Mr. Mukesh Bhargava And Anr. vs Canara Bank And Ors.
2007 Latest Caselaw 1000 Del

JUDGMENT

Sanjay Kishan Kaul, J.

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IA 152/2007 (Under Order 7 Rule 11 CPC)

1. The plaintiffs have filed a suit for declaration and permanent and mandatory injunction. The subject matter of the suit is the immovable property being the first floor of property No. B-97, Lajpat Nagar, New Delhi (hereinafter referred to as the suit property). The plaintiffs seek a declaration that they are owners of the suit property and that the defendants, more particularly defendant No. 1 bank, be restrained from selling, alienating, encumbering or creating any third party interest in the suit property.

2. The plaintiffs claim to have purchased the suit property from Mrs.Anjana Luthra, defendant No. 2, vide a registered sale deed and to have been put in possession in pursuance thereto. The sale deed, possession letter and receipt were all executed on 28.1.2005. The suit has been instituted through a power of attorney holder. The plaintiffs claim to have paid a sum of Rs. 7.00 lacs to defendant No. 2 while purchasing the property.

3. The cause of action for filing the suit is stated to have arisen when the plaintiffs received a notice for settling a sale proclamation under Rule 53 of the Second Schedule to the Income Tax Act, 1961 (hereinafter referred to as the I.T. Act). These notices were served by pasting at the address, though they were sent to defendants No. 9 & 10. The plaintiffs claim to have done whatever was required for verification of title before purchasing the property and the plaintiffs were being cheated and a fraud was committed by the defendants collectively against the plaintiffs. It is alleged that a collusive decree was obtained ex parte. Defendants No. 9 & 10, who are the judgment debtors, did not contest the suit and defendant No. 1, the bank, is stated to have done nothing to protect the mortgage property.

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4. The plaintiffs have given a brief of history of the suit property in para-10 of the plaint as under:

10(a) That initially the entire property bearing No. B1/97, Lajpat Nagar-I, New Delhi, was allotted and leased out to Sh.Krishan Gopal by virtue of a lease and conveyance deed dated 30.03.1970 duly registered as document No. 2233 and 2234 in Addl. Book No. 1, Vol. No. 2388 on pages 85 to 87 and 88 and 89 on 07.04.1970 in the office of Sub-Registrar, New Delhi. The said Sh.Krishan Gopal died on 02.03.1994.

(b) Consequent to the death of Sh.Krishan Gopal, on 03.08.1994 the aforesaid property was duly substituted in the joint names of Smt.Purushotama Devi, Sh.Kuldeep Chander, Sh.Harish Chander, Sh.Vinod Kumar and Sh.Anil Kumar (Widow and sons of Shri Krishan Gopal and R/o B-I/97, Lajpat Nagar, New Delhi), which is entered in the records of L&DO, Nirman Bhawan, New Delhi, vide their letter No. L&DO/PS-II/416.

(c) That on 07.10.1994 Agreement to sell was entered upon between Smt.Purushotama Devi, Sh.Kuldeep Chander, Sh.Harish Chander, Sh.Vinod Kumar and Sh.Anil Kumar through his general Smt.Kusum Jetley with Sh.Mohanjit Singh and Mrs.Daljeet Kaur for the sale of aforesaid property. Thereafter Sh.Mohanjit Singh and Mrs.Daljeet Kaur reconstructed a building on the said plot of land after getting the building plan sanctioned from MCD out of which the first floor is in occupation and possession of the plaintiffs hereinabove.

(d) The entire property was converted into a free hold property vide Conveyance Deed dated 03.07.1995 in the names of (i) Smt.Purushotama Devi, (ii) Sh. Kuldeep Chander, (iii) Sh.Harish Chander, (iv) Sh.Vinod Kumar, (v)Sh.Anil Kumar, all are legal heirs of Late Sh.Krishan Gopal resident of B-I/97, Lajpat Nagar, New Delhi. The said Conveyance Deed is registered as document No. 6008 in Addl. Book No. II, Vol. No. 8809, at pages 48 to 49 on 25.07.1995.

(e) Thereafter two Sale Deeds both dated 28.11.1995 were executed for the entire first floor between (i) Smt.Purushotama Devi, (ii) Sh.Kuldeep Chander, (iii) Sh.Harish Chander, (iv) Sh.Vinod Kumar, (v) Sh.Anil Kumar, all are legal heirs of Late Sh.Krishan Gopal resident of B-I/97, Lajpat Nagar, New Delhi through General Attorney Mrs.Kusum Jetley and also through their General Attorney Shri Inderjit Singh as the then Vendor, Shri Mohanjit Singh and Mrs.Daljit Kaur as the then confirming party sold the entire first floor to Sh.Munish Babbar (1/2 portion) and Ms.Monica Babbar (1/2 portion). By virtue of the said two Sale Deeds 28.11.1995 Sh.Manish Babbar and Ms.Monica Babbar became the absolutely owner of the property in question.

(f) That Ms.Monica Babbar and Mr.Manish Babbar constituted a General Power of Attorney in favor of Mr.Manoj Kumar Shah on 24.2.1999 authorizing him to do certain acts in respect of the property in question. (both of Monica and Manish had half - half undivided share in the property)

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(g) That two Agreement to Sell and Purchase entered into between Ms.Monica Babbar and Shri Manish Babbar respectively with Mr.Manoj Kumar Shah on 26.2.1999 whereby Mr.Manoj Kumar Shah became the owners and the right, title and interest in the Suit property in question shall vest with him.

(h) That on 11.01.2000 Mr.Manoj Kumar Shah constituted a General Power of Attorney in favor of Sh. Vijay Mittal to do certain acts in respect of the property in question and on the same day executed a WILL in favor of Sh.Narottam Mittal.

(i) That on 11.01.2000 an Agreement to Sell and Purchase entered into between Mr.Manoj Kumar Shah and Sh.Narottam Mittal whereby Sh.Narottam Mittal became the owner of the suit property.

(j) That on 26.8.2002 two sale deeds were entered into between Sh.Vijay Mittal and Sh.Narottam Mittal in favor of Smt.Madhu and Sh.Gulshan Kumar respectively and they became the owner of the property in question.

(k) That on 22.10.2004 a sale deed was entered into between Sh.Gulshan Kumar and Smt.Madhu in favor of Sh.Vinod Kumar and Mrs.Anjana Luthra and Sh.Vinod KUmar and Mrs.Anjana Luthra became the absolute owner of the property in question.

(l) That on 23.12.2004 a sale deed was entered into between Sh.Vinod Kumar and Mrs.Anjana Luthra thereby Sh.Vinod Kumar sold/transfer his all rights, titles and interests in the property to Mrs.Anjana Luthra and she became the absolute and sole owner of the property in question.

(m) That on 28.01.2005 a sale deed was entered into between Mrs.Anjana Luthra with Sh.Mukesh Bhargava and Sh.Rishab Bhargava (the Plaintiffs) and Mrs.Anjana Luthra as per the sale deed sold/transfer the peaceful and unencumbered possession as well as the ownership, rights, titles and interests of the property in question to the plaintiffs.

5. In the plaint there is also a mention that in October, 2005 the plaintiffs have filed objections before the Debt Recovery Tribunal (hereinafter referred to as 'Tribunal') in which the proceedings are pending. Thereafter the present suit has been filed in May, 2006.

6. Defendant No. 1 bank has filed the present application seeking rejection of the plaint being barred by time, beyond jurisdiction and without any valid lawful cause of action. It is stated in the application that defendant No. 1 is the mortgagee of the suit property mortgaged by defendants No. 9 & 10 on 8.1.1996 by deposit of title documents. Loans were advanced to a private Limited company M/s Modesto Exim Private Limited and title deeds of the said suit property was deposited to secure the loan. The principal failed to clear the loan outstanding with the result that the original application No. 18/2002 was filed before the Tribunal under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, (hereinafter referred to as the Recovery Act). A final order was passed on 26.5.2003 subsequent whereto a recovery certificate No. 107/2003 had been issued. Defendants No. 9 & 10 herein were jointly and severally held liable for the Page 1390 outstanding amount of Rs. 27,74,978/- along with interest and costs. The suit property was held to be mortgaged for securing the loan of the bank.

7. It is stated that the plaintiffs herein have raised objections to the attachment and public auction of the property and had filed objections under Rule 11 of the Second Schedule of the I.T. Act which stands incorporated in the Recovery Act in view of the provisions of Section 29 of the Recovery Act. The public auction was, thus, postponed. The objections are stated to be still pending.

8. It is the plea of defendant No. 1 that the present suit is barred by the special law being the Recovery Act and the appropriate remedy has been availed of by the plaintiffs by filing objections before the Recovery Officer. It is stated that the Tribunal constituted under the Recovery Act would have exclusive jurisdiction over the matter excluding jurisdiction of other courts, being a special Act.

9. The aforesaid application is resisted by the plaintiffs, who have filed a reply. Learned Counsel for the parties have been heard at length.

10. In order to appreciate the scope of the controversy, it is necessary to reproduce some of the provisions:

17. Jurisdiction, powers and authority of Tribunals.

(1)A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions.

(2)An Appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act.

18. Bar of Jurisdiction.-- On and from the appointed day, no court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under articles 226 and 227 of the Constitution) in relation to the matters specified in Section 17.

24. Limitation.-- The provisions of the Limitation Act, 1963 (36 of 1963), shall, as far as may be, apply to an application made to a Tribunal.

29. Application of certain provisions of Income-tax Act._ The provisions of the Second and Third Schedules to the Income-tax Act, 1961 (43 of 1961) and the Income-tax (Certificate Proceedings) Rule, 1962, as in force from time to time shall, as far as possible, apply with necessary modifications as if the said provisions and the rules referred to the amount of debt due under this Act instead of to the Income-tax:

Provided that any reference under the said provisions and the rules to the "assessed" shall be construed as a reference to the defendant under this Act.

Investigation by Tax Recovery Officer.

11. (1) Where any claim is preferred to, or any objection is made to the attachment or sale of, any property in execution of a certificate, on the Page 1391 ground that such property is not liable to such attachment or sale, the Tax Recovery Officer shall proceed to investigate the claim or objection:

Provided that no such investigation shall be made where the Tax Recovery Officer considers that the claim or objection was designedly or unnecessarily delayed.

(2) Where the property to which the claim or objection applies has been advertised for sale, the Tax Recovery Officer ordering the sale may postpone it pending the investigation of the claim or objection, upon such terms as to security or otherwise as the Tax Recovery Officer shall deem fit.

(3) The claimant or objector must adduce evidence to show that-

(a) (in the case of immovable property) at the date of the service of the notice issued under this Schedule to pay the arrears, or

(b) (in the case of movable property) at the date of the attachment, he had some interest in, or was possessed of, the property in question.

(4) Where, upon the said investigation, the Tax Recovery Officer is satisfied that, for the reason stated in the claim or objection, such property was not, at the said date, in the possession of the defaulter or of some person in trust for him or in the occupancy of a tenant or other person paying rent to him, or that, being in the possession of the defaulter at the said date, it was so in his possession, not on his own account or as his own property, but on account of or in trust for some other person, or partly on his own account and partly on account of some other person, the Tax Recovery Officer shall make an order releasing the property, wholly or to such extent as he thinks fit, from attachment or sale.

(5) Where the Tax Recovery Officer is satisfied that the property was, at the said date, in the possession of the defaulter as his own property and not on account of any other person, or was in the possession of some other person in trust for him, or in the occupancy of a tenant or other person paying rent to him, the Tax Recovery Officer shall disallow the claim.

(6) Where a claim or an objection is preferred, the party against whom an order is made may institute a suit in a civil court to establish the right which he claims to the property in dispute; but, subject to the result of such suit (if any), the order of the Tax Recovery Officer shall be conclusive.

11. Since the application has been filed under the provisions of Order 7 Rule 11 of the Civil Procedure Code, 1908 (hereinafter referred to as the said Code), these provisions are also reproduced in order to appreciate the contentions of learned Counsel for the parties within the parameters of the said rule:

Order VII Rule 11. Rejection of plaint-- The plaint shall be rejected in the following cases:

(a) where it does not disclose a cause of action;

(b) where the relief claimed is undervalued, and the plaintiff, on being required by the Court to correct the valuation within a time to be fixed by the Court, fails to do so;

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(c) where the relief claimed is properly valued but the plaint is written upon paper insufficiently stamped, and the plaintiff, on being required by the Court to supply the requisite stamp-paper within a time to be fixed by the Court, fails to do so;

(d) where the suit appears from the statement in the plaint to be barred by any law;

(e) where it is not filed in duplicate;

(f) where the plaintiff fails to comply with the provisions of Rule 9.

Provided that the time fixed by the Court for the correction of the valuation or supplying of the requisite stamp-paper shall not be extended unless the Court, for reasons to be recorded, is satisfied that the plaintiff was prevented by any cause of an exceptional nature for correcting the valuation or supplying the requisite stamp-paper, as the case may be, within the time fixed by the Court and that refusal to extend such time would cause grave injustice to the plaintiff.

12. The bedrock of the case of defendant No. 1 is the provisions of the Recovery Act which have been mentioned aforesaid. The intent of the bar of jurisdiction created by Section 18, in my considered view, is quite clear. The object is to confer exclusive jurisdiction in respect of the recovery of debts due to banks and financial institutions exclusively on the Tribunal. Learned Counsel for the plaintiffs did seek to contend that the reading of the provisions of Sections 17 and 18 of the said Act would imply that the matters in dispute, like the present one, cannot be decided by the Tribunal as the Tribunal is only concerned with the recovery of debts due. I am unable to accept this plea for the reason that as a consequence of the debt due, the action has been taken in respect of the property in question. Indisputably an equitable mortgage was created in respect of the suit property in favor of defendant No. 1 bank. It cannot be accepted that defendant No. 1 bank was required to do something more when the original title documents were deposited with the bank. The chain of transactions even set out in the plaint show that the first document of title which is duly registered after conversion to free hold property are the two sale deeds both dated 28.11.1995 in favor of defendants No. 9 & 10 to the extent of 50% share each in the suit property. The property could not have been transacted in the absence of the original sale deeds. However, that is not the matter to be gone into depth in the present case but is only being set out to show that the bank did what was expected of it while the plaintiffs failed to insist upon the requirement of the first original title document being handed over to them at the stage of the sale.

13. The present case is not one where the title of the plaintiffs is under challenge but in view of the valid equitable mortgage having been created in favor of defendant No. 1 bank, whatever transactions have occurred thereafter would only be subject to the lien of the bank on the suit property.

14. The provisions of Section 34 of the Recovery Act leave no manner of doubt that the provisions of the Recovery Act shall have effect notwithstanding Page 1393 anything inconsistent therewith contained in any other law for the time being in force. Thus, the Recovery Act has been given an over-riding effect.

15. An important aspect is the provisions of Section 29 of the Recovery Act which provide for the Second and Third Schedule of the I.T. Act and the rules to apply with necessary modification. In terms of Rule 11, quoted aforesaid, an enquiry can be made on the issue whether the property is capable of being attached in such enquiry proceedings before the executing court.

16. Learned Counsel for the plaintiffs sought to rely upon the judgment of the Apex Court in The Tax Recovery Officer II, Sadar, Nagpur v. Gangadhar Vishwanath Ranade (dead) through Mrs. Shobha Ravindra Nemiwant to contend that in case the transaction in question is to be declared invalid, the proper remedy is only in a suit. I see no reason to apply the ratio of the said judgment in the present case as the issue is of a lien of the bank on the mortgaged property and, thus, assuming some title has been transferred in favor of the plaintiffs, the same would be subject to the lien of the bank.

17. Learned Counsel also relied upon the judgment of Jumma Masjid, Mercara v. Kodimaniandra Deviah and Ors. . The matter dealt with the effect of the provisions of the Transfer of Property Act, 1882 (for short the T.P. Act) and it was held that where in a transfer of property by sale the transferor is having spes successionis while he represents that he has the present interest in the property, the transferor is entitled to the benefit of Section 43 of that Act if he has taken the transfer on the faith of that representation and for consideration.

18. Once again I am unable to appreciate the relevance of the judgment to the present facts since the provisions of Section 43 of the T.P. Act only protect the interest of transferee in respect of the property where the transferor fraudulently or erroneously represents that he is authorised to transfer the property and thereafter acquires any interest in such property. The principle is that the transferor should get no benefit of his interest acquired in the property and the transferee should benefit who has suffered as a consequence of the transferor making a fraudulent or erroneous representation.

19. Learned Counsel also sought to rely upon the Division Bench judgment of this Court in Asha M. Jain v. Canara Bank and Ors. to canvas the proposition that where there are set of documents of agreement to sell, GPA, SPA and Will in respect of the lease hold properties, as is prevalent in Delhi, the same create interest in favor of the party to whom possession is handed over and the benefit of Section 53A of the T.P. Act would be available. The present case is not, however, one where there are such documents though the intermittent transactions have these nature of documents.

20. The basic issue in the present case is that the plaintiffs purchased a flat without taking the original sale deed which exclusively dealt with the first Page 1394 floor of the property and the consequence of the same is being enquired into in the execution proceedings before the Tribunal. It is the Tribunal alone which would make an enquiry into this aspect and it is not necessary for this Court to comment on the merits of transaction of how the subsequent sale deeds were executed in the absence of the original sale deed and the inadequacy of consideration where the transfer is shown in the year 2005 for Rs. 7.00 lacs of a valuable property being the suit property.

21. I am, thus, of the considered view that the present suit is barred by law and the enquiry in respect of the claims of the plaintiffs is taking place before the Tribunal for which objections have already been filed and are stated to be at an advanced stage. Defendant No. 1 bank cannot be restrained by a perpetual injunction from dealing with the property as that would amount to nullifying the effect of the decree passed in respect of the property and the effect of the alleged transfer in favor of the plaintiffs is being examined by the Tribunal. Similarly, there can be no declaration of title in favor of the plaintiffs since the plaintiffs are owners by registered sale deeds and the question is of the previous rights of the bank having a lien on the property to realise their debts, the bank not claiming any title to the property.

22. In my considered view, the present suit is only an endeavor by the plaintiffs to avoid the rigours of a possible adverse order against them in the execution proceedings. The application is accordingly allowed.

CS(OS) 1104/2006

In view of IA No. 152/2007 (under Order 7 Rule 11 CPC) being allowed, the suit of the plaintiffs is dismissed with costs of Rs. 10,000/-.