Punjab National Bank v. Sanchaita Investment — 1984 DIGILAW 423 (CAL)

Judgment ANIL K. SEN, J. 1. IN terms of an order dated September 27, 1963, passed by the Supreme Court of India in Writ Petition Nos. 638, 757 to 800 of. 1883 (sm. Chanara Seth and Ors. vs. Union of India and Ors.) we were nominated the Division Bench by the learned Chief Justice of this court for the purpose of adjudicating upon objections to the attachment made by the Commissioner of Sanchaita Investments so appointed by the Supreme Court by the order dated May 41,1983, passed in the said writ petitions, On April 24, 1984, the said Commissioner having attached the 5th floor and the corresponding four covered car parking spaces on the basement in the multiatoreyed building at 113, Park Street, Calcutta, an objection was preferred by the Punjab National Bank. Such an objection was preferred by the Punjab National Bank firstly before the Commissioner and secondly on an application before us filed on June 13, 1884. The Commissioner having forwarded the said objection we have heard the objection on notice to and in the presence of the objector, the Commissioner and Anandi Lal Poddar and Sons Limited. in order to consider the objection it would be necessary to refer to certain facts which may be set out briefly as :follows : 2. ON May 11, 1981 an agreement was entered into between Anandi Lal Poddar and Sons Limited (hereinafter referred to as the Poddars) as the vendors of the one part and Sanchaita Investments, the purchasers on the other for sale of the 5th floor along with four car parking-spaces on the basement of a multiatoreyed building then under construction for a total consideration of Rs.26,95,000/- for the 5th floor and Rs. 1,76,000/- for the car parking spaces, The purchaser Sanchaita Investments admittedly advanced the entire price of Rs.26,95,000/- for the 5th floor as earnest money and it was further agreed that the balance consideration of Rs.1,76,000/.- would be paid by the purchaser to the vendor simultaneously with the handing, over of the said floor. The agreement further provided time schedule for completion of the construction and. The agreement further provided time schedule for completion of the construction and. it was also agreed that the purchaser shall have the right to sell or grant lease or let out the said floor to as many persons as they think fit but not more than 4 persons and the vendor agreed to execute the deeds of sale or deeds of assignment as may be required, by the purchaser from time to time in favour of the purchaser or their nominee-It is not in dispute that at or about the time such an agreement was entered into and the aforesaid sum of Rs.26,95,000/- was advanced, the affairs of SanchaIta Investments, had become the subject matter of criminal investigation which led to a writ proceedings in this court and which ended ultimately by an order of the Supreme Court dated February 2, 1982. 3. ON February 1, 1982, Sanchaita Investments' opened a current account With the Punjab National Bank at its Dharmatala Street Branch. ON February 2, 1982, it is alleged Sanchaita Investments approached the objector bank at its Dharmatala Street Branch for overdraft facilities to the extent of Rs.39,00,000/- on the said current account opened the day before on the security of the said 5th floor and the 4 car parking spaces at the basement of the multi-storied building at 113, Park Street. 4. ON July 31, 1982, an agreement was entered into between Sanchaita investments on the one part and the Punjab National Bank on the other. By this agreement Sanchaita Investments purported to transfer, assure and convey all their right, title and interest and nouihate the said .bank to all their right title and interest under the agreement dated May, 11, 1981, between them and the Poddars. The consideration was liquidation of all the amount due and outstanding on the firm's said overdraft account with the bank. The claim of the objector is entirely based on this, agreement dated July 31, 1982 Exerting its rights under the said agreement dated July 31, 1982, Punjab National Bank instituted on March 27, 1984, a suit in the original side of this Court, being O. S. Suit No. 216 of 1984 against the Poddars for specific performance of the agreement dated/May 11, 1981. In this suit the Commissioner was made a party defendant. In this suit the Commissioner was made a party defendant. In that background on April 24, 1984, the Commissioner made an attachment in respect of the said 5th floor along with the 4 Car parking spaces at the basement of the multistorey building since constructed at premises No. 113, Park Street. The Commissioner's order of attachment reads as follows : "Messrs. Anandi Lal Poddar&Sons Ltd., 36, Chowringhee Road, Calcutta. Sub : Attachment of the 5th floor and the corresponding 4 covered Car parking Spaces on the basement (in the Multistoried Building at 113, Park Street, Calcutta), by the Commissioner, Sahchaita Investments. Deaf Sirs, I am to state that I have been appointed Commissioner Sanchaita Investments under the orders of the Hon'ble Supreme Court of India passed and made on 4.5.83 in Writ Petition Nos. 638, 757-800 of 83 and accordingly, I had taken charge of the said office on 17-6-83 and since then, I have been functioning as such. Under the orders of the Hon'ble: Supreme Court of India passed and made on 27-9-83 in the aforesaid Writ Petitions, I have been further authorized & empowered to attach any property if I am prima -facie satisfied that the said property is owned by the Sanchaita Investments (which had its office at No. 5 & 6, Fancy Lane, Calcutta) or any of its partners. I am prima- facie satisfied that the aforesaid 5th floor, and the corresponding 4 covered car parking spaces in the basement of the Multi Storied building premises at No. 113, Park Street, Calcutta, is owned by the Sanchaita Investments which had its office at No. 5 & 6, Fancy Lane, Calcutta for valuable consideration. In exercise of the said power and authority vested in me under the aforesaid orders of the Hon'ble Supreme Court of India, I am herewith with immediate effect attaching the 5th floor, (12,250 sq. ft) and the corresponding 4 covered car parking spaces on the basement (288 Sq. Ft.) (being the area apportioned in the drive-way in the basement floor for each of the car parking space.) You are hereby directed to let the undersigned know what positive steps you are taking in the matter in compliance with the above order. An immediate reply is directed. Yours faithfully, Commissioner Sanchaita Investments. Copy to :- M/s. Punjab National Bank, 134, Lenin Sarani, Calcutta & 2C Tarachand Dutt St., Calcutta, for information. An immediate reply is directed. Yours faithfully, Commissioner Sanchaita Investments. Copy to :- M/s. Punjab National Bank, 134, Lenin Sarani, Calcutta & 2C Tarachand Dutt St., Calcutta, for information. N. C. Dutta Commissioner Sanchaita Investments." 5. THE ground of objection appears to us to be very short and simple. THE objector bank claims that the bank bonafide and in usual course of its business advanced a sum of Rs.26,50,000/- to Sanchaita Investments against security of right, title and interest and the benefit of Sanchaita Investments under the said agreement dated May 11, 1981, and the Sanchaita Investments having failed to repay the said loan, agreed to transfer and assign all their right, title and interest under their agreement with the Poddars and nominate the bank to all such right, title and interest for valuable consideration of liquidating the liability for the loan. That the Poddars had full knowledge of the said agreement dated July 31, 1982, between Sanchaita Investments and the bank. THE objector bank thus having obtained assignment of Sanchaita Investments right, title and interest and the benefit under the agreement dated May 11, 1981 prior to the date of attachment the purported attachment is illegal, void, malafide and not tenable in law. It was further claimed:- "THE Commissioner is not entitled to attach the fifth floor of the said premises as he has purported to do or to attach the right, title and. interest of Sanchaita Investment under the said agreement dated 11th May, 1981, which has been validly assigned to the petitioner bank and the petitioner bank as a nominee under the said agreement is entitled to enforce the same against Messrs. Anandi Lal Poddar and Sons Limited". 6. THIS objection is being contested principally by the Commissioner. An affidavit has been filed by the Commissioner. Anandi Lal Poddar and Sons Limited". 6. THIS objection is being contested principally by the Commissioner. An affidavit has been filed by the Commissioner. In this affidavit reference having been made to various facts, circumstances and developments it has been claimed by the Commissioner that the entire overdraft transaction is a sham transaction set up by the erstwhile partners of Sanchaita Investment and one Ama lendu Bikash Das, "the Manager of Punjab National Bank at its Dharmatala Street Branch, It is claimed by the Commissioner that the said Amalendu Bikash Das has also been arrested on charges of complicity with the said partners and there was no bonafides in the alleged transaction of furnishing the said property as security or in the matter of assigning of right, title and interest or the benefits arising out of the agreement dated May 11, 1981, between Sanchaita Investments and the Poddars, in favour of Punjab National Bank. The other aspect of the defence taken by the Commissioner is that the purported agreement dated July 31, 1982, is invalid illegal and ineffective and notwithstanding the said agreement the benefits under the original agreement dated May - 11, 1981, remained with Sanchaita Investments which could be and was actually attached by the Commissioner so that there is neither any invalidity nor illegality in the attachment made by him. The Poddars had not preferred any objection to the attachment made by the Commissioner. But they have appeared in this proceeding and have filed an affidavit disputing the validity of the attachment. In this affidavit the Poddars at the same time disputed the validity of the agreement dated July 31, 1982, in favour of the bank. They have taken' the stand that the disputed property still continues to be their property and the Commissioner could not have attached it as one belonging to the Sanchaita Investments. 7. WE have heard Mr. Chakrabarti who has appeared on behalf of the bank in support of the objection preferred. Mr. Mallick appearing for the Poddars and Mr. Mitter who is appearing for the Commissioner. Upon the pleading of the parties, it appears to us that in adjudicating the objection preferred by the bank it would be necessary for us to consider first the two points raised by the Commissioner because, if either of the two points succeeds then in that event, the objection must fail. Mitter who is appearing for the Commissioner. Upon the pleading of the parties, it appears to us that in adjudicating the objection preferred by the bank it would be necessary for us to consider first the two points raised by the Commissioner because, if either of the two points succeeds then in that event, the objection must fail. The first point raised by the Commissioner is that the entire transaction starting from the .taking of the overdraft and ending in the assignment dated July 31, 1982, being sham and collusive transaction, the objector acquired no right, title or interest in the property under attachment and, as such, its objection based thereon is not sustainable at all. The decision on this point would necessitate probe into facts and, as such, it would not be possible for us to decide it unless we adopt the procedure of trial on evidence. Since, however, the other point raised by the Commissioner is a question of law which can effectively be decided on the affidavits before us 'and since in the event the Commissioner succeeds to substantiate the said point, the objection preferred by the bank is liable to fail, we have with the consent of parties, decided to go into and decide that point first. The second point raised by the Commissioner is that the purported agreement dated July 31, 1982, which constitutes the basis oil the objector's claim really constitutes an assignment of right, title and interest in immovable property, so also the benefit arising out of the agreement dated May, 11, 1981, concerning such property valued at more than one hundred rupees and such an assignment could not have been effected except by a properly stamped and registered conveyance. The agreement dated July 31, 1982 neither being properly stamped nor being registered must not only fail as an invalid assignment but is also inadmissible in evidence. 8. BEFORE we proceed to consider the aforesaid second point raised by the Commissioner, it would be necessary for us to dispose of an incidental issue. We have already pointed out that oh April 24, 1984, what the Commissioner attached was the 5th floor and the corresponding 4 covered car parking spaces in the basement of the multistoreyed building at premises No. 113, Park Street, Calcutta. We have already pointed out that oh April 24, 1984, what the Commissioner attached was the 5th floor and the corresponding 4 covered car parking spaces in the basement of the multistoreyed building at premises No. 113, Park Street, Calcutta. It is not disputed before us that the said multistoreyed building still belongs to the Poddars who as lessors of premises No. 113, Park Street, Calcutta, had constructed the said building. Though the Poddars entered into an agreement on May 11, 1981, with Sanchaita Investments for' sale of the said 5th floor and the said 4 covered car parking spaces and accepted an earnest money to the tune of Rs.26,50,000/- from Sanchaita Investments such an agreement did not, of itself, create any interest in or convey any title to such a property in favour of Sanchaita Investments. In India creation of an equitable estate in favour of the purchaser by such an agreement is ruled out by the express terms of section 54 of the Transfer of Property Act. But nonetheless such an agreement reciting payment of earnest money creates a statutory charge for the earnest money under section 55(i) (b) of the said Act. Since, however, the property still remained the property of the Poddars, the Commissioner could not have attached the property itself as has been done. Poddars had not preferred any formal objection, but the stand taken by them in their affidavit in this regard appears to be correct. The objector, however, is entitled to rely upon such an objection to oppose the attachment. Indeed, to that extent there has been a technical defect in the attachment made by the Commissioner and Mr. Mitter appearing on behalf of the Commissioner has fairly conceded that position. But at the same time it has been pointed out by Mr. Mitter that such a defect can be cured immediately by issuing a fresh attachment in respect of the charge as also the benefit under the agreement dated May 11, 1981, which itself constitutes a property. Appreciating the position that up holding of such an objection would be of no real help to the objector, it has been agreed between Mr. Chakrabarti and Mr. Mitter that we should proceed to adjudicate the objection on the basis that what really had been attached is the benefit under the agreement dated May 11, 1981. We now propose to do so. Mr. Chakrabarti and Mr. Mitter that we should proceed to adjudicate the objection on the basis that what really had been attached is the benefit under the agreement dated May 11, 1981. We now propose to do so. Mr. Mitter has drawn our attention to the provision of section 17 and section 49 of the Indian Registration Act. Section 17(1) provides that any non-testamentary instrument which purports or operates to create, declare, assign, limit or extinguish, whether in present or in future any right, title or interest whether vested or contingent of the value of one hundred rupees and up words to or in immovable property, is required to be registered. Section 49 on the other hand expressly debars the court from receiving in evidence any document which is require to be registered under section 17 but has not been so registered and it further provides that such a document does not affect the immovable property. Belying upon these provisions, it has been contended by Mr. Mitter that the purported agreement dated July 31, 1982, is in reality a non-testamentary instrument which purports to assign the right, title and interest of Sanchaita Investments of the 'value of more than one hundred rupees in an immovable property in favour of the bank. Hence, according to Mr. Mitter such an instrument was required to be registered under Section 17 of the Indian. Registration Act, and not having been so registered, not only the assignment itself failed but that the document itself is inadmissible to prove such assignment. 9. MR. Mitter has next contended that though the instrument-dated July 31, 1982, is a conveyance and is required to be stamped as such under Article 23 of the Indian Stamp Act, it has been stamped merely as an agreement. The stamp paid, therefore, being insufficient, such an instrument, cannot be admitted into evidence. 10. ON a careful consideration of the contentions thus raised by Mr. Mitter, we find there is some substance in the objection as to the insufficiency of the stamp as raised by Mr. Mitter. The instrument dated July 31, 1982, though described as an agreement, is really one of ' assignment of the benefit of the earlier' agreement for sale as also all right, title or interest that, accrued in favour of Sanchaita Investments there under. Hence, such an instrument could not have been stamped merely as an agreement. Mitter. The instrument dated July 31, 1982, though described as an agreement, is really one of ' assignment of the benefit of the earlier' agreement for sale as also all right, title or interest that, accrued in favour of Sanchaita Investments there under. Hence, such an instrument could not have been stamped merely as an agreement. But this objection is not really insurmountable because if necessary the document may be impounded and appropriate stamp being paid thereon it could still be taken into evidence. But in our view the real difficulty for the objector bank would arise if it fails to meet the other plea raised by Mr. Mitter, namely, that the assignment must fail because of absence of registration. This leads us to consider the most important issue raised before us, namely, whether the document described as an agreement executed by Sanchaita Investments in favour of the bank on July 31, 1982 was really required to be registered. We have referred to the contents of the document hereinbefore. Though described as an agreement it is in substance a deed of assignment of all the benefit under the earlier contract of sale and all the right, title or interest, if any, acquired by the purchaser, namely, Sanchaita Investments there under. According to Mr. Mitter, such assignment constitutes assignment of an interest in an immovable property valued at more than one hundred rupees and, as such, was required to be registered under section 17(1) of the Indian Registration Act. According to Mr. Chakrabarti, on the other hand, by that assignment what was assigned was a mere right to obtain a conveyance in respect of the said immovable property which when executed would result in acquisition of right, title and interest in the immovable property. By that assignment, according to Mr. Chakrabarti, the assignor acquired no right, title or interest in any immovable property and, therefore, such a deed of assignment is exempted from requirement of registration in view of section 17(2) of the Indian Registration Act. The controversy thus raised needs careful consideration. The benefit of a contract of sale is undoubtedly a property in the wider sense 01 the term as contemplated by section 6 01 the Transfer of Property Act. It is well settled that such a property is transferable. The controversy thus raised needs careful consideration. The benefit of a contract of sale is undoubtedly a property in the wider sense 01 the term as contemplated by section 6 01 the Transfer of Property Act. It is well settled that such a property is transferable. Reference may De made to the decision of the Privy Council in the case of Sakulaguna vs. Munuswami A.I.R. 1928 P. C. 174. Though the benefit under such a contract is a property' in the wider sense it would not necessarily attract the provision of section 17(1) unless it be held that such a property constitutes in some way a right, title or interest in an immovable property valued at more than one hundred rupees. We have pointed out hereinbefore that rule of English law that such a contract of Sale creates an equitable estate in favour of the purchaser, is not applicable in India. Section 54 of the Transfer of Property Act, makes it clear that such a contract of itself creates no interest in the property to be sold. The decision of the Privy Council in the case of J. R. R. Skinner v. R. H Skinner A.I.R. 1929, P.C. 269 has been well explained by several decisions in laying down the principle that the said decision is no authority for the proposition that a contract of sale of an immovable property of itself creates such an interest in the property as would necessitate registration. Such a contract creates an obligation recognised by section 2 of the Specific Relief Act and is annexed to the ownership of the property but does not amount to an interest therein. This position clearly follows from the provision of section 40 of the Transfer of Property Act. The purchaser's right under such a contract of sale is transferable and is also enforceable against a transferee with a notice thereof or a gratuitous transferee of the property from the vendor. But such a contract by itself does not create any right, title or interest in the property. Reference may De made to the decision of the Supreme Court in the case of Ram Baran v. Ham Monit AIR 1967 S.C. 744 . Such being the nature of the property which constitutes the subject matter of transfer or assignment by the purchaser under contract of sate, section 17(1) of the Indian Registration Act, can hardly be invoked. Reference may De made to the decision of the Supreme Court in the case of Ram Baran v. Ham Monit AIR 1967 S.C. 744 . Such being the nature of the property which constitutes the subject matter of transfer or assignment by the purchaser under contract of sate, section 17(1) of the Indian Registration Act, can hardly be invoked. In our opinion, Mr. Chakrabaru may be right in contending that a deed of assignment of such a right would not come within the mischief of section 17(l) irrespective of whether the same is entitled to an exemption under section 17(2) of the Indian Registration Act ' 11. THOUGH such is the position in law. with regard to the assignment of the benefit under a contract of sale simplicitor, it would not so in a case like the one now under consideration where such a contract further acknowledges payment of earnest money and or purchase money because such acknowledgement creates a statutory charge under tire provision of section 55(6) (b) of the Transfer of Property Act. This was pointed out by the Privy Council in the case of Dayal Singh vs. under Singh 53 Indian Appeals 214. The said decision of the Privy' Council necessitated amendment of section 17 of the Indian Registration Act, by way of incorporation of a specific explanation to subsection (2) exempting a document purporting or operating to effect a contract of sale from the requirement of registration although such document contains a recital of payment of any earnest money or purchase money. This amendment was introduced by Act. XXXIX of 1949 and was given retrospective operation. But the explanation covers only the document incorporating the contract for sale A deed of assign merit purporting to assign the benefit 01 such a contract including the statutory charge created there by does not attract the explanation and is not entitied to the exemption provided thereby. There is another aspect which needs to be considered at this stage. When Sanchaita investments entered into the contract of sale" dated May 11, 1981, and advanced a sum of Rs. 26,50,000/- towards the purchase money and such payment was only acknowledge by the vendor in the contract itself," the contract created a statutory charge in favour of the purchaser Sanchaita Investments. An assignment of such a charge would need to be registered. 26,50,000/- towards the purchase money and such payment was only acknowledge by the vendor in the contract itself," the contract created a statutory charge in favour of the purchaser Sanchaita Investments. An assignment of such a charge would need to be registered. We are of the view that it can no longer be disputed that where a charge is purported to be created by a document in writing and so also an assignment of such a charge, would both require registration. Reference may the made to the decision of the Bombay High Court in the case of Venkaji Babaji Nayak v. Sndaramapa Balapa Desai I.L.R. 1895(19) Bombay 663 and the decision of the Madras High Court in the case of Siva Rao v. Official Liquidate A.I.R. 1940 Madras 140. We are, therefore, of the opinion that Mr. Mitter is right in his contention that in so far as Sanchaita Investments purported to assign their right, title and interest as also the benefit under the contract of sale dated May 11, 1981, in favour of this bank, they have failed to do so when the instrument by which they purported to do so was not registered and such a document is also not admissible in evidence in proof of the assignment. It is needless to say that the benefit under the contract is not separable from the statutory charge because payment in advance of a part of the purchase money is the integral part of the contract. 12. IN order to meet such an objection Mr. Chakrabarti appearing on behalf of the objector put forward an alternative case before us. He contended that the agreement dated July 31, 1982, is merely an agreement to nominate the bank as the nominee for the purpose of conveying the property in terms of the original contract of sale dated May 11, 1981. According to Mr. Chakrabarti, an instrument which merely effects nomination in terms of the contract between the parties does not come within the purview of section 17(1) of the Indian Registration Act and, as such, is not required to be registered. This contention of Mr. Chakraborti cannot, however, be accepted for two-fold reasons. According to Mr. Chakrabarti, an instrument which merely effects nomination in terms of the contract between the parties does not come within the purview of section 17(1) of the Indian Registration Act and, as such, is not required to be registered. This contention of Mr. Chakraborti cannot, however, be accepted for two-fold reasons. Firstly, though termed as an agreement as indicated hereinbefore, by the said instrument Sanchaita Investments purported to "transfer, assign and assure to the bank all its rights, title and interest under the said agreement by way of consideration of the said bank liquidating the liability of the said firm" in the said overdraft account. Therefore, there is no doubt in our mind that for valuable consideration exceeding rupees twenty six lakhs Sanchaita Investments did transfer and assign all their right, title and interest flowing from the earlier contract of sale dated May 11, 1981. At least, there can be no manner of doubt that one of the right, title and interest so transferred is the statutory charge for the sum of Rs.26,50,000/. When the tenor of the instrument is such, we are unable to accept the contention of Mr. Chakrabarti that the instrument was merely an act of nomination making the bank a nominee for the conveyance of the property in terms of the contract of sale. Secondly, such a contention of Mr. Chakrabarti if accepted, would place the objector in a still more precarious position because it has been rightly pointed out by Mr. Mitter that Sanchaita Invest merits by mere nomination could not have divested themselves of their right, title and interests as also the benefit under the agreement dated May 11, 1981, It is settled principle that generally it is only the promise or his legal representative who can enforce the contract; of sale. That is section 15 of the Specific Relief Act. One who is not a privy to the contract or has not acquired such privity of the contract by transfer or assignment cannot sue in his own rights to enforce the contract.' Effect of a simple nomination without assignment of the rights under the contract is either to specify the choice of the purchaser in terms of the agreement between the parties in whose name he would obtain the conveyance or at best to make the nominee an agent for the time being for the purchaser. Such nomination does not confer upon the nominee any right to enforce the contract in his own rights or make him the legal representative of the purchaser. If any authority is required to be cited on the point, we may refer to an old decision of this court in the case of Krishnalal v. Mt. Promila A.I.R. 1928 Cal. 518. Reference may also be made to a recent Supreme Court decision in the case of Sarvati Devi vs. Usha Debi A.I.R. 1984 S.C. 346. Therefore, we must accept the contention of Mr. Mitter that if the agreement dated July 31, 1982, be considered to be a mere nomination, then in that event the Sanchaita Investments did not thereby divest themselves of their rights under and for the benefits of the earlier contract of sale and since such right or benefit continued to remain with Sanchaita Investments, the same was validly attached by the Commissioner. For reasons aforesaid, we are of the view that Sanchaita Investments were not divested of their right, title and interest arising out of the contract of sale dated May 11, 1981, or the benefit there under by any effective assignment thereof in favour of the objector bank. Hence, the objection raised by the bank to the attachment made by the Commissioner is clearly unsustainable. The objection raised fails and is Overruled and the attachment made by the Commissioner is upheld. The objection preferred by the bank and forwarded to this court by the Commissioner as also the application of the petitioner bank to this court incorporating the said objections are disposed of on above terms. There will be no order for costs.