Kunal Suryakant Mewalal Mishra & ... vs M/S. Citifinancial Consumer ...
2014 Latest Caselaw 4920 Del

.*    IN THE HIGH COURT OF DELHI AT NEW DELHI

%                           Order delivered on: 29th September, 2014

+            CS(OS) No.1876/2011 & I.A. No 12238/2011 &
             I.A. No.3739/2012

      KUNAL SURYAKANT MEWALAL MISHRA & ORS. ....Plaintiffs
                      Through Mr. Krishna Kant, Adv.

                        versus

      M/S CITIFINANCIAL CONSUMER FINANCE INDIA LTD.
                                              ....Defendant
                         Through Ms.Monika Singhal, Adv. with
                                 Mr.Abhishek Gautam, Adv.

      CORAM:
      HON'BLE MR. JUSTICE MANMOHAN SINGH

MANMOHAN SINGH, J.

1. By way of this order I propose to decide application being I.A. No.3739/2012 under Order VII Rule 11 CPC filed by the defendant No.1 seeking for rejection of plaint for want of territorial jurisdiction and survival of cause of action against the defendant.

2. The plaintiffs have filed a suit for declaration and permanent injunction with regard to the property bearing Flat No.503, fifth floor, D-Wing, Nestle Apartment, Link Road, Malad (W), Mumbai - 400064 (hereinafter referred to as the "suit property") against the three defendants including the present applicant-defendant No.1.

3. Brief facts of the case are that on 15th March, 2004 defendant No.2 and 3 acquired the suit property from developers M/s Gemstar Construction Pvt. Ltd. through a registered deed.

4. Defendant No.1 is engaged in the business of providing financial credit facility in the form of various kinds of loans. The defendant Nos.2 and 3 had approached the defendant No.1 Company for availing loan facility. The defendant No.1 sanctioned a total loan of Rs.39,56,000/- and the defendant Nos.2 and 3 mortgaged two properties vide two loan accounts i.e. 10265966 and 10359613 one being the suit property and another property bearing Flat No.101, 1st Floor, Wing 6AA, Building No.1, Siddharth Nagar, Off Western Express Highway, Near Khatau Mill Compound, Borivali (East), Mumbai (hereinafter referred to as "another property") respectively.

4.1 On 26th April, 2008 the defendant No.1 owing to an alleged default in repayment of loan sent a notice to defendant Nos.2 and 3. As per defendant No.1 on the said date a total sum of Rs.18,97,450.72 was outstanding against defendant No.2 and 3 against the loan account No.10265966.

On 12th May, 2008 a Memorandum of Understanding was executed between defendant Nos.2 and 3 on one hand and plaintiff No.1 on the other hand whereby the plaintiff No.1 was put in possession of the suit property and after taking the possession, the plaintiff No.1 put his licensee Gyanendra Dubey in possession of the suit property.

5. It is admitted by the plaintiffs that defendant No.1 on or about 13th May, 2008 raised an arbitration dispute with defendant Nos. 2 and 3 and the plaintiffs had no knowledge about the same. The plaintiffs in furtherance of the MOU dated 12th May, 2008, made

payments to the CitiFinancial Consumer Loans Ltd. towards the loan account No. 10265966 on 17th May, 2008, 4th June, 2008, 11th July, 2008 and 21st August, 2008.

6. The plaintiffs were not made party in the arbitration proceedings rightly so as they are not the parties to the loan agreement which contained the arbitration clause. Counsel for the plaintiffs admits that there was no privity of contract between the defendant No.1 and the plaintiffs. The Arbitral Tribunal decided the matter ex-parte against the defendant Nos.2 and 3 as they failed to appear. It was held in the Award that the defendant Nos. 2 and 3 are in default of payments of their EMI and that the defendant No.1 was justified in revoking the loan agreements.

7. It is stated by the plaintiffs that since it was difficult for plaintiff No.1 to take steps in furtherance of the MOU dated 12th May, 2008, therefore, for the benefit plaintiff No.2 and 3 as vendees entered into a sale agreement for the suit property with defendant Nos.2 and 3 as vendors on 7th August, 2009. In March- April, 2010 the defendant No.1 demanded to the plaintiffs to deposit the entire amount of the arbitration award which is more than Rs. 46 lacs, whereas the amount pending against the suit property is only sum of Rs.17,17,58,809.15/-. On 20th May, 2010 the plaintiff No.1 executed a Power of Attorney in the favour of the plaintiff No.2. It is further stated that on 31st August, 2010 in an Execution application No.568/2010 filed before the High Court of Bombay in Arbitration case No. AR/ARB/356 of 2008, the Execution court issued warrant of attachment of the suit property as well as another property and the

notice of attachment was executed on or about 2nd February, 2011. Thereafter, on 22nd February, 2011 the plaintiff sent a legal notice to the Arbitrator conveying that the arbitration proceedings are bad. It is stated that the plaintiff is ready and willing to repay the outstanding loan amount on the suit property, which is approximately 21 Lacs and he cannot be liable for the loan amount outstanding against another property and therefore, the insistence of CitiFinancial that entire amount, which is more than 46 Lacs, be paid by the plaintiffs is unreasonable.

8. Written statement on behalf of the defendant No.1 has been filed contending:-

(i) That the plaintiffs have failed to establish any cause of action within the jurisdiction of this court.

(ii) That the plaintiffs have failed to establish their right, title and interest over the suit property and as such the plaintiffs have no locus standi to institute the proceedings against the defendant No.1.

(iii) That the defendant No.1 is not a necessary party as the relief sought is against the defendant No.2 and 3, who are recorded owner of the suit property.

(iv) That the plaintiffs were well aware that there is a loan pending against the property and have deliberately entered into a malafide/illegal and bogus transactions with defendant No.2 and 3.

(v) That it is a well settled law that a person purporting himself to be a transferee cannot obtain a right/title better than what transferor had at the date of alleged transfer of the property. The plaintiffs without having a valid right title and interest over the suit property and without establishing the same with respect to defendant Nos. 2 and 3, plaintiffs cannot get the same enforced against defendant No.1 by invoking Section 34 of the Specific Relief Act, 1963.

(vi) That the defendant No.2 and 3 under the said agreement have agreed not to alienate or otherwise part with the possession of the property or its any of its part thereof or sell or enter into any agreement with respect to the suit property unless it is agreed by the defendant No.1. Thus, any act of defendant No.2 and 3 in contravention of the said agreements is void and therefore no right, title or interest can be claimed by the plaintiffs through defendant No.2 and 3 vide any such alleged Agreement to Sell or MOU's.

(vii) That the arbitral award was passed by the Arbitrator on 27th January, 2009 and alleged MOU and the Agreement to Sell between the plaintiffs and the defendant No. 2 and 3 was dated 7th September, 2009 i.e., after the date of passing of the arbitral award thus, it appears that the said transactions between the plaintiffs and defendant No. 2 and 3 is an afterthought and in collusive nature so as to deny right

accrued to the defendant No.1 via arbitral award dated 27th January, 2009.

9. Replication has been filed to the written statement by the plaintiff No.2 denying the contents of the same.

10. By way of instant application being I.A. No. 3739/2012, inter alia, the defendant No.1 seeks for rejection of the plaint in view of admitted averment made in the plaint and documents filed alongwith plaint. Counsel for the defendant No.1 argued that firstly this Court has no territorial jurisdiction and secondly there is no cause of action lies with the plaintiffs to proceed against the remaining defendant- applicant.

11. Having considered the plaint, documents filed with the plaint, averments made in the application as well as submissions made by both sides, this Court is of the considered view that the prayer made in the application is liable to be allowed for the following reasons :

(i) The suit filed by the plaintiffs against the suit property is not situated under the jurisdiction of this Court. This fact is not denied by the plaintiffs. It is admitted by the plaintiffs that there is no privity of contract between the plaintiffs and the defendant No.1 as for all purposes the plaintiffs are stranger to the defendant No.1. The plaintiffs have purchased the said property from defendant Nos.2 and 3 but have stated no reasons why they had not verified the deeds from the vendors before the purchase of the property.

(ii) The property in dispute is duly mortgaged with the defendant No.1 who has the first charge over the said property. Further, under Clause 5.2. of the loan agreement executed between defendant No.1 and defendant Nos.2 and 3, the borrowers and co-borrowers were completely restrained from the alienation of the mortgaged property in any manner without the explicit written consent of defendant No.1. The said clause is reproduced herein as under:

"5.2: The Borrower covenants with the Lender that unless the lender shall otherwise agree:

5.2(b) The borrower shall not sell, mortgage, lease, surrender or otherwise howsoever alienate the property or any part thereof."

In view of the above any transaction relevant to the said mortgaged property by defendant No.2 and 3, without the explicit written consent of defendant No.1 is illegal, perverse in law and void ab-initio.

(iii) The plaintiffs have sought declaration under Section 34 of the Specific Relief Act, 1963 but have chosen to delete defendant No.2 and 3 from the array of parties without assigning any reason. Therefore, there is cause of action survived within the territory of this Court against the applicant.

(iv) The plaintiff has not challenged the validity of the Arbitral award dated 27th January, 2009 nor the same have been challenged by defendant No. 2 and 3 in any court of law and thus, the validity of the award stands established. Therefore,

the challenge to the arbitration award is barred due to efflux of time on limitation and the defendant No.2 and 3 in collusion with plaintiffs by the present suit are attempting to alter and modify the Arbitral award dated 27th January, 2009.

(v) There is no cause of action as the loan agreement was not entered between the defendant Nos.2 and 3 and defendant No.1 in the jurisdiction of this Court and only the arbitral proceedings were held in New Delhi as per the loan agreement.

12. In view of abovesaid facts and circumstances, it is clear that this Court has got no territorial jurisdiction to entertain the matter. The plaint is accordingly returned under the provisions of Order 7 Rule 10A CPC.

13. The registry shall return the plaint by following the provisions under Order 7 Rule 10 A of CPC.

14. Pending applications are disposed of accordingly.

(MANMOHAN SINGH) JUDGE SEPTEMBER 29, 2014