Madhya Pradesh High Court
Bank Of Maharashtra vs The District Magistrate Bhopal on 10 May, 2018
Bench: Hemant Gupta, Vijay Kumar Shukla
W.P.No.23234/2017
1
HIGH COURT OF MADHYA PRADESH: JABALPUR
(Division Bench)
Writ Petition No.23234/2017
Bank of Maharastra & Another .................. Petitioners
- V/s -
The District Magistrate & Others .................. Respondents
----------------------------------------------------------------------------------------------
CORAM :
Hon'ble Shri Justice Hemant Gupta, Chief Justice
Hon'ble Shri Justice Vijay Kumar Shukla, Judge
----------------------------------------------------------------------------------------------
Present:
Shri A.C. Thakur, Advocate for the petitioners.
Shri Sankalp Kochar, Advocate for respondent No.6.
Shri Sanjay Agrawal, Advocate for respondent No.9 to 12.
----------------------------------------------------------------------------------------------
Whether Approved for Reporting : Yes / No
----------------------------------------------------------------------------------------------
ORDER
(10.05.2018) Per : Hemant Gupta, Chief Justice:
The petitioners have invoked the writ jurisdiction of this Court for issuance of a writ of mandamus to the District Magistrate to give effect to the order passed on 05.11.2016 under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to 'the Act'). The writ petition came up for hearing W.P.No.23234/2017 2 on 05.01.2018 when a direction was issued to execute the order within a period of four weeks from the date of receipt of certified copy of the order.
2. However, subsequently, an application was filed by the present respondents No.9 to 12 (here-in-after referred to as "owners") on the ground that the order has been passed at their back when the petitioners suppressed the material facts. It is pointed out that in fact the Bank has filed a Caveat apprehending challenge to the order of District Magistrate under Section 14 of the Act before this Court and also before the Debts Recovery Tribunal. In both the proceedings, one of the owner that is M/s. Arti Agrawal was reflected as one of the respondents. Under these circumstances, it is alleged that the Bank has not intentionally impleaded proper parties. It is also pleaded that the owners have filed an application under Section 17 of the Act against an order passed by the District Magistrate which is pending before the Debts Recovery Tribunal. It is also pointed that a civil suit was filed by the owners against the borrower stands decreed. It is also pointed out that the parties are at logger heads in respect of disputed property; therefore, the Bank was bound to disclose such facts in the present writ petition.
3. On the basis of such assertions, the order passed on 05.01.2018 was recalled on 19.01.2018 on payment of cost of Rs.10,000/- It is thereafter, the owners (review-petitioners) have been impleaded the Bank as party- respondents in the present petition.
4. The petitioners have filed an application for taking additional documents on record. Such documents are primarily; a review petition filed by the owners including the registered sale-deed executed on 26.06.2013 in favour of W.P.No.23234/2017 3 borrowers i.e. respondents No.4 to 8 in a total sum of Rs.6.75 Crore. The entire sale consideration is stated to have been paid before the execution of the sale deed. The petitioners have produced another sale-deed executed by the owners on 27.05.2015 whereby additional property was sold to the borrowers for a sum of Rs.7.25 Crore. The entire amount was said to have been paid. The owners have filed a suit for cancellation of the two sale-deeds bearing Civil Suit No.1096-A/2015 on the plea that a memorandum of understanding (MOU) was executed before the execution of the sale-deed wherein, the owners alleged that certain payments was made vide post-dated cheques, and that the said cheques have not been honoured. Therefore, the owners have filed a suit claiming cancellation of the sale-deeds. On the basis of such suit filed, a decree was granted on the basis of compromise by Lok Adalat on 27.02.2016 wherein the borrowers agreed to pay amount specified in the compromise deed and that if the amount is not paid within six months, the property shall be old by the process of Court. Such Award of the Lok Adalat was modified by this Court in W.P.No.5820/2016 (Dinesh Leelwani and another vs. M/s. Arti Agrawal and Others) decided on 23.06.2016 in respect of a property of Smt. Simran Leelwani as she claimed that she was not a Director of Shrimati Jewellery House Pvt. Ltd. The owners have also filed almost same set of documents.
5. The argument of the petitioners is that the decree obtained by consent is a fraud so as to defeat the right of Bank who has advanced loan on the basis of security of property purchased by the borrowers. The decree by the Lok Adalat is a consent decree, therefore, such decree which has been passed at the back W.P.No.23234/2017 4 of the petitioners affecting the rights of the public sector Bank is nothing but a crude way to defeat the rights of the Bank to recover the due amount from the borrowers. It is contended that in the sale-deed, there is no assertion that any amount of sale consideration remains unpaid. Therefore, on the basis of memorandum of understanding, the sale-deed cannot be nullified. Reliance is placed upon the Supreme Court judgment reported as (2009) 4 SCC 193 (Kaliaperumal vs. Rajagopal and Another).
6. We have heard learned counsel for the parties and find that the act of the owners to file a suit for declaring the sale-deeds dated 26.06.2013 and 27.05.2015 as void and ineffective qua the rights of the Bank and is in fact a fraud committed to delay or frustrate the rights of Bank to recover the amount due as a secured creditor under the Act. In the said suit, the parties entered into a settlement to pay a specified amount within six months and in case the amount is not paid, the subject property can be sold through Court for realization of the said amount.
7. A perusal of the sale-deeds on record does not show that any part of the sale consideration was left unpaid. The first sale-deed dated 26.06.2013 clearly mentions that amount of Rs.6.75 Crore stands paid (Rs.1.75 Crore by other means and Rs.5 Crore by cheque No.659865 dated 31.03.2013) whereas in respect of second sale-deed amount of Rs.7.25 Crore have been said to be paid (Rs.50 Lac in cash on 01.08.2014; Rs.1,67,75,000/- through cheque No.000019, cheque No.418721 dated 04.04.2015 of Rs.5 Crore and Rs.7.25 lac as TDS). There is no recital in both the sale-deeds that any amount remains unpaid. Though the stand of the owners in the return filed is that Cheque for W.P.No.23234/2017 5 Rs.1.75 Crores bearing 25.9.2015;1.9.2015;7.10.2015 and 25.10.2015 in the first sale deed dated 26.3.2013 were dishonored on presentation whereas, the cheque No.000019 for Rs.1,67,75,000/- dated 1.11.2015 was dishonored paid as part of sale consideration of the sale deed dated 27.5.2017.
8. As per section 54 of the Transfer of Property Act, 1882, 'sale' is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. The Supreme Court in a judgment reported as Vidhyadhar Vs. Manikrao and another, (1999) 3 SCC 573, held that in order to constitute a sale, there must be transfer of ownership from one person to another i.e. transfer of all rights and interest in the property which are possessed by that person are transferred by him to another person. The words 'price paid or promised or promised or part-paid and part-promised' indicates the actual payment of whole of the price at the time of the execution of the sale deed is not a sine qua non for completion of the sale. Relevant extracts read as under:-
"35. Even if the findings recorded by the High Court that the plaintiff had paid only Rs. 500 to defendant No. 2 as sale consideration and the remaining amount of Rs. 4,500 which was shown to have been paid before the execution of the deed was, in fact, not paid, the sale deed would not, for that reason, become invalid on account of the provisions contained in Section 54 of the Transfer of Property Act which provide as under:
54. "Sale" is a transfer of ownership in exchange for a price paid or promised or part- paid and part-promised.
Such a transfer, in the case of tangible immoveable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument.
W.P.No.23234/20176 In the case of tangible immoveable property, of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property.
Delivery of tangible immoveable property takes place when the seller places the buyer, or such person as he directs; in possession of the property. A contract for the sale of immoveable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not, of itself, create any interest in or charge on such property.
36. The definition indicates that in order to constitute a sale, there must be a transfer of ownership from one person to another, i.e., transfer of all rights and interests in the properties which are possessed by that person are transferred by him to another person. The transferor cannot retain any part of his interest or right in that property or else it would not be a sale. The definition further says that the transfer of ownership has to be for a "price paid or promised or part- paid and part-promised". Price thus constitutes an essential ingredient of the transaction of sale. The words "price paid or promised or part-paid and part- promised" indicate that actual payment of whole of the price at the time of the execution of sale deed is not sine qua non to the completion of the sale. Even if the whole of the price is not paid but the document is executed and thereafter registered, if the property is of the value of more than Rs. 100/-, the sale would be complete.
37. There is a catena of decisions of various High Courts in which it has been held that even if the whole of the price is not paid, the transaction of sale will take effect and the title would pass under that transaction. To cite only a few, in Gyatri Prasad v. Board of Revenue and Ors. (1973) Allahabad Law Journal 412, it was held that non-payment of a portion of the sale price would not effect validity of sale. It was observed that part payment of consideration by vendee itself proved the intention to pay the remaining amount of sale price. To the same effect is the decision of the Madhya Pradesh High Court in Sukaloo and another v. Punau, AIR 1961 MP 176.
38. The real test is the intention of the parties. In order to constitute a "sale", the parties must intend to transfer the ownership of the property and they must also intend that the price would be paid either in presenti or in future. The W.P.No.23234/2017 7 intention is to be gathered from the recital in the sale deed, conduct of the parties and the evidence on record.
xxx xxx xxx
48. The Proviso to this clause was added by Section 19 of the Transfer of Property (Amendment) Act, 1929 (XX of 1929). The Proviso was introduced in this clause only to set at rest the controversy about the nature of the document; whether the transaction would be a sale or a mortgage. It has been specifically provided by the Amendment that the document would not be treated as a mortgage unless the condition of repurchase was contained in the same document."
9. The Supreme Court in the case of Kaliaperumal (supra) has held that the registration of sale deed is prima facie proof of an intention to transfer the property. If payment of consideration is a condition precedent for passing of title, held, title would not pass until full consideration is paid to seller. It was held that whether the parties intended that transfer of the ownership should be merely by execution and registration of the deed or whether they intended the transfer of the property to take place, only after receipt of the entire consideration, would depend on the intention of the parties. Such intention is primarily to be gathered and determined from the recitals of the sale deed. However, in the present case, there is no condition of any unpaid sale consideration or that property will be transferred on a future date. The Court held as under:-
"15. The question posed for our consideration is whether title to the disputed properties passed to the appellant when the sale deed dated 26- 6-1983 was registered on 26-10-1983, though admittedly no amount was paid towards consideration to the respondents.
16. Sale is defined as being a transfer of ownership for a price. In a sale there is an absolute transfer of all rights in the properties sold. No W.P.No.23234/2017 8 rights are left in the transferor. The price is fixed by the contract antecedent to the conveyance. Price is the essence of a contract of sale. There is only one mode of transfer by sale in regard to immovable property of the value of Rs 100 or more and that is by a registered instrument.
17. It is now well settled that payment of entire price is not a condition precedent for completion of the sale by passing of title, as Section 54 of the Transfer of Property Act, 1882 ("the Act", for short) defines "sale" as "a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised". If the intention of parties was that title should pass on execution and registration, title would pass to the purchaser even if the sale price or part thereof is not paid. In the event of non-payment of price (or balance price as the case may be) thereafter, the remedy of the vendor is only to sue for the balance price. He cannot avoid the sale. He is, however, entitled to a charge upon the property for the unpaid part of the sale price where the ownership of the property has passed to the buyer before payment of the entire price, under Section 55(4)(b) of the Act.
18. Normally, ownership and title to the property will pass to the purchaser on registration of the sale deed with effect from the date of execution of the sale deed. But this is not an invariable rule, as the true test of passing of property is the intention of parties. Though registration is prima facie proof of an intention to transfer the property, it is not proof of operative transfer if payment of consideration (price) is a condition precedent for passing of the property.
19. The answer to the question whether the parties intended that transfer of the ownership should be merely by execution and registration of the deed or whether they intended the transfer of the property to take place, only after receipt of the entire consideration, would depend on the intention of the parties. Such intention is primarily to be gathered and determined from the recitals of the sale deed. When the recitals are insufficient or ambiguous the surrounding circumstances and conduct of parties can be looked into for ascertaining the intention, subject to the limitations placed by Section 92 of the Evidence Act.
20. In this case, the execution of the sale deed on 26-6-1983 is not in dispute. The said instrument was presented for registration on 21-10- 1983 and registered on 26-10-1983, as the first respondent vendor appeared before the Sub-Registrar and admitted that the vendors had W.P.No.23234/2017 9 executed the documents, but refused to make an endorsement to that effect on the deed as the vendors had not received the balance consideration of Rs 40,000."
10. The sale deed needs to be examined in the light of the Judgments referred to above so as to examine the intention of the parties as the sale deeds are admitted document.
11. The entire case of the owners is based upon Clause 3 of the Agreement where there is mention of 'MOU''. However, there is no date of 'MOU' mentioned in the sale-deed. The MOU relied upon by the owner is on a plain paper, which can be created at any time. Still further, there is no clause that sale is subject to the compliance of the terms of such a MOU. The clause 4 of the sale deeds are to the effect that the title of the property is being transferred to the vendee on receipt of the entire sale consideration and that the entire right of ownership has been transferred in favour of the vendee with the execution of the sale-deed. The clauses 5 of the sale-deeds are that the vendor has transferred the rights in the property free from all encumbrances. There is no clause in the sale-deeds that any part of the consideration remains unpaid or that title of the property will pass on to the vendee only on the fulfillment of certain conditions. Such 'MOU' stands merged when the sale-deed was executed transferring unequivocally all rights, title and interest in the property to the vendee.
12. It is on the strength of such unequivocal transfer of right in favour of the borrowers; the Bank has advanced financial assistance to the borrowers when the title deeds of the property purchased by them were handed over to the Bank. Therefore, filing of a suit by the owners to declare the sale-deeds null W.P.No.23234/2017 10 and void on the basis of alleged non-payment of amounts in terms of the 'MOU' is nothing but a flagrant dishonest intention of not paying the public dues. If there is a 'MOU', it is upon the parties to 'MOU' to seek specific performance of the said Agreement, but the sale-deed which conveys unequivocal right in favour of the borrowers cannot be avoided in the manner adopted by the owner. Thus the title has passed on to the borrowers free from all encumbrances.
13. Learned counsel for the parties argued as if the sale-deeds have been declared null and void by the civil court, but factually the position is different. Though the suit was filed to declare the sale deed as null and void, but the decree passed was for payment of Rs. 11 Crores within six months and another Rs.11.50 Lakhs towards rent. It was contemplated in the compromise, which became part of the Award of the Lok Adalat that in case the payment is not made then only such property can be sold so as to meet the recovery of an amount of Rs. 11 Crores. The relevant extracts from the return filed on behalf of the owner reads as under:-
"9. That, during the pendency of the above suit, the answering respondents and the Srimati Jewellery House Private Limited entered into a compromise and accordingly filed an application under Order 23 Rule 3 CPC. A copy of such application is enclosed herewith as Annexure R/8. Based on such application, the learned District Judge passed an order and decreed the suit in terms of an order passed under Order 23 Rule 3 CPC in Lok Adalat held on 27.2.2016. A copy of such judgment and decree passed in RCS No.1096-A/2015 by the Lok Adalat is enclosed herewith as Annexure R/9. By this judgment and decree, the Srimati Jewellery House Pvt. Ltd was required to pay an amount of Rs. 11 crores within six months from the date of judgment and decree. The Srimati Jewellery House Pvt. Ltd was also required to pay Rs. 11.50 lacs towards rent for the said period of W.P.No.23234/2017 11 six months. It is specifically stipulated that in case of delay in making payments to M/s Srimati Jewellery House Pvt. Ltd was required to pay interest@ 2% per month. It is further mentioned in such compromise judgment and decree that in the event of failure on the part of Srimati Jewellery House Pvt. Ltd to make payment of an amount of Rs. 11 crores within the stipulated period of six months, only such property can be sold as to meet the recovery of an amount of Rs. 11 crores. A copy of award passed by Lok Adlat which is in similar terms is enclosed herewith as Annexure R/10.
xxx xxx xxx
14. That, from the aforesaid narration of facts, it would be evident that the mortgage of the properties in question in favour of Bank of Maharashtra by the Srimati Jewellery House Pvt. Ltd is absolutely illegal. M/s Srimati Jewellery House Pvt. Ltd did not acquire any right, title or interest over the properties purchased by registered sale deeds dated 26.6.2013 and 27.5.2015 contained in Annexure R/4 and R/6 respectively and, therefore, the mortgage of the same in favour of the Bank is also absolutely illegal. If the mortgage itself is illegal, the order passed by the District Magistrate, Bhopal under Section 14 of the Act for delivery of physical possession of the properties in question to the Bank is also absolutely illegal and without jurisdiction."
15. We have recoded finding above that the sale deeds transfer unequivocal right in property to the borrower free from all encumbrances. The Award/ decree passed by the Lok Adalat do not declare the sale deeds as null and void. The legal consequence of the Award of the Lok Adalat is that the owner is an unsecured creditor (Decree Holder) to recover the sum of Rs. 11 Crores from the borrower. In view of the said fact, the Bank as secured creditor has a priority charge over the property and only after satisfying the claim of the Bank, the unsecured creditor can execute the decree, therefore, decree in W.P.No.23234/2017 12 favour of the owners alternatively is subject to the rights of the Bank as a secured creditor against the property mortgaged by the borrowers.
16. The Bank is secured Creditor over a decree holder was never in doubt, but even in respect of crown debts, the Recovery of Debts and Bankruptcy Act, 1993 has been amended on 1-9-2016 by Central Act 44 of 2016 when Section 33-A has been inserted. The said section reads as under:-
"31-B. Priority to secured creditors.-- Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realise secured debts due and payable to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over all other debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority.
Explanation-- For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code."
17. In view thereof, we hold that the decree dated 27.02.2016 granted by Lok Adalat as modified by the High Court on 23.06.2016 in W.P.No.5820/2016 will not affect any of the rights of the Bank as a secured creditor on the basis of mortgage of the property comprised in two sale deeds in favour of the Bank. The Bank as a secured creditor has a right to realize its dues by sale of such property in accordance with law.
18. Consequently, we direct the District Magistrate to immediately hand- over the possession of the property mortgaged in favour of secured creditors W.P.No.23234/2017 13 within two weeks. In case of any failure on the part of the District Magistrate or its Subordinate Officers, liberty is given to the petitioners to file a contempt petition before this Court.
Petition is disposed of.
Digitally signed by ANIL KUMAR SHIVARAMAN
(HEMANT GUPTA) (VIJAY KUMAR SHUKLA) Date: 2018.05.14 12:24:44 +05'30' CHIEF JUSTICE JUDGE Shukla/aks