Bombay High Court
Mr. Mukesh Kothari vs State Bank Of India And Ors on 10 March, 2017
Bench: R.M. Borde
Yadav VG. 1 Judg.wp.9804.14.odt.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 9804 OF 2014
Mr. Mukesh Kothari residing at Flat No.
101, 1st Floor, Rajendra Krupa Co-op.Hsg.
Soc. Ltd., Building No. 5, Manish
Darshan, J. B. Nagar, Andheri (East),
Mumbai 400 059.
.... PETITIONER
V E R S U S
1. State Bank of India, having its
commercial branch amongst others at
Halgekar Building, Opp. Mahavir
Bhawan, Hindwadi, Belgaum 590 011.
2. Rajkumar G Murkibhavi residing at 116,
Pooja Building, 5th Cross Azam Nagar,
Belgaum Karnataka, 590 010.
3. Allahabad Bank having its Branch Office
amongst others at Dharam Krupa
Building, 1st Floor, Old Nagardas Road,
Andheri (East), Mumbai 400 069.
4. Rajendra Krupa Co-op. Hsg. Soc. Ltd., a
Co-operative Society registered under the
MCS Act, 1960 having its Office at
Manish Darshan Near Kanti Nagar, Jain
Temple, J. B. Nagar, Andheri (East),
Mumbai 400 059.
5. State of Maharashtra .... RESPONDENTS
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APPEARANCE :
• Mr. Aashish Kamat a/w Mr. Nikhil Rajani i/by. V. Deshpande
& Co. for Petitioner.
• Mr. Raj Patel i/by. Mr. Prakash Panjabi for Respondent No. 1.
CORAM : R. M. BORDE AND
A. S. GADKARI, JJ.
RESERVED ON : 7th March 2017.
DELIVERED ON: 10th March 2017.
JUDGMENT (PER : R. M. BORDE, J)
. Heard.
2. Rule. With the consent of the parties, Petition is taken
up for final disposal at the admission stage.
3. The Petitioner is objecting to the decision rendered by
the Debts Recovery Appellate Tribunal at Mumbai in Appeal No.
117 of 2009 decided on 16th June 2014 confirming the decision
rendered by the Debts Recovery Tribunal - III at Mumbai in S. A.
No. 35 of 2007 decided on 16th April 2009. The Petitioner herein is
purchaser of Flat No. 101, First Floor, Rajendra Kripa Co-operative
Housing Society Ltd; Manish Darshan, Bidkanti Nagar, near Jain
Yadav VG. 3 Judg.wp.9804.14.odt.
Temple, J. B. Nagar, Andheri (East), Mumbai - 59. The flat was
purchased by Petitioner from Respondent No. 2 through a Sale-
deed dated 18th November 2006 for a sale consideration of Rs.
22.00 Lacs. According to Petitioner, the Sale Agreement was duly
registered on 18th November 2006. The property has been
purchased by Petitioner by obtaining housing loan from
Respondent No. 3 - Allahabad Bank, in whose favour Petitioner is
stated to have created Equitable mortgage in respect of the said
flat. The Petitioner claims that Respondent No. 1 - State Bank of
India has taken steps under Section 13(4) of the SARFAESI Act and
issued a possession notice on 12th April 2007 on the Petitioner. The
Petitioner claims that he is neither a Borrower nor a Guarantor in
respect of the loan availed by Respondent No. 2 from Respondent
No. 1 - Bank.
4. There are two contentions raised by the Petitioner for
resisting the proposed action under Section 13(4) of the SARFAESI
Act at the instance of Respondent No.1 - (i) The Equitable
mortgage created by Respondent No. 2 in favour of Respondent No.
1 - Bank is not a legal, valid and that the Respondent No. 1 - Bank
Yadav VG. 4 Judg.wp.9804.14.odt.
has no right to proceed against the property in possession of
Petitioner under the SARFAESI Act. The Petitioner prays for
declaration of the possession notice dated 12 th April 2007 as null
and void; and (ii) it also contends that the Petitioner is bonafide
purchaser for value, without notice of the Equitable Mortgage
allegedly created in favour of the Respondent No. 1 - Bank. The
Petitioner also contends that he did not have any knowledge in
respect of initiation of proceedings under RDDB & FI Act by
Respondent No. 1 and issuance of interim order of injunction by
the Debts Recovery Tribunal at Bangalore. It is further contended
that even otherwise the transaction of sale between Petitioner and
Respondent No. 2 remains unaffected and that Respondent No. 1 -
Bank does not have any entitlement to proceed against the
Petitioner.
5. It is contended on behalf of Respondent No. 1 - Bank
that the property in dispute has been mortgaged with Respondent
No. 1 - Bank. The Respondent No. 2 has created the Equitable
mortgage by deposit of original Title Deeds and the mortgage is
prior in time and subsisting. The Petitioner does not have any right
Yadav VG. 5 Judg.wp.9804.14.odt.
to create a mortgage in favour of Respondent No. 3 - Allahabad
Bank in respect of the property in dispute and the mortgage created
in favour of Respondent No. 1 - Bank being prior in time, shall
have precedence over the mortgage allegedly created in favour of
Respondent No. 3 - Allahabad Bank by Petitioner. It is also
contended that the transaction of sale effected during operation of
the order of injunction is illegal and as such sale does not have any
binding effect on the Respondent No. 1 - Bank and further that the
prior claim of Respondent No. 1 - Bank on the basis of the
mortgage created by Respondent No. 2 - original owner of the
property remains unaffected. The Petitioner does not have any right
or entitlement to question the Equitable mortgage created by
Respondent No. 2 in favour of Respondent No. 1 - Bank and more
specifically when Respondent No.2 has not raised any question and
has accepted the factum of creation of mortgage by his conduct of
not raising any question in that behalf.
6. The Respondent No. 1 - Bank presented Original
Application No. 47 of 2001 before the Debts Recovery Tribunal
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Karnataka at Bangalore for recovery of amount. During the
pendency of Original Application No. 47 of 2001, Respondent No. 1
- Bank claimed an order of injunction which came to be issued by
the Debts Recovery Tribunal as requested by Respondent No. 1 -
Bank on 12th February 2001 restraining Respondent No. 2 from
transferring, alienating or otherwise dealing with the property in
question. During the pendency of Original Application and
operation of order of injunction, a transaction has been effected
between Respondent No. 2 and Petitioner herein. The Petitioner, as
stated above, questioned the action initiated by Respondent No. 1 -
Bank under Section 13 (4) of the SARFAESI Act by presenting S. A.
No. 35 of 2007 to the Debts Recovery Tribunal-III at Mumbai. On
consideration of contentions raised before the Tribunal, the
Tribunal recorded finding that the transaction of mortgage entered
into between Respondent No. 1 - Bank and Respondent No. 2
cannot be stated to have been proved. It is observed by the Tribunal
that Respondent No. 1 - Bank has not produced the notification
issued by the Government of Karnataka under Section 58 (f) of the
Transfer of Property Act to demonstrate that Belgaum is the City
Yadav VG. 7 Judg.wp.9804.14.odt.
notified by the State Government permitting execution of Equitable
mortgage. In view of the failure of Respondent No. 1 - Bank to
produce notification issued by the Government of Karnataka under
Section 58 (f) of the Transfer of Property Act, the creation of
mortgage by Respondent No. 1 - Bank by deposit of Title Deeds
cannot be recognised. The Tribunal, however, considered the issue
of transaction of sale effected by Respondent No. 2 in favour of
Petitioner during the operation of order of injunction issued by the
Debts Recovery Tribunal Karnataka at Bangalore and recorded the
finding that such transaction being illegal one, Petitioner cannot
claim any relief. The Appeal presented by Petitioner came to be
dismissed by the Debts Recovery Tribunal - III at Mumbai.
7. Being aggrieved by the order passed by the Debts
Recovery Tribunal -III at Mumbai, Petitioner approached to the
Debts Recovery Appellate Tribunal by presenting Appeal No. 117 of
2009 which came to be decided by the Appellate Forum on 16 th
June 2014. The Appellate Court apart from confirming the findings
in respect of illegality of the sale between Petitioner and
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Respondent No. 2, has observed that Belgaum City is notified by
Government of Karnataka under Section 58 (f) of the Transfer of
Property Act and as such the transaction of Equitable mortgage
created in favour of Respondent No. 1 - Bank is valid and
subsisting and Respondent No. 1 - Bank can surely recover the
amount by adopting measures as provided under Section 13 (4) of
SARFAESI Act.
8. It is vehemently contended by the Counsel appearing
for Petitioner that the transaction of sale between Respondent No.
2 and Petitioner is legal and valid, though entered into during the
operation of order of injunction against Respondent No. 2. It is
contended that Petitioner is neither a Borrower nor a Guarantor in
respect of the loan secured by Respondent No. 2 from Respondent
No. 1 - Bank. The Petitioner did not have any knowledge of
creation of Equitable mortgage by Respondent No. 2 in favour of
Respondent No. 1 - Bank. Even if it is assumed that the Equitable
mortgage is created, since it is not in conformity with Section 58 (f)
of the Transfer of Property Act, the Respondent No. 1 - Bank does
Yadav VG. 9 Judg.wp.9804.14.odt.
not have any entitlement to recover the amount on the basis of
such Equitable mortgage. It is contended that since the transaction
between Petitioner and Respondent No. 2 is legal and valid,
Respondent No. 1 - Bank shall not be permitted to take measures
by resorting to provisions of Section 13 (4) of the SARFAESI Act.
9. It is not a matter of doubt that Respondent No. 1 - Bank
presented proceedings before the Debts Recovery Tribunal
Karnataka at Bangalore under the provisions of RDDB & FI Act and
the order of injunction restraining Respondent No. 2 from
transferring, alienating or dealing with the disputed property has
been issued on 16th April 2001 and the said order of injunction is
subsisting. It is also not a matter of doubt that Respondent No. 2
was aware of the issuance of order of injunction and in breach of
the restraining order he has entered into sale transaction with
Petitioner. It is also worthwhile to note that Respondent No. 2
has not come forward to deny creation of Equitable mortgage
concerning the disputed property with Respondent No. 1 - Bank.
The transaction of mortgage entered into between Respondent No.
Yadav VG. 10 Judg.wp.9804.14.odt.
1 - Bank and Respondent No. 2 is disputable by the parties to the
transaction and since Respondent No. 2 has preferred not to
question the transaction, it would be a matter of serious doubt as to
whether the Petitioner who has purchased property during
operation of prohibitory order of injunction issued against
Respondent No. 2 is entitled to question the same. In our view, the
Petitioner prima facie does not have entitlement to question the
validity of the Equitable mortgage created in favour of Respondent
no. 1 - Bank by Respondent No. 2 especially when Respondent No.
2 who is a party to the transaction has preferred not to question the
same and accepted it.
10. The alienation made by Respondent No. 1 - Bank in
favour of Petitioner in defiance of the restraint order passed by the
Debts Recovery Tribunal Karnataka at Bangalore has to be treated
as having not taken place at all for its purposes. In this context,
reliance can be placed on the judgment in the matter of Surjit
Singh and others V/s Harbans Singh and others, reported in
AIR 1996 SC 135. It is observed by the Apex Court in para No. 4 of
the said judgment as below :-
Yadav VG. 11 Judg.wp.9804.14.odt.
"If we were to let it go as such, it would defeat the ends of
justice and the prevalent public policy. When the Court
intends a particular state of affairs to exist while it is in
seisin of a lis, that state of affairs is not only required to
be maintained, but it is presumed to exist till the Court
orders otherwise. The Court, in these circumstances has
the duty, as also the right, to treat the
alienation/assignment as having not taken place at all
for its purposes."
11. An identical question arose in the matter of Keshrimal
Jivji Shah and another V/s Bank of Maharashtra and others,
reported in 2004(3) Mh.L.J. 893. The question was - whether the
transfer of immovable property in contravention of prohibitory
direction or injunction order of a court is illegal or void. While
dealing with the issue, the Division Bench of this Court has
observed in paragraph 26 to 28 of the said judgment as quoted
below :-
"26. We cannot accept Shri Naphade's contention
that observations of the Supreme Court in the case of
Surjit Singh should be read as restricted to proceedings
under Order 22 Rule 10 of Civil Procedure Code and the
Yadav VG. 12 Judg.wp.9804.14.odt.
same cannot be extended to defiance of injunction order
issued under Order 39 Rule 1 of Civil Procedure Code.
Once the issue is placed on the pedestal of public policy
and the very faith of litigants in Rule of law and
administration of justice, then it is not possible to make
the distinction or bifurcation suggested by Shri Naphade.
It would mean that consequences of nullifying such
transaction not being provided by the Statute, it would
not lose its legal efficacy even if it is in utter disregard to
or in violation of or breach of prohibitory order or order
of injunction issued by a Court of law. It would mean that
parties can breach and violate Court orders openly and
with impunity and neither they nor the beneficiaries
suffer any consequences. It is time that we recognise the
principle that transfer of immovable property in violation
of an order of injunction or prohibition issued by Court of
law, confers no right, title or interest in the transferee, as
it is no transfer at all. The transferee cannot be allowed
to reap advantage or benefit from such transfer merely
because he is not party to the proceedings in which order
of injunction or other prohibitory direction or restraint
came to be issued. It is enough that the transferor is a
party and the order was in force. These two conditions
being satisfied, the transfer must not be upheld. If this
course is not adopted then the tendency to flout orders of
Yadav VG. 13 Judg.wp.9804.14.odt.
Courts which is increasing day by day can never be
curbed. The Court exercises its powers on the foundation
of respect and regard for its authority by litigating public.
People would loose faith and respect completely if the
Court does not curb and prevent this tendency. The note
of caution of the Supreme Court must be consistently at
the back of everybody's mind. Therefore, Shri Naphade is
not right in distinction which he is trying to make.
27. Equally untenable is the contention of Shri
Naphade that an order of injunction will bind only the
transferor in this case. It is his submission that the said
order does not bind the world at large. He submits that
ownership rights are neither taken away nor restricted in
any manner by order of injunction or other preventive
directions. He submits that the transfer in favour of his
client was thus neither invalid nor illegal, leave alone null
and void. For the reasons already recorded above, we find
it difficult to accept this contention of Shri Naphade.
Decision of the Supreme Court in the case of Krishan
Kumar Narula Vs. State of Jammu and Kashmir, reported
in AIR 1967 SC 1386 has no application. There, the
Supreme Court was distinguishing an order of stay from
an order of injunction. The distinction was made in the
context of consequences upon breach and violation of such
orders. It is in that context that the Supreme Court
Yadav VG. 14 Judg.wp.9804.14.odt.
observed that the order of stay is qua a Court, whereas an
order of injunction reaches and touches a party to the lis.
These observations cannot be applied when it is noticed
that during the pendency of an order of injunction,
immovable property, which is subject matter of restraint
or injunction, is transferred. When this course is
admittedly adopted, then there is no choice but to declare
the transaction as illegal. There is no question of then
deciding the nature and effect of the order of injunction.
28. Mr. Naphade's submissions overlook the effect
of an order of injunction. An order issuing interlocutory
injunction is issued with a view to preserve and protect
status quo during the pendency of the suit or litigation.
The true effect of such an order is, therefore, preservation
of status quo prevailing as on the date of issuance of the
order. Any alteration in the status quo as prevailing and
directed to be maintained by the Court of law is not
permissible except with leave or sanction of Curt. It is well
settled that if Courts are not to honour and implement
their own orders and encourage party litigants, be they
public authorities, to invent methods of their own to short
circuit and give a go by to the obligations and liabilities
incurred by them under orders of Courts, the rule of law
will become casualty in the process - a consequence to be
Yadav VG. 15 Judg.wp.9804.14.odt.
jealously averred by all and at any rate by the highest
Courts in the State. (see AIR 2001 SC 2790 at P. 2792)."
12. In the light of the decision in the matter of Surjit Singh
(cited supra) as well as considering the conclusion arrived at in the
matter of Keshrimal Shah (cited supra), the transaction which is
recorded in defiance of the prohibitory order shall have to be
branded as illegal, if not void. In the matter of Ghanshyam Sarda
V/s Shashikant Jha, Director, M/s. J. K. Jute Mills Company
Limited and Others, reported in (2017) 1 SCC 599, the Supreme
Court has considered the question of effect of transfer or alienation
in violation of the prohibitory order and has observed that :
"legal consequences of what has been done in breach of or
in violation of the order of stay or injunction can be
undone and the parties could be put back to the same
position as they stood immediately prior to such order of
stay or injunction."
The Counsel appearing for Petitioners relying upon certain
observations in para No. 25 of the aforesaid judgment contends
that; the transaction of sale between Petitioner and Respondent
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No. 2 shall have to be deemed valid. The observations recorded in
para No. 25 are as recorded below :
"If by disobedience the persons enjoined claim that they
have validly effected some charge in the rights and
liabilities of others, although they are liable to penalties
for contempt of court for doing what they did,
nevertheless those acts were validly done. As has been
recorded in the aforesaid judgment."
13. As has been recorded in the aforesaid judgment as well
as in the matter of Keshrimal Shah that the transaction may bind
the parties but such transaction may not override the entitlement or
right of any other party in whose favour the prohibitory order came
to be issued. The transaction of sale entered into between
Respondent No. 2 and Petitioner during operation of the
prohibitory order may bind the parties but the said transaction will
not have any effect on the prior claim of Respondent No. 1 - Bank
as against Respondent No. 2 on the basis of creation of a prior
mortgage in favour of Respondent No. 1 - Bank by Respondent No.
2. The illegal transaction entered into between Respondent No. 2
Yadav VG. 17 Judg.wp.9804.14.odt.
and Petitioner will not bind or affect the entitlement of Respondent
No. 1 - Bank.
14. The Petitioner has made reference to the judgment in
the matter of Thomson Press (India) Limited V/s Nanak Builders
and Investors Private Limited and Others, reported in (2013) 5
SCC 397. In paragraph no. 53 of the said judgment, the Apex
Court has observed thus :-
"53. There is, therefore, little room for any doubt
that the transfer of the suit property pendente lite is not
void ab initio and that the purchaser of any such property
takes the bargain subject to the rights of the plaintiff in
the pending suit. Although the above decisions do not deal
with a fact situation where the sale deed is executed in
breach of an injunction issued by a competent court, we
do not see any reason why the breach of any such
injunction should render the transfer whether by way of
an absolute sale or otherwise ineffective. The party
committing the breach may doubtless incur the liability to
be punished for the breach committed by it but the sale by
itself may remain valid as between the parties to the
transaction subject only to any directions which the
competent court may issue in the suit against the vendor."
Yadav VG. 18 Judg.wp.9804.14.odt.
15. The preposition laid down in the judgment that the
party committing the breach may doubtless incur the liability to be
punished for the breach committed by it but the sale by itself may
remain valid as between the parties to the transaction subject only
to any directions which the competent court may issue in the suit
against the vendor is not at all disputable. The transaction entered
into between Respondent No. 2 and Petitioner binds the parties,
however, such illegal transaction does not have any precedence
over the prior claim of Respondent No. 1 - Bank based upon the
Equitable mortgage entered into between Respondent No. 1 - Bank
and Respondent No. 2. The Petitioner has vehemently contended
that Respondent No. 1 - Bank has failed to prove the prior claim on
the basis of Equitable mortgage entered into between Respondent
No. 1 - Bank and Respondent No. 2. It is contended that Belgaum
is not the town notified by the Government of Karnataka for
purposes of recording Equitable mortgage under Section 58 (f) of
the Transfer of Property Act and as such the transaction of
mortgage cannot be recognized.
Yadav VG. 19 Judg.wp.9804.14.odt.
16. It must be noted that the parties to the transaction i.e.
Respondent No. 2 and more particularly Respondent No. 2 shall be
deemed to have accepted the same since he had not questioned the
transaction. The Petitioner who is purchaser of the property during
operation of the prohibitory order of injunction is not entitled to
question the transaction when the Respondent No. 2 who is the
author of the said mortgage transaction does not dispute the same
and moreover in the circumstance when the subsequent transaction
of sale between Petitioner and Respondent No. 2 is illegal. Even
otherwise, there does not appear to be any room for doubt that
Belgaum was the District headquarter before reorganisation of the
states and in view of Mysore Gazette dated 24 th July 1969 the
provisions of Section 58 (f) of the Transfer of Property Act are
made applicable to all the district headquarters in Mysore State.
17. The Counsel appearing for Respondent No. 1 - Bank
has referred to certain notifications issued by the State of
Karnataka. The extract of the list of notified places for deposit of
Title Deeds in the State of Karnataka is downloaded from the
Yadav VG. 20 Judg.wp.9804.14.odt.
Website of the State of Karnataka and there is a reference to district
Belgaum in the list which has been brought to our notice. The
Appellate Court has also referred to the Commentary of 'Transfer of
Property Act' by Mulla & Mulla and has recorded the finding that
Belgaum is the town prescribed under Section 58(f) of the Transfer
of Property Act, where Equitable Mortgage can be created. Merely
because the original gazette has not been placed before the Court,
will not lead to a conclusion that no Equitable mortgage can be
created at Belgaum.
18. As has been recorded above, since Respondent No. 2
who has created equitable mortgage has not questioned the same,
the transaction which is otherwise validly entered into cannot be
nullified on the technical plea raised by the Petitioner who himself
is staking claim on the basis of an illegal transaction. There are
three requirements of the Mortgage Deed by deposit of Title Deed -
(i) Debt, (ii) Deposit of Title Deeds; and (iii) an intention that the
Deeds shall be the security for the debt [K. J. Nathan V/s
S.V.Maruthi Rao, AIR 1965 SC 430]. All the ingredients of the valid
mortgage transaction do find place in the instant matter.
Yadav VG. 21 Judg.wp.9804.14.odt.
19. In our considered opinion, there is a valid mortgage in
favour of Respondent No. 1 - Bank created by Respondent No. 2
and that such transaction is not at all been questioned by
Respondent No. 2 - creator of the mortgage and as such
Respondent No. 1 - Bank has entitlement to proceed under Section
13 (4) of the SARFAESI Act. As has been observed above, the
transaction entered into by the Petitioner with Respondent No. 2
being illegal one, cannot be recognised and Petitioner does not
have any right to question the measures taken by Respondent No. 1
- Bank under the SARFAESI Act. It would be open for Petitioner to
proceed against Respondent No. 2 for redressal of his grievance.
20. For the reasons recorded above, the Writ Petition does
not deserve favourable consideration and as such dismissed.
21. Rule is discharged.
22. There shall be no order as to costs.
[A. S. GADKARI, J.] [R. M. BORDE, J.]
