CASES REFERREDHarshad Govardhan Sondagar v. International Assets Reconstruction Co. Ltd.
, 2014 (6) SCC 1 5, 8
R. Sankaranarayanan, Advocate for Petitioner.
Sri Ram for A.S Kailasam & Associates, Advocates for Respondent No. 1.
W.P ALLOWED — NO COSTS — M.Ps CLOSED
Prayer: Writ Petition filed under Article 226 of the Constitution of India for the relief of issuance of Writ of Certiorari to call for the records on the file of Second Respondent, quash the Order passed on 23.12.2013, under the proceedings Roc.33103/2013.M4.
JUDGMENT
K. Ravichandra Baabu, J.:— The First Petitioner is a Limited Company incorporated under the Companies Act, 1956. The Second Petitioner is the Managing Director of the First Petitioner-Company. This Writ Petition is filed challenging the Order passed by the Second Respondent in Roc. No. 33103/2013.M4, dated 23.12.2013, whereby the properties of the Petitioners were taken possession under Section 14(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 (hereinafter referred to as “SARFAESI Act”).
2. The case of the Petitioners is as follows:
(i) The First Petitioner-Company is carrying on business of manufacturing of textiles. The First Petitioner desired to have backward integration and opted to set up Spinning Mill to ensure regular and quality supply of yarn. Accordingly, the First Petitioner prepared a Project Report and approached the ICICI Bank during 1993 for sanction of necessary loan. The Project Report was found to be viable. The First Petitioner sought the loan of Rs. 700 lakhs. ICICI Bank sanctioned a loan of Rs. 400 lakhs and assured that the balance amount would be disbursed by the other consortium Banks. SCICI now amalgamated with the ICICI Bank, granted Rs. 200 lakhs. ICICI Bank further assured that the balance amount of Rs. 100 lakhs would be disbursed by IIBI Bank, the another consortium Bank. Thus, the First Petitioner approached the IIBI Bank for the balance amount of Rs. 100 lakhs and the privity of contract came through ICICI Bank. IIBI Bank sanctioned loan of Rs. 98.75 lakhs and disbursed the same in two installments. ICICI Bank filed a Suit before the High Court of Bombay and a Receiver was appointed by the Court. The First Petitioner placed a proposal for One Time Settlement. After negotiation, it was found that the division could be sold for Rs. 5,00,00,000/- only. ICICI Bank had agreed for the proposal, but IIBI objected to the said proposal. The Spinning Mill could not be sold for Rs. 5,00,00,000/-. Then the lender Banks sold the division in Auction only for Rs. 3.40 crores. The loss is attributable to unreasonable demand of IIBI. In the meanwhile, IIBI filed an Original Application in O.A No. 1013 of 1999 on the file of the DRT-1, Chennai for recovery of Rs. 1,99,77,619/- with interest. The Suit filed before the Bombay High Court was also transferred to DRT-1, Mumbai and renumbered as O.A No. 297 of 2000. ICICI Bank had filed an Application before the DRT-1, Mumbai to appropriate a sum of Rs. 2,11,56,000/-. IIBI Bank filed a Petition seeking permission before DRT-1, Mumbai to withdraw a sum of Rs. 41.02 lakhs from the sale proceeds. The Petition No. 54 of 2005 was opposed by the Petitioner-Company and the Tribunal rejected the Petition filed by the IIBI.
(ii) IIBI Bank has executed a Deed of Assignment on 25.5.2011, at Calcutta, whereby various financial facilities, underline facilities with security interest were assigned to and in favour of IFCI Limited, having registered office at New Delhi. The asset of the Petitioner-Company has been assigned to IFCI. Pursuant to the said Assignment Deed dated 25.5.2011, IFCI caused a Possession Notice dated 23.6.2012 and then publication was effected in Tamil and English dailies under Section 13(4) of the SARFAESI Act. The said Possession Notice is not valid and illegal. The said Assignment Deed dated 25.5.2011, has been questioned by the Petitioners before the DRT-1, Chennai in S.A No. 114 of 2012, on various grounds.
(iii) The main contention of the Petitioners in S.A No. 114 of 2012, is that there was no privity of contract between the Petitioners and the IFCI and the said financial institution did not lend any money to the Petitioners. The IFCI being stranger to the contract cannot act against the Petitioners. The said Assignment Deed dated 25.5.2011 was made and executed at Calcutta in 100 Rupees Stamp Paper. Such conveyance not having been duly stamped as per the Stamps Act, is invalid. The said document ought to have been executed and registered with the office of the Sub-Registrar within whose jurisdiction the property sought to be sold is situate. Consequently, the present impugned proceedings issued against the Petitioners under SARFAESI Act at the instance of the First Respondent herein is illegal and non est in the eye of law. The Presiding Officer of DRT-1 heard the Petitioners as well as the Respondent-Bank and reserved orders on 24.9.2012 and till date, no orders have been pronounced. The First Respondent is aware of the status of S.A No. 114 of 2012. The First Respondent has suppressed the fact of pendency of S.A No. 114 of 2012, before the DRT-1, Chennai.
3. While entertaining this Writ Petition on 25.3.2014, this Court has granted an Interim Order of injunction restraining the First Respondent-Bank from bringing the properties for sale mentioned in the Schedule to the Petition, for a period of six weeks and the said Interim Order was further extended on 29.4.2014 till 10.6.2014
4. The First Respondent filed a Counter Affidavit, wherein it is stated as follows:
(i) The Writ Petition is not maintainable, since the Petitioners are having effective remedy available under Section 17 of the SARFAESI Act to file an Appeal before the DRT. The Petitioners have misconceived the fact with regard to the registration of the document and the manner in which it has been registered. The possession has also been handed over to the First Respondent on 13.2.2014
(ii) The contention regarding the privity of contract cannot be raised by the Writ Petitioners, since IFCI Limited was substituted in the place of IIBI Bank in O.A No. 1023 of 1999, therefore, the Petitioners are estopped from contending otherwise. The Petitioners have not filed any Appeal or challenged the Order of Substitution in any manner. The result of S.A No. 114 of 2012, will not affect the proceedings leading to the impugned Order.
5. Mr. R. Sankaranarayanan, learned Counsel appearing for the Petitioners submitted as follows:
(i) The First Respondent is only an assignee pursuant to the Deed of Assignment, dated 25.5.2011 The said Assignment Deed dated 25.5.2011, has not been properly stamped as per the Stamps Act, and the same was also wrongly registered at Calcutta, as the property conveyed or assigned, does not fall within the jurisdiction of the Registered Office at Calcutta. Therefore, such registration is invalid and the said document is also null and void as per Section 28-B of the Indian Registration Act. Even though a second Deed of Assignment came to be executed on 4.10.2012 between the IIBI and IFCI and got it registered at the Sub-Registrar office of Kumarapalayam, the said Deed cannot cure the defect or illegality of the impugned proceedings, which was initiated based on the original Deed of Assignment, dated 25.5.2011
(ii) In so far as the maintainability of the Writ Petition is concerned, it is contended that the same is maintainable as held by the Hon'ble Supreme Court in a recent decision in the case of Harshad Govardhan Sondagar v. International Assets Reconstruction Co. Ltd., 2014 (6) SCC 1.
6. Mr. K. Sri Ram, learned Counsel appearing for the First Respondent, though submitted that the defect noted in respect of the earlier execution of Deed of Assignment dated 25.5.2011 has been subsequently rectified by entering into another Deed of Assignment on 4.10.2012, and rightly registered at the office of Sub-Registrar within the jurisdiction in which the properties were located, however fairly accepted the fact that the impugned proceedings were initiated based on the Original Deed of Assignment, dated 25.5.2011 only.
7. We have considered the rival submissions made by the learned Counsels and perused the materials placed on record.
8. Before going into the merits of the matter, let us consider the preliminary objections raised with regard to the maintainability of the Writ Petition. It is contended that as against the impugned proceedings, the Petitioners are having an effective alternative remedy before the DRT under Section 14 of the SARFAESI Act and hence, the present Writ Petition is not maintainable. The issue with regard to the maintainability of the Writ Petition as against the Orders made under Section 14(3) of the SARFAESI Act has already been considered by the Hon'ble Supreme Court in the decision in the case of Harshad Govardhan Sondagar (supra), wherein at Para No. 29, it has been observed as follows:
“29. Sub-section (3) of Section 14 of the SARFAESI Act provides that no act of the Chief Metropolitan Magistrate or the District Magistrate or any Officer authorised by the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of Section 14, shall be called in question in any Court or before any Authority. The SARFAESI Act, therefore, attaches finality to the decision of the Chief Metropolitan Magistrate or the District Magistrate and this decision cannot be challenged before any Court or any Authority. But this Court has repeatedly held that statutory provisions attaching finality to the decision of an Authority excluding the power of any other Authority or Court to examine such a decision will not be a bar for the High Court or this Court to exercise jurisdiction vested by the Constitution because a statutory provision cannot take away a power vested by the Constitution. To quote, the observations of this Court in Columbia Sportswear Company v. Director Of Income Tax, Bangalore, 2012 (11) SCC 224:
“17. Considering the settled position of law that the powers of this Court under Article 136 of the Constitution and the powers of the High Court under Articles 226 & 227 of the Constitution could not be affected by the provisions made in a statue by the legislature making the decision of the Tribunal final or conclusive, we hold that sub-section (1) of Section 245-S of the Act insofar as it makes the advance ruling of the Authority binding on the Applicant, in respect of the transaction and on the Commissioner and Income Tax Authorities subordinate to him, does not bar the jurisdiction of this Court under Article 136 of the Constitution or the jurisdiction of the High Court under Articles 226 & 227 of the Constitution to entertain a challenge to the advance ruling of the Authority”.
In our view, therefore, the decision of the Chief Metropolitan Magistrate or the District Magistrate can be challenged before the High Court under Articles 226 & 227 of the Constitution by any aggrieved party and if such a challenge is made, the High Court can examine the decision of the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, in accordance with the settled principles of law”.
9. In view of the above referred categorical pronouncement made by the Hon'ble Supreme Court, it cannot be contended any more that the Writ Petition is not maintainable as against the Order made under Section 14(3) of the SARFASI Act. Therefore, we reject the objections raised by the First Respondent with regard to the maintainability of the Writ Petition and hold that this Writ Petition is maintainable.
10. On merits, though various points were raised as against the impugned proceedings, the main and core contention of the learned Counsel appearing for the Petitioners is that the impugned proceedings issued at the instance of the First Respondent based on an invalid and illegal Assignment Deed, dated 25.5.2011, cannot be sustained.
11. It is an admitted fact that the First Respondent's right to proceed against the Petitioners has accrued only in pursuant to the execution of the Deed of Assignment made at Calcutta on 25.5.2011 It is also not in dispute that the said Deed of Assignment has dealt with the immovable properties, which requires compulsory registration as contemplated under Section 17 of the Registration Act, 1908. For the purpose of understanding, Clauses (B) & (D) and 2.2 of the said Assignment Deed are extracted hereunder:
“(B) The Assignor being desirous of selling, transferring and assigning its rights under the aforesaid facility documents together with all its other rights, title and interests including security interests, pledges and/or guarantees in relation thereto has invited bids for the aforesaid financial facilities on the terms and conditions set out in the “Tender Document” dated June 18, 2010.
(D) The parties have accordingly entered into this Deed of Assignment (hereinafter referred to as this ‘Deed’) for transferring and assigning by the Assignor to the Assignee various financial facilities, and underlying securities, as mentioned in the Schedule-1 hereto, together with Security Interests as mentioned herein and all other rights, title and interests in respect hereof.
2.2 The Assignee has become the legal and beneficial owner of all the financial facilities and underlying securities as mentioned in the Schedule-1 hereto on purchasing the same by making payment of the Purchase Consideration and on execution of this Deed.”
12. Further, it is seen that the said Assignment Deed was executed only in 100 Rupees Stamp Paper. It is also an admitted fact that the said Assignment Deed was executed at Calcutta and registered at the office of the Additional Registrar of Assurance-III, Calcutta. The Schedule of immovable properties shown in the said Deed of Assignment, reads as follows:
(i) All those pieces and parcels of land in Namakkal Registration District, Kumarapalayam Sub-Registration District, Amani village admeasuring 5 acres 97½ cents comprised in Survey Nos. 202/1, 202/2, 202/3, 203/2, 203/3, 203/4, 203/5, 203/6, 203/7, 201/2, 201/3, 201/4, 201/5, 201/6, 201/1 & 203/1 together with all building and structures thereon and all plant and machinery attached to the earth or permanently fastened to anything attached to the earth.
(ii) All those pieces and parcels of land in Namakkal Registration District, Kumarapalayam Sub-Registration District, Amani village admeasuring 3 acres 98 cents comprised in Survey Nos. 202/1, 202/2, 202/3, 203/2, 203/3, 203/4, 203/5, 203/6, 203/7, 201/2, 201/3, 201/4, 201/5, 201/6, 201/1 & 203/1 together with all building and structures thereon and all plant and machinery attached to the earth or permanently fastened to anything attached to the earth.
(iii) All those pieces and parcels of land in Namakkal Registration District, Kumarapalayam Sub-Registration Distict, Agraharam village comprised in New Survey No. 49, admeasuring 5190 sp.ft, with following dimensions:
East to West on North:
124 feet
East to West on South:
135 ½ feet
North to South on East:
40 feet
North to South on West:
40 feet
Bounded on East by land belonging to Sundaram Spinning Mills Ltd., West by 30 feet wide connecting road to main road, South by remaining land of R. Asokan and North by land belonging to the Company together with all building and structures and all plant and machinery attached to the earth or permanently fastened to anything attached to the earth.
(iv) All those pieces and parcels of lands in Namakkal Registration District, Kumarapalayam Sub-Registration District, Agraharam village comprised in New Survey No. 49, admeasuring 5650 sq.ft, with following dimensions:
East to West on North:
135 ½ feet
East to West on South:
147 feet
North to South on East:
40 feet
North to South on West:
40 feet
Bounded on East by land belonging to Sundaram Spinning Mills Ltd, West by 30 feet wide connecting road to main road. North by Plot Nos. 22, 23, 24 & 27 belonging to R. Asokan and South by other lands of R. Asokan and together with all building and structures and all plant and machinery attached to the earth or permanently fastened to anything attached to the earth.
(v) All those pieces and parcels of land in Namakkal Registration District, Kumarapalayam Sub-Registration District, Agraharam village admeasuring 87.5 cents bounded on East by Cauvery River, West by Marappa Gounder's Land, South by passage and North by J.K Sundaram Chettiar's and Nachimuthu Gounder's land together with all building and structures and all plant and machinery attached to the earth or permanently fastened to anything attached to the earth.
13. It is not in dispute that the above properties, thus, assigned under the Deed of Assignment dated 25.5.2011, are admittedly situated in Tamil Nadu and not within the jurisdiction of the Registering Authority at Calcutta. Therefore, it is very clear that the said Assignment Deed made at Calcutta in respect of property situated in Tamil Nadu and got registered before the Registering Authority, Calcutta was against Section 28 of the Registration Act as amended by the Tamil Nadu Act 19 of 1997 with effect from 29.3.1997, which reads as follows:
“28. Place for registering documents relating to land:— Save as in this part otherwise provided—
(a) Every document mentioned in Clauses (a), (b), (c), (d) & (e) of sub-section (1) and sub-section (2) of Section 17, in so far as such document affects immovable property and in Clauses (a), (b), (c) & (cc) of Section 18, shall be presented for registered in the office of a Sub-Registrar within whose sub-district the whole or some portion of the property to which such document relates is situate in the State of Tamil Nadu; and
(b) Any document registered outside the State of Tamil Nadu in contravention of the provisions of Clause (a) shall be deemed to be null and void.”
14. A perusal of the above said provision of law would show that the document registered outside the State of Tamil Nadu in contravention of the provisions of Clause (a) of Section 28 of the Registration Act shall be deemed to be null and void. Therefore, there cannot be any doubt that the Deed of Assignment dated 25.5.2011 is deemed to be null and void, since the same was made in violation of Section 28(b) of the Registration Act. Consequently, the First Respondent, having not empowered to act legally against the Petitioners in pursuant to the said Deed of Assignment dated 25.5.2011, was not entitled to initiate the proceedings before the Second Respondent under the SARFAESI Act, which has resulted in passing the impugned Order by the Second Respondent under Section 14(3) of the SARFAESI Act.
15. It is further to be noted that after knowing fully well that the Deed of Assignment executed on 25.5.2011 is not valid in the eye of law, the parties to the said document have once again entered into another Deed of Assignment on 4th October, 2012, at Kumarapalayam of Tamil Nadu State and got it registered at the Sub-Registrar office of Kumarapalayam. Therefore, if at all the First Respondent can initiate any proceeding against the Petitioners, such right should commence only from the date of the Said Deed of Assignment dated 4.10.2012 and not before that. Admittedly, in this case, the impugned proceedings has emanated consequent upon the said invalid and non est Assignment Deed on 25.5.2011 only and therefore, it can not be sustained. Therefore, we are of the view that the impugned proceedings are liable to be quashed.
16. Accordingly, the Writ Petition is allowed and the impugned proceedings is set aside. It is open to the First Respondent to proceed afresh against the Petitioners, if so warranted, based on the Deed of Assignment dated 4th October, 2012, in accordance with law and on such initiation of proceedings, the Petitioners are entitled to canvass their contentions in accordance with law. Since we have set aside the impugned proceedings, the Petitioners are entitled for re-delivery of possession, as the possession was admittedly taken in pursuant to the impugned proceedings. Such re-delivery shall be made within a period of two days from the date of receipt of copy of this order. No costs. Consequently, connected Miscellaneous Petitions are closed.