Bombay High Court
Malvika Herbopharma Pvt. Ltd vs Hotel Shanti Doot And Ors on 26 September, 2025
Author: R.I. Chagla
Bench: R.I. Chagla
2025:BHC-OS:16475
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jsn
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INTERIM APPLICATION (L) NO.5273 OF 2024
IN
EXECUTION APPLICATION NO.1049 OF 2024
Malvika Herbopharma Pvt. Ltd. ...Applicant /
Digitally Decree Holder /
signed by
JITENDRA
JITENDRA SHANKAR
Judg. Creditor
SHANKAR NIJASURE
NIJASURE Date: In the matter between
2025.09.26
18:07:38
+0530 M/s. Hotel Shantidoot & Ors. ...Petitioner /
Judg. Debtor
Versus
The Authorized Officer, Dombivli Nagari ...Respondents
Sahakari Bank Ltd. & Anr.
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Mr. Sharan Jagtiani, Senior Counsel, Mr. Sumeet Nankani, Mr. Agnel
Carneiro, Mr. Prakhar Tandon, Ms. Gayatri Sathe, Mr. Smith Colaco,
and Mr. Smith Barbox i/b. Mulla and Mulla and Craigie Blunt and
Caroe for the Applicant.
Mr. A.V. Anturkar, Senior Counsel, Ms. Kalyani Tulankar and Mr.
Ranjit Shinde, Mr. Sagar Shahani and Mr. Abheek Melwani i/b. Mr.
Ravi Kant Purohit for Judgment Debtor Nos.2 to 4.
Mr. N.C. Pawar, Court Receiver present.
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CORAM : R.I. CHAGLA J.
Reserved on : 30TH APRIL, 2025.
Pronounced on : 26TH SEPTEMBER, 2025.
J U D G M E N T:
-
1. The Execution Proceedings seek to enforce Consent
Terms dated 30th March, 2019 executed between Dombivali Nagari
Sahakari Bank Ltd. ("DNS Bank"), the Judgment Debtors (Pradip
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Dixit and his wife) and the Applicant. By these Consent Terms Writ
Petition (L) No.110 of 2019 filed by Pradip Dixit before this Court
challenging the Order dated 21st December, 2018 passed by the Debt
Recovery Appellate Tribunal ("DRAT") came to be disposed of.
2. By the captioned Interim Application, relief has been
sought by the Applicant / Decree Holder / Judgment Creditor seeking
(i) dispensation of drawing up of decree of Order dated 5th April,
2019; (ii) continuation of the appointment of the Court Receiver
(already appointed in Suit No.1402 of 2018) in these proceedings or
alternatively, the appointment of a new Court Receiver in respect of
the Suit property namely Hotel Shantidoot situated at Dadar ("Suit
property"); (iii) leave to participate in the auction for sale of the Suit
property without depositing any further amount and adjustment of
the decretal amount for the purposes of the same, (iv) withdrawal of
the sale proceeds of the Suit property deposited with the Court
Receiver; (v) deposit of the passports of the Judgment Debtors and
an order of injunction restraining them from leaving the territorial
jurisdiction of this Court.
3. There is a preliminary objection which has been raised to
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the maintainability of the Execution Proceedings by the Judgment
Debtors.
4. Prior to considering the preliminary objection which has
been raised by the Judgment Debtors, certain material facts are
necessary to be referred to as under:-
(i) The DNS Bank sanctioned a loan aggregating to INR 10.75
Crores in favour of one Pradip Dixit and his wife on 27th October,
2012.
(ii) Deed of Mortgage was executed by Pradeep Dixit and his
wife in favour of DNS Bank, whereby the Suit property stood
mortgaged in favour of DNS Bank as security against the said
loan.
(iii) Late Pradip Dixit and his wife were unable to repay the
dues of DNS Bank and accordingly, their loan account was
therefore, declared as a NPA and Notices under Section 13(2) and
13(4) of the Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002 ("SARFAESI Act")
were issued by DNS Bank. Further an Application under Section
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14 of the SARFAESI Act was filed before the Chief Metropolitan
Magistrate, ("CMM"), Mumbai dated 31st December, 2013.
(iv) The Securitization Application filed by late Pradip Dixit
challenging the DNS Bank's declaration of their account as NPA
was rejected by the DRT vide Order dated 29th April, 2017;
(v) Leave and License Agreement was entered into by Pradip
Dixit with one Saidammadath N. Abdul Kareem for running the
hotel business on and from the Suit property on 17th June, 2017.
(vi) An order was passed by the CMM, Mumbai on 1st
December, 2017 in the application filed under Section 14 of the
SARFAESI Act, inter alia directing the Court Commissioner to take
physical possession of the Suit property.
(vii) The Court Commissioner has taken physical possession of
the Suit property on 2nd December, 2017 in terms of the Order
dated 1st December, 2017.
(viii) An Appeal filed by Pradip Dixit on 21st November, 2017
challenging the rejection of his Securitization Application dated
29th April, 2017 was dismissed by the DRAT on 21st November,
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2017.
(ix) A Suit No.1402 of 2018 was filed by the Saidammadath N.
Abdul Kareem (Licensee under the purported unregistered Leave
and License Agreement dated 17th June, 2017) against Pradip
Dixit and his wife on 7th May, 2018 seeking recovery of an
amount of Rs.2,22,62,963/-.
(x) An Order was passed by the DRAT on 21st December, 2018 in
Miscellaneous Appeal No.22 of 2017 filed by the Pradip dixit
dismissing the same.
(xi) A letter dated 28th December, 2018 was addressed by DNS
Bank accepting Pradip Dixit's OTS proposal in the amount of INR
11.50 Crores to be paid on or before 27th March, 2019.
(xii) A Writ Petition (L) No.110 of 2019 was filed by Pradip Dixit
before this Court on 14th January, 2019 challenging the Order
dated 21st December, 2018 passed by the DRAT.
(xiii) A Memorandum of Understanding ("MoU") was executed on
30th March, 2019 between the Applicant and Pradip Dixit,
whereby, inter alia, the Applicant agreed to take over the loan of
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DNS Bank amounting to INR 11.85 Crores by way of assignment.
The said assignment also included a further amount not exceeding
INR 65 lakhs towards capex lent to Pradip Dixit (aggregating to
INR 12.50 Crores.)
(xiv) Consent Terms were executed on 30th March, 2019 between
DNS Bank, Pradip Dixit, his wife and the Applicant. These were
filed on 5th April, 2019 in Writ Petition (L) No.110 of 2019.
(xv) A registered Deed of Assignment Agreement was executed on
31st March, 2019 between DNS Bank, the Applicant and Pradip
Dixit, as per which, DNS Bank sold, assigned and transferred on
an 'As is where is' and 'As is what is' basis, its right in the loan
account, together with all security interest created to secure the
loan to the Applicant at a consideration of INR 11.85 Crores.
(xvi) A letter was addressed by the DNS Bank on 4th April, 2019
acknowledging that they have received the entire consideration
under the Assignment Agreement dated 31st March, 2019 on 3rd
April, 2019 and have handed over peaceful physical possession of
the Suit property to the Applicant. This letter was signed by the
DNS Bank, the Applicant, Pradip Dixit and his wife.
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(xvii) An Order was passed by this Court on 5th April, 2019
disposing of Writ Petition (L) No.110 of 2019 in terms of the
Consent Terms dated 30th March, 2019. All undertakings in the
Consent Terms were accepted by this Court.
(xviii) A Memorandum of Understanding ("MoU 2") was executed
on 29th April, 2019 between Pradip Dixit (termed as Owner) and
one A W Hospitality (termed as 'service provider') whereby AW
Hospitality came to be appointed to run and manage the Suit
property.
(xix) Conducting Agreement was entered into between Applicant
and Pradip Dixit on 21st May, 2019, whereby, the latter sought
permission from the Applicant to operate the Suit property.
(xx) An Order came to be passed by this Court on 13th August,
2019 in Commercial Suit No.1402 of 2018 attaching the
properties and assets of Pradip Dixit and his wife in terms of
Order XXXVII Rule 2A of the Code of Civil Procedure, 1908 (CPC)
as well as striking of the defence of Pradip Dixit and his wife, in
terms of Order XXXVII Rule 11 of the CPC; directing Pradip Dixit
and his wife to make disclosures of their assets and deposit their
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passports; appointing a Court Receiver in respect of a flat owned
by Pradip Dixit as well as directing the Court Receiver to take
possession of the Suit property with the assistance of the
concerned police station with further direction to Pradip Dixit and
his wife not to dispose of any of their assets without leave of the
Court.
(xxi) Mr. Dinesh Sharma - the Applicant's authorized
representative visited the Suit property on 23rd August, 2019,
upon which he realized that it was being run by one Mr. Wahab,
who informed Mr. Sharma that he has given loan to Pradip Dixit
and his wife and for repayment thereof, they have given the Suit
property to him.
(xxii) An Order was passed by this Court in Suit No.1402 of 2018
directing the Court Receiver to take physical possession of the rest
of the rooms for the time being. The 23 occupied rooms were to
be sealed by the Court Receiver as and when they got vacated.
The rooms rents collected post 13th August, 2019 were to be
deposited with the Court Receiver.
(xxiii) Pradip Dixit addressed complaint to the Inspector of Police,
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Bhoiwada dated 26th August, 2019 claiming forceful removal
from the Suit property by Dinesh Sharma (the erstwhile Managing
Director of the Applicant).
(xxiv) The Court Receiver took symbolic possession of the Suit
property on 29th August, 2019, in view of the Orders passed by
this Court in Suit No.1402 of 2018.
(xxv) A declaration was executed by Pradip Dixit on 31st August,
2019 to the effect that all persons working in the Suit property are
working for him and nobody else and that he had borrowed
money from one Mr. Wahab in his personal capacity, but he has no
agreement with Mr. Wahab for running the Suit property. Further,
he has not done anything which would compromise the
Applicant's peaceful possession.
(xxvi) Two Complaints were addressed by Pradip Dixit to the
Senior Inspectors of Bandra (East) and Bhoiwada Police Stations
on 1st September, 2019 to the effect that he was forced into
executing the declaration and that he did not "... retaliate in
Dinesh Sharma's office due to his ill health...".
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(xxvii) A letter was addressed by Pradip Dixit's Advocate on 4th
September, 2019, inter alia contending that Pradip Dixit was in
exclusive use and occupation and possession of the Suit property
till that date. Further, it was alleged that the Applicant is
disturbing Pradip Dixit's business. It is alleged that the MoU was
being revoked and cancelled on the ground that the Applicant
failed to pay INR 65 lakhs to Pradip Dixit in terms thereof.
(xxviii) A letter was addressed by the Applicant's Advocate on 9th
September, 2019 in response to the letter dated 4th September,
2019, inter alia, pointing out that the Conducting Agreement
stood terminated with effect from 1st August, 2019 due to Pradip
Dixit's categorical admission at a meeting held in the first week of
July, to the effect that he was not in a position to perform the
same. By the said letter, Pradip Dixit was called upon to withdraw
the aforesaid letter dated 4th September, 2019.
(xxix) Mr. Wahab did not vacate the Suit property and continue to
run the same. In view thereof, the Applicant wrote to the
Commissioner of Police, Mumbai, DCP, Mumbai and Senior Police
Inspector, Bhoiwada Police Station stating that Pradip Dixit has
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committed offence under Sections 420, 383 and 405 of the IPC.
(xxx) A S.C. Suit No.2453 of 2019 was filed by Pradip Dixit on
17th September, 2019 before the City Civil Court, Mumbai against
the Applicant, inter alia, seeking an Order of permanent
injunction restraining the Applicant from dispossessing him,
disturbing his business and entering into the said Suit property
without following due process of law in view of termination of the
MoU by him.
(xxxi) A document titled Request for Demand Loan of 'Rs.2
Crores' executed between Pradip Dixit and the Applicant on 21st
December, 2019, as per which, inter alia, the Applicant was to
provide an additional amount of INR 2 Crores to Pradip Dixit and
his wife, which amount was to be transferred towards the
cancellation of MoU 2.
(xxxii) A Deed of Cancellation was executed between Pradip Dixit
and AW Hospitality services on 21st December, 2019 for the
purposes of mutually terminating MoU 2.
(xxxiii) The Consent Terms were executed by the Applicant,
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Pradip Dixit, his wife and their son in S.C. Suit No.2453 of 2019.
(2nd Consent Terms).
(xxxiv) The Applicant on 1st January, 2020 withdrew the criminal
complaint filed by it against Pradip Dixit, his wife and son, in
accordance with the 2nd Consent Terms.
(xxxv) In compliance with his obligations under the Deed of
Cancellation dated 21st December, 2019, Pradip Dixit disbursed
an amount of INR 1 Crore towards refund of security deposit in
favour of AW Hospitality on 1st January, 2020.
(xxxvi) Pradip Dixit wrote to the Applicant on 1st January, 2020,
inter alia, stating that he is voluntarily handing over the
operational possession of the Suit property to the Applicant.
(xxxvii) A letter was addressed by Pradip Dixit to the Applicant on
4th February, 2020 confirming receipt of INR 1.5 Crores out of the
additional loan amount of INR 2 Crores and undertaking to seek
payment of the final installment of INR 50 lakhs only after filing
inter alia the Assignment Agreement dated 31st March, 2019
before this Court and documents germane to the additional loan
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of INR 2 Crores before the City Civil Court, Mumbai i.e.
withdrawing S.C. Suit No.2453 of 2019.
(xxxviii) A MoU was executed between the Applicant Rohit Shetty
and Pradip Dixit on 4th March, 2020, inter alia in respect of
availing hotel management services from Rohit Shetty (MOU 3).
(xxxix) The Mumbai Municipal Corporation of Greater Mumbai
requisitioned the Suit property under the Epidemic Diseases Act,
1897 and took it over for the purposes of operating a Covid
Centre, in lieu of which, the MCGM paid INR 18,66,387/- as
compensation to AW Hospitality for the period 1st April, 2020 to
15th August, 2020.
(xl) A letter was addressed by Pradip Dixit on 21st July, 2020
inter alia admitting the total outstanding as on 30th June, 2020 to
be INR 15,62,62,513/- which outstanding is stated to be certified
by a Chartered Account.
(xli) A letter of request was addressed by Pradip Dixit on 27th
July, 2020 by which, he sought an extension of 90 days in order to
make payment of outstanding amount citing the covid lockdown.
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(xlii) An Order was passed by this Court in Suit No.1402 of 2021,
inter alia, restraining the Applicant from parting with the
possession of or inducting any third parties into the Suit property
until further Orders.
(xliii) Further, Order was passed by this Court on 5th April, 2021
in Suit No.1402 of 2021 inter alia restraining the Applicant from,
in any manner, offering the Suit property for sale.
(xliv) An Order was passed by this Court on 12th July, 2021 in
Court Receiver's Report No.17 of 2021 in Suit No.1402 of 2021
inter alia directing the Court Receiver to continue to be in
symbolic possession of the Suit property and cautioning the
Applicant that in the event there is a single incident of obstruction
at the Suit property by it, the Court Receiver's Report would be
made absolute.
(xlv) The S.C. Suit No.2453 of 2019 which was filed by the Pradip
Dixit before the City Civil Court, Mumbai came to be decreed on
14th August, 2021 in terms of the 2nd Consent Terms.
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(xlvi) Pradip Dixit passed away on 20th October, 2021 leaving
behind his wife, son and younger son Ishan Dixit as his legal heirs.
(xlvii) The Interim Application (L) No.22763 of 2021 was filed by
the Applicant against the Respondents in Suit No.1402 of 2018,
on 21st October, 2021 in relation to the protection of their rights
under the Consent terms dated 30th March, 2019 and the MoU 1
as well as the Registered Assignment Agreement dated 31st
March, 2019. The Applicant sought a discharge of the Court
Receiver in respect of the Suit property.
(xlviii) Contempt Petition (L) No.29436 of 2022 was filed by the
Applicant against the legal heirs of Pradip Dixit on 8th September,
2022 for breach of the Consent Terms dated 30th March, 2019
and the Order dated 5th April, 2019.
(xlix) The captioned Execution Application was filed on 22nd
June, 2023.
(l) The captioned Interim Application in the Execution Application
was filed on 13th February, 2024.
5. Mr. A.V. Anturkar, the learned Senior Counsel appearing
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for the Judgment Debtor Nos.2 to 4 has submitted that the Consent
Terms dated 30th March, 2019, in Writ Petition (L) No.110 of 2019
has not resulted into the Consent Decree at all. He has submitted that
all that the Consent Terms indicate is that the parties to the Writ
Petition have already settled the matter. They have agreed to a
certain arrangement and they are merely intimating to the Court that
such arrangement has been arrived at. That arrangement is merely
taken on record only for the purpose of identification and the Writ
Petition is disposed of in the light of that understanding, which is
already arrived at.
6. Mr. Anturkar has submitted that there is no "satisfaction
by the Court" to these Consent Terms as mandated by the provisions
of Order XXIII, Rule 3 of the Code of Civil Procedure 1908. He has
submitted that there is no satisfaction that the agreement is
"scrutinized by the Court", and the "Court has concluded that it is a
lawful Agreement". He has submitted that for the purpose of
converting Consent Terms into a Consent Decree, the conditions
namely (a) That the Agreement, must be "lawful Agreement", and
the Court must have applied its mind to that and (b) That the Court
must have recorded "the satisfaction", that the parties have arrived at
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a compromise is conspicuously absent here.
7. Mr. Anturkar has submitted that the phrases, such as the
Consent Terms, is marked 'X' taken on record "only for the purpose of
identification" shows that the Court has not participated, in applying
its mind as well as, of recording, any satisfaction, that factually and
actually, the Consent Terms have been arrived at between the parties.
He has submitted that in the absence of compliance, demonstrably
absent of the provisions of Order XXIII Rule 3 of the Code of Civil
Procedure, clearly show that what has been produced, as Consent
Terms is actually "not the Consent Terms", but it is only "intimation"
to the Court that the parties inter-se, have arrived at, some
arrangement and in the light of the arrangement, both of them are
requesting that the Writ Petition should be disposed off "and nothing
more than that".
8. Mr. Anturkar has placed reliance upon the judgment of
the Supreme Court in K. Venkatachala Bhat and Anr. V/s. Krishna
Nayak and Ors.1 which has clearly laid down that notwithstanding
the proviso to Section 141 of the CPC, the legal position is that the
provisions of Order XXIII do apply to the Consent Terms which have
1 (2005) 4 Supreme Court Cases 117 decided on 9th March, 2005.
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been filed even in a Writ Petition filed under Article 226. The
Applicant had in counter placed reliance upon the judgment of the
Supreme Court in Commissioner of Endowment Vs. Vithal Rao2
which had been decided prior to K. Venkatachala Bhat (Supra) to
contend that the Writ Court is not bound by Order XXIII of the CPC.
He has submitted that in the light of subsequent judgment no
reliance can be placed upon the judgment in Commissioner of
Endowment (Supra). He has submitted that K. Venkatachala Bhat
(Supra) has been subsequently followed in Sneh Gupta Vs. Devi
Sarup & Ors.3.
9. Mr. Anturkar has submitted that assuming that the Court
has applied its mind to the Consent Terms, the Consent Terms does
not indicate that there was any application of mind by the Court "to
the Memorandum of Understanding" dated 30th March, 2019, or the
"Deed of Assignment" dated 31st March, 2019. He has submitted that
although in the Consent Terms there is an in built reference to the
MoU as well as Deed of Assignment, in the Order passed by this
Court, there is no reference that the Court has scrutinized the MoU
and / or the Deed of Assignment.
2 (2005) 4 Supreme Court Cases 120.
3 2009 (6) SCC 194.
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10. Mr. Anturkar has submitted that from elevating the
Consent Terms to Consent Decree, the compliance of Order XXIII (or
even if it is assumed that Order XXIII strictly does not apply, at least,
principles analogues to Order XXIII), would be attracted. He has
submitted that in the instant case, the Consent Terms dated 30th
March, 2019 neither records that this Court has gone through the
MoU or Assignment Agreement. He has submitted that so far as these
derivative documents are concerned, there is neither any satisfaction
recorded nor the Court has applied its mind to that effect.
11. Mr. Anturkar has submitted that in the Consent Terms
there are only three undertakings given. Conspicuously, there is no
undertaking to pay the money. The undertakings are given in
paragraphs 9 and 11.
12. Mr. Anturkar has submitted that it is evident from the
Consent Terms that, this Court has not passed decree in terms of
Consent Terms. This Court has merely taken the Consent Terms on
record, marked it merely for identification and accepted the
undertakings given therein and disposed of the Writ Petition. This
only amounts to the Court recording that the parties have already
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arrived at an agreement in the light of that, they do not want to
prosecute the Petition and therefore, the Petition is disposed of.
13. Mr. Anturkar has submitted that the first Consent Terms
dated 30th March, 2019 is clearly novated by the second Consent
Terms filed in S.C. Suit No.2453 of 2019. He has placed reliance
upon Clause 1 (viii) and the use of the word 'fresh loan' as against,
the outstanding debt. He has submitted that the expression fresh loan
refers to the amount of Rs.2,00,00,000/- and the outstanding loan
refers to the amount, which was payable as per the first Consent
Terms; and the use of the word is "loans" in plural in Clause 9 and
Clause 9(4) of the second Consent Terms.
14. Mr. Anturkar has submitted that the most important is
paragraph 4 of the second Consent Terms which inter alia states that
"funds will be bifurcated as per the terms mentioned in the demand
document dated 21st December, 2019 at Exhibit 'D'."
15. Mr. Anturkar has submitted that a perusal of clauses (a),
(b), (c) and (d) would show that the entire payment will be utilized
in the manner by invoking the doctrine of waterfall mechanism.
Clause (c) clearly provides that the amount will be utilized towards
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the payment of the interest to the investor for the loans availed now
and the previous loan availed on 31st March, 2019 as per the terms
of that contract and the document by the borrower for the month.
16. Mr. Anturkar has submitted that the first Consent Terms
have been completely substituted by the second Consent Terms. He
has submitted that in Lata Construction & Ors Vs. Dr. Rameshchandra
Ramniklal Shah & Anr4 at paragraph 10, the Supreme Court has held
that novation should be complete substitution and not partial. This
judgment which completely supports the Judgment Debtors. He has
submitted that the reliance placed by the Applicant upon Pushpa
Devi Bhagat Vs. Rajinder Singh & Ors. 5 at paragraph 17 is completely
misconceived. This would apply if the Judgment Debtors wanted to
challenge the Consent Terms on the ground that the Consent Terms
was obtained by fraud or coercion or that the signature on the
Consent Terms are not that of the Judgment Debtors, then only this
judgment would apply.
17. Mr. Anturkar has submitted that it is an admitted
position that the Decree Holder has received amounts under the
4 2000 (1) SCC 586.
5 (2006) 5 SCC 566.
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second Consent Terms, and has appropriated amounts received under
the second Consent Terms, as per Clause (c) waterfall mechanism, for
the amount of Rs.2,00,00,000/-.
18. Mr. Anturkar has submitted that two payments which
were available with the Decree Holder have been utilized by the
waterfall mechanism clause and not exclusively for the purpose of
either the amount of Rs.2 Crore or for the amount of the earlier loan.
These are amounts of Rs.22,00,000/- and Rs.18,66,837/- received by
the Decree Holder from the MCGM for using the Suit property as
Covid - 19 Centre for the period of 1st April, 2020 to 15th August,
2020 and which amounts were utilized as per the waterfall
mechanism.
19. Mr. Anturkar has submitted that the Decree Holder has
on the one hand come with a case that there is no novation; that the
second Consent Terms is only for the purpose of loan amount of
Rs.2,00,00,000/- and on the other hand the Decree Holder has taken
the responsibility to run the Hotel and service the entire loan amount
including the one under the first Consent Terms and after running
the hotel property made profits and adjusted the same towards the
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satisfaction of their claim in the present Execution Application. He
has submitted that not only has the Decree Holder come with
unclean hands, but the admission by the Decree Holder of the
payments received pursuant to the second Consent Terms which are
adjusted towards the loan liability arising out of the first Consent
Terms are based upon the arrangement of the parties in the second
Consent Terms which inter alia provided for a repayment manner as
stated therein.
20. Mr. Anturkar has submitted that second Consent Terms
provides that in the event of auction of the Suit property in Clause
9(f), the Applicant will release its charges on the Suit property
completely as per 'Assignment Deed' dated 31st March, 2019.
21. Mr. Anturkar has submitted that the Decree Holder has
not disclosed that the Decree Holder has in fact, illegally tried to
auction the Suit property by taking recourse to the second Consent
Terms and sent an auction notice on 17th March, 2021. He has
submitted that it has been admitted in the said Notice that the dues
are required to be cleared as per the second Consent Terms dated
25th December, 2019 and Assignment Agreement dated 31st March,
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2019. Furthermore, the e-auction sale notice sent by the Decree
Holder refers to the first Consent Terms dated 30th March, 2019 and
second Consent Terms dated 25th December, 2019. He has submitted
that fully aware that the auction mechanism was provided only in
second Consent Terms, auction sale notice provides for the amount
demanded as Rs.28 Crores. He has submitted that there is no
mechanism to auction the Suit property in the first Consent Terms
and this only goes to show that the first Consent Terms stood
novated.
22. Mr. Anturkar has submitted that it was the responsibility
and obligation of the Decree Holder to run the hotel property as per
the second Consent Terms through the service provider appointed by
the Decree Holder. He has submitted that the Decree Holder not only
started running the property but also serviced the loan liability
arising from the first Consent Terms with the payments of
Rs.22,00,000/- and Rs.18,66,837/-. He has submitted that it is the
failure on the part of the Decree Holder to keep the hotel property
running that has led to the present situation and loss caused to the
Judgment Debtor. He has submitted that the Second Consent Terms
also novated the mechanism for running the property and servicing
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the loans.
23. Mr. Anturkar has submitted that the Consent Terms have
to be read along with MoU. He has submitted that the 'event of
default' provides for the moratorium for the repayment of the interest
for 6 months. It also provides for moratorium on the principal
amount for 24 months. Thereafter, it provides that if there is default
in making payment of interest and principal then it will be necessary
to give two months notice, to make good, that default. It is only after
the period of two months notice then, the default, would take place.
24. Mr. Anturkar has submitted that in the Interim
Application, it is the contention of the Decree Holder that the default
has been committed on 5th July, 2019. He has submitted that in the
written note of argument submitted on behalf of the Decree Holder,
this date is surprisingly changed, and now it is said that the default
has taken place not on 5th July, 2019 but in October, 2019.
25. Mr. Anturkar has submitted that between the first
Consent Terms on 30th March, 2019 and the second Consent Terms
on 25th December, 2019, there was an Independent Agreement
which was executed on 21st May, 2019 between the Decree Holder
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and the Judgment Debtors.
26. Mr. Anturkar has submitted that in the Commercial Suit
No.104 of 2021 filed by the Decree Holder on 19th December, 2019
for the recovery and for the purpose of foreclosure of the mortgage,
in paragraph 3(r) of the Plaint, it is stated that the Defendant No.1
has failed to make payment of the first installment of interest amount
of Rs.21,72,500/- which was due and payable on 5th July, 2019. This
date is of significance as default is seen from the pleading at page 12
of the said Commercial Suit No.104 of 2021.
27. Mr. Anturkar has submitted that if the Decree Holder
wants to execute the decree as per the Consent Terms then he must
take into consideration the mechanism contemplated by the 'Date of
Event' in the MoU and he cannot rely upon some other document,
which is not the part and parcel admittedly of the Consent Terms
namely the agreement dated 21st May, 2019. He has submitted that
on this ground alone the Execution Application is required to be
dismissed as the default as pleaded in the Interim Application by the
Decree Holder relates as per their own admission not of the Consent
Terms but of the agreement dated 21st May, 2019 which is not
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disclosed and is not a part of the first Consent Terms and the Order
passed by this Court on 5th April, 2019.
28. Mr. Anturkar has submitted that it is the contention on
behalf of the Applicant / Decree Holder that if the default is
committed, then the Judgment Debtors should have made the
election. He has submitted that what is completely forgotten and
overlooked is that the Judgment Debtors have made an election and
sent the notice of terminating the contract. He has placed reliance
upon notice dated 4th September, 2019 which is now treated as the
date of cause of action in the Commercial Suit No.104 of 2019.
29. Mr. Anturkar has submitted that the Decree Holder has
by filing the Commercial Suit No.104 of 2019 in this Court on 19th
September, 2019 and thereafter filing the present Execution
Application on 22nd June, 2023, has made an election.
30. Mr. Anturkar has submitted that the first Consent Terms
provides that in the eventuality, of the frustration, of the contract or
in the event of default, the Decree Holder will be at liberty to take all
and every step for enforcement of the security and all action for
recovery of its entire amount due and payable and the borrower and
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the guarantor shall not raise any objection or protest to such action
by the Respondent No.3, after due compliance of the provisions of
law.
31. Mr. Anturkar has submitted that if the breach has been
committed there is no undertaking to make the payment and the only
right which is available to the Decree Holder is to take steps for
enforcement of the security and to take all action for recovery of the
entire amount due. The only recourse available to the Decree Holder
is to file the Suit for foreclosure of the mortgage, which right of the
erstwhile mortgagee namely DNS Bank has been assigned to the
Decree Holder by the Deed of Assignment dated 31st March, 2019.
This has been done by filing Commercial Suit No.104 of 2019 in this
Court on 19th December, 2019. Now it is not open for the Applicant /
Decree Holder to file the Execution Application.
32. Mr. Anturkar has submitted that in the Commercial Suit
No.104 of 2019 in Interim Application (L) No.9236 of 2021, this
Court passed Order dated 5th April, 2021 which had restrained the
Plaintiff from in any manner, offering the Suit property on sale by
public auction. He has submitted that the words "in any manner" is
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wide enough even to file the Execution Application. He has submitted
that the filing of the Execution Application and requesting the Court,
to auction the Suit property even before the decree is obtained in
Commercial Suit No.104 of 2019 is in contempt of the said Order
passed by this Court on 5th April, 2021.
33. Mr. Anturkar has submitted that there were reciprocal
promises in the MoU and the Applicant was to pay capex amount of
INR 65,00,000/-, which it defaulted in paying and hence it cannot
seek execution of the Consent Terms. He has submitted that in a
contract where there are reciprocal promises if the party fails to
comply with the reciprocal promise, either party will be absolved of
their obligation under such contract. In other words, the Judgment
Debtors are absolved from repayment obligations in respect of loan
amount of Rs.11.85 Crores by virtue of the Applicant failing to
comply with its reciprocal promise of payment of capex amount of
INR 65,00,000/- to the Judgment Debtors.
34. Mr. Sharan Jagtiani, the learned Senior Counsel
appearing for the Applicant / Decree Holder has submitted that
admittedly the first Consent Terms dated 30th March, 2019 is filed in
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Writ Petition No.1172 of 2019 and by virtue of the Order of this
Court dated 5th April, 2019, the Writ Petition is disposed of in terms
of the Consent Terms.
35. Mr. Jagtiani has submitted that the first Consent Terms
having received the imprimatur of this Court vide Order dated 5th
April, 2019 is indeed a Consent Decree and must be held to be
binding between the parties until and unless it is set aside. He has
placed reliance upon the judgment of this Court in Govind Waman
Shabhag Vs. Murlidhar Shrinivas Shanbhag & Ors.6 in this context.
The said judgment followed a judgment of the Privy Council in
Charles Hubert Kinch Vs. Edward Keith Walcott & Ors7.
36. Mr. Jagtiani has submitted that the Writ Court is not
bound by Order XXIII Rule 3 of the CPC. This has been held by the
Supreme Court in Commissioner of Endowments (Supra) at
paragraph 17.
37. Mr. Jagtiani has submitted that the contention of the
Judgment Debtors that the derivative agreements referred to in the
Consent Terms do not form part of it, absent "proof to the satisfaction
6 1953 Bom. 412.
7 (1929) AIR 289 P.C.
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of this Court" in terms of Order XXIII Rule 3 of the CPC is
misconceived. He has submitted that in paragraph 13 of the Affidavit
in Reply of the Judgment Debtors, there is categorical admission to
the fact that the Consent Terms came to be filed "based on the above
documents" and which above documents are the MoU dated 30th
March, 2019 and the Assignment Agreement dated 31st March, 2019.
Further, at paragraph 17 of the Judgment Debtors Affidavit in Reply
the non-payment of Rs.65,00,000/- has been stated to be "...nothing
but serious breach of MoU which forms a part of the Consent Terms
...". He has submitted that on the Judgment Debtors own showing
the aforementioned contention is in teeth of its pleaded case.
38. Mr. Jagtiani has submitted that even in the schedule to
the MoU under the head "documentation", there is an express
reference inter alia to the Consent Terms. Likewise, Clauses 7, 9 and
10 of the Consent Terms refer to the MoU. The MoU, is therefore,
incorporated in the Consent Terms by reference.
39. Mr. Jagtiani has submitted that the Conducting
Agreement dated 21st May, 2019 also refers to the MoU at Clause 4.
Recital G of the Conducting Agreement defines the term "Loan
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amount" as being the amount of INR Rs.11.85 Crores. This has also
been confirmed by the Judgment Debtors in the repayment schedule
furnished by them in compliance with their obligations under Clause
8 of the MoU.
40. Mr. Jagtiani has submitted that the material
understanding between the parties under the MoU have been duly
acted upon them.
41. Mr. Jagtiani has submitted that on a plain reading of the
MoU along with the Consent Terms as well as the Judgment Debtors
pleadings it conclusively establishes that the MoU forms an integral
part of the Consent Terms. He has in particular placed reliance upon
Clause 7 of the Consent Terms.
42. Mr. Jagtiani has submitted that without the MoU, the
Consent Terms cannot, in and of itself, be implemented. For this
reason, and with a view to give effect to the Consent Terms, the MoU
has to be read conjointly with and / or part and parcel of the Consent
Terms.
43. Mr. Jagtiani has submitted that the obligation to pay an
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amount of INR 65,00,000/- arises under the MoU. The MoU cannot
be selectively relied on by the Judgment Debtors to argue, on the one
hand, that the non payment of the said amount of INR 65,00,000/-
and the resultant breach of Clause 1 of the MoU, render the Consent
Terms incapable of execution, whilst on the other, contend that the
derivative agreements referred to in the Consent Terms, such as the
MoU, have not been "proved to the satisfaction of the Court" in terms
of the Order XXIII Rule 3 of the CPC.
44. Mr. Jagtiani has submitted that the Judgment Debtors
reliance upon the judgment of the Supreme Court in K. Venkatachala
Bhat (Supra) is misplaced. The judgment came to be passed in a
situation where the High Court disposed of the proceedings before it
in terms of a 'consent memo' and an accompanying Affidavit which
was only signed by one of the parties to the proceedings i.e. the
Respondent. He has submitted that this is not the case here. Further,
a plain reading of the finding in paragraph 11 of the judgment is
that, "...the requirement under Order XXIII Rule 3 can be pressed into
service in the writ proceedings..." shows that it is an exception to the
norm given the particular facts at hand. The judgment in Commission
of Endowments (Supra) relied upon by the Applicant was not
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brought to the notice of three Judge Bench in K. Venkatchala Bhat
(Supra). The reference to Commissioner of Endowments (Supra) is
only by way of editor's comment / note.
45. Mr. Jagtiani has submitted that in the judgment Dwarka
Prasad Agarwal Vs. B.D. Agarwal8 which is also a judgment of three
Judge Bench of the Supreme Court, aligns with the ratio of the
applicability of Order XXIII Rule 3 of the CPC to writ proceedings. He
has placed reliance upon paragraph 35 of the said Judgment. He has
submitted that from the said paragraph 35, it is clear that Order XXIII
Rule 3 of the CPC cannot as an absolute proposition said to bind the
writ Court.
46. Mr. Jagtiani has submitted that the Judgment Debtors
contention that the Order dated 5th April, 2019 does not constitute
"compromise decree" since all that the Division Bench did was to take
note of the fact that the parties arrived at an inter se settlement and
simplicitor, without any application of mind, disposed of Writ Petition
No.1172 of 2019 in terms thereof, ought to be stated only to be
rejected. He has submitted that this is primarily because there is
absolutely no basis for a persistently defaulting Judgment Debtor to
8 (2003) 6 SCC 230
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speculate and suggest, at this stage, that the Division Bench did not
apply its mind as to the lawfulness of the first Consent Terms before
disposing of Writ Petition No. 1172 of 2019 in terms thereof vide
Order dated 5th April, 2019.
47. Mr. Jagtiani has referred to the said Order dated 5th
April, 2019 and has submitted that there are readily discernible
indicators of application of mind on the part of the Division Bench in
the said Order which includes the acceptance of undertakings given
in the first Consent Terms as undertakings to this Court. He has
placed reliance upon the judgment of a Division Bench of this Court
in Bajaranglal Khemka and Anr. V/s. Messrs Kapurchand Ltd 9, Which
holds that when the Court passes a decree it puts its imprimatur on
those terms and makes the terms a rule of this Court. It would be
open to the Court, before it did so to accept an undertaking given by
a party to the Court.
48. Mr. Jagtiani has submitted that the obligation to make
payment of INR 65,00,000/- arises under the MoU, Non payment
thereof would at best entitle the Judgment Debtor to file a Suit for
seeking specific performance of the MoU. No such Suit has been filed.
9 AIR 1950 Bom 36.
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Instead, the Judgment Debtor filed S.C. Suit No.2453 of 2019 before
the City Civil Court seeking an injunction from being dispossessed
from the Suit property. This is in view of the Judgment Debtors
having cancelled the MoU vide letter dated 4th September, 2019. The
basis of the said letter dated 4th September, 2019, to seek
cancellation / revocation of MoU was the non-payment of the
amount of INR 65,00,000/-. The said Suit came to be disposed of by
the second Consent Terms dated 25th December, 2019.
49. Mr. Jagtiani has submitted that there is no reference to
the amount of Rs.65,00,000/- in the second Consent Terms. The
repayment schedule provided by Judgment Debtors is an annexure to
the Conducting Agreement. This confirms the 'Loan Amount' to be
INR 11.85 Crores. Thus, the Judgment Debtors cannot be heard to
contend that such non-payment comes in the way of the execution of
the Consent Terms.
50. Mr. Jagtiani has submitted that the Applicant, by virtue
of admittedly, being the assignee of this debt, is well within its right
to recover the same. He has placed reliance upon Harikrishna
Engineering Works & Ors. Vs. Syndicate Bank and Ors10 at Paragraphs
10 2021 SCC OnLine Guj 112.
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4, 13 - 15 and Landmark Real Estate Developers Ltd. & Ors. Vs. The
Malkapur Urban Co-Operative Bank Ltd11 at paragraphs 9 - 11.
51. Mr. Jagtiani has submitted that the Applicant has stepped
into the shoes of DNS Bank as Assignee of the debt solely in view of
the Judgment Debtors' representations to the effect that the Suit
property would be let out to OYO Rooms and / or Alcott Town
Planners Pvt. Ltd. ("OYO"). The MoU came to be executed with this
understanding in mind.
52. Mr. Jagtiani has submitted that from Clauses 1 and 4 of
the MoU, it becomes clear that the amount of INR 65,00,000/- was to
be expended towards capex for the purposes of carrying out
renovation and / or repair works on the Suit property in order to
bring it to a level where it could be let out / licensed to OYO.
53. Mr. Jagtiani has submitted that the Judgment Debtors
have not explained the need for further capex of INR 65,00,000/-
having already expended INR 28,00,000/- towards the same purpose.
He has submitted that this amount had been paid under the MoU
dated 29th April, 2019. This also goes to show that the amount of
11 Interim Application (L) No.10943 of 2021 decided on 13th December, 2021.
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INR 65,00,000/- contemplated under the aforementioned clauses
was only to be paid if the deal with OYO was going through.
54. Mr. Jagtiani has also placed reliance upon Clause 8 of the
Conducting Agreement which provides that "In case the performance
is not given as per the projections given by him, the Assignee will
enter into a contract with Alcott Town Planners Pvt. Ltd. and / or
OYO Rooms or any other agency of their choice...". He has submitted
that admittedly, the transaction with OYO did not fructify. In these
circumstances, the need to disburse the said amount of INR
65,00,000/- never arose.
55. Mr. Jagtiani has submitted that the contention of the
Judgment Debtors that there is an inherent contradiction between
the 'event of default' clauses of the MoU and the Consent Terms is
misconceived.
56. Mr. Jagtiani has submitted that there is no inherent
contradiction in the event of default clauses of the MoU and the
Consent Terms. Under Clause 7 of the Consent Terms, the Petitioner
has confirmed the aforesaid transaction and further agreed to make
payment as per the understanding to Respondent No.3 under the
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MoU. Further, Clause 9 of the Consent Terms provides that, the
borrower and guarantors undertake that in the event of default in
payment of the stipulated amount as per these Consent Terms read
with the MoU, they shall immediately peacefully vacate the entire
hotel premises. Further Clause 10 of the Consent Terms, inter alia
makes express reference to "...any of the installments of the agreed
Memorandum of Understanding as per these Consent Terms...".
57. Mr. Jagtiani has submitted that the clauses of the
Consent Terms including Clause 10 which is the 'event of default'
clause, expressly refers to the MoU. The understanding of the parties
is that the categorical inclusion of the Consent Terms in the schedule
to the MoU under the head 'documentation' leaves no manner of
doubt that parties always intended for the MoU and the Consent
Terms to be harmoniously read and implemented.
58. Mr. Jagtiani, has submitted that there is no contradiction
between the Clause 6 of the MoU and Clause 10 of the Consent
Terms as sought to be contended by the Judgment Debtors. Clause 6
of the MoU confers upon the Applicant the right to seek peaceful
handover of operational possession of the Suit property from the
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Judgment Debtors, where there have been three consecutive defaults
in repayment of interest and principal. He has submitted that it is
indisputable that there have been in fact three consecutive defaults in
the present case. This is for the reason that not a single installment,
whether of interest or principal, has been paid by the Judgment
Debtors since the payment of interest in the month of October, 2019.
59. Mr. Jagtiani has submitted that the requirement of 60
day notice under Clause 6 of the MoU only arises when recovery of
operational possession is sought by the Applicant. The Applicant is
not seeking that, owing to the fact that the Judgment Debtors
voluntarily handed over operational possession of the Suit property
sometime in December 2019, as evidenced by their letter dated 1st
January, 2020.
60. Mr. Jagtiani has submitted that in the Execution
Proceedings, the Applicant, inter alia, seeks the auction / sale of the
Suit property in order to recover its dues, in terms of Clause 10 of the
Consent Terms read with Clauses 6 and 7 of the MoU and the
schedule thereto. The Applicant's right to do so does not get
extinguished by virtue of the fact that operational possession has
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been voluntarily handed over to the Applicant by the Judgment
Debtors.
61. Mr. Jagtiani has referred to Clause 7 of the MoU by
which the investor shall reserve the right to enforce the security at
anytime after the default is made and no resolution of the same can
be worked out within two months of the default, the property would
be disposed of by following due process of law.
62. Mr. Jagtiani has submitted that Clause 7 of the MoU does
not contemplate three consecutive defaults. Further, there is nothing
in the MoU to suggest that the word 'default' means three
consecutive defaults. He has submitted that the language of Clause
10 of the Consent Terms to the extent it says "...in the event of
default in payment of any of the installments of the agreed MoU as
per these Consent Terms..." must be read not only in light of Clause 6
of the MoU but also in light of Clause 7 thereof.
63. Mr. Jagtiani has submitted that it is abundantly clear that
the Applicant seeks execution of the Consent Terms for the purposes
of seeking recovery of its dues to the tune of INR 14.72 Crores
(approximately) in terms of Clause 10 of the Consent Terms read
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with Clauses 6 and 7 of the MoU and schedule thereto.
64. Mr. Jagtiani has submitted that there is default on the
part of the Judgment Debtors which subsists even upon expiry of the
moratorium period under the MoU. He has submitted that the
moratorium in respect of interest expired on 30th September, 2019,
i.e. six months from the date of the MoU. Accordingly, interest was
payable for the month of October, 2019 and onwards. He has
submitted that moratorium in respect of the repayment of the
principal amount expired on 31st March, 2021 i.e. 24 months from
the date of the MoU. An amount of INR 19.50 lakhs was paid by the
Judgment Debtors towards interest for the month of October, 2019.
Besides this, no payment has been made, whether towards interest or
towards repayment of principal. He has accordingly, submitted that
therefore there have been more than three consecutive defaults.
65. Mr. Jagtiani has submitted that the only remedy
available to a party to a Consent Decree, who wishes not to be bound
by it, is to make an appropriate application to the Court which
recorded the compromise. He has placed reliance upon the judgment
of the Supreme Court in Pushpa Devi Bhagat (Supra). He has
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submitted that the Judgment Debtors cannot express their
unwillingness to be bound by the Consent Terms before the Executing
Court.
66. Mr. Jagtiani has submitted that in order for there to be
novation, there must be 'complete substitution' of the old contract by
a new one. He has placed reliance upon the judgment of the Supreme
Court in Lata Construction and Anr. (Supra). He has submitted that
the second Consent Terms pertain to a further loan of INR 2 Crore.
This amount was sought by the Judgment Debtor from the Applicant
in order to settle his dispute with one Abdul Wahab of A W
Hospitality ("Wahab"). Wahab had paid the Judgment Debtors INR 2
Crores towards an interest free Security Deposit, in terms of a MoU
dated 29th April, 2019. He has submitted that out of which a sum of
INR 28 lakhs was to be utilized towards capex for the purposes of
refurbishment of the Suit property and towards renewal of licenses.
67. Mr. Jagtiani has submitted that the Judgment Debtors
have not explained the need for further capex of INR 65 lakhs having
already expended INR 28 lakhs towards the same purpose. This
further goes to show that the amount of INR 65 lakhs contemplated
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under Clause 1 read with Clause 4 of the MoU was only to be paid if
the deal with OYO was going through.
68. Mr. Jagtiani has submitted that the ambit of the second
Consent Terms has been expressly spelt out after Clause 9 thereof
and which provides that "The only purpose of the loan is to discharge
Mr. Pradip S. Dixit obligation for payment of Rs.2 Crore as interest
free refundable deposit to Mr. Abdul Wahab Amir Shaikh against the
cancellation of Service provide MoU with him dated 29th April,
2019". He has submitted that this is a classic case of commercial
dishonesty and cheating by the Judgment Debtors, by unjustly
enriching themselves by accepting a payment to the tune of INR 2
Crores, on or before 28th April, 2019, whereby out of this INR 2
Crores, INR 1.72 Crores was towards a security deposit as well as
capex amount whereas INR 28 lakhs was paid to the Judgment
Debtors on signing of this document for repair, renovation and
renewal of all licenses, electrical and water connection for the
premises. Despite which the Judgment Debtor illegally demanded
INR 65 lakhs in June, 2019.
69. Mr. Jagtiani has submitted that the "only purpose" of the
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second Consent Terms does not align with that of the first Consent
Terms. Accordingly, Clause 9 of the second Consent Terms, by no
means, can be said to 'completely substitute' the first Consent Terms.
70. Mr. Jagtiani has submitted that the second Consent
Terms nevertheless do provide, at Clause 9 thereof, for auction / sale
of the Suit property, in the event there is "...no resolution to Malvika
Herbopharma loans...". He has submitted that the sale in execution
of a decree is to be mandatorily carried out by this Court in
accordance with Order XXI Rule 64 to 73 of the CPC. He has placed
reliance upon the judgment in K. Sankaranarayana Pillai Vs. S.P.
Sankara Iyer12 at paragraphs 8 - 10, wherein the Division Bench has
held that although Rule 64 refers, in terms to 'attached property', this
would apply to sales of any immovable property in public auction by
Court.
71. Mr. Jagtiani has submitted that valuation of the Suit
property has already been carried out by Mr. Shetgiri and Associates
pursuant to the Order dated 1st October, 2024 passed by this Court.
The Applicant is now pressing for further orders, in terms of prayer
Clauses (b) and (c) of the captioned Interim Application as well as
12 1953 SCC OnLine Ker 74.
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for leave, under Order XXI Rule 72 of the CPC, to participate in the
auction for the sale of the Suit property.
72. Mr. Jagtiani has submitted that Clause 10 of the Consent
Terms inter alia grants liberty to the Applicant "...to take all necessary
steps for enforcement of the security and all actions for recovering its
entire amount due and the Borrower and guarantors shall not raise
any objection or protest to such actions...". He has submitted that the
Applicant under Clause 10 is free to initiate any proceedings for the
purposes of recovering its outstanding dues, so long as such
proceedings are in accordance with law. He has submitted that
accordingly, the Applicant has filed Suit No.104 of 2021 before this
Court seeking foreclosure of mortgage, wherein, the Judgment
Debtors have also filed their Written Statement on 8th October, 2021.
The Applicant has undertaken to withdraw the said Suit, in view of
having elected to recover its dues by the captioned Interim
Application. He has placed reliance upon Section 47 of the CPC, sub-
section (1) of which, inter alia, provides that all questions relating to
the execution, discharge or satisfaction of the decree shall be
determined by the Court executing the decree and not by a separate
Suit. He has in this context placed reliance upon the judgment of the
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Supreme Court in Pradeep Mehra Vs. Harijivan J. Jethwa 13 at
paragraphs 10 - 20.
73. Mr. Jagtiani has submitted that the Suit No.104 of 2021
(Mortgage Suit) was filed by the Applicant on 19th December, 2019.
The Second Consent Terms were executed on 25th December, 2019,
6 days after the filing of the Mortgage Suit. Clause 7 of the Consent
Terms contains an undertaking of the Applicant to withdraw all court
cases and police complaints on execution of this document against
Mr. Pradip Dixit and his family members. The Applicant intends on
abiding by its undertaking given to this Court and which has been
reiterated in the course of oral submission. It is by reason of this
undertaking that the Applicant has not even moved the Mortgage
Suit.
74. Mr. Jagtiani has submitted that assuming arguendo, that
the Applicant elected to file the Mortgage Suit, in terms of Section 39
of the Contract Act, and thereby lost its sight to institute these
proceedings, the aforementioned undertaking, which forms part of
'consent terms' between the parties, i.e. the second Consent Terms
necessarily nullifies any such election.
13 2023 SCC OnLine SC 1395.
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75. Mr. Jagtiani has submitted that the Applicant's failure to
disclose the filing of the Mortgage Suit in the captioned Application
was not wilful. The Applicant did not consider, the filing thereof to be
a material fact warranting disclosure in execution proceedings since
the Applicant had already undertaken, under the second Consent
Terms to withdraw, inter alia, the Mortgage Suit. He has submitted
that the Applicant accepts with the benefit of hindsight that it should
have disclosed the mortgage Suit for good Order and completeness.
76. Mr. Jagtiani has submitted that the Applicant repeats and
reiterates that under Section 47 of the CPC, this Court, in exercise of
its executory jurisdiction, is the only appropriate forum for the
Applicant to receive its dues and / or seek enforcement of the first
Consent Terms and recovery thereunder.
77. Mr. Jagtiani has submitted that reliance on an Order
dated 5th April, 2021 passed by the learned Single Judge of this
Court to contend that the Applicant is injuncted from offering the
subject property for sale, which injunction has not been vacated to
date is misconceived. He has submitted that the Order dated 5th
April, 2021 restrains the Applicant from offering the subject property
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for sale. That is not what is sought to be achieved by these
proceedings. The Applicant seeks sale of the subject property through
this Court in exercise of its executory jurisdiction under inter alia
Order XXI of the CPC. He has submitted that this mode of sale is not
proscribed by the Order dated 5th April, 2021.
78. Mr. Jagtiani has submitted that the objections raised by
the Judgment Debtors on the maintainability of the Execution
Proceedings be rejected and the Executing Court is require to execute
the First Consent Terms dated 30th March, 2019 which, by disposing
of the Writ Petition No.1172 of 2019 vide Order dated 5th April,
2021, is in the form of a Consent Decree.
79. Having considered the submissions, I find much merit in
the submission on behalf of the Applicant that the Order dated 5th
April, 2019, which disposed of Writ Petition No.1172 of 2019 in
terms of the first Consent Terms dated 30th March, 2019 is a Consent
Decree and binding between the parties thereto, until and unless it is
set aside. The Judgment of the Division Bench of this Court in
Bajranglal Gangadhar Khemka (Supra), has held that when the Court
passes a Decree, it puts its imprimatur upon those terms and makes
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the terms a rule of the Court and it would be open to the Court,
before it did so, to accept an undertaking given by a party to the
Court. Therefore, there is nothing contrary to any provision of the
law whereby an undertaking cannot be given by a party to the Court
in the Consent Decree. In the present case at Paragraph 3 of the
Order dated 5th April, 2019 the Division Bench of this Court has
whilst disposing of Writ Petition No.1172 of 2019 in terms of the
Consent Terms accepted the undertakings given in the Consent Terms
as undertakings to this Court. The first Consent Terms can only be set
aside by the Judgment Debtors challenging the legality or validity of
the Consent Terms which is a Consent Decree by adopting
appropriate proceedings. This Court vide Order dated 5th April,
2019 having put its imprimatur of the first Consent Terms and the
said Consent Terms / decree not having been set aside, their
execution cannot be resisted on the ground raised by the Judgment
Debtors. The reliance placed by the Applicant on Govind Waman
Shanbhag (Supra) which has followed the Privy Council Judgment in
Charles Hubert Kinch (Supra) is apposite.
80. I do not find merit in the contention on behalf of the
Judgment Debtors that the first Consent Terms indicate that the
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parties to the Writ Petition have already settled the matter and they
are merely intimating to the Court that such arrangement has been
arrived at. The contention of the Judgment Debtors that there is no
"satisfaction by the Court" as mandated by the provisions of Order
XXIII Rule 3 of the CPC is misconceived. The Writ Court is not bound
by Order XXIII Rule 3 of the CPC. The Judgment relied upon by the
Applicants viz. Commissioner of Endowment (supra) at Paragraph 17
is apposite. Although the Judgment Debtors have relied upon a
subsequent Judgment of the Supreme Court in K. Venkatachala Bhat
(supra) to contend that the provisions of Order XXIII Rule 3 do apply
to the Consent Terms which have been filed even in Writ Petition
under Article 226, this Judgment came to be passed in a situation
where this Court disposed of the proceedings before it in terms of a
"Consent Memo" and an accompanying Affidavit which was only
signed by one of the parties to the proceedings i.e. the Respondent.
This is not the factual situation here. The Consent Terms have been
signed by both the parties and by the Order dated 5th April, 2019
this Court has disposed of the Writ Petition No.1172 of 2019 in terms
thereof. It is not open for the Judgment Debtors who are in default of
the Consent Terms to speculate and suggest that the Division Bench
did not apply its mind as to the lawfulness of the first Consent Terms
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before disposing of the Writ Petition.
81. Further, the contention of the Judgment Debtors that the
Division Bench of this Court in accepting the Consent Terms dated
30th March, 2019 and disposing of the Writ Petition in terms thereof
has not applied its mind to the MoU dated 30th March, 2019 or Deed
of Assignment dated 31st March, 2019 is also misconceived. The
Judgment Debtors have in their Reply to the Interim Application filed
in the above Execution Application, admitted that the Consent Terms
came to be filed based on the above documents which are the MoU
dated 30th March, 2019 and the Assignment Agreement dated 31st
March, 2019. Further, at Paragraph 17 of the Judgment Debtors'
Reply, the non payment of INR 65 Lakh has been stated to be nothing
but a serious breach of the MoU which forms a part of the Consent
Terms. In view of the Judgment Debtors' admission, it would not be
open to them to raise the above contention that this Court had not
applied its mind to the MoU or the Deed of Assignment.
82. The Consent Terms at Clauses 7, 9 and 10 have also
referred to the MoU and hence the MoU is incorporated in the
Consent Terms by reference. The parties have also acted on the
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premise that they were executing the MoU and provided the re-
payment schedule in the form of Annexure to the Agreement dated
21st May, 2019 ("Conducting Agreement"). The Conducting
Agreement also refers to the MoU at Clause 4 thereof. Recital G of
the Conducting Agreement defines the term "Loan Amount" as being
the amount of INR 11.85 Crores. This has also been confirmed by the
Judgment Debtors in the repayment schedule furnished by them in
compliance with their obligations under Clause 8 of the MoU. Thus,
the material understanding between the parties under the MoU has
been duly acted upon by them. I find from the plain language of the
MoU and the Consent Terms as well as the Judgment Debtors'
pleadings that the MoU forms an integral part of the Consent Terms.
Without the MOU, the Consent Terms cannot, in and of itself, be
implemented. Accordingly, the MOU has to be read conjointly with
and/or as part and parcel of the Consent Terms.
83. The Judgment Debtors have on the one hand relied upon
the MoU to contend that the non payment of INR 65 Lakh and the
resultant breach of Clause 1 of the MOU, render the Consent Terms
incapable of execution, whilst on the other hand, they have
contended that the derivative agreements referred to in the Consent
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Terms, such as the MoU, have not been "proved to the satisfaction of
the Court", in terms of the Order XXIII Rule 3 of CPC.
84. The Judgment Debtors have also relied upon the
Judgment of the Supreme Court in Dwarka Prasad Agarwal (supra)
which they contend like K. Venkatachala Bhat (supra) is also a Bench
of the three Judges of the Supreme Court and according to them
holds that the Order XXIII Rule 3 of the CPC is applicable to the
proceedings under Article 226 of Constitution of India. The reliance
on the Judgment of the Supreme Court in Dwarka Prasad Agarwal
(supra) is misplaced as the Supreme Court in Paragraph 35 has held
that "In terms of Section 141 of the CPC, the provisions thereof are
not applicable in a Writ Proceeding. No provision of the CPC has
been made applicable in terms of the rules framed by the High Court
of Judicature at Nagpur..." "In any event the applicability of the
provisions of the Code of Civil Procedure, if any, would be only with
regard to the procedural and machinery provisions contained
therein....". Accordingly, it follows that Order XXIII Rule 3 of the CPC
cannot as an absolute proposition be said to bind the Writ Court as
alleged.
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85. I also do not find any merit in the contention on behalf
of the Judgment Debtors that in view of the Applicant having
defaulted in payment of the capex amount of INR 65 Lakh, the
Applicant cannot seek execution of the Consent Terms. It is evident
from the MoU that the obligation to make payment of INR 65 Lakh
arises thereunder. Non-payment thereof would, at best, entitle the
Judgment Debtors to file a suit seeking specific performance of the
MoU. Instead of filing a Suit, the Judgment Debtors filed S.C. Suit
No. 2453 of 2019 before the City Civil Court seeking an injunction
from being dispossessed from the Suit Property. This is in view of the
Judgment Debtors having cancelled the MoU vide Letter dated 4 th
September, 2019. The stated basis, in the L etter dated 4th
September 2019, to seek cancellation/revocation of the MoU, was the
non-payment of the amount of INR 65 Lakh. The Suit premised on
the Applicant's non-payment of the amount of INR 65 Lakh came to
be disposed of by the Consent Terms dated 25th December 2019
("2nd Consent Terms"). Having opted not to include any payment
terms in respect of the amount of INR 65 Lakh in the 2nd Consent
Terms, which disposed of the proceedings where the cause of action
was expressly stated to be the non-payment thereof, the Judgment
Debtors cannot be heard to contend that such non-payment comes in
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the way of the execution of the first Consent Terms. The Applicant,
by virtue of, admittedly, being the assignee of the debt of INR 11.85
Crores, is well within its right to recover the same. The Judgments
relied upon by the Applicants in this context are apposite. The failure
to advance INR 65 lakh does not discharge the debt of INR 11.85
Crores. The Applicant stepped into the shoes of DNS Bank as Assignee
of the Debt solely in view of the Judgment Debtors representations to
the effect that the Suit Property would be let out to OYO Rooms and /
or Alcott Town Planners Pvt. Ltd ("OYO"). The MoU appears to have
been executed with this understanding in mind.
86. The transaction with OYO did not fructify. The Judgment
Debtors have cited "financial unfeasibility" and "high capex
requirement" as the reasons for the same. Thus the circumstance for
payment of the amount of INR 65 Lakh never arose.
87. Having perused the "event of default" clauses of the MoU
and the Consent Terms, I do not find that there is any "inherent
contradiction" as contended by the Judgment Debtors. The relevant
clauses of the MoU viz. Clause 6 and Clause 7 have to be read
accordingly. Clause 6 of the MoU confers upon the Applicants the
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right to seek peaceful handover of operational possession of the Suit
Property from the Judgment Debtors, where there have been 3
consecutive defaults in repayment of interest and principal. The
requirement of the 60 days notice under Clause 6 of the MoU only
arises when recovery of operational possession is sought by the
Applicant. The Applicant is not seeking such recovery, owing to the
fact that the Judgment Debtors have voluntarily handed over
operational possession of the Suit Property sometime in December
2019, as evinced by their Letter dated 1st January, 2020. Whereas
Clause 7 of the MoU reserves the right of the Investor to enforce the
security at anytime after the default is made and where no resolution
of the same can be worked out within 2 months of the default, the
property will be disposed off by following due process of law. Clause 7
of the MoU does not contemplate 3 consecutive defaults.
88. Further, the language of Clause 10 of the Consent Terms
to the extent it says "...in the event of default in payment of any of the
installments of the agreed Memorandum of Understanding as per
these consent terms...", must be read not only in light of Clause 6 of
the MoU, but also in light of Clause 7 thereof. The Applicant's right to
seek execution of the Consent Terms does not get extinguished by
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virtue of the fact that operational possession has been voluntarily
handed over to the Applicant by the Judgment Debtors. In the present
case it is abundantly clear that the Applicant seeks execution of the
Consent Terms for the purposes of seeking recovery of its dues to the
tune of INR 14.72 Crores (approx.) in terms of Clause 10 of the
Consent Terms read with Clauses 6 and 7 of the MoU and the
Schedule thereto.
89. I find much merit in submission on behalf of the
Applicants that the event of default subsists even upon expiry of the
moratorium period under the MoU. As per the Repayment Schedule
under the MoU there is:
(i) a moratorium for 6 months on the payment of interest
(which monthly interest is to be added to the principal every
month for these 6 months); and
(ii) a moratorium for 24 months on the repayment of the
principal amount, after which, repayment of the outstanding is to
be made within 84 months.
90. The moratorium in respect of interest expired on 30th
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September 2019 i.e. 6 months from the date of the MoU.
Accordingly, interest was payable for the month of October 2019 and
onwards. Whereas the moratorium in respect of repayment of the
principal amount expired on 31st March 2021 i.e. 24 months from
the date of the MoU. The Judgment Debtors paid an amount of INR
19.50 Lakhs towards interest for the month of October 2019.
Besides this, no payment has been made, either towards interest or
towards repayment of principal. Accordingly, it is evident that there
has been more than 3 consecutive defaults.
91. The contention of the Judgment Debtors that the
Consent Terms have been novated by the second Consent Terms
is misconceived. The remedy available to a party to a Consent
Decree, who wishes not to be bound by it, is to make an appropriate
application to the Court which records the compromise. This has
been held by the Supreme Court in Pushpa Devi Bhagat Vs. Rajinder
Singh & Ors. (supra) relied upon by the Applicants. The Judgment
Debtors cannot express their unwillingness to be bound by the
Consent Terms before the Executing Court. In order for there to be
novation, there must be "complete substitution" of the old contract by
a new one. This has been held in Lata Construction & Anr. (supra).
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The second Consent Terms pertain to a further loan of INR 2 Crores
which amount had been sought by the Judgment Debtors from the
Applicant in order to settle their dispute with one Abdul Wahab of A.
W. Hospitality ("Wahab"). Wahab had paid the Judgment Debtor INR
2 Crores towards an interest-free Security Deposit in terms of the
MoU. Out of this amount, INR 28 Lakhs was to be utilized towards
capex for the purposes of refurbishment of the Suit Property and
towards renewal of licenses. The ambit of the second Consent Terms
has been expressly spelt out after Clause 9 and which provides "The
only purpose of the loan is to discharge Mr. Pradip S. Dixit obligation
for payment of Rs. 2 crore as interest free refundable deposit to Mr.
Abdul Wahab Amir Shaikh against the cancellation of Service
Provider MoU with him dated 29th April 2019."
92. I find much merit in the submission on behalf of the
Applicant that the Judgment Debtors inspite of enriching themselves
by accepting a payment to the tune of INR 2 Crores, on or before
28th April, 2019, whereby out of INR 2 Crores, INR 1.72 Crores was
towards a security deposit as well as capex amount of INR 28 Lakh
was paid to the Judgment Debtors, the Judgment Debtors have made
a demand of INR 65 Lakh in June 2019.
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93. The "only purpose" of the second Consent Terms does not
align with that of the Consent Terms. Accordingly, Clause 9 of the
2nd Consent Terms, by no means, can be said to "completely
substitute" the Consent Terms.
94. It is the contention of the Judgment Debtors that the
second Consent Terms provides at Clause 9 for auction / sale of the
Suit Property, in the event there is "...no resolution to Malvika
Herbopharma loans..." and hence the auction / sale of the subject
property is only provided in the second Consent Terms. This
contention overlooks the fact that the Execution Application and
Interim Application taken out therein is for sale of the Suit property
in execution of a Decree which is to be mandatorily carried out by
the Executing Court in accordance with Order XXI Rules 64 to 73 of
the CPC. Order XXI Rule 65 of the CPC mandates the executing Court
to carry out "every" sale in execution of a decree by way of a public
auction. In K. Sankaranarayana Pillai (supra) relied upon by the
Applicants, the Division Bench of the Travancore-Cochin High Court
in the context of Order XXI Rule 64 refers, in terms, to 'attached
property', which has been held to apply to sales of any immovable
property in public auction by the Court. The Applicants have in their
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Interim Application pressed for prayer Clauses (b) and (c) as well as
for leave, under Order XXI Rule 72 of the CPC, to participate in the
auction for the sale of the Suit Property. The valuation of the Suit
property has already been carried out by M/s Shetgiri & Associates
pursuant to Order dated 1st October 2024 passed by this Court.
95. I do not find any merit in the contention on behalf of the
Judgment Debtors that the Applicant's only remedy for default of the
Consent Terms is a Suit for foreclosure of mortgage. A plain reading
of Clause 10 of the Consent Terms makes it clear that the Applicant is
free to initiate any proceedings for the purposes of recovering its
outstanding dues, so long as such proceedings are in accordance with
law. The Applicant had filed Suit No.104 of 2021 before this Court
seeking foreclosure of mortgage. The Judgment Debtors have also
filed their Written Statement on 8th October, 2021. The Applicant
undertakes to withdraw the said Suit in view of having elected to
recover its dues by the captioned Application. Section 47 of the CPC,
sub-section (1) inter alia provides that all questions relating to the
execution, discharge or satisfaction of the decree shall be determined
by the Court executing the decree and not by a separate Suit.
This has been held by the Supreme Court in Pradeep Mehra v.
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Harijivan J. Jethwa (supra) relied upon by the Applicant. The
Judgment Debtors have contended that the Applicant has elected to
file the Suit for foreclosure of mortgage and thus, have exercised its
choice by filing the Commercial Suit (L) No.1374 of 2019 on 19th
December, 2019 prior to the Execution Application (L) No.17358 of
2023, filed on 27th June, 2023.
96. It is the contention of the Judgment Debtors that the
Applicant having taken steps for execution of the security and action
for recovery of the entire amount due, by filing the above Suit, it
would not be open for the Applicant to file the present Execution
Application. I find this contention to be misconceived. Section 47 of
the CPC as aforementioned is available to the Applicant and this
Court is entitled to exercise its executory jurisdiction being the only
appropriate forum for the Applicant to receive its dues and / or seek
enforcement of the first Consent Terms and recovery thereof.
Although the Applicant has failed to disclose the filing of the
mortgaged Suit in the captioned Application, I find that such non-
disclosure is not willful. The Applicant has accepted with the benefit
of hindsight that it should have disclosed the mortgaged Suit for
good order and completeness. In any event, as held by the Supreme
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Court in Pradeep Mehra (supra) all questions relating to execution,
discharge or satisfaction of the Decree shall be determined by the
Court executing the Decree in terms of Section 47 of the CPC and not
by a separate Suit.
97. The Judgment Debtors' reliance on Order dated 5th
April, 2021 passed by the learned Single Judge of this Court to
contend that the Applicant is injuncted from offering the Suit
property for sale, which injunction has not been vacated to date, is
misplaced. The Order dated 5th April, 2021 restrains the Applicant
from offering the Suit property for Sale. The injunction order cannot
be read as restraining the Applicant from seeking sale of the Suit
property through this Court in exercise of its executory jurisdiction
under, inter alia, Order XXI of the CPC. This mode of sale is not
proscribed by the Order dated 5th April, 2021.
98. Accordingly, I do no find any merit in the preliminary
objections raised by the Judgment Debtors to the maintainability of
the above Execution Application and Interim Application taken out
therein.
99. The preliminary objections raised by the Judgment
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Debtors are decided against them. The Applicants are entitled to
pursue the Execution Proceedings. They are at liberty to move the
Interim Application in the Execution Application and which shall be
taken up by the Executing Court.
[ R.I. CHAGLA J. ]
