Bombay High Court
Janakalyan Sahakari Bank Ltd vs The Divisional Joint Registrar, ... on 1 October, 2024
Author: Sharmila U. Deshmukh
Bench: Sharmila U. Deshmukh
2024:BHC-AS:38760
WP 10056-15
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.10056 OF 2015
Jankalyan Sahakari Bank Ltd. ]
A Co-operative Bank registered under ]
the provisions of the Maharashtra ]
Co-operative Societies Act, 1960, ]
140, Vivek Darshan, ]
Sindhi Society, Opp. Bhakti Bhavan, ]
Chembur, Mumbai - 400 071. ] ...Petitioners.
Versus
1) The Divisional Joint Registrar, ]
Co-operative Societies, Mumbai ]
Division, Mumbai. ]
06th floor, Malhotra House, ]
Opp. G.P.O., Fort, ]
2) The Special Recovery & Sales Officer, ]
Attached to the ]
Jankalyan Sahakari Bank Ltd. ]
140, Vivek Darshan, ]
Sindhi Society, Opp. Bhakti Bhavan, ]
Chembur, Mumbai - 400 071. ]
3) Mrs. Shobhana Rajendra Shah. ]
4) Mr. Rajendra Amratlal Shah. ]
5) Mr. Bhushan Rajendra Shah. ]
All are residing at 42, Vishnu Mahal, ]
Marine Driver, Churchgate, ]
Mumbai - 400 020. ] ...Respondents.
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Mr. Atul Damle, Senior Advocate i/by Mr.Onkar Warange, for Petitioner.
Ms. Sarosh Bharucha, Mr.Aditya Khare and Ms. Daksha Kasekar i/by Mr.
Mansukhlal Hiralal and Co. for Respondent Nos.3 to 5.
Ms.S.D.Chipade, AGP for the Respondent-State.
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Coram : Sharmila U. Deshmukh, J.
Reserved on : August 29, 2024.
Pronounced on : October 1, 2024.
sa_mandawgad/Patil-SR (Ch) 1 of 17
WP 10056-15
JUDGMENT :
1. Rule. With consent, Rule made returnable forthwith and heard finally.
2. By this Petition filed under Article 227 of the Constitution of India, exception is taken to the order dated 9 th July, 2015 passed in Revision Application No.342 of 2014 by the Respondent No.1- Divisional Joint Registrar, Co-operative Societies, Mumbai partly allowing the Revision Application and setting aside the order dated 30th May, 2014 issued by the Respondent No.2-Special Recovery and Sales Officer attached to Jankalyan Sahakari Bank Ltd. and remanding the matter to the Respondent No.2 for fresh consideration and decision on merits and in accordance with law. FACTS OF THE CASE:
3. The Petitioner-Co-operative Bank had advanced loan facility to M/s M. Baker Auto Refinishing Pvt Ltd ("said Company") which was secured by personal guarantee of Smt. Indira Baldeo Lulla and Late Shri Baldeo Lulla. Due to default, the Petitioner initiated proceedings for issuance of recovery certificate under Section 101 of MCS and was granted four recovery certificates dated 19 th January, 2006 in Case Nos 2309 of 2005, 2310 of 2005, 2311 of 2005 and 2312 of 2005 against the said Company and its guarantors namely Mr.Baldeo S. Lulla and Mrs. Indira Baldeo Lulla for recovery of an aggregate amount of 2 of 17 WP 10056-15 Rs 8,22,91,027/ due as on 29th November, 2007 alongwith further interest.
4. The Recovery Certificates were put in execution and Warrants of attachment dated 21st March, 2006 and 31st March, 2006 were issued. On 12th July, 2013, the Respondent Nos.3 to 5 filed an Application before the Respondent No.2-Special Recovery and Sales Officer under Rule 107(19)(a) of the the Maharashtra Co-operative Societies Rules, 1961 (for short, "MCS Rules") for setting aside the the warrant of attachment dated 31st July, 2006 in respect of Plot No.31. The contention of the Respondent Nos.3 to 5 was that prior to the warrant of attachment dated 31st July, 2006 attaching Plot No.31 in Sopanbaug Cooperative Housing Society Ltd. Ghorpadi, Pune, the Respondent Nos.3 to 5 have acquired undivided share and right, title and interest. It was contended that the Memorandum of Understanding (MoU) dated 19th March, 2006 was executed by and between the Respondent Nos.3 to 5 and the guarantors- Mr. and Mrs. Lulla for acquiring the said premises, public notice was issued on 19 th April, 2006 inviting objections and no objections were received, title search was conducted which did not find registration of any lis pendens or any claim registered by Petitioner-bank. By duly stamped and registered Deed of Assignment dated 20th June, 2006, the Respondent Nos.3 to 5 have purchased and acquired from Mr. and 3 of 17 WP 10056-15 Mrs. Lulla the premises together with the undivided share, right, title and interest in the Plot No.31 upon payment of valuable consideration.
5. The said Application was resisted by the Petitioner contending that on 21st March, 2006, the property was attached and the reference in the said warrant of attachment to Flat No.31 was a pure typing mistake and the property attached was Plot No.31, the transfer is a fraudulent transfer with an intention to defraud the Petitioner-bank and is therefore not binding on the Petitioner-Bank, the MoU is an unregistered document, the Respondent No.4 was handling the legal matter of Baldeo Lulla and was aware of the default and to avoid the execution proceedings and the attachment order, the transaction had taken place. It was contended that the attachment order dated 21 st March, 2006 issued against the said property is duly served upon the Society and other statutory authorities. There is no prior NOC from Sopanbaug Cooperative Housing Society Ltd. before dealing with the property.
6. The Respondent No 2- Special Recovery and Sales Officer by the order dated 30th May, 2014, ruled on the objections raised the attachment and dismissed the Application dated 12th July, 2013.
7. As against order dated 30th May, 2014, Revision Application No.342 of 2014 was preferred before the Divisional Joint Registrar 4 of 17 WP 10056-15 which allowed the Application and remanded the matter for fresh consideration.
SUBMISSIONS:
8. Mr. Damle, learned Senior Advocate appearing for the Petitioner-Bank would submit that the warrant of attachment issued on 21st March, 2006, contained typographical error and came to be corrected by issuance of subsequent warrant of attachment dated 31 st July, 2006. He would contend that the property, however, stood attached on 21st March, 2006 and by the Deed of Assignment executed on 20th June, 2006 no rights were created in the said premises. He has taken this Court in detail through the findings of the Respondent No 2 and would submit that the transfer has rightly held to be fraudulent. He submits that the Revisional Authority by a very cryptic order has remanded the matter to the Respondent No 2 without considering the detailed findings of the Respondent No 2.
He submits that the objection raised under Rule 107(19)(a) by the Respondent Nos.3 to 5 of being bonafide purchasers has been dealt with and negated. He would further point out that the interest of the Respondent Nos.3 to 5 was confined to 1/4th undivided share in Plot No.31 and not the entire property.
9. Per contra, Mr. Bharucha, learned counsel appearing for the Respondent Nos.3 to 5 would point out the timeline that the MoU was 5 of 17 WP 10056-15 executed on 19th March, 2006, public notice was issued on 19 th April, 2006 and the agreement was executed on 20 th June, 2006 and it is only subsequently that the warrant of attachment was issued on 31 st July, 2006. He submits that under the agreement the Respondent Nos.3 to 5 have acquired ¼th undivided interest in Plot No.31 and an absolute ownership rights in respect of Flat No.C on 2 nd floor of building Suraj, which is standing on Plot No.31 and the parking space and exclusive right to use the terrace. Pointing out to the warrant of attachment issued on 21st March, 2006, he submits that the warrant of attachment was issued in respect of Flat No.31, first floor, whereas the flat which was the subject matter of the agreement with the Respondent No.3 to 5 was Flat "C" situated on the 2 nd floor. He would submit that on the same day i.e. 21 st March, 2006 a warrant of attachment was issued at the address of the original defaulter i.e. Flat No.34, Sahil, Sopanbaug Cooperative Housing Society Ltd. He would further submit that the warrant of attachment was issued in respect of Plot No.31 Suraj, Sopanbaug Cooperative Housing Society Ltd on 31st July, 2006 which was subsequent to the date of the execution of Deed of Assignment. He would further submit that under Rule 107(11)(f) of the MCS Rules, where any immovable property is sold under the Rules, the sale is subject to the prior encumbrances on the property. He submits that the Respondent No 2 could not have gone 6 of 17 WP 10056-15 into the fraudulent nature of the sale-deed. He submits that the remand does not prejudice the Petitioner as there would be proper appreciation of the objection raised by the Respondent Nos 3 to 5. Drawing support from the decision of the Apex Court in Vannarakkal Kallalathil Sreedharan vs. Chandramaath Balakrishnan [(1990) 3 SCC 291], he submits that the MoU i.e. the agreement for sale is prior to even the first order of attachment, if the same is accepted to be an order of attachment. He would further rely on the decision in the case of G. Rajasulochana vs. Inspector General of Registration [2024 SCC OnLine Mad 951] and would submit that the High Court has held by considering Section 53 of the Transfer of Property Act, the transfer if fraudulent is voidable and that the Registrar cannot assume the jurisdiction of the Civil Court while registering the document. He would further submit that the Madras High Court has held that the Sub-Registrar is not a quasi judicial authority deciding the validity of the lease and has no power to cancel any document. He submits that the Special Recovery Officer stands on the same footing and therefore could not have gone into the validity of the transaction.
10. In rejoinder, Mr. Damle would submit that under Rule 107(19)(a) and (c) of the MCS Rules, where a claim or an objection is preferred by a party against whom the order is passed, the party may institute a suit to establish the right which he claims to the property in dispute 7 of 17 WP 10056-15 however subject to the outcome of such suit the order shall be final. He, therefore, submits that it is for the Respondent Nos.3 to 5 to establish their right in the property by instituting a suit. He distinguishes the decision of the Madras High Court by stating that the findings therein is based on different rules. REASONS AND ANALYSIS:
11. Before proceeding with the facts of the case, it would apposite to refer to the statutory framework governing the attachment and sale of property. Under Section 156 of the MCS Act, the Registrar or any other person empowered by him may, without prejudice to any other mode of recovery, recover any amount due under the certificate granted by the Registrar under Section 101 of the MCS Act, together with the interest due on such amount by attachment and sale or by sale without attachment of the property of the person against whom the decision has been obtained. Sub-Section (2) of Section 156 of the MCS Act provides what while exercising such powers the Registrar or the person empowered is a Civil Court only for the purposes of Article 136 in the Schedule to the Indian Limitation Act, 1963.
12. In exercise of powers under Section 165 of the MCS Act, MCS Rules 1961 have been framed, and Rule 107 provides for the complete procedure governing the attachment and sale of property. Rule 107 is a complete code in itself prescribing the entire procedure from
8 of 17 WP 10056-15 levying of attachment till the sale of the property attached including the power to deal with the objections which are raised to such attachment of sale. Rule 107(1) provides for an application to be made by the creditor invoking Section 156 of MCS Act seeking attachment and sale of property. Sub Rule (2) provides that the application shall be in prescribed form and Sub Rule (3) of Rule 107 provides that on receipt of such application, the Recovery Officer shall verify the correctness and genuineness of the particulars set forth in the application with the records, if any, in office of Registrar and prepare the demand notice setting forth the name of defaulter and the amount due.
13. Sub-Rule (11) of Rule 107 of the MCS Rules governs the attachment and sale or sale without attachment of immoveable property and reads as under:
"(11) In the attachment and sale or sale without attachment of immovable property, the following rules shall be observed :-
(a) The application presented under sub-rule (2) shall contain a description of the immovable property to be proceeded against, sufficient for its identification and in case such property can be identified by boundaries or numbers in a record of settlement of survey, the specification of such boundaries or numbers and the specification of the defaulters share or interest in such property to the best of the belief of the applicant and so far as he has been able to ascertain it.
(b) The demand notice issued by the Recovery Officer under sub-
rule (3) shall contain the name of the defaulter, the amount due, including the expenses, if any, and the bhatta to be paid to the person who shall serve the demand notice, the time allowed for payment and in case of non-payment, the particulars of the properties to be attached and sold or to be sold without attachment, as the case may be. After receiving the demand notice, the Sale Officer shall serve or cause to be 9 of 17 WP 10056-15 served a copy of the demand notice upon the defaulter or upon some adult male member of his family at his usual place of residence, or upon his authorised agent or, if such personal service is not possible, shall affix a copy thereof on some conspicuous part of the immovable property about to be attached and sold or sold without attachment, as the case may be:
Provided that where the Recovery Officer is satisfied that a defaulter with intent to defeat or delay the execution, proceeding against him is about to dispose of the whole or any part of his property, the demand notice issued by the Recovery Officer under sub-rule (3) shall not allow any time to the defaulter for payment of the amount due by him and the property of the defaulter shall be attached forthwith.
(c)......
(d) Where attachment is required before sale, the Sale Officer shall, if possible, cause a notice of attachment to be served on the defaulter personally. Where personal service is not possible, the notice shall be affixed in some conspicuous part of the defaulters last known residence, if any. The fact of attachment shall also be proclaimed by beat of drum or other customary mode at some place on, or adjacent to, such property and at such other place or places as the Recovery Officer may consider necessary to give due publicity to the sale. The attachment notice shall set forth that, unless the amount due with interest and expenses be paid within the date therein mentioned, the property will be brought to sale. A copy shall be sent to the applicant.
Where the Sale Officer so directs, the attachment shall also be notified by public proclamation in the Official Gazette.
(e).....
(f) When any immovable property is sold under these rules, the sale shall be subject to the prior encumbrances on the property, if any......
(g)......
(h)......
(I)......
(j)......
(k)....."
14. The statutory scheme emerging from the reading of the above provisions would indicate that an application is required to be made 10 of 17 WP 10056-15 by the Creditor to the jurisdictional Recovery Officer invoking Section 156 of MCS Act for attachment and sale of immoveable property. The application is required to be made in the prescribed form and to contain such description of immovable property to be proceeded against as is sufficient for its identification. Upon receipt of the application, the Recovery Officer is required to verify the correctness and genuineness of the particulars set forth in the application with the records, if any, and prepare a demand notice. The demand notice is to be served upon the defaulter and upon failure to comply with the requisitions of demand notice, the proceedings for attachment and sale to be initiated.
15. Sub- Rule 19(a) of Rule 107 provides as under:
" (a) Where any claim is preferred to or any objection is made to the attachment of, any property attached under this rule on the ground that such property is not liable to such attachment, the Recovery officer shall investigate the claims or objection and dispose it of on merits"
16. The requirement of correct description of the property sufficient for its identification is an essential ingredient of the application by the attaching creditor under Rule 107(1). The object is not far to see as severe consequences ensue from issuance of warrant of attachment of property. The duty is cast upon the attaching creditor by Rule 107(11)(a) to correctly identify the property of the defaulter against whom the recovery certificate has been issued and 11 of 17 WP 10056-15 until the property is correctly identified, the property cannot be said to be attached.
17. In the present case, there are two warrants of attachment issued on the same day i.e. 21st March, 2006. One warrant attaches the property described as "Flat No.31, 1st Floor, Suraj, Sopan Baug Co- operative Housing Society Limited Ghorpadi, Pune 411 001" and the other warrant of attachment attaches the property described as "Flat No.34, Sahil, Sopan Baug Co-operative Housing Society Limited Ghorpadi, Pune 411 001 ("Plot No.31").
18. The contention of Mr. Damle is that there is a typographical error in the warrant of attachment which refers to Flat No.31 instead of Plot No.31. However, perusal of the warrant of attachment would indicate that the property is described as Flat No.31 on 1 st Floor of building known as Suraj situated in Sopanbaug Cooperative Housing Society Ltd, whereas the attachment was to be levied on Plot No 31. It is not a simple case of typographical error as the warrant of attachment described the property as a flat situated on 1 st Floor of Suraj and not a Plot.
19. The incorrect description of the property proposed to be attached came to be rectified by issuance of a subsequent warrant of attachment on 31st July, 2006 describing the property as "Plot No 31, Suraj, Sopan Baug Co-op Housing Society Ltd, Ghorpuri, Pune 411 001."
12 of 17 WP 10056-15
20. The issuance of warrant of attachment has the effect of attaching the property described therein and there is no scope for presumption of attachment of some other property of the judgment debtor which was proposed to be attached, even if available for attachment. Thus the concerned property i.e. Plot No 31 was attached on the date of issuance of the warrant of attachment dated 31 st July, 2006 and not 21st June, 2006.
21. The objection raised by the Respondent Nos.3 to 5 was that they have 1/4th undivided share in the subject plot together with the structure standing therein, claiming to be bonafide purchasers of the subject property stating that at the time when the Deed of Assignment was executed on 20th June, 2006 and even prior thereto when the Memorandum of Understanding was executed on 19 th March, 2006, the subject property was not attached and having acquired a vested interest in the property, the property was not liable to be attached.
22. The remit of enquiry to be conducted by the Respondent No 2 is confined to examination of the objection on the limited ground as to whether the property was liable to be attached. The sole objection taken to the attachment was that there was already transfer of interest in favour of third party and thus the property could not be attached subsequently, which was required to be determined.
13 of 17 WP 10056-15
23. The Respondent No 2 rejected the objection by holding that the transfer was fraudulent by arriving at the following findings:
(a) The MOU dated 19th March, 2006 being unregistered and unstamped does not create an right in the said property.
(b) The handing over possession on execution of MOU on 19th March, 2006 shows fraudulent transfer as the demand notice was issued on 1st March, 2006.
(c) The Objectors being legal advisors to the guarantors were aware of that the execution of Recovery Certificate would take place and thus they are not bonafide purchasers for value.
(d) There was no due diligence done by the Objectors as the NOC of the Society was not obtained as per term of MOU.
(e) The Deed of Assignment is not stamped on the first page which is a mandatory requirement under the Bombay Stamp Act.
24. The above findings would indicate that the Respondent No 2 has delved into the legality of the transaction and the validity of the MOU and Deed of Assignment executed between the parties. There is no reference to the warrant of attachments, the property which came to be attached, the date of attachment of property and no discussion whether there was valid attachment in accordance of procedure prescribed under Rule 107 of MCS Rules. As indicated above, the remit of enquiry is limited only to examine whether the property was 14 of 17 WP 10056-15 liable to such attachment. It is well settled position of law that the authorities under the MCS Act cannot go into the issue of validity and legality of the documents of title.
25. As the core issue required to be considered as to whether the property was liable to be attached, in the background of the objections raised by the Respondent Nos.3 to 5, was not addressed by the Respondent No 2, the Respondent No 1 by the impugned order dated 9th July, 2015 remanded the matter to be decided afresh. The contention of Mr. Damle that there is no reasoned order cannot be accepted as the impugned order indicates that the Respondent No 1 by taken into consideration the factual position, the objections to the attachment and the finding of Respondent No.2 and has thereafter held that the Respondent No.2 has dealt with the title of the subject property and legality of the Deed of Assignment. In my view, the order cannot be termed as non speaking order for the reason that the Respondent No 1 after examining the findings of Respondent No 2 has rightly held that the Respondent No 2 has not dealt with the issues raised by the Objectors and has instead dealt with the title of the subject property and legality of the Deed. I am thus not inclined to interfere with the order of remand.
26. As the matter has been remanded for fresh consideration, I am not inclined to render any observations on the merits of the matter as 15 of 17 WP 10056-15 the same may influence the decision of the Respondent No 2. As the order of the Respondent No 2- Special Recovery and Sales Officer ventured into the validity of the documents of transfer which have been executed the Revisional Authority has rightly set aside the said order and remanded the matter to Respondent No 2 for fresh consideration.
27. Upon a query by this Court as to whether any encumbrances was noted in the Society records in respect of even the first warrant of attachment, Mr. Damle is unable to offer any reply for the same. CONCLUSION:
28. By the impugned order, the Appellate Court has rightly held that the Respondent No 2 while dealing with objection raised under Rule 107(19)(a) of the MCS Rules, has dealt with the issue of title and validity of the registered Deed of Assignment, which is impermissible. As the Respondent No 2 had failed to deal with the issues raised by the Respondent Nos 3 to 5 in accordance with the limited jurisdiction vested in Respondent No 2 under Rule 107(19)(a) of the MCS Rules, the matter has been rightly remanded for fresh consideration on merits and in accordance with law. The findings of the Respondent No 2 when perused, deals with the legality and validity of the transaction and the registered documents executed between the parties which 16 of 17 WP 10056-15 was beyond its jurisdiction. Thus, I find no reason to interfere with the order of remand passed by the Appellate Authority.
29. Resultantly, Petition fails and stands dismissed. Rule stands discharged. Needless to clarify that the Respondent No 2 to decide the Objection Application afresh on its own merits and uninfluenced by any observations made herein.
[Sharmila U. Deshmukh, J.] 17 of 17 Signed by: Sachin R. Patil Designation: PS To Honourable Judge Date: 01/10/2024 18:00:39