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Delhi District Court

Punjab And Sind Bank vs Usha Massey on 23 January, 2024

                IN THE COURT OF SH. REETESH SINGH,
            DISTRICT JUDGE COMMERCIAL COURT-04,
           SHAHDARA, KARKARDOOMA COURTS, DELHI

CNR No. DLSH01-007824-2022
CS (Comm) No. 659/22

In the matter of :-

Punjab & Sind Bank, a body
corporate constituted and functioning
under the Banking companies
(Acquisition & Transfer of Undertaking) Act 40 of 1980.
Having its Head Office at:
Bank House 21, Rajendera Place, New Delhi and amongst others a
Branch situated at Loni Border, Ghaziabad, Uttar Pradesh, through its
principal officer/Attorney

                                                                .....Plaintiff
                 (Through Ld. Counsels Sh. Vinod Gupta and Ms. Juhi Pilwal)

                                  Versus

1.

Ms. Usha Massey (Borrower) Daughter of Sh. Goerge Massey House No.44, Pocket-Q Dilshad Garden, Delhi-110095 Also at:

Flat No.A-2, 803, Geotech Blessing, 8th Floor, Plot No. GH 16A, Sector 01, Greater Noida West, UP-201310

2.Mr. Martin Massey (Guarantor) Son of Sh. Goerge Massey, House No.44, Pocket-Q, Dilshad Garden, Delhi-110095 Aslo at:

A-38K, Sector-64, Noida-201301 CS (Comm) No.659/22 1 /13

3.M/s Morpheus Developers Pvt. Ltd.

Through its Director 1, Main Road, Maujpur, Delhi-110053

4.M/s Geotech Promoters Pvt. Ltd Through its Director G-1/149, Gyan Khand-I, Indirapuram, Ghaziabad, U.P.201010 Also At:

410, Block-D, Pocket-16, Sector-7 Rohini, Delhi-110085 ......Defendant (Defendants are ex-parte) Date of institution of the case : 07.11.2022 Date of final arguments : 12.01.2024 Date of judgment : 23.01.2024 EX-PARTE JUDGMENT

1. This suit has been filed by plaintiff M/s Punjab and Sind Bank against Ms. Usha Massey (Borrower/defendant No.1), Sh. Martin Massey (Guarantor/defendant No.2), M/s Morpheus Developers Pvt. Ltd (defendant No.3) and M/s Geotech Promoters Pvt. Ltd (defendant No.4) praying for a decree for recovery of Rs.14,45,878.65 (Rupees Fourteen Lakhs Forty Five Thousand Eight Hundred Seventy Eight and Paise Sixty Five Only) along with interest pendent lite and future @ 9.70 % per annum with monthly rests from the date of filing of the suit till the date of realization and costs of the suit.

2. It is averred by the plaintiff bank that defendant No.1/Borrower Ms. Usha Massey and defendant No.2 Guarantor/Sh. Martin Massey had approached the plaintiff bank on 22.12.2015 for grant of a Housing Loan for Rs.32,00,000/-. It is averred that M/s Morpheus Developers Pvt. Ltd (defendant No.3) and M/s Geotech CS (Comm) No.659/22 2 /13 Promoters Pvt. Ltd (defendant No.4) are the builders who were to build the property intended to be purchased by the defendant No.1 and they executed a Quadripartite Agreement in this regard. Vide sanction letter dated 28.12.2015, the plaintiff bank sanctioned the Housing Loan for Rs.32,00,000/-. The loan was secured by equitable mortgage against immovable property residential unit No. A-2-803, 8th Floor, Tower/Block-A2, super area measuring 1175 sq.ft. (approximately) at Group Housing Project "Geotech Blessing" on plot bearing no. GH-16-A, Sector-1, Greater Noida, Distt. Gautam Budh Nagar, UP (herein after referred to as the financed property). The plaintiff bank released the Housing Loan of Rs.32,00,000/-

on 28.12.2015 under the terms and conditions of the documents executed by the defendant No.1 and 2, which are detailed in para 8 of the plaint. It is averred that the defendant No.1 deposited the original Allotment-cum-Flat Buyer Agreement dated 22.12.2015 executed by the defendant No.4 with the plaintiff bank.

3. The plaintiff has averred that the Housing Loan was to be repaid in 240 equal monthly installments (EMIs) of Rs.30,400/- each w.e.f. March 2016. Rate of interest applicable to the loan was 9.70% p.a. with monthly rests with liability of additional 2% interest p.a. in case of default. The loan was disbursed in Home Loan Account Number 07041200051253 in the Loni Border Branch of the plaintiff bank. It is averred that the defendant No.1 defaulted in payment of EMIs. Despite several reminders the defendant No.1 did not comply with the terms of the loan and the loan was declared as NPA on 29.12.2020. The plaintiff bank recalled the entire outstanding loan amount from the defendants vide notice dated 28.12.2020 calling upon them to make payment of Rs.12,27,186.95p outstanding as on 30.11.2020. Despite sending the said notice, the defendants did not respond.

4. Before filing of the suit, the plaintiff availed the remedy of pre-institution mediation under Section 12 A of the Commercial Courts Act, 2015 by filing an application before the Shahdara District, Legal Services Authority on 15.09.2022 which was closed as non-starter on 13.10.2022.

5. By order dated 02.12.2022, summons of the suit were directed to be issued to the defendant. As the defendants could not be served in the ordinary manner, on an application under Order V Rule 20 of the CPC of the plaintiff, by order dated 26.07.2023 the defendants were directed to be served with the summons of the suit by way of publication in newspaper "Statesman" having circulation in Delhi and in newspaper "Rashtriya Sahara" having circulation in Uttar Pradesh. Publication of the summons was carried out in the editions dated 19.08.2023 of both the said newspapers, and as none appeared, defendants were proceeded ex-parte vide order dated 21.09.2023. The plaintiff led evidence and examined Ms. Manjeet Kaur, Senior Manager and Authorized Representative of the bank as PW-1 who deposed by way of her affidavit Ex.PW1/A and placed reliance on the following documents :-

(i) Copy of the General Power of Attorney dated 20.09.2014 vide Ex.PW-1/1 (OSR)

(ii) Sanction letter dated 28.12.2015 vide Ex.PW-1/2

(iii) Form No.14 (R) vide Ex.PW-1/3

(iv) Housing Loan Agreement vide Ex.PW-1/4

(v) Form No.256 (RR) vide Ex.PW-1/5

(vi) Form No.103/291/412 vide Ex.PW-1/6

(vii) Form No.106 vide Ex.PW-1/7

(viii) Form No.200 vide Ex.PW-1/8

(ix) Form No.199 vide Ex.PW-1/9

(x) Affidavit/undertaking vide Ex.PW-1/10

(xi) Irrevocable GPA vide Ex.PW-1/11

(xii) Deed of Negative Lien vide Ex.PW-1/12

(xiii) Indemnity Bond vide Ex.PW-1/13

(xiv)Allotment letter-cum-Flat Buyer Agreement dated 22.12.2015 vide Ex.PW-1/14

(xv) Legal Notice dated 28.12.2020 along with postal receipts vide Ex.PW-1/15 (xvi) Non-Starter Report dated 13.10.2022 vide Ex.PW-

(xvii) Computer generated statement of account vide Ex.PW-1/17 (xviii) Certificate under Banker's Book Evidence Act and certificate of interest vide Ex.PW-1/18 CS (Comm) No.659/22 4 /13

6. As the defendants were ex-parte, PW-1 was not subjected to any cross- examination. Plaintiff thereafter closed evidence on 20.10.2023.

7. After hearing arguments, on 06.11.2023, the matter was posted for orders. While dictating orders, it transpired that the Quadripartite Agreement referred to in paras 5 and 6 of the plaint was not on the record and the plaintiff bank vide order dated 23.11.2023 was directed to place the same on the record. The plaintiff bank filed the original copy of the said agreement on 30.11.2023. That day the plaintiff bank was directed to disclose the status of construction of the financed property. The plaintiff bank carried out verification and filed a Visit Report through PW-1 Ms. Manjeet Kaur vide Ex.PW-1/19. PW-1 while tendering the said report in evidence deposed that construction had been done till the 11th Floor but the remaining work had stopped for 5-6 years.

8. Sh. Vinod Gupta, Ld. Counsel for the plaintiff has submitted that the case set up by the plaintiff in the plaint and evidence led has gone unrebutted and submitted that the plaintiff was entitled to the decree as prayed for.

9. I have heard the Ld. Counsel for the plaintiff and have perused the record of the case. The defendants chose not to defend the suit. The averments made by the plaintiff and evidence led have gone unrebutted and unchallenged. The documents placed on record by the plaintiff are deemed to have been admitted by the defendants. The plaintiff has proved on record, amongst others, the sanction letter, housing loan agreement, deed of negative lien, indemnity bond, allotment letter-cum-flat buyer agreement and computer generated statement of account. The statement of account Ex.PW-1/17 reveals that as on the date of filing of the suit an amount of Rs.14,45,878.65p was due and outstanding against the defendants. The plaintiff is held entitled for recovery of the said amount.

10. As recorded above, there are four defendants in this suit Ms. Usha Massey (Borrower/defendant No.1), Sh. Martin Massey (Guarantor/defendant CS (Comm) No.659/22 5 /13 No.2), M/s Morpheus Developers Pvt. Ltd (defendant No.3) and M/s Geotech Promoters Pvt. Ltd (defendant No.4). The loan was sanctioned by the plaintiff bank to the defendant No.1 for purchasing the financed property i.e. residential unit No. A-2-803, 8th Floor, Tower/Block- A2, super area measuring 1175 sq.ft. (approximately) at Group Housing Project "Geotech Blessing" on plot bearing no. GH-16-A, Sector-1, Greater Noida, Distt. Gautam Budh Nagar, UP.

11. Ex.PW-1/14 is the Allotment-cum-Flat Buyer Agreement dated 22.12.2015 executed by the defendant No.4 in favour of the defendant No.1 as per which the cost of the financed property was Rs.42,08,000/-. As per clause 19 thereof, the defendant No.4 was to complete construction of the flat within 30 months of the agreement dated 22.12.2015, plus or minus six months. The plaintiff bank therefore financed a property which was yet to be constructed. As per the statement made by PW-1 Ms. Manjeet Kaur on 20.12.2023 and her Visit Report Ex.PW-1/19, the flat has not been constructed and construction of the building remains stalled for the last 5-6 years. The financed property was therefore never conveyed by the defendant No.3 and 4 to the defendant No.1.

12. As averred in paras 5 and 6 of the plaint, a Quadripartite Agreement dated 22.12.2015 was executed between the defendant No.1 Ms. Usha Massey, the defendant No.3 M/s Morpheus Developers Pvt. Ltd (described as Sub-lessee), defendant No.4 M/s Geotech Promoters Pvt. Ltd (described as builder-developer) and the plaintiff M/s Punjab and Sind Bank. Clauses 1, 4, 6 and 9 of the Quadripartite Agreement are relevant which are reproduced as under:-

"1. That the borrower(s) hereby authorizes the Bank to make disbursement(s) of the sanctioned loan to the Developer and Sub- Lessee directly on behalf of borrower(S) and any such payment made to the Developer and Sub-Lessee shall be deemed to be the payment(s) made to the Borrower(s) and the Borrower(s) shall in each case be liable for the amount of loan disbursed on her behalf to the Developer and Sub-Lessee as though the same had been CS (Comm) No.659/22 6 /13 disbursed directly to borrower(s). If there is any delay in payment to the Developer and Sub-Lessee, it will be treated as default on the part of the Borrower(s) and the Borrower(s) shall be liable to pay the Developer and Sub-Lessee the penalty on such delayed payment, if any, according to the agreement with Developer and Sub-Lessee.

"4. That the Developer and Sub-Lessee undertakes that the sale Deed/Conveyance Deed shall be executed and registered soon after delivery of possession and shall deposit and deliver the said deed directly to the Bank.

"6. That the Developer and Sub-Lessee hereby agrees that in any event of matter, she shall not pay any amount on any account to the Borrower(s) by way of refund or otherwise without obtaining written consent of the Bank.

"9. That in the event of cancellation of allotment of the borrower(s) by the Developer and Sub-Lessee, for any reason whatsoever, the Developer and Sub-Lessee shall refund to the Bank, forthwith, the entire amount received from it along with interest @ Bank's lending rate of interest as applicable from time to time during the period of this agreement."

13. Clause 1 of the Quadripartite Agreement records that the borrower and developer/Sub-Lessee have requested the plaintiff bank to disburse the loan amount notwithstanding the inability of the borrower to create a mortgage as the financed unit was yet to be conveyed to the borrower by the developer. The same records that the borrower authorizes the bank to make disbursement of the sanctioned loan to the developer directly on behalf of the borrower and that such payment shall be deemed to have been made to the borrower who shall be liable for the loan amount disbursed to the developer as if the same was disbursed directly to the borrower. As per clause 4 the developer/sub- lessee has undertaken to execute the sale deed soon after the delivery of possession of the financed property and to deposit the sale deed directly with the plaintiff bank. As per clause 6 the developer/sub-lessee is not to pay any amount to the borrower by way of refund. As per clause 9, in the event of CS (Comm) No.659/22 7 /13 cancellation of allotment, the developer/sub-lessee is liable to refund to the plaintiff bank the entire amount received by it with interest at the banks lending rate. However at the same time, clause 1 of the Quadripartite Agreement does not absolve the liability of the defendant No.1 to repay the loan even though the defendant 3 and 4 may have not been able to construct the financed property or to execute the sale deed in favour of the defendant No.1.

14. In such circumstances, the question which arises is that should the defendant No.1 be made liable to repay the loan to the plaintiff bank jointly and severally along with the defendant No.3 and 4? In the case of Central Inland Water Transport Corpn. v. Brojo Nath Ganguly, (1986) 3 SCC 156, the Hon'ble Supreme Court while considering unconscionable contracts/terms was pleased to refer to American law as contained in Reinstatement of the Law -- Second as adopted and promulgated by the American Law Institute, Volume II which deals with the law of contracts and in which in Section 208 at p. 107, it is provided as under:-

"§ 208. Unconscionable Contract or Term If a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable term, or may so limit the application of any unconscionable term as to avoid any unconscionable result."

15. Thus, where a contract or a term of the same is unconscionable, the court may refuse to enforce the contract or may enforce the remainder of the contract without the unconscionable term. The court may also limit the application of such term to avoid any unconscionable result. The Hon'ble Supreme Court in the case of Central Inland Water Transport Corpn. v. Brojo Nath Ganguly (supra) after reviewing the law on such aspects was pleased to hold in para 89 as under:-

"89. Should then our courts not advance with the times? Should they still continue to cling to outmoded concepts and outworn ideologies? Should we not adjust our thinking caps to match the fashion of the day? Should all jurisprudential development pass us by, leaving us floundering in the sloughs of 19th century theories? Should the strong be permitted to push the weak to the wall? Should they be allowed to ride roughshod over the weak? Should the courts sit back and watch supinely while the strong trample underfoot the rights of the weak? We have a Constitution for our country. Our judges are bound by their oath to "uphold the Constitution and the laws". The Constitution was enacted to secure to all the citizens of this country social and economic justice. Article 14 of the Constitution guarantees to all persons equality before the law and the equal protection of the laws. The principle deducible from the above discussions on this part of the case is in consonance with right and reason, intended to secure social and economic justice and conforms to the mandate of the great equality clause in Article 14. This principle is that the courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power. It is difficult to give an exhaustive list of all bargains of this type. No court can visualize the different situations which can arise in the affairs of men. One can only attempt to give some illustrations. For instance, the above principle will apply where the inequality of bargaining power is the result of the great disparity in the economic strength of the contracting parties. It will apply where the inequality is the result of circumstances, whether of the creation of the parties or not. It will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them. It will also apply where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however unfair, unreasonable and unconscionable a clause in that contract or form or rules may be. This principle, however, will not apply where the bargaining power of the contracting parties is equal or almost equal. This principle may not apply where both parties are businessmen and the contract is a commercial transaction. In today's complex world of giant corporations with their vast infrastructural organizations and with the State through its instrumentalities and agencies entering into almost every branch of industry and commerce, there can be myriad situations which result in unfair and unreasonable bargains between parties possessing wholly disproportionate and unequal bargaining power.

These cases can neither be enumerated nor fully illustrated. The court must judge each case on its own facts and circumstances."

(emphasis supplied)

16. The Hon'ble Supreme Court in the case of Central Inland Water Transport Corpn. v. Brojo Nath Ganguly (supra), inter - alia, held that the courts will not enforce and will strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power. It was further held that this principle will apply where:-

• the inequality of bargaining power is the result of the great disparity in the economic strength of the contracting parties. • the inequality is the result of circumstances, whether of the creation of the parties or not.

• It will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them.

• where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however unfair, unreasonable and unconscionable a clause in that contract or form or rules may be.

17. The above dictum was followed by the Hon'ble Supreme Court in several cases including the case of Kalpraj Dharamshi v. Kotak Investment Advisors Ltd., (2021) 10 SCC 401 in which it was held as under:

"109. This Court has held, that the courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power. It has been held, that this principle will apply where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however unfair, unreasonable and unconscionable a clause in that contract or form or rules may be."

18. In the case of K.C. Cinema v. State of J&K, (2023) 5 SCC 786 the Hon'ble Supreme Court was pleased to explain that the test laid down in the case of Central Inland Water Transport Corpn. v. Brojo Nath Ganguly (supra) will apply not only where the parties have unequal bargaining power but also where a contractual term or a contract is unfair, unreasonable or unconscionable. The Hon'ble Supreme Court has held that a contractual term or a contract is unfair, unreasonable or unconscionable where it is one sided or devoid of any commercial logic. The relevant portion of the said judgment reads as under:-

"30. The test in Central Inland Water Transport Corpn. 9 is not only to assess whether the parties have unequal bargaining power relative to one another but also to ascertain whether a contractual term or a contract is unfair, unreasonable or unconscionable. A contract (or a term in a contract) can be said to be unfair or unreasonable if it is one- sided or devoid of any commercial logic. In the present case, although theatre owners may unilaterally determine the conditions of entry into cinema hall, the condition imposed in this instance is not unfair, unreasonable or unconscionable"

19. In the present case, the borrower/defendant No.1 had sought a housing loan when the flat to be purchased was yet to be constructed. The builder/defendant No.3 and 4 had assured to hand over physical possession of the flat within 30 months of executing the Allotment-cum-Flat Buyer Agreement dated 22.12.2015. The loan amount was disbursed directly to the builder/defendant No.3 and 4 by the plaintiff bank. The only security which the borrower/defendant No.1 had was the allotment letter issued by the builder/defendant No.3 and 4 and clause 9 of the Quadripartite Agreement which obliged the builder/defendant No.3 and 4 to refund to the plaintiff bank the entire money received by it pursuance to the loan agreement of the defendant No.1 in case of cancellation of allotment. It is thus obvious that the borrower/defendant No.1 could not have had the same bargaining power as available with the plaintiff and the defendant No.3 and 4. With the defendant No.1 seeking a housing loan against a flat yet to be constructed by the CS (Comm) No.659/22 11 /13 defendant No.3 and 4, same resulted in inequality due to the circumstances and as such the borrower/defendant No.1 had no choice but to accept the terms of clause 1 of the Quadripartite Agreement dated 28.12.2015

20. As on date, the borrower/defendant No.1 has nothing in her hands, neither the loan amount nor the flat which was to be constructed. In fact the builder/defendant No.3 and 4 have indulged in unjust enrichment as they have not constructed the financed flat despite having received monies from the plaintiff bank directly through the housing loan availed by the defendant No.1. In these facts and circumstances, and keeping in view the ratio laid down by the Hon'ble Supreme Court in the above mentioned cases, enforcing the loan agreement against the defendant No.1 along with clause 1 of the Quadripartite Agreement will give rise to an unconscionable result, i.e. requiring the defendant No.1 to repay the money directly received by the defendant No.3 and 4 without having the financed asset i.e. the flat in question in her hands. The said contractual clauses are unfair, unreasonable and unconscionable being one sided and devoid of any commercial logic as they call upon the borrower/defendant No.1 to repay the loan amount directly received by the defendant No.3 and 4 from the plaintiff bank despite not delivering the financed flat.

21. Hence for the reasons recorded above, this court holds that the defendant No.1 as well as the Guarantor/defendant No.2 will not have any liability towards the suit amount. Plaintiff bank shall be entitled to recover the same only from the defendant No.3 and 4 and not from the defendant No.1/borrower or the defendant No.2/Guarantor.

22. Plaintiff bank has prayed for grant of pendent lite and future interest @ 9.70% per annum with monthly rests. In the opinion of this court, the same is excessive. Grant of simple interest on the outstanding amount @ 9% p.a. from the date of filing of the suit till the date of realization shall meet the ends of CS (Comm) No.659/22 12 /13 justice. Plaintiff shall also be entitled to costs of the suit. Plaintiff's legal fees and expenses are assessed as Rs.21,000/-.

23. For the reasons recorded above, suit of the plaintiff is decreed in the following manner :-

(a) Plaintiff is granted a decree for recovery of Rs.14,45,878.65 against the defendant No.3 and 4 only along with simple interest @ 9% per annum w.e.f. date of filing till the date of realization; and

(b) Plaintiff shall be entitled to costs of the suit and legal fees and expenses of Rs.21,000/- along with simple interest @ 9% per annum from the date of the decree till the date of realization against the defendant No.3 and 4 only.

24. Decree sheet be prepared. File be consigned to record room.

Announced in the open              (REETESH SINGH)
court on this 23rd day              DISTRICT JUDGE
of January 2024                (COMMERCIAL COURT)-04
                            SHAHDARA, KKD COURTS, DELHI




CS (Comm) No.659/22                                                          13 /13