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Judgment
Anil Kumar Srivastava, Chairperson
THE APPELLATE TRIBUNAL :
Instant appeal has arisen against judgment and order dated 25th November, 2019, passed by Learned DRT-III Kolkata in T.S.A. No. 1285 of 2016 (arising out of S.A. 820 of 2012); whereby the SARFAESI Application was dismissed.
As per the pleadings the original SARFAESI Applicant, namely, M/s. Krishnakali Corporation Private Limited, was neither borrower nor guarantor nor mortgagor. Appellant executed an agreement for sale to purchase ground floor and two covered car parking space of the proposed shopping mall which was under construction from Respondent No. 3.
Respondent No. 3 had purchased a piece and parcel of land at premises No. 92, Subodh Chandra Mullick Road, Jadavpur, Kolkata – 700 047, by way of six registered instruments. Mutation was done in its name for construction of a shopping mall. Building map was sanctioned by the Municipal Authorities. Respondent No. 3, namely, Rochita Towers & Estates Private Limited (formerly known as the Evergreen Properties Private Limited), approached the Respondent No. 1, Housing & Urban Development Corporation Limited, (HUDCO), for financial assistant. Loan of Rs.12.00 crore was sanctioned out of which Rs.10.20 crore was availed by the Respondent No. 3 by creating equitable mortgage by depositing the title deeds of the disputed property in the year 2007.
Appellant, by executing an unregistered agreement dated 2nd June, 2008, entered into an agreement for sale with the Respondent No. 3 for purchasing the entire ground floor consisting of 6869 square feet together with two covered car parking space, common passage and amenities for a total consideration of Rs.2,93,45,000.00 out of which Rs.50.00 lac was paid as earnest money on 2nd June, 2008. It was agreed upon to deliver the entire ground floor and two car parking space before May, 2009. Later on when the same was demanded on 8th June, 2009, Respondent No. 3, vide letter dated 20th July, 2009 demanded the balance consideration amount. According to the Appellant, he had assured to make the payment as soon as the possession is delivered. Respondent No. 3 agreed to handover the possession in August, 2009.
Some dispute arose between the parties. Appellant filed Misc. Case No. 1145 of 2012 before the Learned District Judge at Alipore wherein vide order dated 12th July, 2012 Respondent No. 3 was restrained from transferring, alienating or disposing of the ground floor and two car parking space and was directed to maintain status quo till appointment of an arbitrator.
On 16th July, 2012, a sale notice was published in the newspaper wherein HUDCO was proceeding to sell the whole property under the Act for a sum of Rs.20.91 crore. Thus the Applicant filed the SARFAESI Application challenging the sale notice on the ground that the advance money paid by him was paid by Respondent No. 3 in the Escrow Account. HUDCO was having full knowledge regarding the agreement to sale wherein HUDCO also assured the applicant that they were not against the agreement. As such the sale notice is bad in law.
Respondent No. 3 filed opposition before the Learned DRT and stated that the order passed by Learned District Magistrate, South 24 Parganas dated 01/9.9.2015, as modified on 30th August, 2017 and 8th November, 2017, are bad in law. Respondent No. 3 relied upon the grounds taken by the Appellant.
Respondents No. 1 and 2 filed separate oppositions and started loan was availed by the Respondent No. 3 on the terms and conditions mentioned in the offer letter as well as in the Escrow Agreement. Account of Respondent No. 3 became irregular, accordingly, Respondents No. 1 and 2 initiated SARFAESI actions against Respondent No. 3. Respondent No. 3 filed SARFAESI Application, being No. S.A. 266 of 2011, wherein on 25th May, 2012, Learned DRT-II, Kolkata passed an order directing Respondent No. 3 to deposit Rs.2.00 crore towards payment of dues. This order was subsequently modified on 17th August, 2012 to the extent that Respondent No. 3 was asked to deposit Rs.50.00 lac. This order was confirmed by the DRAT on 17th August, 2012.
C.O. 3075 of 2013 was filed challenging the order of the DRAT before the Hon’ble High Court at Calcutta wherein the order, dated 17th August, 2012, was set aside and Respondent No. 3 was directed to deposit Rs.5.00 crore. SLP was filed by Respondent No. 3 before the Hon’ble Supreme Court wherein the order of depositing Rs.5.00 crore was upheld extending the time upto 31st December, 2013.
S.A. 266 of 2011 was finally disposed of by DRT-II, Kolkata on 10th February, 2014 holding the notice under Section 13 (2) as valid an so also the Possession Notice under Section 13 (4) of the SARFAESI Act. Sale notice dated 16th July, 2012 was held to be infructuous.
It is further stated that the order of the Learned District Magistrate cannot be challenged by the Respondent No. 3 in this case as it had disobeyed the order of the Hon’ble Supreme Court by not depositing Rs.5.00 crore. It is further stated that appropriate agreement of sale dated 2nd June, 2008 was executed without their consent and that they were not party to the agreement. It was not a registered agreement which is in violation of Section 17 (b) of the Registration Act, 1908. No right, interest or charge can be created on the basis of an unregistered agreement for sale; it was subject to the equitable mortgage created by the Respondent No. 3 in favour of HUDCO. The present application is filed by the Appellant in collusion with the Respondent No. 3 to frustrate the SARFAESI actions being taken by Respondents No. 1 and 2.
I have heard the Learned Counsel for the parties and perused the record.
There are certain admitted facts in this case. Admittedly, the Appellant is neither a borrower nor guarantor nor mortgagor in this case; rather, Appellant is a third party who entered into an agreement to sale with Respondent No. 3, i.e. Rochita Towers and Estates Private Limited. Respondent No. 3 had taken a loan from Respondent Nos. 1 and 2. An amount of Rs. 12.00 crore was sanctioned out of which an amount of Rs. 10.20 crore was availed by Respondent No. 3 by creating an equitable mortgage by depositing Title Deeds of the disputed property (secured assets) in the year 2007. This is also admitted situation that loan account of Respondent No. 3 was declared as NPA. SARFAESI Application No. 266 of 2011 was filed by the Respondent No. 3 challenging the sale notice dated 16.07.2012 which was disposed of by the Ld. DRT. It is also not in dispute that an amount of Rs. 50 lacs was deposited in the ESCROW account of the Respondent. It is also not in dispute that in S.A. No. 266 of 2011, Learned DRT-III, Kolkata passed an order dated 25th May, 2012 directing the Respondent No. 3 to deposit an amount of Rs. 2.00 crore towards payment of dues. This order was subsequently modified on 17th August, 2012 to the extent that Respondent No. 3 was asked to deposit Rs. 50.00 lac. This order was confirmed by DRAT on 17.08.2012. The Hon'ble Calcutta High Court set aside the order of the DRAT dated 17.08.2012 and directed the Respondent No. 3 to deposit Rs. 5.00 crores. Order of the Hon'ble High Court was challenged in a special Leave Petition before the Hon'ble Supreme Court wherein the order was upheld but the time of deposit was extended till 31.12.2013. This amount was not deposited by the Respondent No. 3.
In the backdrop of above noted admitted facts now it is to be seen as to whether the impugned order passed by Learned DRT dismissing the SARFAESI Application is in accordance with law or not?
Learned Counsel for the Appellant submits that the Learned DRT has erred in dismissing the SARFAESI Application. Appellant has entered into an Agreement for Sale with the Respondent No. 3 and in accordance with the terms and conditions; an amount of Rs. 50.00 lac was paid. But the terms and conditions of the agreement were not complied by the Respondent No. 3. There was an Arbitration Clause in the agreement. An application under Section 9 of Arbitration Act was filed before the Learned District Judge in Alipore wherein an order of status quo was passed. It is further submitted that the Respondent No. 1 and 2 were having full knowledge of the agreement between the Appellant and the Respondent No. 3. Learned DRT has wrongly applied Section 13 Sub Section (13) of the SARFAESI Act against the Appellant. It is further submitted that in the earlier SARFAESI Application No. 206 of 2011, Appellant was not a party. Hence, finding of that case will not affect the rights of the Appellant.
It is further submitted that the amount of Rs. 50.00 lac was deposited in the ESCROW Account which was well within the knowledge of the Respondent No. 1 and 2. Respondent No. 1 and 2 never rejected the agreement between the Appellant and the Respondent No. 3. It is further submitted that the permission of Respondents No. 1 and 2 was not required for entering into an agreement.
Learned Counsel for the Respondent No. 3 submitted that Respondent No. 3 has entered into an agreement with the Appellant. Respondent No. 3 informed the Appellant vide letter dated 21.06.2008 that they have deposited Rs. 50.00 lac in ESCROW Account with Respondents No. 1 and 2 and have also deposited original Agreement with Respondents No. 1 and 2 on 19.06.2008 for their approval. It is further submitted that every action between the Appellant and the Respondent No. 3 was well within the knowledge of Respondents No. 1 and 2. It is further submitted that the agreement was duly sent to the Respondent No. 2 who has never refused or rejected the same.
Learned Counsel for the Respondents No. 1 and 2 submitted that the Appellant is an agreement holder who has allegedly paid Rs. 50.00 lac for purchasing the ground floor of a mall to be constructed by Respondent No. 3. It is submitted that the Respondent No. 3 is the defaulter in payment of loan amount of Rs. 10.20 crore which he had availed from Respondents No. 1 and 2. Earlier SARFAESI Application, filed by the Respondent No. 3, was dismissed. Thereafter, Appellant collusively filed the SARFAESI Application to save the Respondent No. 3.
It is submitted that the Respondent No. 3 had not deposited an amount of Rs. 5.00 crore as per the directions of the Hon'ble Supreme Court. No approval was ever granted by the Respondents No. 1 and 2 for an agreement entered between the Appellant and the Respondent No. 3. Appellant has no right in the property as against the Respondent No. 1 and 2. If he has any dispute with the Respondent No. 3, he may exercise his right against Respondent No. 3 only. It was further argued that the Agreement to Sale itself is not admissible. It is an unregistered document written on stamp of Rs. 10.00 only. Property in dispute was mortgaged with the Respondents No. 1 and 2 who have their first charge. Learned Counsel has further placed reliance upon Section 70 of Transfer of Property Act. It is also submitted that the Respondent No. 3 has not taken any action against the Appellant which shows that they were colluding with each other.
The agreement between the Respondents No. 1 and 2 and Respondent No. 3 was executed on 28.04.2007 wherein in Paragraph 8 sub paragraph F, it is mentioned that -
"It shall incorporate the following stated clause in the letter of allotment/agreement to sale/ lease / license etc. executed in favour of beneficiaries/ purchasers/tenant/ occupants of the project property regarding mortgage of project property in favour of HUDCO.
Promoter is developing the entire project with the loan assistance of HUDCO to whom it has mortgaged the entire property towards security for loans and hence, the right created herein is subject to prior mortgage/ charge of HUDCO, which shall be discharged only after the dues of HUDCO is cleared and written permission of HUDCO to this effect is obtained."
Further, purchaser/ occupant shall make payment towards the booking and all other amounts through project ESCRO account bearing account No.1018 maintained as per HUDCO guidelines."
It is further mentioned in Para 8 sub Para (U) of the Agreement that-
"The possession of Unit shall be handed over to the allottee/ purchaser only after the entire price has been received, proportional loan repaid to HUDCO and written permission for discharge of unit has been received from HUDCO."
These are the conditions which were part of the agreement between the Respondents Nos. 1, 2 and 3. Appellant is a proposed purchaser of a portion of the buildings from Respondent No. 3 who had already created the equitable mortgage of the land in favour of HUDCO. Hence, the proposed purchaser, i.e. the Appellant, would also be bound by the terms and conditions of the agreement entered into between the Respondents Nos. 1, 2 and 3.
Condition as mentioned in Para 8 (F) specifically mentions that the written permission of HUDCO was made mandatory and all the rights created herein would be subject to the prior mortgage/charge of HUDCO. Attempt is made by the Appellant to submit that the letter was sent to the HUDCO on 19.06.2008 by the Respondent No. 3. Another letter was sent by the Respondent No. 3 to the Appellant on 21.06.2008 communicating that the Respondent No. 3 had deposited the amount of Rs. 50.00 lac in the ESCRO Account of HUDCO and they have deposited the original agreement to HUDCO on 19.06.2008 for their approval. This letter itself shows that the approval of HUDCO was mandatory but no approval was ever granted by the HUDCO. Mere knowledge of information to HUDCO regarding Agreement to Sale between the Appellant and the Respondent No. 3 will not operate as estoppel against HUDCO. It is settled principles of law that when an Act is to be done in a particular manner, it should be done in that manner only. When as per the agreement, prior written permission of HUDCO was mandatory then this condition could not be diluted by alleging that the agreement was sent to the HUDCO for approval. In such circumstances, it cannot be accepted that any approval was ever granted by the HUDCO to the Respondent No. 3 or Appellant.
In the agreement executed between the Appellant the Respondent No. 3 on 02.06.2008, it is recorded that the Respondent No. 3 had availed the loan from HUDCO and the property is mortgaged in favour of HUDCO. Hence, it is clear that this fact was well within the knowledge of the Appellant that Respondent No. 3 had availed the loan from HUDCO. Further, the Agreement to Sale will be subject to prior mortgage entered into by the Respondent No. 3 and HUDCO creating security interest in favour of HUDCO which shall be discharged only after outstanding dues of HUDCO are cleared. When this fact was within the knowledge of the Appellant, then it shall be accepted situation that the Appellant had accepted the terms and conditions regarding prior mortgage in favour of HUDCO.
It was one of the conditions for Agreement of Sale that the Respondent No. 3 will develop the entire project with the loan assistance of HUDCO. Since the property was mortgaged in favour of HUDCO, hence all the rights created therein would be subject to prior mortgage and charge of HUDCO. It was well within the knowledge of the Appellant that any right created in his favour would be subject to the prior written approval of HUDCO. Written permission from HUDCO was necessary even for handing over of the possession of the unit as it was one of the conditions that possession of the unit shall be handed over to the allottee/ purchaser only after the entire price has been received, proportionate loan be paid to HUDCO and written permission for discharge of unit has been received from HUDCO. It was the liability of Respondent No. 3 to obtain the written permission of HUDCO as per the requirements of the agreement. Further all these conditions of the agreement between the Respondent No. 1 and 2 i.e. HUDCO and Respondent No. 3 were mentioned in the Agreement to Sale. It is settled legal proposition that the parties cannot go beyond the terms and conditions of the agreement. Hence, these conditions are binding upon the parties, i.e. the Appellant and Respondent No. 3. Since no written approval was given by the HUDCO hence, the Appellant cannot avail any benefit out of the Agreement to Sale.
Learned Counsel for the Appellant submits that since the amount of Rs. 50.00 lacs was deposited in the ESCROW account, hence it would be presumed that HUDCO had knowledge of the Agreement to Sale. Definition of the ESCROW account shows that it is an account where funds are held in Trust whilst two or more parties completed transactions. This means a trusted third party such as ESCRO will secure the funds in a trust account. The funds will be disbursed to merchants after they have fulfilled the ESCRO agreement.
In the present case, the ESCRO Agreement was executed between the Respondent No. 3 and HUDCO. It could not be established that HUDCO had approved the Agreement of Sale in writing. An effort is made to establish that implied approval of sanction of HUDCO was given by depositing an amount of Rs. 50.00 lac in ESCRO Account. It could not be accepted. Mere depositing the advance money in ESCRO Account does not prove that the written approval of HUDCO was obtained.
In the agreement executed between the Respondent No. 3 and the Appellant one of the conditions was:
"And whereas the Owner/ Developer is developing the entire project with the loan assistance of Housing & Urban Development Corporation Limited (HUDCO) to whom it has mortgaged the entire property towards security for loans and hence the right, created herein is subject to the prior mortgage/ charge of HUDCO, which shall be discharged only after the dues of HUDCO is cleared and written permission of HUDCO to this effect is obtained. Further, purchaser/ Occupant shall make payment towards the booking and all other amount through project Escro Account, bearing Account No. 1018, Indian Overseas Bank, Salt Lake Branch, Kolkata and maintained as per HUDCO's Guidelines.”
Further, as per the Agreement it is mentioned in term No.3 that:
"The Purchaser has this day paid to the EPPL a sum of Rs. 50,00,000/- (Rupees Fifty Lakh) only, as and by way of advance and/ or earnest money, the receipt whereof of the EPPL do hereunder written admit and acknowledge.”
Further, in condition No. 13 it has mentioned that-
“The Purchaser hereby agrees to pay the EPPL all amounts payable by the Purchaser under this Agreement as and when the same shall become due and payable and the time in this respect shall be deemed to be the essence of this contract, further subject to the provision herein contained, the EPPL shall not be bound to give any notice to the Purchaser demanding such payments and in case of any default in payment by the Purchaser on the respective dates as mentioned in the Thin Schedule herein-under written, the Purchaser shall not be entitled to plead non-service of demand notice is an excuse for non-payment of the said amounts and moneys on the respective due dates and time.”
As per conditions No. 16 reproduced below it was provided that-
"If the Purchaser fails and neglects and/or delays in making payment of any of the amount payable by the Purchase under this Agreement, the EPPL shall be entitled without prejudice to the EPPL's other rights under this Agreement, to charge interest @ 1.5% per month to be calculated monthly from the date of default till the date of making the actual payment over and above the damages that might be suffered by the EPPL for such delayed payment, provided further that if there be failure of three consecutive payments of installments, arrears and/or default in payment of the deposits and/or any other sums of money payable under the Agreement by the Purchaser and or default in observing and performing the payment schedule mentioned in Thin Schedule in any manner and/or default in observing any of the terms, condition, covenants and restriction as contained in these presents by the Purchaser, then in that event, the EPPL shall have the right cancel this Agreement and forfeit 5% of the total consideration money as liquidated damages for which the Purchaser shall have no objection."
It reveals that only an amount of Rs. 50.00 lac was paid by the Appellant to the Respondent No. 3. This amount was not deposited in the ESCRO Account by the Appellant.
Learned Counsel for the Respondents No. 1 and 2 has placed reliance upon Section 70 of the Transfer of Property Act which provides as under:
"Accession to mortgaged property, - If, after the date of a mortgage, any accession is made to the mortgaged property, the mortgagee, in the absence of a contract to the contrary, shall, for the purposes of the security, be entitled to such accession."
Section 70 itself makes it clear that any accession made to the mortgaged property would make the mortgagor entitled for such accession unless and until there is something contrary in the contract. Admittedly, the mortgage was created by Respondent No. 3 by equitable mortgage by depositing the Title Deeds of the land in question. Respondent No. 3 entered into an agreement with the Appellant wherein ground floor with constructions, as mentioned in agreement, was pre-purchased by the Appellant from Respondent No.3. Respondent No. 3, after creating the equitable mortgage, raised some constructions over the land. There is no contract to the contrary that any accession made by the mortgagor would not entitle the mortgagee over the property. In such circumstances, any construction raised by the Respondent No. 3 over the property in dispute would be covered under the provisions of Section 70 of the Transfer of Property Act.
In a latest judgment of the Hon'ble Supreme Court delivered on 23rd September, 2022 in Civil Appeal No. 6733 of 2022 Balram Singh Vs. Kelo Devi it was held that –
“At the outset, it is required to be noted that the original plaintiff instituted a suit praying for a decree of permanent injunction only, which was claimed on the basis of the agreement to sell dated 23.03.1996. However, it is required to be noted that the agreement to sell dated 23.03.1996 was an unregistered document/ agreement to sell on ten rupees stamp paper. Therefore, as such, such an unregistered document/ agreement to sell shall not be admissible in evidence.
Having conscious of the fact that the plaintiff might not succeed in getting the relief of specific performance of such agreement to sell as the same was unregistered, the plaintiff filed a suit simplicitor for permanent injunction only. It may be true that in a given case, an unregistered document can be used and/or considered for collateral purpose. However, at the same time, the plaintiff cannot get the relief indirectly which otherwise he/ she cannot get in a suit for substantive relief, namely, in the present case the relief for specific performance. Therefore, the plaintiff cannot get the relief even for permanent injunction on the basis of such an unregistered document/ agreement to sell, more particularly when the defendant specifically filed the counter-claim for getting back the possession which was allowed by the learned trial Court. The plaintiff cleverly prayed for a relief of permanent injunction only and did not seek for the substantive relief of specific performance of the agreement to sell as the agreement to sell was an unregistered document and therefore on such unregistered document/ agreement to sell, no decree for specific performance could have been passed. The plaintiff cannot get the relief by clever drafting."
Admittedly Agreement to Sale is an unregistered document. These documents can only be read for collateral purposes only. Hence, no rights could be transferred by unregistered Agreement to Sale.
An attempt is made by Respondent No. 3, i.e. the Borrower, to challenge the SARFAESI proceedings as well as Section 14 proceedings in his reply before the Learned DRT. As far as challenge to Section 14 of the SARFAESI Act proceedings in the reply are concerned, Respondent No. 3 has no locus standi for the same. Under Section 17 of SARFAESI Act, Application was filed by the Appellant wherein the Respondent No. 3 was a Defendant. Further Respondent No. 3 had earlier filed the SARFAESI Application No. 266 of 2011 which was dismissed in the SLP (as referred above). The Hon'ble Supreme Court directed him to deposit an amount of Rs. 5.00 crore which too was not deposited. It means that Respondent No. 3 even did not comply the directions issued by the Hon'ble Supreme Court. Hence, any attempt made by him in these SARFAESI proceedings could not and should not be entertained.
As far as dispute between the Appellant and the Respondent No. 3 is concerned, that may be an inter se dispute between them; there was an arbitration clause in Agreement to Sale which was invoked. But as far as the SARFAESI action of Respondents No. 1 and 2 is concerned, that will not be subject to the Arbitration Clause or any inter se dispute between the Appellant and the Respondent No. 3.
On the basis of discussion made above, I am of the view that the impugned judgment did not warrant any interference. Learned DRT has recorded the findings on the basis of materials available on record, Accordingly, Appeal lacks merits and is liable to be dismissed.
ORDER
The appeal, being Appeal No. 13 of 2022, is dismissed.
No order as to costs.
File be consigned to Record room.
Copy of the order be supplied to Appellant and the Respondents and a copy be also forwarded to the concerned DRT.
Order signed, dated and pronounced in open Court.