Sangay Lama vs Chandra Kumar Sharma And Others

Meenakshi Madan Rai, J

Aggrieved by the decision of the Learned First Appellate Court, the Appellant assails the finding in Title Appeal No.05 of 2017, whereby the Learned District Judge, Special Division – II, Sikkim, at Gangtok, while upholding the finding of the Learned Trial Court on two Issues, set aside the finding on Issue No.3.

2(i). The Appellant herein was the Defendant/Respondent No.4 before the Learned Courts below; Respondent No.1 herein was the Plaintiff/Appellant; Respondent No.2 herein was the Defendant No.1 (ex parte)/Respondent No.1; Respondent Nos.3 and 4 herein was the Defendant Nos.2 and 3/Respondent Nos.2 and 3 and, the Respondent No.5 herein was the Defendant No.5/Respondent No.5.

(ii) They shall be referred to in terms of their appearance before this Court.

In this Second Appeal, the lone substantial question of law framed for determination is;

(i) Whether the Learned First Appellate Court erred in interpretation of the documents of title of the present Appellant and that of the Respondent and arrived at the wrong finding?

4(i). The Suit was initially filed by the Respondent No.1 as Plaintiff, on 08-07-2011, before the Learned District Judge, East and North, at Gangtok, being Title Suit No.12 of 2011, for Declaration and Injunction.

(ii) The Appellant herein filed an Application before the said Court under Order I Rule 10(2) read with Section 151 of the Code of Civil Procedure, 1908 (hereinafter, “Cr.P.C.”), seeking to be impleaded as the Defendant No.4. The Court ordered accordingly on 11-10-2012 and vide the same Order, the State Bank of India was also impleaded as the Defendant No.5.

(iii) On 09-09-2013, based on the averments in the pleadings and submissions of Learned Counsel and examination of the parties under Order X of the Cr.P.C., the following Issues were settled for determination by the Learned District Judge;

(i) Whether the transaction of the Suit land between the Defendant No.1 and the Defendant No.5 took place prior to the transaction of the same land between the Plaintiff and the Defendant No.1?

(ii) Whether the transaction of the Suit land between the Plaintiff and the Defendant No.1 is valid in the eyes of Law in view of the alleged prior transaction of the same, between the Defendant No.1 and the Defendant No.5?

(iii) Whether the Defendant No.5 could have auctioned the Scheduled Property and Defendant No.4 could have purchased the said Property, in view of the fact that the Defendant No.1 was only a Lessee of the land which belonged to Defendant No.2?

(iv) Any other reliefs?

(iv) Pursuant to the settlement of Issues, on the Orders of the High Court dated 13-12-2013, the entire Case records were forwarded to the Learned Civil Judge (Junior Division), East and North Sikkim, at Gangtok, for trial and disposal as per Law, considering the pecuniary jurisdiction of the Court. The Court registered it as Title Suit No.04 of 2014 on 28-12-2013.

(v) In Issue No.1 (supra), the Learned Trial Court by adopting a novel short cut method, merely perused the documents furnished and sans consideration of any evidence, reached a finding that the transaction between Respondent No.2 and Respondent No.5 was entered into on 10-07-2003, while Exhibit 5 the Sale Agreement between the Respondent No.2 and the Respondent No.1 mentioned the date as “28-09-2005”. Accordingly, the Issue was decided against the Respondent No.1 (Plaintiff).

In Issue No.2, the Learned Trial Court reasoned briefly that a right did not accrue to the Respondent No.1 to possess the property on mere agreement and possession of Power of Attorney and decided the Issue against the Respondent No.1 (Plaintiff).

In Issue No.3, it was observed that the Appellant is a bona fide purchaser of the property, auctioned by the Respondent No.5 and decided the Issue in favour of the Appellant.

While considering the Counter-Claim filed by the Appellant seeking ownership of the purchased property, it was observed that as he was the legal purchaser, hence the suit property be handed over to the Appellant by the Respondent No.5, after fulfilling all legal formalities.

(vi) Aggrieved, the Respondent No.1 was before the Learned First Appellate Court who agreed with the findings of the Learned Trial Court on Issue Nos.1 and 2 (supra).

In Issue No.3, the Learned First Appellate Court while differing with the stand of the Learned Trial Court, observed that the Sale Certificate, Exhibit D5/15 was unacceptable, as the suit property was leasehold property. Thus, the sale in favour of the Appellant was determined as illegal ab initio. That, it was unfathomable as to why the Respondent No.5, despite receiving Exhibit 16, a Legal Notice dated 29-04-2006, issued by the Respondent No.1, requesting them to cancel the Sale Notice as he had priorly purchased the property from the Respondent No.2, would proceed to auction the suit property. That, the NOC issued by the Respondent No.3 in favour of the Respondent No.2 was to enable him to procure loan from the Respondent No.5 and not for mortgaging it as security for a third person. It was further observed that the Learned Trial Court failed to notice the material discrepancies in the name of the owner and the property details in the Sale Notice. The finding of the Learned Trial Court in Issue No.3 was accordingly set aside. Dissatisfied with the finding of the Learned First Appellate Court, the Appellant is before this Court.

5(i). Before delving into the arguments advanced by the opposing Counsel before this Court, a brief narration of the facts is essential. The Respondent No.1 averred in his Plaint that he had purchased the suit property from the Respondent No.2, at ₹ 4,50,000/- (Rupees four lakhs and fifty thousand) only, on 25-05-2003. That, the property measuring 20 x 30 ft. was leased to the Respondent No.2 by the Respondent No.3 vide a Lease Deed (Exhibit D5/7). A Sale Agreement was executed between the Respondent No.1 and Respondent No.2, Exhibit 5, dated 28-09-2005, whereupon the Respondent No.1 started construction of a one storeyed building on the suit property. While such construction was in progress, a Legal Notice from M. S. Limboo was delivered for Respondent No.2, mentioning that the said person had already purchased the property from Respondent No.2. M. S. Limboo later admitted that advance money of a few thousand Rupees only had been paid by him and he chose not to pursue the matter. The Respondent No.1 also learnt that the same plot was mortgaged by the Respondent No.2, to the Respondent No.5, against the loan taken by one Thupden Tashi Lepcha (T. T. Lepcha) of Upper Dzongu, North Sikkim. On the loan being unpaid, an Auction Notice (Exhibit D5/14) was issued by the Respondent No.5 in the local Newspaper on 20-04-2006. The last date of Bid was fixed on 02-05-2006. On 29-04-2006, the Respondent No.1 issued Notice to the Respondent No.5 informing it vide Exhibit 16, that, he had already purchased the land and to cancel the Sale Notice, in vain. Hence, the prayers in the Suit.

(ii) In his Written Statement, the Respondent No.2 denied in toto the averments of the Respondent No.1, while the Respondent No.3 in its Written Statement averred that they had allotted and leased the suit land to Respondent No.2 vide Lease Deed (Exhibit D5/7). The Lease Deed bore several clauses to be adhered to by the Respondent No.2 and as lessee he was not the absolute owner of the land, consequently he could not alienate it by way of mortgage. The Respondent No.3 on the request of Respondent No.2 had issued NOC dated 30-04-2003, to enable him to procure loan from the Respondent No.5 for house construction and not for obtaining loan for T. T. Lepcha. That, Respondent No.5 also had no right to Auction and sell the leased suit property to the Appellant.

(iii) Respondent No.4 did not file any written statement.

(iv) The Appellant in his Written Statement averred that he was unaware of the claim of the Respondent No.1 and participated in the bid process on seeing a Sale Notice in the local Newspaper „NOW‟, dated 20-04-2006. His bid was accepted by Respondent No.5 and a Sale Certificate, dated 23-06-2006 (Exhibit D5/15), was issued to him. In his Counter-Claim, he sought a declaration that the sale transaction between the Respondent No.1 and the Respondent No.2 is void and inoperative and he being the bona fide Auction purchaser has right, title and interest over the scheduled property, as its owner.

(v) The Respondent No.5 in its Written Statement admitted that the property in question had been mortgaged to it by the Respondent No.2 as collateral to secure a loan availed by T. T. Lepcha, Proprietor of Lepcha Stone Crusher, for which Title Deeds were deposited on 10-07-2003. On his failure to repay the loan, the property of the Respondent No.2 was sold in Auction in terms of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the property made over to the Appellant, the highest bidder in the Auction. Hence, the Suit be dismissed with exemplary costs.

6(i). The arguments advanced by Learned Senior Counsel for the Appellant was that the Respondent No.1 had no right to file a Declaratory Suit before the Learned Trial Court as an “Agreement for Sale” does not qualify as a “Sale Deed”, nor does it transfer ownership, besides which the Sale Agreement was an unregistered document. The submission was fortified by the observation in Dharma Naika vs. Rama Naika and Another (2008) 14 SCC 517. Adverting to the facts of the case, it was contended that as T. T. Lepcha the principal loanee was unable to repay the loan availed by him, Respondent No.5 sold the mortgaged property in Auction to the highest bidder is the Appellant. That, the entire auction amount has been deposited with the Respondent No.5 by the Appellant, but admitted no documents of title have been made over to him by the Respondent No.5, till date, but that does not divest the Appellant of its ownership. Garnering strength from the ratio in B. Arvind Kumar vs. Govt. of India (2007) 5 SCC 745 it was contended that it is well-settled that when an auction purchaser derives title by confirmation of sale in his favour and a Sale Certificate is issued as proof of such sale and title, no further deed of transfer from the Court is contemplated. That, the Appellant cannot now be deprived of his right on technical grounds raised by Respondent No.1 and the Respondent No.3. Hence, the finding of the Learned First Appellate Court in Issue No.3 be set aside.

(ii) Learned Senior Counsel for the Respondent No.1 reiterating the averments made in the Plaint also invited the attention of this Court to Exhibit D5/10 and contended that the NOC issued by the Respondent No.3 was to enable Respondent No.2 to obtain loan for constructing his own house and not for mortgaging it as a collateral for a third party. That, the property value of the land mortgaged and subsequently auctioned, is far less than the value of the property of the principal loanee T. T. Lepcha‟s land, which though mortgaged with Respondent No.5 was not auctioned. That, the Auction Notice has erroneously mentioned T. T. Lepcha as the proprietor and the Notice does not reveal the boundaries of the property, whereas the site allotment letter issued to the Respondent No.2 describes it in clear and specific terms, thus the Sale Notice being devoid of the correct description of the land and bearing the incorrect owners name, it is void ab initio. That, the Learned First Appellate Court was of the erroneous view that the property belongs to the Respondent No.3, however the Respondent No.1 had purchased it from Respondent No.2 and as he has possession over it he can resist interference from persons who have no better title than himself. To buttress his submission, Learned Counsel placed reliance on M. Kallappa Setty vs. M. V. Lakshminarayana Rao AIR 1972 SC 2299. It was also urged that as Respondent No.1 had already purchased the property, his consent was necessary before issuance of Sale Notice, for which strength was drawn from the ratio in Jagdish Prasad Batham vs. Union of India and Others MANU/MP/1007/2005.

(iii) Learned Government Advocate appearing for Respondent Nos.3 and 4 confined his contentions to the Allotment Order and Lease Deed issued to the Respondent No.2 and while reiterating the facts as revealed hereinabove, contended that the NOC, Exhibit D5/10, with clarity specifies the purpose for which it was issued and it was surely not for the purpose of mortgaging the leased property towards the benefit of T. T. Lepcha to enable him to obtain a loan. It was for the benefit of the lessee to ensure he could obtain loan and construct a dwelling house. Besides, the Lease to the Respondent No.2 is not in perpetuity being limited to a period of 20 years and Clause 3 of the Lease Deed Exhibit D5/7 specifies that the Lessee cannot alienate the lease property by any mode of transfer to a third person, till completion of five years from the date of registration of the deed. Hence, the property being leasehold the Respondent No.5 could not have auctioned it and the reliefs cannot be granted to the Respondent No.1 or the Appellant.

(iv) For his part, Learned Counsel for the Respondent No.5 relied on Exhibit D5/6 the Guarantee Agreement executed between the Respondent No.2 and the Respondent No.5 whereby the Respondent No.2 agreed to be the Guarantor to the loan obtained by T. T. Lepcha and submitted Exhibit D5/7 and site allotment letter Exhibit D5/8. The NOC Exhibit D5/10 specifically permitted Respondent No.2 to mortgage his property, upon which he acted accordingly. That, on account of the inability of T. T. Lepcha to repay the loan despite several Notices issued to him, the property was put up for Auction by the Respondent No.5 and sold to the highest bidder legally in terms of the SARFAESI Act. That, Sale Certificate was accordingly issued to the Appellant being Exhibit D5/15. That, if the Respondent No.2 or Respondent No.1 were aggrieved by the Auction, they ought to have resorted to steps as envisaged under Section 17 of the SARFAESI Act. Admittedly, they were unable to make over the Title Deed to the purchaser on account of the refusal of Respondent No.3 to issue an NOC. Hence, no illegality issues on the part of the Respondent No.5.

7(i). While thus taking up the substantial question of law for determination, it is evident from the foregoing facts and circumstances that the Respondent No.3 allotted a plot of land at Ranipool measuring 20 x 30 ft. to the Respondent No.2, vide communication bearing No.1062(22)1208/UD&HD, dated 25-03-2003. Exhibit D5/7 is the Lease Deed document issued on 25-03-2003 which at Clause 3 reads as follows;

“3) That the Lessee also agrees that he shall not without the previous consent in writing of the Lessor make such alteration in the building constructed thereon and shall not be entitled without such consent as aforesaid to make any sub-division of the said demised premises or to transfer or assign it in parts through the whole plot and house constructed there on may on the expiry of five years from the date of the registration of this deed, but in no case before expiry of such period, be assigned or transferred to any party other than Lessee, without the previous consent in writing of the Lessor.”

(ii) The Respondent No.2 handed over the Lease Deed Exhibit D5/7 and Site Allotment Order Exhibit D5/8 to the Respondent No.5, vide communication, dated 11-07-2003, Exhibit D5/9, which inter alia reads as follows;

“From :

Nantay Lepcha

Ship Gyer

Dikchu

11/07/03

To

The Branch Manager,

State Bank of India,

Gangtok

Dear Sir,

I am writing this to confirm that I have deposited with you on 10.07.2003 title deeds relating to my property at Ranipool, East Sikkim ……………….with the intention of creating an equitable mortgage on the said property by way of collateral security for the amounts due to the Bank from me/the concern of T. T. Lepcha (Lepcha Stone Crusher) under the following credit facilities extended to me/it by the Bank :

(a) T/L fee Rs.11.76.000

(b) T/L for Rs.1,72,000

(c)

(d)

The said property is self-acquired and as such no one else has any interest in the said property. The said property is under my sole occupation (a portion of the building is under tenancy occupation of _______ on monthly rent).

There is no subsisting agreement for the sale of the said property nor has any prospective or any intending purchaser taken possession of it or a part of it. The said property is free from encumbrances.

Sd/-

Yours faithfully,

Description of the property given as security.

20' x 30' = 600 sq. ft. Lessed Land at Ranipool, Sikkim vide Order No.1026 (22) 402/UDHD dt. 25.03.03.”

(iii) As per witness for Respondent No.5, the Bank took the documents Exhibit D5/7 and D5/8 on mortgage, but admittedly Exhibit D5/7 to D5/10 nowhere mentions that the Respondent No.3 had authorized the Bank to mortgage the suit property against the loan advanced to T. T. Dorjee. The witness admitted that the Respondent No.2 did not have the title of the suit land, he was only a lessee in respect of the suit land and Respondent No.3 was the owner of the suit property.

8(i). On this count, two points are noticeable, the first being that the property was leasehold. The property allotted to the Respondent No.2 vide Exhibit D5/8 in terms of Clause 3 of the Lease Deed, Exhibit D5/7, extracted supra, could not have been alienated to any person or Concern, despite which vide Exhibit D5/9 the property was mortgaged by the Respondent No.2 to the Respondent No.5. Secondly, the allotment and the lease was of 25-03-2003 and the mortgage was of 11-07-2003, the mortgage was therefore within the embargo of five years detailed in Clause 3 supra and thus a void mortgage.

(ii) Now, referring to Exhibit D5/10 on which the Respondent No.1, the Respondent No.5 and the Appellant both consistently rely upon. For clarity the entire contents are being extracted herewith;

“URBAN DEVELOPMENT AND HOUSING DEPARTMENT

GOVERNMENT OF SIKKIM

GANGTOK

No.1076/223/1826/UD & HD

DATED: 30/07/03

To,

Shri Namtey Lepcha,

Ranipool Bazar,

East Sikkim.

Sub : NO OBJECTION CERTIFICATE.

With reference to your application dated 17/04/03 I am directed to inform you that the State Government has accepted your request and accordingly grants you permission under clause (3) of the lease deed agreement executed between you and the Urban Development and Housing Department to mortgage the allotted site situated at Ranipool Bazar for the purpose of securing housing/construction loan from State Bank of India, Gangtok.

Sd/-

30/04/03

Deputy Secretary (A/T),

Urban Dev. & Housing Department,

Govt. of Sikkim

Gangtok.     [emphasis supplied]”

(iii) A bare perusal of the document establishes with clarity that on the application of the Respondent No.2 the Respondent No.3 had accepted his request and granted him permission under Clause 3 of the Lease Deed to mortgage the allotted site for the purpose of securing housing/construction loan from the Respondent No.5. The Respondent No.2 would not have sold it to Respondent No.1. Reliance on M. Kallappa Setty (supra) by Learned Senior Counsel for the Respondent No.1 is misplaced as the ratio deals with possession of the property on execution of Sale Deed. Exhibit 5 is only a “Sale Agreement”. In Dharma Naika (supra) the Supreme Court has inter alia clarified that an agreement to sell does not by itself create any interest of the proposed vendee in the immovable property, but only creates an enforceable right in the parties. In an agreement for sale, the title of the property agreed to be sold still remains with the vendor, but in the case of sale, title of the property is vested with the vendee. It is not anyone‟s case that the Respondent No.5 was oblivious to the provisions of Clause 3 of the Lease Agreement as the document was in its possession after Respondent No.2 deposited it with Respondent No.5. This contents of this document has to be read in tandem with the Lease Deed to extricate its intent and purpose. From a reading of both documents it emanates without a doubt that the intention was not for a third person to obtain a benefit from it, but to allow the Respondent No.2 to obtain loan for the purpose of construction of his house on the property. Indeed, the document may not be happily worded, but in no way takes away the intent and purport thereof. That having been said, it is relevant to notice that Sale Notice issued by the Respondent No.5 is a carelessly worded document, the witness of Respondent No.5 admitted that the error was clerical and T. T. Lepcha erroneously attributed with the ownership of the property, measuring 600 sq. ft., at Ranipool Bazar. The property admittedly belongs to Respondent No.2 and during the course of arguments it was submitted by all parties that there is no serious objection to this evidently careless act of the Respondent No.5. It thus falls to reason that the Sale Notice was indeed for the property of the Respondent No.2. The Respondent No.5 while issuing Exhibit D5/15 claims to have made over delivery of possession of the property, but the Appellant insists that no such physical possession till date has been made over by the Respondent No.5 to the Appellant. Admitted the Respondent No.3 refused to grant NOC for transferring of Title Deeds from the Respondent No.2 to the Appellant.

(iv) The position of law settled by B. Arvind Kumar (supra) relied on by the Appellant is not in question here, the question is whether the Respondent No.2 in the first instance was legally competent to alienate the property. Only on his being found competent would the observation in the ratio of B. Arvind Kumar (supra) reflected above, kick into place.

While perusing the evidence of the Appellant under cross-examination he has deposed that the Respondent No.5 (Bank) had told him that the money which he paid to the Respondent No.5 for the Auction Sale would be kept by the Respondent No.5 as Fixed Deposit, until they were able to hand over possession of the suit property to him. That, the Respondent No.5 put his money in Fixed Deposit after about five months of his deposit, when he pressurized it to deliver the possession of the suit property to him. That, the money was deposited in the year 2006 and has not been withdrawn by him.

So far as the claim of possessory title by the Respondent No.1 is concerned, in Poona Ram vs. Moti Ram (Dead) through Legal Representatives and Others (2019) 11 SCC 309 it has been elucidated that the crux of the matter is that a person who asserts possessory title over a particular property will have to show that he is under settled or established possession of the property. Settled possession must be (i) effective, (ii) undisturbed, (iii) to the knowledge of the owner. There cannot be a straitjacket formula to determine settled possession. From the facts that can be culled out from the evidence on record such possessory title has not been established by the Respondent No.1.

Relevantly, in I.A. No.02 of 2020 it is seen that a Complaint was lodged by the Respondent No.1 against the Respondent No.2 in which the Respondent No.2 was convicted by the Learned Sessions Judge, West Sikkim, at Gyalshing, in Criminal Appeal No.01 of 2017, dated 20-07-2017, under Section 420 of the Indian Penal Code, 1860 and vide Order on Sentence of the same date, the Respondent No.2 was sentenced to undergo simple imprisonment till the rising of the Court of that day and he was also directed to pay compensation of ₹ 5,00,000/- (Rupees five lakhs) only, as provided under Section 357(d) of the Code of Criminal Procedure, 1973, to the Respondent No.1. This circumstance is admitted by Learned Senior Counsel for the Respondent No.1 although he insists that it was compensation ordered by the Court and is not to be construed as repayment of the amount deposited by the Respondent No.1 with Respondent No.2, for purchase of the suit property.

It thus concludes that Respondent No.2 acted in violation of the terms of Clause 3 in the Lease Deed, Exhibit D5/7. He was not authorised to alienate the land in terms of Clause 3 either to Respondent No.1 or to Respondent No.5. Respondent No.1 cannot lay claim to the property for the reason that the Sale Agreement is an unregistered document and there is absence of compliance of the Sikkim State Rules Registration of Documents, 1930, which envisages registration of documents which transfers property. Needless to state that registration of the Agreement for Sale would have served no end in light of Clause 3 of Exhibit D5/7. His claim of possessory right is not fortified by any evidence establishing his possession. The decision of the Learned Court of the Sessions Judge, West Sikkim, at Gyalshing, in Criminal Appeal No.01 of 2017 (Chandra Kumar Sharma vs. Namtey Lepcha), is referred to for the purpose that, once the amount of ₹ 5,00,000/- (Rupees five lakhs) only, was ordered to be paid to the Respondent No.1 by the Respondent No.2, in terms of the Order dated 20-07-2017, the Respondent No.1 appears not to have returned to the property or taken possession of the property via any mode. This is gauged from the evidence of Appellant who deposed that pursuant to the sale when he went to the suit property there was no one in the suit premises and the one storied structure in fact was locked.

Respondent No.2 could not have mortgaged the property to the Respondent No.5, in view of Clause 3 of the Exhibit D5/7 (Lease Deed). Consequently, as a cascading effect, the Respondent No.5 had no authority to sell the property to the Appellant when their witness has admitted clear knowledge of the fact that Respondent No.2 only had leasehold rights.

The sale of the property by the Respondent No.5 to the Appellant, as correctly held by the Learned First Appellate Court, in such circumstances is void ab initio. As a result of the above consequences, although the Appellant is a bona fide purchaser he cannot lay claim to the property for the aforementioned reasons and the embargo created by Clause 3 of Exhibit D5/7. The fact that the property of the defaulting loanee T. T. Lepcha is also mortgaged with the Respondent No.5 is not controverted.

The foregoing deliberations soundly determines the substantial question of law.

In the end result, the Appeal fails and stands dismissed accordingly.

Pending applications, if any, also stand disposed of.

Parties to bear their own costs.

Records of the Courts below be remitted forthwith along with a copy each of the Judgment for information.