Dhallo Devi And Ors. vs Bank Of Baroda And Ors.

Ranjit Singh, J

The Original Application filed by Bank of Baroda for recovery of Rs. 1,27,68,581/- is allowed with interest @ 12% per annum from 23rd May, 2003 till recovery with costs from Cheena Apple Traders, Mr. Chander Shekhar Saini s/o. Mr. Beer Singh and Mr. Chander Shekhar Saini as L.R. of Mr. Beer Singh. The Bank has been held entitled to recover the amount by sale of the mortgaged property bearing No. C-11, New Subzi Mandi, Azadpur, Delhi. Aggrieved against this order, the appellants, who are defendant Nos. 4 to 9 have filed this Appeal. Their grievance seems to be against that part of direction whereby the Tribunal below has allowed the recovery of this amount by sale of the property C-11, New Subzi Mandi, Azadpur, Delhi (hereinafter referred to as 'New Sabzi Mandi property'). It was claimed that this property was allotted by DDA in favour of Mr. Sher Singh and Mr. Beer Singh jointly. They had statedly applied to the President of India through Delhi Administration for allotment of the plot of land under the scheme of allotment of shop/plots/sites at New Subzi Mandi, Azadpur. The appellants would urge that the application had been submitted by Mr. Sher Singh individually with such declaration that the amount had been paid by Mr. Sher Singh, and receipt of the same had been issued in favour of Mr. Sher Singh in his life time, which was filed before the Tribunal as well. The DDA had then issued a letter handing over the possession of the property jointly to Mr. Sher Singh and Mr. Beer Singh on 6th April, 1970. It is stated that the possession was taken by Mr. Sher Singh and Mr. Beer Singh individually and that Mr. Beer Singh had applied individually for half portion of the said property.

The President of India had executed a lease deed in respect of the alleged mortgaged property for a consideration of Rs. 12,365.50, which was duly registered in the office of Sub-Registrar. It is averred that Mr. Sher Singh and Mr. Beer Singh had jointly constructed basement, ground floor, first floor and second floor over the said plot of land. It is urged that both were owners of half share each as allottees and they were in joint possession of the said plot during their life time.

The appellants would also disclose that Mr. Beer Singh had let out some portion of the property but he did not render account to Mr. Sher Singh during his life time despite Mr. Sher Singh having approached Mr. Beer Singh in this regard requesting him to render account of realisation from the rent which he collected. As per the appellants, Mr. Beer Singh failed to furnish any account for which Mr. Sher Singh had filed a Civil Suit against Mr. Beer Singh for decree of partition in respect of the property.

The Suit filed before the High Court was taken up on 11th September, 1986. The High Court had granted ex parte stay restraining Mr. Beer Singh from transferring, alienating, encumbering the property in any manner whatsoever. On 10th October, 1986, this order was extended till further orders and Mr. Beer Singh was restrained from realising rent from the various tenants of the property. This order was also intimated to the tenants. The case before the High Court was adjourned from time to time for completing pleadings.

On 3rd October, 1989, the Hon'ble Delhi High Court, while disposing of an application under Order 40, Rule 1 read with Order 39, Rules 1 and 2 appointed a Receiver in respect of the property to manage it and to collect the rent. 37% of the rent was to be paid to Mr. Sher Singh while Mr. Beer Singh was to get 50% of the said amount. The balance 13% was to be kept by the Receiver in a separate Bank account to be opened in a nationalised Bank. Counsel for Mr. Beer Singh had undertaken not to transfer, alienate and encumber the Suit property without seeking prior leave of the Court. The said application was accordingly disposed of in favour of Mr. Sher Singh during his lifetime.

Issues were framed in the Civil Suit which related to the shares of the parties in the property. Another issue was whether the claim for rendition of the account was barred by time and that whether the plaintiff was entitled to claim mesne profit from the defendant. Some cheque was also tendered by Mr. Sher Singh on account of rendition of account. This Suit has been transferred to the District Court and is stated to be still pending.

The appellants would urge that they came to know about the present Suit filed by the Bank, which they would term as collusive one between the defendants and the Bank. The appellants had filed an application under Order 1, Rule 10 of CPC for being impleaded as party in the Suit proceedings. The said application was dismissed on 31st July, 2008 against which the appellants had filed an Appeal before this Tribunal. The said Appeal was allowed on 8th January, 2010.

The appellants, thereafter, filed Written Statement in the pending Original Application filed by the Bank. They had also filed the complete Court proceedings of Civil Suit before the Tribunal below. As per the appellants, Mr. Sher Singh was neither guarantor nor borrower in the proceedings. The appellants would urge that the respondent Bank failed to produce document with regard to memorandum of letter of mortgage. The appellants claim that Mr. Sher Singh had not signed the letter of mortgage and that there was no consent by Mr. Sher Singh for creating mortgage during his life time. The plea by the appellants accordingly was that Mr. Beer Singh had played fraud by stating that no Suit or proceedings were pending in respect of the property, whereas to the knowledge of the Bank litigation in regard to the mortgaged property was pending. As per the appellants, document filed by the Bank would show that the certificate of possession was issued by Delhi Development Authority individually to Mr. Sher Singh and Mr. Beer Singh. The said allotment was issued by the Government jointly in the name of Mr. Sher Singh and Mr. Beer Singh as per the perpetual lease deed. There was a condition in the lease deed that in the event of death of lessee, the person on whom the title of the deceased devolved shall, within three months from the devolution, give notice of such devolution to the lessor. It is accordingly pleaded that after the death of Mr. Sher Singh, the L.Rs. of Mr. Sher Singh became the owner of the property in question which is subject-matter of the present proceedings.

This case, otherwise, relates to recovery of the amount advanced by the Bank to respondent Nos. 2 to 4 who have been held liable for the recovery. The Bank had sanctioned Cash Credit Limit of Rs. 60 lacs on 21st October, 1999. Respondent No. 4, Mr. Beer Singh had executed loan documents. He had also created equitable mortgage in respect of the Sabzi Mandi property which stood in the name of Sher Singh Beer Singh in their capacity as partners. Mr. Beer Singh and Mr. Chander Shekhar Saini had declared on behalf of the firm that the property was jointly owned by them as partners of Sher Singh Beer Singh and that the property was free from all encumbrance, suits, proceedings, etc. They had deposited the certificate of possession dated 21st April, 1970, the letter of allotment dated 6th April, 1970 of Delhi Development Authority, the original certified copy of perpetual lease deed dated 14th July, 1972. They had also represented that earlier Mr. Beer Singh and Mr. Sher Singh were partners of Sher Singh Beer Singh. The partnership firm was dissolved vide Deed of Dissolution dated 26th February, 1987 wherein the erstwhile partners had agreed that Mr. Beer Singh shall enter a lien to be entitled to carry on the business in the name and style of Sher Singh Beer Singh as proprietor even after dissolution of the firm and accordingly Mr. Beer Singh shall take over all the assets and liabilities of the firm.

The stand of the appellants, who got impleaded as respondents, was that they were legal heirs of Mr. Sher Singh who was joint allottee in respect of the Sabzi Mandi property by virtue of perpetual lease deed in the name of Sher Singh Beer Singh. It was urged that Mr. Sher Singh had equal share with Mr. Beer Singh as co-owner and they had jointly constructed the building on the property. Mr. Beer Singh had let out the constructed portion to various parties realising rent/license fee without rendering the account. Mr. Sher Singh had then instituted a partition Suit before the High Court. The High Court had issued interim order restraining the defendant from transferring, alienating or encumbering the property. It was averred that Mr. Beer Singh had filed Written Statement admitting that the property was allotted jointly to late Mr. Sher Singh and Mr. Beer Singh and an undertaking was filed before the High Court of Delhi that the property shall not be transferred, alienated or encumbered without seeking prior leave of the Court. It was urged that the creation of equitable mortgage by Mr. Beer Singh claiming to be exclusive owner was totally on the basis of false and fabricated documents. This was termed as illegal, contrary to the settled principles of law for creation of equitable mortgage. It was also alleged that the Bank without verifying the title accepted the property as collateral security for repayment of loan though it was in its knowledge that the Suit for partition and rendition of account was pending before the High Court. The appellants would also allege that Mr. Beer Singh had flouted the orders and undertaking and in clandestine manner created mortgage of the property. The appellants pleaded that they had no objection if the property was sold by auction as per rules, but they may be given preferential right to purchase the property at the market rate which is prevalent or equal to the highest bidder in case the Court was of the view that the appellants were entitled to 50% share of the sale proceeds in view of the joint ownership.

One of the issues which was framed by the Tribunal was:

"Whether there is valid mortgage in respect of the property in favour of the applicant?"

Incidental issue was whether the appellants have any valid claim over the mortgaged property or not. The whole basis of challenge by the appellants is that the property in question was allotted to individual names of Mr. Sher Singh and Mr. Beer Singh and both have 50% each right over the property. The Tribunal below has referred to the perpetual lease deed which is in favour of Sher Singh Beer Singh. From this, the Tribunal has held that lease was not in favour of any person but was in favour of Sher Singh Beer Singh which was a partnership firm. The plea by the appellants was that the lease deed was in the name of Sher Singh and Beer Singh. The Tribunal found that the word 'and' is not existing in the deed and in the absence of the same, appellants cannot be allowed to add this word which was not present in the document. The finding by the Tribunal below is that lease deed was in favour of Sher Singh Beer Singh which was a partnership firm. The Tribunal has accepted this plea of the borrower. In fact, this finding returned by the Tribunal below has not been seriously contested by the appellants.

The only point which the Counsel for the appellants pressed hard is that the mortgage created on the face of the restraint order passed by the High Court would not be valid. The plea by the Counsel is that there was an interim injunction and transfer of rights during the subsistence of injunction against him would render the transaction/transfer illegal, which cannot be recognized. In support of this plea, the Counsel for the appellants has heavily relied upon the judgment of Bombay High Court titled Keshrimal Jivji Shah v. Bank of Maharashtra, IV (2004) BC 6 (DB). The Court in this case has held that transfer of immovable property in violation of an order of injunction or prohibition issued by Court of law confers no right, title or interest in the transferee, as it is no transfer at all. The Court has further observed that the transferee cannot be allowed to reap advantage or benefit from such transfer merely because he is not party to the proceedings in which order of injunction or other prohibitory direction or restraint came to be issued. It is enough that the transferor is a party and the order was in force. The Court has further held that if during the pendency of an order of injunction, immovable property, which is subject-matter of restraint or injunction, is transferred, then there is no choice but to declare the transfer as illegal. The submission by the Counsel for the appellants is that the mortgage was created while Mr. Beer Singh had given undertaking not to transfer, alienate, or create any third party right in the property before the Hon'ble High Court.

The order under challenge before the Hon'ble High Court in the case of Keshrimal Jivji (supra) was that where the Court has expressed its view that sublease in favour of petitioners being in contravention of the order of injunction passed by the said Court is void and confers no right, title and interest in favour of petitioners. The Court whose order was under challenge before the High Court had observed that the petitioners had failed to substantiate their plea that they were bona fide purchasers for value without notice. There conclusions were challenged before the High Court by filing a writ petition under Article 226 of the Constitution of India. The plea before the High Court was that the conclusion by the Court below holding that the transfer during pendency of restraint/prohibitory/injunction order is void, is erroneous. The Counsel for the petitioners had submitted before the High Court that there was no provision either in the Civil Procedure Code or elsewhere which makes transfer of immovable property in violation of an injunction order/prohibitory order null and void. The plea by the Counsel for the respondent before the High Court, on the other hand, was that the petitioners had purchased the property in violation of the order of injunction rendering the whole transaction to be illegal. The plea was that the transaction which had entered into either to defeat the order of the Court of law or to violate it, confers no right, title or interest in favour of transferee. The Bombay High Court has taken the view as noticed above after referring to judgments in the cases of Surjit Singh v. Harbans Singh, AIR 1996 SC 135, Ramachandra Ganpat Shinde v. State of Maharashtra, AIR 1994 SC 1673, and Satya Brata Biswal v. Kalyan Kumar Kisku, (1994) 1 SCR 413.

In addition the Counsel for the appellants have also relied upon the case of Punjab National Bank v. Delite Properties Pvt. Ltd., AIR 2004 Cal. 114. In this case, a matter pertaining to disturbing interim order to maintain status quo by taking of possession of property under dispute and transferring the same was involved. The status quo order for transferring the property was obtained. The Court has held that transferring the property during the order of maintenance of status quo is not justified and such subsequent transferees do not have any right to property obtained under transaction made in violation of Court order. The person holding the possession illegally was held liable to be evicted. The Counsel for the appellants has also relied upon some other judgments as well.

There may not be much need to go into the effect of restraint order in the factual background of the present case. The appellants did not press any such plea before the Tribunal below. This issue, in my view, would lose much of its significance in view of the subsequent development in this case. The evidence on record shows that the firm standing in the name and style of Sher Singh Beer Singh, which was a partnership firm, was dissolved and dissolution deed dated 26th February, 1987 was prepared. Mr. Sher Singh, party of second part, discontinued as a partner of the firm and since only one partner was left who, by himself, could not constitute a firm, the firm was dissolved on 26th February, 1987. It was agreed that Mr. Beer Singh shall be entitled to continue to carry on the business in the name and style of Sher Singh Beer Singh as a proprietor on an ongoing concern basis. It was further agreed that Mr. Beer Singh shall be entitled to right of possession of the premises. Mr. Beer Singh accordingly was allowed to continue the business and he was given right of possession of the property. The plea that the property still remained with Mr. Sher Singh and Mr. Beer Singh is against the fact and evidence on record. There was specific clause in the dissolution deed which stipulated that the party of first part shall take over all assets and liabilities of erstwhile firm Sher Singh Beer Singh in terms of the balance sheet. Thus, Mr. Beer Singh had taken over all assets and liabilities of the erstwhile firm. The subject-matter property, which was an asset of the firm, with the dissolution of the firm had become property of Mr. Beer Singh alone who took over the assets and liabilities of the firm. This left Mr. Sher Singh with no right over the property. Thus, the contention of the appellants that they had inherited the rights of Mr. Sher Singh would not lead the case to anywhere. Their plea that Mr. Beer Singh had let out portion of the property on rent would show that Mr. Beer Singh was in possession and enjoyed the property thereafter. Subsequently, on 23rd March, 1999, a fresh partnership was entered into. As per this partnership deed, Mr. Beer Singh and Mr. Chander Shekhar Saini had entered into partnership business in the name and style of Sher Singh Beer Singh and profit and loss of the firm was to be shared equally between them. Thus, the appellants who claim their right through Mr. Sher Singh are left with no rights in the property. Accordingly, they have no locus to either challenge the mortgage or to dispute the claim fastened on the respondent borrowers.

Accordingly, the effect of restraint order, if any, on the right to create mortgage in this factual scenario would not be of much significance. That is the reason, perhaps, the appellants have not pressed this ground before the Tribunal below. Even in the written arguments this ground is not found reflected. The appellants cannot now in fairness be allowed to press this ground. I do not find any reason to interfere in the impugned order. The Appeal is accordingly dismissed.