Bombay High Court
Janakalyan Sahakari Bank Ltd vs The Divisional Joint Registrar, ... on 1 October, 2024
Author: Sharmila U. Deshmukh
Bench: Sharmila U. Deshmukh
2024:BHC-AS:38760
WP 10056-15
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.10056 OF 2015
Jankalyan Sahakari Bank Ltd. ]
A Co-operative Bank registered under ]
the provisions of the Maharashtra ]
Co-operative Societies Act, 1960, ]
140, Vivek Darshan, ]
Sindhi Society, Opp. Bhakti Bhavan, ]
Chembur, Mumbai - 400 071. ] ...Petitioners.
Versus
1) The Divisional Joint Registrar, ]
Co-operative Societies, Mumbai ]
Division, Mumbai. ]
06th floor, Malhotra House, ]
Opp. G.P.O., Fort, ]
2) The Special Recovery & Sales Officer, ]
Attached to the ]
Jankalyan Sahakari Bank Ltd. ]
140, Vivek Darshan, ]
Sindhi Society, Opp. Bhakti Bhavan, ]
Chembur, Mumbai - 400 071. ]
3) Mrs. Shobhana Rajendra Shah. ]
4) Mr. Rajendra Amratlal Shah. ]
5) Mr. Bhushan Rajendra Shah. ]
All are residing at 42, Vishnu Mahal, ]
Marine Driver, Churchgate, ]
Mumbai - 400 020. ] ...Respondents.
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Mr. Atul Damle, Senior Advocate i/by Mr.Onkar Warange, for Petitioner.
Ms. Sarosh Bharucha, Mr.Aditya Khare and Ms. Daksha Kasekar i/by Mr.
Mansukhlal Hiralal and Co. for Respondent Nos.3 to 5.
Ms.S.D.Chipade, AGP for the Respondent-State.
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Coram : Sharmila U. Deshmukh, J.
Reserved on : August 29, 2024.
Pronounced on : October 1, 2024.
sa_mandawgad/Patil-SR (Ch) 1 of 17
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JUDGMENT :
1. Rule. With consent, Rule made returnable forthwith and heard
finally.
2. By this Petition filed under Article 227 of the Constitution of
India, exception is taken to the order dated 9 th July, 2015 passed in
Revision Application No.342 of 2014 by the Respondent No.1-
Divisional Joint Registrar, Co-operative Societies, Mumbai partly
allowing the Revision Application and setting aside the order dated
30th May, 2014 issued by the Respondent No.2-Special Recovery and
Sales Officer attached to Jankalyan Sahakari Bank Ltd. and remanding
the matter to the Respondent No.2 for fresh consideration and
decision on merits and in accordance with law.
FACTS OF THE CASE:
3. The Petitioner-Co-operative Bank had advanced loan facility to
M/s M. Baker Auto Refinishing Pvt Ltd ("said Company") which was
secured by personal guarantee of Smt. Indira Baldeo Lulla and Late
Shri Baldeo Lulla. Due to default, the Petitioner initiated proceedings
for issuance of recovery certificate under Section 101 of MCS and was
granted four recovery certificates dated 19 th January, 2006 in Case
Nos 2309 of 2005, 2310 of 2005, 2311 of 2005 and 2312 of 2005
against the said Company and its guarantors namely Mr.Baldeo S. Lulla
and Mrs. Indira Baldeo Lulla for recovery of an aggregate amount of
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Rs 8,22,91,027/ due as on 29th November, 2007 alongwith further
interest.
4. The Recovery Certificates were put in execution and Warrants
of attachment dated 21st March, 2006 and 31st March, 2006 were
issued. On 12th July, 2013, the Respondent Nos.3 to 5 filed an
Application before the Respondent No.2-Special Recovery and Sales
Officer under Rule 107(19)(a) of the the Maharashtra Co-operative
Societies Rules, 1961 (for short, "MCS Rules") for setting aside the
the warrant of attachment dated 31st July, 2006 in respect of Plot
No.31. The contention of the Respondent Nos.3 to 5 was that prior to
the warrant of attachment dated 31st July, 2006 attaching Plot No.31
in Sopanbaug Cooperative Housing Society Ltd. Ghorpadi, Pune, the
Respondent Nos.3 to 5 have acquired undivided share and right, title
and interest. It was contended that the Memorandum of
Understanding (MoU) dated 19th March, 2006 was executed by and
between the Respondent Nos.3 to 5 and the guarantors- Mr. and Mrs.
Lulla for acquiring the said premises, public notice was issued on 19 th
April, 2006 inviting objections and no objections were received, title
search was conducted which did not find registration of any lis
pendens or any claim registered by Petitioner-bank. By duly stamped
and registered Deed of Assignment dated 20th June, 2006, the
Respondent Nos.3 to 5 have purchased and acquired from Mr. and
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Mrs. Lulla the premises together with the undivided share, right, title
and interest in the Plot No.31 upon payment of valuable
consideration.
5. The said Application was resisted by the Petitioner contending
that on 21st March, 2006, the property was attached and the reference
in the said warrant of attachment to Flat No.31 was a pure typing
mistake and the property attached was Plot No.31, the transfer is a
fraudulent transfer with an intention to defraud the Petitioner-bank
and is therefore not binding on the Petitioner-Bank, the MoU is an
unregistered document, the Respondent No.4 was handling the legal
matter of Baldeo Lulla and was aware of the default and to avoid the
execution proceedings and the attachment order, the transaction had
taken place. It was contended that the attachment order dated 21 st
March, 2006 issued against the said property is duly served upon the
Society and other statutory authorities. There is no prior NOC from
Sopanbaug Cooperative Housing Society Ltd. before dealing with the
property.
6. The Respondent No 2- Special Recovery and Sales Officer by the
order dated 30th May, 2014, ruled on the objections raised the
attachment and dismissed the Application dated 12th July, 2013.
7. As against order dated 30th May, 2014, Revision Application
No.342 of 2014 was preferred before the Divisional Joint Registrar
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which allowed the Application and remanded the matter for fresh
consideration.
SUBMISSIONS:
8. Mr. Damle, learned Senior Advocate appearing for the
Petitioner-Bank would submit that the warrant of attachment issued
on 21st March, 2006, contained typographical error and came to be
corrected by issuance of subsequent warrant of attachment dated 31 st
July, 2006. He would contend that the property, however, stood
attached on 21st March, 2006 and by the Deed of Assignment
executed on 20th June, 2006 no rights were created in the said
premises. He has taken this Court in detail through the findings of the
Respondent No 2 and would submit that the transfer has rightly held
to be fraudulent. He submits that the Revisional Authority by a very
cryptic order has remanded the matter to the Respondent No 2
without considering the detailed findings of the Respondent No 2.
He submits that the objection raised under Rule 107(19)(a) by the
Respondent Nos.3 to 5 of being bonafide purchasers has been dealt
with and negated. He would further point out that the interest of the
Respondent Nos.3 to 5 was confined to 1/4th undivided share in Plot
No.31 and not the entire property.
9. Per contra, Mr. Bharucha, learned counsel appearing for the
Respondent Nos.3 to 5 would point out the timeline that the MoU was
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executed on 19th March, 2006, public notice was issued on 19 th April,
2006 and the agreement was executed on 20 th June, 2006 and it is
only subsequently that the warrant of attachment was issued on 31 st
July, 2006. He submits that under the agreement the Respondent
Nos.3 to 5 have acquired ¼th undivided interest in Plot No.31 and an
absolute ownership rights in respect of Flat No.C on 2 nd floor of
building Suraj, which is standing on Plot No.31 and the parking space
and exclusive right to use the terrace. Pointing out to the warrant of
attachment issued on 21st March, 2006, he submits that the warrant
of attachment was issued in respect of Flat No.31, first floor, whereas
the flat which was the subject matter of the agreement with the
Respondent No.3 to 5 was Flat "C" situated on the 2 nd floor. He would
submit that on the same day i.e. 21 st March, 2006 a warrant of
attachment was issued at the address of the original defaulter i.e. Flat
No.34, Sahil, Sopanbaug Cooperative Housing Society Ltd. He would
further submit that the warrant of attachment was issued in respect
of Plot No.31 Suraj, Sopanbaug Cooperative Housing Society Ltd on
31st July, 2006 which was subsequent to the date of the execution of
Deed of Assignment. He would further submit that under Rule
107(11)(f) of the MCS Rules, where any immovable property is sold
under the Rules, the sale is subject to the prior encumbrances on the
property. He submits that the Respondent No 2 could not have gone
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into the fraudulent nature of the sale-deed. He submits that the
remand does not prejudice the Petitioner as there would be proper
appreciation of the objection raised by the Respondent Nos 3 to 5.
Drawing support from the decision of the Apex Court in Vannarakkal
Kallalathil Sreedharan vs. Chandramaath Balakrishnan [(1990) 3
SCC 291], he submits that the MoU i.e. the agreement for sale is prior
to even the first order of attachment, if the same is accepted to be an
order of attachment. He would further rely on the decision in the case
of G. Rajasulochana vs. Inspector General of Registration [2024 SCC
OnLine Mad 951] and would submit that the High Court has held by
considering Section 53 of the Transfer of Property Act, the transfer
if fraudulent is voidable and that the Registrar cannot assume the
jurisdiction of the Civil Court while registering the document. He
would further submit that the Madras High Court has held that the
Sub-Registrar is not a quasi judicial authority deciding the validity of
the lease and has no power to cancel any document. He submits that
the Special Recovery Officer stands on the same footing and
therefore could not have gone into the validity of the transaction.
10. In rejoinder, Mr. Damle would submit that under Rule 107(19)(a)
and (c) of the MCS Rules, where a claim or an objection is preferred by
a party against whom the order is passed, the party may institute a
suit to establish the right which he claims to the property in dispute
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however subject to the outcome of such suit the order shall be final.
He, therefore, submits that it is for the Respondent Nos.3 to 5 to
establish their right in the property by instituting a suit. He
distinguishes the decision of the Madras High Court by stating that
the findings therein is based on different rules.
REASONS AND ANALYSIS:
11. Before proceeding with the facts of the case, it would apposite
to refer to the statutory framework governing the attachment and
sale of property. Under Section 156 of the MCS Act, the Registrar or
any other person empowered by him may, without prejudice to any
other mode of recovery, recover any amount due under the certificate
granted by the Registrar under Section 101 of the MCS Act, together
with the interest due on such amount by attachment and sale or by
sale without attachment of the property of the person against whom
the decision has been obtained. Sub-Section (2) of Section 156 of the
MCS Act provides what while exercising such powers the Registrar or
the person empowered is a Civil Court only for the purposes of Article
136 in the Schedule to the Indian Limitation Act, 1963.
12. In exercise of powers under Section 165 of the MCS Act, MCS
Rules 1961 have been framed, and Rule 107 provides for the complete
procedure governing the attachment and sale of property. Rule 107 is
a complete code in itself prescribing the entire procedure from
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levying of attachment till the sale of the property attached including
the power to deal with the objections which are raised to such
attachment of sale. Rule 107(1) provides for an application to be
made by the creditor invoking Section 156 of MCS Act seeking
attachment and sale of property. Sub Rule (2) provides that the
application shall be in prescribed form and Sub Rule (3) of Rule 107
provides that on receipt of such application, the Recovery Officer shall
verify the correctness and genuineness of the particulars set forth in
the application with the records, if any, in office of Registrar and
prepare the demand notice setting forth the name of defaulter and
the amount due.
13. Sub-Rule (11) of Rule 107 of the MCS Rules governs the
attachment and sale or sale without attachment of immoveable
property and reads as under:
"(11) In the attachment and sale or sale without attachment of
immovable property, the following rules shall be observed :-
(a) The application presented under sub-rule (2) shall contain a
description of the immovable property to be proceeded against,
sufficient for its identification and in case such property can be
identified by boundaries or numbers in a record of settlement of survey,
the specification of such boundaries or numbers and the specification of
the defaulters share or interest in such property to the best of the
belief of the applicant and so far as he has been able to ascertain it.
(b) The demand notice issued by the Recovery Officer under sub-
rule (3) shall contain the name of the defaulter, the amount due,
including the expenses, if any, and the bhatta to be paid to the person
who shall serve the demand notice, the time allowed for payment and in
case of non-payment, the particulars of the properties to be attached
and sold or to be sold without attachment, as the case may be. After
receiving the demand notice, the Sale Officer shall serve or cause to be
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served a copy of the demand notice upon the defaulter or upon some
adult male member of his family at his usual place of residence, or upon
his authorised agent or, if such personal service is not possible, shall
affix a copy thereof on some conspicuous part of the immovable
property about to be attached and sold or sold without attachment, as
the case may be:
Provided that where the Recovery Officer is satisfied that a
defaulter with intent to defeat or delay the execution, proceeding
against him is about to dispose of the whole or any part of his property,
the demand notice issued by the Recovery Officer under sub-rule (3)
shall not allow any time to the defaulter for payment of the amount due
by him and the property of the defaulter shall be attached forthwith.
(c)......
(d) Where attachment is required before sale, the Sale Officer
shall, if possible, cause a notice of attachment to be served on the
defaulter personally. Where personal service is not possible, the notice
shall be affixed in some conspicuous part of the defaulters last known
residence, if any. The fact of attachment shall also be proclaimed by
beat of drum or other customary mode at some place on, or adjacent to,
such property and at such other place or places as the Recovery Officer
may consider necessary to give due publicity to the sale. The
attachment notice shall set forth that, unless the amount due with
interest and expenses be paid within the date therein mentioned, the
property will be brought to sale. A copy shall be sent to the applicant.
Where the Sale Officer so directs, the attachment shall also be notified
by public proclamation in the Official Gazette.
(e).....
(f) When any immovable property is sold under these rules, the
sale shall be subject to the prior encumbrances on the property, if
any......
(g)......
(h)......
(I)......
(j)......
(k)....."
14. The statutory scheme emerging from the reading of the above
provisions would indicate that an application is required to be made
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by the Creditor to the jurisdictional Recovery Officer invoking Section
156 of MCS Act for attachment and sale of immoveable property. The
application is required to be made in the prescribed form and to
contain such description of immovable property to be proceeded
against as is sufficient for its identification. Upon receipt of the
application, the Recovery Officer is required to verify the correctness
and genuineness of the particulars set forth in the application with
the records, if any, and prepare a demand notice. The demand notice
is to be served upon the defaulter and upon failure to comply with
the requisitions of demand notice, the proceedings for attachment
and sale to be initiated.
15. Sub- Rule 19(a) of Rule 107 provides as under:
" (a) Where any claim is preferred to or any objection is made
to the attachment of, any property attached under this rule on
the ground that such property is not liable to such
attachment, the Recovery officer shall investigate the claims
or objection and dispose it of on merits"
16. The requirement of correct description of the property
sufficient for its identification is an essential ingredient of the
application by the attaching creditor under Rule 107(1). The object is
not far to see as severe consequences ensue from issuance of warrant
of attachment of property. The duty is cast upon the attaching
creditor by Rule 107(11)(a) to correctly identify the property of the
defaulter against whom the recovery certificate has been issued and
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until the property is correctly identified, the property cannot be said
to be attached.
17. In the present case, there are two warrants of attachment
issued on the same day i.e. 21st March, 2006. One warrant attaches the
property described as "Flat No.31, 1st Floor, Suraj, Sopan Baug Co-
operative Housing Society Limited Ghorpadi, Pune 411 001" and the
other warrant of attachment attaches the property described as "Flat
No.34, Sahil, Sopan Baug Co-operative Housing Society Limited
Ghorpadi, Pune 411 001 ("Plot No.31").
18. The contention of Mr. Damle is that there is a typographical
error in the warrant of attachment which refers to Flat No.31 instead
of Plot No.31. However, perusal of the warrant of attachment would
indicate that the property is described as Flat No.31 on 1 st Floor of
building known as Suraj situated in Sopanbaug Cooperative Housing
Society Ltd, whereas the attachment was to be levied on Plot No 31. It
is not a simple case of typographical error as the warrant of
attachment described the property as a flat situated on 1 st Floor of
Suraj and not a Plot.
19. The incorrect description of the property proposed to be
attached came to be rectified by issuance of a subsequent warrant of
attachment on 31st July, 2006 describing the property as "Plot No 31,
Suraj, Sopan Baug Co-op Housing Society Ltd, Ghorpuri, Pune 411 001."
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20. The issuance of warrant of attachment has the effect of
attaching the property described therein and there is no scope for
presumption of attachment of some other property of the judgment
debtor which was proposed to be attached, even if available for
attachment. Thus the concerned property i.e. Plot No 31 was attached
on the date of issuance of the warrant of attachment dated 31 st July,
2006 and not 21st June, 2006.
21. The objection raised by the Respondent Nos.3 to 5 was that
they have 1/4th undivided share in the subject plot together with the
structure standing therein, claiming to be bonafide purchasers of the
subject property stating that at the time when the Deed of
Assignment was executed on 20th June, 2006 and even prior thereto
when the Memorandum of Understanding was executed on 19 th
March, 2006, the subject property was not attached and having
acquired a vested interest in the property, the property was not liable
to be attached.
22. The remit of enquiry to be conducted by the Respondent No 2 is
confined to examination of the objection on the limited ground as to
whether the property was liable to be attached. The sole objection
taken to the attachment was that there was already transfer of
interest in favour of third party and thus the property could not be
attached subsequently, which was required to be determined.
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23. The Respondent No 2 rejected the objection by holding that the
transfer was fraudulent by arriving at the following findings:
(a) The MOU dated 19th March, 2006 being unregistered
and unstamped does not create an right in the said property.
(b) The handing over possession on execution of MOU on
19th March, 2006 shows fraudulent transfer as the demand
notice was issued on 1st March, 2006.
(c) The Objectors being legal advisors to the guarantors
were aware of that the execution of Recovery Certificate
would take place and thus they are not bonafide purchasers
for value.
(d) There was no due diligence done by the Objectors as
the NOC of the Society was not obtained as per term of
MOU.
(e) The Deed of Assignment is not stamped on the first
page which is a mandatory requirement under the Bombay
Stamp Act.
24. The above findings would indicate that the Respondent No 2
has delved into the legality of the transaction and the validity of the
MOU and Deed of Assignment executed between the parties. There is
no reference to the warrant of attachments, the property which came
to be attached, the date of attachment of property and no discussion
whether there was valid attachment in accordance of procedure
prescribed under Rule 107 of MCS Rules. As indicated above, the
remit of enquiry is limited only to examine whether the property was
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liable to such attachment. It is well settled position of law that the
authorities under the MCS Act cannot go into the issue of validity and
legality of the documents of title.
25. As the core issue required to be considered as to whether the
property was liable to be attached, in the background of the
objections raised by the Respondent Nos.3 to 5, was not addressed by
the Respondent No 2, the Respondent No 1 by the impugned order
dated 9th July, 2015 remanded the matter to be decided afresh. The
contention of Mr. Damle that there is no reasoned order cannot be
accepted as the impugned order indicates that the Respondent No 1
by taken into consideration the factual position, the objections to the
attachment and the finding of Respondent No.2 and has thereafter
held that the Respondent No.2 has dealt with the title of the subject
property and legality of the Deed of Assignment. In my view, the
order cannot be termed as non speaking order for the reason that the
Respondent No 1 after examining the findings of Respondent No 2
has rightly held that the Respondent No 2 has not dealt with the
issues raised by the Objectors and has instead dealt with the title of
the subject property and legality of the Deed. I am thus not inclined
to interfere with the order of remand.
26. As the matter has been remanded for fresh consideration, I am
not inclined to render any observations on the merits of the matter as
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the same may influence the decision of the Respondent No 2. As the
order of the Respondent No 2- Special Recovery and Sales Officer
ventured into the validity of the documents of transfer which have
been executed the Revisional Authority has rightly set aside the said
order and remanded the matter to Respondent No 2 for fresh
consideration.
27. Upon a query by this Court as to whether any encumbrances
was noted in the Society records in respect of even the first warrant
of attachment, Mr. Damle is unable to offer any reply for the same.
CONCLUSION:
28. By the impugned order, the Appellate Court has rightly held
that the Respondent No 2 while dealing with objection raised under
Rule 107(19)(a) of the MCS Rules, has dealt with the issue of title and
validity of the registered Deed of Assignment, which is impermissible.
As the Respondent No 2 had failed to deal with the issues raised by
the Respondent Nos 3 to 5 in accordance with the limited jurisdiction
vested in Respondent No 2 under Rule 107(19)(a) of the MCS Rules,
the matter has been rightly remanded for fresh consideration on
merits and in accordance with law. The findings of the Respondent No
2 when perused, deals with the legality and validity of the transaction
and the registered documents executed between the parties which
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was beyond its jurisdiction. Thus, I find no reason to interfere with the
order of remand passed by the Appellate Authority.
29. Resultantly, Petition fails and stands dismissed. Rule stands
discharged. Needless to clarify that the Respondent No 2 to decide
the Objection Application afresh on its own merits and uninfluenced
by any observations made herein.
[Sharmila U. Deshmukh, J.]
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Signed by: Sachin R. Patil
Designation: PS To Honourable Judge
Date: 01/10/2024 18:00:39
