Housing Development Finance ... vs Saiba Suri
2012 Latest Caselaw 6878 Del

       *         IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                     Date of Decision :       December 3, 2012

+       CS(OS) 1785/2010

HOUSING DEVELOPMENT FINANCE CORPORATION LTD.                          ..... Plaintiff

                         Through:           Mr. Ajay Saroya, Adv.

                         versus

SAIBA SURI                                                       ..... Defendant

                         Through:           Mr. Mohit Chaudhary, Adv.

CORAM:
HON'BLE MR. JUSTICE V.K.JAIN

                         JUDGMENT

V.K.JAIN, J. (ORAL)

IA 7213/2011 (O.37 R.3(5) CPC)

This is a suit filed under Order 37 of the Code of Civil procedure for

recovery of Rs.39,40,351/-. The case of the plaintiff is that the defendant having

approached it for grant of a housing loan, it sanctioned a sum of Rs.35 lakhs as

loan to the defendant for purchase of a property located at 1003, 10th floor,

Building 15, Unitech Horizon, Plot No.6, Sector Alistonia, Greater Noida, under its

Individual Loan Scheme. The loan was paid for 240 months with interest at

variable rate of 8% per annum, which at present stands at 10.5%. The plaintiff

disbursed a sum of Rs.32 lakhs to the defendant who executed a promissory note

dated 21st February, 2006 for the said sum in favour of the plaintiff. Under clause

2.6 of the Loan Agreement, the defendant agreed to pay EMI/Pre EMI every

month. As per clause 2.7(b) of the Loan Agreement, the defendant also agreed to

pay additional interest as per rules of the plaintiff, in case of delay/default in

making the repayment of the loan. An additional sum of Rs.2,22,837/- was

disbursed to the defendant on 5th January, 2008, thereby raising the total disbursed

amount. The loan was re-payable in EMIs of Rs.34,114/-. The defendant made

last payment on 14th April, 2009 and according to the plaintiff, a sum of

Rs.33,21,537/- is still due and outstanding towards principal sum besides

Rs.5,45,001/- towards EMI outstandings, Rs.72,403/- towards additional interest

and Rs.1,410/- towards incidental charges.

2. In her application for leave to contest, the defendant has taken a preliminary

objection that this Court lacks territorial jurisdiction to try the present suit since the

agreement was executed at Gurgaon, the property got financed by the defendant is

situated in Greater Noida and the defendant is residing in Chandigarh. On merits,

the defendant has admitted having taken the loan from the plaintiff and executing

the Loan Agreement in its favour. This is also the case of the defendant in the

application that the plaintiff was required to monitor the progress of construction of

the property financed by it and carry out periodical inspections in this regard.

According to the defendant, the builder Unitech Limited did not carry out

construction within the stipulated time and on visiting the site, she found that the

work was at a very preliminary stage, running at a very slow pace, and in no

likelihood to have completed in 3-4 years. It is also alleged that the material being

used for construction was sub-standard, inferior and of poor quality. It appears

from the application that the defendant applied to Unitech for refund of the amount

paid to it but, that amount was not refunded. The defendant has also filed a

complaint under Consumer Protection Act against Unitech and the plaintiff, which

is stated to be pending. The learned counsel for the defendant states that the prayer

made by the defendant to the Consumer Forum is for a direction to refund the

amount paid by her directly to the plaintiff. The defendant is also seeking to file a

counter-claim of Rs.50 lakhs against the plaintiff on the ground that it had

disbursed the loan in connivance with the Builder without keeping prior check with

the project and without looking progress of the project.

3. In M/s Mechalec Engineers and Manufactures v. M/s Basic Equipment

Corporation (1977) 1 SCR 1060, the Supreme Court set out the following

principles:-

(a) If the Defendant satisfies the Court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the defendant is entitled to unconditional leave to defend.

(b) If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled

to sign judgment and the Defendant is entitled to unconditional leave to defend.

(c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he has a defence, yet, shows such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff's claim the Plaintiff is not entitled to judgment and the Defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security.

(d) If the defendant has no defence or the defence set up is illusory or sham or practically moonshine then ordinarily the Plaintiff is entitled to leave to sign judgment and the Defendant is not entitled to leave to defend

(e) If the defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the Plaintiff is entitled to leave to sign judgment, the Court may protect the Plaintiff by only allowing the defence to proceed if the amount claimed is paid into Court or otherwise secured and give leave to the Defendant on such condition, and thereby show mercy to the Defendant by enabling him to try to prove a defence.

4. As regards territorial jurisdiction, the contention of the learned counsel for

the defendant is that since no cause of action arose in the jurisdiction of this Court,

and the defendant is not residing in Delhi, this Court lacks territorial jurisdiction to

try the present suit. A bare perusal of Section 20 of the Code of Civil Procedure

shows that the provisions contained in the said Section apply subject to limitations

stipulated in Sections 14 to 19 of the Code. The provisions of Section 16 to 19 do

not apply to the present case and, therefore, it is Section 20 of the Code which

governs the territorial jurisdiction of this Court as far as the present suit is

concerned.

Section 20 of the Code of Civil Procedure to the extent, it is relevant,

provides that a suit shall be instituted in a Court within whose jurisdiction the

defendant resides or carries on business or personally works for gain. Another

alternative jurisdiction is the place where the cause of action wholly or in part,

arises. If the plaintiff is able to show that the defendant is either residing or

working for gain in Delhi, Delhi Courts would certainly have territorial jurisdiction

to try the present suit, even if no cause of action arose in the territorial jurisdiction

of this Court.

5. Though the defendant has alleged that she is residing in Chandigarh, a

perusal of the affidavit filed by her along with the appearance would show that in

fact that she is residing at B-101, Second Floor, Neeti Bagh, New Delhi. This

exactly is the residential address given by her in the affidavit. A perusal of the

summons issued by the Court which was served upon the defendant would show

that when the process server went to D-253, Second Floor, Sarvodaya Enclave,

New Delhi, which is the address given in the suit, the person residing there

informed the process server that the defendant had shifted to B-101, Second Floor,

Neeti Bagh, New Delhi. The report of the process server and the affidavit filed by

the defendant along with her appearance clearly shows that at the time of filing of

this suit, the defendant was residing at B-101, 2nd Floor, Neeti Bagh, New Delhi.

Therefore, it is difficult to accept the plea that this Court lacks territorial

jurisdiction to try the present suit.

6. A perusal of the original Loan Agreement executed by the defendant with

the plaintiff would show that the parties, inter alia, agreed as under:-

"2.4 Details of Disbursement

The loan shall be disbursed in one lumpsum or in suitable instalments to be decided by HDFC with reference to the need or progress of construction (which decision shall be final and binding on the borrower). The borrower hereby acknowledge the receipt of the loan disbursed as indicated in the Receipt hereinbelow.

2.6 Amortisation

(a) Subject to Article 2.2 the borrower will amortise the loan as stipulated in the Schedule subject however that in the event of delay or advancement of disbursement for any reason whatsoever, the date of commencement of EMI shall be the first of the month following the month in which the disbursement of the loan will have been completed and consequently the due date of payment of the first EMI in such case will be the 5th day of the month following such month.

(b) In addition to (a) above, the borrower shall pay to HDFC PEMII every month, if applicable.

(e) Notwithstanding anything to the contrary contained in this Agreement, having regard to the AIR for the time being, HDFC shall be entitled to increase the EMI amount suitably if:

(i) the said EMI would lead to negative amortisation (i.e. EMI not being adequate to cover interest in full), and/or

(ii) the principal component contained in the EMI is inadequate to amortise the loan within such period as determined by HDFC.

The borrower shall be required to pay such increased EMI amount and the number thereof as decided by HDFC and intimated to the borrower by HDFC.

(f) HDFC may vary its retail prime lending rate from time to time in such manner including as to the loan amounts as HDFC may deem fit in its own discretion.

2.7 Delay in payment of EMI etc.

(a) No notice, reminder or intimation will be given to the borrower regarding his obligation to pay the EMI or PEMI regularly on due date. It shall be entirely responsibility to ensure prompt and regular payment of EMI or PEMI.

(b) The delay in payment of EMI or PEMI shall render the borrower liable to pay additional interest at the rate of 18 per cent per annum or at such higher rate as per the rules of HDFC in that behalf as in force from time to time. In such event, the borrower shall also be liable to pay incidental charges and costs to HDFC.

5.1 Particular Affirmative Covenants

(a) Utilisation of loan: The borrower shall utilize the entire loan for the purchase/construction of the property as indicated by him in his loan application and for no other purpose whatsoever.

5.3 HDFC's Right to Inspect

The borrower agrees that HDFC or any person authorized by it shall have free access to the property for the purpose of inspection/supervising and inspecting the progress of construction and the accounts of construction to ensure proper utilization of the loan. The borrower further agrees that HDFC shall have free access to the property for the purpose of inspection at any time during the pendency of loan."

7. Clause 5.1(a) would show that it required the borrower, i.e., the defendant to

utilize the loan only for purchase/construction of the property indicated in the loan

application and he was prohibited from using the same for any other purpose. This

clause, therefore, has no applicability to the present case. Clause 5.3 give a right to

the plaintiff to have free access to the property for the purpose of

inspection/supervising and inspecting the progress of construction and the accounts

of construction to ensure proper utilization of the loan. This clause further

stipulates that the borrower agrees to the plaintiff having free access to the property

for the purpose of inspection at any time during the subsistence of the loan.

According to the learned counsel for the plaintiff, as would be evident from the

second part of clause 5.3, it applies only to a case where an individual carries

construction after taking loan from the plaintiff and does not apply to a case where

the construction is carried out by a third party such as Unitech in this case.

However, assuming for the sake of arguments, that in exercise of the powers

conferred upon it by clause 5.3 of the Agreement, the plaintiff could have accessed

the property which Unitech was to construct and inspect the construction going on

there, that by itself does not mean that the plaintiff could not have released the loan

to Unitech Limited without first ensuring adequate progress of the construction.

Admittedly, the Loan Agreement, in this case, was executed on 21st

February, 2006 and even a pronote of Rs.32 lakhs was executed by the defendant

on the same date. A perusal of para 7 of the plaint indicates that the amount of

Rs.32 lakhs was disbursed to the defendant on 21st February, 2006 whereas, a sum

of Rs.2,22,837/- was disbursed on 5th January, 2008, as stated in para 8 of the

plaint. Since there was no obligation under the Loan Agreement, on the plaintiff to

carry out inspection and ensure progress of the work before disbursing the loan

amount, it cannot be said that the plaintiff had committed breach of its contractual

obligations with the defendant. Mere right to inspect the property, assuming such a

right existed in respect of the project in which booking was made by the defendant

with Unitech Limited, did not cast an obligation upon the plaintiff to monitor the

progress of the construction and make disbursal on the basis of the progress

achieved by the builder in completing the construction of the project. A perusal of

the Loan Agreement would show that as far as the plaintiff was concerned, it had

disbursed the loan amount of Rs.32 lakhs to the defendant though the amount must

have been paid by way of cheque/pay order in the name of Unitech Limited. The

defendant under the Agreement between the parties agreed to pay not only pre-

EMIs but also the equated monthly instalment as worked out by the plaintiff. A

perusal of the Statement of Account on page19 indicates that the pre-EMIs amount

was Rs.3,97,406/- which had been paid by the defendant by 30th April, 2008. A

perusal of the statement at page 20 would show that the defendant also paid EMIs

amounting to Rs.4,37,991/- between 30th June, 2008 to 14th April, 2009. This

clearly shows that the defendant admitted his liability to pay the pre-EMIs as well

as the EMIs and that is why he made the aforesaid payment. This is not the case of

the defendant that any payment made by her to the plaintiff has not been credited in

her account. Therefore, it appears to me that the defendant has no worthwhile

defence as far as the merits of the case are concerned.

As regards additional interest, clause 2.7 clearly obliges the defendant to pay

additional interest in case there was delay in payment of EMIs or pre-EMIs.

Therefore, the plaintiff is entitled to recover additional interest from the defendant

since there is a delay in payment of EMIs.

8. The learned counsel for the defendant has relied upon the decision of this

Court in National Horticulture Board vs. M/s. Flora Continental Ltd. & Ors., 108

(2003) DLT 228. A perusal of the aforesaid case would show that the facts in that

case were altogether different. In that case, besides the issue of territorial

jurisdiction, the defendant had also raised the plea of limitation. On merits also,

they had sought to raise a counter-claim against the plaintiff. However, in the case

before this Court, I have not found any merit as far as the plea of territorial

jurisdiction is concerned and no issue of limitation is involved in this case. On

merits also, the rights and liabilities of the parties are governed by Loan Agreement

dated 21st February, 2006 which is an admitted document and I have not been able

to find any breach of any of those obligations on the part of the plaintiff.

9. The next plea taken in the application is that the suit is barred by Section 18

of the Recovery of Debts Due to Banks and Financial Institutions Act 1993.

Section 18 of the aforesaid Act bars jurisdiction of any Court or authority except

the Supreme Court and High Court exercising jurisdiction under Articles 226 and

227 of the Constitution, in relation to matters specified in Section 17. Section 17(i)

of the said Act provides that 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. The expression "bank" has been defined in Section 2(d) of

the Act, whereas the expression "financial institution" has been defined in Section

2(h) of the Act, which read as under:-

"2(d) bank" means--

(i) banking company;

(ii) a corresponding new bank;

(iii) State Bank of India;

(iv) a subsidiary bank; or

(v) a Regional Rural Bank"

"2(h) "financial institution" means--

(i) a public financial institution within the meaning of Section 4A of the Companies Act, 1956 (1 of 1956);

(ii) such other institution as the Central Government may, having regard to its business activity and the area of its operation in India by notification, specify."

As stipulated in Section 2(e) of the said Act, the expression "banking

company" shall have the meaning assigned to it in clause (c) of Section 5 of the

Banking Regulation Act, 1949. Section 5(c) of the Banking Regulation Act, 1949

provides that "banking company" means which transacts the business of the

banking in India. Section 5(b) of the Banking Regulation Act defines "banking" to

mean the accepting, for the purpose of lending or investment, of deposits of money

from the public, repayable on demand or otherwise, and withdrawal by cheque,

draft, order or otherwise. There is no averment in the application that the plaintiff

transacts business of banking in India in terms of Section 5(b) of the Banking

Regulation Act and is a banking company within the meaning of Section 5(c) of

the said Act. As per Section 2 (f) of The Recovery of Debts due to Banks and

Financial Institutions Act, 1993, the expression "corresponding new bank" shall

have the same meaning as is assigned to it in clause (da) of section 5 of the

Banking Regulation Act, 1949. The said provision defines "corresponding new

bank" to mean a corresponding new bank constituted under Section 3 of the

Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.

Admittedly, the plaintiff is not a „corresponding new bank‟ within the meaning of

Section 5(da) of the Banking Regulation Act. The expression "subsidiary bank"

has the same meaning which is assigned to it in (k) of Section 2 of the State Bank

of India (Subsidiary Banks) Act 1959 and admittedly the plaintiff is not a

subsidiary bank of State Bank of India. The plaintiff is also not a Regional Rural

Bank which expression has been defined to mean "a Regional Rural Bank"

established under Section 3 of the Regional Rural Banks Act, 1976. Therefore, it

cannot be disputed that the plaintiff is not a bank within the meaning of Section

2(d) of the Recovery of Debts due To Banks and Financial Institutions Act, 1993.

The plaintiff is certainly not a Public Financial Institution within the meaning of

Section 4A of the Companies Act, 1956 which provides that Financial Institutions

specified therein shall be regarded as Public financial institutions. The plaintiff is

also not a Securitization Company Or Reconstruction Company in terms of Section

2(h)(i)(a) of Recovery of Debts due To Banks and Financial Institutions Act,

1993. This is also not a case of the defendant that the plaintiff has been notified

by the Central Government to be a Financial Institution within the meaning of the

said Act. Therefore, the provisions of Sections 17 & 18 of Recovery of Debts due

To Banks and Financial Institutions Act, 1993 do not apply to the plaintiff.

10. The third plea taken in the application is that the suit is barred by Section 34

of The Securitisation and Reconstruction of Financial Assets and Enforcement of

Security Interest Act, 2002. The aforesaid provision provides that no civil court

has jurisdiction to entertain any suit or proceedings in respect of any matter which

a Debt Recovery Tribunal is empowered by or under the said Act to determine.

Though the plaintiff is a „Financial Institution‟ within the meaning of Section

2(1)(m)(iv) of Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002, the provisions of Section 34 of the said

Act do not apply to the present suit for the simple reason that Debt Recovery

Tribunal is not empowered to entertain a civil suit by the plaintiff for recovery of

money from the defendant and no action has been taken or is proposed to be taken

by the plaintiff pursuant to the powers conferred upon financial institutions by the

said Act. Had the plaintiff sought to recover the amount due to it by enforcement

of a security, in terms of the power conferred upon it by the said Act only then the

jurisdiction of the civil court would have been barred in respect of any such action.

11. Since the defence raised by the defendant is sham and illusionary, she is not

entitled to any defence, but, in view of clause (e) of the above-referred guidelines, I

grant leave to the defendant to contest this suit subject to the condition that she

would file either an FDR or a bank guarantee of Rs.35,92,000/- within eight

weeks from today. The learned counsel for the defendant states that the defendant

undertakes to give bank guarantee or FDR of Rs. 35,92,000/-, to the satisfaction of

the concerned Joint Registrar, within eight weeks from today.

12. In view of this undertaking, the defendant is granted leave to contest the suit

subject to her furnishing a bank guarantee or an FDR of Rs.35,92,000/- within

eight weeks from today. If neither bank guarantee nor FDR is furnished within the

aforesaid time, this application shall stand dismissed without any further orders and

the plaintiff shall be entitled to judgment forthwith.

The observations being prima facie made in order to decide this application

would not affect the decision of this suit on merits.

For the reasons stated hereinabove, the application being devoid of any merit

and is hereby dismissed.

IA 2016/2012(O.7 R.11 CPC)

The first contention of the learned counsel for the defendant is that since this

Court lacks territorial jurisdiction of this Court to try the present suit, the plaint is

liable to be rejected. It is by now well settled proposition of law that while

considering an application under Order VII Rule 11 of the Code of Civil Procedure,

the Court is to see only the averments made in the plaint and the documents filed

by the plaintiff. Neither written statement nor the documents filed by the defendant

can be considered at this stage. The plaintiff has clearly alleged in the plaint that

the defendant was residing in Delhi. Therefore, it cannot be said that the plaint

does not disclose such facts and as would give territorial jurisdiction to this Court

to try the present suit. In any case, as noted earlier, while deciding

IA 7213/2011, the defendant herself has given her residential address at B-101,

Second Floor, Neeti Bagh, New Delhi in her affidavit filed along with the

appearance. The plea is, therefore, devoid of any merit, and is rejected.

The application is dismissed.

CS(OS) 1785/2010

Subject to furnishing of bank guarantee and FDR in terms of the order,

written statement be filed within eight weeks from today and replication would be

filed within two weeks thereafter.

List before Joint Registrar for admission/denial of documents on 21 st

February, 2013.

List before the Court for framing of issues on 26th March, 2013.

V.K. JAIN, J DECEMBER 3, 2012 'sn'