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2017 DIGILAW 128 (CAL)

Frontline Corporation Ltd v. Punjab and Sind Bank

2017-01-30

NISHITA MHATRE, TAPABRATA CHAKRABORTY

body2017
JUDGMENT : Tapabrata Chakraborty J. 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. 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 bona fide 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. 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 v. 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). 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 nonperformance 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). 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. 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). 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. 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. Appeal and stay application disposed of.