A mortgage created in violation of the terms of a prior mortgage is void in law, and the court has jurisdiction to declare such mortgages void to prevent serious injury to the first charge holder.

ORDER :

(ARIF S. DOCTOR, J.)

1. The captioned Suit has been filed inter alia seeking a declaration that the (a) Plaintiff is the exclusive first charge holder / mortgagee in respect of two properties,[(i) a property admeasuring 21,774.10 sq. mtrs. situated at C.S. Nos. H401, H402, H415 to H438 of Bandra Village, Samtacruz (W), Mumbai with structures standing thereon (Santacruz Property) and (ii) a plot of land known as Ghia Compound admeasuring 4,325.30 sq. mtrs. bearing C.S. No. H/395, H/296, H/397 and H/398 of Bandra Village, Santacruz (W), Mumbai (the Ghia Compound Property)] i.e. the Santacruz Property and the Ghia Compound Property more particularly set out in Exhibit ‘A’ to the plaint (“the Suit Properties”) and (b) the Deeds of Simple Mortgage dated 30th July 2018 are void and illegal to the extent of the mortgage created by Defendant Nos. 2 and 3.

2. Before adverting to the rival contentions, it is necessary for context, to set out the following facts, viz.

i. The Original Plaintiff i.e. Yes Bank Limited (“Yes Bank”) had sanctioned certain financial faculties/loans under three Term Loan Facility Agreements to Defendant No.2 to the extent of Rs.700 crores.

ii. Defendant No. 2 and one Real Estate Projects Private Limited (“REPPL”) as 50% owners of the Santacruz Property mortgaged the said property in favour of Yes Bank under Deeds of Mortgage dated 9th February 2016 and 12th May 2016 respectively as and by of security for due repayment of the said facilitates granted by Yes Bank to Defendant No.2. Defendant No.3 then, by way of a Supplemental Deed of Mortgage dated 6th February 2018 as owner, mortgaged the Ghia Compound plot in favour of Yes Bank. The three Mortgage Deeds executed in favour of the Plaintiff are for convenience referred to as “the Plaintiff’s Mortgage”.

iii. It is not in dispute that all the clauses contained in all the aforesaid Deeds of Mortgage were virtually identical. For convenience, reference to the relevant clauses from the Plaintiff’s Mortgage i.e. clauses 5, 13(d) and 10(B) of Schedule I are extracted from the Deed of Mortgage dated 9th February 2016, which are as follows:

“5. DEALINGS WITH RESPECT TO THE MORTGAGED PROPERTIES The Mortgaged Properties shall be specifically appropriated in the charge and mortgage and lien created under this Deed and the Mortgagor shall not sell, transfer, lease out, assign, dispose of or otherwise part with the Mortgaged Properties or any part thereof, or deal with the same or create or suffer any mortgage, charge, lien or other encumbrance on the Mortgaged Properties, without the prior written consent of the Mortgagee. Any mortgage/charge created hereafter by the Mortgagor on the Mortgaged Properties, in violation of this Deed, shall be subject to the present mortgage/charge created in favour of the Mortgagee under this Deed and the mortgage/charge created in terms of this Deed shall in all circumstances rank superior.

13(d) not create any mortgages, charges and encumbrances over the Mortgaged Properties in favour of any person except which are expressly permitted to be created under the Financing Documents and as are disclosed to the Secured Parties in writing;”

10(B). PROVISIONS RELATING TO FLOATING CHARGE

(i)….

(ii)….

(iii) ....FURTHER THAT, the Mortgagor shall not create or suffer any lien on the Mortgaged Properties set out in paragraph 10(A)(iv) of this Schedule I or any part thereof except with the specific written approval of the Mortgagee. Any subsequent fixed or floating charge created by the Mortgagor, in violation of this Deed, shall under no circumstances rank superior to the charge created by the Mortgagor in favour of the Mortgagee under this Deed. Further, upon creation of any charge in violation of this Deed, the charge created under this Deed shall crystallize and shall have priority over any and all other charges created in violation of this Deed.”

iv. In or about July 2018 Defendant No.2 and 4 represented to Yes Bank that they were desirous of repaying the