IMPORTANT POINT
A sale deed remains valid despite non-payment of the entire sale consideration if the intention to transfer ownership is evident.

JUDGMENT :

Alok Aradhe, CJ.

Mr. Vivek Jain, learned counsel for the petitioners.

Mr. Prabhakar Peri, learned counsel for the respondent No.2/Bank.

2. In Writ Petition No.38351 of 2014, the petitioners have assailed the validity of the order dated 18.09.2014 passed by the Debt Recovery Appellate Tribunal at Kolkata, by which the appeal preferred by the petitioners under Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2022 (hereinafter referred to as ‘the SARFAESI Act’) has been dismissed. Commercial Court Appeal No.8 of 2018 is directed against the Judgment dated 6.02.2018 passed in C.O.S.No.50 of 2017. On account of commonality of the issues, the writ petition as well as the Commercial Court Appeal were heard analogously and are being decided by this common judgment.

3. Relevant facts giving rise to the controversy involved in both the cases are that the appellants (hereinafter referred to as ‘the owners’) are the owners of four-storied building bearing Municipal Nos.3-4-683, 3-4-684 and New Shop adjacent to it and house No.3-4-685/1, admeasuring 297 square yards along with built up area of 13300 square feet, situated in front of Municipal Market, Narayanaguda, Hyderabad (hereinafter referred to as ‘the schedule property’). The borrower had entered into a loan agreement on 11.12.2006 with the respondent No.2 (hereinafter referred to as ‘the bank’). The respondent No.3 (hereinafter referred to as ‘the borrower’) approached the owners with an offer to purchase the schedule property for a sale consideration of Rs.1.50 crores. The buyers on receipt of three post dated cheques bearing Nos.422681, 422682 and 422683 executed the sale deed on 27.12.2006 in favour of the borrower, which was registered. On the same day, the owners and the borrower entered into a Memorandum of Understanding (MoU) which contained a stipulation that in the event of non-realisation of the amounts mentioned in the cheques, the owners shall be entitled to seek cancellation of the sale deed.

4. After execution of the sale deed, the schedule property was mortgaged on 27.12.2006 in favour of the Bank. The borrower defaulted in repayment of the loan amount. As a result, the loan account was declared ‘Non Performing Asset’. The post dated cheques issued in favour of the owners being the sale consideration of the sale deed dated 27.12.2006 were dishonoured. It is the case of the owners that no sale consideration was paid to them.

5. Thereupon, the owners filed a suit seeking the relief of declaration that the sale deed registered by the owners in favour of the borrower being null and void be cancelled. The owners also prayed for consequential relief of injunction restraining the defendants or their agents from dealing with the schedule property in any manner.

6. During the pendency of the civil suit, the Bank initiated the proceedings under the SARFAESI Act and the owners challenged the validity of the action of the Bank in initiating the proceedings under the SARFAESI Act by way of a securitization application before the Debts Recovery Tribunal, Hyderabad. The Debts Recovery Tribunal, Hyderabad by order dated 28.10.2013 dismissed the securitization application preferred by the owners.

The aforesaid order passed by the Debts Recovery Tribunal, Hyderabad was upheld vide order dated 18.09.2014 in the appeal by the Debts Recovery Appellate Tribunal, at Kolkata. In the writ petition, the petitioners have challenged the validity of the aforesaid order passed by the Debts Recovery Appellate Tribunal, at Kolkata.

7. Thereafter, the Commercial Court by the Judgment and Decree dated 06.02.2018 dismissed the suit filed by the owners seeking the relief of declaration and injunction inter alia on the ground that the owners and the borrower have colluded and have failed to prove that they are in possession of the schedule property. In the Commercial Court Appeal, the owners have assailed the validity of the aforesaid judgm