Punjab National Bank vs Compact Disc India Ltd. And Ors.

Ranjit Singh, J

The Punjab National Bank has filed this appeal against the order passed by the Tribunal below on 17th December, 2012 whereby Securitisation Application filed by the respondents herein has been allowed and notices issued by the Bank under Section 13(2) of the SARFAESI Act and under Section 13(4) issued thereafter have been quashed. Respondent M/s. Compact Disc India Ltd. is an animation firm making company and is listed in the stock exchange of Ludhiana and Mumbai. The respondent Company had planned to set its own animation studio at Chandigarh and for this purpose acquired land at Chandigarh Technology Park at Manimajra, Chandigarh. Cost of the proposed project was estimated as Rs. 7949.40 lacs and this was proposed to be met by way of term loan of Rs. 25 crores from the Bank finance, promoter's contribution being Rs. 5449.50 lacs.

Loan of Rs. 25 crores was accordingly sanctioned in favour of the respondent company on terms and conditions contained in letter dated 24th February, 2010. The appellant pleaded that permission to mortgage in respect of built site No. 13, Rajeev Gandhi I.T. Park at Kishangarh, Chandigarh was granted by the Chandigarh Administration on 5th March, 2010 to mortgage the property the property in favour of the Punjab National Bank, Phase-1, SAS Nagar, Mohali. This was to raise the loan for construction purpose subject to the condition that the first charge on the property shall remain with the Chandigarh Administration/Estate Officer.

The respondents herein could not maintain the financial discipline and the Bank had to issue notice under Sections 13(2) of the SARFAESI Act on 13th September, 2011. Thereafter, possession notice under Section 13(4) of the SARFAESI Act was issued on 10.12.2011 and 14.12.2011. Aggrieved against the same, the respondents herein filed SA before the Tribunal below raising various pleas. The Tribunal below has allowed the prayer of the respondents on sole ground that the lease deed property in question could not have been mortgaged with the Bank to secure loan in terms of the condition contained in the lease deed. Other grounds raised by the respondents have not been considered. Notices under Sections 13(2) and 13(4) of the SARFAESI Act have been quashed and the S.A. allowed. The Bank accordingly has filed the present appeal to impugn the said order.

Mr. Nabi appearing for the Bank would submit the Tribunal below has not properly appreciated the conditions contained in the lease deed. The Counsel would contend that the clause on the basis of which the Tribunal below has allowed the S.A. has another clause which permitted the lessee to mortgage this property in favour of the Central Government, State Government. Chandigarh Administration, Life Insurance Corporation of India and any other scheduled Bank, anybody corporate created under a State/Central Act, etc. The Counsel would contend that the Tribunal below has misconceivedly ignored the part of lease deed while relying upon Clause 4(a) contained in the lease deed. The relevant clause of the lease deed on the basis of which the Tribunal below has allowed the S.A. filed by the respondents reads as under:

"4(a): The lessee shall not sell or otherwise transfer his/her right in the site/building or part thereof for a period of 15 years from the date of execution of lease deed of the site/building, except in the event of expiry or cancellation of the letter of Approval issued by the Competent Authority under the Special Economic Zone Act/Rules.

In the case of transfer after the expiry of ban period of 15 years by the lessee company by way of sale/gift/mortgage or otherwise of the site or any right, title or interest therein, Lessee Company shall be liable to pay the unearned increase as per provisions of the Chandigarh Estate Rules, 2007.

4(b): Notwithstanding anything contained in Sub-clause (a), the lessee may, with the previous consent in writing of the Estate Officer mortgage or charge the plot in favour of Central Government. State Government, Chandigarh Administration, Life Insurance Corporation of India, any Scheduled Bank, anybody corporate created under a State/Central Act or anybody corporation/undertaking wholly owned by Government for securing a loan to be advanced by them for constructing the building on the plot.

Clause 5 is also relevant which provides that whenever the title of the lessee in the plot is transferred in any manner whatsoever the transfer shall be bound by all the covenants and conditions."

It would thus be noticed that the Tribunal below even after having taken note of Clause 4(b) contained in the lease deed which permitted the lessee to create a mortgage or charge over the plot in favour of the Central Government, etc. has held that the property could not have seen mortgage. Clause 4(b) of the lease deed begins with the word "Notwithstanding anything contained in Sub-clause (a)" which would make this clause override the Clause (a) of Para 4 of lease deed. The Tribunal below has gone ahead to allow the S.A. only on relying on Clause 4(a) of the lease deed dated 17th July, 2009 according to which the lessee shall not sell or otherwise transfer his/here right in the site/building or part thereof for a period of 15 years from the date of execution of the lease deed. The view expressed by the Tribunal below is that no right or charge could have been created over this plot for a period of fifteen years. This view has been formed by the tribunal below by ignoring the Clause 4(b) contained in the lease deed itself. The Tribunal below, in my view, has not properly considered the effect of Clause 4(b) of the lease deed. Clause 4(b) has carved out an exception to Clause 4(a) and this would make the lease entitled to create mortgage or charge in favour of the State Government, Central Government, Life Insurance Corporation of India or any Scheduled Bank, etc. Clause 4(b) would prevail over Clause 4(a) whereby the rights of the lessee have been restricted in the manner that he could not sell or transfer his right in any manner for a period of 15 years. The Counsel for the respondents could not say much on the issue, the clauses being clear. In view of this, the impugned order passed by the Tribunal below cannot be sustained and the same is set aside. The appeal is accordingly allowed. The Bank would be at liberty to proceed further in accordance with law. However, the first charge of Estate Officer, Chandigarh shall be kept in view.