Bombay High Court
Florita Buildcon Private Ltd vs Florita Buildcon Private Ltd. And ... on 1 December, 2016
Bench: S.C. Dharmadhikari
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 11025 OF 2013
Asset Reconstruction Company (India) Ltd.,
a Company incorporated under the Companies
Act, 1956, registered as Securitisation
Company and Reconstruction Company under
the provisions of Section 3 of the Securitisation
and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (the
SARFAESI Act) and having its registered office
at The Ruby, 10th floor, 29, Senapati Bapat
Marg, Mumbai 400 028 acting as a sole trustee
of Arcil-SBPS-017-I Trust through its Assistant
Manager Mr.Nilesh Bhople
ig ...Petitioner
Versus
1 Florita Buildcon Private Limited
A private Limited Company, having its
registered Office at 425/A, Raut Industrial
Estate, 1st Floor, Behind Johnson & Johnson
Mogul Lane, Mahim(W), Mumbai-400 016
2 Shaikh Husain Nanasaheb
Adult, Indian, Inhabitant of Mumbai residing at
Kamgar Nagar, Rahivasi Sangh, 7 Bungalows,
Link Road, Andheri(West), Mumbai-400 058
3 Mehboob Subhan Nanasaheb
Adult, Indian, Inhabitant of Mumbai residing at
Kamgar Nagar, Rahivasi Sangh, 7 Bungalows,
Link Road, Andheri(West), Mumbai-400 058
4 Mohammmed Yusuf Nanasaheb
Adult, Indian, Inhabitant of Mumbai residing at
Kamgar Nagar, Rahivasi Sangh, 7 Bungalows,
Link Road, Andheri(West), Mumbai-400 058
...Respondents
WITH
CIVIL APPLICATION NO. 2969 OF 2015
IN
WRIT PETITION NO. 11025 OF 2013
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Florita Buildcon Private Limited ... Applicant
In the matter between
Asset Reconstruction Company (India) Ltd. ... Petitioner
V/s.
Florita Buildcon Private Limited & Ors. ... Respondents
Mr.Nitin Thakkar, Senior Advocate with Mr.Rohit Gupta, Mr.Vinod Kothari &
Ms.Salma Mansuri i/b.M/s.Apex Law partners for Petitioner.
Mr.Ravi Kadam, Senior Advocate with Ashish Kamat, Mr.Roshan Kadam,
Mr.Nikhil Rajani & Ms.Pallavi Ghaisas i/b. M/s.V.Deshpande & Co. for
Respondent No.1.
CORAM : S.C. DHARMADHIKARI &
DR. SHALINI PHANSALKAR-JOSHI, J.J.
RESERVED ON
ig : 5TH AUGUST, 2016.
PRONOUNCED ON : 1ST DECEMBER, 2016.
JUDGMENT : [Per Dr. Shalini Phansalkar-Joshi, J.]
1] By this petition filed under Article 226 of the Constitution
of India, the Petitioner is invoking extraordinary writ jurisdiction of
this Court for issuance of writ of certiorari to quash and set-aside the
order dated 23rd September, 2013 passed by the Debts Recovery
Appellate Tribunal, Mumbai in Appeal No.161 of 2011 and thereby to
dismiss the said appeal.
2] The facts, in the light of which above said prayer is
made, can be stated in brief as follows;
The Petitioner is a Securitization Company, incorporated
under the provisions of the Companies Act, 1956 and registered
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under Section 3 of the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002, (hereinafter
referred to as "SARFAESI Act'", for the sake of brevity). Petitioner is
having its registered office at the Ruby, 10th floor, 29 Senapati Bapat
Marg, Dadar (West), Mumbai. The Petitioner had, vide Assignment
Agreement dated 31st March, 2008 acquired the rights with respect
to the account of M/s.D.N. Exports from the Assignor Bank i.e. Bank
of India.
3]
Respondent No.1 is the purchaser of the properties
mortgaged to the Petitioner. Respondent Nos.2 to 4 are the partners
who had guaranteed the repayment of the dues of M/s.D.N. Exports
and they are also erstwhile owners of the mortgaged properties.
4] The Petitioners' predecessor-in-interest i.e. Bank of
India had guaranteed financial assistance to M/s.D.N. Exports,
wherein Respondent Nos.2 to 4 are the partners as well as the
guarantors. Respondent Nos.2 to 4 had mortgaged in favour of Bank
of India the immovable property, which is a piece and parcel of land
being CTS No.1309/19, Survey No.131 area 1743 sq.mtrs. situated
at village Varsova, Taluka Andheri, Mumbai. As the account of
M/s.D.N. Exports had become a non-performing asset, a notice
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dated 22nd October, 2003 was issued by Bank of India under Section
13(2) of SARFAESI Act to M/s. D.N. Exports. It was also published in
newspaper on 22nd February, 2004. Bank of India, thereafter,
assigned the debt by Deed of Assignment dated 31st March, 2008 to
the Petitioner along with Security Interest in the mortgaged property.
In the meantime, Debts Recovery Tribunal, Chennai in O.A. No.2036
of 2001 had issued a Recovery Certificate in the sum of
Rs.24,88,66,110.17 on 3rd April, 2009. The Petitioner made an
application before DRT-II Chennai to bring its name on record in
place of Bank of India, in view of the Assignment Deed dated 31 st
March, 2008. The said application was allowed on 27 th July, 2010
and the Recovery Certificate has been amended accordingly.
5] As per the case of the Petitioner, the Authorized Officer
appointed by the Petitioner had, meanwhile, taken possession of the
mortgaged property on 24th June, 2009 and published the
possession notice in respect thereof, in various newspapers, dated
25th June, 2009, as required under the Security Interest
(Enforcement) Rules, 2004. Neither the Mortgagors, i.e. Respondent
Nos.2 to 4, nor any third party challenged the possession of the
Petitioner and the measures taken by the Petitioner under Section
13 of SARFAESI Act. Thereafter, on 23rd July, 2009 the Petitioner
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published a notice in "Free Press Journal" for sale of the said
mortgaged property intimating that the Authorized Officer would sell
the said mortgaged property in his possession, after a period of 30
days from the date of notice i.e. 23rd July, 2009.
6] In pursuance of the said notice, the Director of
Respondent No.1 approached the Petitioner and evinced his interest
in purchasing the mortgaged property. After discussion, it was
informed to Respondent No.1 that the Petitioner would issue bid
document to interested parties detailing terms and conditions for
sale by first week of August, 2009. In due course, the bid document
was issued to various parties inviting offers for purchase of the
mortgaged property on "as is where is and as is what is basis". The
various terms and conditions forming the part of bid document
clearly casted the responsibility and liability on the bidder to ensure
that the title of the mortgaged property is verified by the bidder and
the property is being sold clearly on "as is where is and as is what is
basis".
7] It is the case of the Petitioner that the first respondent,
by its letter dated 10th September, 2009, submitted its bid along with
Annexure-II and Annexure-III duly stamped and forwarded Pay
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Orders totaling Rs.83,75,000/- in respect of its bid of
Rs.3,51,00,000/-. On 15th September, 2009 sale was conducted
amongst various bidders. In the said sale, Respondent No.1
enhanced its bid to Rs.7,01,00,000/- which was accepted by the
Petitioner, by their letter dated 16th September, 2009, recording that
the sale was confirmed on "as is where is and as is what is basis".
Respondent No.1 was required to pay balance amount of purchase
consideration on or before 30th September, 2009 and get the Sale
Certificate stamped. ig Accordingly, Respondent No.1 by its letter
dated 22nd September 2009 recorded that 25% of the total purchase
consideration of Rs.1,75,25,000/- was already paid and they are
enclosing the balance consideration amounting to Rs.5,25,75,000/-.
By the said letter Respondent No.1 also requested for issuance of
Sale Certificate and for delivery of possession.
8] In accordance therewith, on 24th September, 2009, the
Petitioner handed over possession of the mortgaged property to
Respondent No.1 and called upon Respondent No.1 to get the said
Sale Certificate stamped. According to the Petitioner, the Petitioner
was always ready and willing to execute the Sale Certificate after it
was duly stamped. However, instead of getting the Sale Certificate
stamped, Respondent No.1 started to wriggle out of the sale. By the
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letter dated 7th October, 2009, Respondent No.1 demanded return of
the consideration amount. The Petitioner informed Respondent No.1
by the letter dated 16th October, 2009 that the sale having been
confirmed, in as much as the contract between the Petitioner and
Respondent No.1, having been completed and concluded, there was
no scope or warrant for cancelling the same. Moreover, as the sale
was on "as is where is and as is what is basis", Respondent No.1
cannot wriggle out of the said sale. It was also pointed out that, it
was for Respondent No.1 to carryout due diligence including the title
and all related aspects and once Respondent No.1 has voluntarily
entered into the contract, Respondent No.1 cannot withdraw from
the same.
9] Respondent No.1, however, filed Securitisation
Application No.48 of 2009 in the Debts Recovery Tribunal, Mumbai
to set aside the sale on the count that the mortgaged property was
falling in Coastal Regulation Zone (CRZ) and was a plot reserved for
Recreation Ground (RG) and, therefore, there was no saleable
interest in the mortgaged property. It was also contended that
Respondent No.1 came to know about the same only when
Respondent No.1 started erecting shed on the said property.
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10] The Petitioner challenged the Securitization Application
by contending inter alia that the Debts Recovery Tribunal will not
have jurisdiction to entertain and try the said Application at the
instance of the purchaser, as the sale was concluded and finalized
and the possession was also given to the purchaser. It was also
contended that the purchaser cannot take advantage of his own
wrong, especially when the property was sold on "as is where is and
as is what is basis".
11]
The learned Presiding Officer of Debts Recovery
Tribunal, by its order dated 29th July, 2001, dismissed the
Securitisation Application.
12] Being aggrieved, Respondent No.1 filed Appeal No.161
of 2011 before the Debts Recovery Appellate Tribunal, Mumbai. The
Petitioner filed reply in the said Appeal and raised the very same
contentions, which were agitated before the Debts Recovery
Tribunal. However, the Debts Recovery Appellate Tribunal, Mumbai
allowed the Appeal vide its order dated 23 rd September, 2013, which
was more than 6 months after the hearing was completed.
13] The submission of learned senior counsel for the
Petitioner is two fold. In the first place, it is submitted that the
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Securitisation Application itself was not maintainable as the
Application under Section 17 to set-aside the Sale cannot lie at the
instance of the purchaser. According to learned Senior Counsel for
the Petitioner, Respondent No.1 had no locus standi or statutory
right to file such an Application as Respondent No.1 cannot be
termed as "any person", who is aggrieved by any of the measures
referred to, in Sub-Section 4 of Section 13 of SARFAESI Act. It is
urged by him that the only person who could be aggrieved by a
measure under Section 13(4) of SARFAESI Act would be a borrower
or any third party claiming interest in the property. The purchaser, in
whose favour the interest is created, would come in picture only after
the measure under Section 13(4) is completed. Therefore, the
purchaser cannot be regarded as a party, who is aggrieved by the
measure taken under Section 13(4). Hence, according to him, the
alleged Securitisation Application filed by Respondent No.1 was not
maintainable in itself. According to him, the Appellate Tribunal has,
therefore, committed an error in holding such Application to be
maintainable and at the same time allowing it.
14] As regards the merits of Respondent No.1's claim, it is
submitted by learned Senior Counsel for the Petitioner that
Respondent No.1 was estopped from challenging the sale as he has
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voluntarily participated in the Auction Purchase. Therefore, he could
not be called as "aggrieved person". Moreover, he also cannot be
permitted to contend that the Petitioner had no 'saleable interest' in
the property. It is urged that Appellate Tribunal also failed to
appreciate that in case of a plot falling within the CRZ and reserved
as "RG Plot", ownership thereof stands vested in the sub-plot
owners, only after the Conveyance is executed in their favour. As in
the present case, no such Conveyance has been executed, the
original owners continued to retain the ownership of the mortgaged
plot. In view thereof, there was hardly any substance in the
contention of Respondent No.1 that the Petitioner had no 'saleable
interest' in the mortgaged property.
15] Further it is submitted by learned Senior Counsel for the
Petitioner that, when the sale was strictly on "as is where is and as
is what is basis" and the bid document contained in so many words
the said terms and conditions, Respondent No.1 is now estopped
from challenging, in any way, the concluded sale on the ground that
the mortgaged property is an RG Plot. It is urged that there was
absolutely no question of any cheating, misrepresentation or
dishonest concealment on the part of the Petitioner, as observed by
the Appellate Tribunal. It was clearly the responsibility of Respondent
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No.1 to take the search of the necessary documents and conduct
the due diligence before entering into the contract, which
Respondent No.1 has failed to do. According to learned Senior
Counsel for the Petitioner, the fact that mortgaged property is within
CRZ or is reserved as "RG Plot" can, by no stretch of imagination,
be held to be a mistake of fact on the part of both the parties, as is
held by the Appellate Tribunal. It is submitted that the fact that the
mortgaged property was a plot reserved as "RG", was within the
public domain.
16] Ultimately, it is also submitted by learned Senior
Counsel for the Petitioner that the question of validity of mortgage
was an issue before the Debts Recovery Tribunal, Chennai in O.A.
No.2036 of 2001 and had been decided by it. Therefore, the said
question could not have been reopened or decided by the Appellate
Tribunal. Moreover, the said question was exclusively between a
mortgagor and mortgagee and no third party, like Respondent No.1,
could question any decision regarding the same.
17] Further, according to learned Senior Counsel for the
Petitioner, the reservation of the plot for a particular purpose does
not restrict its transferability but only affects the user of such plot and
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therefore, in no way, there was any scope for canceling the sale,
which was duly effected in favour of Respondent No.1. According to
learned senior counsel for the Petitioner, Appellate Tribunal has thus
committed a grave error in allowing the appeal and setting aside the
sale and the order passed by the Presiding Officer of Debts
Recovery Tribunal. Therefore, the impugned order needs to be
quashed and set aside.
18] This petition came to be resisted by learned senior
counsel for Respondent No.1 by strongly supporting and upholding
the impugned order of the Appellate Tribunal, contending inter alia
that the Appellate Tribunal has rightly decided all the factual and
legal issues and hence no interference is warranted in those findings
in the limited scope of this extraordinary writ jurisdiction.
19] According to learned senior counsel for Respondent
No.1, when the mortgaged property, admittedly, falls within CRZ and
is reserved as a "RG Plot", it could not be sold by the original owner
Smt.Anusaya Kantilal Shah, in favour of Respondent Nos.2 to 4.
Respondent No.2 to 4, therefore, could not become owners of the
said plot on the basis of Conveyance Deed executed by
Smt.Anusaya Kantilal Shah in their favour. Therefore, having not
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acquired any ownership of the said plot, Respondent Nos.2 to 4, in
their turn, could not create any security interest upon the said plot in
favour of Bank of India, to secure the amount of credit facilities
availed by M/s. D.N. Exports. It is pointed out by learned Senior
Counsel for Respondent No.1 that the "RG Plot" cannot be used for
any purpose other than the beneficial use of the remaining plot
holders. "RG Plot", therefore, cannot be freely and openly saleable in
the true sense and, in such circumstances, even if the mortgaged
property is sold on "as is where is and as is what is basis", even then
for want of saleable interest of the Petitioner in the said plot, the sale
becomes non-existent and void in itself. According to him,
Respondent No.1 can, therefore, very well challenge the sale even if
it was concluded. It is submitted by him that the wording "any person
aggrieved by the measures taken under Section 13(4) can file such
Application", as used in Section 17 of SARFAESI Act, being wide in
scope, the Application filed by Respondent No.1 before the Tribunal
was maintainable. According to learned Senior Counsel for
Respondent No.1, as the sale is yet not completed strictly,
considering that Sale Certificate is not yet stamped, Respondent
No.1 can very well challenge the same. Appellate Tribunal has,
therefore, in his submissions, rightly allowed the appeal and set
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aside the order of the Debts Recovery Tribunal and the auction sale.
20] In support of their respective contentions, learned
Senior Counsels for both the parties have relied upon various
judgments and authorities of the Hon'ble Apex Court and this Court,
which we find convenient to deal with as and when the relevant
contentions are considered in the course of judgment.
21] Thus, having heard learned Senior Counsels for both
the parties at length and in extenso, the first and foremost question,
which, in our opinion, necessarily arises for our determination is
about the maintainability of the Securitisation Application filed under
Section 17 of SARFAESI Act before the Tribunal. Admittedly, the
Application was preferred by the Auction Purchaser i.e. Respondent
No.1 herein. According to learned Senior Counsel for the Petitioner,
the words "any person" used in Section 17 of SARFAESI Act cannot
cover the Auction Purchaser. They can only cover the mortgagor or
the guarantor, but not the Auction Purchaser. To substantiate this
submission, learned Senior Counsel for the Petitioner, has relied
upon the decision of the Division Bench of this Court in Umang
Sugar Pvt.Ltd. Vs. State of Maharashtra and anr.1.
1 2014 (4) Mh.L.J.
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22] As against it, learned Senior Counsel for Respondent
No.1 has submitted that, the words "any person", used in Section 17
of SARFAESI Act, are not, in any way, "qualified" to give restricted
meaning to them, as they are wide enough to cover even the
successful purchaser of the secured assets. According to him, as
Respondent No.1 is challenging the measures taken under Section
13(4) of SARFAESI Act, he being aggrieved by the measures taken
under the said provision, the only remedy available to Respondent
No.1 is an application under Section 17 of SARFAESI Act. According
to him, as the SARFAESI Act is a complete Code in itself,
Respondent No.1 has to approach the Debts Recovery Tribunal only,
and no other Forum, for getting redressal of his grievance.
23] In order to appreciate these rival submissions advanced
before us, we find it useful to first reproduce, for ready reference, the
relevant provisions of Section 13(4) of the SARFAESI Act, which
read as follows;
"13(4) In case the borrower fails to discharge his liability
in full within the period specified in sub-section
(2), the secured creditor may take recourse to
one or more of the following measures to recover
his secured debt, namely:-
(a) take possession of the secured assets of the
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borrower including the right to transfer by
way of lease, assignment or sale for
realizing the secured asset;
(b) take over the management of the business
of the borrower including the right to transfer
by way of lease, assignment or sale for
realizing the secured asset:
Provided that the right to transfer by way of
lease, assignment or sale shall be exercised
only where the substantial part of the
business of the borrower is held as security
ig for the debt:
Provided further that where the
management of whole of the business or
part of the business is severable, the
secured creditor shall take over the
management of such business of the
borrower which is relatable to the security
for the debt;
(c) appoint any person (hereafter referred to as
the manager), to manage the secured
assets the possession of which has been
taken over by the secured creditor;
(d) require at any time by notice in writing, any
person who has acquired any of the secured
assets from the borrower and from whom
any money is due or may become due to the
borrower, to pay the secured creditor, so
much of the money as is sufficient to pay the
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secured debt".
24] At this stage, it may also be necessary to reproduce
Section 17 of the SARFAESI Act, under which Application was
preferred by Respondent No.1 before the Debt Recovery Tribunal. It
reads as under:
"17. Right to appeal
(1) Any person (including borrower), aggrieved
by any of the measures referred to in sub-
section (4) of section 13 taken by the
ig secured creditor or his authorised officer
under this Chapter, may make an application
alongwith such fee, as may be prescribed to
the Debts Recovery Tribunal having
jurisdiction in the matter within forty-five days
from the date on which such measure had
been taken:
PROVIDED that different fees may be
prescribed for making the application by the
borrower and the person other than the
borrower.
Explanation: For the removal of doubts, it is
hereby declared that the communication of
the reasons to the borrower by the secured
creditor for not having accepted his
representation or objection or the likely
action of the secured creditor at the stage of
communication of reasons to the borrower
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shall not entitle the person (including
borrower) to make an application to the
Debts Recovery Tribunal under this sub-
section.
(2) The Debts Recovery Tribunal shall consider
whether any of the measures referred to in
sub-section (4) of section 13 taken by the
secured creditor for enforcement of security
are in accordance with the provisions of this
Act and the rules made thereunder.
(3) If, the Debts Recovery Tribunal, after
ig examining the facts and circumstances of
the case and evidence produced by the
parties, comes to the conclusion that any of
the measures referred to in sub-section (4)
of section 13, taken by the secured creditor
are not in accordance with the provisions of
this Act and the rules made thereunder, and
require restoration of the management of the
business to the borrower or restoration of
possession of the secured assets to the
borrower, it may by order, declare the
recourse to any one or more measures
referred to in sub-section (4) of section 13
taken by the secured creditors as in valid
and restore the possession of the secured
assets to the borrower or restore the
management of the business to the
borrower, as the case may be, and pass
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such order as it may consider appropriate
and necessary in relation to any of the
recourse taken by the secured creditor under
sub-section (4) of section 13.
(4) If, the Debts Recovery Tribunal declares the
recourse taken by a secured creditor under
sub-section (4) of section 13, is in
accordance with the provisions of this Act
and the rules made thereunder, then,
notwithstanding anything contained in any
other law for the time being in force, the
ig secured creditor shall be entitled to take
recourse to one or more of the measures
specified under sub-section (4) of section 13
to recover his secured debt.
(5) Any application made under sub-section (1)
shall be dealt with by the Debts Recovery
Tribunal as expeditiously as possible and
disposed of within sixty days from the date of
such application:
PROVIDED that the Debts Recovery
Tribunal may, from time to time, extend the
said period for reasons to be recorded in
writing, so, however, that the total period of
pendency of the application with the Debts
Recovery Tribunal, shall not exceed four
months from the date of making of such
application made under sub-section (1).
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(6) If the application is not disposed of by the
Debts Recovery Tribunal within the period of
four months as specified in sub-section (5),
any part to the application may make an
application, in such form as may be
prescribed, to the Appellate Tribunal for
directing the Debts Recovery Tribunal for
expeditious disposal of the application
pending before the Debts Recovery Tribunal
and the Appellate Tribunal may, on such
application, make an order for expeditious
ig disposal of the pending application by the
Debts Recovery Tribunal.
(7) Save as otherwise provided in this Act, the
Debts Recovery Tribunal shall, as far as may
be, dispose of the application in accordance
with the provisions of the Recovery of Debts
Due to Banks and Financial Institutions Act,
1993 and the rules made thereunder."
25] Admittedly, in this case, the measures of 'taking
possession' and of 'selling the mortgaged property' are taken by the
Petitioner under Section 13(4) of SARFAESI Act. Respondent No.1
is aggrieved by such measures, on the count that the Petitioner was
not having any 'saleable interest' in the mortgaged property, as the
mortgaged property falls in CRZ and is reserved as a "RG Plot".
Therefore, Respondent No.1 is aggrieved on count of the measures
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of auction of property, which, according to Respondent No.1, is void
in itself. Therefore, needless to state that he is aggrieved by the
measures referred to in Sub-Section 4 of Section 13 of the
SARFAESI Act.
26] Now the question is, 'whether the words "any person"
used in Section 17 of the SARFAESI Act are of wide import or their
scope is restricted only to cover mortgagor or the guarantor?' In our
considered opinion, these words are of wide import, as they are not
qualified in any way. We also say so, in view of decision of the
Hon'ble Apex Court in the case of United Bank of India Vs.
Satyawati Tandon & Ors.2, relied upon by learned Senior Counsel for
Respondent No.1. In this decision, after considering the entire scope
of the SARFAESI Act and the provisions of Section 13(4) in the
context of Section 17, it was categorically held in paragraph 42 of
the judgment that the expression "any person" used in Section 17(1)
is of wide import. It takes within its fold, not only the borrower but
also the guarantor or any other person who may be affected by the
action taken under Section 13(4) or Section 14. The similar view was
taken by this Court also in the case of State Bank of India Vs.
Jigishaben B. Sanghavi & Ors.3, wherein while considering the bar of
2 (2010) 8 SCC 110
3 (2011) (2) Mh.L.J.
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jurisdiction of a Civil Court for entertaining any suit or proceedings in
respect of the matters which can be determined by the SARFAESI
Act itself, in paragraph No.17 of the judgment, this Court was
pleased to rely upon its earlier judgment in M/s.Trade Well Vs.
Indian Bank4 and held that, "once a measure is adopted under
Section 13(4), a statutory remedy provided under Section 17 is
available not only to the borrower, but to any person who is
aggrieved by the taking of a measure".
27]
It was further held that, "the remedy provided under
Section 17 is an efficacious alternate remedy available to a third
party as well as to the borrower, where all grievances can be
raised."
28] In this judgment, this Court has also considered the
above-said decision of the Hon'ble Apex Court in the case of United
Bank of India Vs. Satyawati Tondon5, holding that, the expression
'any person', used in Section 17(1), is of wide import. It takes within
its fold, not only the borrower but also guarantor or any other person
who may be affected by the action taken under Section 13(4) or
Section 14.
4 2007(2) Mh.L.J. (Cri) 412 = 2007(3) AIR Bom R 656 (DB)
5 2010(3) Bankers' Journal 581
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29] We can, in this respect, also take recourse to the
landmark decision in the case of Mardia Chemicals Vs. Union of
India6, wherein the Hon'ble Apex Court has considered entire
scheme of the SARFAESI Act and held that the said Act provides a
comprehensive scheme and is a complete code in itself. It was held
that once a measure is adopted as per Sub-Section 4 of Section 13,
the Act provides for a remedy of an Appeal under Section 17. The
scheme, which is enunciated under the Act, cannot be rendered
nugatory by seeking recourse to the jurisdiction either of a Civil
Court or for that matter, in adopting writ proceedings under Article
226 of the Constitution of India. When the law expressly
contemplates a challenge to a measure taken under Section 13(4)
and such challenge is provided before the Tribunal, then it follows
that such challenge before any other Forum is barred; the only
remedy available to the aggrieved party being an Appeal under
Section 17 of the Act, when such measure is taken.
30] In the above-said decision of State Bank of India
(supra), the Division Bench of this Court was further pleased to hold
that, "once a measure is adopted under Section 13(4), the Act
6 2004 (2) Mh.L.J. (SC) 1090 = AIR 2004 SC 2371
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provides a statutory remedy not only to the borrower, but to any
person aggrieved by taking of a measure. While enquiring into an
Application under Section 17, the Tribunal is empowered to
determine whether the action, which is taken by the secured
creditor, is in accordance with the provisions of the Act and the
Rules made thereunder. If the Tribunal comes to the conclusion that
the action was invalid, it is vested with wide powers, including both
to restore the management of the business or restoration of
possession to the borrower and to pass such orders as it may
consider appropriate and necessary in relation to the recourse taken
by a secured creditor under Sub-Section 4 of Section 13."
31] What is important to know is that, in this authority, it was
further held that, "when a person other than a borrower is aggrieved
by a measure taken by the secured creditor under Sub-Section 4 of
Section 13, a remedy is equally made statutorily available to such a
person."
32] Learned Senior Counsel for Respondent No.1 has, in
this context, also relied upon the recent decision in the case of
Jagdish Singh Vs. Heeralal and Ors.7, wherein the Hon'ble Apex
Court was pleased to once again reiterate that the expression "any
7 (2014) 1 SCC 479
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person", used in Section 17, is of wide import and takes within its
fold not only the borrower but also the guarantor or any other person
who may be affected by action taken under Section 13(4) of the
SARFAESI Act.
33] The learned Senior Counsel for Respondent No.1 has
placed reliance on the definition of the 'aggrieved person', as given
in "Black's Law Dictionary-Tenth Edition", which defines "aggrieved
party" to mean, "a party entitled to a remedy; especially, a party
whose personal, pecuniary, or property rights have been adversely
affected by another person's actions or by a court's decree or
judgment".
34] Here in the case, Respondent No.1 claims that its
property rights have been adversely affected by the measures taken
by the Petitioner in auction sale of the mortgaged property, by not
disclosing that the mortgaged property was falling within the CRZ
and was reserved as "RG Plot". Hence, he is an aggrieved person.
His grievance pertains to one of the measures taken by the
Petitioner under Section 13(4) of the SARFAESI Act. Respondent
No.1 has no other remedy, in such situation, considering the law laid
down by the Hon'ble Apex Court, and by this Court. In the law laid
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down in the above said authorities, the jurisdiction of Civil Court to
entertain Petitioner's grievance is completely barred. The only
remedy, therefore, which the aggrieved person, like Respondent
No.1, is having, is of a right of appeal before the Debts Recovery
Tribunal. Hence, in our considered opinion, the Securitisation
Application preferred by Respondent No.1 before the Tribunal was
very much maintainable. As to the Judgment of the Division Bench of
this Court, relied upon by learned Senior Counsel for the Petitioner,
in the case of Umang Sugar Pvt. Ltd. (supra), in our considered
opinion, it cannot be made applicable to the facts of this case, as the
facts of the Judgment were different. In that case, the bidder had
filed Writ Petition raising certain grievances in respect of tender
document. The maintainability of the Writ Petition was challenged on
the count that there was an efficacious remedy available under
Section 17 of the SARFAESI Act. In that context, it was held that the
Petitioner, being a bidder only, and neither a borrower, nor a secured
creditor, has a limited issue to the extent of recovering the E.M.D.
and to withdraw from the tender proceedings. Therefore, he could
not be said to be an "aggrieved person" in respect of the measures
taken under Section 13(4) of the SARFAESI Act. It was further held
that, "from the admitted facts, neither Respondent No.2-Bank, nor
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the secured creditor has resorted to any measures under Section
13(4) of the SARFAESI Act and hence, considering the words "any
of the measures", referred to in Sub-Section 4 of Section 13 taken by
the secured creditor, it was held that the Petitioner therein, would not
have a remedy of right to appeal under Section 17 of the SARFAESI
Act. It was further held that, a bidder in auction sale is not an
aggrieved person and hence has no remedy to file an appeal. No
doubt, in this context, it was held that, "if the Auction Purchaser is
permitted to challenge the auction or measures resorted to under
Section 13(4), he cuts his own legs and indirectly, will be assisting
the cause of borrower also. It will thus be prejudicial not only to his
own interests but to the interests of Respondent No.2 as well."
35] However, in our considered opinion, these observations
being made in the facts of the said case, they cannot be said to be
laying down a law as such that if the purchaser himself is a
aggrieved person, on count of the measures taken under Section
13(4) of the SARFAESI Act, he is not having remedy to file
Application under Section 17 of the Act. If one considers the fact that
the SARFAESI Act is a complete Code in itself, meant for providing
efficacious and expeditious remedies to the party, aggrieved on
account of the measures taken under the said Act, then, in our
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considered opinion, such remedy is available to the Auction
Purchaser also in respect of measures taken by the Petitioner-Bank
under Section 13(4) of the SARFAESI Act. Therefore, as far as this
aspect is concerned, in our considered opinion, both the Tribunal
and Appellate Tribunal have rightly held that the Application filed by
Respondent No.1 before it under Section 17 of the Act was
maintainable.
36] This takes us to the next question, 'as to whether
Respondent No.1 can successfully set aside the sale, on count that
the Petitioner has not acquired any 'saleable interest' in the
mortgaged property?' This question requires consideration of two
aspects: first, whether Respondent No.1 is estopped from doing so,
as the said issue is already set at rest in the proceedings before the
Debts Recovery Tribunal, Chennai in O.A. No.2036 of 2001, and,
secondly, whether Respondent No.1 in his capacity as an Auction
Purchaser can do so? According to learned Senior Counsel for the
Petitioner, in the proceedings before the Debts Recovery Tribunal,
Chennai, this issue is already decided and concluded. Neither the
guarantors nor borrowers have challenged their 'saleable interest' in
the mortgaged property, which is acquired by the Petitioner and,
therefore, Respondent No.1, who is an Auction Purchaser, is now
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estopped from challenging the same.
37] In our considered opinion, in order to appreciate these
rival contentions, it would be necessary to take brief overview of the
facts of the case. Undisputedly, Smt.Anusaya Kantilal Shah was
owner and in possession of the plot bearing Survey No.131, ad-
measuring 22156.535 sq.mtrs. situated at village Versova within the
boundaries of Ward "K" of the Municipal Corporation Greater
Mumbai. She had divided the said plot into 19 sub-plots, in the year
1970. Out of them, sub-plot Nos.131/19 and 131/4 forming 15% of
the total area of the main plot were earmarked as 'Recreation
Ground' (RG). It necessarily implies that the said plots were meant
for the use of other 17 sub-plot owners. The dispute in the present
petition relates to the sub-plot No.131/19, which was the mortgaged
property. It is a matter of record that the original owner Smt. Anusaya
Kantilal Shah had submitted a Layout Plan of the entire plot, bearing
Survey No.131, before the Municipal Corporation of Greater Mumbai
(MCGM) for development, which was sanctioned by the Competent
Authority of the MCGM on 19th February, 1976. On 3rd April, 1971
she had transferred this sub-plot, bearing No.131/19, which is ad-
measuring 1743 sq.mtrs. in favour of Respondent Nos.2 to 4 through
unregistered Deed of Conveyance.
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38] Subsequent thereto in the year 1997 Smt. Anusaya
Kantilal Shah has executed registered deed of confirmation in favour
of Respondent Nos.2 to 4 confirming the earlier deed of conveyance
and agreement of sale dated 3rd April, 1971. Thereafter, another
registered deed come to be executed between Smt. Anusaya
Kantilal Shah and Respondent Nos.2 to 4 on 18 th February, 1998
declaring conveyance in respect of the very property. On 23 rd May,
2000 Respondent Nos.2 to 4 deposited registered Deed of
Confirmation dated 20th June, 1997 of the Conveyance Deed dated
3rd April, 1971 and thus created equitable mortgage of the property in
favour of Bank of India for securing dues of M/s.D.N. Exports.
39] According to learned senior counsel for Respondent
No.1, as the layout plan of the aforesaid plot was sanctioned by the
MCGM in the year 1976 itself Smt. Anusaya Kantilal Shah could not
have transferred the said plot in favour of Respondent Nos.2 to 4, on
the basis of unregistered Conveyance Deed. Hence Respondent
Nos.2 to 4 could not become owners of the said plot. Though,
Smt.Anusaya Kantilal Shah had, thereafter, on 20th June, 1997 made
the registered sale-deed of the said plot in favour of Respondent
Nos.2 to 4, but according to learned senior counsel for Respondent
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No.1 she was not entitled to do so, as the said plot was already
reserved as a RG plot under the sanctioned layout plan. The said
plot therefore, could be only used by the sub-plot owners for the
limited purpose of recreation facilities and upto limited extent only, as
permissible under Development Control Regulation (DCR). Thus,
according to learned senior counsel for Respondent No.1, the
unregistered Conveyance Deed dated 3rd April, 1971 and registered
deed of confirmation dated 18th February, 1997 executed by
Smt.Anusaya Kantilal Shah in favour of Respondent Nos.2 to 4,
could not and did not confer any right, title and interest in respect of
the said plot in favour of Respondent Nos.2 to 4. Therefore,
Respondent Nos.2 to 4 could not become owner of the said plot and
as a result, they could not mortgage the said plot in favour of Bank of
India, to secure the amount of credit facilities extended to M/s.D.N.
Exports. Hence according to learned senior counsel for Respondent
No.1, the so called mortgage created by Respondent Nos.2 to 4 in
favour of Bank of India is void in the eyes of the law and on the basis
of so called equitable mortgage, the Bank of India had got no
security interest upon the said plot. As a result thereof, the Petitioner
had also not derived any security interest on the said plot so as to
sell the same by auction.
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40] As against it, the submission of learned senior counsel
for the Petitioner is that, although the said plot falls within the CRZ
and is reserved as a RG plot, it has not lost the 'saleable interest' as
it was transferable. It is submitted by him that according to
Regulation 23 (1) (e) of the DCR, the ownership of such sub-plot
reserved as 'Recreational Ground' shall vest in the other sub-plot
owners, only if the conveyance deed had been executed by the
owner of the plot in favour of other sub-plot holders in accordance
with sanctioned layout plan. In the instant case, it is submitted by
him, that the ownership of the said plot had not been vested in other
sub-plot holders as no such Conveyance Deed has been executed.
Therefore, the owner of the plot namely Smt.Anusaya Kantilal Shah
was not divested of her ownership rights over the subject plot. She
was very much competent and therefore, entitled to transfer it in
favour of Respondent Nos.2 to 4. Respondent Nos.2 to 4 having
become the owners of the said plot on the basis of the unregistered
sale-deed dated 3rd April, 1971 which was confirmed in the year
1997, they had saleable interest and were entitled to create
mortgage of the said plot in favour of the Bank of India. Thus,
according to learned senior counsel for Petitioner, the mortgage
created by Respondent Nos.2 to 4 in favour of Bank of India is
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perfectly valid and on the basis of such mortgage, the Bank of India
received security interest/saleable interest in the said plot. It is urged
that the said issue has already decided in Original Application (OA)
No.2036 of 2001 in Debts Recovery Tribunal, Chennai against
borrower and guarantor, vide judgment and order dated 12th
September, 2008. Admittedly, the said judgment and order is not
challenged by any of the parties, therefore, it has attained finality
and the said plot has been declared as mortgaged property.
Therefore, according to learned senior counsel for the petitioner,
now it is not open to the Auction Purchaser to dispute the security
interest of the Bank or its assignee. Respondent No.1 has also
accepted the 'saleable interest' of the Petitioner in the said plot and
had participated in the Auction Sale and hence, Respondent No.1 is
now estopped from challenging the security interest of the Petitioner
in the said plot.
41] In our considered opinion, the real issue in crux arising
for our consideration is thus, whether the plot, which is declared to
be a RG plot, is transferable or not ? Depending on answer to this
question, we will have to consider, whether the security interest as
defined under the SARFAESI Act is created in favour of the
petitioner in the said plot or not. For that purpose we may usefully
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refer to the definition of "security interest" as given in Section 2(zf) of
the SARFAESI Act, which states that the "security interest" means,
"right, title and interest of any kind, whatsoever upon property,
created in favour of any secured creditor and includes any
mortgage, charge, hypothecation, assignment other than those
specified in section 31". The security interest thus necessarily means
right, title and interest in respect of any property. Hence, one has to
consider whether Respondent Nos.2 to 4 were having such right,
title and interest in the mortgaged property so as to transfer the
same in favour of the Bank of India and then the Bank of India was
having such right, title and interest to assign the same in favour of
the Petitioner.
42] In this respect, we will have to therefore, consider what
is the exact legal position as to the right, title and interest in respect
of the plot, which is reserved as 'Recreation Ground' under the
provisions of Development Control Regulations (DCR for short) and
whether there is any restriction on the sale of such plot which is
reserved as a RG plot. For that purpose, we have to take recourse to
Rule 23 of DCR for Greater Bombay.
43] For ready reference, we may reproduce Regulation 23
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of the Development Control Regulations, the relevant portion of
which, reads as under:-
"23. Recreational/Amenity Open Space :-
(i) Open Spaces in residential and commercial
layouts:-
(a) Extent-In any lay-out or sub-division of
vacant land in a residential and commercial
zone, open spaces shall be provide as
under:-
Area from 1001 sq.m. to 2500 sq.m.-15%
(b) ...
(c) ...
(d) ...
(e) Ownership :- The ownership of such
recreational space shall vest, by provision in
a deed of conveyance, in all the property
owners on account of whose holdings the
recreational space is assigned.
(f) ...
(g) Structures/uses permitted in recreational
open spaces:-
(i) ...
(ii) In a recreational open space or playground
of 1000 sq.m. or more in area (in one piece
and in one place), structures for pavilions,
gymnasia, club houses and other structures
for the purpose of sports and recreation
activities may be permitted with built-up area
not exceeding 15 percent of the total
recreational open spaces in one place. The
area of the plinth of such a structure shall be
restricted to 10 percent of the areas of the
total recreational open space. The height of
any such structure which may be single
storey shall not exceed 8 m. A swimming
pool may also be permitted in such a
reccreational open space and shall be free of
the structures for such sports and recreation
activities shall conform to the following
requirements:-
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(a) The ownership of such strucctures and other
appurtenant users shall vest by provision in a
deed of conveyance, in all the owners on
account of whose cumulative holdings, the
recreational open space is required to be
kept as recreational open space or ground
viz."R.G." in the layout of sub-division of the
land.
(b) The proposal for construction of such
structure should come as a proposal from
the owner/owners/society/societies or
federation of societies without any profit
motive and shall be meant for the beneficial
use of the owner/owners/members of such
society/societies federation of societies.
(c)
ig Such structures shall not be used for any
other purpose, except for recreational
activities for which a security deposit as
decided by the Commissioner will have to be
paid to the Corporation.
(d) The remaining area of the recreational open
space of playground shall be kept open to
sky and properly accessible to all members
as a place of creation, garden or a
playground.
(e) The owner/owners/society or societies shall
submit to the Commissioner a registered
undertaking, agreeing to the conditions in (a)
to (d) above."
44] The Development Control Regulations for Greater
Mumbai, 1991 (for short "DC Regulations") are traceable to section
22 of the Maharashtra Regional and Town Planning Act, 1966 (for
short "MRTP Act"). Section 22 sets out the contents of a
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development plan. One important content of the plan are the
regulations applicable to use and development of land and building
activities. The attempt is to regulate such activities for proper and
complete planning. That is how the DC Regulations have been
brought into force. Regulations 2 and 3 refer and contain the
definitions. The definition of the term "amenity" is to be found in
Regulation 3(7). That means roads, streets, open spaces, parks,
recreational grounds, playgrounds, gardens etc. and other utilities,
services and conveniences.
ig If parts of these regulations are
perused, then, it would be evident that they are divided with some
specific object and purpose. The Administration is covered by Part-I.
That contains regulations enabling grant of development permission
and commencement certificate. They outline the procedure for
obtaining the permission and certificate and the procedure to be
followed during construction. Part II is titled General planning
requirements, Land users and manner of development. Regulations
9 to 36 fall in this Part. Regulation 9 clarifies that the uses of all
lands situated within the Municipal limits of Greater Mumbai which
have been allocated, designated or reserved for certain purposes in
the development plan, shall be regulated in the type and manner of
development/redevelopment according to Table 4. Then, there are
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various aspects in relation to grant of development permission in
respect of public housing / high density housing. Then, there are
regulations dealing with every minute aspect so as to sub-serve the
general planning requirements and land uses. Recreational/Amenity
open spaces is an aspect dealt with by Regulation 23. Sub-
regulation (1) thereof provides for open spaces in residential and
commercial layouts and their extent. While it is stated that these
open spaces shall be exclusive of areas of accesses / internal road /
designations or reservations, development plan roads and areas for
road widening and shall as far as possible be provided in one place,
however, there are exceptions and to be found in clause (a) of sub-
regulation (1) of Regulation 23. Various clauses of this sub-
regulation would clarify as to how eventually the ownership of such
recreational spaces shall vest, by a provision in a deed of
conveyance, in all the property owners on account of whose
buildings the recreational space is assigned. There are
structures/uses permitted in recreational open spaces and even that
aspect is highlighted in clause (g) of sub-regulation (1) of Regulation
23. Various sub-clauses even in relation to these structures and
permissible uses in recreational open spaces would denote that the
ownership does not vest automatically but by a provision in a deed of
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conveyance.
45] It is not possible to agree with Mr. Kadam, learned
senior counsel appearing for respondent No.1 that Regulation 21,
dealing with layout of land and land sub-division as also Regulation
23 with the sub-regulation and sub-clauses highlighted by him,
namely, (a), (b), (d) and (e) of sub-regulation (1) of Regulation 23
would mean that there is a vesting of recreation space and that
ownership thereof goes at the sub-division to the plot holders on
whose account the recreation area is to be provided. If that had
been the intent, then, there not be any necessity of inserting the
words "shall vest by a deed of conveyance". These are not mere
surplusage. It is apparent and unambiguous that even where
reservations are carved out and for public purposes in a
development plan, there is no automatic vesting. These lands or
reserved plots do not vest in the State or the Planning Authority
straight away. The Planning Authority has to acquire them and the
rights therein by an elaborate process. All the more in layouts and
particularly private layouts, such recreation spaces would have to be
conveyed and transferred to those on whose account these spaces
are assigned. It is not possible to agree with him that the words
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employed in these regulations denote only a manner in which the
vesting would take place. He would urge that vesting and
conveyance are the words employed not in their strict legal sense.
Meaning thereby, a specific act being required to be performed for
this purpose, but it generally indicates the mode and manner of
handing over. Mr. Kadam has gone as far as suggesting that mere
provision or assigning of a recreation area or recreation open space
means no alienation is possible of the earmarked plot. According to
the respondent No.1, by mere provision the divesting of the right of
re-alienation takes place. Alternatively Mr. Kadam would suggest
that DC Regulation 23 operates as a statutory bar on alienation. He
would submit that there is a common usage contemplated and,
therefore, reading of this DCR would mean once layout is sanctioned
the land gets alienated to the alienee. Mr. Kadam then contends that
the title vests with the plot holders and, therefore, Anusuya could not
have sold this plot nor anyone claiming through her could have
transferred it. Once Anusuya had no title and from inception, then, no
interest could have been created.
46] Mr. Kadam has relied upon paragraph 14 page 72 of the
compilation Volume I which is a pleading in the securitisation
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application. He also relied upon the grounds at page 14, paragraphs
20 and 21. These are the pleadings in the writ petition. He submits
that these pleadings and the grounds in the writ petition are based
on the pleadings filed in the Debts Recovery Tribunal and Debts
Recovery Appellate Tribunal. Our careful reading of all the clauses
and the DC Regulations as a whole leaves us in no manner of doubt
that they and DC Regulation 23 contemplate regulation and control
of use and development of land and in that a provision has to be
made for recreational/amenity spaces but as far as their ownership is
concerned, that would have to be governed by clause (e) of
Regulation 23 sub-regulation (1). It may be that property holders, on
account of whose holdings the recreational space is assigned, can
claim and ought to have access to it, still, its ownership is governed
by general principles and would require conveying the space and
area specifically to a defined legal activity. Therefore, vesting and
ownership of the recreational space takes place by a provision in a
deed of conveyance. There is neither any deprivation of title of
Anusuya or respondent Nos.2 to 4.
47] Mr. Kadam's arguments overlook the fact that even
when there are designations and allocations in a development plan
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and proposals are made reserving lands, time and again it has been
held by the Hon'ble Supreme Court that such plots or lands and
which are styled as reserved plots/lands do not vest or get
transferred to the Planning Authority or the State free of cost. In fact,
provisions of this nature have been struck down as unconstitutional
by the Hon'ble Supreme Court of India and suffice it to refer to the
judgments delivered in the case of Yogendra Pal & Ors. vs.
Municipality, Bhatinda and Anr. AIR 1994 SC 2550 and Pandit Chet
Ram Vashist vs. Municipal Corporation of Delhi, AIR 1995 SC 430.
In the latter case, the Hon'ble Supreme Court held that the resolution
of the Standing Committee of the Corporation holding that area
specified in the layout plan for parking and school shall vest in the
Corporation free of cost was not in accordance with law. Once we
are dealing with a private land, then, all the more it is not possible to
agree with Mr. Kadam.
48] Thus, in our considered opinion, though the bare
reading of Rule 23 indicates that the ownership of the RG plot vests
in all the property owners, on account of whose holdings the
recreational space is assigned, however, as such vesting takes
place only by Deed of Conveyance, this Regulation thus does not
OSK wp-11025-2013.odt
put or create any embargo as such, for sale or transfer of the RG
plot. This Regulation also does not provide for automatic vesting of
the said plot in the name of sub-plot holders but it provides that
vesting is to take place only after the Deed of Conveyance is
executed. Hence, it follows that merely because in the layout plan,
some open plot is shown as RG plot, it does not mean that the
owner of the plot ceases to have any right, title and interest in such a
RG plot. It may be true that use of a RG plot may be restricted, as its
user other than for the purpose of RG is not permissible. Its user
cannot be made except for certain structures, as provided by the
Development Control Regulations. The scheme of Development
Control Regulations reveals that the proposal for construction of
such structure should come from the owners for whom the RG plot is
meant and it should be for their beneficial use. However, restrictions
on user of the RG plot cannot and does not in any way affect the
transferability of the said plot. Hence it would be difficult to accept
the proposition, submitted by learned senior counsel for Respondent
No.1 that as the RG plot cannot be used for any other purpose, other
than the beneficial use of the remaining plot holders, the
transferability of the RG plot is also affected. It has to be held that
the RG plots are as open and free in nature as in the case with any
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other ordinary plots. In our considered opinion, therefore, even
assuming that the transferability of RG plots is restricted or qualified,
it will not be possible in any way to say that RG plots are not having
any 'saleable interest'. It cannot be, therefore, accepted that Smt.
Anusaya Kantilal Shah has no 'saleable interest' in the said plot, so
as to transfer the same to Respondent Nos.2 to 4. The title of this
sub-plot though reserved as RG remained with her, which she had
validly transferred in the name of Respondent Nos.2 to 4, who have
in their turn created mortgage in the said plot in favour of Bank of
India.
49] In our considered opinion, the Debts Recovery Tribunal
has, in this respect rightly placed reliance on the judgment of the
Division Bench of this Court in Municipal Corporation of Greater
Mumbai and Ors. Vs. L.K.Builders8. In this judgment, the question
raised before the Division Bench of this Court was whether the plots
reserved for public purposes like college, cemetery, play-ground,
recreation ground, municipal hall, garden, school, etc have got any
rateable value? The Additional Chief Judge of Small Causes Court,
Mumbai before whom, the rateable value fixed on such R.G. plots by
Mumbai Municipal Corporation, was challenged, held that such plots
8 1995(4) Bombay CR 606
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have nominal or nil rateable value. The MCGM preferred an Appeal
against said judgment of reducing the rateable value as nominal
value. In the said context it was held by this Court as follows;
"Merely because all these plots are reserved for certain
public purposes as mentioned in earlier part of this
judgment under the development plan or under the
town planning scheme, it does not follow that the same
have no value for the owner of the plots. Whenever a
town ship is to come or whenever a huge building
complex is to be constructed, the entire land can never
be built upon. Some of the remaining sub-plots of the
land are always required to be kept open under the
Development Control Rules or some such plots can be
used for limited purposes. It does not follow that these
plots have no rateable value or no value at all".
50] It was further categorically held in this judgment that,
"there is no restriction on the sale of such RG plots". In our
considered opinion, in view of this categorical observation made by
this Court that there is no restriction on the sale of RG plots, the
contention of learned senior counsel for Respondent No.1 that the
mortgaged property in the instant case, being a RG plot,
Smt.Anusaya Kantilal Shah was not having any 'saleable interest'
therein, so as to transfer the same to Respondent Nos.2 to 4, cannot
be accepted.
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51] The next question for consideration is, 'whether the fact
of it being an RG plot was not disclosed in tender documents, is
sufficient to entitle Respondent No.1 to cancel or set aside the
Auction Sale itself?' According to learned senior counsel for
Respondent No.1, the fact that it was a RG plot necessarily implies
that there was either non existence of title on the said plot or if there
is a title, then it was defunct in the sense that no one can purchase
or sell the said plot, except the sub-plot owners. Therefore, this
defect in the title or absence of title goes to the root of the matter
and as such the Auction Sale, conducted by the petitioner without
disclosing this material fact cannot be called as legal and valid and
hence, it needs to be set aside. However, once it is held that
reservation of the subject plot as RG plot has no effect on its title or
saleability, then, this contention of Respondent No.1 holds no merits.
52] Moreover, Respondent No.1 is otherwise also not
entitled to raise such contention, if we have regard to the terms and
conditions of the tender document, namely "the Invitation of the
Sale". In this case, admittedly the Auction Sale was conducted on
"as is where is and as is what is basis". This fact is not disputed by
Respondent No.1 also. Learned senior counsel for the Petitioner had
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also highlighted the various relevant clauses at Sr. Nos.12, 13, 15
and 27 of the said Tender Document, which can be reproduced
below for ready reference and which emphasize the fact that the
sale was strictly on "as is where is and as is what is basis".
"12. The successful Quoter(s) shall be deemed to
purchase the property with full knowledge of and
subject to all the reservations, if any, in the Master
Plan and/or Development Plan or Draft
Development Plan or Town Planning Scheme
affecting the said property and consent, including
permission of the competent authority and/or under
the provisions of the Urban Ld (Ceiling &
Regulation Act) if any required form the concerned
authorities.
13. The secured assets are offered for sale strictly on
"as is where is and as is what is basis". Neither
ARCIL nor the authorized Officer undertakes any
responsibility to produce any permission/licence
etc. in respect of the assets offered for sale. The
secured assets are being sold with all known and
unknown encumbrances.
15. The Quoters in order to protect their individual
interests are advised to verify the assets, conduct
due diligence at their own costs in respect of the
same, as well as ascertain the known and
unknown liabilities, encumbrances and authorities
of stake holders to their satisfaction before
submitting the Quotation. Any Quotation made
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shall be deemed to have been submitted after
complete satisfaction of title thereto and or all
claims there against and due proper inspection of
the secured assets and hence the Quoter shall not
be entitled to make any representation or raise any
querry/objection vis-a-vis ARCIL/Authorized
Officer/Secured Creditor as to the title or condition
of the secured assets or any part thereof any
liabilities/ encumbrances/ dues/taxes/ levies
irrespective as to whether disclosed or
undisclosed.
27. The information in respect of the said secured
assets, including the description as per Annexure I
and dues specified hereinabove, in any, have been
stated to the best of the knowledge of the
Authorized Officcer, who, however, shall not be
responsible for any error, misstatement or omission
in the said particulars. The Quoteres are, therefore,
requested to verify the same for their own
individual before submitting their Quotations."
53] Learned senior counsel for the Petitioner has also, in
this respect, drawn attention to the following clauses in Appendix-II
of the Quotation Form submitted by Respondent No.1.
"We are also aware and confirm that ARCIL/authorized
Officer have not made any representation as to the
correctness, validity or adequacy or otherwise of any
information pertaining to liabilities, encumbrances and
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dues and have carried out our own due diligence for the
purpose before submitting this Quotation.
ARCIL/authorized Officer shall not be in any way liable
for anything pertaining to the same".
54] Our attention is also invited to the Annexure 'B' to the
Respondent No.1's letter dated 16th September, 2009 accepting the
bid. It reads as follows;
"The purchaser is deemed to have verified the Secured
Assets, conducted due diligence in respect of the same,
as well as ascertain the known and unknown liabilities,
encumbrances and any other dues from concerned
authorities or stake holders to their satisfaction. The
payment of purchase consideration for secured assets to
ARCIL is deemed to have been submitted after complete
satisfaction of title thereto and / or all claims there
against and due proper inspection of the Secured Assets
and hence the purchaser shall not be entitled to make
any representation or raise any query / objection / I
ARCIL / Authorized Officer as to the title or condition of
the Secured Assets or any part thereof or any liabilities /
encumbrances / dues / taxes / levies irrespective as to
whether disclosed or undisclosed."
55] The perusal of these various clauses in the Tender Bid,
Appendix-II and Respondent No.1's letter dated 16 th September,
2009 thus makes it very clear that, it was entirely the responsibility
and liability of the bidder/purchaser, Respondent No.1 herein, to
make necessary enquiries as to the title of the mortgaged property.
Clause No.12 of the Tender Document makes it abundantly clear
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that successful bidder shall be deemed to purchase the property with
full knowledge and subject to all the reservations, if any, in the
Master Plan or Development Plan or Draft Development Plan or
Town Planning Scheme, affecting the said property. Thus, it was not
only a sale on "as is where is and as is what is basis" but it was also
casting a positive burden on the purchaser to ensure that he has
made the necessary enquiries with all the relevant authorities to
know that the property is not affected, in any way, either in its title or
even under Development Control Regulations. Respondent No.1 has
also, vide its letter dated 16th September, 2009, accepted these
terms and conditions, with a categorical statement that Respondent
No.1 is deemed to have verified the Secured Assets, conducted the
due diligence in respect of the same, as well as has ascertained the
known and unknown liability, encumbrance etc. over the secured
assets. It was also made clear in the said letter that the Authorized
Officer of the Petitioner has not made any representation as to the
correctness, validity, adequacy or otherwise of the information
pertaining to the assets, liabilities etc.
56] Thus in this case, it is clear that the Auction Sale was
held on the terms and conditions reproduced above, which were
binding on both the parties. These terms and conditions had put the
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positive burden and liability on Respondent No.1, the purchaser, of
satisfaction of the valid title as also the satisfaction that the said
property is not reserved under development plan or town planning
scheme. As the reservation of the plot as RG is under Sanctioned
Development Plan or Town Planning Scheme, in our considered
opinion, it was obligatory on the part of Respondent No.1 to verify
whether there was any reservation on the sale/plot under
Development Control Regulation, before submitting its bid.
57]
It is a matter of record and undisputed fact that
Respondent No.1 has obtained the search report of the lawyer, who
has searched the record of the Registrar of Assurances. It was,
therefore, for Respondent No.1 only, to take the search of the
relevant reservations on the said plot from Town Planning Authority
under Town Planning Scheme. If Respondent No.1 has not done so,
then now he cannot contend that the sale should be set-aside.
58] According to learned senior counsel for Respondent
No.1, however, it was necessary for the Petitioner also to disclose
this relevant and material fact in the Tender Bid. It is urged that the
fact that plot was reserved as RG has material bearing on the
transferability and beneficial use of the said plot. It has also the
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effect on the value of the said plot and, therefore, in the public notice
of the sale, the Petitioner should have mentioned this relevant and
material fact. In this respect learned senior counsel for Respondent
No.1, has relied upon Clause (f) of proviso to Sub-Rule 6 of Rule 8
of the Security Interest (Enforcement) Rules, 2002 which provides
about the facts to be disclosed in the notice for auction/sale and it
reads as follows;
"Any other thing which the authorized officer
considers it material for a purchaser to know in order
to judge the nature and value of the property".
59] According to learned senior counsel for Respondent
No.1, as the reservation of the subject plot as RG was having
bearing on its value, it was necessary for the Petitioner to mention
the same in the public notice. The Petitioner, therefore, cannot
contend that as the sale was on "as is where is and as is what is
basis", Respondent No.1 is bound by the said sale, though, the fact
that it was a RG plot has caused serious prejudice to the rights of
Respondent No.1 over the said plot.
60] However, in our view, as rightly submitted by learned
senior counsel for the Petitioner, when the auction sale is on "as is
where is and as is what is basis", that too, casting a clear duty on the
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bidder/purchaser to ascertain the title and all relevant faccts with due
diligence, then the sale cannot be set-aside on account of the
negligence on the part of the bidder/purchaser to do so. We may in
this respect rely upon the judgment of the Hon'ble Apex Court in the
case of United Bank of India Vs. Official Liquidator and Ors. 9,
wherein the Auction Purchaser has challenged the sale conducted
by the Official Liquidator on count that the property was onerous.
While rejecting this contention, it was held that as the sale was on
"as is where is basis", Auction Purchaser cannot wriggle out of the
same on the count of diminution of the sale price. It was held that;
"When the Official Liquidator sells the property and
assets of a company in liquidation under the orders of
the Court he cannot and does not hold out any
guarantee or warranty in respect thereof. This is
because he must proceed upon the basis of what the
records of the company in liquidation show. It is for the
intending purchaser to satisfy himself in all respects as
to the title, encumbrances and so forth of the
immovable property that he proposes to purchase. He
cannot after having purchased the property on such
terms then claim diminution in the price on the ground
of defect in title or description of the property. The case
of the Official Liquidator selling the property of a
company in liquidation under the orders of the Court in
9 (1994) 1 SCC 575
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altogether different from the case of an individual selling
immovable property belonging to himself".
(Emphasis supplied)
61] Learned senior counsel for the Petitioner has also in this
respect rightly relied upon the decision of the Madras High Court in
the case of V. Sambandan Vs. The Punjab National Bank by its
Chairman cum Managing Director and Anr.10, wherein also relying
upon the above said decision of the Hon'ble Apex Court in the case
of United Bank of India (Supra), it was held that when the sale is on
"as is where is basis" and it is by the Official Liquidator, it does not
hold out any guarantee and/or warranty in respect of the title to the
said property.
62] We can also consider in this respect the judgment of the
Delhi High Court in the case of M/s.Midas Electronics Pvt.Ltd. Vs.
Small Industrial Development Bank of India and Ors. 11, relied upon
by learned senior counsel for the Petitioner. In that case also, the
Auction Sale was conducted by the Bank on "as is where is basis",
highlighting that it was the duty of a bidder to ascertain the title of the
property, whether there were encumbrance thereon; as also the
physical measurement and the site condition. In the said case also
10 CDJ Law Journal 2009 MHC 5179
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the reliance was placed on Sub-Rule 6 of Rule 8 of the Security
Interest (Enforcement) Rules, 2002 by the Auction Purchaser to
challenge the said sale by contending that it was the duty of the
secured creditor like Bank to disclose the material things which a
purchaser must know, in order to judge the nature and value of the
property. It was contended that as it was not disclosed that the title
to the sale property was "leasehold" and that there were outstanding
lease rentals payable, the auction notice had to be quashed and the
money be returned with interest. This contention was however,
rejected by the Delhi High Court, holding that though, as per Clause
(a) to the proviso to Sub-Rule 6 of Rule 8 of the Security Interest
(Enforcement) Rules, 2002 any encumbrance known to the secured
creditor of a property has to be indicated in the public notice inviting
bids, however, the 'lease-hold' title is not an encumbrance. The
advertisement was neutral. It neither informed that property is 'free-
hold' nor informed that the property is 'lease-hold'.The prospective
bidders however, were clearly informed that property being sold is on
"as is where is basis". Hence relying on the above said authority of
United Bank of India (Supra), it was held that when there was clear
indication to the prospective bidders that property is put up for sale
on "as is where is basis", no case was made out to set aside the
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auction sale. The Writ Petition came to be dismissed accordingly.
63] As to the judgment of the Hon'ble Apex Court in
Haryana Financial Corporation & anr. Vs. Rajesh Gupta12, on which
the learned Appellate Tribunal has relied upon, in the said case,
auction sale was challenged on the ground that in the public notice
the non existence of the independent passage to the unit was not
disclosed. Moreover, copy of the site application and the building
plan, although demanded by the purchaser to ascertain the correct
position, was not supplied. In such situation, it was held that in view
of Section 55 of the Transfer of Property Act, 1882, which casts a
duty of the seller to disclose to the buyer any material defect in the
property or in the seller's title thereto of which the seller is, and the
buyer is not, aware, and which the buyer could not, with ordinary
care discover. It was held that it was incumbent on the State
Financial Corporation to disclose to the Auction Purchaser about the
non-existence of the independent passage to the unit. As the
Corporation failed to do so and also failed to produce to the buyer
the entire documentation as required by Section 55(1) (b) of the
Transfer of Property Act, 1882, the sale was required to be set aside.
64] Thus, in the said case, the observations made by the
12 (2010) 1 SCC 655
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Hon'ble Apex Court in paragraph 29, reveal that the Respondent-
Auction Purchaser, therein, had made all necessary enquiries and
had also called upon the Petitioner Corporation to produce the
necessary documents which Corporation failed to do and hence in
the light thereof, it was held that the Corporation has failed to
perform its obligation in giving fair description of the property offered
for sale. The Hon'ble Apex Court has therefore, in this context relied
upon provisions of Section 55 (1)(a) & (b) of the Transfer of Property
Act, 1882 and upheld the contention of the Auction Purchaser. Thus,
it can be clearly seen that the facts of this authority are totally
different from the facts of the case before us. In this authority, the
sale was not as on "as is where is and as is what is basis", with so
many conditions attached thereto as in the instant case. Learned
Presiding Officer of Debts Recovery Tribunal has therefore, rightly
distinguished the facts of this case to the facts of the reported
authority, which Appellate Tribunal has failed to do.
65] As held by the learned Debts Recovery Tribunal that in
the instant case there are so many other conditions of the sale,
which clearly cast a duty on Respondent No.1 to satisfy itself not
only about the valid title of the property but also to the fact whether
sale plot was reserved under the Development Plan or Town
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Planning Scheme. It is also pertinent to note that the Petitioner has
not deliberately withheld the said information from the knowledge of
prospective bidders. Both, the Debts Recovery Tribunal and the
Appellate Tribunal have arrived at the conclusion that it was a mutual
mistake on the part of both the parties as both the parties were not
aware of the plot being RG plot. Hence having regard to the terms
and conditions of the Tender Bid of which Respondent No.1 was fully
aware, and which casted a burden on Respondent No.1 to verify
whether the plot was reserved or otherwise, and as Respondent
No.1 has not done so, in our opinion, now he cannot turn back to the
auction and contend that auction be set-aside. It is also not the case,
as held hereinabove, that RG plot cannot be sold or there is blanket
bar on sale of such plots. If it was so, then one would have
considered the contention of Respondent No.1 that the Petitioner
had no 'saleable interest' in the subject plot which the Petitioner
could transfer to Respondent No.1. The legal position is however,
very clear that the title in law remained vested with Smt.Anusaya
Kantilal Shah, even after the plot was declared as RG plot. She was
not divested of the same and therefore, as the Petitioner had
'saleable interest' in the plot, the Auction of the plot cannot be set-
aside merely because Respondent No.1 had failed to act with due
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diligence and subsequently discovered that it was a RG plot, its use
is restricted and hence value is diminished, especially when it was
the sale on "as is where is and as is what is basis" casting in so
many terms and conditions, the burden and liability on Respondent
No.1 to ascertain whether it was so reserved or otherwise.
66] In our considered opinion, therefore, the impugned
judgment and order of the Appellate Tribunal, setting aside the sale
cannot be sustained; it is liable to be quashed and set-aside,
restoring thereby the order of Presiding Officer of the Debts
Recovery Tribunal dated 29th July, 2011.
67] Accordingly, the writ petition is allowed. The impugned
judgment and order passed by Debts Recovery Appellate Tribunal
dated 23rd September, 2013 is hereby quashed and set-aside. As a
result, the Appeal No.161 of 2011 stands dismissed. In
consequence, the order passed by Debts Recovery Tribunal dated
29th July, 2011 is upheld. In the circumstances, Rule is made
absolute in these terms leaving parties to bear their own costs.
68] At this stage, request is made by learned counsel for
first respondent to continue the order passed on 5 th February, 2014,
for further two months, so as to enable the first respondent to
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consider their position, if advised, to challenge the judgment of this
Court in the Higher Court. This request is opposed by learned
counsel for the petitioner and it is submitted that once the petition
succeeds, then there is no warrant for continuing this arrangement.
69] In the circumstances, and when there was a direction to
refund the amount of Rs.7.01 Crores as a final order, which has
been set-aside by us, then, there is no warrant for continuing this
interim arrangement. We do not think that the first respondent is
without any remedy. In the event, this judgment is reversed, they can
seek appropriate relief in the Higher Court. The request is, therefore,
refused.
70] The amount deposited in the Court is thus allowed to be
withdrawn by the petitioner with accrued interest thereon.
71] Civil Application is, accordingly, disposed of in the above
terms.
(DR.SHALINI PHANSALKAR-JOSHI, J.) (S. C. DHARMADHIKARI, J.)
