Bombay High Court
Chandrakant V. Shah vs Axis Finance Limited And Ors on 20 July, 2022
Author: R.I. Chagla
Bench: R.I. Chagla
906-IAL-29766-21.doc
Sharayu Khot.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INTERIM APPLICATION (L) NO. 29766 OF 2021
IN
INTERIM APPLICATION (L) NO. 19370 OF 2021
IN
COMMERCIAL SUIT (L) NO. 19362 OF 2021
Mr. Chandrakant V. Shah ...Applicant
(Original
Defendant No. 6)
In the matter between
Axis Finance Limited ...Plaintiff
Versus
M/s. Soham Estates & Ors. ...Defendants
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Mr. Dhurva Gandhi a/w Ms. Arundhati Korale i/by Solicis Lex for the
Applicant/Defendant No. 6.
Mr. Karl Tamboli, Mr. Nishit Dhruva, Mr. Prakash Shinde, Ms. Niyati
Merchant, Mr. Yash Dhruva, Mr Harsh Sheth i/by MDP and Partners
for the Plaintiff.
Ms. Pooja Gaikwad i/by Sanjay Chaturwedi Associates for the
Defendant No. 1
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SHARAYU
PANDURANG
KHOT
CORAM : R.I. CHAGLA J.
DATE : 20 July 2022.
ORDER :
Digitally signed by SHARAYU PANDURANG KHOT Date:
2022.08.03 19:05:33 +0530
1. Heard learned Counsel for the parties.1/10
906-IAL-29766-21.doc
2. By this Interim Application, the Applicant is seeking vacation of ad-interim order of this Court dated 26th October 2021 and subsequent order dated 9th December 2021.
3. Learned Counsel appearing for the Applicant has submitted that the order dated 26th October 2021 was an order passed in the absence of the Applicant/original Defendant No. 6. He has submitted that the said order has not taken into consideration the fact that the first loan sanctioned by the Plaintiff to the 1st Defendant and pursuant which was secured by the first Deed of Mortgage dated 5th August, 2014 had been repaid. This Court was required to consider the 2nd Deed of Mortgage/Agreement of Indenture dated 29th December 2016. He has submitted that in the mortgaged property which is recital E, it is clearly provided that one of the conditions precedent for the lender making available the facility to the borrower for its project is that the borrower shall secure all its obligations under the facility agreement inter alia by the mortgaged property as detailed in Schedule I thereto in consideration of the facility on and subject to the terms and conditions set out in the Indenture and set out in the other finance documents in favour of the security trustee. In the ranking of security clause in the Indenture of 2/10 906-IAL-29766-21.doc Mortgage Deed it is provided that the security created over the mortgaged property as described in part A of Schedule 1 shall be first ranking pari-passu security registered in favour of the security trustee and the security created over the mortgaged property as described in part B of Schedule 1 shall be a second ranking paripassu security registered in favour of the security trustee until the full repayment of the borrower's obligations under the existing facility, after which the security over the mortgaged property as described in part B of schedule 1 shall be the first ranking paripassu charge in favour of the security trustee.
4. The learned Counsel for the Applicant has submitted that from a perusal of part A and part B, wherein the mortgaged property has been set out, there is no mention of the subject flats as part A consists of flats in tower 5 and though Part B mentions various flats of tower 4 as mortgaged property, there is no mention of the subject flats which have been purchased by the Applicant. He has submitted that the subject flats not being part of the mortgaged property, could not be subject to a No Loan Objection Certificate (NOC) being granted by the Plaintiff and/or in absence of which, it cannot be said that there is no valid transfer of title of the subject 3/10 906-IAL-29766-21.doc flats in favour of the Applicant / 6th Defendant.
5. Learned Counsel appearing for the Applicant has further submitted that the Applicant had purchased the subject flats on 31st May 2016. Thereafter NOC was granted on 6th October 2017 by the Plaintiff, which was thereafter, recalled on 6th September 2019. It is an admitted position that the first loan taken was repaid on 21st August 2017. He has accordingly, submitted that such post facto NOC was not required to be issued, when first loan was repaid on 21st August 2017. Further, as aforementioned the 2nd loan facility provided by the Plaintiff makes no mention of the subject flats as part of mortgaged property. He has accordingly, submitted that the ad- interim order which arrived at a prima facie finding that without Plaintiff's NOC, there could be no valid transfer of the subject four flats could not have been arrived at in favour of the 6th Defendant. He has accordingly, submitted that by granting prayer clause (I) of the Interim Application, the Applicant has been restrained from in any manner selling, alienating, encumbering or creating third party rights in respect of the subject four flats, being Flat Nos. 104, 201, 301 and 2602 in Tower 4 of the suit project. Grave prejudice is caused to the Applicant and accordingly the ad-interim order be 4/10 906-IAL-29766-21.doc accordingly, recalled.
6. Mr. Tamboly, learned Counsel appearing for the Plaintiff has submitted that the Defendant No. 6 was served with the Interim Application as well as the captioned Suit and notice was given to the Defendant No. 6 of the Interim Application being moved by the Plaintiff. It is recorded in the order dated 26th October 2021 that the Defendants had been served. Some of the Defendants had entered appearance through Advocate Mr. Sanjay Chaturvedi.
7. Mr. Tamboly has submitted that the 1st term loan of Rs.60 Crores which was sanctioned on 28th July 2014 to the 1st Defendant had been secured by Indenture of Mortgage dated 6th August 2014. The 1st term loan was repaid on 21st August 2017. Prior to the repayment of the 1st term loan, 2nd term loan of Rs. 25.00 Crores was granted by the Plaintiff to the 1st Defendant on 20th September 2016.
8. The 1st Defendant had sought no objection from the Plaintiff for sale of certain flats. The project being developed by the 1st Defendant comprised of 5 Towers out of which 4 Towers were part of phase 1 and 5th Tower was part of phase 2. This Court has in 5/10 906-IAL-29766-21.doc the ad-interim order dated 26th October 2021 noted that the 6th Defendant is an outsider who claims to have purchased Flat Nos. 104, 201, 301 and 2602 in Tower 4.
9. It is the case of the Plaintiff that there have been persistent defaults and irregularities on the part of the 1st Defendant. The Plaintiff had accordingly, sought for an order in terms of prayer
(c) and (e) of the Interim Application. Prayer (I) was in respect of subject four flats which the 6th Defendant claimed to have purchased. This Court in the ad-interim order noted that the subject four flats would require NOC to be granted by the Plaintiff and that such post facto NOC had been granted on 6th October 2017 which was thereafter recalled on 6th September 2019. It is an admitted position that insofar as the 1st term loan granted on 28th July 2014, the subject four flats of the Applicant/Defendant No. 6 was part of the mortgaged property and this is apparent from the schedule to the Deed of Mortgage.
10. In any view of the matter, it was necessary for NOC to be issued as the 1st term loan was repaid only on 1st August 2017. It is in view of this position that this Court in the said ad- interim order dated 26th October, 2021 observed that without the 6/10 906-IAL-29766-21.doc Plaintiff's NOC, there could be no valid transfer of the subject four flats in favour of the Defendant No.6. Further the post facto NOC issued by the Plaintiff was conditional and required the sale proceeds to be deposited in RERA Escrow Account. If this condition remained unfulfilled, the NOC could not survive a breach of this condition. Thus, this Court arrived at a prima facie finding that in breach of condition of post facto NOC would materially affect any title that could be said to have passed to the 6th Defendant. The corresponding consequence is that these four flats would continue to form part of the security available to the Plaintiff to secure repayment of the entire loan, considering the term loan granted as well as the interest on the term loan and accounting for payments already made on the date of institution of the Suit stands at Rs. 13,23,92,937.16.
11. In view thereof, ad-interim order in terms of prayer clause (I) was also granted by this Court in addition to prayer clauses (c) and (d) of the Plaint. This was issued till 9th December 2021 and thereafter, further continued by the subsequent order dated 9th December 2021, till further orders.
12. Having considered the submissions, in my view 7/10 906-IAL-29766-21.doc recall of the ad-interim order dated 26th October 2021 and the subsequent order dated 9th December 2021 which continued the ad- interim order till further orders is uncalled for. It is an admitted position that the subject four flats of the Applicant/Defendant No. 6 formed part of the mortgaged property with respect to the 1st term loan of Rs. 60.00 Crores granted on 28th July 2014 by the Plaintiff to the 1st Defendant. This position is clear from the schedule to Indenture Mortgage dated 5th August 2014. It is further an admitted position that 1st term loan was repaid only on 21st August 2017, prior to which Applicant/Defendant No. 6 claimed to have purchased the subject four flats on 31st May 2016.
13. Thus, in my view, this Court in the ad-interim order dated 26th October 2021 had correctly arrived at a prima facie finding that without the Plaintiff's no objection certificate, there could have been no valid transfer in favour of the 6th Defendant, as the NOC was necessary to sell the subject four flats to the 6th Defendant in the first place. In fact, admittedly, the post facto NOC was issued by the Plaintiff on 6th October 2017 which was conditional upon deposit of the sale proceeds in RERA Escrow Account as observed by this Court in the said order. It is accordingly, 8/10 906-IAL-29766-21.doc held by this Court in the ad-interim order that in the event, the condition of the deposit in RERA would remain unfulfilled, the NOC could not survive a breach of the condition. Thus, a prima facie view has been taken by this Court that this could would directly affect any title that could be said to have passed to the 6th Defendant.
14. The submissions of the learned Counsel for the Plaintiff is that the 2nd term loan and the Deed of Mortgage executed to secure of the 2nd term loan facility granted by the Plaintiff had not mentioned in the schedule of mortgaged property, the subject four flats which Applicant/original Defendant No. 6 claims to have purchased and thus prior NOC for sale of subject four flats was not required, cannot be accepted. In fact, the sale of the subject four flats was prior to repayment of the 1st NOC. The mortgaged property in the 1st Deed of Mortgaged dated 5th August 2014 in respect of the 1st term loan facility clearly mentioned the subject four flats which the Applicant/original Defendant No. 6 claims to have purchased. Thus, prior to the purchase of the flats, the NOC was required to be issued by the Plaintiff. Considering that post facto NOC was issued by the Plaintiff conditional upon the deposit of the sale proceeds in RERA Escrow Account which had remained unfulfilled, this Court 9/10 906-IAL-29766-21.doc had in my view correctly arrived at the prima facie that this would directly affect any title that could be said to have passed to the 6th Defendant.
15. In that view of the matter, I find no reason for recall of the ad-interim order passed which grants prayer clauses (c) and (d) as well as (I) of the Plaint and which has thereafter, been continued by the subsequent order dated 9th December 2021. The Defendant No. 6 in fact had been served which is recorded in the said ad-interim order. Thus they were aware that the Interim Application was being moved and by choosing not to appear, it does not lie in the mouth of the Applicant/original Defendant No. 6 that the ad-interim order has in any manner been passed without notice to the Defendants. Accordingly, there is no merit in the Interim Application and the leave sought for in the Interim Application is rejected.
16. The Interim Application is disposed of in the above terms.
[R.I. CHAGLA J.] 10/10