Iifl Wealth Prime Limited Earlier ... vs Fastgrowth Hospitality Llp
2021 Latest Caselaw 13060 Bom

                                                        38-IAL-15741-2021 IN COMSL-15734-2021.DOC




                       Arun



                            IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                               ORDINARY ORIGINAL CIVIL JURISDICTION
                                       IN ITS COMMERCIAL DIVISION
                              INTERIM APPLICATION (L) NO. 15741 OF 2021
                                                           IN
                                 COMMERCIAL SUIT (L) NO. 15734 OF 2021


                       IIFL Wealth Prime Limited Earlier Known as                      ...Plaintiff
                       IIFL Wealth Finance Ltd
                             Versus
                       Fastgrowth Hospitality LLP                                   ...Defendant


                       Mr Ashish Kamat, with Kunal Mehta, & Jinelle Gogri, i/b Negandhi
                            Shah & Himayatullah, for the Plaintiff.
                       Mr Mukesh Vashi, Senior Advocate, with Sean Wassoodew, for the
                            Defendant.


                                              CORAM: G.S. PATEL, J
                                              DATED: 14th September 2021
                       PC:-


                       1.

On 2nd August 2021, I passed the following order:

"1. In this mortgage suit, Mr Kamat for the Plaintiff seeks a relief of disclosure in terms of prayer clause (b) and then injunctions in terms of prayer clauses (d) to (g). These Digitally prayers in the Interim Application read as follows:

          signed by
          ARUN
ARUN      RAMCHNDRA
RAMCHNDRA SANKPAL
                                     "(d) that pending the hearing and final
SANKPAL   Date:
          2021.09.15                 disposal of the Suit, this Hon'ble Court be
          10:16:26
          +0530                      pleased to pass a temporary Order and




                                                     14th September 2021

38-IAL-15741-2021 IN COMSL-15734-2021.DOC

injunction restraining and prohibiting Defendant Nos. 1 to 4 from in any manner whatsoever (directly and/or indirectly) dealing with, creating third party rights over or parting with possession of their movable and immovable assets including the assets disclosed;

(e) that pending the hearing and final disposal of the Suit, this Hon'ble Court be pleased to pass a temporary Order and injunction restraining and prohibiting Defendant No. 5 from in any manner whatsoever (directly and/or indirectly) [dealing with] creating third party rights over or parting with possession of either Office No. 203 or the La Vida Property or the La Empressa Property (described in the Schedule at Exhibit 'A' to the Plaint);

(f ) that pending the hearing and final disposal of the Suit, this Hon'ble Court be pleased to pass a temporary Order and injunction restraining and prohibiting Defendant Nos. 6 and 7 from in any manner whatsoever (directly and/or indirectly) dealing with, creating third party rights over or

(described in the Schedule at Exhibit 'A' to the Plaint);

(g) that pending the hearing and final disposal of the Suit, this Hon'ble Court be pleased to pass a temporary Order and injunction restraining and prohibiting the Defendants from in any manner whatsoever (directly and/or indirectly) dealing with,

14th September 2021 38-IAL-15741-2021 IN COMSL-15734-2021.DOC

creating third party rights over or parting with possession of Office No. 203B (described in the Schedule at Exhibit 'A1' to the Plaint);"

2. There is no difficulty with making an order in terms of prayer clause (b) for disclosure. This will be required in any case.

3. The injunction sought in prayer clause (e) is slightly awkward in its wording. It seeks a relief in respect of 'either Office No. 203 or the La Vida property or the La Empressa property'. I believe what Mr Kamat really seeks is an injunction in respect of all three. The various properties mortgaged are described at Exhibit "A" to the plaint, at page 42. There are five schedules there. Mr Vashi says that although the second and third schedules may appear to be different, they both refer to the La Vida property. He maintains that only the land in this property is mortgaged to the Plaintiff. There are several service apartments constructed on this property. About eight have been let out. Others are not yet let out. Mr Kamat contests the assertion that the constructed premises are not mortgaged to the Plaintiff. All contentions are kept open.

4. On instructions, Mr Vashi states that he is agreeable to an injunction (except the words 'dealing with') in regard to Office No. 203, Office No. 202 and the La Empressa property.

5. The relief in respect of Office No. 203B stands on a different footing. The Defendants have mortgaged this property to Cosmos Bank. They will put the necessary details on Affidavit. There will also be an injunction as sought (except the words 'dealing with') in regard to Office No. 203B. However, this order of injunction will not prejudice the rights, if any, of the Cosmos Bank.

6. As regards the constructed units on the La Vida property described in the Second and Third schedule at

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Exhibit "A", obviously, those that have been given out to third parties cannot be affected by this order. There can be no injunction in regard to those. But as regards the ones that have not been given up, I believe an injunction in the same terms is required because, irrespective of the rival contentions, it is not yet clear that the Defendants have sufficient means to redeem the mortgage.

7. Mr Vashi on instructions also points out that his clients have a proposal, yet in negotiations, to give out either the La Vida or the La Empressa properties (or both) to a third party for being run as a hotel or a resort. He states that before that transaction is finalized, he will make the necessary application to this Court with notice to the Advocates for the Plaintiff. He will give at least three working days' notice. The statement is reasonable and is accepted.

8. There will thus be an order in the foregoing terms. This will operate for a limited period until the interim application can be finally heard.

9. Affidavit in Reply is to be filed and served on or before 23rd August 2021. Affidavit in Rejoinder, if any, is to be filed and served on or before 7th September 2021.

10. List the Interim Application on 14th September 2021.

11. This order will be digitally signed by the Private Secretary of this Court. All concerned will act on production of a digitally signed copy of this order."

2. There are now an Affidavit in Reply, an Affidavit in Rejoinder and a separate Affidavits of Disclosure from the Defendants.

3. I propose today to pass an order that will dispose of the Interim Application. Only a few facts are necessary.

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4. The Defendants took financial assistance from the Plaintiff, a Non-Banking Financial Company. some time in December 2017. The Plaintiff and the Defendants entered into a Master Finance Agreement or MFA recording the terms and conditions of this financial assistance. The Plaintiff sanctioned a loan of approximately of Rs. 20 crores. There is a separate sanction letter. As usual, various documents were also executed on that day, including two separate Deeds of Guarantee personally by Defendants Nos. 6 and 7 and a further personal Deed of Guarantee by one Hemant Parikh.

5. On 14th May 2018, there were two separate Memoranda of Entry recording the deposit by Defendant No. 5 with the Plaintiff of title deeds in relation to the properties at Goa with the intent of creating a security by way of an equitable mortgage to secure the repayment due by the Defendants of the finance facility referred to above. There is some controversy about the exact ambit of these mortgage documents. I will return to that shortly.

6. On 3rd January 2018, there were another pair of Memoranda of Entry similarly recording the deposit by the Defendants Nos. 6 and 7 with the Plaintiff of title deeds relating to properties at Santacruz, again to create an equitable mortgage to secure the repayment of these facilities.

7. Between March and December 2019, the Plaintiff enhanced the Defendants' facilities to Rs. 23 crores. On 26th May 2020, the Defendants executed an undertaking to create a charge in favour of the Plaintiff in respect of Unit No. 203B in Mumbai.

14th September 2021 38-IAL-15741-2021 IN COMSL-15734-2021.DOC

8. According to the Plaintiffs, the Defendants were irregular in servicing the loan. The Plaintiffs issued a notice declaring an event of default on 25th June 2020. On 30th June 2020, Defendant No. 5 proposed that it be permitted to sell the mortgaged properties at Mumbai to repay the Plaintiffs outstanding dues. A similar proposal was put up by Defendants Nos. 6 and 7.

9. On 18th May 2021, the Defendants addressed an email to the Plaintiffs asking for temporary financial assistance and to extend the maximum moratorium coverage and to reduce the interest rates in view of the pandemic. On 10th June 2021, the Plaintiffs declined to accede to this request and again issued a notice of event of default calling for repayment of the entire amount. By a response letter of 28th June 2021, the Defendants Advocates seems to have admitted the liability to pay the Defendants, but I will leave that question open for another day.

10. The Suit, filed on 12th July 2021, seeks recovery of an amount of just under Rs. 25 crores including interest and other charges.

11. Now, as the previous order shows, there is clearly a controversy in regard to prayer clause (e) and the mortgages in question mentioned in paragraph 3 of the previous order. Mr Vashi maintains that, despite the observation in the previous order the Plaintiffs have done nothing to amend prayer clause (e) of the Interim Application. That matters little. I have already indicated that I will read prayer clause (e) as being an application in respect of

14th September 2021 38-IAL-15741-2021 IN COMSL-15734-2021.DOC

Office No. 203B, the La Vida Property and the La Empressa Property in Goa.

12. The next question is the extent and ambit of the mortgage in question. Mr Vashi maintains that the Goa mortgages were restricted to the underlying land and did not extend to the structures constructed on that land.

13. For this one must look at the Memoranda of Entry. For Goa, there are two and there are similarly two for Mumbai. Any one will suffice for today's purposes. The Memorandum of Entry of 14th May 2018 is at Exhibit 'H1'. Clause 3 at page 117 of the plaint reads thus:

"3. Whilst making the deposit, Security Provider stated that he/she was doing so with intent to create (in favour of the Lender) security by way of mortgage by deposit of title deeds over the Security Providers' immovable properties together with all the buildings, plant and machinery, structures and constructions of every description thereon, attached to the earth or permanently fastened to anything attached to the earth, whether now standing thereon or attached thereto, erected or attached or shall at anytime hereafter till the date on which all Secured Obligations have been irrevocably and unconditionally paid and discharged in full to the satisfaction of the Lender be erected and standing or attached thereon (collectively the "Secured Property") to secure the due repayment, discharge and redemption by the Borrower of the Secured Obligations."

14. Prima facie, the inept language apart, this would indicate that the mortgage covers not only the land but everything constructed on

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it and attached to it then and in future. The emphasized words above make it clear that as the development of land evolves, everything done on that land is part of mortgage.

15. Mr Vashi draws attention to Schedules I and II at pages 119 and 120 to say that there is no deposit of any title deed in relation to the constructed property. But there need not be. Indeed, I imagine it is the other way around. If only the constructed portion was mortgaged, then the title deeds would be in relation to the constructed portion and not the land. The description in Schedule II would be of the constructed portion and not the land. Once the deposit is of the title deeds to the land and the description is of the land, and these two are read along with clause 3, it puts the matter beyond all controversy that the mortgage was in respect of the land, all structures then erected and existing on it and all structures to thereafter be erected, constructed or developed on that land. There is no question, therefore, of restricting the ambit of the mortgage deed in the manner Mr Vashi suggests.

16. With this addressed, what remains is to consider whether a Court Receiver is necessary. Of course, this is an equitable and discretionary remedy but as Mr Kamat points out that in a mortgage action, settled law has it, and it is a rule of almost universal application that a Receiver will generally be appointed unless the debtor Defendant is able to otherwise secure readily in Court the repayment for redemption of the mortgage. This the Defendants are clearly unable to do. I would have considered not appointing a Receiver and perhaps even modifying or reducing the level of the injunctions had the Defendants agreed to made a deposit of some

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kind in this Court. This is not a question of attachment before judgment. It is intended to ensure that the security asset is not allowed to be dissipated.

17. Thus, not only will the previous order of 2nd August 2021 be confirmed but the injunctions in question will now extend to the constructed portions on the mortgaged Goa properties. The qualifications in the previous order will also continue. Mr Vashi explains on taking further instructions that some of the constructed units are sold to investors and the Defendants then rent them out on behalf of the investors to third parties. Those will obviously not be affected by this order because those investors are not parties to these proceedings.

18. But as regards the other properties that are subjected to the injunction, there will have to be the appointment of the Court Receiver, except that the Receiver is to take only symbolic possession. He is not required to take physical possession of any of the premises as yet. The Receiver will need to put up some indication of symbolic Receivership on the properties, both Mumbai and Goa. The Office No. 203B is already mortgaged to Cosmos Bank, and so it is not part of the order of Receivership, although the injunction in respect of that office continues. The premises in the La Vida property that are sold to third party investors are also excluded for the present from this order of symbolic Receivership.

19. This order will continue until further orders.

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20. Liberty to the parties to apply.

21. The Interim Application is disposed of in these terms. In the facts and circumstances of this case, there will be no order as to costs.

22. This order will be digitally signed by the Personal Assistant of this Court. All concerned will act on production of a digitally signed copy of this order.

(G. S. PATEL, J)

14th September 2021