2007 Supreme(SC) 1129

2007(6) Supreme 258
Supreme Court of india
(From Andhra Pradesh High Court)
S.B. Sinha & Markandey Katju, JJ.
Syndicate Bank — Petitioner
versus
Estate Officer & Manager, A.P.I.I.C. Ltd. & Ors. — Respondents
Appeal (civil) 7824-7828 of 2004
Decided on : 30-08-2007

imporant point
Where valuable right is created by allotment letters whether it may or may not confer an assignable right is the question which requires clear determination.

Headnote:(a)Transfer of Property Act, 1882 – Section 58 – 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 – Where valuable right is created by allotment letters, whether it may or may not confer an assignable right is the question which 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 – Also, the effect of an admission by an authorized representative of the State having regard to the rules of executive business or otherwise vis-à-vis the Appellant-Bank also requires consideration – Keeping in view the importance of the questions raised 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. (Paras 22, 26 and 39 to 42)

       AIR 1974 Madras 16; AIR 2002 Madras 378; AIR 1981 Cal. 404; (2005) 11 SCC 520; 1965 (3) SCR 567; 1964 (6) SCR 727 – Referred.

       (b)Transfer of Property Act, 1882 – Section 58 – Mortgage – It is one thing to say that a person cannot convey any title, which he himself does not possess; but it is another thing to say that no mortgage can be created unless he obtains a title by reason of a registered conveyance. (Para 29)

       Facts of the case :

       On or about 19.03.1969, United Auto Tractor Ltd. filed an application before the State Government for allotment of 100 acres of land in the industrial area for setting up an industrial unit for the purpose of manufacture of agricultural tractors and implements. The Government of Andhra Pradesh pursuant to or in furtherance thereof made allotment of 51 acres of land in the Industrial Development Area, Nacharam, Andhra Pradesh to the Company for the aforementioned purpose in terms of an order dated 18.07.1972. On 03.08.1972, an agreement was entered into by and between the Government of Andhra Pradesh and the Company in relation thereto.

       On the said date, the Government of Andhra Pradesh also issued a letter to the Company, permitting it to mortgage the said 51 acres of land to any scheduled bank to obtain financial assistance to the project, which the Company sought to establish.

       The allotted land allegedly was being utilised by the borrower for the purpose for which the same was allotted. It is stated that the borrower paid the entire cost of the land to the Government on or about 31.07.1980 being a sum of Rs. 2,03,304/-, which was acknowledged by A.P.I.I.C. After, a long time, however, A.P.I.I.C. purported to have cancelled the allotment of 25 acres out of 51 acres of land allotted to the Company. The balance 26 acres of land was designated as Plot No.A-27/1, which is the disputed property in this case.

       Appellant-Bank filed O.A. No. 425 of 1995 against the Company and the guarantor for recovery of a sum of Rs.2,57,10,393/- before the Debt Recovery Tribunal, Bangalore. In the said application, the Bank intended to enforce its charge on the property which had been created.

       The said application was allowed by an order dated 18.10.1996, whereafter a recovery certificate was issued on 01.07.1997.

       A notice for sale of the entire 51 acres of land by public auction was proposed to be held by the Recovery Officer on 08.03.1998. An objection thereto was made by A.P.I.I.C. on or about 21.03.1998, stating that it had no objection for sale of 26 acres of land. A writ petition was thereafter filed before the High Court questioning the validity of the said proposed auction before the Andhra Pradesh High Court by A.P.I.I.C.

       During pendency of the said writ petition, A.P.I.I.C. resumed possession of 25 acres of land and decided to hold auction in respect thereof only, which was questioned by the appellant-Bank by filing a writ petition before the Andhra Pradesh High Court, which was marked as W.P. No. 24060 of 1998. By an order dated 12.08.1998, the claim petition filed by A.P.I.I.C. before the Debt Recovery Tribunal was dismissed. A.P.I.I.C. being aggrieved by and dissatisfied therewith filed a writ petition before the Andhra Pradesh High Court on or about 01.09.1998.

       A sale proclamation for the entire 51 acres of land proposing to sell the said land by public auction was issued by the Recovery Officer on or about 10.12.1998. Yet again a writ petition was filed by A.P.I.I.C. and the operation of the said for holding auction was stayed.

       On or about 24.08.1998, one Nacharam Industries Association also filed a writ petition questioning the auction in respect of 25 acres of land. The Company also filed a writ petition, which was marked as Writ Petition No. 25056 of 1998 questioning the auction-cum-sale notice dated 06.08.1998 held by APIIC. No stay, however, was granted therein. During pendency of the aforementioned writ petition, APIIC issued a show cause notice dated 18.12.1998 upon the Company directing it to show cause as to why the allotment of balance 26 acres of land should not be cancelled on the following grounds that : (a) it had failed to set up an industry much less the proposed industry for which the land was allotted, except constructing some structures on Plot No.A.27/1; and (b) the Company had failed to pay the balance cost of the land, property tax and maintenance charges etc. amounting to a sum of Rs.27,19,366/-.

       No cause, however, was shown by the Company. It had merely been asking for time for submitting the explanation. On or about 14.07.1999, allotment in favour of the Company in respect of the balance 26 acres of land was also cancelled, the agreement dated 03.08.1972 was determined and the amount already paid by the Company was forfeited. The Company was directed to surrender the vacant possession of the land.

        Appellant filed a writ petition questioning the said order dated 14.07.1999 before the Andhra Pradesh High Court which held that the order of cancellation of allotment of 25 acres of land dated 17.08.1993, having not been challenged, the same became final. It was also held that as a clear and categorical finding had been arrived at by APIIC in its order dated 14.07.1999 that the Company had failed to utilise the land for the purpose for which the same had been allotted, the order of cancellation of allotment was also valid in law.

       Findings of the Court:

       The issues raised being of importance and any decision thereupon is likely to have serious effect.

       Result : Matter referred to larger Bench.