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Himachal Pradesh High Court · body

2023 DIGILAW 114 (HP)

Chaggan Lal v. Nand Lal Sharma

2023-03-07

VIVEK SINGH THAKUR

body2023
JUDGMENT : Chamber Appeal No.1 of 2022 This Chamber Appeal has been filed by respondents No.1 and 2 under Rule 5 of Chapter II of High Court of Himachal Pradesh (Original Side) Rules, 1997 (hereinafter referred to as ‘Original Side Rules, 1997’), for setting aside order of accepting the solvent security bond, passed by Registrar (Judicial) on 28.08.2020, and also for direction to the petitioners to deposit entire awarded amount in the Registry of this Court. 2. Petitioners invoking provisions of Section 34 of Arbitration and Conciliation Act (hereinafter referred to as ‘Arbitration Act’) have filed main petition for quashing and setting aside Arbitral Award dated 14.11.2019 passed by the Sole Arbitrator. 3. Vide order dated 06.03.2020, passed in OMP No.84 of 2020, execution and operation of impugned Award was stayed, subject to deposit of entire awarded amount in the Registry of this Court alongwith up-to-date interest within six weeks from passing the order, or subject to furnishing solvent security bond, equivalent to the aforesaid sum or of a bank guarantee, equivalent to aforesaid sum within the aforesaid period in the Registry of this Court. 4. Petitioners could not deposit entire amount or furnish solvent security within time, however, after due date, solvent security bond was furnished by/on behalf of the petitioners, with extension of time, vide order dated 16.07.2020 passed in OMP No.156 of 2020. 5. Solvent security bond furnished by or on behalf of the petitioners was directed to be placed before Registrar (Judicial) with a direction to him to accept or reject the same after satisfying the validity and viability of security bond with further order that in case solvent security bond was not found viable or acceptable then petitioners had to furnish another security bond or bank guarantee on or before 17.08.2020, failing which they had to deposit entire amount alongwith up-to-date interest in the Registry of this Court on or before 31.08.2020. 6. Vide order dated 25.08.2020, Registrar (Judicial) was permitted to take up the matter on 28.08.2020 for assessing viability and solvency of security bond and bank guarantee, in terms of order dated 16.07.2020 read with order dated 06.03.2020. 7. Vide order dated 28.08.2020 Registrar (Judicial) accepted the security bond furnished and executed on behalf of the petitioners by Jitender Dua. 8. Vide order dated 25.08.2020, Registrar (Judicial) was permitted to take up the matter on 28.08.2020 for assessing viability and solvency of security bond and bank guarantee, in terms of order dated 16.07.2020 read with order dated 06.03.2020. 7. Vide order dated 28.08.2020 Registrar (Judicial) accepted the security bond furnished and executed on behalf of the petitioners by Jitender Dua. 8. Respondents No.1 and 2 had disputed validity and legality of security bond and, therefore, they filed an application OMP No.338 of 2020 by raising objection to acceptance of security bond by Registrar (Judicial) furnished on affidavit of Jitender Dua on behalf of the petitioners. The said application was dismissed with liberty to applicants-respondents No.1 and 2 to avail appropriate remedy, in accordance with law, if advised so, in view of provisions of Rule 5 of High Court of H.P. (Original Side) Rules, 1997. Thereafter, present appeal has been preferred by applicants-respondents No.1 and 2. 9. On behalf of petitioners, two properties have been furnished as solvent security bonds. 10. First property is Conveyance Deed registered on 18. 10.2018 between Himachal Pradesh State Industrial Development Corporation Limited (HPSIDC) and M/s Shri Sai Balaji Pharmatech Private Limited, through its Director Jitender Dua. 11. Second property is land measuring 11 Biswa 5 Biswansi, located in Village Billanwali Gujran, Tehsil Baddi, District Solan, H.P., with title report of one Ravinder Singh Thakur, Advocate. 12. Valuation Reports with respect to afore two properties obtained from registered Valuator/Valuer namely Anil Vats Associates, Panchkula, have also been placed on record indicating that current value of two properties was about 6 Crores 14 lacs. 13. Registrar (Judicial) vide order dated 28.08.2020 had accepted these properties as solvent security bond on the basis of affidavit filed by Jitender Dua, after rejecting the objections raised by/on behalf of applicants-respondents No.1 and 2. 14. Learned counsel for the applicants-respondents No.1 and 2 has pointed out that a condition in Conveyance Deed referred supra (first property) with respect to Plot No.5-Extension unambiguously depicts that this property is not free from all encumbrances so as to furnish the same as solvent security with clear title. 14. Learned counsel for the applicants-respondents No.1 and 2 has pointed out that a condition in Conveyance Deed referred supra (first property) with respect to Plot No.5-Extension unambiguously depicts that this property is not free from all encumbrances so as to furnish the same as solvent security with clear title. He has referred Clause (xiii)(a), which reads as under:- “(xiii)(a) The Vendee shall have no right to transfer by way of gift, mortgage or by transfer of shares other than the original promoter declared at the time of allotment/agreement/conveyance deed or change of management or otherwise, the land or any right of the plot or the building(s) erected thereon except with the prior written approval of the Vendor Corporation. The Competent Authority of the Vendor Corporation shall have the right to refuse such request without assigning any reasons thereof. The Competent Authority while granting such permission may impose such conditions as may be decided by the Vendor Corporation from time to time.” 15. It has further been submitted on behalf of the applicants-respondents No.1 and 2 that allottee/transferee of the plot has no right to transfer the property by way of gift, mortgage or transfer of shares other than original promoter declared at the time of allotment/agreement/conveyance deed or change of management or otherwise, the land or any right of the plot or the building(s) erected thereon except with prior written approval of Vendor Corporation. Therefore, it has been contended that property of Plot No.5-Extension, above referred, cannot be a solvent security free from all encumbrances and, thus, acceptance of property as a solvent security, by Registrar (Judicial), warrants interference in this appeal. 16. With respect to second property it has been submitted that valuation report itself vis-a-vis maps of the property placed on record, are depicting contradictory factual matrix. It has further been submitted that valuation of the report of Plot No.5-Extension, at its first page, number of floors have been mentioned as 4. Whereas, in second page, including ground floor there is valuation of 5 floors. It has further been submitted that valuation of the report of Plot No.5-Extension, at its first page, number of floors have been mentioned as 4. Whereas, in second page, including ground floor there is valuation of 5 floors. Further, in the Map, Plot No.5-Extension is only having 3 floors, i.e. ground floor, first floor and second floor, and in supplementary affidavit dated 17.08.2020 filed by Jitender Dua, in support of additional solvent security bond, in para-2 it has been submitted that 3 storeys of the building have been approved by concerned authority and 4th storey has not been got approved by Deponent and Deponent shall apply for approval of the same. It has also been pointed out that in second page of valuation report, a remark has been given that Valuator had taken actual measurement area for valuation, and this report was only for general purpose, but cannot be used for banking purpose. By pointing out aforesaid points and variations and defects in the valuation report as well as construction on Plot No.5-Extension, it has been contended that this property is not fit for furnishing and/or accepting it as solvent security. 17. With respect to second property, it has been pointed out by learned counsel for appellants/respondents No.1 and 2 that as per revenue record, Jitender Dua is owner of the property bearing Khasra No.606/188 and 171, situated in Mohal Billanwali Gujjran, Tehsil Baddi, District Solan, H.P., measuring 11 Biswas 5 Biswansi (544.50 sq.yard), but in its valuation report, property has been reflected by the Valuer as 11 Biswas 12 Biswansi (562.50 sq. yard) which is in excess by 18 sq. yard and, thus, bond is factually incorrect and was not required to be accepted. 18. It has further been submitted that even if, second property is accepted as a valid security bond then also, its valuation is only worth Rs.3,27,08,800/-, whereas, amount due at the time of furnishing bond was about Rs.6,50,00,000/- and, therefore, acceptance of solvent security bond by Registrar (Judicial) instead of directing the petitioners to deposit entire awarded amount alongwith up-to-date interest, is major mistake based on material illegality and irregularity committed by acceptance of defective security bond upon which no charge can be created for want of authority and competence. 19. 19. Learned counsel for non-applicants/petitioners has argued that in Plot No.5-Extension, 3 storeys are sanctioned and valuation thereof is sufficient to consider it sufficient solvent security furnished in compliance of order passed by the Court. It has further been submitted that M/s Shri Sai Balaji Pharmatech Private Limited is allottee of Plot No.5-Extension with all rights to create charge thereon by virtue of conveyance deed executed between HPSIDC and M/s Shri Sai Balaji Pharmatech Private Limited and in Clause (xiii)(a) there is no bar to furnish this property as security. The bar is only with respect to transfer of right by way of gift or mortgage, and creation of charge on the said property is not prohibited as the allottee has absolute right on the Plot and lien of Industrial Department nowhere creates any hindrance on the absolute ownership of the allottee entitling him to execute bond for furnishing the allotted plot as solvent security. It has further been submitted that valuation report is with respect to title verification and valuation thereof and in case valuation of only 3 validly constructed storeys is taken into consideration then also, valuation is higher than the amount awarded by the Arbitrator. Further that, second property is in ownership and possession of Jitender Dua, who is competent to furnish the same in security and minor discrepancy in measurement of area, happened in mentioning measurement of the area is irrelevant as valuation of property has been done by the Valuator after visiting the spot physically. 20. First property of Plot No.5-Extension alongwith construction thereon is a property which cannot be transferred or alienated by the allottee except prior approval of HPSIDC. My considered opinion is that such property cannot be furnished as a bond or solvent security as a guarantee of payment/repayment of awarded amount without consent of HPSIDC. There is nothing on record that HPSIDC has communicated any no objection for furnishing this property as solvent security or bond against the amount due/payable in compliance of award passed by the Arbitrator, in case of dismissal of Objection Petition preferred by the petitioners. The security to be furnished as surety bond must be free from all encumbrances having no rider of any condition of permission from any third party and in case of such rider no objection of such person/authority is mandatory and in absence thereof, such property cannot be accepted as a solvent security. The security to be furnished as surety bond must be free from all encumbrances having no rider of any condition of permission from any third party and in case of such rider no objection of such person/authority is mandatory and in absence thereof, such property cannot be accepted as a solvent security. 21. Registrar (Judicial) has also committed a mistake in accepting security bond of Plot No.5-Extension and property constructed thereon, particularly when it is an admitted fact that out of 5 storeys only 3 storeys have approval, for constructions, and Evaluator, at one place, had recorded the building of 4 storeys and at another place as 5 storeys and in the Map only 3 storeys have approval of the Competent Authority. 22. In absence of first property, there is no valid solvent security/bond equivalent to the amount payable by the petitioners, in terms of award passed by the Arbitrator. Therefore, title and valuation of second property is also irrelevant because it cannot be considered as a solvent security equivalent to amount payable, in terms of award. Therefore, second property cannot be considered as a solvent security. 23. In view of above discussion, present appeal is allowed and order dated 28.08.2020 passed by Registrar (Judicial) is set aside with a direction to the petitioners to furnish solvent security, in terms of order dated 06.03.2020 and subsequent orders passed thereafter on or before 10.04.2023, failing which petitioners are directed to deposit entire awarded amount alongwith up-to-date interest in the Registry of this Court on or before 29.04.2023.