Festival City Revival Association vs Arens Entertainment Zone Ltd. and Others

Hemant Gupta, J.—The petitioner is an association of the persons, who have purchased units in the proposed shopping complex namely ''Festival City Mall'' in the city of Ludhiana, Punjab, whereas some of the persons have entered into an agreement to lease. Such agreement to purchase and agreement to lease were executed pending construction of such shopping complex. The builder - respondent No. 1 i.e. M/s. Aerens Entertainment Pvt. Ltd., after entering into agreement to sell and/or agreement to lease with the members of the petitioner association, entered into financial arrangement with Indian Overseas Bank, Allahabad Bank and Bank of Rajasthan to avail loan of Rs. 100 crores. Respondent No. 1 defaulting in making the payment of the loan amount and in terms of the agreement, the Allahabad Bank and Indian Overeseas Bank entered into an assignment deed with respondent No. 3 on 08.04.2011, whereas a separate assignment deed was entered by ICICI Bank, with whom the Bank of Rajasthan stood merged on 31.03.2011. The assignment of debts by Allahabad Bank and Indian Overseas Bank was with respondent No. 3, which is an Asset Reconstruction Company (ARC). Such assignment of debt was in terms of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short the Act''), whereas assignment of debt by ICICI Bank in favour of respondent No. 2 was with a Company, which is Non Asset Reconstruction Company (Non-ARC) as defined in the Act. It further transpires that on 06.05.2011, respondent No. 3, an Asset Reconstruction Company, assigned its debts to respondent No. 2, a Non Asset Reconstruction Company, except a nominal amount of Rs. 1 lac each i.e. Rs. 2 lacs.

Prior to assignment of debts, a notice under Section 13(2) of the Act was issued by Allahabad Bank on 31.03.2010 followed by a notice under Section 13(4) of the Act on 06.07.2010. The petitioner-association has challenged the notices and also the clause in the agreement dated 06.05.2011, whereby respondent No. 3 has retained Rs. 2 lacs.

The members of the petitioner-association, had entered into agreement to purchase units in the shopping complex, whereas some of them have agreed to purchase lease hold rights. The association has invoked the jurisdiction of this Court asserting themselves to be a tenant and prospective purchaser and that they have right to protect possession in the light of the judgment of the Hon''ble Supreme Court in Harshad Govardhan Sondagar Vs. International Assets Reconstruction Company Ltd. and Others, , through the present writ petition.

It is argued that the order of this Court in CWP No. 15921 of 2014 titled ''M/s. Punjab Chemical Industries v. District Magistrate-cum-Deputy Commissioner, Ludhiana & others'' decided on 12.08.2014, is not the correct enunciation of principle of law, as the ratio decidendi in Harshad Govardhan Sondagar''s case (supra) is binding on this Court in respect of the issues raised in the present writ petition.

Having heard learned counsel for the petitioner at length, we do not find any merit in the present writ petition. We are not examining the argument raised by the learned counsel for the petitioner, whether the petitioner has alternative remedy of appeal under Section 17 of the Act in terms of the Division Bench judgment of this Court, but on merits, we find that the present writ petition is wholly unwarranted.

It has come on record that some of the similarly situated persons, as the members of the present petitioner, have invoked the original jurisdiction of the Delhi High Court and also filed an application seeking an ad interim injunction against the defendants i.e. respondent No. 1 herein from carrying on with its activities complained of in the application. The learned Single Judge of Delhi High Court in exercise of original jurisdiction passed an order on 18.05.2011 directing the defendants including respondent No. 1 herein to maintain status quo with regard to title and possession of the property. It is admitted by the learned counsel for the petitioner that SLP No. 724 of 2012 preferred by respondent No. 3 herein and SLP No. 6707 of 2012 filed by another similarly situated person, as the members of the petitioner-association, are still pending before the Hon''ble Supreme Court.

Firstly, we shall examine the claim of the petitioners relying upon an agreement to lease to claim protection of possession. The relevant condition from the agreement to lease reads as under:

"1. POSSESSION AND RENT FREE PERIOD

A. The FIRST PARTY agrees to demise to the Second Party and the SECOND PARTY agrees to take on lease the Premises for the term specified herein. The FIRST PARTY shall make best efforts to give complete vacant possession of the Premises to the SECOND PARTY on or within 60 days by 3rd Quarter 2008 from completion of the Festival City (which is expected to be accomplished no later than the last Quarter, 2008) and until then he will not allow anybody to commit encroachment of trespass thereon. The possession of the Premises shall be given to the SECOND PARTY in a bare shell condition."

A perusal of the said condition would show that possession has not been delivered to the petitioner in pursuance to the agreement to lease. In the absence of delivery of possession, the members of the petitioner association cannot claim protection of possession. They cannot ask for relief to protect possession, when the possession has not been delivered to the intending persons. The members of the petitioner are at best prospective leases, who may have right to seek specific performance of an agreement to seek possession in a properly constituted suit. In terms of Section 105 of the Transfer of Property Act, 1882, a lease is transfer of rights in the immovable property. The reliance of the petitioners is on an agreement to lease, which is not creating any right in favour of the petitioners as a lease. The claim of the petitioners as a lessee is premature. The status of the members of the petitioner is that of a prospective lessee, which does not entitle them to claim the status of a lessee and protection as discussed in Harshad Govardhan Sondagar''s case (supra).

In respect of some of the persons, who have entered into agreement to sell, it is suffice to state that in terms of Section 54 of the Transfer of Property Act, 1882, an agreement to sell does not, of itself, create any interest in or charge on such property. Therefore, merely on the basis of agreement to sell, the members of the petitioner - association cannot claim any interest over any part of the commercial property in respect of such agreement was executed.

Learned counsel for the petitioner could not refer to any document, notice or action on behalf of respondent Nos. 2 & 3 proposing or contemplating proceedings under the Act. We find that the rights have been transferred by an Asset Reconstruction Company in favour of Non Asset Reconstruction Company. Thus, a non ARC entity is seeking to enforce its contractual obligation. Such intervention is independent of the proceedings once initiated by a secured creditor. In view of the above, we do not find any merit in the present writ petition. The same is dismissed.