Suresh Lachhmandas Raheja vs Ferrani Hotels Pvt. Ltd.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2010 Supreme(Bom) 1656

High Court of Judicature at Bombay
THE HONOURABLE DR. JUSTICE D.Y. CHANDRACHUD
Suresh Lachhmandas Raheja
Versus
Ferrani Hotels Pvt. Ltd. & Others
APPLICATION UNDER RULE 133 OF THE BOMBAY HIGH COURT (ORIGINAL SIDE) RULES IN APPEAL NO.270 OF 2007 IN NOTICE OF MOTION NO.3899 OF 2006 IN SUIT NO.3190 OF 2006
Decided on : 26-11-2010

Advocates Appeared:
For the Applicant:R.A. Dada, Senior Advocate with Zubin Behramkamdin, Vivek Vashi. Ms. Anusha Jagdeesh i/b Bharucha & Partners, Advocates.
For the Respondents:R1, I.M. Chagla, Senior Advocate with H. Jagtiani, Naval Agarwal, S. Bhole & B. Zaveri i/b Kanga & Co., R2, Chetan kapadia with Mayur Khandeparkar i/b Mahimtura & Co. , Advocates.

Headnote:Bombay High Court (Original Side) Rules, 1980 - Rule 133-Furnishing of security- Valuation report of property offered as security-Reliability of report-One report not rely upon sale instance-Second report not stated similarities of sale instance with property at hand-Third report based on rate mentioned in ready reckoner for purpose of stamp duty-Sale instance of redeveloped property given not at par with property at hand-No reliance can be placed on any valuation report.-That leaves the Court with the question of valuation. The plaintiff has relied on two sets of valuation reports. Both the valuation reports proceed to make a valuation on the basis of what is described as the saleable area. The built-up area of the two sets of flat is respectively 6703 sq. ft. The built-up area of these two sets is enhanced for the purposes of valuation to 12,868 sq. ft. and 20,541 sq. ft. by including certain ancillary areas such as the lobby, servants, room servants, toilet, common passage, common AHU, AHUs, niches and walls. The total plinth area is thereupon deduced to which is added a prorata interest in the common areas. The report of A.V. Shetty & Associates states that the fair market value of the property has been assessed based on local enquiries using the market value method and taking into account other factors including location, accessibility, distance and development such as infrastructure. The valuation report does not rely upon even a single sale instance. The second report of Perfect Valuations and Consultant is similarly based on saleable area as opposed to the built-up area. The report relies on a solitary sale instance of a flat in a building described as Raheja Anchorage purchased by Godrej Industries Limited. The purchase price was Rs. 43 Crores for a built-up area of 2850 sq. ft. The valuation report does not disclose whether the sale instance was similar in terms of amenities, construction, location and other associated advantage. Counsel appearing on behalf of the first respondent submitted, as a matter of fact, that the two properties are not similarly circumstanced. But that is not an issue which falls for determination by the Court since it ought to have been considered by the valuer. The valuer has totally failed to do so. The Prothonotary and Senior Master was in the circumstances justified in not relying upon either the report of A.V. Shetty & Associates or Perfect Valuations and Consultants.
The first and third defendants have similary relied upon a valuation report of Rane Engineers and Surveyor. The report relies on the rate mentioned in the ready reckoner, for the purpose of stamp duty of Rs. 18,718/- per q. ft. of built-up area. Now it is settled that the ready reckoner merely provides an index for the revenue authorities for the purpose of levying stamp duty. Valuation either under the Land Acquisition Act or even in proceedings such as the present cannot be based on a ready reckoner. The report then relied upon four sale instances where the valuation of the property varied between R. 18,845/- and Rs. 19,347/- per sq. ft. The valuer adopted a rate of Rs. 25,000/-. After giving a certain discount of Rs. 800/- per sq. ft. the valuer adopted a rate of Rs. 24,200/- per sq. ft. The Prothonotary and Senior Master have principally accepted the report relied upon by the third defendant though without the deduction of Rs. 800/- per sq. ft. The valuation on which reliance has been placed by the third respondent is also open to the objection that it has failed to consider certain material issues. One of the sale instances upon which reliance has been placed is an adjoining building, RNA Mirage. Counsel appearing on behalf of the plaintiff has produced before the Court a photocopy of an agreement to sell in respect of one of the premises in the building. The development in that case was under Development Control Regulation 33(7) which pertains to the redevelopment of cessed buildings in the island city of Mumbai. There is merit in the submission that the valuation of a property where redevelopment has taken place under Development Control Regulation 33(7) may not be at par with the valuation which is ascribed to a property, which to use a phrase of contemporary parlance is a free ’sale’ project.

JUDGMENT

1. These Applications come up before the Court under Rule 133 of the Bombay High Court (Original Side) Rules. Rule 133 reads thus :

“R.133 Adjournment of matter to Judge Any “ party desiring to have any question decided by the Prothonotary and Senior Master, whether disputed or not, adjourned to a Judge, may apply to the Prothonotary and Senior Master for such adjournment within four days from the passing of the order complained of. If the application is within time, the Prothonotary and Senior Master shall adjourn the matter and put it on the board of the Judge in Chambers. If the party makes the application after the said period of four days, the Prothonotary and Senior Master may adjourn the matter to the Judge in Chambers if he is satisfied that the party had sufficient cause for not making the application in time.”

2. By an order dated 17 January 2008 a Division Bench of this Court in Appeal 270 of 2007 directed the Plaintiff to furnish security to the extent of Rs.200 Crores to the satisfaction of the Prothonotary and Senior Master. Initially by an order dated 29 January 2008 the Prothonotary merely accepted a security bond and undertaking of the First Respondent. This order was set aside by a Learned Single Judge on 1 July 2010. While construing the order of the Division Bench, the Learned Single Judge directed the Plaintiff to furnish security consisting of tangible assets of the value of Rs.200 Crores to the satisfaction of the Prothonotary and Senior Master. The order of the Learned Single Judge was confirmed in appeal by the Division Bench on 29 July 2010. A Special Leave Petition against the order of the Division Bench directing the furnishing of security was dismissed on 4 October 2010. The Plaintiff moved an interim application before the Supreme Court seeking an extension of time by a period of twelve weeks to furnish security. The Supreme Court by an order dated 16 November 2010 extended time by a period of two weeks.

3. Before the Prothonotary and Senior Master the Plaintiff relied on valuation reports of two valuers (i) A.V. Shetty – & Associates and (ii) Perfect Valuations and Consultants. The Plaintiff offered by way of security a total of thirteen flats which are owned by the two sons of the Plaintiff, Mr. Rahul Raheja and Mr. Ashish Raheja. One set of seven flats has been converted into a single flat while another set of six flats has similarly been converted into a single unit. The valuation which was placed on the flats by A.V. Shetty & Associates was Rs.90.07 Crores and Rs.143.78 Crores. The second valuer, Perfect Valuations and Consultants valued the flats at Rs.92.65 Crores and Rs. 147.90 Crores. On the other hand, the Third Defendant relied on a valuation report of Rane Engineers and Surveyors. The valuer adopted a valuation of Rs.16.92 Crores and Rs.25.57 Crores. The Prothonotary and Senior Master accepted the contention of the First and Third Defendants that the valuation reports on which reliance was placed by the Plaintiff could not be accepted. While accepting the valuation report placed on record by the First and Third Defendants, the Prothonotary and Senior Master accepted a valuation of the flats offered as security at Rs.44.27 Crores. In the circumstances, the Plaintiff was directed to furnish additional security so as to make good the deficiency in order to fulfill the direction that the total security offered must be to the extent of Rs.200 Crores.

4. The Plaintiff as well as the Third Defendant moved two applications before the Prothonotary and Senior Master under Rule 133 for placing the matter before the Court. Accordingly, these proceedings come up under Rule 133.

5. The learned Senior Counsel appearing for the Third Defendant and the learned counsel for the First Defendant have at the outset submitted that the offer which was placed before the Prothonotary on behalf of the Plaintiff of thirteen flats belonging to the two sons of the Plaintiff must be rejected for the reaso

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