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Judgment
This T.S.A., arising out of S.A. 654 of 2014 originally filed before DRT-II, which was transferred to this Tribunal for adjudication consequent on change of jurisdiction and renumbered as aforesaid, has been filed by the applicant company seeking relief to declare the SARFAESI proceeding initiated by respondent no. 1 and 2 bank for enforcing the property situated at CF-3 (Plot No. AA-1C) in Block No. CF, Street No. 178 and 173, New Town, Rajarhat, Dist. North 24 parganas is void and also for a permanent injunction restraining respondent no. 1 and 2 bank from dispossessing the applicant company from any part or portion of the impugned property and also restraining them from giving effect to the three notices dated 28.03.2014 issued by respondent 1 and 2 bank for taking over possession of the subject property.
The applicant No. 1 is a company incorporated Act and engaged in the business of development of Agricultural Cooperative Marketing Federation of India under the Companies properties. National Ltd., (NAFED) being a Multi-State Cooperative Society had applied for land in New Town area and considering such application aforesaid plot of land was allocated to NAFED by HIDDCO, the Developing Authority of New Town area, by executing a registered sale deed for the purpose of construction of a super market' Said NAFED was the absolute owner of the aforesaid plot of land measuring one acre. NAFED has constructed boundary wall of the property. Thereafter by a registered deed of indenture dated 18.09.2007 said NAFED had sold aforesaid property to nine different companies, (1) Piyarelall Shipping Pvt. Ltd., (2) PNR Nirman Pvt. Ltd., (3) NKP Commercial Pvt. Ltd., (4) PNR Vinimay Pvt. Ltd., (5) Sanayana Properties Pvt. Ltd., (6) Siddhartha Finovest Pvt. Ltd., (7) Beautiful Dealcom Pvt. LTd., (8) Ever Youth High Rise Pvt. Ltd., and (9) Harmony Vayapaar Pvt. Ltd., as described at Annexure A to the application. On 20.09.2007, just after two days, said nine companies jointly entered into an agreement with the instant applicant for development of the said plot of land for constructing a multi-storied super market with the project name "Extra" in accordance with the building plan sanctioned by HIDCO on 28.07.2007. According to building sanction plan the proposed construction would have a basement and ground to six upper floors with central atrium across the ground to third floors. It was agreed between nine owners and applicant company that ground, first and third floors would be used as a mall while the upper floors, that is 4th to 6th would be used as commercial and office space. In terms of the development agreement dated 20.09.2OO7, 42% of total proposed building area along with 42% of land and appurtenant amenities and facilities would belong to said nine companies while remaining 58% would go to the applicant company and accordingly they agreed to transfer 58% share to the applicant company and its nominees after satisfactory completion of the building and in consideration thereof applicant company and its nominees agreed to construct the building according to the sanction plan approved by HIDDCO. Security deposit of Rs.2.00 crore was deposited by the applicant company to the said nine companies with the agreement that security money would be refunded after completing construction of the building. During course of construction said nine companies were amalgamated into Siddhartha Finovest Pvt. Ltd, respondent no.3 herein, pursuant to a scheme of merger approved by Hon'ble High Court at Calcutta on 04.03.2009. After completion of construction said amalgamated company proceeded to identify their agreed allocation and thereafter by a letter dated 18.10.2010 applicant proposed certain allocation of building and it was accepted and confirmed by respond no.3 with certain changes in the manner that 4th floor would be allocated to respondent no.3, while 5th and 6th floor would be allocated entirely to the applicant company and Ground, first, second and third floors would be divided into 42% of the building and adjoining area for the respondent no.3 and rest 58% for the applicant company. More precisely total 74332 Sq.Ft. area would be divided into 31220 Sq.Ft. for respondent no.3 and 43112 Sq.Ft for the applicant company. It was also agreed that mall premises from ground to 3rd floor would not be separated and revenue earned from the mall premises would be divided into 42:58 ratio. It was also agreed that in the event mall premises being sold or leased out, all such documents would be executed jointly including its registry. Aforesaid agreement was reconfirmed by a subsequent letter dated 16.05.2011. However, parties to the agreement did not find suitable buyers for mall from ground to 3rd floor as also for upper floors. Consequently, they requested HIDCO authority for alternative use of said floors. HIDCO has given permission for maximum 50% of the total built-up area for "other compatible use" along with retail. Despite such permission, mall portion as well as upper floors are remain unoccupied. Applicant has deputed guards for security of the building to stop trespass and pilferage. On 14.11.2011 respondent no.3 submitted completion plan before HIDCO authority. On 28.03.2014 applicant came to learn that three possession notices were affixed on aforesaid building which indicated that respondent no. 4, 5, 6 and 7 have created security interest in respect of certain portion of said building in favour of respondent no.1 bank, who made a claim of Rs.56,51,80,992.48. On enquiry it was revealed that respondent no.6 has mortgaged 8574 Sq.Ft. of building area to respondent bank by virtue of a lease deed executed by respondent no.3 on 10.02.2011 and on the same day another lease deed was executed giving 10000 Sq.Ft. to respondent no.5, who mortgaged said lease deed to respondent bank. On 21.10.2011 other lease deed was executed by respondent no.3 giving 8759 Sq.Ft. to respondent no.7, who mortgaged said lease deed to respondent bank. Being aggrieved by aforesaid three possession notices, the instant application has been filed.
Applicant argued that possession is sine qua non for grant of lease. Since the property is in possession of the applicant and said property was un-demarcated/ undivided in terms of the development agreement at 42:58 ratio, respondent no.3 cannot lease out any portion of the property without applicant's consent. Three lease deeds granted in favour of respondent no. 5, 6 and 7 are sham documents. Respondent bank cannot accept security interest on the basis of aforesaid lease deeds without inspecting aforesaid building and without going through said development agreement. Applicant company has contended that according to agreement security deposit of Rs.2.00 crore would have to be refunded after completion of the project. The building was complete to the satisfaction of the owner. However, security money was not refunded. Without refunding security money respondent no.3 is not entitled to sell or lease out the property. It was further argued that respondent no.5, 6 and 7 are alter-ego of respondent no.3 and are managed and controlled by the same persons. Respondent no.5, 6 and 7 in collusion with bank officials had created fraudulent mortgage deeds. Two lease deeds granted in favour of respondent 5 and 7 allocating 10000 and 8759 Sq. Ft. at fourth floor did not contain floor plan or demarcation, subsequently rectification deed executed on 02.11.2011 annexing floor plan showing demarcation. Possession notices do not describe rectification deed. Without physical possession and physical demarcation lease deeds are void. Respondent no.3 has no right to lease out any portion of the property without consent of applicant, since property has not been demarcated according to development agreement. Consequently, respondent bank is not entitled to take possession of the fourth floor on the strength of said two lease deeds. Respondent no.3 cannot unilaterally demarcate any part or portion of first or fourth floor. Both the parties have mutually agreed that mall portion i.e. ground to third floor would not be divided or demarcated and same will be dealt with jointly. As such, respondent no.3 is not entitled to lease out 8574 Sq.ft. on first floor to respondent no.6 without consent of the applicant. Demarcation of 8574 Sq.ft. on first floor is practically impossible in view of its nature of construction. Lease deed shows that certain portion of central atrium has been attempted to be divided, which cannot be done in terms of the agreement. Respondent bank ought to have enquired into the development agreement before accepting said security interests.
Respondent no. 1 and 2 have opposed the application by filing affidavit in opposition. According to respondent bank said nine companies entered into an agreement on 20.09.2007 with the applicant company for development of said plot of land into a multi-storied super market project named 'Extra' keeping 42% share of the building and open land for themselves and remaining 58% of the building and open land thereof for the developer, applicant company. Thereafter by an order 17.12.2009 passed by the Hon'ble High Court at Calcutta in C.A. No. 5 of 2009 arising out of CP No. 28 of 2009 connected with C.A. No. 672 0f 2009 Siddhartha Finovest Pvt. Ltd., respondent no.3, has acquired all the assets and liabilities of said nine companies by dissolution. Change of ownership of property in the name of said Siuddhartha Finovest has been recorded before HIDDCO authority. Respondents submitted that in the backdrop of aforesaid fact, respondent no. 5 to 7 created mortgage in favour of respondent bank by depositing three lease deeds granted by respondent no.3 within its 42% share of the entire premises with the precondition that respondent no.3 shall get their allocated share demarcated and separately divided within its share. Aforesaid mortgage was created for availing credit facility by the respondent no.4 and such debt was classified NPA. As such, respondent bank has invoked SARFAESI measure and issued demand notice followed by said three possession notices. They further submitted that entire fourth floor and 42% of the first floor was mortgaged as per letter dated 18.10.2010 whereby applicant's proposed allocation of property was accepted by respondent no.3 with certain changes. It was also submitted that R, Piyarelall Import & Export Ltd., R. Piyarelall International Pvt. Ltd., R. PiyarelaIl Iron & Steel and other respondents have same set of Directors and subject property has been leased out to respondent no. 5 to 7 on perpetual lease, however, they have not initiated any action against respondent no.1 bank. This shows applicant's connivance with respondent no. 3. It is their submission that applicant is neither borrower nor guarantor nor in any way connected with the financial transaction with respondent no. 5 to 7. Applicant is a developer of the project and according to unregistered development agreement they would get 58% of the project including land area. Applicant will in no way be prejudiced if certain portion of 42% share of respondent no.3 is enforced, who leased out certain portion within its share to respondent no.5 to 7, who in turn mortgaged it to respondent bank. Since the mortgaged property is the secured asset of the bank, they are empowered, according to SARFAESI Act, to enforce the mortgaged property and sale it for recovery of NPA dues. Applicant company should not have grievance against enforcing part of 42% share of respondent no.3, who leased out it to respondent no.5 to 7.
In the written notes of argument respondent no.1 and 2 bank has reiterated the facts narrated above. They further submitted that after completion of the project both landlord and developer have identified their respective portion in a letter dated 18.10.2010 which was reconfirmed by the parties vide letter dated 16.05.2011. In terms of said letter fourth floor was identified and allocated to the landlord, respondent no.3, and fifth and sixth floors were identified and allocated to the developer, applicant, and 42% of the Ground to third floors were allocated to respondent no.3 and rest 58% would be entitled to applicant among the undivided area of each floors of ground to third. It has been submitted that even after giving permission by HIDDCO authority to sell out for other compatible use of the premises, no buyer could be identified and the owner never came forward to claim physical possession of the Mall portion and in spite of specific agreement respondent no.3 did not refund security deposit money even after completion of the project. It is further submitted that respondent no.3 has executed a lease deed on 10.02.2011 in favour of Extra Property Management P. Ltd, respondent no.7, in respect of 8759 Sq.Ft. on fourth floor, another lease deed dated 10.02.2011 in favour of Riddhi Builders Pvt. Ltd., respondent no.5, in respect of 10000 Sq.Ft on the fourth floor and other lease deed was executed on 21.10.2011 in favour of Extra Builders Pvt. Ltd, respondent no.6, in respect of 8574 Sq.ft. on first floor of the said building. It is the argument of respondent bank that ownership right is with Siddhartha Finovest Pvt. Ltd, respondent no.3, and development agreement executed in 2007 cannot be relied upon as it was an unregistered document and subsequent registration after filing of this case has no retrospective effect. Respondent bank had no knowledge of said development agreement as it was an unregistered agreement. Purported lease deeds show that respondent no.3 was the absolute owner of the property and entitled to lease out the property. Security interest was created as per Section 2(zf) within the meaning of Sec. 2(zd) of the Act of 2002. As such, secured creditor bank is empowered to enforce the security interest over the secured asset as defined u/s 2(zc). Section 13(1) of the Act of 2002 has given wide power to enforce secured asset by adopting one of the measures provided u/s 13(4). In this case security interest was created in respect of first and fourth floor along with respective open space by respondent no. 5 to 7 and vide letter dated 18.10.2010 applicant and respondent no.3 has mutually identified respective area according to 42:58 ratio. Respondent bank argued that disputes, if any, that has arisen between applicant and respondent no.3 to 7 and the applicant taking advantage of said dispute is trying to delay the recovery of public money, which may not be allowed to be done. In support of their case respondents have cited judgement of Hon'ble Apex Court in Jagdish Singh Vs, Heeralal & Ors [Civil Appeal No. 9771 of 2013] and in view of the ratio of aforesaid judgement suit filed by applicant against respondent no.3 to 14 is not maintainable and it is also contended that suit for partition would not be maintainable in a situation where Proceeding under SARFAESI Act has been initiated. Respondents have also cited judgement of Hon'ble Apex Court in Commissioner of Income Tax vs. Balbir Singh in Civil appeal No.15619 of 2017 and also M/s SMS Tea Estates Pvt. Ltd., Vs. M/s. Chandmari Tea Co. Pvt. Ltd. in Civil Appeal No. 5820 of 2011 in support of their argument that since the alleged agreement was not registered on the date of its execution it has no efficacy in the eye of law and subsequent registration has no retrospective effect.
Applicant company has filed rejoinder to the affidavit-in-opposition wherein it is submitted that Civil Suit No. 367 of 2014 had been filed against respondent no.3 and other interested parties wherein substantive claims for declaration of perpetual injunction had been made. Applicant claimed that SARFAESI proceeding in respect of suit property is illegal. Applicant further claimed that respondents no. 5 to 7 were not eligible to mortgage the property before being demarcated within its 42% share. It is the submission of the applicant company that as per letter dated 18.10.2010 the mall area comprising ground, first, second and third floor continued to be undivided and no allocation of said four floors has ever been made. Respondent no.5 to 7 have surreptitiously created mortgage. Applicant urged that purported lease deeds executed in favour of respondent no. 5 to 7 are sham. Applicant declined that they would not be prejudiced by the action of the bank, since respondent no. 3 to 7 are liable to fulfil the demand of the applicant as per agreement. It is the argument of the applicant that no security interest can be created on the basis of void lease deed, as such bank has no right to take recourse to the provisions of section 13(4) of the 2002 Act.
It appears from record that this Tribunal has directed the applicant to submit copy of original development agreement dated 20.09.2007 executed between the applicant and said nine companies. In compliance with said order applicant has submitted said development agreement by way of filing affidavit wherein they have averred that said agreement was submitted for the purpose of registration before ARA-II on the same date with requisite stamp duty and serial no.10560 of 2007 was allotted, however, upon assessment of market value deficit stamp duty was deposited later and said agreement was registered in 2014.
Respondent no.1 and 2 bank has filed written objection to the aforesaid supplementary affidavit wherein they submitted that development agreement was executed in 2007 and it was registered in 2014. It is their contention that said development agreement was registered after filing present application and such registration has no retrospective effect, as such an unregistered document may not be treated as valid document in the eye of law. By citing provisions of Section 53A of the T.P.Act as amended and Section 17(1A) and 49 of the Registration Act, 1908 aforesaid development agreement is not to be treated as registered agreement at least for adjudication of the present case and it has no efficacy in the eye of law.
During the course of argument ld. Counsel for the applicant has cited several judgements in support their case (1) Praniivan Purushottam Zaveri & Anr. Vs. Dena Bank reported in (2011) SCC On Line Guj 2353; (2) Kochkuju Nair vs. Koshy Alexander & ors report in (1999)3 SCC 482; (3) Dwarakanath Vishram Ghurya Vs, Narayan Vasudeo Dhond reported in 1989 SCC Online Bom 45 and (4) MRF Ltd. Vs. Manohar Parrikar & Ors reported in (2010) 11 SCC 374. On the contrary respondent bank has formulated their argument in the following manner. It is their contention that present applicant has no locus to file instant application since they have neither borrower nor guarantor nor mortgager and not in any way connected with the financial transaction with the bank. For the sake of argument if it is assumed that prayer made by the applicant is allowed, in that event also possession cannot be restored back to the mortgager. Fact remains that respondent no.4 to 7, who are involved in the financial transaction with the bank, have not contested the case even after effective service of the S.A. Respondent bank urged this proceeding was initiated by annexing unregistered development agreement, later facing predicament during hearing of the case applicant had registered said agreement. Respondents contended that said development agreement requires mandatory registration according to Registration Act and its registration long after its execution has no retrospective effect and unregistered agreement containing transfer of immovable property has no evidential value in the eye of law. In support of their case they have cited the case of Bachhaj Nahar Vs, Nilima Mandal & Anr. Reported in (2008)17 SCC 491 and Harshad Govardhan Sondagar Vs, International Assets Reconstruction Co. Ltd. & Ors. Reported in (2014) 6 SCC 1.
Heard learned counsel for the parties, perused materials on record and considered the facts and circumstances of the case including case laws cited by learned counsel for the parties. Respondent no. 3 to 14 do not contest the case in spite of effective service upon them.
Admittedly facts narrated above are more or less undisputed. SARFAESI proceeding was initiated by respondent no.1 and 2 bank against respondent no. 4 to 7 owing to default in repayment of loan by respondent no.4 wherein respondent no. 5 to 7 stood guarantor of said loan by creating equitable mortgage depositing impugned lease deeds granted by respondent no.3. For recovery of NPA dues respondent bank has issued demand notice, followed by three possession notices dated 28.03.2014, which were affixed on the aforesaid building. Present applicant was aggrieved by said three possession notices have filed instant application.
Respondent bank has challenged the locus of the applicant, since they are neither borrower nor guarantor / mortgager nor in way connected with the financial transactions between bank and respondent no.5 to 7. This application has been filed u/s 17(1) of the Act of 2002. The initial wording of Sec. 17(1) has a wide implication. "Any person", including borrower aggrieved by "any of the measures, u/s 13(4) may approach the Tribunal in accordance with law. "Any person aggrieved", would include not only borrower, guarantor, tenant, co-owner but also any other person whose right may be affected by the measures taken u/s 13(4) under SARFAESI Act. This was the interpretation of Hon'ble Supreme Court in Satyawati Tandon case reported in (2010) 8 SCC 110. In this case applicant company is aggrieved by the impugned three possession notices issued u/s 13(4), as according to them possession cannot be taken in an undivided and undemarcated property, which was mortgaged before the bank. Therefore, it cannot be said that applicant has no locus to file the present application.
Fulcrum of applicant's argument mainly based on two documents, first one is a development agreement executed on 20.09.2OO7 and registered in 2014 and next documents are two letters dated 18.10.2010 and 16.05.2011 wherein applicant company proposed allocation of the aforesaid building as per development agreement, which was confirmed and accepted by respondent no.3 with certain changes. Undisputedly respondent no.3 is the absolute owner of the plot of land. As per development agreement, applicant company agreed to construct the building as per HIDDCO sanction plan with the consideration of allocation of ownership right of 58olo of the building and open land to them keeping 42% of the building and proportionate open space for respondent no.3, owner of the premises. It was also agreed that applicant will deposit Rs.2.00 crore as security money, which will be refunded after satisfactory completion of the building. From the letters dated 18.10.2010 and 16.05.2011 it is revealed that applicant company proposed allocation in the following manner.
Floor level
Super built up area including 50o/o of open space. Terrace. (in Sft.)
Allocation for Respondent no.3
(insft. )
Allocation for applicant (insft. )
Level 0 to 3
74332
37220
431112
Level 4
18759
18759
NIL
Level 5
15412
NIL
15412
Level 6
10417
NIL
10417
Total Area
118920
49979
68941
Open car parking
75
31
44
Covered parking
67
28
39
Against the aforesaid Proposal, respondent no.3 had sent an explanatory note for allocation area in the following manner, which is annexed to the pleading :
Floor level
BUA (sft.)
SBA (Sft)
Owner 42%
Developer 58%
Level 0
17407
21585
9066
12579
Level 1
16464
20415
8574
11841
Level 2
16803
20836
8751
12085
Level 3
16803
20836
8751
12085
Level 4
15294
18965
18965
NIL
Level 5
14138
17531
NIL
17531
Level 6
6563
8138
8138
Roof
4634
5746
2413
3333
Basement
20944
25971
10908
15063
Covered parking
67
28
39
Aforesaid letters are unregistered document wherein both the parties unambiguously accepted that formal documents relating to aforesaid allocation along with floor plan would be executed and signed in due course to avoid any future complexities. No formal document relating to aforesaid allocation was executed. Moreover, applicant's claim that mall portion from ground to third floor would remain undivided and revenue earned therefrom would be divided in 58:42 ratio is not substantiated after issuance of aforesaid explanatory note for allocation sent by respondent no.3.
Regarding development agreement the applicant states that said agreement was produced before registering authority on the same day i.e. 20.06.2007 with requisite stamp duty, however, due to deficit stamp duty according to market value registration was not done on that day and it was done on 28.08.2014. Per contra, respondent bank submitted that applicant annexed an unregistered development agreement which is not enforceable in the eye of law and later facing predicament during course of hearing they registered the development agreement which has no retrospective effect. Respondent bank further submitted that as per Section 53A of the T P.Act as amended and section 17(1A) and 49 of the Registration Act, 1908 an unregistered agreement has no efficacy in the eye of law. For appropriate adjudication of the issue reference of aforesaid sections need to be reproduced.
53A of T.P.Act-
"53A, Part performance.-where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that 2[***] where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force' the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof.]
Aforesaid section seeks to protect the prospective transferees by allowing them to retain the possession over the property, against the rights of the transferors, who after the execution of an incomplete instrument of transfer, fail to complete it in the manner specified.
Sec. 49 and 17(14) of Registration Act -
Section 49 - Effect of non-registration of documents required to be registered0-No document required by section 17 1[or by any provision of the Transfer of Property Act, 1882 (4 of 18A2)1, to be registered shall-
(a) affect any immovable property comprised therein, or
(b) confer any power to adopt, or
(c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered: 54 [provided that an unregistered document affecting immovable property and required by this Act or the Transfer of property Act, 1882 '4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (3 of 1977) 55, 56 [***] or as evidence of any collateral transaction not required to be effected by registered instrument,] State Amendment Uttar Pradesh: In section 49,-
(i) in the first paragraph, after the words "or by any provision of the Transfer of Property Act, 1882" insert the words "or of any other law for the time being in force",
(ii) substitute clause (b) as under: "(b) confer any power or create any right or relationship, or",
(iii) in clause (c), after the words "such power", insert the words "or creating such right or relationship",
(iv) in the proviso, omit the words "as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1827, or". [Vide Uttar Pradesh Act 57 of 1976, sec. 34 (w.e.f. 1-1-1977)]
Section 17(1A) of the Registration Act
[(1A) The documents containing contracts to transfer for consideration, any immovable property for the purpose of section 53A of the Transfer of property Act, 1882 (4 of 1882) shall be registered if they have been executed on or after the commencement of the Registration and Other Related laws (Amendment) Act, 2001 and if such documents are not registered on or after such commencement, then, they shall have no effect for the purposes of the said section 53A.]
Aforesaid provision of law makes it clear that registration is mandatory in respect of aforesaid development agreement.
Applicant contended that respondent bank had created security interest on certain portion of aforesaid building without inspecting the premises. If they had inspected the premises it would have been known to them the real position since whole premises was under their possession and they provided security guard for avoiding trespass. On the contrary respondent bank argued during course of argument that there was no valid document to suggest that applicant was holding portion of the building. Mere providing security guard does not depict possession of the building, It was further argued that letter dated 18.11.2010 is not a valid document in the eye of law since in the said letter applicant evidently stated that valid document would be executed later for avoiding future complexities, which was not done. Moreover respondent no.3 had also sent explanatory note (supra) which suggests that respondent no.3 had certain objection with regard to mall premises. Said allocation of the property in 42:58 ratio has never been executed by a deed of indenture. As such, fact remains that respondent no.3 is the absolute owner of the total building and they will allocate 58% of the total construction area along with proportionate open space to the applicant by executing deed of indenture.
Applicant's next limb of argument is that possession is sine qua non of leasing out any portion of the building. Since respondent no.3 was not under actual possession they cannot lease out any portion of the building to respondent no. 5 to 7. Applicant claimed that they are in absolute possession of the whole building by providing security guard. Generally development agreement is made between the landlord and developer to provide security guard by the developer for security of the building till its handing over, but it does not establish that applicant is in absolute possession of the whole building. Applicant failed to produce any valid document to show that they were in actual possession of the building. For the sake of argument if reliance is placed on the unregistered development agreement then also it establishes without saying that respondent no.3 is the owner of at least 42% of the building along with proportionate open space. Therefore, respondent no.3 is entitled to lease out within its 42% share. Applicant's contention that lease deeds are sham is not sustainable in law.
Applicant further contended that in terms of the development agreement security money so deposited by them has to be refunded after completion of the project. Hence, without refunding said security money respondent no. 3 cannot enter into any lease deed without their consent. Refund of security deposit is a matter not to be adjudicated before this Tribunal, for which applicant has to approach in appropriate forum for redressal of their grievance.
Applicant's argument that it was agreed by both the parties that mall area would not be divided between them and revenue earned from the mall would be divided between them has no basis since respondent no.3 had sent explanatory note to the proposed allocation of the building made by the applicant, which is annexed to the written objection against the supplementary affidavit. From said explanatory note it is noticed that the respondent No. 3 had proposed that ground to 3rd floor would also be divided into 42:58 ratio. Therefore, applicant's claim that ground to third floor was agreed to be run jointly does not have any basis and such claim is not established by producing substantial evidence. Moreover, aforesaid letter was not a registered document. Hence, respondent no.3 is empowered to lease out certain portion within its share of 42%.
Let me now consider the case laws cited by the ld. counsel for the parties in support of their respective contentions.
As already discussed above, the main plank of arguments of the ld. counsel for the applicant is that since there was no partition, especially of the ground to 4th floors, as per the mutual agreement, the respondent No. 3 could not lease out those floors to the respondents 4 to 7 who in turn mortgaged the same to the bank.
20(i) Ld. counsel for the applicant has placed reliance on the decision of the Hon'ble Gujarat High. Court in Pranjivan Purushottam Zaveri -vs- Dena Bank (supra). On going through the facts of the cited case I fail to understand as to how this case can be of any assistance to the applicant. In that case, an application was filed before DRT, Ahmadabad by the applicant therein against the respondent Dena bank as also respondent No. 2 from whom the applicant purchased a property. While purchasing the property he obtained search report through an advocate who gave clearance certifying that the property was encumbrance free. However, subsequently it was revealed that the respondent No.2 and his son obtained loan from the respondent bank and created security interest in the property which was a Banglow which the applicant claimed to have purchased. The DRT dismissed the application against which decision the applicant went before the Hon'ble Gujarat High Court in appeal. The Hon'ble High Court also dismissed the appeal and held that the applicant has no right to challenge the action taken by the respondent bank. However, it was observed that if the applicant so desired he can file appropriate application before appropriate forum for recovery of the amount paid by him to the respondent No. 2 as well as a criminal proceedings can also be filed.
20(ii) Next case relied on is the case of Kochkunju Nair vs Koshy Alexander And Others (supra). In that case a Full Bench decision of the Hon'ble Kerala High Court was under challenge before the Hon'ble Supreme Court. The Full Bench opined that when a person has land in co- ownership with another, whatever be its extent, it would not disentitle him to claim the rights of a Kudikidappukaran under the provisions of the Kerala Land Reforms Act, 1963. Having held so, the Full Bench proceeded to consider whether appellant has such an entitlement. It was found that the land in his possession was not in co-ownership with others and hence the Full Bench repelled his claim to have Kudikidappu rights. However, the Hon'ble Supreme Court did not agree with this view and held that "ownership imports three essential rights, namely, right to possession, right to enjoy and right to dispose. If an owner is wrongly deprived of possession of his property he has a right to be put in possession thereof". All the three essentials are satisfied in the case of co-owner of a land. All co-owners have equal rights and co-ordinate interest in the property, though their shares may be either fixed or indeterminate. Every co-owner has a right to enjoyment and possession equal to that of the other co-owner or co-owners. Each co-owner has, in theory interest in every infinitesimal portion of the subject matter and each has the right, irrespective of the quantity of his interest, to be in possession of every part and parcel of the property, jointly with others.
It is not understood as to how this decision can be of any help to the applicant in the present case since factual position is totally different.
20 (iii) In Dwarkanath Vishram Ghurye v/s Narayan Vasudeo Dhond (supra), which is the next case relied upon by the ld. Counsel, the suit property belonged to one Vishram Ghurye, who partitioned it during his life time in three parts, one for self, one for his second wife, Sumatibai and the third for his son from his earlier wife, Dwarkanath. Vishram also executed will and bequeathed his one-third part of property to his wife Sumatibai, who thus became owner of two-third of the undivided property and one-third was owned by Dwarakanath, the step son. It appears that Sumatibai created a lease for rent in favour of respondent Narayan Vasudeo Dhond who filed a case for enforcement of the lease. However, the lease for rent was disputed on various grounds, The main ground was that Sumatibai was owner of two-third share of land but she leased out the entire land for rent without consent of Dwarkanath who was the owner of one-third share. Mainly, three questions arose for consideration viz., - (a) whether a valid, recognizable and identifiable tenancy could spring into existence in respect of any person's undivided share in any land? (b) whether one of the co-owners, who was not seeing eye to eye with the other co-owner, could create a tenancy in respect of the share of the other co-owner by necessary implication ? (c) whether a person claiming to be a tenant pleads in the Court contractual tenancy in respect of the suit land can be held to be a deemed tenant within the meaning of Section 4 of the Tenancy Act in the absence of any pleadings in that behalf upon his failure to prove the contractual tenancy ? The three questions were dealt with serially by the Hon'ble Bombay High Court.
From the basic facts and questions arising for determination, it is quite clear that the case is about tenancy and the entire plot of land was leased out on rent while the lessor was owner of 2/3rd part of the land. In the case in hand, the respondent No. 3 leased out from his 42% share and has not touched the 58% share of the applicant. Therefore, this decisions is of no use for the applicant.
20(iv) In M/S. M.R.F. Ltd V. Manohar Parrikar (supra) the appellants have called in question the correctness of the judgment and order in writ Petition No. 316 of 1998 dated 19/24.4.2001, passed by the High Court of Bombay Panaji Bench, at Goa. In a Writ Petition brought in public interest by one Manohar Parrikar, a Member of Legislative Assembly, Goa (who later on became the Chief Minister of the State of Goa) questioning the legality, validity and propriety of two notifications issued by Government of Goa dated 15.5.1996 and 01.8.1996 in respect of grant of 25% rebate to Low Tension, High Tension and Extra High Tension Industrial consumers of electricity as a policy of the State Government. It, therefore, appears that factual aspects of this case are totally different and the case is of no avail to the applicant.
Now, coming to the respondents' side, the main thrust of argument of the ld. counsel is that without registration, the agreement between the applicant and the respondent No.3 has no legal value and therefore, it cannot be relied upon.
21(i) Ld. counsel has placed reliance on the case of Commissioner of Income-tax -vs- Balbir Singh Maini (supra). A group of appeals were decided by the Hon'ble Punjab & Haryana High court with regard to income-tax appeals in favour of the appellants against which the respondent Income-tax Commissioner preferred appeals before the Hon'ble Supreme Court. In those appeals the bone of contention was a tripartite Joint Development Agreement (JDA) dated 25.02.2007 for development of 21.2 acres of land in the village Kansal. This JDA was entered into between the owner i.e. Punjabi Cooperative Housing Building Society Ltd., Hash Builders Pvt. Ltd., Chandigarh (HASH) and Tata Housing Development Company Ltd. (THDC). Under the JDA, it was agreed that HASH and THDC viz', the developers, will undertake to develop 21.2 acres of land owned and registered in the name of the society. The agreed consideration was to be disbursed by THDC through HASH to each individual member of the society, and different amounts and flats were payable and allotable to members having different plot sizes. The developers were to make payments in four instalments as indicated in the agreement. The problem arose for assessment years due to pending proceedings, first in the Punjab and Haryana High Court and thereafter in the Delhi High Court, for which the necessary permissions for development were not granted, as a result of which the JDA did not take off the ground. The Assessing Officer vide an order dated 30.12.2009, passed under Section 143(3) of the Act, held that since physical and vacant possession had been handed over under the JDA, the same would tantamount to "transfer" within the meaning of sections 2(47)(ii), (v) and (vi) of the Income Tax Act. He further held that, in the case of an assessee owning a 1000 square yards plot, the full value of consideration would be Rs.3.675 crores less cost of acquisition of Rs.12,81,724/-. The long term capital gain was, therefore, stated to be Rs.3,54,68,2761/-. The Commissioner (Appeals) dismissed the appeal upholding the order passed by the Assessing Officer. Aggrieved by the order, the assesses filed appeal before the Income Tax Appellate Tribunal (ITAT), which was also dismissed. Against the order of the ITAT, appeals were made before the Hon'ble High Court which were allowed. Being aggrieved, the respondent Income tax commissioner preferred appeals before the Hon'ble Supreme Court. While considering the matter, the Hon'ble Apex Court analysed Sec. 53A of Transfer of Property Act as also Sec. 17(1A) and Sec. 49 of Registration Act and held that registration of agreement is mandatory after 2001 amendment. It will be profitable to reproduce the following paragraph from the said judgement:-
"18. Section 53A, as is well known, was inserted by the Transfer of property Amendment Act. 1929 to import into India the equitable doctrine of part performance. This Court has in Shrimant Shamrao Suryavanshi & Anr. v. Pralhad Bhairoba Suryavanshi (D) by LRs, & Ors., (2002) 3 SCC 626 at 682 stated as follows:
"16. But there are certain conditions which are required to be fulfilled if a transferee wants to defend or protect his possession under Section 53- A of the Act. The necessary conditions are:
(1) there must be a contract to transfer for consideration of any immovable property;
(2) the contract must be in writing, signed by the transfer, or by someone on his behalf;
(3) the writing must be in such words from which the terms necessary to construe the transfer can be ascertained;
(4) the transferee must in part-performance of the contract take possession of the property, or of any part thereof;
(5) the transferee must have done some act in furtherance of the contract; and
(6) the transferee must have performed or be witting to perform his part of the contract,"
It is also well-settled by this Court that the protection provided under Section 53A is only a shield, and can only be resorted to as a right of defence. See Rambhau Namdeo Gajre v. Narayan Bapuji Dhgotra (Dead) through LRs. (2004) 8 SCC 614 at 619, para 10. An agreement of sale which fulfilled the ingredients of Section 53A was not required to be executed through a registered instrument. This position was changed by the Registration and Other Related Laws (Amendment) Act,2001. Amendments were made simultaneously in Section 53A of the Transfer of property Act and Sections 17 and 49 of the Indian Registration Act. By the aforesaid amendment, the words "the contact, though required to be registered, has not been registered, or" in Section 53A of the 1882 Act have been omitted' Simultaneously, Sections 17 and 49 of the 1908 Act have been amended, clarifying that 28 unless the document containing the contract to transfer for consideration any immovable property (for the purpose of Section 53A of 1882 Act) is registered, it shall not have any effect in law, other than being received as evidence of a contract in a Suit for specific performance or as evidence of any collateral transaction not required to be effected by a registered instrument, Section 17(1A) and Section 49 of the Registration Act, 1908 Act, as amended, read thus:
"17(1A). ** already quoted above
The documents containing contracts to transfer for consideration any immovable properties for the purpose of Section 53A of the Transfer of Property Act, 1882 (4 of 1882) shall be registered if they have been executed on or after the commencement of the Registration and Other Related Laws (Amendment) Act, 2001 and if such documents are not registered on or after such commencement, then they shall have no effect for the purposes of the said Section 53A."] "49. Effect of non-registration of documents required to be registered. No document required by Section 17 or by any provision of the Transfer of Property Act, 1882 (4 of 1882), to be registered shall- (a) affect any immovable property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered: 29 Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter of the Specific Relief Act, 1887 (1 of 1877) or as evidence of any collateral transaction not required to be effected by registered instrument"
The effect of the aforesaid amendment is that. on and after the commencement of the Amendment Act of 2001, if an agreement, like the JDA in the present case, is not registered, then it shall have no effect in law for the purpose of Section 53A. In short, there is no agreement in the eyes of law which can be enforced under Section 53A of the Transfer of Property Act. This being the case, we are of the view that the High Court was right in stating that in order to qualify as a "transfer" of a capital asset under Section 2(47)(v) of the Act, there must be a "contract" which can be enforced in law under Section 53A of the Transfer of Property Act.
A reading of Section 17(14) and Section 49 of the Registration Act shows that in the eyes of law, there is no contract which can be taken cognizance of, for the purpose specified in Section 53A, The ITAT was not correct in referring to the expression "of the nature referred to in Section 53A" in Section 2(47)(v) in order to arrive at the opposite conclusion This expression was used by the legislature ever since sub-section (v) was inserted by the Finance Act of 1987 w.e.f 01.04.1988. All that is meant by this expression is to refer to the ingredients of applicability of Section 53A to the contracts mentioned therein it is only where the contract contains all the six features mentioned in Shrimant Shamrao Suryavanshi (supra), that the Section applies, and this is what is meant by the expression "of the nature referred to in Section 53A". This expression cannot be stretched to refer to an amendment that was made years later in 2001, so as to then say that though registration of a contract is required by the Amendment Act of 2001, yet the aforesaid expression "of the nature referred to in Section 53A" would somehow refer only to the nature of contract mentioned in Section 53A, which would then in turn not require registration, As has been stated above' there is no contract in the eye of law in force under Section 53A after 2001 unless the said contract is registered. This being the case, and it being clear that the said JDA was never registered, since the JDA has no efficacy in the eye of law, obviously no "transfer" can be said to have taken place under the aforesaid document. Since we are deciding this case on this legal ground, it is unnecessary for us to go into the other question decided by the High Court, namely, whether under the JDA possession was or was not taken; whether only a licence was granted to develop the property; and whether the developers were or were not ready and willing to carry out their part of the bargain since we are of the view that sub-clause (v) of Section 2(47) of the Act is not attracted on the facts of this case, we need not go into any other factual question. ..... " (underlining for emphasis).
21(i) Next case relied upon by the ld. counsel for the respondents is the case of M/s. SMS Tea Estates PW. Ltd' vs. M/s. Chandmari Tea Co. Pvt. Ltd. (supra) in that case the appellant Tea Company entered into an agreement with the respondent tea company for 30 years lease of two tea gardens. Subsequently, the respondent offered the appellant to sell the aforesaid two gardens which they agreed. But all on a sudden the respondent resiled back and refused either to sell or to give on lease as per agreement. Being aggrieved, the appellant filed a case before the Hon'ble Guwahati High Court which dismissed the case. Challenging that decision, the appellant moved the Hon'ble Supreme Court. The Hon'ble Apex Court held that since the appellant wanted to resort to arbitration clause only as per the said agreement, it was not necessary that the agreement should be registered which was the defence taken by the respondent. The Hon'ble Apex Court held that so far as lease is concerned registration is necessary, otherwise for arbitration purpose, the agreement even though compulsorily registrable, but not registered, can be acted upon for limited purposes. However, in the facts of the present case, the case is of not much assistance to the respondents.
21(ii) The next case relied upon is that of Bachhaj Nahar vs Nilima Mandal & Ors (supra). This case relates to dispute between two neighbours over a small strip of land which lingered long two decades. This decision has no relation with the facts of the present case.
21(iii) in a recent decision in Harshad Govardhan -vs- International Assets Reconstruction & Ors (supra) relied upon by the ld. counsel for the respondents, it was held that agreement for lease for rent for more than one year must be registered.
21(iv) In yet another recent decision in Civil Appeal Nos. 6772 of 2019 dated 2.9.2019 in the case of Prakash Sahu vs. Saulal & Ors. It has been held by the Hon'ble Supreme Court as under:
3, The short question in the present appeal is whether an unregistered agreement of sale can be seen for collateral purposes under the proviso to section 49 of the Registration Act, 1908
The Trial Court based its reasoning on a decision of this Court in S.Kaladevi v. V.R. Somasunderam & Ors, (2010) 5 SCC 401 elucidating as follows:-
"(I) In that situation it is essential for the registration of the document, if, unregistered is not admissible in evidence under section 49 of the Registration Act.
(ii) Yet, such unregistered document can be used by way of collateral evidences provided in the proviso to the section 49 of the Registration Act.
(iii) For effecting with the collateral transaction, whose registration is required by law should be free from the transaction or be divisible from that.
(iv) Collateral transaction should be such a transaction which may not be automatically expected of effecting by the registered document, i.e. Rupees One Hundred or any transaction or instrument or right or interest in any immovable property of the value of more than Rupees One Hundred.
(v) If the document is inadmissible in evidence in the absence of registration then any of its estopple cannot be admitted in evidence and for use of the document for purposes of proving important part, it would not be utilized by way of collateral purpose,"
The High Court failed to consider the aforesaid while holding that the unregistered document could not be taken into consideration for collateral purposes."
On the strength of aforesaid judgement delivered by Hon'ble Supreme Court, it cannot be said that aforesaid lease deeds are sham, as argued by the applicant.
From the various decisions cited by both parties, it is quite apparent that development agreement entered into between the applicant and respondent No. 3 ought to have been registered earlier and in the absence of its prior registration, (l am aware that the agreement has been registered after filing of the present TA in 2014) it has no legal value and can be taken cognizance of by this Tribunal.
A point has been taken by the applicant that on the date of executing agreement i.e. 20.9.2007, the agreement was presented for registration before ARA-II vide Sl No. 10560 of 2007. But admittedly for deficit of stamp duty it was not registered and after deposit of the deficit stamp it was actually registered in 2014 after filing of the SA. It is strange that the applicant did not take step to deposit the deficit stamp duty immediately after it was known to them and it was deposited after a prolonged delay of 7 years, which is a serious default and that delay is squarely attributable to the applicant. Mere depositing the agreement before the Registration authority does not end the duty of the applicant company, they have to take follow up measures till it is actually registered.
That apart in a catena of judgement of Hon'ble Supreme Court has held that as per Ss. 105 and 111 T.P. Act, so long as lease of immovable property does not get determined, lessee has a right to enjoy the Property and this right is a right to property and this right cannot be taken away without the authority of law as provided in Art. 300-4 of the Constitution. Without determination of a valid lease, possession of lessee is lawful and such lawful possession of a lessee has to be protected by all courts and tribunals.
Lastly, I come to the decision relied on by the ld. counsel for the respondents in the case of Jagadish Singh -vs- Heeralal & Ors (supra). In that case the Hon'ble Supreme Court interpreted Sec. 34 of the SARFAESI Act as regards bar of jurisdiction of civil court in respect of matters in which DRT or DRAT has jurisdiction. The Hon'ble Apex Court inter alia has held as under:-
"The opening portion of Section 34 clearly states that no civil court shall have jurisdiction to entertain any suit or proceeding "in respect of any matter" which a DRT or an Appellate Tribunal is empowered by or under the Securitisation Act to determine. The expression 'in respect of any matter' referred to in Section 34 would take in the "measures" provided under sub-section (4) of Section 13 of the Securitisation Act. Consequently if any aggrieved person has got any grievance against any "measures" taken by the borrower under sub-section(4) of Section 13, the remedy open to him is to approach the DRT or the Appellate Tribunal and not the civil court. Civil Court in such circumstances has no jurisdiction to entertain any suit or proceedings in respect of those matters which fall under sub-section (4) of Section 13 of the Securitisation Act because those matters fell within the jurisdiction of the DRT and the Appellate Tribunal, Further, Section 35 says, the Securitisation Act. overrides other laws, if they are inconsistent with the provisions of that Act, which takes in Section 9 CPC as well.
We are of the view that the civil court jurisdiction is completely barred, so far as the "measure" taken by a secured creditor under sub-section (4) of Section 13 of the Securitisation Act, against which an aggrieved person has a right of appeal before the DRT or the Appellate Tribunal. To determine as to whether there has been any illegality in the "measures" taken,"
In view of the above decision, the civil suit filed by the applicant cannot be taken cognizance of in deciding this case.
Applicant alleged that respondent no. 5 to 7 are alter-ego of respondent no.3 and they are managed and controlled by same persons. They are in collusion with the bank officials and had created fraudulent mortgage. Onus lies upon the person who made the allegation to substantially prove the allegation so made by producing evidence. In this case, applicant failed to produce any evidence to establish the allegation.
Applicant also alleged that demarcation of leased out portion of 8574 Sq.Ft. in first floor is impossible in view of its nature of construction. Since the building has never been demarcated between the landlord and developer at 42:58 ratio, they can easily demarcate the building on aforesaid ratio keeping 8574 Sq.Ft. in first floor for respondent no.6. On this allegation only possession notices cannot be set aside.
Now coming to the fact of the case again I find that respondent no.3 has leased out aforesaid three portions of the building at fourth floor and 1st floor to respondent no.5 to 7, who mortgaged those lease deeds to respondent no.1 bank. It is also revealed that said respondent no.3 has also leased out another three portions of said building to respondent no.8, 9 and 10, who mortgaged said three lease deeds to State bank of India and said bank has also affixed three possession notices on the aforesaid premises, for which applicant has also instituted S.A. 160 of 201S before this Tribunal,
which is also pending for final order. It appears from record that both this TSA and said SA are head simultaneously. Total leased portion is enumerated below :
Respondent
Floor
Area of lease in sft.
Lease date.
In TSA 64 of 2014
Bank of Baroda
No.5
4th
10000
10.12.2011
No.7
4th
8759
10.02.2011
No.6
1st
8574
21.10.2011
In S.A. 160 of 2015
State Bank of India
No.8
2nd
2010
21.10.2011
No.10
2nd
2350
30.04.2011
No.9
Ground
9066
11.11.2011
Total area
40,759 Sq.ft.
Now if I again look to the letter dated 18.10.2010 (supra), though it is not a registered document, I find that applicant, who developed the building must have known exact measurement, on his own stated that total area of the building is 118920 Sq.Ft. out of which he proposed to allocate 49,979 Sq.Ft. to respondent No.3, the landlord, keeping 69941 Sq.Ft. for them. It is curious that when applicant themselves proposed to allocate approximately 49979 Sq.Ft. to respondent no.3 why they have objected to respondent no.3's leasing out only 40,759 Sq.ft. to respondent no. 5 to 1O and corresponding mortgage in favour of aforesaid two banks. In view of foregoing discussions, I am of the opinion that instant applicant has filed this application in order to delay recovery of public money, which is not allowed to be continued. Moreover, applicant has filed Suit No. APO No. 176 of 2017 in CS No. 367 of 2014 before the Hon'ble High Court at Calcutta wherein it has been observed by Hon'ble Mr. Justice Sanjib Banerjee: "In such a scenario, if the banks, the developer and the landowner put their head together along with the leases under the landowner (if they have independent identity), the imbroglio may be resolved". Aforesaid observation of Hon'ble High Court proves without saying that applicant is not willing to resolve the imbroglio and went on filing petitions in different forum to delay the recovery proceeding.
Applicant's last limb of argument is that since a civil suit filed by them is pending and respondent no.3 has also filed a partition suit which is also pending before civil court, this Tribunal cannot adjudicate this case. This issue has already been dealt with in the foregoing paragraphs. Section 34 of the Act of 2002 declares that a Civil Court shall not have jurisdiction to entertain any suit or proceeding in respect of any matter which Debts Recovery Tribunal or the Appellate Tribunal under the Act is empowered to determine and Section 35 is a general non-obstante clause declaring that this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force. Hon'ble Apex court has held that pendency of partition suit does not come in the way of disposing of the SARFAESI application. Therefore contention of the applicant is rejected.
ORDER
In view of foregoing discussions, instant T.S A. is liable to be dismissed being devoid of merit. Accordingly, instant T.S.A. is dismissed. However, liberty is granted to the applicant to approach appropriate forum for realisation of security deposit of Rs.2 crores deposited with the respondent No. 3 and respondent bank may proceed with pending partition suit, if so desire. No costs.
Copy of the judgement/final order be uploaded in the Tribunal's website. File be consigned to the Record Room.
(Dictated to Stenographer- transcribed by him, corrected, signed and pronounced by me in the open Court on this the 22nd day of September 2020)