crores. On the other hand, the Third Defendant relied on a
valuation report of Rane Engineers and Surveyors. The valuer
adopted a valuation of Rs.16.92 Crores and Rs.25.57 Crores. The
Prothonotary and Senior Master accepted the contention of the First
and Third Defendants that the valuation reports on which reliance
was placed by the Plaintiff could not be accepted. While accepting
the valuation report placed on record by the First and Third
Defendants, the Prothonotary and Senior Master accepted a valuation
of the flats offered as security at Rs.44.27 Crores. In the
circumstances, the Plaintiff was directed to furnish additional security
so as to make good the deficiency in order to fulfill the direction
that the total security offered must be to the extent of Rs.200 Crores.
4. The Plaintiff as well as the Third Defendant moved two
applications before the Prothonotary and Senior Master under Rule
133 for placing the matter before the Court. Accordingly, these
proceedings come up under Rule 133.
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5. The learned Senior Counsel appearing for the Third Defendant
and the learned counsel for the First Defendant have at the outset
submitted that the offer which was placed before the Prothonotary on
behalf of the Plaintiff of thirteen flats belonging to the two sons of
the Plaintiff must be rejected for the reason that the Plaintiff was
directed to furnish security. In this connection reliance was placed
on the provisions of Chapter 27 of the Rules and particularly on Rule
441. Hence, it was urged that security in the form of flats belonging
to the sons of the Plaintiff cannot be accepted. This submission
which has been urged on behalf of the First and Third Defendants
cannot be accepted. The object of directing a party to furnish
security is that a party for whose benefit the security is furnished
must be in a position to realize the security in the event that the
conditions for the invocation of the security are made out in an
adjudication of the Court. This as a matter of fact was clearly the
intention when the Learned Single Judge by his order dated 1 July
2010 directed that security should be furnished. The Learned Single
Judge observed thus :
"The intention of passing such order directing the Prothonotary
to accept security to her satisfaction is that the Prothonotary
and Senior Master must feel satisfied that the interest of the
party which is sought to be protected by the order of this court
is sufficiently secured."
6. When an appeal was carried before the Division Bench, the
order of the Court dated 29 July 2010 also clarified that the object of
directing the Plaintiff to furnish security was "to secure the interest
of the Defendants against any loss that the Defendants may suffer
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because of the operation of the ad-interim order" and that "the
Plaintiff had to put forth some tangible property against which the
Defendants can proceed, in the event he becomes entitled to recover
the amount of loss from the Plaintiffs" Rule 441 on which reliance
has been placed comes into operation if the security required to be
furnished is of a bond to be given by a surety or sureties. In that
case particulars of the name and address of each surety, and a
description of the property which is offered for justification has to be
filed with the Prothonotary. In other words, Rule 441 postulates an
order of the Court requiring that security should be furnished of a
bond to be given by a surety or sureties. The order of the Court
does not fall within the purview of Rule 441. The object of directing
the Plaintiff to furnish security was to protect the interests of the
Defendant in the event that as a result of the order of injunction, a
loss was suffered by the Defendants in respect of which restitution is
ordered by the Court at a future date. It would be rather technical
for the Court to hold that the security must be furnished by the
Plaintiff in person. At the same time if security is sought to be
offered on behalf of the Plaintiff by a third party, albeit the sons of
the Plaintiff in the present case, the Prothonotary must be objectively
satisfied that the security is capable of being realized in the event it
is necessary to do so and that it is not encumbered.
7. In the present case, the Plaintiff sought to tender by way of
security, two groups of thirteen flats, as noted earlier, belonging to his
sons in a building known as Rajeja Legend at Worli. The agreements
for sale under which the two sons of the Plaintiff have obtained title
to the flats contain two conditions to which a reference would be in
PNP 6 APP270-26.11.sxw
order. Clause 33(l) imposes a condition to the effect that the written
consent of the owner must be obtained before the flat is transferred
or assigned. The owner in the agreement is described as a company
by the name of Raheja Universal Private Limited. Similarly, Clause 39
confers preemptive rights on the owner. Clauses 33(l) and 39 read
as follows :
"(l) TO transfer or assign the Flat Purchaser's interest in or
benefit of this Agreement until all the dues payable by the Flat
Purchaser to the Owner under this Agreement are fully paid up
and even after such payment, only if the Flat Purchaser has not
been guilty of breach or non-observance of any of the terms
and conditions of this Agreement and until the Flat Purchaser
has obtained the Owner consent in writing to the same."
"39. The Flat Purchaser agrees that as and when they decide
to sell their Said Premises (or shares in the event co-operative
society/ company / condominium is formed) then in that event,
the (Flat Purchasers shall offer the same to the Owners who
shall have the right of first refusal to purchase Said Premises at
the consideration mutually agreed between them at that point
of time."
8. Before these flats can be accepted as security in terms of the
order of the Court, it will be necessary that the owner files an
undertaking to the satisfaction of the Prothonotary and Senior Master
waiving the conditions which are stipulated in Clauses 33(l) and 39.
The Court is informed that the present owner is a public limited
company by the name of Raheja Universal Limited. The undertaking
shall be filed by an authorized officer of the company which shall be
supported by a resolution of the Board of directors sanctioning the
filing of the undertaking in Court.
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9. That leaves the Court with the question of valuation. The
Plaintiff has relied on two sets of valuation reports. Both the
valuation reports proceed to make a valuation on the basis of what is
described as the saleable area. The built up area of the two sets of
flats is respectively 6703 sq. ft. and 10,566 sq. ft. The built up area of
these two sets is enhanced for the purposes of valuation to 12,868 sq.
ft and 20,541 sq. ft. by including certain ancillary areas such as the
lobby, servants' room, servants' toilet, common passage, common AHU,
AHUs, niches and walls. The total plinth area is thereupon deduced
to which is added a pro-rata interest in the common areas. The
report of A. V. Shetty & Associates states that the fair market value of
the property has been assessed based on local enquiries using the
market value method and taking into account other factors including
location, accessibility, distance and development such as infrastructure.
The valuation report does not rely upon even a single sale instance.
The second report of Perfect Valuations and Consultants is similarly
based on saleable area as opposed to the built up area. The report
relies on a solitary sale instance of a flat in a building described as
Raheja Anchorage purchased by Godrej Industries Limited. The
purchase price was Rs.43 Crores for a built up area of 2850 sq. ft.
The valuation report does not disclose whether the sale instance was
similar in terms of amenities, construction, location and other
associated advantages. Counsel appearing on behalf of the First
Respondent submitted, as a matter of fact, that the two properties are
not similarly circumstanced. But that is not an issue which falls for
determination by the Court since it ought to have been considered by
the valuer. The valuer has totally failed to do so. The Prothonotary
and Senior Master was in the circumstances justified in not relying
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upon either the report of A.V. Shetty & Associates or Perfect
Valuations and Consultants.
10. The First and Third Defendants have similarly relied upon a
valuation report of Rane Engineers and Surveyors. The report relies
on the rate mentioned in the ready reckoner, for the purpose of
stamp duty of Rs.18,718/- per sq. ft. of built up area. Now it is
settled that the ready reckoner merely provides an index for the
revenue authorities for the purposes of levying stamp duty. Valuation
either under the Land Acquisition Act or even in proceedings such as
the present cannot be based on a ready reckoner. The report then
relied upon four sale instances where the valuation of the property
varied between Rs.18,845/- and Rs.19,347/- per sq. ft. The valuer
adopted a rate of Rs.25,000/-. After giving a certain discount of Rs.
800/- per sq. ft. the valuer adopted a rate of Rs.24,200/- per sq. ft.
The Prothonotary and Senior Master has principally accepted the
report relied upon by the Third Defendant though without the
deduction of Rs.800/- per sq. ft. The valuation report on which
reliance has been placed by the Third Respondent is also open to the
objection that it has failed to consider certain material issues. One of
the sale instances upon which reliance has been placed is an
adjoining building, RNA Mirage. Counsel appearing on behalf of the
Plaintiff has produced before the Court a photocopy of an agreement
to sell in respect of one of the premises in the building. The
development in that case was under Development Control Regulation
33(7) which pertains to the redevelopment of cessed buildings in the
island city of Mumbai. There is merit in the submission that the
valuation of a property where redevelopment has taken place under
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Development Control Regulation 33(7) may not be at par with the
valuation which is ascribed to a property, which to use a phrase of
contemporary parlance is a 'free sale' project.
11. In the circumstances, the Court is left with a situation where
neither of the valuation reports on which reliance has been placed by
the parties can be accepted. In this view of the matter, during the
course of the hearing, I had indicated to the learned senior counsel
that it would be in the fitness of things that if both the counsel
suggest the name of an independent valuer; a valuer of integrity
whose competence and expertise cannot be doubted. The Court
made it clear that the direction to appoint a fresh valuer for the
purposes of carrying out a valuation would be a direction of the
Court, but it would be appropriate if the Court were assisted with the
name of a valuer by the learned counsel. Both the learned counsel
have accordingly suggested the name of Jones Lang Lasalle Properties
Consultants (India) Pvt. Ltd. This would be without prejudice to the
rights and contentions of the parties. For the reasons aforesaid, the
impugned order of the Prothonotary and Senior Master dated 15
November 2010 is set aside. M/s. Jones Lang Lasalle Properties
Consultants (India) Pvt. Ltd. are accordingly appointed as valuers in
order to carry out a valuation in respect of the flats belonging to
Mr.Rahul Raheja and Mr.Ashish Raheja in the building known as
Raheja Legend of which security is sought to be offered by the
Plaintiff. The valuers are requested to complete the process of
valuation within a period of two weeks from today.
12. The present proceedings shall stand disposed of in terms of the
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following directions :
i) M/s. Jones Lang Lasalle Properties Consultants (India) Pvt. Ltd.
are appointed as valuers to carry out the valuation of the flats
belonging to Mr.Rahul Raheja and Mr.Ashish Raheja in the
building known as Raheja Legend at Worli;
ii) The valuers are requested to expedite the process of valuation
and to submit their report to the Prothonotary and Senior
Master on or before 13 December 2010;
iii) The costs of the valuation shall be borne by the Plaintiff;
iv) Upon receipt of the report, the Prothonotary and Senior Master
shall pass fresh orders within a period of two weeks after
furnishing to the parties an opportunity of being heard;
v) The Prothonotary and Senior Master is directed to furnish
photocopies of the title deeds of the flats in question which are
in her custody and possession to the valuers. In addition, the
parties would be at liberty within a period of one week from
today to furnish any other material including sale instances to
the valuers on which they seek to rely upon;
vi) The Plaintiff is allowed to furnish security in the form of the
residential flats to which a reference has been made earlier
subject to the condition that - (i) the flat owners, Mr.Rahul
Raheja and Mr.Ashish Raheja furnish an undertaking which shall
be placed on the record of these proceedings within a period of
one week from today that they shall not mortgage, lease, gift or
deal with the flats in any manner whatsoever without further
orders of the Court;
(ii) M/s. Raheja Universal Ltd. shall also file an undertaking
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before the Court of a duly authorized officer, together with
a resolution of the board of directors, stating that the
company has no objection to the aforesaid flats being
offered by way of security and that the company waives its
rights under clauses 33(l) and 39 of the agreements for sale;
(iii) The title deeds in respect of the flats shall continue to
remain in the possession and custody of the Prothonotary and
Senior Master;
vii)In the event that the valuation report suggests any deficiency in
the value of the security, the Plaintiff shall offer additional
security so as to make good the total security of Rs.200 Crores
as directed by the Division Bench. The Prothonotary and
Senior Master shall consider whether the additional security
that has been offered by the Plaintiff is appropriate and proper.
The proceedings shall stand disposed of in these terms.
(Dr. D.Y. Chandrachud, J.)
