Bharat Tubes and Tins Printers a Partnership Firm Rep. by Its Partner Smt. Anita Kedia Vs. the Andhra Pradesh State Financial Corporation Ltd. a Govt. Corporation Rep. by Its Managing Director and ors. - Court Judgment

Excerpt:
- - 1. the plaintiff who is unsuccessful, is the appellant in this appeal which is sought to be filed against the judgment and decree in o. therefore, the relief as sought for is perfectly sustainable, which the court below did not properly consider from proper perspective. the principal question, which, therefore, requires consideration is as to whether for satisfying the requirements of section 58(f) of the transfer of property act, it was necessary to deposit documents showing complete title or good title and whether all the documents of title to the property were required to be deposited.b. prakash rao, j.1. the plaintiff who is unsuccessful, is the appellant in this appeal which is sought to be filed against the judgment and decree in o.s. no. 177 of 2000, dated 30-8-2007 on the file of the ix additional chief judge (fast track court), city civil court, hyderabad in dismissing the suit filed by him seeking for declaration as against the document in question namely the alleged deposit of title deeds dated 24-11-1982 as illegal, void and unenforceable and for a permanent injunction restraining the 1st defendant-1st respondent namely the andhra pradesh state financial corporation ltd., from interfering with possession and enjoyment over the suit schedule property and for further direction against the defendant no. 1 to pay a sum of rs. 12,00,000/- with interest at 24% per annum from 9-8-1999 till the date of realization and the costs.2. heard sri d. prakash reddy, learned senior counsel appearing for the appellant and sri challa sitaramaiah, learned senior counsel appearing on behalf of the respondents.3. the case of the appellant-plaintiff as per the averments contained in the plaint which has been filed on 23-8-1999 is to the effect that the appellant ( herein after called as the 'plaintiff') is a registered partnership firm constituted on 2-4-1994 for the purpose of manufacturing pipes, tubes, cycle parts, hospital equipment etc., which has been carrying on business in lux-1 shed, industrial estate, sanathnagar, hyderabad admeasuring to an extent of 8319.11 sq. yards of land together with industrial shed in plinth area of 3126.66 square yards. the shed was purchased by the 2nd defendant and 3rd defendant under the sale deed, dated 28-3-1987 and subsequently partners of the said firm purchased the said property under two different sale deeds and shown them as the joint stock property of the firm. the said property was mortaged with the state bank of hyderabad for obtaining working capital loan to a tune of rs. 2 crores. it is the case of the plaintiff that at the time of the purchase, though sufficient enquiries were made, but nothing has come to their notice nor disclosed by the defendants. hence, the plaintiff is a bona-fide purchaser. however, on 14-12-1992 some of the officials of the defendant no. 1 came to the premises in the afternoon and stated that the property would be seized for realization of the goods. further, the seizure was effected against the property without any notice. it is further pointed out that the defendant no. 1 never visited or inspected the suit premises from 1987 to till 1992. the plaintiff had approached before this court by filing w.p. no. 16269 of 1992 challenging the said action, where in the counter affidavit filed by defendant no. 1, it is stated that the defendant no. 2 had created a mortgage by deposit of title deeds namely depositing the agreement of sale on 24-11-1982. therefore, the writ petition was disposed of on 23-6-1999 directing the plaintiff to go to civil court for appropriate reliefs. in the said proceeding as per the direction given by this court, the plaintiff deposited rs. 12,00,000/- with defendant no. 1 on 9-8-1999. it was stated that the alleged agreement of sale dated 23-11-1982 was preceded by letter dated 23-11-1982. as such, they have no objection to defendant no. 2 to mortgage with defendant no. 1 provided the balance amount is paid.4. the defendant no. 1 has not paid the balance and cost to the said defendant no. 3. therefore, on the face of it, according to the plaintiff the alleged deposit of title deeds does not create a mortgage, since it is unstamped, unregistered and quite contrary to the provisions of the stamp act and registration act and therefore, the 1st defendant corporation cannot proceed against the said property under the foot of the said mortgage. hence, the suit for declaration that the said transaction does not amount to a valid mortgage and unenforceable and for consequent relief as stated as above.5. defendant no. 1 contested the suit claim and the relief as sought for inter alia denying the various allegations made in the plaint and further pointed out the plaint property alleged by defendants no. 2 and 3 and that the financial assistance provided by defendant no. 1 acquiring the same. however, the amount was paid to defendant no. 3 directly, therefore, a formal agreement of sale was executed by defendant no. 3 in favour of defendant no. 2, who in turn confirming the deposit of sale agreement. having regard to the said nature of transaction, defendant no. 1 has charged over the property which is within the knowledge of defendant no. 2 who confirmed the said transaction. therefore, the grievance of the plaintiff could only be against defendant nos. 2 and 3, but not against the defendant no. 1. apparently, the plaintiff and the defendant no. 2 are in collusion and the plaintiff is not a bona fide purchaser. since plaintiff committed default in payment of the loan, defendant no. 1 proceeded against the property by seizing. the allegation that the defendant no. 1-corporation did not make any visit cannot be correct, since there was no necessity, having regard to the fact that the amounts are being paid to a tune of rs. 29.75 lakhs till 1987. it was further pointed out that cbi charged the director of defendant no. 1 for cheating the financial institution and freezed the accounts of defendant no. 2., the very fact that defendant no. 3 addressed a letter to the defendant no. 1 on 23-11-1982 shows that the plaintiff is aware of the mortgage by defendant no. 2 in favour of defendant no. 1. in fact, the plaintiff could have obtained 'no objection' from both the defendants 1 and 3 prior to his purchase. the sale consideration was paid by defendant no. 3 by cheque no. l619359, dated 26-11-1982 drawn on the state bank of india. therefore, in view of the peculiar circumstances the liability can only be fastened against defendant no. 2 for any loss sustained by the plaintiff and not by defendant no. 1. further, it was pointed out that it is due to the action on the part of the defendant no. 3 in delivering the sale directly to defendant no. 2, the said defendant no. 3 is answerable and liable to be paid by defendant no. 1. therefore, as against defendant no. 1 no cause of action arose and the suit is liable to be dismissed.6. defendant no. 2 remained absent and set ex-parte.7. defendant no. 3 which is the andhra pradesh state infrastructure development corporation limited filed separate written statement denying the allegation and the claim of the plaintiff and reiterated its own activities. it was pointed out that the defendant no. 3 conveyed the title under the registered sale deed, dated 28-3-1987 in favour of defendant no. 2, but the defendant no. 3 is not aware of subsequent purchase made by the plaintiff from defendant no. 2, the plaintiff did not exercise due diligence prior to his purchase nor make any proper enquiries. the plaintiff is having full knowledge of the subsisting mortgage created by defendant no. 2 in favour of defendant no. 1 and also defendant no. 4. it was also pointed out that the mortgage of the property in favour of defendant no. 5 by deposit of original sale deed. the steps have already taken in this regard for bringing to the notice about the said mortgage to avoid multiplicity of the proceedings. thus the defendant no. 3 is no way liable for any cause of the plaintiff.8. defendant no. 4 filed a separate written statement which is inter alia reiterating about its providing with the credit facility to defendant no. 2 and creating a memorandum dated 27-8-1987. he has filed o.s. no. 488 of 1990 on the file of the ii senior civil judge, city civil court, hyderabad for recovery of rs. 68,60,236-32 as against defendant no. 2, which was subsequently transferred to debt recovery tribunal and registered as o.s. no. 475 of 1999. therefore, the liability of the defendant no. 4 is quite independent and defendant no. 3 is liable to be paid.9. defendant no. 5 filed its written statement reiterating about the mortgage in its favour by obtaining loan of rs. 2 crores and pleaded total lack of knowledge of other transaction including the seizure of the property by the defendant no. 1.10. on the aforesaid allegations contain in the respective pleadings the court below framed the following issues.i) whether the plaintiff is entitled for a declaration that the memorandum of deposit of title deeds dated 24-11-1982 is void, illegal and unenforceable and does not create any mortgage?ii) whether the plaintiff is entitled for a declaration in the alternative that the defendants 2 and 3 are alone to pay the amounts due to the 1st defendant without effecting their title, possession and enjoyment of the plaintiff over suit property?iii) whether the plaintiff is entitled for permanent injunction, restraining the 1st defendant from interfering with the peaceful possession and enjoyment of plaintiff over suit property?iv) whether the plaintiff is entitled for rs. 12,00,000/- together with interest at 24% per annum from 9-8-1999.v) to what relief?additional issues:1) whether there is a cause o faction for the suit?2) whether the plaintiff is entitled to seek any relief against the 3rd defendant?11. subsequently, the parties went into trial and the plaintiff examined pw-1, the g.p.a. holder of the firm and marked exs. a-1 to a-16. the defendants examined dw-1 and dw-2 the officials of the defendant no. 1 corporation and marked exs. b-1 to b-21.12. on a consideration of the evidence and material on record, the court below dismissed the suit inter alia holding that the plaintiff is not entitle for declaration as sought for, nor for permanent injunction. hence, this appeal. learned counsel appearing for the appellant by taking us through the entire evidence and material on record contended that, having regard to the very nature of transaction which is incomplete and not complying to the provisions of the stamp act and indian registration act and thus there being no valid and legal mortgage, the defendant no. 1 cannot enforce the same. therefore, the relief as sought for is perfectly sustainable, which the court below did not properly consider from proper perspective.13. learned counsel appearing on behalf of the respondents submitted that dehors the absence of stamp or registration, there is a valid charge created under the law which can be enforced by the defendant no. 1 and therefore, the court below was right in rejecting the suit and thus, there are no merits in the submissions advanced by the learned counsel for the appellant. on these and other submissions made across the bar in detail from both the counsel and on a perusal of the material, the point, which arises for consideration is:whether under the facts and circumstances the transaction in question constitutes a valid and enforceable mortgage?14. on behalf of the plaintiff, pw-1 one of the partners was examined who has given entire narration of events and stated that the property was purchased on 13-4-1987 by the plaintiff from the defendant no. 2, who in turn purchased the same on 28-3-1987. however, the plaintiff was not aware of any such encumbrances or charges whatsoever in nature, nor it was disclosed to them and not stated in the sale deed dated 28-3-1987. further, there was no inspection by the corporation from 1987 till 1992. it is only in the writ proceedings filed in this court from the counter affidavit the alleged deed of mortgage by deposit of agreement of sale by defendant no. 2 in respect of the property came to its notice. but the same is not a valid one since admittedly, the said mortgage transaction is stamped or registered. there is no serious dispute on behalf of defendant no. 1 with regard to the fact that there is no such mortgage stamped and registered. however, it has been pointed out by the defendant no. 1 that the said agreement by defendant no. 3 in favour of defendant no. 2, dated 24-11-1992 which was marked as ex.b-14 was deposited by the defendant no. 1 and the same was confirmed by him. defendant no. 3 had issued a 'no objection certificate' on 26-11-1982 and the defendant no. 2 acknowledged the receipt of the amounts on 2- 12-1982. defendant no. 2 has created a charge on the property on 24-11-1982 under ex.b-15 with the registrar of company for the money advanced by defendant no. 1. therefore, it is this act whereby the corporation gets its charge in due conformity with section 125 of the companies act r/w rule 6 and form 8 of appended-1. and the charge created under section 125 of the companies act can be treated as knowledge to every one and especially to a person seeking to acquire the property who shall be deemed to have a notice as per under section 126 of the companies act. therefore, there is a due enforceable and valid charge and accordingly, defendant no. 1 corporation is rightly proceeding with the same.15. that apart, the plaintiff was aware of the said mortgage and therefore cannot claim to be a bona fide purchaser nor entitled to any indulgence either under law or facts, but is equally bound by it.16. coming to the first aspect of the question on the alleged mortgage not having been stamped or registered and thus there is no valid mortgage which can be enforced by the corporation, there is no dispute on the facts. admittedly, there is no stamp nor registration. the question is, whether such a transaction would amount to a valid mortgage and can be enforced. on this issue learned counsel on either side referred to a decision of the apex court in syndicate bank v. estate officer & manager, apiic limited : air2007sc3169 where considering the provisions of sections 58, 54, 100, 5 and 6 of transfer of property act, in similar circumstances and on same questions whether a mortgagor having incomplete or inchoate title (having allotment letter, licence as to use of land, and possession thereof without any sale deed having been executed or registered) in mortgaged property, to the knowledge of mortgagee - validity and enforceability - wherein, it was held as under:(28) the requisites of an equitable mortgage are : (i) a debt; (ii) a deposit of title deeds; and (iii) an intention that the deeds shall be security for the debt. the existence of the first and third ingredients of the said requisites is not in dispute. the territorial restrictions contained in the said provision also does not stand as a bar in creating such a mortgage. the principal question, which, therefore, requires consideration is as to whether for satisfying the requirements of section 58(f) of the transfer of property act, it was necessary to deposit documents showing complete title or good title and whether all the documents of title to the property were required to be deposited. a' fortiori the question which would arise for consideration is as to whether in all such cases, the property should have been acquired by reason of a registered document.(29) each case will have to be considered on its own facts. a jurisprudential title to a property may not be a title of an owner. a title which is subordinate to an owner and which need not be created by reason of a registered deed of conveyance may at times create title. the title which is created in a person may be a limited one, although conferment of full title may be governed upon fulfilment of certain conditions. whether all such conditions have been fulfilled or not would essentially be a question of fact in each case. in this case a right appears to have been conferred on the allottee by issuance of a valid letter of allotment coupled with possession as also licence to make construction and run a factory thereon, together with a right to take advances from banks and financial institutions; subject, of course, to its fulfilment of condition may confer a title upon it in terms of section 58(f) of the transfer of property act, but the question would be whether such a right is assignable. .... ....(39) there cannot be any doubt whatsoever that in absence of a registered deed of sale, the title to the land does not pass, but then what would not be conveyed is the title of the estate and not the allotment and possession itself.(40) it would, therefore, appear that there is no clear authority on the question as to whether in absence of any title deed in terms whereof the mortgagee obtained title by reason of a registered deed can be a subject-matter of mortgage. section 58 of the transfer of property act does not speak of mortgage of an owner's interest. if any interest in property can be created by reason of a transaction or otherwise which does not require registration, in our opinion, it may not be necessary to have a full title before such a mortgage is created by deposit of title deeds. a person may acquire title to a property irrespective of the nature thereof by several modes e. g. a lease of land which does not require registration; (ii) by partition of a joint family property by way of family settlement, which does not require registration.(41) in a case of this nature where valuable right is created which may or may not confer an assignable right, the question requires clear determination having regard to the equitable principle in mind, and would have far reaching consequences, as a large number of banks and financial institution advance a huge amount only on the basis of allotment letters. if such allotment letters are to be totally ignored, the same may deter the banks in making advances which would in effect and substance create a state of instability.(42) apart from the said question, the effect of an admission by an authorized representative of the state having regard to the rules of executive business or otherwise vis-'-vis the appellant-bank also requires consideration.(43) we, therefore, are of the opinion that keeping in view the importance of the questions raised at the bar, as noticed hereinbefore, and in the context of the factual matrix involved in the matter, the questions require consideration by a larger bench so that an authoritative pronouncement can be made thereupon.17. from the principles as laid down and reiterated, it was held that such mortgages are to be treated necessarily as unenforceable and invalid, since there is no valid mortgage. however, having regard to the larger importance in question effecting various financial institutions, the apex court has referred the matter to the larger bench. an attempt was made on behalf of the counsel appearing for the respondents to the effect that since reference was made to the larger bench this case be adjourned awaiting the said decision. however, on the undisputed prepositions as to the requirement of stamp and registration, this court is bound by the same under article 141 of the constitution of india. this will however subject to any charge in the proposition.18. learned counsel appearing for the respondents herein submits that dehors the said question it can sustain the charge on the other grounds and that aspect alone would not be a criteria, which of course, is being dealt in later paras. however, we are of the view that though subject to the view taken and the principles that would be laid down by the larger bench, such transaction would not amount to a valid mortgage and cannot be enforced.19. coming to the other aspect of the matter, on which the learned counsel for the respondent sought to take us on a different claim to sustain the legality of the charge and its right to proceed against the property. it is their case that having regard to ex. b-2, dated 23-11-1982 and terms and conditions contained therein treating the financial agency to be the first mortgagee and the defendant no. 3 falling to the 2nd charge, as per the clause contained therein putting a restraint against the defendant no. 2 against alienation or otherwise to create any liabilities and especially 'no objection certificate' issued by the defendant no. 3 under ex.b-5 on 23-11-1982, the due charge was created under ex.b-15 with the registrar of companies, as provided under section 125 of the companies act r/w rule 6 form-a pointing it. according to the learned counsel, notice to all concerned including any purchaser has to be deemed as contemplated under section 126 of the companies act.20. having given due consideration to the submissions made and the scope and the object behind the said provisions, it is to be seen that the charge as provided under section 125 of the companies act totally stand on a different footing and cannot be equated with the charge or rights or obligations and liabilities that arise from a valid mortgage, as per the provisions of section 58 of transfer of property act vis--vis stamp and registration. at the outset, it is to be stated that the provisions of the companies act does not override the provisions of the transfer of property act or with stamp act or indian registration act on this count, nor would they exclude or make inapplicable and dispense with these requirements. further, the provisions of the transfer of property act or stamp act or indian registration act does not make any exception to the alleged charge contemplated under section 125 of the companies act. therefore, it follows that for any such charge, registered under section 125 of the companies act, necessarily it has to be under a valid transaction as contemplated under law for its enforcement. and the only law which provides for creation of valid charge or mortgage is the transfer of property vis--vis compliance of stamp act or indian registration act.21. thus, we are of the view, that a charge registered with the registrar of the companies under section 125 of the companies act to be valid one and enforceable, necessarily it should be in consonance with the transfer of property act vis--vis indian registration act or stamp act. hence, we do not find any reason to accept the submissions made on behalf of the respondents- defendants in this regard.22. for the foregoing reasons, we hold that there being no valid and enforceable mortgage, the plaintiff would be entitled for the declaration in respect of the deed or transaction dated 24-11-1982 as invalid and unenforceable. secondly, we hold that the registration with registrar of companies act under section 125 of companies act, of the charge would constitute a valid and enforceable mortgage.23. the appeal accordingly is allowed and the suit is decreed both for the declaration and injunction as prayed. however, this will be subject to the condition that it is open for the defendant no. 1 corporation to take other proceedings as contemplated under law for the purpose of recovery of the amount. no order as to costs.