Gujarat High Court
Bhavesh Kishorbhai Modi vs Jeevan Commercial Cooperative Bank Ltd ... on 19 January, 2015
Author: Ks Jhaveri
Bench: Ks Jhaveri, A.G.Uraizee
C/LPA/28/2015 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
LETTERS PATENT APPEAL NO. 28 of 2015
In
SPECIAL CIVIL APPLICATION NO. 5851 of 2014
With
CIVIL APPLICATION NO. 344 of 2015
In
LETTERS PATENT APPEAL NO. 28 of 2015
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BHAVESH KISHORBHAI MODI....Appellant(s)
Versus
JEEVAN COMMERCIAL COOPERATIVE BANK LTD & 3....Respondent(s)
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Appearance:
MR AS ASTHAVADI, ADVOCATE for the Appellant(s) No. 1
MR SHALIN MEHTA WITH MR NIRAV C SANGHAVI, CAVEATOR for the
Respondent(s) No. 3 - 4
MR.KISHAN PRAJAPATI, CAVEATOR for the Respondent(s) No. 3 - 4
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CORAM: HONOURABLE MR.JUSTICE KS JHAVERI
and
HONOURABLE MR.JUSTICE A.G.URAIZEE
Date : 19/01/2015
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE KS JHAVERI)
1. This Letters Patent Appeal is filed under Clause 15 of the Letters Patent challenging the judgment and order dated 19.12.2014 passed by the learned single Judge in the captioned writ petition whereby, the petition came to be dismissed.
2. Bhavesh Kishorbhai Modi, the appellant herein, original Page 1 of 12 C/LPA/28/2015 ORDER petitioner, is one of the Directors of M/s. Soham Pharma Pvt. Ltd., which had approached respondent no.1Bank seeking financial assistance. According to the application form for loan, the appellant was one of the three persons, whose name was mentioned as the Applicant as well as the Guarantor for the loan, apart from being the Director of the said company. For facilitating the loan, C.K. Modi, who happens to be the Uncle of the appellant, offered his property / residential premise bearing Revenue Survey No.443 paiki Survey No.443/D of Rajkot admeasuring about 30680 sq. yards of Plot No.5 with constructed residential unit in "Shanti Niketan Coop. Housing Society Ltd." as security for the loan and the said property was taken in mortgage by respondent no.1Bank.
3. However, on account of defaults in repayment of loan, respondent no.1Bank initiated action under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, "the Act"). Demand Notice dated 26.02.2003 u/s.13(2) of the Act was issued against the said Company, the Guarantor / mortgagor and the Directors, including the appellant herein. Against the Notice dated 26.02.2003, the Company filed objections dated 09.04.2003 and 13.08.2003 u/s.13(3A) of the Act. The Guarantor / mortagor also filed objections u/s.13(3A) of the Act vide objections dated 14.08.2003. It is pertinent to note that neither the appellant nor any of the two other Directors filed separate objections u/s.13(3A) of the Act. Further, the Guarantor / mortgagor had also filed a suit being Civil Suit No.136/2003 in the Court of Civil Judge, Senior Division, Page 2 of 12 C/LPA/28/2015 ORDER Rajkot challenging the action initiated by respondent no.1Bank u/s.13 of the Act. It appears that the Guarantor / mortgagor had also filed an application (Appeal) u/s.17 of the Act before the Tribunal, which was numbered as Securitization Application (Appeal) No.59 of 2004. Over and above, the Guarantor / mortgagor had also filed a writ petition being Special Civil Application No.4546 of 2003 before this Court challenging the action initiated by respondent no.1Bank under the provisions of the Act.
4. In 2003 itself, Nirmalaben Dhokai, wife of the Guarantor / mortgagor, also initiated proceedings in respect of the property in question by filing Civil Suit No.60/2003 before the Small Causes Court, Rajkot wherein, she claimed tenancy rights and prayed for injunction against the action of respondent no.1Bank. In the said suit, the trial Court granted interim injunction vide order dated 06.05.2003. Aggrieved by the said order, the respondentBank filed writ petition being Special Civil Application No.13042/2003 before this Court wherein, interim relief came to be granted, vide order dated 14.10.2003. Against the interim order, the wife of the Guarantor filed Letters Patent Appeal No.1090 of 2003. Subsequently, the writ petition being S.C.A. No.13042/2003 came to be disposed of vide order dated 03.02.2009. The erstwhile owner and mortgagor of the property died in 2006.
5. Besides, the heirs of the Guarantor / mortgagor had also initiated proceedings before the Tribunal by filing Waiver Application, which came to be dismissed for nonprosecution, vide Page 3 of 12 C/LPA/28/2015 ORDER order dated 06.03.2007.
6. Since the Notice u/s.13(2) of the Act issued by respondent no.1Bank did not yield any result, the Bank published Notice dated 14.07.2004 u/s.13(4) of the Act taking over possession of the property in question. Thereafter, the Bank published advertisement / notice dated 11.08.2004 whereby, it declared that the property in question is to be sold by auction and invited bids from public.
7. It is pertinent to note that the appellant had neither challenged the Notice u/s.13(2) or the subsequent Notice u/s.13(4) of the Act. It appears that when the advertisement inviting bids was published, the wife of the Guarantor filed a petition being S.C.A. No.9828/2004 before this Court opposing the action of the respondentBank of taking over possession of property in question. In the said petition, this Court passed an interim order on 16.08.2004, which was carried in appeal by the wife of Guarantor by filing L.P.A. No.1103/2005. The said LPA came to be disposed of as withdrawn vide order dated 16.08.2005.
8. Pursuant to the aforesaid orders, in April 2007, the respondentBank issued Notices to the Directors, including the appellant herein and Guarantors demanding its dues. The wife of the Guarantor had again filed another petition being S.C.A. No.1091/2008 alleging that the Bank was finalizing the sale by private negotiations. The said petition was disposed of vide order dated 27.03.2008.
Page 4 of 12 C/LPA/28/2015 ORDER9. Subsequently, the respondentBank sold the property in question to respondent no.2 herein in August 2008. Thereafter, in March 2013, respondent no.2 sold the property to respondents no.3 & 4 herein, vide Sale Deed dated 11.03.2013.
10. Being aggrieved by the action of the respondentBank, the appellant filed writ petition before the learned single Judge, which came to be rejected, vide impugned judgment and order dated 19.12.2014. Hence, this appeal.
11. Mr. A.S. Asthavadi learned counsel appearing for the appellant submitted that the initiation of action by the respondent Bank under the said Act is without jurisdiction as the respondent Bank is not the secured creditor. It was submitted that the respondentBank did not follow the procedure prescribed in the Rules framed under the Act inasmuch as consent of all the parties was not obtained before effecting the sale. It was submitted that the appellant was not aware about the sale of the property in question because the sale was effected by private negotiations. The appellant came to know about the sale only when he was served with the process of Lavad Suit No.290 of 2011, which was filed by the respondentBank and where the appellant was impleaded as partyopponent.
11.1 Learned counsel Mr. Asthavadi submitted that no Notice was ever served upon the appellant regarding the sale by private treaty. It was submitted that no soon as the appellant came to know about Page 5 of 12 C/LPA/28/2015 ORDER the sale of the property by respondentBank, it approached the Debts Recovery Tribunal. Therefore, the very basis on which the learned single Judge has passed the impugned judgment is erroneous. He, therefore, submitted that the impugned judgment and order passed by the learned single Judge deserves to be quashed and set aside.
12. Mr. Shalin Mehta learned Senior Advocate appearing for respondents no.3 & 4 raised a preliminary contention regarding the locus standi of the appellant to file the present litigation. He submitted that respondents no.3 & 4 are the bona fide purchasers of the property in question from respondent no.2 herein. The appellant was never the owner of the property in question. In fact, he was aware about the various rounds of litigations that ensured between the parties and the appellant is acting on behalf of the heirs and legal representatives of deceased Guarantor / mortgagor. The heirs of the erstwhile owners and mortgagor were party to the sale deed in favour of respondent no.2 inasmuch as they were signatories to the deed as "confirming party". Now, since the heirs are not in a position to challenge or raise dispute regarding the transaction of sale in favour of respondent no.2, they have sought to raise the present dispute through the appellant herein and therefore, this is a sponsored litigation.
12.1 Learned Senior Counsel Mr. Mehta submitted that respondents no.3 & 4 are the bona fide purchasers of the property in question. Respondent no.2 had purchased the property in question in pursuance of the orders of this Court and it was, Page 6 of 12 C/LPA/28/2015 ORDER subsequently, purchased by respondents no.3 & 4 herein. The appellant has initiated the present litigation, at the behest of the erstwhile owner of the property, with the mala fide intention to reclaim the property during which period new equities have already come in existence.
12.2 He drew our attention to the observations made by the learned single Judge in para14.6 of its judgment, which reads as under;
"14.6 It is pertinent that when the respondent bank took impugned action (sold the property in question by taking recourse to the provisions under the Act) in 2008 and even thereafter until Division Bench passed the judgment dated 22.4.2013 in case of Administrator, Shri Dhakdi Group Co operative CottonSeed (supra), this Court's decision in case of Apex Electrical (supra) held the field and the legality and validity of the action by the cooperative bank taken by having recourse to the provisions under the Act where governed, tested and determined in light of the decision in case of Apex Electrical (supra)."
12.3 Learned Senior Advocate Mr. Mehta submitted that the appellant has not approached this Court with clean hands and had complete knowledge about the entire proceedings that were initiated in respect of the property in question. He, therefore, submitted that the present appeal deserves to be dismissed with costs.
13. We have heard learned counsel for both the sides. Having examined the appeal in light of the preliminary contention raised Page 7 of 12 C/LPA/28/2015 ORDER by respondents no.3 & 4, we find merits in the same since the property in question has changed two hands and respondents no.3 & 4 are the present owners. Therefore, a suggestion was put to learned counsel Mr. Asthavadi whether he was desirous to withdraw the appeal, which was replied in the negative, strangely after consulting J.K. Modi, who was present in the Court and happens to be one of the Directors of the Company and not the petitioner, who was absent. It was stated by Mr. Asthavadi that J.K. Modi was authorized by the appellant to give necessary instructions in the matter. In view of the same, the Court proceeded to decide the matter on merits.
14. It is a fact undisputed that the appellant herein was never the owner of the property in question. We find that the appellant herein was one of the Directors of the Compnay, who was served with the demand Notice dated 26.2.2003 u/s.13(2) of the Act for committing default in repayment of loan. Pursuant to the auction sale conducted by respondentBank, the property in question was sold to respondent no.2 on 12.08.2008, after the death of the original owner / mortgagor, who had mortgaged the property. The heirs and legal representatives of the erstwhile owner / mortgagor were party to the sale deed, in the capacity of "confirming party"
and as the "confirming party", they had consented and confirmed the sale of the said property at the relevant time, i.e. in 2008.
15. Before the appellant had filed the captioned writ petition, the owner of the property in question, who also happened to be the Guarantor / mortgagor, as also his heirs and legal representatives, Page 8 of 12 C/LPA/28/2015 ORDER had initiated series of litigations against the action of the respondentbank, at every possible and conceivable stage. In pursuance of the permission granted by this Court, the respondent bank disposed of the property in question to respondent no.2 vide sale deed dated 12.08.2008. Thereafter, the property in question was purchased by respondents no.3 & 4 from the auction purchaser on 05.07.2012.
16. In view of the aforesaid factual scenario, the dispute with regard to sale of the property and the Bank's actions have attained finality by way of various orders passed by this Court as also the Debts Recovery Tribunal. A period of almost seven years after the sale of the property in question, almost eight years after the possession of property was taken over under Section 13(4) of the Act and almost twelve years after the Notice under Section 13(2) was issued, the appellant herein, who was neither the owner nor mortgagor of the property before the property came to be sold as a measure under the Act, has initiated the present proceedings in spite of the fact that the proceedings have attained finality by virtue of the previous orders of this Court and though the heirs and legal representatives of the mortgagor had, as "confirming party", consented to and accepted the sale of the property to the respondent no.2 in 2008.
17. It is even more glaring when the appellant states that he was unaware about the sale of the property in question. The appellant has taken a clear dishonest stand since it is a fact apparent that the appellant herein, who was one of the three Directors in the Page 9 of 12 C/LPA/28/2015 ORDER principal borrower company, which is a closely held private limited company, was a partyrespondent in SCA No. 13042 of 2003, SCA No. 4546 of 2003, SCA No. 9828 of 2004 and LPA No. 1090 of 2003. Therefore, it is highly unbelievable that the Company and / or its Directors would be unaware about the said proceedings and about the different orders passed by different Courts / Tribunal.
18. Despite such position and such facts, learned advocate for the appellant tried to justify the delay by citing that in the year 2013, in the case of Administrator, Shri Dhakdi Group Cooperative CottonSeed vs. Union of India, (2013 [3] GLR 2337), this Court has quashed the Notification dated 28.1.2003 and had held that Cooperative Banks cannot invoke provision and power under the Act and in light of the said decision, the appellant had initiated the present proceedings. However, in our considered opinion, the dispute actually ended in the year 2008 upon sale of the property to the respondent No.2 in pursuance of the order dated 27.3.2008 in SCA No. 1193 of 2008.
19. It is also relevant to note that the Notification dated 28.1.2003, which was challenged in the abovementioned case of Administrator, Shri Dhakdi Group Cooperative CottonSeed (supra), had come up for consideration before the Court in the case of Apex Electricals Ltd. vs. ICICI Bank Ltd, (2003 [2] GLR 1785) wherein the Court had upheld the said Notification vide judgment and order dated 30.7.2003 . In the said case of Apex Electricals Ltd. (supra), the Court had rejected the challenge against the said Notification dated 28.1.2003 and observed, inter alia, that: Page 10 of 12 C/LPA/28/2015 ORDER "The challenge made by the concerned petitioners to the legality and validity of the notification dated 2812003 issued by the Central Government for specifying "Cooperative Bank" as "Bank" for the purpose of the Act also fails and the petitions shall stand dismissed to that extent.
20. When the respondent bank published the Notices dated 14.07.2004 and 11.08.2004 and took action under the Act and thereafter, sold the property in question, it was the said decision of this Court in the case of Apex Electricals Ltd. (supra), which governed the field. On this count, it is necessary to note that from 2003 until 2008 when the property in question came to be sold and the heirs and legal representatives of the owner and mortgagor signed the sale deed as "confirming party", the appellant did not raise any objection, at any stage, against the said actions. Even after 2008 until 2014, the appellant did not take any action against any decision or any action of the respondentBank and did not claim any relief. In fact, before initiating the process of auction under the provisions of the Act, the respondent bank had issued demand Notice dated 26.2.2003, which was followed by Notice dated 14.7.2004. Even during that time, no action was taken by the appellant.
21. Therefore, on the ground that in 2013 in the decision in case of Administrator, Shri Dhakdi Group Cooperative CottonSeed vs. Union of India (supra) this Court has taken different view and quashed the Notification dated 28.1.2003, the action taken by the respondentBank does not warrant any interference and do not Page 11 of 12 C/LPA/28/2015 ORDER deserve to be set aside, more particularly, because in the interregnum, i.e. during the period from 2003 to 2008, the respondentbank's actions were challenged in different proceedings and have attained finality by virtue of different orders passed by the Court and also by virtue of efflux of time. At this stage, it will not be out of place to mention that the said judgment in case of Administrator, Shri Dhakdi Group Cooperative CottonSeed (supra) is carried in appeal before Hon'ble Apex Court and it is reportedly pending.
22. In view of the above discussion, we find no merits in the present appeal. We are in complete agreement with the reasonings given by the learned single Judge while dismissing the writ petition and hence, find no reasons to entertain this appeal. Consequently, the appeal is dismissed. Interim relief granted earlier stands vacated.
(K.S.JHAVERI, J.) (A.G.URAIZEE, J.) Pravin Page 12 of 12