Caparo Financial Solutions ... vs Robin Karamchandani
2023 Latest Caselaw 4065 Bom

                                                                    6-ial-4188-2023.doc

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                   IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                       ORDINARY ORIGINAL CIVIL JURISDICTION
                       INTERIM APPLICATION (L) NO.4188 OF 2023
                                            WITH
                       COURT RECEIVER'S REPORT NO.51 OF 2020
                                              IN
                                     SUIT NO.634 OF 2017
       Caparo Financial Solutions Ltd.                         ...Applicant
             In the matter between
       Robin Karamchandani                                     ...Plaintiff

               Versus

       Jem and Associates & Ors.                               ...Defendants
                                           ----------
       Mr. Shrey Fatterperkar with Ameet Mehta, Nirav Marjadi and Vinay
       Shingada and Nikita Deora i/b. M/s. Solicis Lex for the Plaintiff.
       Mr. Ashish Kamat, Senior Counsel, Mohit Khanna, Venkat Rao,
       Sindhu K. and Akash Gaonkar i/b. Legalserve and Associates for
       Caparo for the Applicant.
       Karl Tamboly, Deepak Shukla and Ronish Mehta i/b. Vinod Mistry &
       Co. for Defendants.
       Mrs. Rekha Rane, 2nd Asstt. to C.R. is present.
                                           ----------

                                           CORAM : R.I. CHAGLA J.
                                           DATE   : 24 APRIL 2023.
       ORDER :

1. By this Interim Application, the Applicant is seeking a

direction to the Court Receiver to hand over vacant and peaceful

possession of the subject mortgage property to the Applicant.

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2. Mr. Ashish Kamat, learned Senior Counsel for the

Applicant has referred to the order dated 12th March, 2020 passed

by this Court. By the said order this Court was informed that both the

Properties are mortgaged to Caparo Financial Solutions Limited and

Reliance Home Finance Limited and the allotment letters are

annexed to the mortgage documents. Certified copies of the

mortgage documents (but not the allotment letters) were already

with the Court Receiver. This Court had held that given the fact that

there are two admitted mortgages, clearly, a no objection of the two

lenders will be required for any sale. In the meantime, the Court

Receiver was directed to write to both financial institutions asking

whether they are agreeable to the sale and will their no objection to

the sale of these two premises, but making it clear that the mortgage

debts will be cleared from the sale proceeds first.

3. The Court Receiver had addressed letter dated 16th

March, 2020 in compliance with the said order. In response the

Applicant has addressed letter to the Court Receiver dated 10th June,

2020 in which they have given their conditional consent / no

objection for sale of the subject mortgage property. The conditions

have been mentioned in Paragraph 6 of the said letter.

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4. In view of non compliance of the conditions mentioned

in letter dated 10th June, 2020, the Applicant addressed another

letter dated 7th March, 2022 to the Court Receiver wherein it is

stated that the subject mortgage property is not yet sold and that in

view of the subject property having been mortgaged to the Applicant,

a right recognized both by the Plaintiff and Defendants under

Consent Minutes dated 3rd November, 2018 forming part of the

Consent Order dated 3rd November, 2018 passed in Contempt

Petition (L) No.123 of 2018, as secured Creditor, under SARFAESI

Act, the Applicant had issued notice under Section 13(2) of the

SARFAESI Act and called upon the Defendants herein to pay the

debts of the Applicant. The matter has accordingly been proceeded

with under the SARFAESI Act. Further, the Applicant had initiated the

process of taking over possession and other actions under Section

13(4) of the SARFAESI Act and in this regard symbolic possession of

the subject mortgaged property has been taken by issuance of notice

dated 2nd March, 2022 to the borrowers and guarantors including

the Defendants. By the said letter Court Receiver was directed to not

to deal with the subject mortgaged property in any manner and / or

not to create any kind of hindrance or impediment in carrying out

actions under Section 13(4) of the SARFAESI Act in respect of the

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subject mortgaged property.

5. Mr. Kamat has submitted that in view of the steps

initiated under the SARFAESI Act, including 13(4) of the Act, the

present Application has been taken out for directions to the Court

Receiver to hand over the subject mortgaged property to the

Applicant. He has placed reliance upon the decision of this Court in

Mineral Sales Pvt. Ltd. Vs. Otoklin Plants & Equipment Ltd. (In

Liquidation)1. He has submitted that this Court in the said decision

had considered a similar application made by the Applicant for

direction to the Official Liquidator to hand over the secured assets of

the Company in liquidation which had been mortgaged to the

Applicant. This Court had considered that the Applicant had

exercised powers under the Securitization Act (SARFAESI Act.) The

learned Single Judge placed reliance upon the decision of this Court

in Akola Oil Industries Vs. State Bank of India 2, wherein it was held

that a secured creditor while proceeding under the RDB Act or

Securitization Act does not need the permission of the Company

Court. Section 35 of the Securitization Act gives overriding effect to

1 Company Application No.1170 of 2009 in Company Petition No.970 of 1997 decided on 26th November, 2009.

2    2005(5) Bom C.R. 706.







                                                          6-ial-4188-2023.doc

the provisions of the Act notwithstanding anything inconsistent

therewith contained in any other law in force. Accordingly, this Court

had allowed the application and directed the Official Liquidator to

handover the mortgaged properties to the Applicant.

6. Mr. Kamat has submitted that the Court Receiver has

been appointed by this Court in the present Suit and it is an admitted

fact that mortgage of the subject property had been created in favour

of the Applicant. This Court has taken note of this fact as well as

making clear in the said order that mortgage debts will be cleared

from the sale proceeds first. Considering that the Court sale has not

gone through as well as proceedings have been instituted under the

SARFAESI Act, the Applicant has made the present Application for

handing over of the subject mortgaged property. In light of the law

laid down in the aforementioned decisions as well as Section 35 of

the SARFAESI Act the relief sought for in the present Interim

Application be granted.

7. Mr. Tamboly learned Counsel for the Defendants has

submitted that Applicant by the present Application is circumventing

the provisions of the SARFAESI Act under which in the event

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possession of the subject property cannot be taken under Section

13(4) of the SARFAESI Act, then apply the secured creditor is

statutorily mandated by Section 14 of the Act to make an Application

before the Chief Metropolitan Magistrate or District Magistrate for

assistance in taking possession of the secured assets. He has

submitted that a Section 17 application has been preferred under the

SARFAESI Act by the Judgment Debtor challenging the notice under

Section 13(2) and steps taken under Section 13(4) of the SARFAESI

Act. The Application is pending. Further, he has submitted that there

are arbitral proceedings between the Applicant and the Defendants

which are also pending. In the arbitral proceeding monies have been

claimed from the Applicant which are due to the Defendants. He has

accordingly submitted that no orders be passed in the present

application in view of the statutory mandate of the SARFAESI Act as

well as the arbitral proceedings in which the debt of the Applicant is

yet to be determined.

8. Mr. Tamboly has relied upon the decision of the Division

Bench of this Court in the case of Pratap G. Somaiya S/ o.

Goverdhandas Vs. Rajesh Thakker, S/o. Prabhudas Thakker 3 wherein

3 Appeal (L) No.162 of 2016 decided on 6th October, 2016.

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this Court in a similar Application made directing the Court Receiver

to hand over the mortgaged property to ARCIL (Secured Creditor)

had considered the provisions of Section 13(2) and 13(4) of the

SARFAESI Act and had further considered that the proceedings under

Section 14 had not been taken. The Division Bench of this Court was

of the view that in the event of any order being passed by the Chief

Metropolitan Magistrate permitting the bank to take possession, the

Court Receiver shall hand over possession of the mortgaged

properties to ARCIL. Mr. Tamboly in that connection submitted that

in view of a similar application being made in the present case, the

relief sought for ought not to be granted as this would give the

Applicant possession of the mortgaged property where otherwise the

Applicant would have had to resort to proceeding under Section 14

of the SARFAESI Act.

9. Mr. Fatterperkar, the learned Counsel appearing for the

Plaintiff has submitted that the conditions which had been imposed

by the Applicant can easily be satisfied including filing an Affidavit by

Defendants in terms of the said order dated 12th March, 2020. The

mere delay in compliance with the conditions cannot result in the

subject mortgaged property which is custodia legis being handed

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over by the Court Receiver to the Applicant.

10. Mr. Fatterperkar has further submitted that the

notice was issued under Section 13(2) of the SARFAESI Act by the

Applicant way back on 15th January, 2021 and thereafter in view of

the physical possession of the subject property being unable to be

taken by the Applicant as the subject mortgaged property is custodia

legis, the present Application is now made without following the

provisions of the SARFAESI Act including filing the requisite

proceedings under Section 14 of the Act. He has submitted that no

relief be granted in the present Interim Application.

11. Having considered the submissions, it can be seen

from the said order dated 12th March, 2020 that the learned Single

Judge of this Court was informed that both the Properties are

mortgaged to Caparo Financial Solutions Limited and Reliance Home

Finance Limited and the allotment letters are annexed to the

mortgage documents. Certified copies of the mortgage documents

(but not the allotment letters) were already with the Court Receiver.

The learned Single Judge held that given the fact that there are two

admitted mortgages, clearly, a no objection of the two lenders will be

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required for any sale. It is in view of these observations that the

Court Receiver was directed to write both the financial institutions

which included the Applicant herein as to whether they are agreeable

to the sale and will give their no objection to the sale of these two

premises. It was further made clear that the mortgage debts will be

cleared from the sale proceeds first.

12. It is to be noted that the Court Receiver had

accordingly addressed letter dated 16th March, 2020 to the

Applicant. In response thereto, the Applicant had by letter dated 10th

June, 2020 addressed a letter giving their conditions to be satisfied

for granting their consent / no objection for sale of the subject

mortgaged property. Admittedly these conditions have not been met.

13. The Applicant has accordingly by letter dated 7th

March, 2022 addressed to the Court Receiver withdrawn their

consent for the Court sale and called upon the Court Receiver not to

deal with subject property and / or create any kind of hindrance or

impediment in carrying out the Applicant's actions under Section

13(4) of the SARFAESI Act in respect of the subject mortgaged

property.

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14. This Court in the case cited by Mr. Kamat on behalf

of the Applicant namely Mineral Sales Pvt. Ltd. (Supra), where an

Official Liquidator had been appointed for the Company (In

liquidation), an application had been made directing the Official

Liquidator to hand over of the mortgaged property to the Applicant

therein. In that case though other Creditors had made claims against

the Company (In liquidation), this Court upon considering the

provisions of the SARFAESI Act and placing reliance upon the Akola

Oil Industries (Supra) held that secured creditors proceeding under

the Securitization Act does not need permission of the Company

Court. Further, Section 35 of the Securitization Act gives overriding

effect to the provisions of the Act, notwithstanding anything

inconsistent therewith contained in any other law for time being in

force. This Court had accordingly granted the relief sought for in the

Application by directing the Official Liquidator to handover the

mortgaged property to the Applicant.

15. In so far as the decision in Pratap G. Somaiya

(Supra) relied upon by Mr. Tamboly for the Defendants, it is

distinguishable on facts. Further, the prior decisions of this Court in

Mineral Sales Pvt. Ltd. (Supra) and Akola Oil Industries (Supra) have

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not been considered. Under Section 35 of the SARFAESI Act, there is

an overriding effect given to the provisions of the SARFAESI Act. It is

clear from the SARFAESI Act that in the event physical possession of

the Secured Act cannot be taken then proceedings under Section 14

of the Act, are to be taken by the secured creditor taking possession

of the secured assets. In normal course possession of the Secured

Asset would be taken from the borrower. However, considering that

the subject mortgaged property in the present case is custodia legis,

the Judgment Debtor cannot use this as a shield to prevent the

Applicant from taking possession of the secured asset. In fact reliance

placed upon Section 14 of the SARFAESI Act by the Defendants in

contending that the Applicant would necessarily have to apply to the

Chief Metropolitan Magistrate for an order assisting the Applicant /

as Secured Creditor in taking possession of the secured assets, is

misplaced as in this case it is not the borrower who is retaining

possession of the secured asset / mortgaged property but the

possession as mentioned is with the Court Receiver and thus custodia

legis.

16. In my view, considering that the subject mortgaged

property is in the custody of this Court, it is for this Court to assist

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the Applicant in taking possession of the secured asset particularly

when the conditions for consent to the Court sale have not been

satisfied. This Court is cognizant of this fact that the said order was

passed way back on 12th March, 2020. This Court cannot continue

with the possession of the subject mortgaged property. The mortgage

debt would require to be satisfied first as held in the said order.

17. Accordingly, the present Application is allowed and

the Court Receiver is directed to hand over vacant and peaceful

possession of the subject mortgaged property to the Applicant. The

rights and contentions of the Defendants in the SARFAESI

proceedings including the Application made under Section 17 of the

SARFAESI Act as well as the ongoing arbitral proceedings between

the Applicant and Defendants are kept open and the observations in

this order will not have a bearing on those proceedings which shall

be decided independently on their merits.

18. Interim Application is accordingly disposed of.

19. The Applicant is at liberty to make application

before the Court Receiver for handing over possession of the subject

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property. Once the Application is made, the Court Receiver shall

handover the subject property after a period of two weeks.

20. Liberty is granted to the Plaintiff to apply to the

appropriate Court / Tribunal in the event there is a surplus after the

settlement of the dues of the Applicant.

[R.I. CHAGLA J.]