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2019 DIGILAW 281 (CAL)

AMIT SINGH v. ICICI BANK LIMITED

2019-02-27

SABYASACHI BHATTACHARYYA

body2019
JUDGMENT : SABYASACHI BHATTACHARYYA, J. 1. Both the revisional applications are taken up together for hearing, since the same order has been challenged in both. C.O. No. 3142 of 2018 is filed by the borrowers and C.O. No. 2628 of 2018 by a developer who entered into an agreement for development with the borrowers. 2. The opposite party no.1-bank had filed an application under Section 19 of the Recovery of Debts Due to the Banks and Financial Institutions Act, 1993 (hereinafter referred to as "the 1993 Act"), giving rise to the original application bearing O.A. No. 53 of 2016. 3. The Debts Recovery Tribunal - 3 at Kolkata, by its final order dated January 29, 2018, allowed the original application by passing several directions, including reviving a settlement between the opposite party no.1-bank and the borrowers (despite the borrowers having failed to fulfil their terms of the settlement as per the bank) and other consequential directions. The Tribunal also directed that the injunction order passed in relation to "the immovable property" would continue till the payment was made as per that order. 4. The bank preferred against the aforementioned order an appeal before the Debts Recovery Appellate Tribunal at Kolkata. The appellate tribunal, by its judgment and order dated July 25, 2018, allowed the appeal, thereby setting aside the impugned order dated January 29, 2018 and remanding the matter to the concerned tribunal to decide O.A. No. 53 of 2016 afresh, after giving opportunity of hearing to both sides, further directing that meanwhile the bank shall retain the possessed vehicle and that the interim injunction granted in respect of "the immovable property" shall continue. 5. Learned counsel for the borrowers places reliance on Order No. 20 dated December 19, 2017, whereby the tribunal disposed of an interlocutory application (I.A.) filed by the bank for passing final order on the basis of an alleged admission made by the borrowers in a previously executed Memorandum of Understanding (MOU), inter alia by directing the defendants-borrowers, if so desired, to revive their MOU on payment of interest for the delayed period, fixing the matter for final arguments on the next date. 6. The borrowers filed their written statement subsequently on January 18, 2018, inter alia praying in paragraph no. 16 thereof for revival of the said settlement and to grant some reasonable time to pay the balance dues with interest for the delayed period. 6. The borrowers filed their written statement subsequently on January 18, 2018, inter alia praying in paragraph no. 16 thereof for revival of the said settlement and to grant some reasonable time to pay the balance dues with interest for the delayed period. 7. It is argued on behalf of the borrowers that since vide Order No. 20 dated December 19, 2017 the defendants-borrowers were directed, if so desired, to revive their MOU on payment of interest for the delayed period, and since the bank, in whose presence the said order was passed, never challenged the said order and allowed it to attain finality, the bank was also bound by such direction. As a "revival" of the MOU on payment of interest for the delayed period was not possible unilaterally by the borrowers and the bank had to be a party to it, the bank had acquiesced to the order by not challenging the same despite being represented when it was passed. 8. The said order dated December 19, 2017 was appellable under Section 20 of the 1993 Act but the bank never preferred any appeal against the same, thus precluding it from refusing to adhere to the same and now and/or disagreeing to a revival of the MOU. 9. In this context, learned counsel for the borrowers cites a judgment reported at (Prahlad Singh v. Sukhdev Singh, AIR 1987 SC 1145 ) for the proposition that orders deciding rights of parties finally operate as res judicata in subsequent stages of the proceedings and are not to be treated as mere interlocutory orders. In the said case, there was a finding in an interlocutory order as to the landlord being agreeable to withdraw the suit and accept rent. 10. Pursuant to such order dated December 19, 2017, the borrowers submit to have paid the entire interest by bank drafts to the opposite party no. 1-bank. The bank accepted such payment, although it did not encash the drafts. 11. It is next argued by the borrowers that the property on which injunction was passed was never mortgaged with the ICICI bank. 1-bank. The bank accepted such payment, although it did not encash the drafts. 11. It is next argued by the borrowers that the property on which injunction was passed was never mortgaged with the ICICI bank. Although the 2016 amendment of the Recovery of Debts Due to Banks and Financial Tribunals Act, 1993 contemplated orders being passed in respect of other properties than the mortgaged properties, the present case was filed before the said amendment came into force and as such the amendment was not applicable herein. 12. Moreover, it is submitted, Section 19 (3A) of the 1993 Act envisaged other property of the borrowers to be roped in the proceeding only if the estimated value of the mortgaged property was not sufficient to satisfy the debt. In the present case, the procedure and criteria stipulated in sub-sections (3A), (3B) and (4) of Section 19 of the Act were not satisfied. 13. Learned counsel for the borrowers cites an unreported judgment of a co-ordinate bench of this court dated October 4, 2010 passed in Suresh Khemka & Anr. v. Ashok Kumar Agarwala & Ors., wherein it was held that even if a plaintiff had a money claim, it would not be entitled to elevate itself to the status of a secured creditor either by obtaining an order of injunction in respect of the shares held by the first three defendants therein in the fourth defendant company or by seeking an order in the nature of attachment before judgment in respect of the dividends received or due to be received by the first three defendants from the fourth defendant company. 14. Next placing reliance upon a Division Bench judgment of this court, reported at [Kohinoor Steel Private Ltd. v. Pravesh Chandra Kapoor, AIR 2011 Calcutta 29], learned counsel for the borrowers argues that in the event the plaintiff failed to make out a case of attachment before judgment in a money suit, no injunction in the nature of attachment before judgment could be granted. 15. Learned counsel for the developer, on the other hand, argues that the impugned order and the previous orders in the proceeding were passed behind the back of the developer, without impleading the developer as a party. 15. Learned counsel for the developer, on the other hand, argues that the impugned order and the previous orders in the proceeding were passed behind the back of the developer, without impleading the developer as a party. On August 11, 2016, that is, much prior to the impugned order, a registered development agreement and a consequent power-of- attorney were executed by the borrowers in favour of the developer. In such agreement, only a previous loan from a different bank, namely the Bank of India, and a connected mortgage were mentioned. All dues owed by the borrowers to the said bank were cleared off and the mortgage foreclosed by the developer, pursuant to the agreement. In support of such arguments, learned counsel places reliance on Clause 2 and other relevant clauses of the developer's agreement. 16. It is pointed out by the developer that the injunction order communicated vide letter dated July 26, 2018, from which the developer learnt of the proceeding and the order, indicated injunction to have been passed in respect of construction on the disputed property as well. However, later on, the developer learnt upon enquiry that the injunction order pertained to dealing with the property, which was different from that communicated to it. 17. The developer argues that the appellate court's order granting injunction in respect of 'immovable property' casts a cloud on the developer's share as well, which ought not to have been brought within the ambit of the injunction. 18. The developer submits that valuable rights had passed in favour of the developer, at least in respect of the developer's allocated portion of the disputed property and the developer's share in the land therein. In fact, the ICICI Bank has also admitted such position in its affidavit-in-opposition to C.O. No. 2628 of 2018. The developer relies on a special bench judgment of this court, reported at [Ashok Kumar Jaiswal & Ors. v. Ashim Kumar Kar & Ors., AIR 2014 Calcutta 92], for the proposition that in a development agreement which envisages a party thereto, other than the owner, being responsible for ensuring the construction of a building on the subject land and having a share therein, there is an inescapable contract to transfer immovable property. v. Ashim Kumar Kar & Ors., AIR 2014 Calcutta 92], for the proposition that in a development agreement which envisages a party thereto, other than the owner, being responsible for ensuring the construction of a building on the subject land and having a share therein, there is an inescapable contract to transfer immovable property. A development agreement which envisages the developer to have a share in the building proposed to be constructed in terms of the agreement, in law entails the transfer of immovable property in the sense that the developer or an assignee of the developer, at the instance of the developer, would be entitled not only to a part of the constructed area but the proportionate share of the land on which the construction is made. In such sense, it is argued, a development agreement is regarded as an agreement to transfer immovable property. 19. By relying upon various clauses of the development agreement, learned counsel for the developer submits that a bundle of rights, title and interest in respect of the property-in- question passed to the developer at that point. Even the bank's affidavit-in-opposition to C.O. 2628 of 2018 contained an admission to that effect. 20. The present disputed property, in which the developer claims right, title and interest, was neither a part of the mortgaged property nor was the subject-matter of the main proceeding under Section 17 of the 1993 Act or the prayer made in the interlocutory application before the tribunal. 21. The bank had knowledge of the developer's interest, which is evident from a letter dated December 8, 2017 issued by the ICICI bank to the borrowers, with a copy to the developer. 22. It is further argued that the bank's dues are less than fifty per cent of the disputed property, that is, the owners' (borrowers') allocation of the property. As such, no injunction could be passed, in any event, against the developer's allocation of the said property. In this regard, learned counsel for the developer relies on a valuation report of the borrowers' share annexed to its affidavit-in-reply. 23. The present disputed property was never the subject-matter of the mortgage with the ICICI Bank, which is the present creditor, nor was the property ever mentioned in the schedule of the interlocutory application filed by the creditor-bank when the initial injunction order was passed. 23. The present disputed property was never the subject-matter of the mortgage with the ICICI Bank, which is the present creditor, nor was the property ever mentioned in the schedule of the interlocutory application filed by the creditor-bank when the initial injunction order was passed. Only a different property at Rajarhat, which belonged to the borrower and over which the developer has no interest, was mentioned as the subject-matter of such interlocutory prayer. 24. The bank in its composite reply, argues that the tribunal, in Order No. 20 dated December 19, 2017, only directed the defendants therein to revive their MOU on payment of interest for the delayed period. The exact language used in the order was as follows: "Defendants are directed if so desired, to revive their MOU on payment of interest for the delayed period. However, matter should be listed for final arguments on the next date. I.A. stands deposed of". 25. It is thus argued that only the defendants/borrowers were directed to take steps for revival of their MOU on payment of interest for the delayed period. The borrowers, in fact, did not comply with the said order, since, after passing of the said order, the borrowers filed their written statement, praying therein for paying the balance amount. As such, the liberty granted in the order dated December 19, 2017 was not availed of by the borrowers themselves. 26. Moreover, it is argued that there could not be any unilateral revival of the MOU at the instance of the borrowers only. Since no direction was passed on the bank to revive the MOU, the said portion of the order could not be deemed to be a direction on the bank at all. At best, such direction could give the borrowers a further lease of life by providing them another opportunity to take steps for revival of the MOU, of course, subject to the agreement of the bank. Neither did the borrowers avail of such opportunity by taking steps in time, nor was any agreement expressed by the bank to so revive. 27. Moreover, it is evident from the order dated December 19, 2017 itself that the same was of interlocutory nature, disposing of the connected interim application. Neither did the borrowers avail of such opportunity by taking steps in time, nor was any agreement expressed by the bank to so revive. 27. Moreover, it is evident from the order dated December 19, 2017 itself that the same was of interlocutory nature, disposing of the connected interim application. The order itself revealed that the matter would be listed for final arguments on the next date, thereby nipping any scope for argument that it was a direction of final nature. As such, the argument of the borrowers that, having not challenged the said direction, the bank conceded to a revival of the MOU, does not have any solid ground to stand on. 28. This apart, the direction incorporated the expression "if so desired". Hence, even in the unlikely case that the same was to be deemed as a direction on the bank, it was subject to the desire of the bank, which desire never fructified. 29. The borrowers paid demand drafts to the bank only after the final order being passed by the tribunal, that is, after January 29, 2018. As such, there cannot arise any question of even the alleged direction dated December 19, 2017 having been complied with by the borrowers. 30. It is well-settled that interlocutory orders merge with the final order of a proceeding. Hence, the order dated December 19, 2017 merged with the final order dated January 29, 2018 and as such there was no scope or necessity of challenging the said interlocutory order. 31. Learned counsel for the bank also argues that, in effect, Section 19(3A) of the 1993 Act was not invoked in terms. As such, the rigours of the said section were not applicable in the present case. Absence of particulars of the property now sought to be injuncted would not vitiate the said order of injunction. It is argued that the order was merely in the nature of one passed under Sub-section (18) of Section 19 and as such could also pertain to "any property" and need not have been restricted to the property specifically mortgaged. Sub-section (18), read with Sub-section (12), which was then prevalent, would have the combined effect of empowering the tribunal to grant the order of injunction in respect of the property currently in dispute. 32. Sub-section (18), read with Sub-section (12), which was then prevalent, would have the combined effect of empowering the tribunal to grant the order of injunction in respect of the property currently in dispute. 32. As far as the alleged interest of the developers is concerned, no title passed by virtue of the development agreement and/or the power of attorney executed by the borrowers in respect of the developers. At best, certain encumbrances were created, subject to which the tribunal could, in law, proceed against the said property as well, since the title in the same still remained vested with the borrowers. 33. By reading out several clauses, including clauses 2, 3, 4 and 5, of the development agreement, it is argued by the bank that the owners were to join in the capacity of owners in future transactions contemplated in the agreement. The owners also had to apply in certain cases in their own name, as such, indicating clearly that ownership still remained with the borrowers and was not transferred to the developers. Hence, no right vested in the developer, in any event, for it to be entitled to independent hearing, since the developer remained and acted as an agent of the principal, that is, the borrowers, against whom the order was passed. The development agreement, it is argued, mandated the borrowers to execute and register transfer deeds to be entered into in future, which was a clear indication that ownership was not transferred to the developer. 34. The borrowers' statements in that regard, as annexed to the bank's affidavit-in- opposition, filed in C.O. No. 2628 of 2018, also indicated that the borrowers had admitted the said position. 35. As regards the judgment reported at AIR 2014 Calcutta 92, it is argued by the bank that the question which arose in the said matter was, whether the developers' agreement was enforceable and as regards the question of stamp duty required therefor. The tenor of the said judgment itself shows that developers' agreements were enforceable, meaning thereby that only a future right was created thereby. 36. Section 54 of the Transfer of Property Act also clarifies the position that there cannot be any devolution of title in praesenti by virtue of an agreement for sale. 37. The tenor of the said judgment itself shows that developers' agreements were enforceable, meaning thereby that only a future right was created thereby. 36. Section 54 of the Transfer of Property Act also clarifies the position that there cannot be any devolution of title in praesenti by virtue of an agreement for sale. 37. By placing reliance on a judgment reported at [Peethani Suryanarayana and another vs. Repaka Venkata Ramana Kishore and others, (2009) 11 SCC 308 ], it is argued by the bank that wrong description of the suit property is not fatal. As such, even if the present disputed property was not specifically mentioned initially, the same could very well be the subject-matter of the injunction order passed by the tribunal. 38. The title deed of the suit property, which was mortgaged, also contained mention of the other property, being the present disputed property, although the same was not specifically transferred by the said deed. Since such property was mentioned in the deed under mortgage, the tribunal had jurisdiction to issue an injunction in respect of such other property of the borrowers also. 39. Placing reliance on the 'Seaward Principle', learned counsel for the bank argues that the developer was aware of the order and despite being conscious of the same, flouted it. In this context, learned counsel relies on a communication dated December 8, 2017, annexed to the affidavit-in-opposition of the bank in C.O. No. 2628 of 2018, issued by the bank to the borrowers, with a copy to the developer. From such communication, it is crystal clear that the developer was intimated about the injunction order dated August 24, 2016 and was specifically requested not to carry out any further construction and/or development over the property-in-question till the disposal of the Original Application, as there was a specific injunction over the said property at 14/2B, Jainuddin Mistry Lane, Ward No. 82, P.S.: Chetla, Kolkata - 700 027. In such view of the matter, it did not lie in the mouth of the developer to claim non-impleadment, since it was for the developer to pray for impleadment in the proceeding, being fully aware of the said order of injunction. 40. In such view of the matter, it did not lie in the mouth of the developer to claim non-impleadment, since it was for the developer to pray for impleadment in the proceeding, being fully aware of the said order of injunction. 40. In reply, the borrowers reiterated their initial submissions, particularly as regards there being no initial injunction regarding the present disputed property and the order dated December 19, 2017 having attained finality, closing the MOU between the bank and the borrowers. 41. In reply, the developer argued that even if the right of the developer only operated as an encumbrance on the disputed property, any order of injunction would be subject to such encumbrance and could not be operative as against the developer. 42. It is further added by the developer that clause 8 of the power of attorney indicates that no signature of the owners would be required in future transfer deeds, which was a clear indicator that title / rights had already vested in the developers when the final order of injunction was passed by the appellate tribunal. 43. The plinth of the submissions of the borrowers is the effect of the Order No. 20 dated December 19, 2017. However, the arguments of the borrowers, as to the 'direction' issued therein being binding on the bank, cannot be accepted. The specific direction incorporated in the said order was on the defendants, that is, the borrowers, to 'revive their MOU' on payment of interest for the delayed period. As such, there was no direction on the bank, which is evident from the clear words of the said order. Since there could not be any revival of the MOU unilaterally at the instance of the borrowers, the effect of the order could not be the revival of the MOU. The real effect of the said order was merely that the borrowers were given another opportunity to take the initiative for revival of the MOU, only on payment of interest for the delayed period, if they so desired. In view of the borrowers having failed to avail of such opportunity by depositing bank drafts even after the December 19, 2017 order, at least prior to the final order being passed, the borrowers could not now rely on the said order to allege that the agreement was revived. 44. In view of the borrowers having failed to avail of such opportunity by depositing bank drafts even after the December 19, 2017 order, at least prior to the final order being passed, the borrowers could not now rely on the said order to allege that the agreement was revived. 44. This apart, since the revival could not be unilateral and the bank never agreed to the same, the order dated December 19, 2017 was basically toothless in so far as such revival was concerned. 45. Not only did the borrowers fail to avail of the opportunity as opened up by the order under reference, they challenged the same by arguing that they were not liable to make payment of interest for the delayed payment, although ultimately demand drafts were deposited with the bank. However, the bank never encashed those bank drafts and as such the said deposits do not have any value in the eye of law. 46. As regards the common arguments of the developer and the borrowers, that no other property than the mortgaged property or property which was the subject-matter of the initial injunction could be injuncted, the same is on a sounder footing on law. 47. Undoubtedly, even if Section 19(3A) of the 1993 Act, as amended, could be argued to be applicable, no compliance with the procedure and criteria stipulated in Sub-sections (3A), (3B) and (4) of Section 19 were not satisfied. In any event, it is doubtful as to whether the said provision was applicable at all, since the original application commenced prior to the 2016 Amendment to the said Act, which incorporated Sub- section (3A). 48. This apart, when the developer entered into the developer's agreement and power of attorney with the borrowers, the present disputed property was not the subject-matter of the mortgage, nor was it a subject-matter of the injunction application before the tribunal. 49. The post facto inclusion of the property within the fold of the injunction order could not negate the developer's accrued rights in respect of the said property. 49. The post facto inclusion of the property within the fold of the injunction order could not negate the developer's accrued rights in respect of the said property. Although, contrary to the submissions of the developer, the decision rendered by the special bench of this court in AIR 2014 Calcutta 92 could not be construed to have decided the ratio that title vested in the developer by a development agreement, at least certain present inchoate rights, to be fructified later, were created by the said agreement in favour of the developer. The developer's agreement, read in conjunction with the power of attorney, at least created some executory rights, which were present in nature, to be ripened subsequently. Such rights could not be brushed aside by granting an injunction in respect of the developer's allocation in the said property at 14/2B, Jainuddin Mistry Lane, Ward No. 82, P.S.: Chetla, Kolkata - 700 027. The arguments of the bank, that the impugned order was passed under Section 17(18) of the 1993 Act is ex facie contrary to the said sub-section, which does not contemplate such injunctions at all. 50. Sub-Section (12) of Section 19, which was prevalent at the relevant juncture, on the other hand, did not take within its ambit other properties than those mortgaged to the bank and subject-matter of the application under Section 17 of the said Act. In such scenario, the injunction order, at least in respect of the developer's allocation in the present disputed property, was bad in law. 51. Apart from this, the appellate tribunal acted without jurisdiction in passing a blanket injunction in respect of the entire property at Jainuddin Mistry Lane, without assessing whether the bank's dues would be satisfied by auction sale of the borrowers' property, including the borrowers' share in the property at Jainuddin Mistry Lane, Kolkata - 700 027. Such satisfaction was necessary prior to passing of the said injunction order. A cursory extension of the injunction to the said disputed property was patently an illegal exercise of jurisdiction on the part of the appellate tribunal. 52. In view of the above observations, C.O. Nos. Such satisfaction was necessary prior to passing of the said injunction order. A cursory extension of the injunction to the said disputed property was patently an illegal exercise of jurisdiction on the part of the appellate tribunal. 52. In view of the above observations, C.O. Nos. 2628 of 2018 and 3142 of 2018 are disposed of by modifying the impugned order to the extent that the borrowers will be restrained from transferring, alienating and/or encumbering the borrowers' mortgaged property as well as the borrowers' allocation in the immovable property situated at 14/2B, Jainuddin Mistry Lane, Ward No. 82, P.S.: Chetla, Kolkata - 700 027 to third parties. However, the developer, being the petitioner in C.O. No. 2628 of 2018, will be free to transfer, encumber, alienate and/or deal with the developer's allocation/share in the said property at 14/2B, Jainuddin Mistry Lane, Ward No. 82, P.S.: Chetla, Kolkata - 700 027 and the injunction order will not prevent the developer from doing so. 53. There will be no order as to costs. 54. Urgent certified website copies of this order, if applied for, be made available to the parties upon compliance with the requisite formalities.