Calcutta High Court
Frontline Corporation Ltd vs Punjab & Sind Bank on 30 January, 2017
Equivalent citations: AIR 2017 CALCUTTA 172, (2017) 3 CALLT 118, (2017) 3 CURCC 60, (2017) 2 BANKCAS 131, (2017) 3 CAL LJ 422, (2018) 1 CIVLJ 213, (2017) 180 ALLINDCAS 278 (CAL), (2017) 3 CAL HN 1
Author: Tapabrata Chakraborty
Bench: Nishita Mhatre, Tapabrata Chakraborty
IN THE HIGH COURT AT CALCUTTA
Civil Appellate Jurisdiction
ORIGINAL SIDE
Present:
The Hon'ble Acting Chief Justice Nishita Mhatre
&
The Hon'ble Justice Tapabrata Chakraborty
GA 3535 of 2016
APOT 411 of 2016
CS 217 of 2013
FRONTLINE CORPORATION LTD.
Versus
PUNJAB & SIND BANK
For the Appellant/
Petitioner : Mr. Jayanta Kumar Mitra, Sr. Adv.
Mr. Sakya Sen, Adv.
Ms. Nilanjana Adhya, Adv.
Mr. Kaushik Banerjee, Adv.
Ms. Rashmita Sen, Adv.
For the Respondent : Mr. Joy Saha, Adv.
Mr. Rudrajit Sarkar, Adv.
Ms. Ranjana Seal, Adv.
Ms. M. Chaudhury, Adv.
Hearing is concluded on : 14.12.2016.
Judgment On : 30th January, 2017.
Tapabrata Chakraborty J. :
1. The instant appeal has been preferred challenging an order
dated 2nd November, 2016 passed by the learned Single Judge in
C.S. No.217 of 2013 by which the appellant's interlocutory
application being G.A. No.1884 of 2013 filed in connection with the
suit was dismissed with costs and the vacating application being
G.A.2352 of 2014 filed by the Punjab & Sind Bank (hereinafter
referred to as the said bank) was disposed of.
2. Shorn of unnecessary details the facts are that the said
bank being the respondent herein was a tenant in respect of
premises no.8, Old Court House Street, Kolkata-700001 (hereinafter
referred to as the said property) under M/s. Bharat Chamber of
Commerce and seeking a declaration of such tenancy, the bank
preferred a suit being C.S. No.422 of 1993. In the year 2003, M/s.
Bharat Chamber of Commerce preferred an Ejectment Suit No.02 of
2003. During pendency of the same, the appellant purchased the
said property by a deed dated 17th February, 2005 and thereafter
entered into an agreement with the said bank with conditions to the
effect that the said bank would vacate the said property and
handover possession to enable the appellant to develop the said
property and undertake reconstruction and that upon completion of
such reconstruction, the said bank would be relocated. In part
performance of the said agreement the parties executed a deed of
lease on 11th February, 2011 and the said bank vacated the said
property upon availing the shifting charges to the tune of Rs.5
lakhs from the appellant. In the midst thereof the appellant
obtained a sanctioned building plan on 11th January, 2007 after
paying a sanction fee amounting to Rs.1,46,53,633/-. For such
reconstruction works the appellant took a loan from the said bank.
Subsequent thereto, the said bank issued a notice under Section
13(2) of the Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002 (hereinafter referred
to as the SARFAESI Act) and in the said notice dated 13th June,
2012, the facilities availed by the appellant were stated to have been
secured by three properties including the said property at Kolkata.
Thereafter a possession notice pertaining to the said property was
issued by the said bank on 19th January, 2013 and as such the
appellant was constrained to prefer an application under Section 17
of SARFAESI Act. On 26th June, 2013 the appellant filed the suit
being C.S. No.217 of 2013 praying for a decree for specific
performance of the agreement and the lease deed dated 11th
February, 2011. In connection with the said suit the appellant
preferred an interlocutory application in which an interim order was
passed on 15th July, 2013 to the effect that "let steps be taken for
selling premises no.8, Old Court House Street, Kolkata but let not
final orders of sale be passed till six weeks from date". The said
interim order was directed to continue until further order by an
order dated 2nd December, 2013. The parties exchanged their
affidavits in the said interlocutory application and the bank also
filed an application for vacating the interim order being G.A.
No.2352 of 2014. Upon contested hearing the interlocutory
application preferred by the appellant was dismissed.
3. Mr. Mitra, learned senior counsel appearing for the
appellant submits that under the terms of settlement arrived at
between the parties and the lease deed dated 11th February, 2011,
the bank agreed to allow the appellant to develop the said property
and to repay the loan from the income that would be derived upon
construction of a new building in the said property and upon
acceptance of the terms of settlement, the bank, in fact, shifted
from the said property and the appellant on its part obtained a
sanctioned building plan to construct the new building so that it
may relocate the bank in the said property and sell the remaining
portion to repay the loan out of the said sale proceeds. Such
bonafide intent and action on the part of the appellant was sought
to be thwarted by the bank by withholding possession in the said
property in spite of having shifted therefrom and as a consequence
thereof reconstruction work over the said property could not be
commenced. In the midst thereof, the bank issued a notice under
Section 13(2) of the said Act of 2002 and issued possession notice
with an intention to sell the said property at Kolkata.
4. He further argues that under Section 13(2) of the said Act of
2002 where any borrower makes any default in repayment of a
secured debt, the secured creditor may require the borrower by
notice to discharge his liabilities. In the instant case, prior to
issuance of the notice under Section 13(2), the bank acted in terms
of the agreement and the lease deed by shifting from the said
property upon availing the shifting charges from the appellant.
Having taken such steps, the bank waived its right to issue the
notice under Section 13(2) in respect of the said property. In
support of such contention reliance has been placed upon a
judgment delivered in the case of Commissioner of Customs,
Mumbai -vs- M/s. Virgo Steels, Bombay & Anr., reported in
(2002) 4 SCC 316.
5. According to Mr. Mitra, the appellant altered its position to
its detriment by incurring huge expenses to obtain a sanctioned
building plan and to undertake reconstruction in the said property
so as to relocate the bank therein but the bank sought to repudiate
its obligations under the settlement and such act of the bank is
violative of the principles of promissory estoppel.
6. He submits that the learned Judge erred in law in co-
relating the right of the appellant to claim specific performance of
an agreement with the right of the bank, being the other party to
the agreement, to exercise its right under Section 13(4) of the said
Act of 2002. The bar under Section 34 will not operate since the
Debts Recovery Tribunal or the Appellate Tribunal is not
empowered by and under the SARFAESI Act to decide an issue
pertaining to specific performance.
7. He further argues that relief under the provisions of the
Specific Relief Act is a discretionary relief and upon reasonable
exercise of discretion this Court granted an interim protection way
back in the month of July, 2013 and such order was not appealed
against and a vacating application was filed almost after a year and
the interim order was vacated almost two years thereafter by the
order impugned passed in the year 2016. He urges that the learned
single Judge has found that the suit preferred by the appellant was
a mischievous one though in the order itself it was observed by the
learned Court that the suit being a suit for specific performance
was certainly maintainable. By the impugned order the learned
Judge had withdrawn the interim order observing that in the event
the appellant fails to repay its dues, the bank might be able to sell
the said property rendering the suit infructuous. Bereft of an
interim protection, the appellant would be faced with a fait accompli
and it would be well-nigh impossible for the appellant to undertake
reconstruction on the said property as per the terms of settlement.
8. Per contra Mr. Saha, the learned advocate appearing for the
bank submits that the accounts in respect of the debt was classified
as non-performing asset on 31st March, 2012 and thus, the right to
issue the said notice under Section 13(2) occasioned only on 31st
March, 2012 and as such, question of relinquishment or waiver of
such right under the SARFAESI Act prior thereto, did not occasion
and the argument of Mr. Mitra to the effect that the bank waived its
right to issue the notice under Section 13(2) by entering into the
agreement, is absolutely fallacious.
9. He further submits that there is not a single clause in the
agreement executed towards repayment of the debt. It was only an
agreement, that too, an unregistered one, containing clauses to the
effect that the appellant would undertake reconstruction of the said
property and that during the said period the bank has to shift and
that upon such reconstruction, the appellant would relocate the
bank in the new building. The said agreement/terms of settlement
appears to have been filed in the Ejectment Suit No.2 of 2003 by
way of an application under Order 23 Rule 3 read with Section 151
of the Code of Civil Procedure for issuance of a consent decree and
though the same stands signed on behalf of the appellant, the bank
and M/s. Bharat Chamber of Commerce, it has not been disclosed
in the plaint as to whether such consent decree has been obtained.
The said agreement cannot, by the furthest of imagination, be
construed to be an agreement pertaining to repayment of debt and
that as such there was no bar on the part of the bank to take steps
against the appellant under the provisions of SARFAESI Act when
the appellant has admittedly defaulted in repayment of the dues.
Furthermore the suit is barred in view of the complete embargo
under Section 34 of the SARFAESI Act.
10. He argues that save and except an amount of Rs.5 lakhs
towards shifting charges, the bank has not been paid any further
amount as specified in the said agreement. On the contrary the
bank as a tenant has continued to pay the rent amount as
specified. The sanctioned plan was obtained by the appellant on
11th January, 2007 and the same expired on 29th April, 2011 and
thereafter no steps were taken by the appellant to renew the said
sanctioned plan and instead about two years thereafter the
appellant preferred the instant suit. An act in isolation cannot be
construed as readiness and willingness on the part of plaintiff to get
the relief of specific performance. There was absolutely no readiness
or willingness on the part of the appellant to take steps in term of
the agreement and the lease deed and that as such the appellant is
not entitled to avail the reliefs as prayed for in the said suit.
11. In reply, Mr. Mitra submits that though the loan availed by
the appellant stands sufficiently secured by mortgage of properties
at New Delhi and Gandhi Nagar, the bank had also incorporated the
property at Kolkata in the notice under Section 13(2), knowing fully
well that an agreement and a lease deed had been executed in
respect of the said property at Kolkata and such conduct is most
unbecoming of a nationalized bank. It has been further reiterated
that in spite of shifting from the said property the bank had not
handed over possession which prevents the appellant from
undertaking reconstruction work though the appellant had
represented before the bank to vacate the said premises, as would
be explicit from letters dated 19th September, 2012 and 13th
October, 2012.
12. Heard the learned advocates appearing for the respective
parties and considered the materials on record.
13. The SARFAESI Act was enacted to curb the menace of
growing non-performing assets (NPAs). Due to non-recovery of the
dues the banks also run out of the financial resources to further
carry on the financial activity. Therefore, need was felt for a faster
procedure empowering the secured creditors to recover their dues
and for securitisation of financial assets so as to generate maximum
monetary liquidity. The bar of jurisdiction of the Civil Court was
thought to be necessary to avoid lengthy legal process in realizing
the amount due.
14. In the order impugned the learned Judge has observed
that though the suit for specific performance of the terms of
settlement is maintainable, such right to institute the suit to
specifically enforce the terms of settlement would not entail an
injunction restraining the bank from taking steps as a secured
creditor qua the security. This would tantamount to non-suiting the
petitioner and to render the suit infructuous. Such a course of
action would be nugatory to the jurisdiction of the Court to grant
injunction in connection with the specific performance of executory
contracts. Sometimes the injunction is the instrument by which
the Court specifically enforces the contract itself or some part of it,
sometimes the injunction is merely incidental to or ancillary to the
performance of the contract and sometimes the injunction is used
for the purpose of giving effect to rights resulting from the non-
performance of the contract.
15. It would be explicit from the notice under Section 13(2)
that the facilities availed by the appellant have been stated to be
secured by three properties including that of Kolkata. The fact that
the Kolkata property is the subject matter of an agreement and a
lease deed executed on 11th February, 2011 was known to the bank
prior to issuance of 13(2) notice on 16th June, 2012 and that in part
performance of the agreement the bank did shift from the Kolkata
property upon availing Rs.5 lakhs from the appellant.
16. The expression "in respect of any matter" referred to in
Section 34 of the SARFAESI Act, would take in "measures" provided
under Section 13(4). Consequently, if an aggrieved person has got
any grievance against any "measures" taken by a secured creditor
under Section 13(4), the remedy open to him is to approach the
Debts Recovery Tribunal and not the Civil Court. The filing of a suit
for specific performance pertaining to an agreement and a lease
deed entered into between the parties does not come within the bar
provided under Section 34. The suit filed by the plaintiff does not
question any notice under Section 13(4). The bar under Section 34
is not absolute because where the dispute raised cannot be
adjudicated by the Tribunal created under the Act, right of parties
to approach the Civil Court cannot be whittled down. Hence, it
cannot be stated that the jurisdiction of Civil Court to entertain, try
and decide the suit claiming specific performance, is totally barred
under Section 34.
17. The loan as prayed for by the appellant was advanced by
the bank in terms of the agreement and the deed of lease. Had
there been no such agreement and deed of lease, proceedings could
have been drawn under the provisions of the SARFAESI Act for
recovery of the loan advanced by the bank, by keeping the
appellant's property under mortgage. The bank advanced the loan
in part performance of the agreement. The appellant has prayed for
specific performance in terms of the said agreement as the bank
had not taken the subsequent steps as agreed to by the parties.
Facts thus do not reveal that the appellant has invoked the
jurisdiction of the Civil Court posing as if he had cleared the dues. The appellant admits that there are dues which he is agreeable to repay upon completing construction of the building in the said property and by selling of parts of the newly constructed building and as such the right of the bank to recover the loan amount stands protected.
18. The property involved in the suit for specific performance cannot be treated as a secured asset under the SARFAESI Act. A secured asset means a property on which security interest is created. Pertaining to the property involved in the suit there exists a subsisting agreement and a lease deed and as such no security interest is created upon the said property.
19. We find substance in the argument of Mr. Mitra that in respect of the Kolkata property, the bank having opted for the course as stipulated in the settlement was estopped from taking steps as a secured creditor qua the security. The learned Tribunal under SARFAESI Act is not empowered to decide the dispute, in respect of the property at Kolkata, in respect of which the instant suit has been preferred. The issue as to whether, in the facts of the case, there was a conscious relinquishment of the right, on the part of the bank, to proceed in terms of the SARFAESI Act, merits consideration and the said issue ought to have been decided, prior to vacation of an interim protection granted by the Court in the month of July, 2013, by the impugned order passed in the month of November, 2016, on the basis of a vacating application filed by the bank in 2014. The learned Judge has vacated the interim order observing that in the event the bank can sell off the property for non-payment of dues, the suit itself would become infructuous. Due to denial of injunction, the appellant is divested of his right to establish and substantiate the readiness and willingness on his part to perform his part of contract through evidence at the appropriate stage.
20. We do not find any substance in the argument of Mr. Saha that in the event the appeal is admitted, this Court would be acting as an appellate Court over the tribunal. The dispute in the suit is inextricably attached with the issue of the bank's right as a secured creditor sought to be exercised through the notice u/s 13(2). The property in question has been included in the said notice though prior thereto, the bank did take steps in terms of the settlement and such conduct of the bank ought to have been considered by the learned Judge prior to formation of the opinion that the suit was mischievous and vacation of the interim protection granted by the Court more than three years ago in the month of July, 2013. The bank having taken steps in terms of the terms of settlement cannot repudiate its obligations under the settlement. In such a situation the doctrine of promissory estoppel would apply warranting issuance of necessary order restraining the bank from selling the said property until determination of the rights of the parties.
21. For the reasons discussed above, we are of the opinion that the impugned order dated 2nd November, 2016 is not sustainable in law and the same is, accordingly, set aside and the interim order initially passed in the suit shall revive and continue till the disposal of the suit.
22. With the above observations and directions the appeal and the stay application being G.A. No.3535 of 2016 are disposed of.
There shall, however, be no order as to costs.
Urgent Photostat certified copy of this judgment, if applied for, be given to the parties, as expeditiously as possible, upon compliance with the necessary formalities in this regard.
(Tapabrata Chakraborty, J.) (Nishita Mhatre, A.C.J.) Later The learned counsel appearing for the respondent bank seeks an order for expedition of the suit. The learned Single Judge is requested to hear the suit as expeditiously as possible.
(Tapabrata Chakraborty, J.) (Nishita Mhatre, A.C.J.)