Everfame Construction Pvt. Ltd. ... vs Bank Of Baroda Through Authorized ...
2021 Latest Caselaw 7204 Bom

                IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                     ORDINARY ORIGINAL CIVIL JURISDICTION


                   INTERIM APPLICATION (L) NO.4997 OF 2021
                                              IN
                       COMMERCIAL SUIT (L) NO.4995 OF 2021

Everfame Construction Pvt. Ltd. & Anr.                     .. Applicants-Plaintiffs
                v/s.
Bank of Baroda
Through Authorized Officer                                 .. Defendants

                   INTERIM APPLICATION (L) NO.4999 OF 2021
                                              IN
                       COMMERCIAL SUIT (L) NO.4996 OF 2021

Ashok Sharma & Anr.                                        .. Applicants-Plaintiffs
           v/s.
Bank of Baroda & Ors.                                      .. Defendants

                   INTERIM APPLICATION (L) NO.5001 OF 2021
                                              IN
                       COMMERCIAL SUIT (L) NO.4998 OF 2021

Everfame Construction Pvt. Ltd. & Anr.               .. Applicants/Plaintiffs
         v/s.
Bank of Baroda & Ors.                                .. Defendants


Mr. Rohaan Cama i/b. Chaitnya Nikte, for the Applicants-Plaintiffs.
Mr. H.P. Kar, with Mr. Ashish Pimple, i/by Interjuris, for Defendant No.1.
Mr. Aditya Bhatt, i/by Bespoke Legal, for Defendant Nos.2, 3 and 4.


                                                CORAM : A. K. MENON, J.

DATED : 5TH MAY, 2021.

(THROUGH VIDEO CONFERENCE)

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P.C. :

1. Called for ad-interim relief. For the reasons recorded separately,

there will be an ad-interim order in terms of prayer clause (b).

2. The plaintiffs have filed these three suits seeking identical decrees

against defendant nos.2 to 4, jointly and severally to execute the

agreements for sale as contemplated under the Maharashtra Ownership

and Flats Act, 1963 ("MOFA") in respect of three residential flats in a

proposed building known as 'Ganga Jamuna Sangam'. The table below

sets out the plaintiffs flat number and area.

Suit (L)                                                                              Area
                         Plaintiff                      Flat No.
  No.                                                                              (In sq.ft)

3. The case of the plaintiffs arises out of alleged breach by defendant

nos.2 to 4 in executing agreements, completing construction and

handing over the flats. All these plaintiffs claim that they have paid

more than 96% of the purchase price.

4. Mr. Cama, the learned counsel appearing on behalf of the

plaintiffs submitted that the in respect of each of these flats

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consideration payable is set out in Letters of Reservation ("LOR"). He

submitted that in respect of flat no.1102 total consideration of Rs.2.51

crores out of which Rs.2.46 crores had been paid leaving the balance of

Rs.5 lakhs. In relation to suit A-601 agreed to be purchased by Ashok

Sharma and another, the purchase price was Rs.2.71 crores of which

Rs.2.65 crores had been paid leaving a balance of Rs.5 lakhs and in

respect of third suit the price was Rs.2.51 crores of which Rs.2.46 crores

had been paid leaving a balance of Rs.5 lakhs. The LORs in respect of

suits filed by Everfame Construction was dated 27 th August, 2012

whereas in the suit filed by Ashok Sharma, the LOR was dated 8 th

August, 2013.

5. According to Mr. Cama, these payments have already been made

between 2010 to 2013 in installments. Mr. Cama relied upon a chart

showing the installments paid. Everfame Constructions claims to have

paid six installments between 3rd December, 2010 and 7th September,

2013 in relation to both those suit flats viz. 1102 and 602. Ashok

Sharma claims to have paid Rs.2.65 crores between 26 th July, 2013 and

8th August, 2013 for flat no.601. Although the plaint mentioned two

other flats claimed by Ashok Sharma, the submissions at the bar did not

refer to those flats. The reason for filing the suit, according to

Mr. Cama, is that defendant no.1 - Bank is about to auction the flats and

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that on the first attempt at auction, the Court had granted limited

protection as seen from order dated 24 th February, 2021 but the bank

appearing on that date confirmed that there were no bidders and the

sale did not go through. The reason for moving this ad-interim

application is that fresh notice has been published whereby the bank

proposes to conduct an auction on 6th May.

6. According to Mr. Cama, the suit seeks principally two reliefs (i) a

decree of specific performance of the LORs under MOFA and (ii) the

relief of marshalling. Mr. Cama submitted that the plaintiffs were

neither borrowers nor guarantors and were not connected with dealings

between the bank and defendant nos.2 to 4. Defendant nos.2 to 4

appear to have availed of credit facilities and mortgaged the entire

property including the suit flats which, according to Mr. Cama, could

not have been done since the plaintiffs had already paid more than 96%

of the purchase price.

7. Mr. Cama therefore submitted that he is entitled to urgent relief

restraining the bank from proceeding with the auction. He relied upon

the LOR. He admitted that when the bank had proceeded under

SARFAESI, the plaintiffs had filed a writ petition in this Court

challenging the notice under Section 13(2) of SARFAESI. Those petitions

were pending but are infructuous. He claims that the plaintiffs are in the

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process of withdrawing the same but as on date, however, these

petitions are pending.

8. Mr. Cama relies upon Exhibit 'C' to the plaint which is a Sanction

Order issued by defendant no.1 to defendant no.2 on 27 th December,

2013. Amongst other conditions in the sanction, the borrower has

provided a certificate from a Chartered Accountant certifying, inter alia,

contribution margins brought in by the borrower. This

margin/contribution is to be found in the certificate of Chartered

Accountant at Exhibit 'E' that reveals that advances were received from

customers in a sum of Rs.18,37,69,600/-. This was obviously from flat

purchasers including the plaintiffs. Thus the bank was aware that third

party rights had been created. Despite this, the bank did not bother to

intimate the plaintiffs but issued a possession notice under the SARFAESI

in respect of the suit flats as seen from Exhibit 'G'.

9. Mr. Cama submitted that the plaintiffs are entitled to protection

having paid 96% of the amount and they are entitled to performance of

the LOR by execution of agreements for sale as contemplated under

MOFA. In the inter alia, he seeks ad-interim relief in terms of prayer

clause (g) for injunction and also in terms of prayer clause (b) since he

seeks an order for marshalling.

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10. Defendant nos.2 to 4 did not appear despite appearance having

been entered by their Advocates and after the matter was kept back and

notice was once again given to their Advocates. The plaintiffs' Advocates

have since been informed that the defendants have discharged their

Advocates. Defendant no.3 later appeared in person on Video

Conference claiming that he was indisposed and quarantined and stated

that he would make alternate arrangements. That is how the matter

came to be adjourned to date.

11. On behalf of the bank, Mr. Kar opposed the application. He

submitted that the plaintiffs were all along aware of the bank's

proceedings moved the court. He submitted that the flats were shown as

unsold flats and the bank has proceeded on the basis of a mortgage of

land and building. Thereafter the possession notice was issued on 14 th

September, 2016 and the plaintiff took no steps, being notice published

in the newspaper, the plaintiffs are deemed to have notice of the same.

Defendant nos.2 to 4 had sought to prevent the auction from proceeding

by filing a writ petition in this court. One writ petition was dismissed for

default which was restored by order dated 21 st March, 2018 passed by

the Division Bench. That order reveals that the defendants 2 to 4 were to

make disclosures, which they failed to do. Considering the conduct of

the defendant nos.2 to 4 the order of status quo granted earlier in

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respect of certain flats was vacated. This order mentions four flats.

However, we are not today concerned with the order of status quo since

the same has already been vacated.

12. Mr. Kar therefore submitted that no case is made out for grant of

any relief. According to him, the plaintiffs were guilty of suppressing

correct facts. The bank is only seeking to recover monies advanced by

them to defendants 2 to 4. He submitted that the jurisdiction of the civil

court is barred and that only DRT has exclusive jurisdiction in the

matter. The consideration for the flats is alleged to have been paid

almost 10 years ago. He questions the bonafides of the plaintiffs in filing

the suits now. He submitted that the suits are barred by limitation and

stated that writ petition filed by the plaintiff was still pending.

Applications under Section 17 of SARFAESI were also filed. No relief has

been granted. He therefore submitted that the IA be rejected.

13. As far as maintainability is concerned, Mr. Cama has relied upon

the Division Bench judgment in Civil Revision Application no.29 of

2011 and connected matters in Bank of Baroda v/s. Gopal Shriram

Panda & Another1. It prima facie supports his case that the suit can be

filed to protect a third party's title even against the bank when the bank

claims security interest in the property.

2021 SCC Online Bom 466

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14. Having heard the learned counsel for the parties, I am of the view

that no case is made out for grant of any ad-interim relief against

defendant no.1 interfering with the sale process. None of the plaintiffs

have demonstrated that the transactions were bonafide transactions for

purchase of the suit flats. They have relied upon identically worded

LORs, a copy of which is seen at Exhibit 'B'. The LOR reveals that

defendant no.2 had agreed to "reserve" the flat described in the letter for

consideration mentioned therein. The payment schedule discloses a

booking amount of Rs.2.46 crores and the balance of Rs.5 lakhs and

service tax against possession being given.

15. Prima facie, it is difficult to accept that 96% of the purchase price

has been paid on booking. Furthermore, clause no.8 of LOR provides

that the defendant no.2 has availed or will avail financial assistance

from banks against the land and/or proposed construction. Thus, the

plaintiffs were put to notice that the developer had already borrowed /

would borrow monies against security of the land and project flats. It

was for the plaintiffs therefore to have obtained suitable clarifications

and/or no objection letter from the lenders. The bank would then have

notice of a prior sale. Even otherwise it is difficult to accept the

plaintiffs case that the bank is at fault. The bank has a registered

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mortgage in its favour and the land and proposed construction thereon

and is clearly entitled to enforce its security. The plaintiffs have been far

from diligent. Even if the plaintiffs' case is that 96% of the purchase

price was paid as "booking amount" and it is not possible to accept the

plaintiffs contention that they were unaware of the banks rights for all

these years.

16. According to Mr. Cama, the plaintiffs came to learn of the bank's

security interest in the property only when the bank filed its affidavit in

the DRT and the cause of action according to the plaintiffs arose on 10 th

January, 2020 when the bank attempted to sell the flat and once again

on 15th January, 2021 the plaintiffs called upon the defendant to comply

with the statutory obligation under MOFA. Thus for an entire year after

the bank attempted to sell the flats, the plaintiffs do not demand

performance from the defendant nos.2 to 4. In my view, there is

absolutely no justification in seeking an injunction to restrain the bank

from proceeding with the sale.

17. Mr. Aditya Bhatt who appeared today on behalf of defendant

nos.2 to 4 states that he has now been instructed to appear in the matter.

He undertakes to enter appearance and seeks time to file reply. In the

meanwhile, he seeks to support the plaintiffs by contending that the

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bank was aware of all payments made and the fact that the rights were

created in favour of the plaintiffs. Save and except these brief

submissions, he had sought leave to file reply.

18. The defendant nos.2 to 4 have admitted receipt of money, whether

or not the plaintiffs would be entitled to an order under Section 56 of

the Transfer of Property Act is a question that will have to be considered.

Meanwhile, considering the conduct of defendant nos.2 to 4, I am of the

view that defendant nos.2 to 4 should be directed to make disclosures in

accordance with prayer clause (b).

19. The contention of defendant nos.2 to 4 taken up by Mr. Bhatt

today is obviously an attempt to support the plaintiffs to stall the sale.

Defendant nos.2 to 4 have failed to execute any agreement in favour of

the plaintiffs and considering the opportunistic conduct, it is obvious

that defendant nos.2 to 4 may have to be held responsible at-least as far

as the plaintiffs' dues are concerned and to that extent, at this prima

facie stage, it would appear that the plaintiffs are entitled to some relief

against defendant nos.2 to 4.

20. In view of the same, I pass the following order;

(i) There will be an ad-interim order in terms of prayer

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clause (b). Prayer for injunction in terms of prayer (g)

is rejected.

(ii) Disclosure to be made within a period of four weeks

from today.

(iii) Respondent nos.2 to 4 to also file affidavit-in-reply in all

these matters within four weeks from today. Mr. Cama to

file rejoinder, if any, within two weeks thereafter.

(iv) Plaintiffs to file rejoinders within two weeks thereafter.

(A. K. MENON, J.)

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