Ansal Properties & Infrastructure Ltd. vs Syndicate Bank and Ors.

S.N.H. Zaidi, J

This appeal impugns the order dated 14.11.2011 passed by the learned Presiding Officer of the Debts Recovery Tribunal-I, Delhi dismissing the application (IA No. 648/11) filed by the appellant for its impleadment as a party in O.A. No. 07/2010 as not maintainable. Briefly stated, the relevant facts are that an application (O.A. No. 07/2010) has been filed by respondent Bank before the Debts Recovery Tribunal Delhi-I, for short, the DRT, against respondent company and its Directors for the recovery of Rs. 24,17,11,166.20 together with pendente lite and future interest with the averments, inter alia, that a Short Term Loan (STL) to the extent of 50 crores was sanctioned by the Bank to the respondent company for acquiring land/plots from DDA in open auction. The respondent company being successful in the auction of four plots, including the plot in question bearing No. 9, measuring 800 sq. mtrs., Sector 20, Part II, Dwarka. New Delhi, made initial payment of 25% of the bid amount to the DDA from the aforesaid STL and repaid the unutilised amount of loan to the Bank. Further Short Term Loan for payment of the balance 75% bid amount to the DDA in respect of two properties, including a loan of Rs 5-85 crores qua the plot in question, was also sanctioned to the respondent company, which created equitable mortgage of the said plot and other properties in favour of the Bank after the due execution and registration of the conveyance deed by the DDA.

During the course of hearing of the said OA, the appellant herein moved application (IA No. 648/11) for its impleadment as a defendant in the proceedings, stating that the respondent company, on being successful in auction of the plot in question, made initial payment of the earnest amount of Rs 4.6 crores and approached the appellant, which is an incorporated Company and a leader in real estate market, for funds for making payment of the balance amount of 75% of the bid amount, etc., in respect of which a loan of Rs. 5.85 crores was also sanctioned by the respondent Bank to it, and requested the appellant to join hands with it as a developer of that property. It is also stated that the appellant and respondent company entered into a Collaboration Agreement on 28.1.2008 for the purposes of development and construction of a commercial complex over that plot, after obtaining a No Objection Certificate (NOG) dated 28.1.2008 from the respondent Bank, which had given its no objection after fully considering the terms and conditions of the Collaboration Agreement and accordingly a sum of Rs. 10 crores was paid by the appellant in the account of respondent company for making payment to the DDA and the appellant was put in physical possession over the plot in question and as such the appellant, having a legal interest in it, is a necessary party qua that plot, which is the subject matter of the OA. It has further been said that in order to circumvent the rights of the appellant in the plot in question, the respondent company moved an application for the sale of that plot and the DRT, vide order dated 31.5.2011, had allowed the same. The learned PO of the DRT dismissed the impleadment application as not maintainable by the impugned order.

I have heard Mr. Y.P. Narula, learned Senior Advocate with Mr Hemant Chaudhary, Mr Mudit Sharma and Mr. Anirudh Chaudhary for the appellant, Mr. A.B. Dial, learned Senior Advocate with Mr. R.S. Raju and Mr. Anoop Prakash Awasthi for the respondent Bank and Mr. Pallav Saxena with Mr. Arvind Sharma for the respondent company and perused the record.

Mr. Narula has stated that though certain other orders have also been assailed in this appeal, but it is being pressed only in respect of the order dated 14.11.2011 of the DRT with which the application for impleadment has been dismissed.

It has been submitted by Mr. Narula that the appellant had entered into the collaboration agreement dated 28.1.2008 with the respondent company and had given Rs. 10 crores to it for the purpose of making payment to the DDA in respect of the plot in question only after the respondent Bank had given its no objection in writing by saying that they had gone through the terms and conditions of the proposed collaboration agreement and had no objection to their (respondent company) entering into the said collaboration agreement with the APL (the appellant), but the Bank fully knowing the legal and rightful interest of the appellant qua the plot in question, deliberately suppressed it and did not mention about it in the OA, in respect of the Short Term Loan No. 179 OSLN080280001 for Rs 5.85 crores, which relates to the plot in question.

Mr. Narula has further submitted that the respondent company after stating in Sub-clause (xvi) of Clause (E) of preliminary submissions of its Written Statement that the purported liability qua STL No. 1790SLN080280001 stands transferred to M/s. Ansal Properties and Infrastructure Ltd., (the appellant) by way of collaboration agreement dated 28.1.2008 to which the Bank had granted no objection certificate on 28.1.2008. has also taken the plea of non-joinder of necessary party, i.e., of the appellant, in Sub-clause (xix) thereof.

It has been pointed out by Mr. Narula that the respondent company had filed Writ Petition (C) No. 9040 of 2009 before the Delhi High Court for quashing the notice issued by the respondent Bank under Section 13(2) of the SRFAESI Act in respect of the STL relating to the plot in question and the High Court had stayed the recourse to coercive steps under the aforesaid Act by its order dated 19.5.2009. He has further pointed out that an application (IA 420/2011) moved by the respondent company for the sale of the plot in question by way of public auction was disposed of by the Tribunal by order dated 31.5.2011 with a direction to the Bank to take appropriate steps as per law in the light of the prayer of the defendant (respondent company), but the Bank moved application (I A 597/2011) for review/ modification of the said order with the averments that the property sought to be sold is under a collaboration agreement and in possession of M/s. Ansal Properties and Infrastructure Ltd. (the appellant), a third party, with which the borrower had entered into the agreement for raising funds to make payment to DDA and as the Bank was restrained from selling the plot in question by the order dated 19.5.2009 of the High Court, therefore, the Bank will not be able to sell that property and the said application is still pending disposal before the DRT.

The contention of Mr. Narula is that in view of the aforesaid facts and circumstances it is sufficiently established that the appellant has a legal interest in the plot in question and it is a necessary and proper party for the O. A. but the learned DRT below did not properly consider the facts and circumstances of the case and erred in dismissing the impleadment application. Lastly, Mr Narula has said, on instruction, that the appellant is ready to deposit the amount of debt due, in respect of the plot in question, to the Bank.

Mr. Dial, on the other hand, reiterating the facts and circumstances of the O. A., has submitted on behalf of the Bank that the alleged collaboration agreement, which is the basis of the appellant's case, is on a 50 Rupees' Stamp Paper only and since it is neither sufficiently stamped nor registered, though legal interest in an immovable property is being alleged to have accrued to the appellant on its basis, therefore, it is hit by Article 23-A of the Stamp Act as well as by Section 17, as amended in 2001, and Section 49 of the Registration Act and as such it cannot be looked into as evidence of the appellant's contention. He further submitted that the appellant is neither a proper nor a necessary party for the effective adjudication of the OA filed by the Bank wherein relief has been sought against the borrower (respondent company) only. It has been pointed out by him that the appellant had sent a letter dated 29.5.2008 to the Bank saying that it had no objection in case the Bank identify a buyer for the purchase of the plot in question and had also agreed to assign its rights in favour of the new buyer on receipt of entire payments.

The submission of Mr. Pallav Saxena, the Counsel for the respondent company, is that the appellant has no legal interest in the plot in question and at best its interest can only be said to be commercial which cannot be a ground for its impleadment as a party to the recovery proceedings. In this regard Mr. Saxena has relied upon the observations of the Apex Court and the High Courts in M/s. Aliji Momonji & Co. v. Lalji Mavji & Ors., : III (1996) CLT 171 (SC)= JT 1996(7) SC 53, Madhu Puri (Ms.) & Anr. v. Shri Moti Lal Puri & Ors, 2005 VIII AD (De) 737.

Mr. Saxena has further submitted that the collaboration agreement dated 28.1.2008 which is the basis of the appellant's claim for impleadment also provides for arbitration in its Clause (35) and if the appellant has any dispute in connection with the said agreement he should have invoked that clause. It has been pointed out by him that the responding company has made a counter claim for 35 crores against the Bank and both the O.A. and the Counter Claim are to be tried jointly by the Tribunal for which the appellant is neither a necessary nor a proper party.

Admittedly the appellant was nowhere in picture when the credit facilities were sanctioned to the respondent company after its Directors executed the agreements of hypothecation and guarantee and they had also mortgaged their properties in favour of the Bank and as such the appellant was not a privy to any contract with the Bank. The contention of the appellant that since the collaboration agreement was entered into after the Bank had given its no objection to it, therefore, the appellant has also a privity of contract with the Bank is not tenable. It appears that, in respect of the plot in question, the appellant had intended to enter into a commercial agreement with the respondent company and since the terms and conditions of the agreement were not prejudicial to the interest of the Bank, therefore, the Bank did not object to it and gave its no objection but this circumstance does not make the Bank a privy to that agreement,

In New Redbank Tea Co. Pvt. Ltd. v. Kumkum Mittal and Others, : (1994) 1 SCC 402, the Supreme Court has reiterated its earlier view that: "in a suit relating to property in order that a person may be added as a party, he should have a direct interest as distinguished from commercial interest in the subject-matter of the litigation" (Razia Begum v. Sahebzadi Anwar Begum, : AIR 1958 SC 886).

The Supreme Court in the case of Mi. Aliji Momonji & Co. v. Lalji Mavji & Ors. (supra) has observed in para 5 of the judgment that:

5....It is settled law by catena of decisions of this Court that where the presence of the respondent is necessary for complete and effectual adjudication of the dispute, though no relief is sought, he is a proper party. Necessary party is one without whose presence no effective and complete adjudication of the dispute could be made and no relief granted... The only reason which makes it necessary to make a person a party to an action is that he should be bound by the result of the action and the question to be settled, therefore, must be a question in the action which cannot be effectually and completely settled unless he is a party.

The learned DRT has quoted the following observations of the Hon'ble Supreme Court made in Competition Commission of India v. Steel Authority of India Ltd & Ors., : VII (2010) SLT 88=IV (2010) CLT 16 (SC)= (2010) 10 SCC 744, as has been relied upon by the appellant, that:

In the light of the above statutory provisions, let us examine the scheme under the general principles as well. The provisions of Order 1 Rule 10 of the Code of Civil Procedure control the parties to the proceedings and their addition or deletion thereof. Wide discretion is vested in the Court/ appropriate forum in regard to impleadment of necessary and proper parties to the proceedings. Of course, such discretion has to be exercised in accordance with provisions of law and principles enunciated by various judicial pronouncements. The consideration before the Court, while determining such a question, is whether the said party is a necessary or a proper party and its presence before the Court is essential for complete and effective adjudication of the subject matter, inter alia, it should also be kept in mind that multiplicity of litigation is to be avoided and that the necessary or property party should not be left out from the proceedings, particularly, before the Tribunal or the Forum

These principles were stated by this Court in Udit Narain Singh Malpaharia v. Board of Revenue, wherein this Court has held as under: (: AIR 1963 SC 786, p. 788 para 7)

To answer the question raised it would be convenient at the outset to ascertain who are necessary or proper parties in a proceeding. The Law on the subject is well settled; it is enough if we state the principle. A necessary party is one without whom no order can be made effectively; a proper party is one in whose absence an effective order can be made but whose presence is necessary for a complete and final decision on the question involved in the proceeding.

Another way to examine the matter is that if the proceedings cannot be concluded completely and effectively in absence of a party, that party should be normally impleaded as a party before the Court, of course, subject to other restrictions in law. While non joinder of necessary parties may prove fatal, the non-joinder of proper parties may not be fatal to the proceedings, but would certainly adversely affect interest of justice and complete adjudication of the proceedings before the appropriate forum.

In the light of the above proposition of law also, in my opinion, the appellant does not appear to be either a necessary or a proper party to the OA filed by the Bank against the respondent company for the recovery of its outstanding dues as his presence before the DRT is not essential for the complete and effective determination of the amount of debt due to the Bank and the DRT can pass an effective order in the O.A. without making the appellant a party. I am also of the view that the proceedings of the O.A. can completely and effectively be concluded in the absence of the appellant.

In M.L. Agarwal v. Oriental Bank of Commerce & Ors., : I (2005) BC 79 : 2006(88) DRJ 214 (DB), where impleadment in the OA was sought on the basis of purchase of the property in question by a Power of Attorney and agreement to sell but there was no registered sale deed in favour of the applicant, the DRT had rejected the impleadment application and the appeal against the rejection was also dismissed by the DRAT, the Delhi High Court dismissed the Writ Petition against the order of the DRAT by holding that the agreement to sell, Will, Power of Attorney and a receipt of payment of money do not constitute a sale as the sale of an immovable property can only be by a registered sale deed under Section 17 of the Registration Act. In this matter also the collaboration agreement which is the basis of the appellant's case is an unregistered document, thus no title or ownership right accrues to the appellant in the plot in question on its basis. The learned DRT has rightly observed that if the appellant has any dispute against the respondent company qua the said collaboration agreement, it may invoke the arbitration clause of the agreement.

In view of above, I am of the opinion that the order impugned does not suffer with any illegality and as such no interference is warranted in it and the appeal is liable to be dismissed being devoid of any merit.

Appeal is, accordingly, dismissed. Copy of this order be furnished to the parties as per law and one copy be sent to the learned DRT concerned.