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High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE SRINIVASAN & THE HONOURABLE MR. JUSTICE AR. LAKSHMANAN
Punjab National Bank, Madras
Versus
Jaggi Brothers by partners & Others
O.S. Appeal No. 126 of 1994 & Application No. 4029 of 1994 in C.S. No. 180 of 1984 & O.S. Appeal No. 146 of 1995 & Application Nos. 4864 of 1991 & 5177 of 1993 in CS. No. 180 of 1984
Decided On :Decided on : 05-07-1995
CIVIL PROCEDURE CODE - SALE OF MORTGAGED PROPERTY - STATUTORY LIABILITIES OF MORTGAGORS - PRIORITY OVER MORTGAGE RIGHTS - COURT'S DIRECTION TO DISCHARGE LIABILITIES - MODIFICATION OF ORDER - WITHDRAWAL OF APPLICATION - DISMISSAL OF APPEAL - SALE THROUGH ADVOCATE-COMMISSIONER - DELIVERY OF MOVABLES TO PURCHASER - REFUND OF SALE PRICE - INTEREST ON SALE PRICE - ADVOCATE-COMMISSIONER'S REMUNERATION.
Fact of the Case:
The Bank obtained a decree based on mortgage and hypothecation. After failed attempts to sell the properties through an Advocate-Commissioner, the Bank entered into private negotiations with a third-party purchaser. The Bank filed an application for accepting the offer and directing a sale in its favor. The learned judge directed the Bank to discharge all the statutory liabilities of defendants towards income-tax, sales-tax, and others. The Bank appealed against the direction. The third-party purchaser filed an application for modification of the order, alleging that the order did not incorporate the terms of the agreement relating to the payment of Rs. 50 lakhs and delivery of movables. The Bank filed an application for withdrawal of the modification application.
Finding of the Court:
The Court found that the third-party purchaser's application for modification was not bona fide and was filed after a long delay. The Court also found that the Bank was not concerned with the direction to meet the statutory liabilities but only with the question of delivery of movables. The Court held that the agreement between the Bank and the third-party purchaser could not be accepted and there could not be a sale in terms of the said agreement. The Court set aside the order directing sale on certain conditions and directed the sale to be held by the advocate-Commissioner as per the decree.
Issues: 1. Whether the Bank can be directed to discharge the statutory liabilities of the mortgagors? 2. Whether the third-party purchaser's application for modification of the order was bona fide? 3. Whether the agreement between the Bank and the third-party purchaser could be accepted? 4. Whether the sale should be held by the advocate-Commissioner as per the decree?
Ratio Decidendi: 1. The Court held that the Bank cannot be directed to discharge the statutory liabilities of the mortgagors as there was no first charge over the properties having precedence over the mortgage rights of the Bank. 2. The Court held that the third-party purchaser's application for modification was not bona fide as it was filed after a long delay and the third-party purchaser had not taken steps to protect its interests. 3. The Court held that the agreement between the Bank and the third-party purchaser could not be accepted as the conditions imposed by the learned single judge in the order under appeal had not been complied with by the third-party purchaser. 4. The Court held that the sale should be held by the advocate-Commissioner as per the decree.
Final Decision: The Court allowed the Bank's appeal, dismissed the third-party purchaser's application for modification, set aside the order directing sale on certain conditions, and directed the sale to be held by the advocate-Commissioner as per the decree.
SRINIVASAN, J.
1. (O.S.A. No. 126/94 & Application No. 4029/94) This appeal is by the decree-holder (Punjab National Bank, Madras-1, hereinafter referred to as the ‘Bank’) in C.S. No. 180 of 1984 against the order of a learned single judge of this Court in Application No. 6488 of 1993.
2. The Bank is aggrieved by the direction contained in the judgment of the learned single judge whereby the Bank is directed to discharge all the statutory liabilities of defendants 1 to 16 towards income-tax, sales-tax and others in such a way that defendants 1 to 16 are not burdened with any liability after the execution of the sale deed.
3. The Bank obtained a decree passed on consent in C.S. No. 180 of 1984 on 14-6-1989. It was a decree based on mortgage and hypothecation. After some attempts were made to sell the properties through an Advocate-Commissioner and failed, the Bank entered into private negotiations with certain parties and ultimately, agreed with one K.K.R. Finance & Housing Development (P) Ltd. for sale of all the properties at Rs. 2.25 Crores. It is not necessary at this stage to set out all the terms of the agreement betw een the Bank and the said K.K.R. Finance & Housing Development (P) Ltd., which is called for the purpose of this order as ‘third-party purchaser’.
4. The Bank filed Application No. 6488 of 1983 for accepting the offer made by the said third-party purchaser and directing a sale in its favour of the properties which were the subject matter of the decree. While ordering that application, the learned judge has given the direction as stated above. The Bank is aggrieved by the aforesaid direction.
5. The contention of the Bank is that being a mortagagee, the Bank cannot be made to discharge the statutory liabilities of defendants 1 to 16 which consist of sales-tax, as well as income-tax. Arguments were advanced on both sides at length on the question whether there is a first charge over the properties having precedence over the mortgage rights of the bank in the mortgaged properties.
6. It is not necessary for us to decide the question in this appeal in view of the subsequent developments. The third-party purchaser was directed by the order under appeal to deposit a sum of Rs. 50 lakhs within two months from the date of the order and it was also directed to pay the balance within two months from the date of such payment. The order said that possession will be delivered after the entire amount is paid after the execution of the sale deed at the cost of the third party-purchaser. Alleging that as per the terms of the agreement between the Bank and the third-party purchaser, the Bank was bound to deliver all movables and machineries to the third-party purchaser immediately after the payment of Rs. 50 lakhs which the purchaser had agreed to pay within 24-hours from the passing of the order by the Court approving of the agreement and accepting the offer, the third-party purchaser stated that the order had not taken note of the fact that movables should be delivered to it immediately after the payment of the first instalment of Rs. 50 lakhs and consequently, the order should be modified permitting payment of Rs. 50 lakhs and taking of delivery of all the movables lying in the premises in question.
7. The said application was moved on the Original Side in Application No. 4029 of 1994. That was filed on 20-7-1994. In paragraph 4 of the affidavit filed in support of the said application it is stated that the applicant was not informed of the order of this Court. In paragraph 5 it is stated that the Chief Manager of the Bank informed the applicant of the order after a long delay and said that the order was not in consonance with the terms of the agreement in as much as the terms relating to payment of Rs. 50 lakhs within 24 hours from the order of the court against delivery of the movables lying in the properties was not incorporated in the order. It is also stated that the Chief Manager of the Bank was aggrieved
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