Delhi District Court
Ashok Kumar Jain vs M/S. Swarn Gems Pvt. Ltd on 16 March, 2018
In the Court of Ms. Priya Mahendra, Additional District Judge04,
South District, Saket Courts, New Delhi.
Civil Suit No. 48/2017.
Ashok Kumar Jain,
S/o Late Sh. S P Jain,
R/o B7 Extn/116A,
Safdarjung Enclave,
New Delhi.
.....Plaintiff.
Versus
1. M/s. Swarn Gems Pvt. Ltd.,
F38, Second Floor,
NDSE, Part1, New Delhi.
Also at:
(i) 611, Somdutt Chambers,
Bhikhaji Cama Place,
New Delhi110066.
(ii) B4/158, Safdarjung Enclave,
New Delhi. (proceeded exparte on 13.07.2010)
2. Sh. Ashok Jain,
Director M/s. Swarn Gems Pvt. Ltd.,
F38, Second Floor,
NDSE PartI, New Delhi.
Also at :
(i) 611, Somdutt Chambers,
Bhikhaji Cama Place,
New Delhi110066.
C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.1/31
(ii) B4/158, Safdarjung Enclave,
New Delhi. (proceeded exparte on 13.07.2010)
3. Indian Overseas Bank,
Through its Branch Manager,
Yusuf Sarai Branch,
New Delhi110016.
.....Defendants.
Date of institution of the suit : 21.01.2008.
Date reserved for judgment : 16.02.2018.
Date of pronouncement of judgment : 16.03.2018.
JUDGMENT
Suit for Declaration, Cancellation of the Sale Deeds dated 13th April, 2005, Recovery of Possession, Injunction, Damages and Mesne Profit.
1. This is a suit for Declaration, Cancellation of the Sale Deeds dated 13th April, 2005, Recovery of Possession, Injunction, Damages and Mesne Profit. The plaintiff is seeking Cancellation and Declaration of the two Sale Deeds both dated 13.04.2005 in the name of defendant no.1 as void/voidable because of the fraud played and the undue influence exerted by the defendants nos.1 and 2 on the plaintiff and also for the reason of nonpayment of sale consideration by defendant no.1 to plaintiff. The plaintiff has also sought declaration that he was and continues to be the owner of the property, subject matter of the said two sale deeds and has prayed for other consequential reliefs of injunctions, damages etc.
2. The brief factual matrix of the case as reflected in the plaint that C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.2/31 the defendant no.1 is a Private Ltd. Company and is a family company owned and controlled by defendant no.2 and his family members only. The defendant no.3 is the Bank of both the plaintiff and the defendants nos.1 and 2 and whom the defendants nos.1 and 2 claimed to have mortgaged the suit property and taken loan. One property being a leasehold plot of land bearing no.4, Block A, Sarvodaya Enclave, New Delhi admeasuring 782 sq. yds (hereinafter referred to as 'the suit property') was developed by the plaintiff under a Collaboration Agreement dated 4 th March, 1996 and an addendum thereto dated 4th April, 2000 entered into by the plaintiff with the then owners of the plot i.e. Sh. Amit Kumar Chatterji, Mrs. Vramori Chatterji, Sh. Vishwajeet Chatterji and Ms. Shakuntala Chatterji. Under the said Collaboration Agreement dated 4th March, 1996, the plaintiff with his own funds and resources constructed on the said plot a building comprising of basement, ground floor with inbuilt mezzanine, First Floor, Second Floor, Third Floor and Fourth Floor with terrace. The basement, entire ground floor with inbuilt mezzanine, entire Third Floor, entire Fourth Floor with terrace thereupon alongwith proportionate undivided, individual and impartible ownership right in the land underneath came to the share of the plaintiff and rest to the owners of the plot.
2.1. The defendant no.2 is known to the plaintiff for last more than 20 years. He is related to the plaintiff, being brother in law of the first cousin of plaintiff and residing in the same locality as plaintiff. The plaintiff and defendant no.2 being also of the same community were very close to each other. Over all these years, the plaintiff and defendant no.2 had various C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.3/31 close financial dealings. In April, 2005 the defendant no.2 approached the plaintiff with a request to purchase a portion of the share of the plaintiff in the third floor and fourth floor in the aforesaid building constructed by him on Plot No.4, Block 'A', Sarvodaya Enclave, New Delhi in the name of defendant no.1. The plaintiff agreed to sell to defendant no.1, third floor Super Area admeasuring 1800 square feet and fourth floor Super Area measuring 1300 square feet and terrace (hereinafter referred to as "the suit property"). The plaintiff sold the super area admeasuring 1800 square feet on the third floor at the cost of Rs.50Lacs and super area admeasuring 1300 square feet on the fourth floor and open terrace at the cost of Rs.20 Lacs to the defendant nos.1 and 2 in the name of defendant no.1 vide two separate registered Sale Deeds both dated 13th April, 2005. Towards the payment of sale consideration of Rs.50Lacs the defendant nos.1 and 2 handed over four following cheques:
(a) Rs.10 Lacs vide Cheque No.552186, dated 12.04.2005.
(b) Rs.10 Lacs vide Cheque No.552187, dated 12.04.2005.
(c) Rs.10 Lacs vide Cheque No.552188 dated 12.04.2005.
(d) Rs.20 Lacs vide Cheque No.552189, dated 12.04.2005 Towards the payment of sale consideration of Rs.20Lacs the defendant nos.1 and 2 handed over five following Cheques:
(a) Rs.4 Lacs vide Cheque No.552181, dated 12.04.2005.
(b) Rs.4 Lacs vide Cheque No.552182, dated 12.04.2005.
(c) Rs.4 Lacs vide Cheque No.552183 dated 12.04.2005.
(d) Rs.4 Lacs vide Cheque No.552184, dated 12.04.2005.
(e) Rs.4 Lacs vide Cheque No.552185, dated 12.04.2005.C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.4/31
All cheques were drawn on Indian Overseas Bank, Yusuf Sarai Branch, New Delhi in favour of the plaintiff Sh. Ashok Kumar Jain. All the aforesaid cheques were handed over to the plaintiff by defendant no.2 for and on behalf of defendant no.1 at the time of execution and registration of the sale deeds in the Office of the Sub Registrar assuring and promising that the same were good for payment and will be duly honoured on presentation. Even earlier to this transaction, the plaintiff and his family members had sold various other properties to the defendants or their family members and on every such sale transaction, defendant no.2 or their family member paid the sale consideration through cheque, so there is no reason for plaintiff to believe that these nine cheques would not good for payment. It is only believing the said representation and assurance and the promise of defendant no.2 to be correct and acting thereon and also in view of the relationship and earlier financial dealing of plaintiff with defendant no.2, the plaintiff executed and got registered the sale deeds in favour of the defendant no.1.
2.2 Immediately after the sale deeds had been executed and registered, the defendant nos.1 and 2 requested the plaintiff not to present the cheques immediately and postpone their presentation for sometime telling that they do not have requisite funds in their account and were arranging the same and as soon as the funds will be arranged, he will inform the plaintiff and the cheques can be presented. Although the plaintiff was quite surprised but the relation between the parties were such that he did not suspect any four play and agreed to the postponement of the C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.5/31 presentation of cheques. The plaintiff also had the bank account in the same bank i.e. India Overseas Bank, Yusuf Sarai Branch, New Delhi (defendant no.3 herein) from where the cheques had been issued and made inquiries about the availability of funds in the bank account of defendant no.1. The plaintiff came to know that the defendant no.1 did not have sufficient money in its account for making payment under the said cheques. The plaintiff realized that no purpose would be served by presenting the cheques in the bank as the same would be dishonoured. He therefore did not present the cheques for realization.
2.3 On regular basis, the plaintiff kept checking up with the defendant no.2 as to when he should present the cheques for encahment. Whenever the plaintiff insisted on the presentation of the cheques, defendant no.2 pleaded that he was arranging the funds and as soon as he would be able to do so, he himself will inform the plaintiff and thereafter the plaintiff can present the cheques. Further the defendant no.2 use to give reference to his long old association and relation with the plaintiff and kept on requesting to bear with him. At that time the defendant no.2 assured and undertook to the plaintiff that till he make the payment to the plaintiff, he will not deal with the suit property. The relationship between the plaintiff and the defendant no.2 was such that even after their transaction, they had a financial dealing which was kept separate of the present transaction in question. As the validity of the cheques in question were expiring, the defendants no.1 and 2 revalidated the same on 31 st October, 2005. From the date of the revalidation of the cheques, the plaintiff again C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.6/31 kept on following up with defendants no.1 and 2 as to when he should present the cheques so that he can get the sale consideration. However, except requesting and persuading the plaintiff for postponing the presentation of cheques in view of long and close relationship of defendant not 2 with the plaintiff, the defendant no.2 did not do anything.
2.4 The plaintiff got fed up and lost patience with defendant nos.1 and 2 and presented all the cheques for encashment to its bank and all the cheques were got dishonoured on the ground that each one of them "exceeds arrangement". The plaintiff issued notice dated 09.03.2006 to the defendant no.1 under Section 138 of the Negotiable Instrument Act and also filed a criminal complaint under Section 138 of the Negotiable Instrument Act, which is still pending. That the defendant nos.1 and 2 have cheated and defrauded the plaintiff in luring him to enter into a sale consideration and played a fraud upon the plaintiff in the matter of sale and purchase of the suit property under the Sale Deeds dated 13.04.2005. The said sale transaction and the deeds of sale are vitiated by fraud and undue influence played upon by defendants nos.1 and 2 on the plaintiff at the time of entering the said sale transactions and the execution and registration of the Sale Deeds dated 13th April, 2005. The defendants nos.1 and 2 played a fraud upon the plaintiff with intent to deceive him and induce him into entering into the said sale transaction and executing and getting registered the Sale Deeds dated 13th April, 2005. They not only made promise without any intention of performing it but also made various statements, representations which were not true and were also not true to the C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.7/31 knowledge of defendant no.2 but they falsely represented the plaintiff that the same were true. At the time of entering in the said sale transactions and the execution and registration of the Sale Deeds dated 13 th April, 2005, the defendant no.2 represented to the plaintiff that he had sufficient money in his bank account and the cheques issued by him on presentation will be duly honoured, knowing fully well that the said representation and statement made to the plaintiff was false as there was no sufficient funds in his account and the cheques shall be dishonoured on its presentation. It is submitted that the said false statement was made by defendant no.2 only to induce the plaintiff to enter into the sale transaction and execute and register the sale deeds with respect to the suit property in favour of defendant no.1 as otherwise the plaintiff would not have entered into the said transaction/execute the sale deeds in question. Even thereafter the defendant no.2 for himself and on behalf of defendant no.1 kept on promising the plaintiff of making the payment with no intention of performing their said promise. It is submitted that defendant no.1 used his close and old relationship with the plaintiff and influenced the plaintiff to believe him and in his false promise/representation and persuaded the plaintiff to execute and register the sale deeds only on the basis of the cheques and not insisting on bank drafts and therefore, obtained an unfair advantage over the plaintiff. That on the basis of submissions made herein above, the entire sale transaction with respect to the suit property and the sale deeds in question both dated 13th April, 2005 are not only void for want of consideration but also voidable in view of the fraud played and undue influence exerted by the defendant no.2 on the plaintiff. That the C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.8/31 defendant nos.1 and 2 have played fraud against the plaintiff in going back to their promise/commitment to the plaintiff that they will not deal with the property in any manner and also not create any encumbrance charge or mortgage on the said properly till payment is made to the plaintiff. In violation of the said understanding/commitment, the defendants nos.1 and 2 have mortgaged the suit property in favour of their bank(defendant no.3) and have raised a huge loan against it.
2.5 Sometime, on 26/27th December, 2007, the plaintiff went to the defendant no.3 where he came to know that the defendant nos.1 and 2 are a defaulter in repayment of the loan taken by them from defendant no.3 against the suit property and the said bank had issued a Notice dated 2 nd February, 2007 under the Securitization and Reconstruction of Finance Assets and Enforcement of Security Interest, 2002 and Security Interest (Enforcement) Rules, 2002 of the Act and Rule 9 and the possession notice in this regard has been posted by defendant no.3 (Bank) outside the suit property. On 9th January, 2008, a notice has been published by the defendant no.3, in the "The Statesman" for the sale of the suit property under Rule 8 (5) and (9) of the Security Interest (Enforcement) Rule 2002. It is stated in the said notice that a sum of Rs.63,38,24,971/ is due to the defendant no.3 from the defendant no.1 as on 30 th November, 2005 with further interest and that the defendant no.3 has issued a demand notice to the defendant no.1 and defendant no.2 who besides others were the guarantor as they had failed to reply the amount due to the defendant no.3, the bank had taken the possession of the suit property. That the sale C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.9/31 transaction and the sale deeds are void on one account and voidable on the other and as such vitiated and did not confer any right, title or interest on the defendants nos.1 and 2 and the suit property continues to be owned by the plaintiff. The plaintiff is entitled to be declared having right, title and interest in the suit property and other consequential reliefs. The defendant nos.1 and 2 as such had/have no right or authority to deal with the suit property in any manner whatsoever. That being so, the purported mortgage of the suit property by defendant nos.1 and 2 in favour of defendant no.3 is invalid and did not/does not crate any right in favour of defendant no.3 and as such the defendant no.3 had/has no authority in law or otherwise to proceed against the suit property for its any alleged claim of repayment of loan or otherwise.
3. Defendants nos.1 and 2 were declared exparte vide order dated 13.07.2010.
4. The Written statement is filed by defendant no.3 and Mr. M. S. Yadav, who is stated to be one of its Principal Officer (Chief Manager) and is also authorised to institute and defend legal proceedings and to sign, file written statement. It is stated that the suit property had been inter alia duly mortgaged by the defendant no.1 in favour of the answering defendant to secure the due repayment of loans granted by the answering defendant to M/s. Swarn Gems Pvt. Ltd./defendant no.1 and defendant no.3 has already initiated recovery steps against the mortgaged property under Securitization and Reconciliation of Financial Assets and Enforcement of Security C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.10/31 Interest At 2002 (SARFAESI ACT).
4.1 The mortgaged property was owned by Mr. Amit Kumar Chatterji, son of late Sh. A B Chatterji, Mrs. Vrom Ori Chatterji, W/o Mr. Amit Kumar Chatterji, Sh. Vishwajeet Chatterji, S/o Mr. Amit Kumar Chatterji, Ms. Amita Chatterji, D/o Mr. Amit Kumar Chatterji and Ms. Shakuntala Chatterji, D/o Mr. Amit Kumar Chatterji (hereinafter called as 'vendors'), who had sold it vide separate duly Registered Sale Deeds both dated 13th April, 2005 to the defendant no.1 for a total sale consideration for the 3rd floor flat for Rs.50Lacs and for the 4th floor flat for Rs.20Lacs (as has been specifically mentioned in the respective Sale Deeds). The vendors have appointed the plaintiff as their Power of Attorney Holder and the sale deeds had been executed in favour of the defendant no.1 by the plaintiff acting on behalf of the vendors as their duly appointed Attorney.
4.2 That it has been stated in the sale deeds that the vendors and the plaintiff had entered into a collaboration agreement dated 4th March, 1996 and an addendum thereto dated 4th April, 2000 and in pursuance of the same the plaintiff had redeveloped and reconstructed the whole plot of the suit property. As per the said Sale Deeds, the plaintiff was entitled to receive the sale consideration of the mortgaged property. That M/s. Swarn Gems Pvt. Ltd./defendant no.1 was enjoying certain loan facilities from the answering defendant as the defendant no.3 has sanctioned a loan to defendant no.1 and defendant no.2 was a guarantor for these Credit/Loans facilities granted by the defendant no.3 to defendant no.1. That the C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.11/31 defendant no.1 had inter alia as a collateral security created an equitable mortgage of the suit property by deposit of the original documents of title on 6th July 2004 with intention to create mortgage thereon to secure the credit facility granted to defendant no.1 by the defendant no.3. The said equitable mortgage had subsequently been extended on 27th September, 2005 by defendant no.1 to secure the enhanced facilities. That the plaintiff and the defendant having personal relationship is well aware of the creation of the above said mortgage. That the disbursal of the above loan, the defendant no.1 and 2 failed to repay the said loan inspite of repeated reminders and as such the defendant no.3 had initiated steps against the Mortgaged Property/suit property under the SARFAESI Act and the Demand Notice dated 5th May, 2006 was also issued for an amount of Rs.6,38,24,961.76 with interest thereon. Since there was no compliance to the said notice the defendant no.3 thereafter issued Possession Notice as contemplated under Rule 891) of SARFAESI Act, 2002 on 05.02.2007. That thereafter the defendant nos.1 and 2 approached the defendant no.3 to settle the above loan facilities since the settlement did not materialize.
4.3 Thereafter, one Sh. Raj Kumar Gupta filed a suit for cancellation and permanent injunction against the defendant no.2 and the defendant no.3 alleging that he was the erstwhile owner of the property bearing no.2 measuring 400 square yards approximately out of total land measuring 500 square yards which was again part of larger plot of larger plot situated at under Hill Lane, Civil Lines, Delhi and obtained an exparte injunction in the said suit (Sh. Raj Kumar Gupta v. Ashok Kumar Jain) pending before C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.12/31 this court bearing CS (OS) No.1372/2007. Thereafter, the defendant no.3 filed an application for vacation of the exparte injunction order and when the defendant no.3 was proceedings for the recovery of the outstanding against the Mortgaged Property/suit property, the plaintiff has filed the abovesaid suit. That the whole chain of events would clearly reveal that both suits are collusive and are filed to defeat the just claim of the defendant no.3. That the above suit filed by the plaintiff is not maintainable as the same has been filed in collusion with defendant nos.1 and 2 to defeat the mortgage rights of the defendant no.3 over the suit property.
4.4 That admittedly, the defendant no.1 had purchased the Mortgaged Property/suit property vide Registered Sale Deed and sale consideration has also been paid and it is matter of record that there is no clause in the Sale Deed dated 13.04.2005 that the sale is conditional to the encashment of the cheque etc. It is also matter of record that as per the Sale Deed the possession of the Mortgaged Property/suit property has already been handed over to the defendant no.1 and it has been further incorporated that the plaintiff shall not have the right, title, interest or claim in any manner whatsoever and the vendee has become the absolute owner of the Mortgaged Property. The relevant portion of the Sale Deed is reproduced herein for the sake of ready reference:
"That the actual, physical, vacant possession the said portion of the said property has been delivered to the vendor and the confirming party to the vendee on the spot. Now the vendor and confirming party have been C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.13/31 left with no right, title, interest, claim or concern of any nature with the said portion of the said property and the vendee has become the absolute owner of the said portion of the said property, when full right to use, enjoy, sell and transfer the same as absolute owner and to realize the rents and profits in respect of the same, without any objection hindrance by the vendor and confirming party or any other person claiming through or under them".
4.5 That a simple reading of the above clause clearly indicates that the sale transaction was final and there is absolute no scope for cancellation of the Sale Deeds as averred in the plaint.
4.6 That it is borne out from the averments of the plaint that the plaintiff had clear knowledge of the creation of the mortgage, inspite of that no action has been initiated against the defendants. In fact, plaintiff maintained a stoic silence for more than three years after the execution of the Sale Deed and only when SARFAESI action was initiated, the above suit was filed.
4.7 That without prejudice to the other objections taken in the present written statement and without prejudice to the fact that the plaintiff had due knowledge even prior to the creation of the equitable mortgage over the "mortgage property" and had never objected to the same, it is stated that the present suit is also not maintainable and is liable to be dismissed as the plaintiff has not approached this court at the first instance but has C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.14/31 deliberately and malafidely kept silent for years after having specific knowledge of the creation of the equitable mortgage over the mortgaged property. It is settled law that a person seeking a discretionary relief like declaration, cancellation, injunction has to approach the court at the first instance however in the present case the plaintiff has waited for years altogether before approaching this court. The above would be evident from the own pleadings of the plaintiff that the plaintiff had specific knowledge of the creation of mortgage over the "mortgaged property" years prior to the filing of the suit. That the plaintiff has alongwith the present suit also filed the copy of the complaint filed by him against the defendant nos.1 and 2 under Section 138 of the Negotiable Instruments Act, and the plaintiff has in para no.7 of his complaint specifically alleged that the defendant no.1 and 2 had raised huge loan by pledging the "mortgaged property". That the defendant no.1 and the plaintiff were friends and also had very close business and personal relations and the plaintiff was always aware of the fact that the mortgaged property had been mortgaged to the answering defendant by the defendant no.1 to secure the credit facilities granted by the answering defendant to the defendant no.1. In fact the plaintiff also has/had his bank account with the answering defendant and on many occasions the defendant no.2 and the plaintiff also visited the Office of the answering defendant together so plaintiff was all along aware of creation of equitable mortgage in favour defendant nos.3.
5. In the Replication, the plaintiff has denied the contents of the Written Statement and has reiterated & reaffirmed the contents of the C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.15/31 plaint. It is denied that the plaintiff was only acting as an attorney/agent of the Vendors and was not the owner of the mortgaged property and thus has no locus standi to file the present case. It is stated that the plaintiff had become the owner of the suit property and offered to sell the same in his own right. Therefore, the plaintiff has every right and locus standi to institute the present suit. That the suit property was developed by the plaintiff under a collaboration agreement dated 4 th March 1996 and an Addendum thereto dated 4th April, 2000 entered into by the plaintiff with the then owners of the pot. Under the collaboration agreement, the plaintiff became the absolute owner of the property with respect to basement, entire ground floor with inbuilt mezzanine floor, entire third floor, entire fourth floor with entire terrace thereupon. The plaintiff had become the owner of the suit property and offered to sell the same in his own right. Therefore, the plaintiff has every right and locus stand to institute the present suit.
5.1 It is further denied to the knowledge of the plaintiff that the defendant no.1 had interalia as collateral security created an equitable mortgage of the mortgaged property by deposit of the original documents of title on 6th July, 2004 with intention to create mortgage thereon to secure the credit facilities granted to the defendant no.1 by the answering defendant. It is further denied to the knowledge of the plaintiff that the equitable mortgage had subsequently been extended on 27th September, 2005 by the defendant no.1 to cover/secure the above mentioned enhanced credit/loan facilities. It is also denied that the whole chain of events would clearly reveal that the present suit is collusive and the defendant no.3 is a C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.16/31 victim of well planned conspiracy and of which conspiracy even the plaintiff is coconspirator as alleged or otherwise.
6. From the pleadings of the parties, the following issues were framed on 24.02.2011 by the Hon'ble High Court of Delhi:
(i) Whether the two sale deed dated 13th April, 2005 executed by the plaintiff in favour of defendant no.1 are without consideration and are liable to be declared as void? OPP.
(ii) Whether the defendant no.1 caused the two sale deeds dated 13 th April, 2005 to be executed by undue influence or fraudulently from the plaintiff and are hence voidable? If so, to what effect? OPP.
(iii) If answer to the issue nos.1 and/or 2 is in the affirmative, whether the two sale deeds dated 13th April, 2005 are liable to be cancelled and the plaintiff entitled to a decree for possession of the suit property? OPP.
(iv) Whether defendant nos.1 and 2 had created equitable mortgage of the suit property in favour of defendant no.3? OPD3.
(v) If the answer to issue no.(iv) is in affirmative, whether the present suit is not maintainable in view of defendant no.3 initiating steps against the suit property under SARFAESI Act? OPD3.
(vi) Whether the plaintiff is entitled to damages as claimed? If so, of what amount? OPP.C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.17/31
(vii) Relief.
An additional issue was also framed on 22.12.2017 with the consent of both the parties.
Additional Issue No.1. :
Whether the plaintiff is entitled to decree of Rs.70 Lakhs being sale consideration payable by the defendant nos.1 and 2 under the SaleDeed dated 13.04.2005 with interest @ 18% per annum? OPP.
7. In support of its case, the plaintiff examined himself as PW1 and tendered his affidavit in evidence as Ex.PW1/A and has relied upon documents Ex.PW1/1 to Ex.PW1/15 i.e. :
Ex.PW1/1 is copy of addendum dated 04.04.200 to the Collaboration Agreement dated 04.03.1996, Ex.PW1/2 is copy of joint application I.A. No.4878/2000 under Order XXIII Rule 3 read with Section 151 CPC, Ex.PW1/3 is copy of the order dated 25.05.2000 passed in I.A. No.4878/2000, Ex.PW1/4 certified copies of the Sale Deeds both dated 13.04.2005 executed by the plaintiff in favour of Defendant No.1 and 2 for a sum of Rs.50,00,000/ and Rs.20,00,000/ respectively, Ex.PW1/5 is the Certified Copy of the Site Plan, Ex.PW1/6 are certified copies of five cheques bearing Nos.552181, 552182, 552183, 552184 and 552185, all dated 12.04.2005 and each for an amount of Rs.4,00,000/, C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.18/31 Ex.PW1/7 is certified copy of Return Memo dated 28.04.2006 issued by Indian Overseas Bank, Yusuf Sarain Branch, New Delhi, Ex.PW1/8 is certified copy of the Legal Notice dated 09.05.2006 issued by M/s. S C Sharma & Co. on behalf of the plaintiff to the defendant nos.1 and 2 alongwith its postal receipt, UPC, Receipt and Return Aknowledgment Card, Ex.PW1/9 is certified copy of the complaint under Section 138 of the Negotiable Instrument Act filed by the plaintiff against the defendant nos.1 and 2 before the Chief Metropolitan Magistrate, New Delhi, Ex.PW1/10 is list of witnesses filed by the plaintiff alongwith the Complaint before the Chief Metropolitan Magistrate, New Delhi, Ex.PW1/11 are Certified Copies of the orders dated 24.06.2006, 27.10.2006, 21.02.2007, 26.02.2007, 25.04.2007, 10.07.2007 and 17.09.2007 passed by the Chief Metropolitan Magistrate, New Delhi, Ex.PW1/12 is the Certified Copy of the Notice under Section 251 Cr.P.C.
issued by the Chief Metropolitan Magistrate, New Delhi, to the defendants No.1 and 2, Ex.PW1/13 is the Certified Copy of the evidence by way of affidavit dated 24.06.2006 and 17.09.2007 filed by the plaintiff before the Chief Metropolitan Magistrate, New Delhi, Ex.PW1/14 are the Original Photographs showing the notice of possession dated 02.02.2007 has been inserted in the suit property and Ex.PW1/15 is the Original Newspaper cutting of "The Statesman" dated 09.10.2008.
C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.19/318. Plaintiff has examined only himself in support of his case and PE was closed vide order dated 07.08.2013.
9. Defendant nos. 1 and 2 were proceeded exparte vide order dated 13.07.2010. Only defendant no.3 Sh. Gurvinder Singh Bhatia, Senior Branch Manager, Indian Overseas Bank, Muradabad Branch, examined himself as D3W1 and relied upon documents i.e. Ex.D3W1/1, Certified Copy of Claim Petition in the Debt Recovery Tribunal for recovery of Rs.9,38,87,531.67 inter alia against defendant no.1 and 2 herein on 26.09.2008 (O.A. No.81 of 2008) alongwith interim order dated 28.04.2009, Ex. D3W1/2, the Certified Copy of the Statement of Account duly certified under the Banker's Book of Evidence of Act filed in the DRT and Ex.D3W1/3, Certified Copy of Judgment dated 28.06.2013 in O.A. No.81 of 2008 titled Indian Overseas Bank v. M/s. Swarn Gems Pvt. Ltd. And Ors.
10. No other DW was examined by defendant no.3 and DE was closed vide order dated 27.04.2015.
11. Final arguments heard. Record perused. My findings on the issues are as follows:
Issue Nos. 1, 2 & 3.
(i) Whether the two sale deed dated 13 th April, 2005 executed by the plaintiff in favour of defendant no.1 are without consideration and are C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.20/31 liable to be declared as void? OPP.
(ii) Whether the defendant no.1 caused the two sale deeds dated 13 th April, 2005 to be executed by undue influence or fraudulently from the plaintiff and are hence voidable? If so, to what effect? OPP.
(iii) If answer to the issue nos.1 and/or 2 is in the affirmative, whether the two sale deeds dated 13th April, 2005 are liable to be cancelled and the plaintiff entitled to a decree for possession of the suit property?
OPP.
11.1 These issues are decided together as they are interrelated. The entire sale consideration of the suit property sold vide two saledeeds dated 13.04.2005 was admittedly paid by the defendant No.1 & 2 to the plaintiff through cheques:
(a) Rs.10 Lacs vide Cheque No.552186, dated 12.04.2005.
(b) Rs.10 Lacs vide Cheque No.552187, dated 12.04.2005.
(c) Rs.10 Lacs vide Cheque No.552188 dated 12.04.2005.
(d) Rs.20 Lacs vide Cheque No.552189, dated 12.04.2005
(e) Rs.4 Lacs vide Cheque No.552181, dated 12.04.2005.
(f) Rs.4 Lacs vide Cheque No.552182, dated 12.04.2005.
(g) Rs.4 Lacs vide Cheque No.552183 dated 12.04.2005.
(h) Rs.4 Lacs vide Cheque No.552184, dated 12.04.2005.
(i) Rs.4 Lacs vide Cheque No.552185, dated 12.04.2005.
Ex. PW1/7 establishes that the said cheques were dishonoured later on the ground 'exceeds arrangement'. The plaintiff thereafter filed complaint under Section 138 of Negotiable Instruments Act against the defendant No.1 & 2 as proved vide Ex. PW1/9 and Notice under Section 251 Cr.P.C C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.21/31 in the said complaint was framed against the defendant No.1 & 2 as proved vide Ex. PW1/12.
11.2 Ld. Counsel for the defendant No.3 has vehementally argued that for completion of sale, payment of entire sale consideration is not a condition precedent in terms of Section 54 of the Transfer of Property Act. Further, there is no condition in the saledeeds that the title shall pass in favour of vendee/defendant No.1 only on encashment of cheques and payment of sale consideration. So, now the plaintiff cannot challenge the saledeeds after execution of registered saledeeds in favour of defendant No.1 and handing over of possession of the suit property to the defendant No.1 on the ground of nonpayment of consideration. He has further argued that on the ground of nonpayment of consideration, the plaintiff cannot seek the cancellation of saledeeds and his only remedy is to file a suit against the defendant No.1 & 2 for recovery of sale consideration. In order to support of his arguments, he has relied on the judgment of Bishundeo Narain Rai (Dead) by L.Rs and Ors. vs. Anmol Devi & Ors. (1998) 7 Supreme Court Cases 498 and M/s KMJ Land Developers India Ltd. vs. Karan Realtech Pvt. Ltd. 2015 SCC OnLine Del 12833. On the other hand, Ld. Counsel for the plaintiff has argued that no valid title passed in favour of the defendant No.1 on the basis of the saledeeds as no consideration has been received by the plaintiff from the defendant No.1 & 2 and saledeeds in question being without consideration, are void. He has relied on judgment of Official Receiver of Salem vs. Chinna , Goundan & Anr. 1957 Madras 630 (V 44, C 191, Oct.) Further, it is argued that the C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.22/31 saledeeds were executed by the plaintiff under the undue influence and fraud perpetrated by the defendant No.2 and thus are liable to be cancelled.
11.3 In Bishundeo Narain Rai (supra), it was held by Hon'ble Supreme Court in Para 11 that "Apropos the question noted above, a reference to Section 54 of the Transfer of Property Act will be apposite. While defining "sale", Section 54 sets out how sale is made. Sale is defined to mean a transfer of ownership in exchange for price paid or promised or partpaid or partpromised; it says, inter alia, in case of tangible immovable property of the value of Rs. 100 and upward or in case of a reversion or other tangible things, sale can be made only by a registered instrument. Section 8 of the Transfer of Property Act declares that on a transfer of property, all the interests which the transferor has or is having at that time, capable of passing in the property and in the legal incidence thereof, pass on such a transfer unless a different intention is expressed or necessarily implied. A combined reading of Section 8 and Section 54 of the Transfer of Property Act suggests that though on execution and registration of a sale deed, the ownership and all interest in the property pass to the transferee, yet that would be on the terms and conditions embodied in the deed indicating the intention of the parties. It follows that on execution and registration of a sale deed, the ownership title and all interests in the property pass to the purchaser unless a different intention is either expressed or necessarily implied which has to be proved by the party asserting that title has not passed on registration of the sale deed. Such intention can be gathered by intrinsic evidence, C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.23/31 namely, from the averments in the sale deed itself or by other attending circumstances subject, of course, to the provisions of Section 92 of the Evidence Act, 1872."
11.4 To ascertain the intention of the parties in the present case, it shall be apposite to reproduce the relevant stipulation of saledeeds dated 13.04.2005 Ex. PW1/4 (Colly) which are as under:
"That the actual, physical, vacant possession of the said portion of the said property has been delivered by the Vendor and the Confirming Party to the Vendee, on the spot.
Now the Vendor and the Confirming party have been left with no right, title, interest, claim or concern of any nature with the said portion of the said property and the Vendee has become the absolute owner of the said portion of the said property, with full right to use, enjoy, sell and transfer the same as absolute owner and to realise rents and profits in respect thereof, without any objection/hindrance by the Vendor and the Confirming Party or any other person claiming through or under them.
That the Vendors and the Confirming Party hereby assure the Vendee that they have neither done nor been party to any act whereby their rights and title to the said portion of the said property may in any way be impaired or whereby they may be prevented from transferring the said portion of the said property."
11.5 The aforesaid averments unmistakably show conveying of title to the property absolutely in favour of the defendant No.1; by virtue of sale, C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.24/31 the defendant No.1 was put in possession of the suit property, became entitle to the custody of the saledeeds and other documents and enjoyment of suit property. There is nothing on record to establish that parties intended not to pass ownership, title and all interests in the suit property to the defendant No.1 unless the cheques are encashed. In M/s KMJ Land Developers India Ltd. (supra), the Hon'ble High Court clearly held that if the payment of the consideration is not a consideration precedent for conveying the title under the saledeed, the seller cannot maintain the suit for cancellation of the saledeed on the ground of nonpayment of whole or part of the consideration amount and only remedy available with him is to file the suit for recovery of consideration against the purchaser.
11.6 It is argued by Ld. Counsel for the defendant that the suit property was not owned by the plaintiff and he was merely acting as a Power of Attorney Holder of the owners of the suit property and the sale deed had been executed by the plaintiff in favour of defendant No.1 acting on behalf of the vendors/owners as their duly appointed Attorney. So, the present suit filed by the plaintiff is not maintainable. On the other hand, Ld. Counsel for the plaintiff has stated that under the Collaboration Agreement dated 04.03.1996 and Addendum thereto dated 04.04.2000 and by virtue of the settlement reached between the earlier owners and the plaintiff recorded in the Hon'ble High Court of Delhi, the plaintiff became the owner of the suit property and is competent to maintain the present suit.
11.7 Ex. PW1/1, Ex. PW1/2 and Ex. PW1/3 clearly establish that the C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.25/31 plaintiff herein became the absolute owner of the basement, ground floor, third floor and fourth floor with terrace of the building in question. So, the plaintiff is the absolute owner of the suit property and is competent to maintain the present suit.
11.8 It is the case of the plaintiff that in view of the long standing amicable relationship and terms of the plaintiff with the defendant No.2, he was deceived by the defendant No.2 to execute the saledeeds on the misrepresentation made by the defendant No.2 that the cheques paid for consideration of the suit property shall be duly honoured on presentation and is a victim of fraud and undue influence exercised by the defendant No.1 & 2. The defendant No.1 & 2 never participated in the proceedings and were accordingly proceeded exparte. Thus, the averments of undue influence and fraud made by the plaintiff against the defendant No.1 & 2 remained unimpeached and uncontroverted. The plaintiff in his suit as well as in evidence by way of affidavit stated that defendant nos.1 and 2 have played fraud against the plaintiff in going back to their promise/commitment to the plaintiff that they will not deal with the property in any manner and also not create any encumbrance charge or mortgage on the said properly till payment is made to the plaintiff. In violation of the said understanding/commitment, the defendants nos.1 and 2 have mortgaged the suit property in favour of their bank(defendant no.3) and have raised a huge loan against it. However, in his crossexamination, PW1/plaintiff stated that defendant no.2 did not give him any assurance that he will not mortgage the property with defendant no.3 till the payment C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.26/31 is made. The deposition of the plaintiff also runs contrary to the written stipulation in the Sale Deeds and is thus cannot be considered in view of the provisions contained in Section 91 & 92 of Indian Evidence Act, 1872.
11.9 It cannot be lost sight of that the relief of Cancellation of Documents, Declaration and Injunction is an equitable discretionary relief and the persons seeking discretionary relief must act diligently and should come to the court with clean hands. It is stated by the defendant No.3 that the plaintiff had due knowledge about the creation of the equitable mortgage over the suit property by the defendant No.1 years prior to the filing of the suit. However, he deliberately kept silence for years and approached the court only after the defendant No.3 took steps against the suit property under SARFAESI ACT. On the other hand, it is argued by Ld. Counsel for the plaintiff that he came to know about the creation of the equitable mortgage by the defendant No.1 in respect of the suit property only on 26/27 December, 2007 when the plaintiff went to the defendant No.3 and came to know that the defendant No.1 & 2 are defaulters in the repayment of the loan taken by them from the defendant No.3 against the suit property and the defendant No.3 Bank had issued notice under SARFAESI ACT. The plaintiff acted with diligence and expeditiously filed the present suit.
11.10 The plaintiff in Para No.7 of the complaint filed by the plaintiff against the defendant No.1 & 2 under Section 138 of N.I. Act Ex. PW1/10 filed in the year 2006 stated that the plaintiff has learnt that after C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.27/31 pledging/mortgaging the suit property, the defendant No.1 & 2 raised huge loan of Crores of rupees from his bankers. Importantly, the defendant No.3 bank is no stranger to the plaintiff and both the plaintiff and the defendant No.1 & 2 are maintaining the account with the defendant No.3 bank. So, the plaintiff was fully aware of the equitable mortgage created in respect of suit property way back in the year 2006 but filed the present suit only in the year 2008 after initiation of SARFAESI action by the defendant No.3 against the defendant No.1 & 2. The undue delay in filing present suit is not explained by the plaintiff and on account of conduct of the plaintiff, he is not entitled discretionary relief of declaration and cancellation of the saledeeds. In view of the aforesaid reasons, relief of cancellation of two saledeeds dated 13.04.2005 cannot be passed in favour of the plaintiff and against the defendants and the plaintiff is not entitled to a decree for possession of the suit property. Hence, these issues are decided in favour of the defendants and against the plaintiff.
Issue Nos. 4 & 5(iv) Whether defendant nos.1 and 2 had created equitable mortgage of the suit property in favour of defendant no.3? OPD3.
(v) If the answer to issue no.(iv) is in affirmative, whether the present suit is not maintainable in view of defendant no.3 initiating steps against the suit property under SARFAESI Act? OPD3.
11.11 These issues are also decided together as they are interrelated. The Debt Recovery Tribunal Delhi has already passed a judgment/order Ex. DW1/3 in favour of the defendant No.3 and against the defendant No.1 C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.28/31 & 2 for recovery of outstanding loan granted to the defendant No.1 & 2 by the defendant No.3 bank upholding the validity of equitable mortgage in respect of suit property created in favour of the defendant No.3 bank in order to secure the loan granted to defendant No.1 & 2 by the defendant No.3 bank.
11.12 During the course of the arguments, Ld. Counsel for the plaintiff has also argued that the testimony of D3W1 cannot be read in evidence as he has not filed any Power of Attorney in his favour by the defendant No.3 authorizing him to depose on behalf of the bank. In support of his submission, he has placed reliance on judgment of S. Kesari Hanuman Goud vs. Anjum Jehan 2013 (12) SCC 64. I am of the considered view that there is no requirement of any law to specifically authorize the official of the company/bank for deposing in favour of the company/bank. The D3W1 being Senior Branch Manager of the defendant No.3 bank is competent to depose on behalf of the defendant No.3 bank. The judgment of S. Kesari Hanuman Goud (supra) is distinguishable on facts.
11.13 Section 35 of SARFAESI ACT reads as under:
"35. The provisions of this Act to override other laws. The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law."
11.14 In view of the overriding effect of provisions contained in C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.29/31 SARFAESI ACT over other laws, the present suit is not maintainable. Hence, these two issues are decided in favour of the defendants and against the plaintiff.
Issue No.6.
(vi) Whether the plaintiff is entitled to damages as claimed? If so, of what amount? OPP.
11.15 In view of the finding on issues No.1, 2 & 3, the plaintiff is not entitled to damages/mesne profits claimed by the plaintiff. The plaintiff has also failed to establish that he is entitled to compensation of Rs.1 Crore from the defendant No.1 & 2. The plaintiff in his oral testimony given by way of affidavit Ex. PW1/A stated that he intended to invest the sale consideration in procuring another property and the property which the plaintiff would have been able to buy at Rs. 70 Lakh in April 2005 is now available is now available Rs.1.70 Crore (approximately) so he has suffered loss of Rs. 1 Crore. However, no documentary evidence has been filed to corroborate the oral testimony of the plaintiff that he suffered a loss of Rs. 1 Crore. The onus was on the plaintiff to show that on account of non payment of sale consideration, he suffered loss of Rs. 1 Crore. However, the mere oral evidence of the plaintiff is not sufficient to establish loss of Rs. 1 Crore by the plaintiff on account of failure of the defendant No.1 & 2 to pay the sale consideration of the suit property to the plaintiff. Hence, this issue is decided in favour of the defendants and against the plaintiff.
C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.30/31Additional Issue No.1 Whether the plaintiff is entitled to decree of Rs.70 Lakhs being sale consideration payable by the defendant nos.1 and 2 under the Sale Deed dated 13.04.2005 with interest @ 18% per annum? OPP. 11.16 In view of the finding on issues No.1 , 2 & 3, the plaintiff is entitled to decree of Rs. 70 lakh being sale consideration payable by the defendant No.1 & 2 under saledeeds dated 13.04.2005. The plaintiff has also sought interest @ 18% per annum. The interest claimed is exorbitant and in my considered opinion, interest of justice would be met, if the interest is allowed @ 10% per annum. So, the defendant No.1 & 2 are directed to pay a sum of Rs. 70 Lakhs to the plaintiff alongwith interest @ 10% per annum from 13.04.2005 till the date of payment. Cost of suit is also awarded in favour of the plaintiff and against the defendant No.1 & 2.
12. Decree sheet be prepared accordingly. File be consigned to the Record Room after necessary compliance.
Announced in the open court (Priya Mahendra)
On 16.03.2018 Additional District Judge04,
South District, Saket Courts
New Delhi.
Digitally
signed by
PRIYA
PRIYA MAHENDRA
MAHENDRA Date:
2018.03.17
17:05:19
+0530
C.S. No. 48/2017. Ashok Kumar Jain v. Swarn Gems Pvt. Ltd. and Ors., Page No.31/31