TaxTMI 
TaxTMI 
2017 (3) TMI 748
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....a, Mr.Vidur Mohan and Ms.Shivangi Agarwal, Advs., Mr.Vishwajit Singh with Mr.Pankaj Singh, Ms.Ridhima Singh, Mr.Gaurav Singh, Advs., Mr.Satinder Singh, Adv. with Mr.Avinash Detha, Adv. JUDGMENT : Ms.G.ROHINI, Chief Justice 1. These five LPAs and four writ petitions being interlinked are heard together and being disposed of by this common judgment. 2. It may, at the outset, be stated that all the LPAs arose out of the interim orders passed pending W.P.(C) No.2604/2013 and W.P.(C) No.7261/2015. When the said appeals were listed before us, we thought that it would be appropriate to hear and decide the main writ petitions as well. Thus with the consent of the learned counsels for both the parties, the said writ petitions as well as two other connected petitions being W.Ps.(C) No.4412/2013 and 3047/2016 were tagged on to the LPAs and all the matters were heard together. 3. The facts in brief are as under. 4. Maharaji Educational Trust (hereinafter referred to as 'the Trust') which has been running medical colleges and charitable hospitals at various places, possessed several properties including the buildings wherein its colleges, hospitals, staff quarters, etc. are locate....
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....f Appeal No.120/2008 by DRAT by order dated 06.10.2010, the Recovery Officer attached to DRT-II, Delhi initiated steps for recovery of the amount specified in the Recovery Certificate by sale of the mortgaged properties. 10. In May, 2011, SGS Constructions filed objections before the Recovery Officer qua property No.6 on the basis of the Agreement of Sale dated 26.08.2010 executed by the Trust in its favour. The objections included that the dispute between the parties to the Agreement of Sale is the subject matter of proceedings pending before the sole Arbitrator and that on an application filed by it under Section 17 of the Arbitration and Conciliation Act, 1996 seeking interim protection, it was undertaken by the Chairman and Managing Trustee of the Trust that the disputed land measuring 63.45 acres would not be alienated pending the arbitration proceedings. It was also contended that the DRT, Delhi had no territorial jurisdiction to conduct the proceedings since the property No.6 is situated in the State of Uttar Pradesh. The Recovery Officer passed an interim order dated 06.09.2011 deferring the sale proclamation in respect of property No.6 till the objections raised by SGS Co....
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.... Security Interest Act, 2002 (hereinafter referred to as 'the SARFAESI Act') by enforcement of the interest created in its favour in respect of the properties mortgaged by the Trust. Possession notice under Section 13(4) of the SARFAESI Act was issued by the HUDCO on 22.11.2011 followed by sale notice dated 12.01.2012 for sale of the properties under mortgage. At that stage, the Trust preferred a Securitization Application under Section 17 of the SARFAESI Act and pursuant thereto stay of sale, to the extent of property No.6, was granted by the Debt Recovery Tribunal (DRT), New Delhi on 25.01.2012. Against the said order of stay, HUDCO filed an appeal before the Debt Recovery Appellate Tribunal (DRAT) and the same was disposed of by order dated 25.06.2013 holding that instead of proceeding against property Nos.1 to 5, it would be appropriate to proceed to sell property No.6, in the first instance, in accordance with the provisions of the SARFAESI Act and the Rules made thereunder. Recording the statement of the Trust/respondents therein that they have a buyer who is ready to purchase property No.6 for Rs. 395 crores, the DRAT directed HUDCO to consider to sell property No.6 ....
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....the proceedings initiated under SARFAESI Act qua property No.6 are pending before DRT-II, Delhi and that as per Section 56 of Transfer of Property Act, 1882 HUDCO has to proceed against the property Nos.1 to 5 for recovery of the amounts due to it from the Trust. To bring a quietus to the whole dispute, SGS Constructions had also expressed its willingness to clear the entire liability of the Trust by making a payment of Rs. 145 crores towards sale consideration for property Nos.1 to 5, (which are not agricultural lands) by way of private treaty under Security Interest (Enforcement) Rules, 2002. To show its bona fides, SGS Constructions made Fixed Deposits dated 23.04.2013 in favour of HUDCO for Rs. 14.5 crores and Rs. 25.5 crores i.e. 10% of the amount offered by it. 17. On 30.06.2015, SGS Constructions filed three applications before the Recovery Officer, i.e., (i) seeking permission to amend its objections by incorporating that property No.6 includes 21 acres of unencumbered land as specified in para 6 of the said application; (ii) to recall the earlier order of the Recovery Officer dated 21.05.2015 thereby fixing 01.07.2015 as the date for final arguments on the objections, and....
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....nforcement) Rules, 2002 and there is also a direction by DRAT dated 25.06.2013 to proceed with the sale of property No.6 in the first instance in accordance with the provisions of the SARFAESI Act, HUDCO failed to do so. Writ Petitions: 20. For the sake of convenience, the reliefs sought in the four writ petitions may be noted hereunder: (i) W.P.(C) No.2604/2013 has been filed by M/s KM Realcon Pvt. Ltd. with a prayer to direct HUDCO to exercise its statutory power of sale in relation to Property No.6 and sell the same to the petitioner / M/s KM Realcon Pvt. Ltd. for a total sale consideration of Rs. 395 Crores offered by it on 15.03.2013. (ii) W.P.(C) No. 4412/2013 has been filed by Maharaji Educational Trust with a prayer to direct HUDCO to take all necessary steps for sale of Property No.6 by exercising its statutory power under the provisions of SARFAESI Act and further to declare that no interest is payable to HUDCO on the decretal amount w.e.f. 15.03.2013, i.e. the date on which M/s KM Realcon Pvt. Ltd. offered to buy Property No.6 for a total sale consideration of Rs. 395 Crores. (iii) W.P.(C) No. 7261/2015 has been filed by SGS Constructions with a prayer to direct HU....
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....icient opportunity to SGS Constructions and to decide all the objections raised by it. While directing to re-notify the said application on 30.07.2015 for the response of the non-applicants, the learned Single Judge passed an order on 21.07.2015 directing the Recovery Officer not to pass any order on the objection application filed by SGS Constructions. 24. Aggrieved by the said order dated 21.07.2015, the Trust filed LPA No.223/2016. The Trust also filed LPA No.249/2016 assailing the order dated 21.07.2015 as well as the order dated 13.07.2015 passed by the learned Single Judge. 25. In W.P.(C) No.7261/2015 filed by SGS Constructions seeking a direction to HUDCO to consider its proposal for purchase of property Nos.1 to 5 by private treaty under SARFAESI Act, SGS Constructions/writ petitioner filed CM No.6095/2016 with a prayer to appoint a Court Receiver to take possession of the property No.6 and to protect the same. A further direction was also sought to restrain HUDCO from taking measures under Section 13(4) of the SARFAESI Act qua property No.6. By order dated 19.02.2016, the learned Single Judge passed an order on the said application restraining HUDCO from proceeding furt....
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.... along with frivolous applications are nothing but abuse of process of law. 30. Disputing the claim of SGS Constructions that property No.6 is an agricultural land, it is contended by the learned Senior Counsel that there is a clear recital in the agreement itself that the said land is situated in a residential zone and that the U.P. Housing Board has also clarified by its letter dated 26.02.2016 that the said land is a residential land. 31. Shri Sanjay Jain, the learned ASG appearing for HUDCO, while reiterating the contention that the claim of SGS Constructions that property No.6 is an agricultural land is without any basis in the light of the specific recital in the agreement of sale itself, further submitted that the letter dated 12.12.2011 of AEVP also makes it clear that property No.6 is a residential land. Placing reliance upon Transcore v. Union of India & Anr.; (2008) 1 SCC 125, it is further contended by the learned ASG that the order passed by the learned Single Judge dated 19.02.2016 which is the subject matter of LPA No.221/2016 filed by HUDCO, is erroneous since the same runs contrary to the settled principle of law that a financial institution can take recourse to ....
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....or recovery of the loan amount. 35. Disputing the claim of HUDCO that the original Exchange Deed had been deposited with it on 27.07.2011, it is contended by the learned Senior Counsel that even assuming that it is true, the same is immaterial and of no consequence since no new contract could have come into being after filing of O.A. No.160/2002 for recovery of the loan amount which had culminated in the Recovery Certificate dated 03.06.2008. In support of the said submission, the learned Senior Counsel relied upon Somdev v. Rati Ram; (2006) 10 SCC 788. 36. It is further contended that W.P.(C) No.3047/2016 having been filed for ensuring implementation of the order of the Supreme Court dated 15.05.2015 holding that the issue relating to the nature of 21 acres of land covered by the Exchange Deed would be adjudicated upon by the Recovery Officer, it would be proper and appropriate to allow the writ petition as prayed for directing the Recovery Officer to effectively adjudicate the issues relating to the nature and character of 21 acres of land. 37. It is also submitted by the learned Senior Counsel that in view of the interim order passed by the Arbitral Tribunal dated 15.01.2011 ....
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....ect of the properties specified in the Recovery Certificate. Admittedly, property No.6 is one of the items shown in the Recovery Certificate dated 03.06.2008. According to the Trust, property No.6 is a vacant land and the entire land of 63.45 acres was mortgaged to HUDCO. The specific case of the Trust as well as HUDCO is that property No.6, being vacant land, shall be sold first and the same would be sufficient to clear the entire loan amount due to HUDCO. It is also the specific case of the Trust and HUDCO that HUDCO is entitled to take recourse to the proceedings under SARFAESI Act notwithstanding the pendency of the recovery proceedings under RDDBFI Act, 1993 and that there cannot be any objection to sell property No.6 to M/s KM Realcon Pvt. Ltd. by private treaty in accordance with Rule 8(5)(d) of the Security Interest (Enforcement) Rules, 2002 particularly in view of the order of DRAT dated 25.06.2013, which attained finality. 42. Though the Trust does not dispute the fact that it had entered into the agreement of sale dated 26.08.2010 with SGS Constructions for sale of the entire 63.45 acres of land comprised in property No.6, it is contended by the Trust that no right or t....
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....isions of Uttar Pradesh Stamps and Registration Act, it has acquired right and title over the said property. (iii) At any rate, so far as 21 acres of unencumbered land covered by the Exchange Deed is concerned, neither the Trust nor HUDCO is entitled to make any claim. (iv) The said 21 acres of land, therefore, needs to be demarcated since it does not form part of the properties specified in the recovery certificate dated 03.06.2008. (v) Property No.6 being an agricultural land, the provisions of SARFAESI Act are not applicable as per Section 31(i) of SARFAESI Act and therefore the question of selling property No.6 by private treaty under Rule 8(5) of the Security Interest (Enforcement) Rules, 2002 does not arise. (vi) Since the dispute between the Trust and SGS Constructions has already been referred for arbitration in terms of the arbitration clause provided under the Agreement of Sale dated 28.06.2010 and the proceedings are pending before the Arbitrator in which the Trust has also participated and undertook to maintain status quo unless and until the right and title acquired by SGS Constructions qua property No.6 is adjudicated by the Arbitrator, HUDCO cannot claim any righ....
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....adjudication of applications under Section 17(1) of SARFAESI Act. The order dated 25.06.2013 passed by DRAT, Delhi upon which the learned counsels appearing for HUDCO and the Trust placed much reliance does not create any impediment for DRT to proceed with the enquiry and adjudicate the claims made by the third parties under Section 17(1) of the SARFAESI Act. In fact, the order dated 25.06.2013 directing sale of property No.6 in the first instance appears to be contrary to the very scheme and object of SARFAESI Act, more particularly the protection granted under Section 17(1) of the SARFAESI Act to the aggrieved parties. The said order virtually renders the Securitization Applications pending on the file of the DRT redundant. 47. Coming to the proceedings pending before the Recovery Officer under the RDDBFI Act, the question that needs consideration is whether the allegation that SGS Constructions was not afforded proper opportunity to address its objections is established and whether the order passed by the Recovery Officer dated 01.07.2015 as confirmed by DRT and DRAT by orders dated 10.07.2015 and 20.07.2015 respectively are sustainable under law. 48. Admittedly, SGS Construct....
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....e guise of directing the Avas Evam Vikas Parishad to demarcate the land and give finding that it was unencumbered land. The High Court has erred in law in giving a finding on merits on effect of exchange and that Section 70 of the TP Act is not applicable. It was not the function of the High Court to decide these questions under writ jurisdiction. 13. Section 70 of the TP Act is extracted hereunder: "70.Accession to mortgaged property.-If, after the date of a mortgage, any accession is made to the mortgaged property, the mortgagee, in the absence of a contract to the contrary, shall, for the purposes of the security, be entitled to such accession." 14. We could have decided the aforesaid question finally. However, we refrain from doing so as, in our opinion, it was not open to the High Court to take up these questions under writ jurisdiction and to declare the properties as unencumbered. It was for the parties to agitate the questions before the DRT where the recovery proceedings are pending at the instance of Hudco with whom the property had been mortgaged by the Trust." 50. As per Section 29 of RDDBFI Act, 1993, the Recovery Officer is bound to make the inquiry in the manner....
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....efore the High Court of Allahabad, which were ultimately decided by the Supreme Court by judgment dated 15.05.2015. The applications filed by SGS Constructions before the Recovery Officer to bring on record the subsequent events by seeking amendment of objections and to receive additional documents cannot therefore be held to be an attempt to delay the proceedings. We have already observed that Rule 11(3) of Schedule II to Income Tax Act, 1961 entitles the claimant or objector to adduce evidence to establish that he had some interest in the property in question. Therefore, in our considered opinion, the order passed by the Recovery Officer dated 01.07.2015 as confirmed by DRT and DRAT by orders dated 10.07.2015 and 20.07.2015 respectively are contrary to law and unwarranted. Hence the said orders which are the subject matter of W.P.(C) No.3047/2016 are liable to be set aside. 53. Coming to the other writ petitions, we found that the reliefs sought therein and the issues involved arise out of the disputes inter se M/s K.M. Realcon Pvt. Ltd. and HUDCO, the Trust and HUDCO and SGS Constructions and HUDCO with regard to the mortgaged properties. Since no such issues deserve considerat....