Form not J.(2) IN THE HIGH COURT AT CALCUTTA Civil Appellate Jurisdiction Original Side Present: The Hon’ble Justice Ashim Kumar Banerjee And The Hon’ble Justice Dr.
Mrinal Kanti Chaudhuri A.P.O.No.180 of 2012 C.S.No.299 of 2007 ASSET RECONSTRUCTION COMPANY (INDIA) LTD.versus EXCEL DEALCOMM PVT.LTD.& ORS.For the Appellant : Mr.S.P.Sarkar, Senior Advocate Mr.Anupam Das Adhikari, Advocate Ms.Suruchi Agarwal, Advocate For the Respondent No.1 : Mr.Utpal Bose, Advocate Mr.Rudraman Bhattacharya, Advocate Mr.Kuldeep Mullick, Advocate Mr.Pratik Ghosh, Advocate For the Respondent No.4 : Mr.Abhrajit Mitra, Advocate Mr.Chayan Gupta, Advocate Mr.Abhijit Sarkar, Advocate Heard on : February 20, 25 and 26, 2013.
Judgment on : March 8, 2013.
ASHIM KUMAR BANERJEE.J.BACKDROP : Uniworth Apparel Limited was a company registered in Maharashtra under the Companies Act, 1956.
It had an industrial unit at Thane (Navi Mumbai) in the District of Maharashtra.
The Uniworth availed credit facilities from ICICI Bank.
They could not clear the Bank’s dues, as a result Bank assigned their claim in favour of Asset Reconstruction Company (India) LTD.(hereinafter referred to as ‘ARCIL’).a company incorporated under the provisions of the Companies Act, 1956 and registered with the Reserve Bank of India as a company under Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘SARFAESI Act’, 2002).ICICI Bank assigned their interest in the assets of Uniworth to the ARCIL.
ARCIL took steps under Section 13 of the SARFAESI Act and took possession of the assets.
Ultimately, ARCIL sold the assets to M/S.Webtech Industries PVT.LTD.and handed over possession to them.
The sale was concluded.
Long after sale had been concluded a company by the name of Excel Dealcomm PVT.LTD.(hereinafter referred to as ‘EXCEL’) filed a suit in this Court being C.S.No.299 of 2007 inter alia praying for a decree for specific performance of the agreement for sale allegedly recorded in a document dated February 13, 2007 by one Mr.Sanjoy Gupta, the then Vice President of ARCIL on the one hand and EXCEL on the other hand.
EXCEL also claimed, they paid the purchase price to the extent of Rs.9.5 crores vide cheque dated March 1, 2007 in the name of ARCIL.
ARCIL however did not encash the cheque.
Vide letter dated March 20, 2007 the said Mr.Sanjoy Gupta asked EXCEL to collect the cheque from the Office of ARCIL, as the deal did not materialize, as the management of ARCIL did not approve such ‘proposal’.
The plaint filed by EXCEL did have the following prayeRs.“a) A decree for specific performance of the Agreement for sale recorded in the document dated February 13, 2007 being Annexure-“A”.
hereto by directing the defendants.
1 and 2 to issue in favour of the plaintiff Sale Certificate in respect of assets mentioned in schedule 1 to Annexure “A”.
hereto and on as is where is basis in terms of the said agreement.
b) Injunction.
c) Receiver d) Costs e) Further and other reliefs.”
The immovable property for which the specific performance was asked for, was admittedly situated at Maharashtra outside the jurisdiction of this Court.
EXCEL also made interim application inter alia praying for an order of restraint as against ARCIL and/or Webtech from dealing with the property.
Such petition ended in a logical conclusion when the order of the learned Single Judge merged in the judgment and order of the Division Bench.
The relevant extract is quoted below : “The learned Counsel appearing for ARCIL although present, did not make any submission.
We specifically asked them to do so.
They, however, expressed their inability in absence of a definite instruction on that score.
We are told, ARCIL had an independent appeal from the order of dismissal passed by the learned Single Judge of an application made under Order 7 Rule 11 of the Code of Civil Procedure.
Such appeal was also appearing along with the present one, however, we were unable to proceed with the said appeal at that stage in the absence of the Senior Counsel appearing for ARCIL the said appeal is still appearing and we shall be hearing when its turn comes again.
Coming back to the present controveRs.we are of the view, the learned Single Judge possibly ignored two aspects: i) the true spirit of Section 19(b) of the Specific Relief Act.
ii) The effect of the so called agreement that Excel had with ARCIL.
Section 19(b) would unequivocally protect a bona fide purchaser for valuable consideration without any knowledge of earlier transaction.
Paragraphs 20 and 21 of the plaint so amended would not definitely say, defendant No.4 had prior knowledge of the so called transaction.
Hence Section 19(b) would squarely protect Webtech and thus deny interim relief to Excel.
In this regard, we would refer to the Patna Decision in the case of Dalmia Jain and Company Limited (supra) that would rather support Webtech than to support Excel.
Paragraphs 7 and 8 were relied upon, that discussed the earlier precedents and the proposition of law on the subject controversy.
While doing so the Patna High Court observed, “then it is well settled that a decree for specific performance of contract may be passed against the contracting party as well as his transferee who is in possession of the property forming the subject matter of the contract, because a decree against the contracting party alone would be infructuous in absence of a decree against the subsequent transferee who is in possession.”
This proposition of law was not disputed at the Bar.
Pertinent to note, no relief was claimed as against the defendant No.4.
If we follow the Patna High Court decision the decree as against ARCIL might be infructuous in absence of a decree against Webtech that could not be passed in absence of a relief claimed there.
Mr.Chatterjee also put emphasis on Section 91 of the Indian Trust Act, 1882 to contend, when a person acquired property with notice that another person had entered into an existing contract, he would be holding that property in trust for the former party.
To support his contention he relied upon paragraph 13 of the Apex Court decision in the case of Vasantha Vishwanathan (supra).Mr.Chatterjee would also rely upon the Madras decision reported in Vimala Ammal (supra) wherein the learned single Judge considered Section 19(b) of the Specific Relief Act.
This decision would also go squarely as against Mr.Chatterjee.
In paragraphs 7 and 8 the Madras High Court observed, ‘in a suit for specific performance of sale agreement the subsequent purchaser of the property is a necessary party and unless he is impleaded, the decree would be nullity and cannot be executed against him.’ The decree cannot be executed against any person unless it is passed against him.
The Madras High Court decision would thus not be of any help to Mr.Chatterjee.
Reliance was also placed on the Division Bench decision of our Court in the case of Sm.
Muktakesi Dawn & ORS.–versus Haripada Mazumdar & Anr., reported in AIR 198.Cal.”
25. The Division Bench considered Section 52 of the Transfer of Property Act while dealing with the issue of lis pendence.
The Maharashtra amendment in Section 52 came up for consideration in the case of T.G.Ashok Kumar –versus Govindammal & Anr., reported in (2010) 14 SCC 370.
Paragraphs 13,14 and 15 being relevant herein are quoted below: “13.
The principle underlying Section 52 is clear.
If during the pendency of any suit in a court of competent jurisdiction which is not collusive, in which any right of an immovable property is directly and specifically in question, such property cannot be transferred by any party to the suit so as to affect the rights of any other party to the suit under any decree that may be made in such suit.
If ultimately the title of the pendente lite transferor is upheld in regard to the transferred property, the transferee’s title will not be affected.”
14. On the other hand, if the title of the pendente lite transferor is recognised or accepted only in regard to a part of the transferred property, then the transferee’s title will be saved only in regard to that extent and the transfer in regard to the remaining portion of the transferred property to which the transferor is found not entitled, will be invalid and the transferee will not get any right, title or interest in that portion.”
15. If the property transferred pendente lite, is allotted in entirety to some other party or parties or if the transferor is held to have no right or title in that property, the transferee will not have any title to the property.
Where a co-owner alienates a property or a portion of a property representing to be the absolute owner, equities can no doubt be adjusted while making the division during the final decree proceedings, if feasible and practical (that is, without causing loss or hardship or inconvenience to other parties) by allotting the property or portion of the property transferred pendente lite, to the share of the transferor, so that the bona fide transferee’s right and title are saved fully or partially.”
Let us not consider the effect of the so-called agreement.
The agreement appearing at pages 35 to 53 was nothing but a minute recording the agreed terms and conditions pending formal execution of the contract.
Emphasis was put by Mr.Mitra on the words ‘subject to contract’ as appearing in the said document.
According to him, in the absence of concluded contract, the same could not be specifically performed.
Moreover, according to him, ARCIL did not accept payment so tendered by the EXCEL.
However, in the absence of any submission on behalf of the ARCIL, we cannot proceed with the said issue any further.”
The present appeal would relate to an order of refusal to revoke leave granted under clause-12 of the Letters patent, coupled with a prayer for return of plaint, presumably, under Order 7 Rule 10 and 11 of the Code of Civil Procedure.
The learned Single Judge dismissed the said application.
Hence, this appeal.
JUDGMENT
ANALYSIS The learned Single Judge, by the judgment and order dated December 22, 2011, while expediting the hearing of the suit, observed, jurisdiction issue would be heard as a preliminary issue.
His Lordship considered principally two aspects – (i) Whether it was a suit for land?.
(ii) If it was not so, in view of the forum selection clause, would the suit be maintainable before this Court?.
Clause-4 of the so-called agreement would point out, Courts of Mumbai would have jurisdiction whereas clause-10 would say, disputes shall be subjected to Mumbai Courts Tribunal only.
Learned Judge considered the decisions cited at the Bar on the issue.
The learned Judge accepted the argument advanced by ARCIL to the effect, the forum stipulated in the agreement would oust the jurisdiction of the other Courts.
His Lordship was however of the view, once ARCIL participated in the interim application before the other learned Judge and refrained from making any submission it would amount to sufficient step in the proceeding that would amount to waiver of their right.
His Lordship held, this Court would have otherwise jurisdiction to try and determine the suit.
The ARCIL was however, precluded from taking the plea of forum selection in view of waiver.
On the issue of suit for land, the learned Judge observed, security would include moveable and immovable properties.
Hence, the suit could not be said to be a suit for land.
Once the plaintiff asked for specific performance of the agreement, the type of security having inclusive of movables part of cause of action would definitely arise within the jurisdiction as pleaded.
Hence, it could not be said to be a suit for land.
On the applicability of Sections 34 and 35 of the SARFAESI Act, His Lordship held, no fetter could be applied that would stand in the way of entertaining the suit by this Court.
CONTENTIONS : Mr.Anupam Das Adhikari, learned Advocate appearing for the appellant raised five issues on behalf of ARCIL : (i) Questions framed by His Lordship were erroneous, as it would not relate to the real issues involved therein.
(ii) The agreement not being a concluded one, could not be enforced.
(iii) Suit was barred by Sections 34 and 35 of the SARFAESI Act that the learned Judge failed to appreciate.
(iv) No part of the cause of action arose within the territorial jurisdiction of this Court that the learned Judge failed to appreciate.
(v) The alleged negotiations took place at Mumbai.
The parties were working for gain at Mumbai.
The property was situated at Maharashtra, hence, balance of convenience would be overwhelmingly in favour of filing the suit in appropriate Courts of Maharashtra and not Calcutta.
Elaborating his argument, Mr.Das Adhikari took us to the relevant provisions of the SARFAESI Act particularly, Section 13(4) and 13(6) and Section 17 of the Recovery of Debts Due to Banks and Financial Institution, Act, 1993 to show, the Civil Court could not have jurisdiction to entertain the subject suit.
According to Mr.Das Adhikari, the averments of the plaint would be relevant for the purpose of the application of the like nature.
The facts surrounding the controveRs.could also be taken note of to come to the conclusion as to whether this Court would have jurisdiction at all to entertain the suit.
Referring to the forum selection clause, Mr.Das Adhikari would contend, the property was situated at Maharashtra.
The parties were residing and/or carrying on business at Maharashtra.
The suit was for specific performance of sale of an immovable property situated at Maharashtra.
The Court should honour the wishes of the parties and the forum selection clause would have a dominant role to play.
On merits, Mr.Das Adhikari would contend, the so-called agreement, even if taken as sacrosanct, could never be termed as a proposal that would have the flavour of a concluded contract and Section 10 of the Specific Relief Act would operate as a bar to have it specifically performed through Court.
Assuming but not admitting, the agreement was a valid one denial to perform, would give rise to a claim for damage particularly, when the plaintiff contended, it would involve movables.
Mr.Shyama Prosad Sarkar, learned Senior Counsel also appearing for the appellant referred to the Dictionary meaning of the “Term Sheet”.
to suggest, the so-called agreement referred to in the plaint could at best be called a “Term Sheet”.
and would have no statutory flavour giving rise to a cause of action for specific performance.
On this issue he cited three English decisions that are as follows :
1.
1974 Volume-III All England Report page-881 (Bahamas International Trust Co.LTD.and Anr.
versus Threadgold).2.
1984 Volume-I All England Report page-555 Queen’s Bench Division (National Coal Board versus Wm Neill & Son (St Helens) Ltd.; 3.
1985 Volume-II All England Report page-545 (Alpenstow LTD.and Anr.
versus Regalian Properties plc.) On the issue of forum selection clause, Mr.Sarkar would contend, the application for revocation of leave under clause-12 was made at a stage when ARCIL did not file any written statement.
Such application was filed on April 19, 2011 whereas written statement was filed long after filing of the application i.e.May 17, 2012.
Hence, question of waiver of any right would not arise at all.
He referred to the two decisions of the High Court in the case of Shri Ram Shah versus Mastan Singh and ORS.reported in All India Reporter 1978 Allahabad page-288 and in the case of IFB Automotive Seating and System LTD.and ORS.versus Union of India reported in All India Reporter 2003 Calcutta page-80.
Mr.Abhrajit Mitra, learned Advocate appearing for Webtech adopted the submissions advanced by ARCIL Mr.Mitra would add, Rule 9(6) Appendix – V of the SARFAESI Act, 2002 would pre-suppose handing over of land as a relevant obligation that could not be avoided.
Hence, the prayer for handing over possession was already built in the agreement for sale.
The prayer for specific performance would automatically relate to handing over of possession that would amount to a suit for land.
He relied on two Calcutta decisions in the case of Sm.
Bimal Kumari versus Asoke Mitra and Anr.
reported in All India Reporter 1955 Calcutta page-402 and in the case of D.
Tarafdar versus B.M.Bardhan reported in 87 Calcutta Weekly Notes page-54.
Per contra, Mr.Utpal Bose, learned Counsel would contend, the suit was filed in December, 2008.
EXCEL added Webtech without any protest being raised by any of the defendants including ARCIL.
The defendants contested the application for addition of parties as well as for interim protection.
No plea of jurisdiction was ever raised.
Hence, the belated application would not be maintainable.
He would refer to the Apex Court decision in the case of Harshad Chiman Lal Modi versus DLF Universal LTD.& Anr.
reported in 2005 Volume-VII Supreme Court Cases page-791.
According to him, there had been waiver by conduct that would preclude making of the application for revocation of leave under clause-12 of the Letters Patent.
In any event, the learned Judge permitted ARCIL to take the plea of jurisdiction as a preliminary issue.
Hence, no finality reached on the issue that could make the present appeal maintainable.
He relied on three Apex Court decisions and one Calcutta decision that are as follows :
1.
2005 Volume-VII Supreme Court Cases page-791 (Harshad Chiman Lal Modi versus DLF Universal LTD.& Anr.).2.
2004 Volume-XII Supreme Court Cases page-376 (Indian Mineral & Chemicals Co.& ORS.versus Deutsche Bank).3.
All India Reporter 1960 Volume-47 Calcutta page-626 (Debendra Nath Chowdhury versus Southern Bank Ltd.).Mr.Bose would lastly contend, EXCEL did not come within the mischief of Section 13, hence, Section 17 cold not have any role to play to oust the jurisdiction of the Civil Court.
While giving reply, Mr.Sarkar contended, the learned Single Judge finally decided the issue.
Hence, ARCIL was entitled to prefer appeal.
Distinguishing the decision in the case of Indian Mineral & Chemicals Co.(supra).Mr.Sarkar would contend, the averments made in the plaint, even if taken as sacrosanct, must be read in conjunction to find out the true purport.
The Apex Court decision was rendered on a different context that would make the ratio distinguishable.
Dealing with the argument of Mr.Bose on the purport of the subject document, Mr.Sarkar would admit, oral agreement could also constitute a concluded agreement that could be subsequently enforced if it would relate to an immovable property.
However, the subject document, if read, as a whole, would clearly suggest, it was an agreement for sale of an immovable property situated at Maharashtra that would make it a suit for land.
According to him, in case this Court would decree the suit in favour of EXCEL, ARCIL would have to handover possession of the land in question and issue Sale Certificate, declaring EXCEL as a owner of the property and recording the fact, ARCIL handed over possession of the property to EXCEL.
OUR VIEW : Let us fiRs.discuss the law on the subject.
Section 3 of the SARFAESI Act would require an appropriate registration of a company that it would intend to work in the field of reconstruction of industrial units.
Unless appropriate licence is obtained from the Reserve Bank no such company could deal with the assets possessed under the SARFAESI Act.
Section 13 would give a complete guideline for enforcement of security by a secured creditor that would include sale of the securities.
It would give the enabling power to the secured creditor or their assignee to take possession of the securities and to sell and/or deal with the said property with the intent of recovery of their debts.
Section 13(6) would automatically vest the said industrial unit upon the new entrepreneur through the Sale Certificate issued under sub Section (4).If anybody is aggrieved he would have a right to approach the Appellate Forum under Section 17 however, such right was restricted to the measures being taken in terms of Section 13(4).In the present case ARCIL was a registered company under Section 3 having appropriate licence from the Reserve Bank of India under Section 3.
ICICI assigned the right in favour of ARCIL that could not be called in question.
ARCIL being substituted in place of original secured creditor possessed the industrial unit and thereafter transferred the assets to Webtech.
EXCEL would contend, ARCIL entered into an agreement for sale with EXCEL for sale of the property.
Hence, denial to honour the said agreement would give them appropriate right to institute such civil suit.
The plea of Mr.Das Adhikari to the extent, the suit was barred under the SARFAESI Act was not maintainable, was thus not tenable.
We uphold the ultimate decision of the learned Judge however, on a different logic.
The English decision cited by Mr.Sarkar would predominantly suggest, an agreement unless concluded, could not be enforced.
This is an abstract proposition of law that would have a guiding force.
A document, whether could be said to be a concluded contract, would depend upon the nature and the purport.
In the present case, the socalled document did not have any date or appropriate stamp duty.
It was signed by one Mr.Sanjoy Gupta said to be the then Vice President of ARCIL.
Neither any Board Resolution was ever referred to not it was contended, the agreement was entered into on behalf of ARCIL.
Moreover, the said Sanjoy Gupta immediately returned the cheque as referred to above.
The parties did not agree to term it as a concluded contract.
Even if it was so that could give rise to a claim for damage as the learned counsel would say, the agreement was also for movables.
The decisions on the forum selection clause cited by the parties would render on a well-settled principle, if two Courts would have territorial jurisdiction to decide an issue the parties by agreement can subsequently suggest one to the exclusion of the other.
On the specific performance, the parties relied on the decisions to suggest, the prayer for specific performance would pre-suppose handing over of possession that would make it a suit for land.
In this regard, we may refer to the decision in the case of D.
Tarafdar (supra) wherein the Division Bench held, the Court in decreeing the suit need not necessarily direct delivery of possession expressly as directing enforcement of the agreement would automatically include delivery of possession.
In the case of Sm.
Bimal Kumari (supra).the learned Single Judge held, the cause of action for possession was the same as cause of action for specific performance.
For a property outside the jurisdiction of the Court the suit for specific performance would thus not be maintainable.
Mr.Bose would however rely on the decision in the case of Indian Mineral & Chemicals Co.& ORS.(supra) where the Apex Court observed, the assertion in the plaint must be assumed to be true to determine whether leave was liable to be revoked.
According to him, since the agreement was pleaded to be entered into at Calcutta within the jurisdiction this Court would have jurisdiction to entertain the suit.
He would rely upon the decision in the case of AdCo.Electronics PVT.LTD.(supra) wherein the Apex Court declined to revoke the leave under clause-12 and permitted the parties to go to trial.
The Apex Court observed, since the suit for specific performance of the agreement did not specifically ask for relief of delivery of possession, the suit could not be said to be a suit for land.
On analysis of the facts involved therein we however do not get the true purport as to the subject matter of the suit.
The other decision of the Supreme Court in the case of Harshad Chiman Lal Modi (supra) would suggest, plea of jurisdiction must be taken at the initial stage.
If objection is not taken at the earliest it cannot be allowed subsequently.
On a combined reading of the decisions cited before us and discussed above, it would suggest, a suit for specific performance impliciter may not be termed as a suit for land provided the true purport of the agreement would not relate to handing over of possession simultaneously on execution.
Otherwise, such prayer was a built in prayer for possession making the suit a suit for land.
Once more than one Courts could have jurisdiction to try a suit the parties would be at liberty to specifically choose one to the exclusion of the other.
CONCLUSION : If we take the agreement on its face value and the averments made therefor we would find, Mr.Sanjoy Gupta entered into the agreement on behalf of ARCIL.
It was subject to the approval of the Board of DirectORS.Mr.Sanjoy Gupta wrote to EXCEL and asked them to take back the cheque as the sale could not be concluded in absence of Board’s approval.
Once it could not be said to be a concluded contract we doubt, how it could be specifically enforced?.
Applying the ratio discussed above, in the present factual matrix, we hold, learned Single Judge erred in holding, it was not a suit for land.
The property was admittedly situated outside the jurisdiction of this Court.
It was not the case of the plaintiff, they were in possession.
Hence, sale in their favour could only be concluded on a Sale Certificate being issued in terms of Rule 5(6) Appendix-V that would pre-suppose handing over of possession simultaneously on conclusion of the sale.
Hence, specific performance, if decreed, would require handing over of possession that would make the suit a suit for land.
Taking the document as a whole, we are of the opinion, the same could at best be termed as an invitation to treat.
It could not be said to be a concluded contract.
We need not deliberate on the forum selection clause.
Agreement was not enforceable.
In any case, such agreement would relate to an immovable property.
The specific performance of the said agreement could not be asked in this Court, as it would lack territorial jurisdiction.
The appeal succeeds and is allowed.
The leave under clause-12 of the Letters Patent is revoked.
The suit is dismissed.
There would be no order as to costs.
There would be stay of operation of the judgment and order for a period of two months from date.
Urgent certified copy of this judgment, if applied for, be given to the parties on their usual undertaking.
Dr.
Mrinal Kanti Chaudhuri, J.I agree.
[ASHIM KUMAR BANERJEE,J.].[DR.
MRINAL KANTI CHAUDHURI,J.].