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2011 Supreme(Bom) 382
2011 (3) ALL MR 793
High Court of Judicature at Bombay
THE HONOURABLE MRS. JUSTICE RANJANA DESAI & THE HONOURABLE MR. JUSTICE RANJIT MORE
Re. B.D. Agarwal & Others
Versus
Official Assignee & Others
APPEAL NO.106 OF 2010 IN NOTICE OF MOTION NO.67 OF 2009 IN INSOLVENCY PETITION NO.46 OF 2002 WITH NOTICE OF MOTION NO.68 OF 2009 WITH REPORT NO.8 OF 2009 of the Official Assignee present in the court.
Decided on : 28-03-2011
For the Appellants:S.A. Tawate, Advocate. For the Respondents:
O.A. Das for Central Bank of India, Kishore Jain i/b Nisha Parmar for the Official Assignee, Y.C. Parikh, Official Assignee present in the court.
Headnote:Presidency Town Insolvency Act, 1909 - Section 17-Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 13(2)-Bombay Rents, Hotel and Lodging House Rates (Control) Act, 1947, Section 13-Claim for restoration of possession-Termination of lease agreement-Termination wrong, contended by appellants-tenants-Official Assignee’s possession of flat as owner declared insolvent-Society changes not paid by appellants-Breach of terms of agreement-Lease agreement for 15 years not registered-Rental amount was Rs. 1/- per month-Official Assignee rightly permitted to terminate lease.-So far as the grievance of the appellants that the lease agreement is wrongly terminated is concerned, Court has already noted that after the adjudication order was passed, the property vested in the Official Assignee under Section 17 of the Presidency Towns Insolvency Act, 1909. Clause 10 of the said agreement entitles the owner to terminate the said agreement if there is breach of any of the terms and conditions of the said agreement. Since according to the Official Assignee, the appellants had failed to pay the Society charges, the Official Assignee rightly sought permission from Single Judge to terminate the said agreement. It is pertinent to note that what weighed with Single Judge is the fact that the lease agreement is entered into by Insolvent 2 who is or, in any event, was at the material time, wife of Insolvent I, who was a director of the company; that the lease agreement which is for a period of 15 years has not been registered and that the lease rental is an amount of Rs. 1/- per month. Single Judge, therefore, cannot be faulted for having granted permission.
Presidency Town Insolvency Act, 1909 - Section 17-Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 13(2)-Claim for restoration of possession-Appellants, tenants in flat-Official Assignee’s possession of flat as owner declared insolvent-Flat already mortgaged with Bank-Bank’s dues not paid by owners-Bank, secured creditor-Official Assignee rightly directed to handover possession of flat to Bank.-The Supreme Court held that Section 13(2) proceeds on the basis that the borrower is under a liability; that the debt has become due and that the borrower’s account in the books of account of the bank is classified as substandard. The Supreme Court observed the Sections 13(1) and 13(2) of the SARFAESI Act proceed on the basis that the security interest in the bank needs to be expeditiously enforced. The Supreme Court further held that there is no dichotomy between constructive possession and physical possession. In view of this, Single Judge was right in directing the Official Assignee to hand over the said flat to the Central Bank.
Presidency Town Insolvency Act, 1909 - Section 17-Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Sections 13(2) and 17-Claim for restoration of possession-Tenants, appellants in flat-Official Assignee’s possession of flat as owner declared insolvent-Flat already mortgaged with Bank-Bank’s dues not paid by owner-Bank, secured creditor-Court, while directing Official Assignee to handover possession of flat to Bank not decided any question in thin jurisdiction of Small Causes Court-Appellants having any grievance against Bank can file appeal in DRT under Section 17 of SARFAESI Act.-Single Judge has rightly observed that if he appellant has any grievance against the Central Bank, it would be open to the appellant to take recourse according to law. In this connection, reference must be made to Section 17 of the SARFAESI Act which gives right to any person, including borrower to file an appeal to the DRT if he is aggrieved by any measures taken under Section 13(4) of the SARFAESI Act.
Smt. Ranjana Desai, J.
1. Admit. The respondents waive service. By consent of the parties, taken up for hearing, forthwith.
2. The appellants have challenged in this appeal order dated 1/12/2009 passed by learned Single Judge of this court. By the impugned order, learned Single Judge has disposed of Notice of Motion No.67 of 2009, Notice of Motion No.68 of 2009 and Report No.8 of 2009 submitted by the Official Assignee. The present appeal revolves around Flat No.305, Blase View 'A' Co-operative Housing Society Limited, Matherpada Road, Amboli, Andheri (West), Mumbai – 400 058, (for short, “the said flat”).
3. Notice of Motion No.67 of 2009 was taken out by the appellants - Krystal Stone Exports Limited, inter alia, praying that the Official Assignee be directed to restore the possession of the said flat to the appellants. In the affidavit in support of the notice of motion filed by one Popat Lal Kanadia, who claims to be the Director of the appellants, it is stated that the said flat is owned by Mrs. Sangeeta Agarwal; that it is mortgaged to Central Bank of India (for convenience, “Central Bank”), who is the secured creditor of the appellants; that the said flat is given to the appellants by Mrs. Sangeeta Agarwal on a lease agreement on 11/4/1996 for a period of 15 years and that the said agreement is in force upto 10/4/2011. It is further stated that, therefore, the Official Assignee had no reason to take physical possession of the said flat because it falls outside the purview of the Presidency Towns Insolvency Act, 1909. It is further stated that the said flat being a mortgaged property, cannot be sold or used by the Official Assignee for any reason whatsoever; that the secured creditor who is a bank has not relinquished its charge on the said flat which is mortgaged with the bank and, therefore, the Official Assignee has no right to take possession thereof. A categorical statement is made in the affidavit that the appellants were in lawful possession of the said flat and by putting its own lock on the said flat on 9/9/2009, the Official Assignee has disturbed the appellants' lawful possession.
4. Notice of Motion No.68 of 2009 was taken out by the Central Bank having its Branch Office at Jaipur, Rajasthan praying that the Official Assignee be directed to hand over the said flat to the Central Bank in order to sell the same under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, the SARFAESI Act”). It is also prayed that the Official Assignee may be restrained from selling, alienating, dealing with and creating any third party right in the said flat. In the affidavit in support of this notice of motion filed by one Narendra Khandelwal, Senior Manager, Central Bank, it is stated that Mrs. Sangeeta Agarwal and her husband Bansi Dhar Agarwal are declared as Insolvents pursuant to the order passed by this court and pursuant to the said order, the Official Assignee has taken over possession of the said flat. It is further stated that the Central Bank has given credit facilities to the appellants and in order to secure the said credit facilities, the said flat has been mortgaged by Mrs. Sangeeta Agarwal in favour of Central Bank. It is further stated that the parties have not paid the outstanding dues and, their accounts have become Non Performing Assets (for short, “the NPA”). It is further stated that the Central Bank had filed original application in the Debts Recovery Tribunal (for short, “the DRT”) against Insolvents at Jaipur being Original Application No.234 of 2002 to recover a sum of Rs.3,91,44,184.48 with further interest. The said original application was decreed on 31/3/2006. The Central Bank filed an execution petition and a demand notice came to be issued to the Judgment Debtors. Pursuant to the order passed by the Recovery Officer, the Central Bank is stated to have taken possession of the said flat from the Official Assignee. The Insolv
