Axis Bank Limited vs Madhav Prasad Aggarwal And 2 Ors

Pvr 1 comapl 360-17 Axis-22-10-18.odt

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

APPEAL NO. 360 OF 2017 IN NOTICE OF MOTION NO.1208 OF 2017 IN SUIT NO.62 OF 2017 Axis Bank Limited ...Appellant Versus Madhav Prasad Aggarwal & Ors. ...Respondents

WITH APPEAL NO.361 OF 2017 IN NOTICE OF MOTION NO.1207 OF 2017 IN SUIT NO.60 OF 2017 Axis Bank Ltd. ...Appellant Versus Manisha Saraf & Anr.. ...Respondents

WITH APPEAL NO. 362 OF 2017 IN NOTICE OF MOTION NO.1206 OF 2017 IN SUIT NO.8 OF 2017

Axis Bank Ltd. ...Appellant Versus Padma Ashok Bhatt & Ors. ...Respondents

WITH

COMMERCIAL APPEAL NO. 171 OF 2017 IN COMM.NOTICE OF MOTION NO.323 OF 2017 IN COMM.SUIT NO.192 OF 2017

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:57 ::: Pvr 2 comapl 360-17 Axis-22-10-18.odt

Axis Bank Ltd. ...Appellant Versus Om Project Consultants & Engineers Ltd. & Anr. ...Respondents

WITH COMMERCIAL APPEAL NO. 172 OF 2017 IN COMM.NOTICE OF MOTION NO.377 OF 2017 IN COMM.SUIT NO.450 OF 2017

Axis Bank Ltd. ...Appellant Versus Niraj Dilip Jiwrajka & Ors. ...Respondents ----- Mr.Rafique Dada, Senior Advocate with Mr.Karl Tamboly, Mr.Bhalchandra Palav, Ms.Shreya Jha i/b. Cyril Amarchand Mangaldas, for Appellants in Com.Ap.171/17.

Ms.Sapana Rachure i/b. T.N.Tripathi for Official Liquidator in Com.Ap.171/17 and ComAp.172/17, APP 361/17, 362/17..

Mr.Navroj Seervai, Senior Advocate with Ms.Ankita Singhania, Mr.Adhish Sharma i/b. Khaitan & Khaitan, for Respondent No.1 in Com.AP 171/17 and for Respondent no.3 in Com.AP 172/17.

Mr.Karl Tamboly with Mr.Bhalchandra Palav i/b. Cyril Amarchand Mangaldas, for the Appellants in ComAP 172/17.

Mr.Alok Mishra i/b. T.N.Tripathi & Co., for the Official Liquidator.

Ms.Naira Jejeebhoy with Danesh Mehta i/b. M.Mulla Associates, for Respondent No.1 in COMAP 172/17.

Mr.Sarosh Bharucha with Ms.Naira Jejeebhoy, Ms.Khusboo Malvia, Ms.Siddha Pamecha I/b. M.Mulla Associates, for Respondent in Comap 172/17.

Mr.R.A.Dada, Senior Advocate in APP 360/17, Mr.Prasad Dhakephalkar, Senior Advocate in APP 361/17, Mr.Virag Tulzapurkar, Senior Advocate in APP 362/17 with Mr.Karl Tamboly, Mr.Bhalchandra Palav, Ms.Shreya Jha I/b. Cyril Amarchand Mangaldas, for the Appellants.

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:57 ::: Pvr 3 comapl 360-17 Axis-22-10-18.odt

Mr.Navroz Seervai, Senior Advocate with Ms.Ankita Singhania, Mr.Adhish Sharma i/b. Khaitan and Khaitan, for Respondent no.14 in APP 362/17 @ Darshana Bargode in APP 171/18 for Respondent no.1, in Appeal no.172/17 for Respondent no.3.

Mr.S.N.Vaishnav with Ms.Nupur J.Mukherjee, Mr.Kunal S.Vaishnav, Ms.Kirtika Kothari i/b. N.N.Vaishnav & Co., for Respondent No.1 in App 361 and 362 of 2017 and for Respondent nos.1 and 2 in APP 360 of 2017. --- CORAM : NARESH H. PATIL ACTING C.J. & G.S. KULKARNI, JJ.

Reserved on : 24th July, 2018

Pronounced on : 26th October, 2018

Judgment (Per G.S. Kulkarni, J.):

1. The point which falls for consideration in this batch of appeals

is as to whether the plaints against the appellant/defendant-Axis Bank

Limited (for short 'the Bank') are required to be rejected under the

provisions of Order 7 Rule 11(d) of the Code of Civil Procedure, in view

of the bar created by section 34 of the Securitisation and Reconstruction

of Financial Assets and Enforcement of Security Interest Act, 2002 (for

short, " Securitisation Act").

2. These appeals arise from a common order passed by the

learned Single Judge on five Notice of Motions which were filed by the

bank in the five Civil Suits in question, invoking the provisions of Order

VII Rule 11(d), seeking rejection of the plaint qua the Bank. By the

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:57 ::: Pvr 4 comapl 360-17 Axis-22-10-18.odt

impugned order, the Notice of Motions are rejected by the learned

Single Judge.

3. The contesting respondents in these appeals are the original

plaintiffs (referred as "plaintiffs"). The other respondents are the

developers M/s.Orbit Corporation Ltd. (for short, "Orbit").

4. Succinctly put, the material facts giving rise to the present

appeal are as under :-

The plaintiffs in these five suits have a common cause and

interest. The plaintiffs case as set out in the plaint is that they desired

purchasing of luxurious flats in a project known as 'Orbit Heaven' (for

short "the project") which was being developed by Orbit at Nepean Sea

Road in Mumbai. The case of the plaintiffs is that they have parted with

huge amounts of money as paid to Orbit for purchase of these flats. The

amounts are substantial ranging in several crores. Notwithstanding the

fact that the plaintiffs merely have allotment letters issued by Orbit and

in two cases a Memorandum of Understanding (MOU), and although

none of the plaintiffs have a registered agreement/document for

purchase of the flats, the plaintiffs say that they have valuable rights on

the project property. It is not necessary to delve into the details of

payment made by the plaintiffs from time to time to Orbit, suffice it to

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:57 ::: Pvr 5 comapl 360-17 Axis-22-10-18.odt

state that the payment of the amounts is not disputed by Orbit.

5. The facts in each of the plaints are quite similar. The plaintiffs'

prayers as made in the plaints, are primarily against Orbit namely the

plaintiff's interalia seeking specific performance of the alleged

agreements entered with them by Orbit for sale of the suit flats.

6. In the year 2009 the bank had granted loan facilities to Orbit

aggregating to a principal sum of Rupees 150 Crores. To secure the said

lending Orbit by registered deed(s) of mortgage created security

interest in favor of the bank in the said project (land and the building),

in which flats were proposed to be sold to the plaintiffs.

7. The case of the bank is that in or around January, 2016,

Orbit committed defaults in re-payment of the amounts advanced by the

bank. Despite repeated reminders, Orbit failed and neglected to repay

the interest and principal amount due under the credit facilities. A

notice dated 3 August 2016 was addressed to Orbit, its guarantors and

its mortgagors, recalling the credit facilities. Guarantees were also

invoked and the guarantors were called upon to pay entire outstanding

amounts due under the credit facilities. Despite these efforts, Orbit and

its guarantors/ mortgagors failed and neglected to pay the dues.

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:57 ::: Pvr 6 comapl 360-17 Axis-22-10-18.odt

Consequently, the bank resorted to enforce the security interest created

over the secured assets which included the project, by issuing a notice

dated 19 August 2016 under Section 13(2) of the Securitisation Act to

Orbit, seeking recovery of an amount of Rs.161,03,92,020.26 as on 12

August 2016 together with interest. The bank also issued public notices

dated 10 August 2016 and 13 September 2016 interalia cautioning the

public that all charges/claims on the project shall be subject to the rights

of the bank as mortgagee. Some claims were received from plaintiffs,

however, the bank by its letter dated 4 October 2016 denied the said

claims. As there was non-compliance of the notice issued by the bank

under Section 13(2) of Securitisation Act, by Orbit, its guarantors and

mortgagors, on 7 November 2016, the bank took symbolic possession of

the project, namely the semi-constructed Orbit Haven Project.

Thereafter an application was filed by the bank under Section 14 of the

Securitisation Act, before the learned Metropolitan Magistrate at

Mumbai, who passed an order dated 8 March 2017 allowing the bank

to take forcible possession of the suit project. Also an original

application No.1453 of 2016 was filed by the bank before the Debt

Recovery Tribunal at Mumbai, for recovery of the said dues of

Rs.165,96,91,559.26 payable by Orbit. In the said proceeding, by an

order dated 29 November 2016 interim reliefs were granted against

Orbit, its guarantors and its mortgagors.

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:57 :::

Pvr 7 comapl 360-17 Axis-22-10-18.odt

8. The plaintiffs in or about December 2016 to January 2017

claiming to be allottees of the flats/ suit premises in the said project,

filed the suits in question (except Commercial Suit No.450 of 2017

which was filed on 13-6-2017), interalia seeking a declaration that there

is a valid and subsisting agreement executed between plaintiff and Orbit

in respect of the suit premises and praying for specific performance of

the agreement between the plaintiffs and Orbit and praying for handing

over vacant possession of the suit premises to the plaintiff. An

alternative prayer for damages against Orbit is also made. We shall

make a reference to the prayers as made in each of the plaints in the

later part of this judgment. Though there was no privity of contract

between the plaintiffs and the bank, however it appears that as the

project was mortgaged to the bank and as the plaints in these suits

disclose that measures under section 13(4) Securitisation Act, were

adopted by the bank, the bank stood impleaded as a defendant in these

suits.

9. On the above backdrop, the bank being aggrieved by its

impleadment as a defendant in the suit(s), moved notice of motions in

question, in each of these suits, invoking the provision of Order VII Rule

11(d) of the CPC, interalia contending that the suit(s) as instituted

against the bank were barred under the provisions of Section 34 of the

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 ::: Pvr 8 comapl 360-17 Axis-22-10-18.odt

Securitisation Act and thus qua the bank the plaint was liable to be

rejected.

10. The contention of the bank was of a statutory bar created by

Section 34 of the Securitisation Act, for the Civil Court to entertain the

suits against the bank. This principally for the reason that the project

was a 'secured asset' within the meaning of section 2(1) (zc) of the

Securitisation Act, in view of the registered equitable mortgage created

in its favour, which would enable the bank to realize the dues/ debt

payable to it by Orbit. The bank contended that the advances as made

to Orbit were secured by a 'Registered Supplemental Indenture of

Mortgage' dated 17th September 2013, for the over draft facility of

Rs.30 Crores and by another Supplemental Indenture of Mortgage dated

17th June 2015 for a over draft facility of Rs.17 Crores.

11. In the notice of motions filed by the bank under Order 7 Rule

11(d) of the Code of Civil Procedure 1908, the bank contends that a

reading of the plaint demonstrates that the cause of action to implead

the bank is principally on the project being mortgaged to the bank and

the bank taking measures under Section 13(4) and 14 of the

Securitisation Act, which according to the bank are being indirectly

questioned by the plaintiffs in the suits, despite a specific remedy being

available to the plaintiffs under Section 17 of the Securitisation Act

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 ::: Pvr 9 comapl 360-17 Axis-22-10-18.odt

namely of a right to file an appeal before the Debts Recovery Tribunal

(for short DRT). It is contended that such a right is conferred on any

person who is aggrieved by any of the measures referred to in Sub-

Section (4) of Section 13, taken by a secured creditor, by making an

application to the DRT. The bank contended that it would be the

jurisdiction of the DRT to determine as to whether any of the measures

referred to in Sub-Section (4) of Section 13, taken by the secured

creditor for enforcement of securities are validly taken. The bank

contended that Section 34 of the Securitisation Act barred the

jurisdiction of Civil Court to entertain a suit and proceedings in respect

of any matter which the DRT or the Appellate Tribunal were empowered

to determine under the Securitisation Act. It was contended that also

Section 35 of the Securitisation Act provided for an overriding effect of

the Securitisation Act over other laws. The bank accordingly contended

that on a reading of the plaints, it was clear that the suits were not

maintainable against the bank, even considering the alleged case of the

plaintiffs on the so called allegations of fraud. Notice of Motions as filed

by the bank and as decided by the learned Single Judge, by the

impugned order, prayed for rejection of the plaint qua the bank.

12. The plaintiffs resisted the bank's notice of motions interalia

contending that the plaintiffs having parted substantial amounts as paid

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 ::: Pvr 10 comapl 360-17 Axis-22-10-18.odt

to Orbit for purchase of the flats in the said project, valuable rights in

the project were created in favour of the plaintiffs. The bank could not

have advanced loan to Orbit by receiving equitable mortgage of the

project property. It was contended that due diligence was not

undertaken by the bank before extending the credit facilities. It was

contended that once the rights were created by Orbit in favour of the

plaintiffs, the project assets were not available to be mortgaged to the

bank. The plaintiffs contended that the plaintiffs charge on the suit

property was a prior charge to that of the bank's charge, which was

required to be legally recognized. It was contended that there was

collusion between the officers of the bank and Orbit in creating

mortgage in respect of the project assets and thus the mortgage was bad

and illegal and not binding on the plaintiffs. It was contended that it

could not be overlooked that substantial amounts were paid by the

plaintiff to Orbit and consequently the bank cannot deal with the suit

property without due consideration to the rights created in favour of the

plaintiffs. It was thus contended that the plaintiffs were entitled to a

decree of specific performance of the agreement entered by them with

Orbit and in these circumstances the bank was a necessary party to the

suit. It was contended that the cause of action for the plaintiffs to file

the suit was not the measures taken by the Axis Bank under Section 13

of the Securitisation Act, but the plaintiffs entitlement to have specific

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 ::: Pvr 11 comapl 360-17 Axis-22-10-18.odt

performance of the agreement against Orbit and for which the bank was

a necessary party, as it would be required to confirm the transfer of the

said flats in favour of the plaintiffs. It was also contended that the

plaintiffs were protected under the provisions of The Maharashtra

Ownership Flats (Regulation of the promotion of construction, sale,

management and transfer) Act, 1963 (for short "the MOFA"). Referring

to the provisions of Section 4, 4A, 5 and 9 of the MOFA Act, it was

contended that by virtue of these provisions protection is granted to the

purchasers of the flats being constructed for the plaintiffs. In view of

these provisions the bank cannot claim any higher rights than that of the

flat purchasers.

13. Considering the rival pleas the learned Single Judge by the

impugned order rejected the bank's notice of motions interalia holding

that there were sufficient averments in the plaint of collusion between

the officers of bank and Orbit, which supports a case of fraud as pleaded

by the plaintiff and falling within the exception as culled out in the

decision of the Supreme Court in Maradia Chemicals warranting trial. It

is held that under the provisions of MOFA the bank was under an

obligation to undertake due deligence and the issues as falling under

MOFA cannot fall with the jurisdiction of the DRT.

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 :::

Pvr 12 comapl 360-17 Axis-22-10-18.odt

Submissions on behalf of the Bank/Appellants

14. Mr.Rafiq A.Dada, Mr.Tulzapurkar, Mr.Dhakephalkar, learned

Senior Counsel, and Mr.Tamboli have represented the bank in these

appeals.

Submissions in Appeal no.360 of 2017

15. Mr.Rafiq Dada, learned Senior Counsel appearing for the Bank

in Appeal no.360 of 2017 contended that the plaint in its entirety is

liable to be rejected against the bank, in view of the specific bar created

by Section 34 of Securitisation Act, and a remedy being available to an

aggrieved person/ plaintiffs, against the bank under Section 17 of the

Securitisation Act. Referring to the decisions of the Supreme Court in

Mardia Chemicals Ltd. & Ors. Vs. Union of India & Ors.1 and Jagdish

Singh versus Heeralal & Ors.2 it is submitted that law in regard to the

jurisdiction of the DRT and the bar to the jurisdiction of the Civil Court

as created by Section 34 of the Securitization Act is well settled in these

decisions. It is submitted that in view of the mortgage of the project as

created by Orbit in favour of the bank, the bank has superior rights, and

if the plaintiffs contend that they have higher rights over the bank, then

as a requirement of law, it was necessary for the plaintiffs to invoke the

jurisdiction of the DRT under Section 17 of the Securitisation Act. It is

then contended that the plaint is required to be read in its entirety as 1 (2004)4 SCC 311

2 (2014) 1 SCC 479

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 ::: Pvr 13 comapl 360-17 Axis-22-10-18.odt

framed against the bank and on such reading of the plaint it is clearly

revealed that the suit directly concerns the security rights of the bank

qua the project and the measures which are adopted by the bank under

the Securitization Act. It is submitted that entertaining such a suit

against the bank, would be defeating the legislative intent of a remedy

which being provided by Section 17 of the Securitisation Act. It is

submitted that by clever drafting of the plaint the bar as created under

section 34 of the Securitization Act cannot be defeated. It is submitted

that the plaintiff's contention that a case of fraud has been alleged in the

plaint against the bank is untenable as according to the bank, a plain

reading of the averments relating to fraud as made in the plaint, can by

no stretch of imagination and even remotely can be accepted and

understood as a case of fraud played by the bank, as per the

requirement of the provisions of Order VI Rule 4 of the CPC. It is

submitted that also there is no plea of fraud with regard to the creating

of security interest in banks favour. It is submitted that the bare plea,

that bank is hand-in-glove with Orbit, is not sufficient to maintain the

suit against the Bank. On merits it is contended that an unregistered

MOU as entered by Orbit with the plaintiffs to purchase the flat would

not create any right of the plaintiff in the project so as to affect the

security interest of the bank. In any case, even going by the MOU once

the plaintiffs have concurred in the MOU and acknowledged the

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 ::: Pvr 14 comapl 360-17 Axis-22-10-18.odt

mortgage as made in favour of the Axis Bank, it cannot be said that any

fraud is played by the bank, so as to carve out an exception for

maintaining a civil suit on the Mardia principle and overcome the bar

created by Section 34 of the Securitisation Act. Referring to the prayers

in the plaint, it is pointed out that there is no prayer in the alternative

against the bank and the averments which are made against the bank in

the plaint are not in aid of any relief. It is submitted that there is no

claim for damages which is made against the bank and the only prayer

for damages is against Orbit. It is submitted that in any case the legality

of the mortgage in favour of the Axis bank cannot be decided by the civil

court and it is only the Debt Recovery Tribunal which can decide such

issue and this position is accepted by the learned Single Judge as

observed in paragraph 13 of the impugned order. It is submitted that the

adjudication on priority of the rights of the parties in the mortgaged

property, can only be subject matter of adjudication before the DRT and

if the plaintiffs succeed to establish that their rights are prior to that of

the bank, only in that case the sale can be confirmed in favour of the

plaintiffs. It is next submitted that the adjudicating machinery created

under the Securitisation Act is the only remedy provided by law for

determination of all the issues qua the rights of the bank in regard to the

advances made. In the statutory scheme the bank cannot be dragged

into a prolonged litigation before the civil court, frustrating its rights on

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 ::: Pvr 15 comapl 360-17 Axis-22-10-18.odt

the secured assets thereby causing a serious prejudice to the financial

interest of the bank and the security rights created in the said assets in

favour of the bank by the borrowers under registered. It is for these

reasons that the provisions of Section 17 of Securitisation Act confers a

right "in any person" to approach the DRT. Even the argument of due

diligence not being complied by the bank, is misconceived, as there is no

claim for damages against the bank. It is submitted that as there is no

registered agreement entered into between the plaintiffs and Orbit as

per the requirement of Sections 4 and 9 of the MOFA. Thus, MOFA was

clearly not applicable. The protection under Section 9 of the MOFA

would be available only when there is an agreement between the parties

and the agreement is registered. It is submitted that in the present case

the MOU was executed on a stamp paper of Rs.100/- and the said

agreement is neither registered nor stamp duty has been paid. It is next

submitted that as clear from the recitals of the MOU, the plaintiffs were

aware that the project is mortgaged by Orbit in favour of the Bank,

however, despite such awareness, no steps whatsoever were taken by

the plaintiff to register the flat purchase agreement between the plaintiff

and Orbit. The validity of the mortgage is also not questioned in the

plaint, and thus, the plain consequence of Sections 4 and 9 of the MOFA

cannot be avoided, in the absence of a registered agreement. Section 9

of the MOFA cannot be pressed into service in vacuum and without any

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 ::: Pvr 16 comapl 360-17 Axis-22-10-18.odt

sequitur. In support of his submission, Mr.Dada has placed reliance on

the decision of Madras High Court in Arasa Kumar & Anr. Vs.

Nallammal & Ors.3; (ii) the decision of the Supreme Court in Hansa V.

Gandhi Vs. Deep Shankar Roy & Ors. 4; (iii) the decision of the Division

Bench of this Court in State Bank of India Vs. Jigishaben B.Sanghavi

& Ors.5; (iv) the decision of the Supreme Court in the case Mardia

Chemicals Ltd. & Ors. Vs. Union of India & Ors.(supra)

Submissions in Appeal No.362 of 2017

16 Mr.Tulzapurkar, learned Senior Counsel for the bank in

Appeal No.362 of 2017 has made the following submissions:

(I) The plaint is clearly barred by the provisions of section 34 of

the Securitisation Act. The plaintiffs have no case to sustain the plaint

against the bank. It is difficult to believe that the plaintiffs are bonafide

flat purchasers as for years together the plaintiffs never demanded an

agreement from Orbit though extraordinary/substantial money of about

9 crores is claimed to have been parted for the purported purchase of

the flats. Referring to the amended plaint in Suit No. 8 of 2017 by

insertion of Rider No.4 (Page 115 of the paper-book), it is submitted

that the bank is casually roped in as a defendant.

(II) On the issue of fraud our attention is drawn to the averments

3 2004(4)CTC 261 4 (2013)12 SCC 776 5 2011(3) BCR 187

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 ::: Pvr 17 comapl 360-17 Axis-22-10-18.odt

as contained in paragraphs 24(a) to (c) at page 105 of the paper-book

which are the averments on amendment. It is submitted that the only

averment of a fraud is to be found in paragraph 24(b) and there is no

other averment. Paragraph 24(b) reads thus:-

"24(b) The Defendant No.15 further knew that the land and the building is required to be conveyed free of encumbrances to the body of flat purchasers. Thus the mortgage and the loan obviously appears to be fraudulently and in collusion and in connivance between Defendant No.1 and Defendant No.15."

(III) It is submitted that the bank at all times has acted fairly , the

mortgage as created in favour of the bank at material times was

disclosed, as clear from the contents of the MOU/ agreement entered by

Orbit with some other purchasers. Reference in this regard is made to an

agreement dated 31 July 2014 entered by Orbit with Mr. Bhaderesh

Mehta and Mrs. Heena Mehta, whereas in the case of the present

plaintiff, there was no agreement sought by the plaintiffs from the

builder much less any agreement as per the requirement of law/MOFA,

requiring registration and payment of stamp duty. It is submitted that

there is not a single letter from the plaintiff demanding an agreement

from Orbit, which according to the learned Senior Counsel is very

peculiar and would speak volumes in regard to the genuineness of the

purported flat purchase transaction between the plaintiffs and the Orbit.

It is submitted that a plain reading of the plaint would, in fact, creates

an impression that the amount which was paid by the plaintiffs to Orbit

was not in respect of the transaction for purchase of flats but was a

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 ::: Pvr 18 comapl 360-17 Axis-22-10-18.odt

money lending transaction. It is submitted that the suit was instituted on

17 December 2016. It is submitted that the first payment is stated to be

made by the plaintiffs in the year 2009 and thus for a period of eight

years the plaintiff did not ask for an agreement from Orbit. By referring

to page 129 being an annexure to the plaint, by which the plaintiff

shows the details of the payments made of an amount of

Rs.1,76,00,000/- the dates being 16 April 2009, 28 April 2009, 16 May

2009 and 16 May 2009, it is submitted that no receipts were issued by

Orbit or taken by the plaintiff immediately. This clearly shows that this

is not a conduct of a bonafide purchaser. No bonafide purchaser would

wait for a receipt to be given at the sweet will of a developer. It is

submitted that the allotment letter also appeared to be anti-dated and

the same was procured later, this for the reason that payments did not

tally with the allotment letter. It is submitted that though the allotment

letter records that an agreement would be entered within six months,

however, no such agreement was executed. These were clear traits of a

financial transaction of loan being advanced to Orbit by the plaintiff and

the deal was far from a bonafide transaction for purchase of flat. It is

further submitted considered from this background this is a clear case of

clever drafting of the plaint whereby a plaint which otherwise is barred

by law against the bank is being impressed to be valid and that too by

subsequently incorporating amendments by making averments of fraud

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 ::: Pvr 19 comapl 360-17 Axis-22-10-18.odt

against the bank. A reference in this regard is made to prayer clause (a)

as amended. Learned senior counsel referring to the provisions of the

MOFA, contends that in the facts of the case, the provisions of MOFA are

wholly inapplicable to the bank and there is no obligation on the bank

towards the plaintiffs under any of the provisions of MOFA. It is thus

submitted that prayer clause (a) of the plaint which interalia prays for a

decree that Orbit and the bank shall jointly and severally be ordered to

comply with all the obligations under the MOFA is per se not

maintainable. In this regard our attention is also drawn to Section 4 of

the MOFA which while giving an overriding effect over the provisions of

any other law interalia postulates that a promoter who intends to

construct or constructs a block or building of flats, shall, before he

accepts any sum of money as advance payment or deposit, enter into a

written agreement for sale with each of such persons who are to take or

have taken, such flats, the agreement to be registered under the

Registration Act,1908 and to be in the prescribed form. It is contended

that when the mandate of the provision requires that a written

agreement should be entered into and registered on receiving not more

than 20% of the sale price of the consideration, and when in the

present case no such agreement being entered by Orbit and more

particularly after eight long years the suit being filed, takes the matter

beyond a pale of doubt, that it is not an agreement for purchase of a

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 ::: Pvr 20 comapl 360-17 Axis-22-10-18.odt

flat. The provisions of MOFA thus can never be invoked by the plaintiff

is the contention on behalf of the bank. Further referring to Section 9 of

the MOFA it is contended that this provision is specific which provides

that no promoter after he executes an agreement to sell any flat,

"mortgage or create a charge on the flat or the land", without the previous

consent of the persons who take or agree to take the flats, and if any

such mortgage or charge is made or created without such previous

consent 'after the agreement referred to in Section 4 is registered', it shall

not affect the right and interest of such persons. It is thus contended

that in the absence of a registered agreement between Orbit and the

plaintiffs, the plaintiffs cannot claim a protection of section 9 of the

MOFA. It is submitted that bank has meticulously followed the law,

there is no illegality which can be found in the loan granted by the bank

to Orbit and the measures as available to the bank under the

Securitisation Act being resorted on default in repayment of the

advances by Orbit. It is contended that in the fact situation, the rights of

the plaintiff in any case cannot be subservient to the rights of the bank

as the bank has followed the law by advancing the loan under a valid

mortgage agreement entered with Orbit. It is submitted that in any case

the plaintiffs would not succeed in getting any relief unless the

mortgage as entered by the bank with Orbit is declared to be

unenforceable, for which the only forum to assail any rights preventing

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 ::: Pvr 21 comapl 360-17 Axis-22-10-18.odt

the bank from resorting to the measures under Securitisation Act was to

approach the DRT under Section 17 of the Securitisation Act. The DRT

is not precluded from considering the arguments of the plaintiffs under

MOFA, while considering whether the measures as adopted by the bank

under Section 13 of the Securitisation Act, could be resorted or not. A

reference is made to Section 5(b), (c), 5A and Section 6 of the Banking

Regulation Act,1949 to submit that these provisions are clearly

indicative of the kind of business the bank can undertake. It is submitted

that as regards the maintainability of the appeal, the decision in

Wander Ltd. And Anr. vs Antox India P. Ltd.6 as referred on behalf of

the plaintiffs, is not applicable in the facts of the present case as there

can be no question, of a possible or a plausible view of the court, in

passing an order on an application under Order 7 Rule 11 (d) of the

CPC. It is then contended that ouster of jurisdiction has to be strictly

construed. It is next contended that the contention of the plaintiffs that

Section 55(6)(b) of the Transfer of Property Act is applicable cannot be

accepted as the said provision is only applicable for refund of the

money. It is submitted that there is no money claim made against the

bank. In support of his submissions Mr. Tulzapurkar learned senior

counsel for the bank has placed reliance on the following decisions:- (i)

Punjab National Bank Vs. J.Samsath Beevi 7; (ii) T.Arivandandam Vs.

61990 (supp) SCC 727

7 2010(3) CTC 310

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 ::: Pvr 22 comapl 360-17 Axis-22-10-18.odt

T.V.Satyapal8; (iii) Begum Sabiha Sultan Vs. Nawab Mohd. Mansur

Ali Khan9; (iv) Ranganayakamma & Anr. Vs. K.S.Prakash(Dead) By

LRS & ors.10; (v)Authorised Officer, Kotak Mahindra Bank Ltd, Pune. Vs. M/s.Brahmo ConstructionPvt.Ltd., Pune11; (vi) K.S.Dhondy Vs.

Her Majesty The Queen of Netherlands 12; (vii) Church of Christ

Charitable Trust & Educational Charitable Society vs. Ponniamman

Educational Trust13; (viii) Hiralal Parbhudas Vs. Ganesh Trading Co.

& Ors.14; (ix) National Chemicals and Colour Co. & Ors. VS. Reckitt

and Colman of India Ltd. & Anr.15

Submissions in Appeal No.361 of 2017

17. Mr.Dhakephalkar, learned Senior Counsel appearing for the

bank has made the following submissions:-

(I) It is submitted that Axis Bank is not a party to the agreement

entered between the plaintiffs and Orbit and only by virtue of clever

drafting a case is sought to be made out against the bank. Our attention

is drawn to prayer clause in the plaint (in Commercial Suit No.60 of

2017). It is submitted that the real prayer is to prevent the bank from

proceeding under the Securitisation Act. It is submitted that such a

relief against the bank only can be sought under Section 17 of the 8 (1977)4 SCC 467 9 (2007)4 SCC 343 10 (2008)15 SCC 673 11 2015(3) ABR 783 12 2013(4) Mh.LJ 64 13 (2012)8 SCC 706 14 AIR 1984 Bom 218 15 AIR 1991 Bom 76

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 ::: Pvr 23 comapl 360-17 Axis-22-10-18.odt

Securitisation Act by approaching DRT. It is submitted that the only

exception available to the plaintiff to bring a civil suit against the bank is

only when a clear case of fraud is made out against the bank as per the

Mardia principle. Our attention is drawn to paragraphs 23 and 28 to

contend that the averments as contained in these paragraphs is the only

case of fraud which is pleaded against the bank. It is submitted that a

plain reading of these averments can never be accepted to be a case of

a fraud as played by the bank in advancing loan. The plaintiffs by

merely saying that no public notice was given by the bank before

advancing of loan facilities, cannot amount to a fraud by the bank. Our

attention is drawn to the prayer clause in the plaint in Suit no.60 of

2017 and more particularly to prayer clause (c)(iii) which is a relief that

the plaintiffs have the first charge in respect of the suit property, it is

submitted that this only prayer, as made against the bank, clearly falls

within the jurisdiction of DRT under Section 17 of Securitisation Act.

Submissions in Appeal Nos.171 of 2017 and 172 of 2017

18. Mr.Tamboli, learned Counsel for the appellant/Axis Bank in

Appeal Nos.171 of 2017 and 172 of 2017 would submit that the case of

the plaintiffs against the bank is completely on apprehension and

presumption. It is submitted that the due diligence cannot be measured

in the manner suggested by the plaintiffs. It is submitted that the

averments in regard to the fraud as made in the plaint is only a piece of

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 ::: Pvr 24 comapl 360-17 Axis-22-10-18.odt

clever drafting to bring the suit within the jurisdiction of this Court,

when the suit against the bank is barred by Section 34 of the

Securitisation Act. It is submitted that there is no obligation in any law

for the bank to have due diligence. In support of his submissions,

reliance is placed on the decisions in (i) Chandrakant Kantilal Jhaveri

Vs. Madhuriben Gautambhai16 and (ii)Sopan Sukhdeo Sable & ors.

Vs. Assistant Charity Commissioner & ors.17

Submissions on behalf of the Plaintiff

19. On behalf of the plaintiff, we have heard Mr. Navroj Seervai,

learned senior counsel, Mr.S.N.Vaishnav and Mr.Sarosh Bharucha, who

have opposed these appeals in supporting the impugned order.

(i) It is submitted that the impugned order which is passed on an

application under Order 7 Rule (11) (d) of the Code of Civil Procedure

1908 is a discretionary order and the learned single Judge has

appropriately exercised the discretion in rejecting notices of motions,

filed by the bank. It is submitted that the appellate Court would

interfere in the impugned order only, when it would come to a

conclusion that the view taken by the learned single Judge is not a

possible, probable or a plausible view even, if it could not be an

absolutely correct view. The view taken by the learned single Judge is a

probable and a plausible view and thus the appeals, need not be

16 AIR 2011 Guj 27 17 (2004)3 SCC 137

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 ::: Pvr 25 comapl 360-17 Axis-22-10-18.odt

entertained. To support this proposition reliance is place on the decision

of the Supreme Court in the case of Wander Ltd & anr vs Antox India

P.Ltd. (supra). On merits, it is submitted that it was not necessary for

the plaintiffs to have a registered agreement as contemplated by the

provisions of MOFA Act. It is enough that there was some agreement

between the parties and that money was paid as a consideration for

purchase of flats. The plaintiffs having paid large amounts to Orbit

Corporation for purchase of flats in respect of which allotment letters

were issued and/or MOU executed, the plaintiff would nonetheless

have appropriate protection under the provisions of MOFA Act. In this

regard reliance is placed on section 4A of the MOFA and rule 10 of the

MOFA rules. It is submitted that all these issues are required to be gone

into at the trial of the suit and for adjudication of these issues bank is a

necessary party. It is contended that DRT is not a civil court and it

cannot entertain proceedings for a relief of specific performance of the

agreement against Orbit Corporation, who has entered into a collusive

mortgage with the bank, without undertaking any due diligence. The

bank is thus a necessary party to the suit. Thus, the subject matter of the

suit cannot be decided by D.R.T. under section 17 of the Securitisation

Act. It is submitted that fraud is only one of the aspects and there are

several other aspects which would be relevant when an entitlement of a

party to file a suit which is subject matter of consideration. ::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 :::

Pvr 26 comapl 360-17 Axis-22-10-18.odt

(ii) Referring to the plaint in Commercial Suit No.192 of 2017 it

is submitted that there are sufficient averments of fraud and/or

collusion made in the plaint against the bank and thus, applying the

principles of law as laid down in the decision of the Supreme Court in

Mardia Chemicals vs Union of India (supra), the plaint against the

bank is maintainable and not barred by law. Referring to the provisions

of section 13 (4) (b) of the Securitisation Act it is submitted that it

would be an obligation of the bank to complete construction of the

project and recognize the rights of the plaintiff. It is submitted that once

the flats in the project were sold to the plaintiff by issuance of

allotment letters, the said project could not have been mortgaged to the

bank by Orbit. The bank also could not have accepted such mortgage

where third party rights were already created. The bank ought to have

taken inspection of the records and accounts of Orbit which would have

clearly revealed that flats were sold to the plaintiff. A reference in this

regard is made to Rule 10 of the MOFA Rules. Thus, with all knowledge

about the sale of the flats to the plaintiffs, a collusive mortgage was

created in favour of the bank by Orbit Corporation. It is submitted that

section 9 of MOFA Act also recognizes the rights of the flat purchasers.

Attention of the Court is also drawn to section 55 (6) (b) of the Transfer

of Property Act, 1882 to submit that the plaintiffs being the flat

purchasers would have a prior charge and hence there was a

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 ::: Pvr 27 comapl 360-17 Axis-22-10-18.odt

requirement of due diligence, before loan was advanced by the bank to

Orbit Corporation. It is submitted that there is no material to accept the

submission as advanced on behalf of the bank that the plaintiffs are

mere investors and not genuine flat purchasers. Referring to section 56

(b) of the Transfer of Property Act,1882, section 8 of the MOFA Act, it

is next submitted that the plaintiffs could have approached DRT under

section 17 of the Securitisation Act only if possession of the flats was to

be with the plaintiffs and not otherwise, as section 34 of the

Securitisation Act would recognize only possessory rights. It is submitted

that contribution of the plaintiff and other flat purchasers towards

construction of the building was about Rs.83 crores of rupees and thus,

there was not only a legitimate expectation of Orbit completing the

project but also of putting the plaintiff in possession of the respective

flats which were being sold to the plaintiff. Considering all these

circumstances, the remedy of approaching the DRT was not an

appropriate remedy, and suit as filed against the bank was maintainable.

It is submitted that incidental reliefs can also be granted by a Civil Court

and thus the reliefs which are prayed are incidental to the main reliefs.

The bank would be a necessary party as and when a conveyance is

required to be executed by Orbit in case a decree for specific

performance was to be granted. It is thus, necessary that the bank is a

necessary party to the suit.

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:58 :::

Pvr 28 comapl 360-17 Axis-22-10-18.odt

20. In support of the submissions Mr. Seervai has placed reliance

on the decisions in (i) Nahar Industrial Enterprises Ltd vs Hongkong

and Sanghai Banking Corporation.18; (ii) Indian Bank vs ABS Marine

Products (P) Ltd.19; (iii) Arasa Kumar & anr vs Nallammal & ors.20;

(iv) Jagdish Singh vs Heeralal & ors. (supra); (v) Saleem Bhai & ors

vs State of Maharashtra21; (vi) Chhotanben & anr vs Kiritbhai

Jalkrushnabhai22; (vii) Bhau Ram vs Janak Singh & ors. 23; (viii)

Gopal Srinivasan vs National Spot Exchange. 24; (ix) National Spot

Exchange vs P.D.Agro25; (x) State Bank of India vs Jigishaben

Sanghavi26; (xi) Wander Ltd & anr vs Antox India P.Ltd. 27; (xii) Avitel

Post Studioz Ltd vs HSBC PI holdings28;

21. In support of the submissions Mr.Vaishnava, learned Counsel

for the plaintiffs /respondents has placed reliance on the decisions in (i)

Master Circular by Reserve Bank of India on Management of

Advances. Relevant para 8.2; (ii) Abdul Jabbar Ibrahim vs Serkop

Builders & ors29 (Sec. 5 of MOFA).(Relevant para 9) (iii)

G.Swaminathan vs Shivram Co-op Hsg.Soc & ors (Sec. 5 of MOFA. 18(2009) 8 SCC 646 19(2006) 5 SCC 72 20II (2005) BC 127 21 2002 (9) SCALE 22 2018 SCC online SC 352 23(2012) 8 SCC 701 24 2016 (4) Bom C.R.492 25 2015 SCC online Bom 6412 262011 (3) Bom.C.R.187 27 1990 (supp) SCC 727 28 2014 SCC online 929 29 1985 Mh.L.J. 163

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 29 comapl 360-17 Axis-22-10-18.odt

(Relevant para 10)30; (iv) Delhi Development Authority vs Skipper

Construction Co.P.Ltd & ors. (Sec. 55 (6) (b) of T.P.Act.Relevant para

29.)31; (iv) Popat and Kotecha Property vs SBI Staff Association 32

(O.7 R.11 (d). Relevant 14 to 22 & 25); (v) Mayar (HK) Ltd & ors vs

Owners & parties Vessel M.V.Fortune Express & ors. 33 (Relevant para

12), (vi) Kamala & ors vs K.T.Eshwara & ors. 34 (O.7 R. 11 (d)

Relevant para 21), (vii) C.Natrajan vs Ashimbai & anr 35, (viii) Roop

Lal Sathi vs Nachhattar Singh Gill 36 (O.7 R.11 (d) Only a part of plaint

cannot be rejected. Relevant para 20), (ix) Cauvery Coffee Traders,

Mangalore vs Hornor Resources (International) Co.Ltd. 37 (Estoppel.

Relevant para 33 & 34), (x) Ramesh B.Desai & ors vs Bipin Vadilal

Mehta & ors.38 (O.7 R.11 (d)and fraud.Para 15 on Order 7 R.11.Para 22

on fraud 8 to 13), (xi) Harshal Developers Pvt.Ltd Pune & anr vs

Manohar Gopal Bavdekar & anr39 (Sec.4A over rides section 4 of

MOFA. Para 8 to 13.)

22. In support of the submissions Mr.Sarosh Bharucha, learned

counsel for the respondents, has placed reliance on the decisions in

30 1983 (2) Bom CR 548 31(2000) 10 SCC 130 32(2005) 7 SCC 510 33(2006) 3 SCC 100 34(2008) 12 SCC 661 35(2007) 14 SCC 183 36(1982) 3 SCC 487 37(2011)10 SCC 420 38(2006) 5 SCC 638 39 2013 (1) Mh.L.J. 855

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 30 comapl 360-17 Axis-22-10-18.odt

Dwarka Prasad Singh & ors vs. Harikant Prasad Singh 40, Rajanala

Kusuma Kumari vs The State of Telangana 41, Ramniklal Tulsidas

Kotak vs Varsha Builders42, Kasiser Oils Pvt. Ltd. vs Allahabad

Bank43, Preamble.Maha Ownership Flats Act, 1963, Vishal N.Kalsaria

vs Bank of India44, Sejal Glass Ltd vs Navilan Merchants Pvt. Ltd.45

Discussion and Conclusion

23. We have heard learned counsel for the parties. We have

perused the record of these appeals and the impugned order.

24. We first deal with the submission as urged on behalf of the

plaintiffs that these appeals do not require interference as the impugned

order passed by the learned single judge exercising jurisdiction under

the Order 7 Rule 11 (d) is a discretionary order, and the view taken by

the learned single judge being a plausible view, the appellate court in

such a situation would not interfere, with the exercise of the discretion

by the court, and substitute its discretion. We do not agree.

25. This submission as made on behalf of the plaintiffs that the

impugned order is a discretionary order, cannot be accepted. This for

the reason that Rule 11 of Order 7 of CPC does not confer a discretion

40. (1973) SCC 179

41. 2018 SCC online Hyd 33

42. 1993 Mh.L.J. 323

43. MANU/WB/0713/2017 (High Court of Calcutta)

44. (2016) 3 SCC 762

45. Civil Appeal No.10802 of 2017

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 31 comapl 360-17 Axis-22-10-18.odt

on the court, moreover it creates an obligation on the Court to reject the

plaint if the requirements as set out in the rule are satisfied. The

provisions of Order 7 Rule 11 of CPC are mandatory. The opening words

of Rule 11 are material which say that "The plaint shall be rejected in

the following cases", this clearly indicates that it is an obligation on the

Court to reject a plaint in the event the requirement of clauses (a) to (f)

are satisfied. It also cannot be disputed that such an application would

require adjudication. Thus, when there is an adjudication by the court

in this context and if the requirements as provided in the different

clauses in the rule are satisfied, then, there is no occasion for any

discretion to be exercised by the Court and more so it is an obligation on

the Court to reject the plaint. In making these observations, we are also

supported by the following observations of the Supreme Court in Popat

and Kotecha Property Vs. State Bank of India Staff Association 46.

"23. Rule 11 of Order VII lays down an independent remedy made available to the defendant to challenge the maintainability of the suit itself, irrespective of his right to contest the same on merits. The law ostensibly does not contemplate at any stage when the objections can be raised, and also does not say in express terms about the filing of a written statement. Instead, the word 'shall' is used clearly implying thereby that it casts a duty on the Court to perform its obligations in rejecting the plaint when the same is hit by any of the infirmities provided in the four clauses of Rule 11, even without intervention of the defendant. In any event, rejection of the plaint under Rule 11 does not preclude the plaintiffs from presenting a fresh plaint in terms of Rule 13." (emphasis supplied)

26. A Division Bench of Calcutta High Court in "Allahabad Bank

46 (2005)7 SCC 510

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 32 comapl 360-17 Axis-22-10-18.odt

Vs. Shank's (Steel Fab Pvt.Ltd.& Ors.)"47 held that the provision is

mandatory and no discretion is left with the Court, as can be seen from

the following observations in paragraph 10:-

"10. Order VII Rule 11(d) authorizes a Court to reject a plaint, where the suit appears from the statements made in the plaint to be barred by any law. In order to invoke Order VII Rule 11(d) of the Code, the Court must restrict its scrutiny only to the averments made in the plaint and at that stage, it cannot take into consideration the defence of the defendant nor can it seek assistance of any evidence from the parties. If it appears from the averments made in the plaint itself that the Court cannot entertain the suit because of any bar created by law, the Court is left with no other alternative but to reject the plaint by taking recourse to Rule 11(d). In other words, at the time of invoking the jurisdiction under Order VII Rule 11(d) of the Code, the Court shall presume all statements made in the plaint to be true and even if on that basis, it appears that the suit is barred by any law for the time being in force, the plaint shall be rejected. The provision is mandatory and no discretion is left with the Court." (emphasis supplied)

27. In this context the submission as urged by the learned Senior

Counsel for the bank, that discretion is distinct from adjudication and

once there is an adjudication of such an application, there is no question

of Court exercising discretion under Order 7 Rule 11 of CPC, relying on

the observations of the Division Bench of this Court in the case "Hiralal

Parbhudas Vs. Ganesh Trading Company & Ors."(supra), is well

founded. The following observations of the Division bench in paragraph

21 of the decision would also support our conclusion:

"21. It was finally urged by Mr. Kale that the discretion exercised by the Deputy Register under Section 56 of the Act in the respondents' favour should not be lightly disturbed and the appellate Court should therefore not disturb the judgment and order of the learned single Judge. We ask ourselves. Pray where at all arises the question of discretion. To start with, the Deputy Registrar did not exercise any discretion under Section 56 in rejecting the appellants' application for

47 AIR 2008 Cal 96

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 33 comapl 360-17 Axis-22-10-18.odt

rectification. It must be remembered that the concept of discretion is distinct from that of adjudication. When the Deputy Registrar rejected the appellants' application for rectification on the ground that the two marks are not deceptively similar, she did not use any discretion but adjudicated upon the rival contentions of the parities. It would be trite to say that exercise of discretion can arise in favour of a party when adjudication by the Registrar is against that party. In the present case, the Deputy Registrar's adjudication was in fact in favour of the respondents, with the result that there was no occasion for the Deputy Registrar to exercise any discretion. If the Deputy Registrar had held that the two marks were deceptively similar (which she did not) but that in exercise of her discretion she did not consider it necessary to pass an order for rectification, it could be said that the Deputy Registrar having exercised the discretion in favour of the respondents, interference with such discretion was not called for. Nothing of the kind can be said in the present case where in fact the Deputy Registrar has held that the two marks are not deceptively similar. In any event, this court having come to the conclusion that the two marks are deceptively similar, this cannot be a case for the exercise of discretion in favour of the respondents as their case is not founded on truth and also in view of the uncontroverted evidence of actual deception perpetrated and confusion caused."

28. Similar view was taken by the Division Bench in "National

Chemicals and Colour Co. & Ors. VS. Reckitt and Colman of India

Ltd. & Anr."(supra)

29. The plaintiffs reliance on the decision in Wander Ltd. And

Anr. vs Antox India P. Ltd. (supra) to support the contention that an

order passed by the Civil Court on an application under Order 7 Rule

11(a) is a discretionary order, is not well founded. In Wander Ltd.

(supra) the issue which fell for consideration of the Court arose from an

injunction order which was reversed by the Division Bench of the High

Court. It is in this context, the Court made the observations in paragraph

14 of the judgment, that if the discretion was exercised by the trial court

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 34 comapl 360-17 Axis-22-10-18.odt

reasonably and in a judicial manner, the fact that the appellate court

would have taken different view may not justify interference with the

trial court's exercise of discretion. These observations in paragraph 14

were made by the court in the light of the principles referred by

Mr.Justice Gajendragadkar in "Printers (Mysore) Private Ltd. v.

Pothan Joseph"48 which was also a case of the Court considering

discretion to be exercised by the Court under Section 34 of the

Arbitration Act,1940 and the power to stay legal proceeding when there

was an arbitration agreement between the parties.

30. The decision of the Division Bench in "Avitel Post Studioz

Ltd. & Ors. Vs. HSBC PI Holdings (Mauritius) Ltd." (supra) which in

the facts of the case referred to the principles as laid down in Wander

Ltd. And Anr. vs Antox India P. Ltd. (supra), is also not applicable as this

was also a case where the Court was considering an injunction order

passed by the learned Single Judge, under Section 9 of the Arbitration

and Conciliation Act,1996.

31. Reliance on behalf of the plaintiffs on the decision of the

learned Single Judge of Rajasthan High Court in "Sahina w/o. Aslam

vs. Returning Officer (Panchayat) Gram Panchayat Jhiwana; District

Election Officer Alwar, Jeenat"49 is also not well founded. This decision

48 AIR 1960 SC 1156 49 2017 LawSuit (Raj) 569

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 35 comapl 360-17 Axis-22-10-18.odt

cannot be said to be an authority on the proposition that the orders

which would be passed by the Court under Order 7 Rule 11 of CPC, are

discretionary orders. In this case, the Court refused to entertain a second

application under Order 7 Rule 11 of CPC, in view of rejection of the

first application filed on the same ground. It is in that context the Court

made an observation that the learned trial Judge has exercised

discretion in rejecting the second application. There was no adjudication

on the application. Further the decision of the learned Single Judge of

this Court in "Naginchand s/o. Devichand Buccha vs. Vinod

s/o.Tarachand Gupta" is of no assistance to the plaintiffs. In this case

the learned trial Judge had held that the issue of limitation is mixed

question of law and facts and therefore, rejected an application made

under Order VII Rule 11(d). We thus find no merit in the contention as

urged on behalf of the plaintiffs that the appeals do not warrant any

interference as the impugned order passed the learned single judge is a

discretionary order taking a possible view.

32. We now proceed to examine the merits. As the issue which

falls for consideration arises under the provisions of Order 7 Rule 11 (d)

of the Code of Civil Procedure, 1908 namely as to whether the plaint

against the bank is barred by law, the same would be required to be

determined by examining the plaint in its entirety. A holistic and

meaningful reading of the plaint is what is called for and not a

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 36 comapl 360-17 Axis-22-10-18.odt

superficial or a perfunctory reading in segment or in parts, so as to find

out the real cause of action. There cannot be any compartmentalization,

dissection, segregation and inversions of the language of various

paragraphs in the plaint nor is it permissible to cull out a sentence or a

passage and to read it out of the context in isolation. The pleading needs

to be construed as it stands without addition or subtraction of words or

change of its apparent grammatical sense. No other pleading can be

taken into consideration. The law in this regard is well-settled. [See

Sopan Sukhdeo Sable & ors vs Assistant Charity Commissioner & ors.

(supra)]. The real object of Order 7 Rule 11 of the Code is to keep out of

Courts irresponsible law suits. [See Popat and Kotecha Property

(supra)]

33. It is not in dispute that the project assets have been

mortgaged by Orbit in favour of the bank. The bank as a mortgagee thus

has legal rights as conferred under section 13 of the Securitization Act to

realize its dues, on a default by Orbit and its guarantors, in repayment

of the money so advanced. The bank has already resorted to enforce

these legal rights by issuing a notice under section 13 (2) and

subsequently, taking measures under section 13(4) of the Securitization

Act. It is significant that the suits in question are principally filed seeking

specific performance of the alleged agreement to purchase flats between

the plaintiffs and Orbit, however, the suits are filed only after the bank

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 37 comapl 360-17 Axis-22-10-18.odt

adopted the measures under the Securitization Act, to realize its dues

from the mortgaged property, in which security interest was created in

the bank by Orbit. In such a situation, if rights of the bank to resort to

such measures under the Securitization Act are to be contested or some

other rights as against the bank are required to be asserted by the

plaintiffs, then the law clearly confers a jurisdiction on the D.R.T. under

section 17 of the Securitization Act. On a plain reading of the said

provision it is clear that 'any person' can invoke the remedy under

section 17 of the Act. It is not in dispute that the bank is impleaded and

brought into picture only due to the mortgage of the project assets in its

favour by Orbit and for no other reason. The plaintiffs have no direct

legal connection of any nature or privity with the bank.

34. In Mardia (supra), the Supreme Court considering the rights

of the secured creditors under section 13 (4) and the implications of the

provisions of section 34 of the Securitization Act, held that to a very

limited extent, the jurisdiction of the civil Court can be invoked, where

for example the action of the secured creditor is alleged to be fraudulent

or his claim may be so absurd and untenable, which may not require any

probe whatsoever or to say precisely to the extent the scope is

permissible to bring an action in the civil court in the cases of English

mortgages. It would be apposite to note the observations of the

Supreme Court in paragraphs 50 and 51 of the decision which read

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 38 comapl 360-17 Axis-22-10-18.odt

thus :

"50. It has also been submitted that an appeal is entertainable before the Debts Recovery Tribunal only after such measures as provided in sub-section (4) of section 13 are taken and section 34 bars to entertain any proceeding in respect of a matter which the Debts Recovery Tribunal or the Appellate Tribunal is empowered to determine. Thus, before any action or measure is taken under sub-section (4) of section 13, it is submitted by Shri.Salve, one of the counsel for the respondents that there would be no bar to approach the civil court. Therefore. it cannot be said that no remedy is available to the borrowers. We however, find that this contention as advanced by Shri Salve is not correct. A full reading of section 34 shows that the jurisdiction of the civil court is barred in respect of matters which a Debt Recovery Tribunal or an appellate Tribunal is empowered to determine in respect of any action taken "or to be taken in pursuance of any power conferred under this Act.". That is to say the prohibition covers even matters which can be taken cognizance of by the Debts Recovery Tribunal though no measure in that direction has so far been taken under sub-section (4) of section 13. It is further to be noted that the bar of jurisdiction is in respect of a proceeding which matter may be taken to a tribunal. Therefore, any matter in respect of which an action may be taken even later on, the civil court shall have no jurisdiction to entertain any proceeding thereof. The bar of civil court thus applies to all such matters which may be taken cognizance of by the Debts Recovery Tribunal, apart from those matters in which measures have already been taken under sub-section (4) of section 13."

"51. However, to a very limited extent jurisdiction of the civil court can also be invoked, where for example the action of the secured creditor is alleged to be fraudulent or his claim may be so absurd and un-tenable which may not require any probe whatsoever or to say precisely to the extent the scope is permissible to bring an action in the civil court in the cases of English mortgages. We find such a scope having been recognized in the two decisions of the Madras High Court which have been relied upon heavily by the learned Attorney General as well appearing for the Union of India namely, V.Narasimhachariar, AIR at pp 141 and 144, a judgment of the learned single Judge where it is observed as follows in para 22 (AIR p.143)

"22. The remedies of a mortgagor against the mortgagee who is acting in violation of the rights, duties and obligations are two-fold in character. The mortgagor can come to the court before sale with an injunction for staying the sale if there are materials to show that the power of sale is being exercised in a fraudulent or improper manner contrary to the terms of the mortgage. But the pleadings in an action for restraining a sale by a mortgagee must clearly disclose a fraud or irregularity on the basis of which relief is sought. 'Adams vs Scott: (1859) 7 WR 213.249. I need not point out that this restraint on the exercise of the power of sale will be exercised by courts only under the limited circumstances mentioned

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 39 comapl 360-17 Axis-22-10-18.odt

above because otherwise to grant such an injunction would be to cancel one of the clauses of the deed to which both the parties had agreed and annul one of the chief securities on which persons advancing moneys on mortgages rely. (See Ghose Rashbehary: Law of Mortgages Vol II 4th Edn p.784.)" (emphasis supplied)

35. On the above backdrop, and having noted that the suits are

filed only after the bank has resorted to recover its dues from Orbit by

taking recourse to the provisions of Section 13(2) and 13(4) of the

Securitisation Act, it would be necessary to examine from the reading of

the plaints, in each of the five suits, so as to ascertain whether the plaint

is barred against the bank under the provisions of section 34 of the

Securitisation Act. In so doing we would examine as to what in reality is

the cause of action pleaded against the bank and as to what is the nature

of the averments of 'a fraud' as made against the bank in the plaint and

the acceptability of these averments when tested on the anvil of the

provisions of Order VI Rule 4 of the CPC.

I. Commercial Appeal No.360 of 2017 arising from Suit No.62 of 2017 (Madhav Prasad Agarwal & anr vs Axis Bank Ltd)

36. We set out the facts in some detail as the other plaints have

somewhat similar factual matrix.

37. This appeal arises from the impugned order to the extent it

deals with the plaintiff's case in Suit No.62 of 2017. The plaintiffs in

this suit are one Madhav Prasad Aggarwal and Mrs.Sushma Madhav

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 40 comapl 360-17 Axis-22-10-18.odt

Aggarwal. Orbit is defendant no 1 and the bank is defendant no.2.

The case of the plaintiff is that in the year 2009 the plaintiffs were

looking out for suitable luxurious spacious accommodation in the

vicinity of Nepean Sea Road. Having received knowledge that Orbit has

launched a project namely 'Orbit Heaven' at Nepean Sea Road, the

plaintiffs approached the directors of Orbit. The plaintiffs exhibited

their interest to purchase a duplex apartment on the 16th and 17th floor

consisting of five bedrooms of an area approximately of 7608 sq.ft. and

carpet area of 4169 sq.ft. and a terrace area of approximately 2487 sq.ft.

alongwith six car parking spaces at total price of Rs.38.25 crores, and

agreed to purchase from Orbit this duplex flat. In pursuance of the

concluded negotiations between the plaintiffs and Orbit, an amount of

Rs.21,03,75,000/- was paid by the plaintiffs to Orbit towards part

consideration of the purchase price. This payment was acknowledged by

issuance of a receipt by Orbit. The amounts were paid by cheques

between 3 August 2009 to 25 June 2010. A letter of allotment dated 26

June 2010 was issued for sale of the said flat. The allotment letter

recorded that the plaintiffs have agreed to pay Orbit, the balance price

as per the agreement for sale 'to be executed'. Thereafter, Orbit by its

letter dated 23 December 2010 demanded from the plaintiffs an amount

of Rs.1,91,25,000/-. The said amount was paid by the plaintiffs to

Orbit. On 25 February 2011 a further amount of Rs.1,91,25,000/- was

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 41 comapl 360-17 Axis-22-10-18.odt

paid as demanded by Orbit. An amount of Rs.9,84,938/- was also paid

as service tax on 20 July 2011.

In or about 2013 the plaintiffs were informed by Orbit that it

had obtained loan from Axis Bank and that there was term loan

agreement dated 21 January 2013, an indenture dated 20 February

2013 under which the project property was mortgaged to the bank.

However, Orbit assured the plaintiffs that the rights of the plaintiffs in

the suit project shall not be diluted in any manner. It "appeared" to the

plaintiffs that Orbit had informed the bank about allotment of the said

premises to the plaintiffs. By letter dated 17 July 2013 the bank gave its

no objection to the sale of the suit premises to the plaintiffs. However,

it appears that through inadvertence the name of the first plaintiff was

only mentioned as a purchaser of the duplex flat. As there was mis-

description of the flat in the said letter, the plaintiffs approached Orbit

for rectification. A memorandum of understanding dated 20 August

2014 was executed between Orbit and the plaintiffs inter alia confirming

the said allotment letter dated 26 June 2010. The bank is not a party

to the said MOU, also the said document is not a registered document

and is not adequately stamped as per requirement of law.

38. The plaintiff has stated that on 13 September 2016 the bank

issued a public notice in the Economic Times recording that the said

project (Orbit Heaven) is mortgaged to the Bank and informing that any

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 42 comapl 360-17 Axis-22-10-18.odt

person dealing with the said property without the consent of the bank

shall, do so, on its own risk and any such dealing shall not in any

manner alter/affect the rights of the mortgagee bank over the said

property. The plaintiffs by their letter dated 19 September 2016 replied

to the said notice and recorded the facts, of the sale of one of the flats

to the plaintiffs and payments made to Orbit in that regard. The bank

replied by its letter dated 4 October 2016 interalia stating that the letter

of allotment cannot be considered as sufficient document of any

ownership right over the mortgaged property. The plaintiffs thereafter

noticed that on 7 November 2016 a possession notice was affixed on the

project site interalia announcing that the bank had taken possession of

the said project under Section 13(4) of the Securitisation.

39. On the assertion that the said flat was sold to the plaintiffs by

Orbit and accordingly rights are created in favour of the plaintiffs, the

suit in question was filed interalia contending that the Orbit had agreed

to sell the premises under the provisions of MOFA, and the actions of

Orbit and the bank were contrary to the provisions of MOFA. The

plaintiffs contended that Orbit ought to have mortgaged the said

property only after prior consent of the plaintiffs and that due diligence

ought to have been carried out by the bank to ascertain the rights of the

plaintiffs. The only averments as made in the plaint against the bank

(defendant no.2) can be found in paragraphs 16, 23 and 28 of the plaint

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 43 comapl 360-17 Axis-22-10-18.odt

which read thus:-

16. The plaintiffs state that the defendant no.2 issued a public notice in the Economic times dated 13th September 2016 whereby the defendant no.2 informed the public that the residential project named Orbit Haven formerly known as Avasi House has been mortgaged with the defendant no.2 and that any person dealing with the said property without the consent of the 2nd defendant shall be doing so at their sole risk and that such dealing shall not in any manner affect the rights of the 2nd defendant over the said property. Hereto annexed and marked Exhibit L is a copy of the said public notice."

"23. Without prejudice to the aforesaid the Plaintiffs state that at the request of the Defendant No.1, the Defendant no.2 has already granted it's no objection for sale of the said premises in favour of the 1st Plaintiff. The Defendant No.2 cannot now back out from its commitment for the reasons alleged in the said letter dated 4 th October,2016 or otherwise. In any event the Plaintiffs submit that the mortgage created in favour of 2nd Defendant, is subject to the Plaintiffs' rights in the said premises. The Plaintiffs state that the Defendant No.2 has advanced the loan and have taken the said property as charge with the knowledge of the Plaintiffs rights in the said premises. [It is obvious that prior to advancing loan of such a huge amount the Defendant No.2 ought to have carried out due diligence and ought to have ascertained the rights of the 1 st Defendant and ought to have accepted the liability of the 1 st Defendant for allotment of the said premises to the Plaintiffs.] Even the 2 Defendant did not invite claims and objections of nd

the public by publishing public notice before granting loan for such a huge amount.

.....

28. The Plaintiffs submit that the Defendant No.1 and Defendant No.2 are hands in gloves and they have in connivance and in conspiracy with each other attempted to deprive the Plaintiffs from their valuable rights in the said premises." (emphasis supplied)

40. On the above backdrop, the plaintiffs have prayed in the suit

for relief of a declaration that there is valid and subsisting agreement for

sale of the flats in favour of the plaintiffs and a further prayer for

specific performance of the agreement and in the event the relief of

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 44 comapl 360-17 Axis-22-10-18.odt

specific performance cannot be granted, then, for a money decree and

damages. The only relief as prayed against the bank can be found in

prayer clause (b) namely that in case, the prayer for specific

performance is allowed, the bank be directed to confirm the sale of the

suit premises in favour of the plaintiffs. Prayer clause (b) reads thus:-

"(b) That the Defendant No.1 may be ordered and directed to specifically perform the said Agreement and to do all such acts, deeds, things and matters and such other matters as per the Plaintiffs' Agreement and sign, execute and register the Agreement for sale in respect of suit duplex flat described in Exhibit "A" hereto as required under the provision of Maharashtra Ownership Flat Act and to execute documents, papers, letters, writings, affidavits and undertakings etc. as may be necessary to and in favour of the Plaintiffs and the Defendant No.2 may be directed to confirm the sale of the said premises to the Plaintiffs and the Defendant No.1 may be directed to hand over quiet, vacant and peaceful possession of the said premises to the Plaintiffs within the time that may be fixed by this Hon'ble Court and to do all such other acts, deeds, and things as may be necessary for the specific performance of the Plaintiffs' Agreement."

II. Commercial Appeal No.361 of 2017 arising out of Suit No.60 of 2017 (Mrs.Manisha Saraf vs M/s Orbit Corporation & anr)

41. This appeal arises from the impugned order dealing with the

plaintiff's case in suit no.60 of 2017. The plaintiff is Mrs.Manisha Saraf.

M/s. Orbit Corporation is defendant no.1 and the bank is defendant

no.2. The plaintiff in this case is similarly situated like the plaintiffs in

the above suit. The plaintiff approached Orbit and its directors intending

to purchase duplex flats on the 28th and 29th floors of the said project

consisting of a living room, five bed rooms and a attached terrace

aggregating 7,555 sq.ft saleable area, comprising 4,168 carpet area and

a terrace area of 2481 sq ft alongwith five car parking spaces, for an

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 45 comapl 360-17 Axis-22-10-18.odt

aggregate sum of Rs.24 crores. In token of purchase of said duplex flats,

the plaintiff paid Rs.2,70,00,000/- by cheque dated 25.7.2009 which

issued by the plaintiff's husband. A Memorandum of Understanding

(MOU) dated 28.9.2009 was executed between Orbit, the plaintiff and

her husband Sanjay Saraf, as flat purchasers. On a oral demand by

Orbit, the plaintiff's husband made payment of an aggregate sum of

Rs.14,65,00,000/- which was equivalent to 61% of the total

consideration. Thereafter by a gift/declaration-cum-confirmation dated

3.11.2014 the plaintiff's husband gifted his interest in favour of the

plaintiff. A copy of the same is not annexed to the plaint. The other

contents and averments of the plaint are quite similar to those as made

in the plaint in other suit of Mr.Madhav Agarwal, which we have in

extenso referred above. In regard to the bank (defendant no.2), the

limited averments can be found in paragraph 22, 23 and 28 of the plaint

which read thus:

"22. The plaintiff submits that neither the defendant no.1 nor the defendant no.2 informed about creation of the mortgage. The plaintiff came to know about the same only on publication of the public notice in the Economic Times published dated 13 th September 2016. The defendant no.1 demanded payment of sum of Rs.1,00,00,000/- on or about in March 2014 and at that time also the defendant no.1 kept the plaintiff in dark about the creation of the mortgage in favour of the 2nd defendant. Even thereafter also the defendant no.1 demanded from the plaintiff further part payment towards the said purchase price and accordingly the plaintiff paid an aggregate sum of Rs.25,00,000/- in the month of September 2014 to the defendant no.1. The plaintiff states that the defendant no.1 has violated rules and regulations of the Maharashtra Ownership Flats Act. The 1st defendant being promoter ought not to have mortgaged the said project without written consent of the plaintiff."

23. The plaintiff submits that the mortgage created in favour of 2 nd

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 46 comapl 360-17 Axis-22-10-18.odt

defendant is subject to the plaintiff's rights in the said premises. The plaintiff states that the defendant no.2 has advanced the loan and has taken the said property as charge with the knowledge of the plaintiff's rights in the said premises. It is obvious that prior to advancing loan of such a huge amount the defendant no.2 ought to have carried out due diligence and ought to have ascertained the rights of the 1 st defendant and ought to have accepted the liability of the 1 st defendant for allotment of the said premises to the plaintiff. Even the 2 nd defendant did not invite claims and objections of the public by publishing public notice before granting loan for such a huge amount."

28. The plaintiff submits that the defendant no. 1 and defendant no.2 are hand in glove and they have in connivance and in conspiracy with each other attempted to deprive the plaintiff from her valuable rights in the said premises."

42. Although the plaint contains no specific prayers against the

bank, however, learned counsel for the plaintiff has referred to prayer

clause (a) and prayer clauses (c-iii) to be relevant against the bank

(defendant no.2). These prayers read thus :

(a) this Hon'ble Court be pleased to declare by an order and decree that there is a valid and subsisting plaintiff's agreement dated 28th September 2009 for the said premises more particularly described in Exhibit A hereto and the same is binding on the defendants;

.... .....

(c-iii): It may be declared that the plaintiff is having first charge on the said premises for payment of the said sum of Rs.22,81,19,396/- together with interest on Rs.14,65,00,000/- at the rate of 9% per annum as per the particulars of claim in Exhibit I hereto and Rs.51,55,00,000/- as per the Particulars of claim in Exhibit J hereto together with interest thereon @ 24% p.a. from the date of suit till payment and/or realization as prayed in prayers (c) (i) and (ii) above and in the event of the defendant would fail and neglect to pay the said aggregate sum of Rs.74,36,19,396/- and/or interest or any part thereof within the time to be fixed by this Hon'ble Court,the said premises to the plaintiff be directed to be sold by an under decree and/or directions of this Hon'ble Court and out of the net sale proceeds thereof payment be made to the plaintiff towards the satisfaction

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 47 comapl 360-17 Axis-22-10-18.odt

of the plaintiff's claim.

III. Commercial Appeal no.362 of 2017 in Suit no.8 of 2017.(Padma Ashok Bhatt vs M/s Orbit Corporation & ors).

43. This appeal arises from the impugned order dealing with the

plaintiff's case in Suit no.8 of 2017. The plaintiff is Mrs.Padma Ashok

Bhatt. M/s Orbit Corporation is defendant no.1.Defendant nos.2 to 14

are respective flat purchasers. The bank is defendant no.15. In this case,

the plaintiff says that the plaintiff agreed to purchase flat no.2302 and

2402 at a total consideration of Rs.12,45,00,000/- and as part

consideration had made a payment of Rs.9,23,50,000/- to Orbit. The

plaintiffs' averments in relation to the information received by the

plaintiff, that the bank is taking measures under the Securitisation Act

are similar to the one pleaded in the other plaints and as noted by us in

the foregoing paragraphs. Orbit had issued allotment/confirmation letter

dated 16.11.2009 agreeing to sell the said flats to the plaintiff for a

modified consideration of Rs.17,34,00,000/- for flat no.2302 and 2402.

On 15.3.2015 an amount of Rs.3,21,00,000/- had remained due and

payable by the plaintiff to M/s Orbit Corporation. The plaint recites the

amount paid by various other defendants who are similarly situated. As

to what is the relevance in impleading other flat purchasers as

defendants is not known. The averments as made against the bank

(defendant no.15) are found in paragraph 16, 17, 18, 19, 24 (a) (b) and

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 48 comapl 360-17 Axis-22-10-18.odt

(c) and in paragraph 28 inserted by amendment which read thus :

"16. Meanwhile the plaintiff and other flat owners learnt that defendant no.15 have issued a public notice on 13 th September 2016 in Economic Times informing public at large that the project named Orbit Haven has been mortgaged. Hereto annexed and marked Exhibit F is the public notice dated 13 th September 2016. On learning the same, the flat owners by their respective letters giving the details of the allotment letter by defendant no.1 to them and the details of the payment made each of them to the defendant no.1. Hereto annexed and marked Exhibit G is the copy of letter dated 29 th September 2016 sent by plaintiff to defendant no.15.

17. On receipt of the said letter, the defendant no.15 intimated that that they would look into the matter and revert back in due course. Hereto annexed and marked Exhibit H is the copy of the said letter dated 29th September 2016 issued by defendant no.15. The defendant no.15 ultimately by their letter dated 4 th October 2016 stated that they do not recognize any such transaction as there is a mortgage created by defendant no.1 in their favour and that the allotment letter cannot be considered as a sufficient document as an evidence of ownership over the mortgaged property unless sufficient and documentary evidence such as registration of sale deed prior to mortgage date submitted to the bank. The defendant no.15 ultimately through their attorneys sent a letter dated 1 st December 2016 that they be given a notice of any suit or proceeding. Hereto annexed and marked Exhibit I is the copy of the said letter dated 1 st December 2016."

18. The plaintiff states that defendant no.15 claim to have advanced loan to the defendant no.1 around in the year 2013, which is much after the defendant no.1 agreed to sell the flats to most of the purchasers. The defendant nos.2 to 5 has booked the flats in 2010 and 2011 and have got in registered in July 2014. The defendant no.1 neither disclosed to the defendant nos. 2 to 5 nor intimated nor disclosed in the agreement about any mortgage with the defendant no.15. Even when the agreement was registered, there was no such endorsement with the office of Sub-Registrar to show that there was any such mortgage."

19. The plaintiffs has learnt that the defendant no.15 have not carried out any due diligence search while granting loan to defendant no.1. Certainly, if the due diligence search would have taken, it would show in the record of defendant no.1 that they have received substantial money from various purchasers who have booked flats in Orbit Haven. To the knowledge of the plaintiff, it seems that even public notice was issued by defendant no.15 before advancing loan to the defendant no.1. It is common to the knowledge of everybody that the moment the building construction start, people book the flat to take advantage of reduced price and save themselves from escalation in prices. It is also evident and common that an individual applies for loan from the bank though due diligence search

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 49 comapl 360-17 Axis-22-10-18.odt

is carried out by the bank whereas in the present case to the plaintiff's knowledge, no such due diligence search at all has been carried out by defendant no.15 before advancing money as is claimed by defendant no.15. In any event, the mortgage in favour of defendant no.15 is with the rights and obligations created by defendant no.1 in favour of the plaintiff which is also protected by law.

... ... ...

24. The plaintiff and Defendants no.2 to 14 have put in their hard earned money with a hope to get flats in the building Orbit Haven and at the relevant time, the flat was booked and allotted to them there was no mortgage of any nature whatsoever by Defendant No.1 and it was free from all encumbrances and the title of the flat was marketable. The Plaintiff submit that it seems that the Defendant No.1 in collusion with the officers of Defendant No.15 Bank have mortgaged the said property in spite of having no right to mortgage the same. It is also pertinent to note that the Defendant No.15 have also not carried out any due diligent search as on enquiry by the Bank with Defendant No.1 and from their records it would certainly disclose that all the flats are sold and that no flat is available to be mortgaged with the Defendant No.15. The Defendant No.15 Bank is also aware about the factum of the flats being allotted by virtue of allotment letters as is also evident from the fact that Flat No.2501 is not registered and to the knowledge of the Plaintiff, there is only a letter of allotment/booking in respect of Flat No.2501 and Defendant No.11 in their Public Notice have clearly stated that they have mortgaged the suit property except the Flat Nos.2301, 2401 and 2501. The Defendant No.15 were certainly aware about the pre- existing rights of all flat purchasers.

24(a) "The Plaintiff states that the alleged mortgage as claimed by Defendant No.15 is contrary to law and it is contrary to the provisions of Maharashtra Ownership Flats Act. The mortgage is also unenforceable in law being contrary to the provisions of Section 9 of Maharashtra Ownership Flats Act, as also several other flat purchasers including Plaintiff have paid consideration for acquisition of their respective flats in excess of 20% prior to the purported mortgage. The Defendant No.15 did not take any search of the flat purchaser's register as required to be mandatory maintained by Defendant No.1 in which names and addresses of all flat purchasers alongwith the flat numbers are required to be mentioned and also of separate Account in Bank mandatorily required to maintained for any sum received by the Defendant No.1. The Defendant No.15 knew it too well that the building to be constructed by Defendant No.1 was for sale of the flats to various members of public under the provisions of Maharashtra Ownership Flats Act. The Defendant No.15 thus cannot claim to be that they are bonafidy mortgagee of the said property.

24(b) The Defendant No.15 further knew that the land and the building is required to be conveyed free of encumbrances to the body of flat purchasers. Thus the mortgage and the loan obviously appears

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 50 comapl 360-17 Axis-22-10-18.odt

to be fraudulently and in collusion and in connivance between Defendant No.1 and Defendant no.15.

24(c) Without prejudice to the aforesaid and in alternative, it is submitted that the Defendant No.15 by claiming to be mortgagee and permitting the Defendant No.1 to develop and construct the said property subsequent thereto have assumed character of a promoter as defined under Maharashtra Ownership Flat Act and is equally bound and liable to perform all the obligations of the provisions of Maharashtra Ownership Flats Act and are accordingly bound and liable to perform delivery of possession of the respective premises free from all encumbrances and to perform all other obligation towards the flat purchasers being Plaintiff and Defendants Nos.2 to 14. The purported mortgage is even otherwise contrary to Registration Act and Stamp Act and is enforceable in law."

.... ....

28. In any event, the Defendant No.1 have issued allotment letters/booking letters and receipts from time to time when the respective flat purchasers booked their flats. The plaintiff states that all the said payment receipts show the contractual obligations upon the Defendant No.1 to complete sale of the flat and hand over vacant and peaceful possession and also to enter into Agreement as provided under MOFA. Merely because Defendant No.1 have not executed a regular Agreement with some of the flat owners and have not registered the same, would not permit them to mortgage the flats without the written consent of the flat owners as the rights were already created in favour of the plaintiff prior to the so called mortgage. The plaintiff states that there is absolute collusion between the Defendant No.1 and the officers of Defendant No.15 in allegedly mortgaging the said property. If the Defendant No.15 would have verified the records, they would certainly be able to get the details from Defendant No.1 that the flats are encumbered and that the Defendant No.1 have sold the flats to the respective flat purchasers. The Plaintiff has always been ready and willing to perform her part of contract and is still ready and willing to perform her part of contract and obligation. The plaintiff further state that the mortgage if any with Defendant No.1, cannot take away the pre- existing rights of the flat purchasers including Plaintiff protected by the provisions of law."

The prayer in the plaint as made against the bank (defendant no.15) is

prayer clause (b) which read thus :

(b) that the plaintiff is also entitled for a declaration that there is no legal, valid enforceable lien, charge or mortgage in favour of defendant no.15 in respect of the building or any part thereof known as Orbit Haven,situate at Darabshaw Lane, Napeansea Road, Mumbai-400 036.

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:34:59 ::: Pvr 51 comapl 360-17 Axis-22-10-18.odt

IV. Commercial Appeal No.171 of 2017 in Suit no.192 of 2017 (Om Project Consultants and Engineers Limited vs Orbit Corporation).

44. This appeal arises from that part of the impugned order

dealing with the plaintiff's case in suit no.192 of 2017. The plaintiff is

Om Project Consultants and Engineers Limited. Defendant no.1 is Orbit

Corporation Ltd and defendant no.2 is the bank. The case of the

plaintiff is that Mr.Ratan Jindal Director of the plaintiff is an old

acquaintance of Mr.Sujit Agarwal as also Mr.Ravi Kiran Agarwal

Promoters of Orbit Corporation. In the year 2009, the promoters had

approached Mr.Ratan Jindal informing about the said project and in

view of the long association, the plaintiff decided to purchase duplex flat

nos.3001 on the 30th and 31st floor. The premises being allotted to

Mr.Ratan Jindal consisted of five bed rooms admeasuring 7344 sq.feet

with six car parking spaces. Mr.Ratan Jindal in the year 2009-10 made

substantial payments amounting to Rs.20,75,75,000/- in respect of the

said premises being more than 65% of the total agreed consideration for

the said premises. Later on in 2014, Mr.Ratan Jindal decided to acquire

the said premises through the family owned company of the plaintiff

wherein Mr.Ratan Jindal was himself a Director. Accordingly, the

plaintiff on 30.5.2014 is stated to have paid a further amount of Rs.2

crores to Orbit for the said premises and further amount of

Rs.27,22,00,000/- was paid between the period 30.5.2014 to 14.7.2014

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:00 ::: Pvr 52 comapl 360-17 Axis-22-10-18.odt

in respect of which a "consolidated receipt" dated 9.7.2014 was issued

by Orbit. A separate receipt was issued in favour of the plaintiff for Rs.2

crores paid on 30.5.2014. Thus, the total consideration of

Rs.29,2,79,00,000/- was paid by plaintiff to Orbit which included an

amount of Rs.1,02,79,000/- as service tax and Rs.78,00,000/- as TDS.

Thereafter, a Memorandum of Understanding (MOU) dated 5.9.2014

was entered into between the plaintiff and Orbit for sale of the said flats.

Thus, almost 91% of the total consideration was paid, at which stage,

the plaintiff was informed at the time of signing of the MOU that M/s

Orbit Corporation had availed loan facility from the bank in 2013 for

mortgaging the said project including its receivables. The plaintiff has

stated that the suit premises were already allotted to Mr.Ratan Jindal

Director of the plaintiff well before creation of the mortgage in favour of

the bank. The plaintiff learnt about the bank's public notice dated

13.9.2016 of the mortgage of the suit project in favour of the bank. The

plaintiff responded to the said public notice by its letter dated 9.11.2016

inter alia recording that the suit premises were allotted to the plaintiff

well before the loan was availed by Orbit Corporation. The plaintiffs

state that the bank however did not respond to the said letter and in fact

went ahead by pasting a notice under section 13 (4) of the

Securitisation Act at the said project. The averments made in the plaint,

relevant to the bank (defendant no.2) and the alleged act of fraud,

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:00 ::: Pvr 53 comapl 360-17 Axis-22-10-18.odt

stated to be committed by the bank, are contained in paragraph

13,14,15,16, 17 and 22 of the plaint which read thus:-

"13. The plaintiff company after the perusal of the aforesaid public notice were surprised to read the contents thereof, which was completely contrary to the assurance of defendant no.1 in respect of the rights of the plaintiff company in respect of the said premises. The charge of the plaintiff company over the said premises is paramount as the said premises was allotted to Mr.Ratan Jindal in the year 2009, much before defendant o.1 had availed the loan facility from the defendant no.2.

14. The plaintiff company replied to the aforesaid public notice vide its response dated 9th November 2016 categorically stating that the said premises was allotted to the plaintiff well before the said loan was taken by defendant no.1 from defendant no.2. Copy of the response dated 5th November 2016 is exhibited with the present suit as Exhibit 'G'.

15. The defendant no.2 Bank did not pay any heed, whatsoever to the response dated 9 th November 2016 but on the contrary the defendant no.2 has now affixed a possession notice at the site of the said project inter alia stating that it has taken the symbolic possession of the said project under section 13 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Copy of the said possession notice is exhibited with the present suit as Exhibit 'H'.

16. It is a matter of common parlance and understanding that before granting any loan facility, as was granted to defendant no.1 banks of repute such as defendant no.2, conduct a detailed title search/due diligence on properties intended to be mortgaged as security for such loan, however, it is apparent that nothing of this sort had been done while the aforesaid loan had been granted to the defendant no.1 by the defendant no.2"

17. It is apprehended by the plaintiff company that certain employees of defendant no.2 bank are hand in glove with the representatives of defendant no.1 organisation and the said loan has been granted by the defendant no.2 bank for illegal and unlawful gains without any proper scrutiny or title search/due diligence."

22. No monetary compensation shall be adequate in lieu of the specific performance of the said MOU. It is further submitted that the defendant no.1 and defendant no.2 are hand in gloves and they are in connivance with each other for depriving the plaintiff from their valuable rights in the said premises."

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:00 :::

Pvr 54 comapl 360-17 Axis-22-10-18.odt

45. The substantive prayer as made against the bank (defendant

no.2) is prayer clause (c) and an interim prayer is prayer clause (f).

These prayers read thus:

"(c) the Defendant no.2 be specifically directed to confirm the sale of the said premises to Plaintiff and Defendant no.1 may be directed to hand over the vacant and peaceful possession of the suit premises to the Plaintiff within the specific timeline as defined by this Hon'ble Court and to do all such acts, deeds, things and such other matters as per the said MOU; ... ... ...

(f) that the Defendant No.1 & Defendant No.2 including its assignees, associates, servants, employees and other persons acting on its behalf be restrained by and under an order of this Hon'ble Court for taking possession of the said premises or any part thereof;"

V. Commercial Appeal No.172 of 2017 arising in Commercial Suit no.450 of 2017 (Axis Bank Limited vs Niraj Dilip Jiwrajka & ors)

46. The plaintiff is Mr.Niraj Dilip Jivrajka. Defendant no.1 is Orbit

Corporation. The bank is impleaded as defendant no.3. Defendant no.2

is another flat purchaser. Defendant nos.4 and 5 are companies in whose

favour security was created by Orbit by way of second charge on pari-

passu basis in respect of the project rights as stated in paragraph 5 of the

plaint. The case of the plaintiff is that in the beginning of the year 2010

the plaintiff agreed to purchase from Orbit a flat in the said project for a

consideration of Rs.28.60 crores. An allotment letter dated 3.3.2010 was

issued in favour of the plaintiff. Out of the total consideration, the

plaintiff had already paid an amount of Rs.15 crores as on 3.3.2010. The

plaintiff paid to Orbit the entire consideration of Rs.28,60,00,000/-

which is not disputed by Orbit. Except the allotment letter, there is no

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:00 ::: Pvr 55 comapl 360-17 Axis-22-10-18.odt

other document between the Plaintiff and Orbit. The only averments

against the bank are contained in paragraph 20 and 24 which reads

thus :

"20. In the premises, it is submitted that the plaintiff is entitled to a declaration that the allotment letter dated 3 rd March 2010 constitutes a valid, subsisting and binding contract between the plaintiff and the defendant no.1.The plaintiff is entitled to an order directing the defendant no.1 to take necessary steps so as to specifically perform its obligations under the allotment letter including but not limited to completing construction of the project and handing over possession of the suit property to the plaintiff free from all encumbrances whatsoever. The plaintiff is also entitled to an order directing the defendant nos.1 and 3 to 5 to jointly and/or severally comply with all the obligations, under the Maharashtra Ownership of Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act 1963 and the Real Estate (Regulation and Development) Act 2016 including but not limited to (i) the execution of the necessary agreement in terms thereof (ii) completing the project (iii) to deliver vacant and peaceful possession of the suit property to the plaintiff and(iv) to give clear and marketable title in respect of the suit property free from all encumbrances whatsoever. The plaintiff is also entitled to an order directing the defendant o.1 to indemnify the plaintiff in respect of all claims, charges that may be made by anybody in respect of the suit property and keep the same indemnified till registration of the necessary agreements and conveyance of land in favour of any organization/association that may be formed/constituted by the plaintiff with the other persons who have purchased flats in the project.

24. The plaintiff having purchased the suit property in the project prior to the mortgage thereof by the defendant no.1 to the defendant no.3 the question of the defendant no.3 having a first charge in respect of the suit property does not arise. It appears that the defendant no.1 has not provided the defendant on.3 with complete and accurate information in respect of the project in which the suit property is comprised which would have enabled it to carry out proper due diligence in respect of the security for the loan viz., the project at the time of advancing monies to the defendant no.1 and executing the documents in respect of the mortgage so created. If the defendant no.3 had carried out the due diligence as required, it would have discovered the fact that the plaintiff and other flat purchasers had already purchased various flats in the project. The defendant no.1 having already sold the suit property to the plaintiff was no longer the owner of the suit property, had no right, title or interest therein and therefore could not have mortgaged the same to the defendant no.3. Further the defendant no.1 also could not have further encumbered the project in favour of the defendant nos.4 and 5.The plaintiff submits that the defendant no.1 would have surely disclosed the allotment letter executed between the plaintiff and defendant no.1 to the defendant no.3. The plaintiff submits that the defendant no.3 has

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:00 ::: Pvr 56 comapl 360-17 Axis-22-10-18.odt

therefore not acted in a prudent manner having express notice of the allotment letter. The defendant no.3 ought not to be permitted to take advantage of its own lack of due diligence. Without prejudice to the aforesaid in the event of the defendant no.1 not having disclosed the allotment letter to the defendant no.3 then and in such event the defendant no.1 cannot now take advantage of its own wrongdoing. Viewed from any angle the defendant no.1 is legally bound to complete the transactions of sale and specific performance of the allotment letter in favour of the plaintiff."

47. The only prayer against the bank (defendant no.3) is prayer

clause (c) which reads thus:

"(c.) that the defendant nos.1 and 3 to 5 be jointly and/or severally ordered and directed by this Hon'ble Court to comply with all the obligations, under the Maharashtra Ownership of Flats (Regulations of the Promotion of Construction, Sale, Management and Transfer) Act 1963 and the Real Estate (Regulation and Development) Act 2016including but not limited to (i) the execution of the necessary agreement in terms thereof (ii) completing the project (iii) to deliver vacant and peaceful possession of the suit property to the plaintiff and (iv) to give clear and marketable title.

48. In the light of the averments/statements as made in the plaint

and the prayers as noted by us above, we now examine as to whether

the plaint can be said to be barred by the provisions of Section 34 of the

Securitisation Act as contended on behalf of the appellant- bank.

49. It is well settled that the jurisdiction of the Court to try suits of

civil nature is expressive as seen from the clear language of Section 9 of

the Code of Civil Procedure which is on the principle of Ubi Jus Ibi

Remedium. The exception being suits of which their cognizance is either

expressly or impliedly barred. For these category of suits the Civil Court

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:00 ::: Pvr 57 comapl 360-17 Axis-22-10-18.odt

would lack jurisdiction to entertain and try such suits. It is further well

settled that the exclusion of the jurisdiction of the Civil Court should be

construed strictly. In Kamla Mills Vs. State of Bombay 50, a Constitution

Bench (Seven Judge's Bench) of the Supreme Court considered the

question as to when and in what circumstances, can a suit of civil nature

be said to be barred by a Special Statute. The court in paragraphs 30

and 32 held as under:-

"30. ... .... the question about the exclusion of the jurisdiction of civil courts either expressly or by necessary implication must be considered in the light of the words used in the statutory provision on which the plea is rested, the scheme of the relevant provisions, their object and their purpose. ... ... ...

32. ... ... ... Whenever it is urged before a civil court that its jurisdiction is excluded either expressly or by necessary implication to entertain claims of a civil nature, the Court naturally feels inclined to consider whether the remedy afforded by an alternative provision prescribed by a special statute is sufficient or adequate. In cases where the exclusion of the civil courts' jurisdiction is expressly provided for, the consideration as to the scheme of the statute in question and the adequacy or the sufficiency of the remedies provided for by it may be relevant but cannot be decisive. But where exclusion is pleaded as a matter of necessary implication, such considerations would be very important, and in conceivable circumstances, might even become decisive. If it appears that a statute creates a special right or a liability and provides for the determination of the right and liability to be dealt with by tribunals and specially constituted in that behalf, and it further lays down that all questions about the said right and liability shall be determined by the tribunal, so constituted, it becomes pertinent to enquire whether remedies normally associated with actions in civil courts are prescribed by the said statute or not." (emphasis supplied)

50. The objection as raised on behalf of the bank before the

learned Single Judge was of the plaint being barred by Section 34 of the

Secrutisation Act. The bank contended that qua any cause of action 50 AIR 1965 SC 1942

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:00 ::: Pvr 58 comapl 360-17 Axis-22-10-18.odt

against the bank, the remedy of the plaintiffs would be to invoke the

provisions of Section 17 by approaching the Debt Recovery Tribunal

(DRT), this for the primary reason that there was no privity of contract

between bank and the plaintiffs. The privity of the bank was only qua

Orbit in view of the mortgage of the project assets in favour of the bank

by Orbit as a security of the loan advanced by it. The bank was merely

realising the security interest in the assets mortgaged to it by Orbit. To

appreciate the contention of the bank it would be appropriate to extract

some of the provisions of the Securitisation Act, relevant to the

present controversy. Following are the provisions:-

"Section 2 (zf) "security interest" means right, title and interest of any kind whatsoever upon property, created in favour of any secured creditor and includes any mortgage, charge, hypothecation, assignment other than those specified in section 31;

(f) "borrower" means any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution and includes a person who becomes borrower of a securitisation company or reconstruction company consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance;

(ha) "debt" shall have the meaning assigned to it in clause (g) of section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993)

(k) "financial assistance" means any loan or advance granted or any debentures or bonds subscribed or any guarantees given or letters of credit established or any other credit facility extended by any bank or financial institution;

(zc) "secured asset" means the property on which security interest is created;

17. Application against measures to recover secured debts- (1) Any person (including borrower), aggrieved by any of the

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:00 ::: Pvr 59 comapl 360-17 Axis-22-10-18.odt

measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, [may make an application along with such fee, as may be prescribed] to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken:

[Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.] [Explanation.--For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub section.] 1-A ... ... ...

(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.

(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management or restoration of possession, of the secured assets to the borrower or other aggrieved persons, it may by order,-

(a) declare the recourse to any one or more measures referred to in sub section (4) of section 13 taken by the secured creditor as invalid; and

(b) restore the possession of secured assets or management of secured assets to the borrower or such other aggrieved person, who has made an application under Sub-section 1, as the case may be; and

(c) pass such other direction as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of section 13.

(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section (4) of section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force , the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub-section (4) of section l3 to recover his secured debt.

[(4-A) Whether -

(i) any person, in an application under sub-section (1), claims any tenancy or lease hold rights upon the secured asset,

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:00 ::: Pvr 60 comapl 360-17 Axis-22-10-18.odt

the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy,-

(a) has expired or stood determined; or

(b) is contrary to section 65-A of the Transfer of Property Act,1882 (4 of 1882) ; or

(c) is contrary to terms of mortgage; or

(d) is created after the issuance of notice of default and demand by the Bank under sub-section (2) of section 13 of the Act; and

(ii) the Debt Recovery Tribunal is satisfied that tenancy right or lease hold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause

(d) of clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act.] ... ... ....

34. Civil Court not to have jurisdiction:- No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993).

35. The provisions of this Act to override other laws.-The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." (emphasis supplied)

51. Section 13 of the Securitisation Act provides for enforcement

of the security interest and the measures which can be taken by the

secured creditors. Section 13 begins with a non obstante clause to

provide that "notwithstanding anything contained in section 69 or

section 69-A of the Transfer of Property Act,1882, any security interest

created in favour of any secured creditor may be enforced, without the

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:00 ::: Pvr 61 comapl 360-17 Axis-22-10-18.odt

intervention of the Court or tribunal, by such creditor in accordance

with the provisions of this Act." Section 69 of the Transfer of Property

Act provides for general power of sale as conferred on the mortgagee.

Section 69-A of the Transfer of Property Act provides for appointment

of a receiver and such security interest would be enforced in accordance

with the provisions of Secrutisation Act.

52. In Mardia (supra), the Supreme Court was considering the

challenge to the legality of the provisions of Sections 13, 15, 17 and

Section 34 of the Securitisation Act. The Court examined the provisions

of Section 34 which bars jurisdiction of the Civil Court to entertain any

suit or proceedings, in respect of any matter which a Debt Recovery

Tribunal or the appellate Tribunal is empowered under the

Secrutisation Act to determine, in respect of any action taken or to be

taken, in pursuance of any power conferred by or under the

Secrutisation Act or under the Recovery of Debts Due to Banks and

Financial Institutions Act,1993. The Court also examined the provisions

of Section 35 of the Secrutisation Act, which provides for the Act to have

an overriding effect all other laws, and as to why and in what

circumstances it was thought necessary by the legislature to provide for

a non obstante clause in sub-section (1) of Section 13 of the

Secrutisation Act. It was observed that the situation as prevailed in

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:00 ::: Pvr 62 comapl 360-17 Axis-22-10-18.odt

1882 when the Transfer of Property Act was enacted, has undergone a

sea-change and what was conceived to be correct in the situation then

prevailing, may not be so in the present day scenario. It was observed

that functions of different institutions including the banking and

financial institutions have changed and new functions have been

introduced for financing the industries etc., and a new economic and

fiscal environment exits, after more than 100 years after the enactment

of the Transfer of Property Act was initially brought into force. The

Court referred to the report of Rajamannar Committee appointed by

Government of India which submitted its report in 1977 indicating the

effect of the changed situation and the efficacy of the provisions of the

Transfer of Property Act. The Court also examined the Narasimham

Committee Report 1998 which advocates for a legal framework which

should clearly define the rights and liabilities of the parties to the

contract and provisions for speedy resolution of disputes, being a sine

qua non for efficient trade and commerce, especially for financial

intermediation. A reference is also made to the guidelines of the Reserve

Bank of India in relation to classifying the Non Performing Assets (NPA)

and the appropriate remedies available to the borrowers. The Court

noted the adequate safeguards which are available to the borrowers as

provided under Section 13 of the Act. The court also considered the

contention that an appeal under Section 17 would be entertainable

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:00 ::: Pvr 63 comapl 360-17 Axis-22-10-18.odt

before the Debt Recovery Tribunal, only after such measures as provided

under sub-section (4) of Section 13 are taken. The court held that a full

reading of section 34 shows that the jurisdiction of the civil court is

barred, in respect of matters which a Debt Recovery Tribunal or

appellate Tribunal is empowered to determine, in regard to any action

taken or "to be taken" in pursuance of any power conferred under

Securitisation Act and thus the prohibition under Section 34, covers

even the matters which can be taken cognizance by the Debt Recovery

Tribunal though no measure in that direction was taken under sub-

section (4) of Section 13. It was held that the bar of jurisdiction of the

civil court, applies to all such matters which may be taken cognizance by

the Debt Recovery Tribunal, apart from those matters in which measures

have already been taken under sub-section (4) of Section 13. The Court

however held, that to a very limited extent jurisdiction of the civil court

can also be invoked, where the action of the secured creditor is alleged

to be fraudulent or their claim may be so absurd and untenable which

may not require any probe, whatsoever or to say precisely to the extent

the scope is permissible to bring an action in the civil court in the cases

of English mortgages.

53. As there was much discussion in this context from both the

sides and more particularly paragraphs 50 and 51 of the decision in

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:00 ::: Pvr 64 comapl 360-17 Axis-22-10-18.odt

Mardia Chemicals Ltd.(supra), it would be appropriate to note the

observations as made by their Lordships which read thus:-

"50. It has also been submitted that an appeal is entertainable before the Debt Recovery Tribunal only after such measures as provided in sub-section (4) of Section 13 are taken and Section 34 bars to entertain any proceeding in respect of a matter which the Debt Recovery Tribunal or the appellate Tribunal is empowered to determine. Thus before any action or measure is taken under sub-section (4) of Section 13, it is submitted by Mr. Salve one of the counsel for respondents that there would be no bar to approach the civil court. Therefore, it cannot be said that no remedy is available to the borrowers. We, however, find that this contention as advanced by Shri Salve is not correct. A full reading of section 34 shows that the jurisdiction of the civil court is barred in respect of matters which a Debt Recovery Tribunal or appellate Tribunal is empowered to determine in respect of any action taken "or to be taken in pursuance of any power conferred under this Act". That is to say, the prohibition covers even matters which can be taken cognizance of by the Debt Recovery Tribunal though no measure in that direction has so far been taken under sub-section (4) of Section 13. It is further to be noted that the bar of jurisdiction is in respect of a proceeding which matter may be taken to the Tribunal. Therefore, any matter in respect of which an action may be taken even later on, the civil court shall have no jurisdiction to entertain any proceeding thereof. The bar of civil court thus applies to all such matters which may be taken cognizance of by the Debt Recovery Tribunal, apart from those matters in which measures have already been taken under sub-section (4) of Section 13.

51. However, to a very limited extent jurisdiction of the civil court can also be invoked, where for example, the action of the secured creditor is alleged to be fraudulent or his claim may be so absurd and untenable which may not require any probe, whatsoever or to say precisely to the extent the scope is permissible to bring an action in the civil court in the cases of English mortgages. We find such a scope having been recognized in the two decisions of the Madras High Court which have been relied upon heavily by the learned Attorney General as well appearing for the Union of India, namely V.Narasimhachariar p.135 at p.141 and 144, a judgment of the learned single Judge where it is observed as follows in para 22:(AIR p.143) "22. The remedies of a mortgagor against the mortgagee who is acting in violation of the rights, duties and obligations are twofold in character. The mortgagor can come to the Court before sale with an injunction for staying the sale if there are materials to show that the power of sale is being exercised in a fraudulent or improper manner contrary to the terms of the mortgage.

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:00 ::: Pvr 65 comapl 360-17 Axis-22-10-18.odt

But the pleadings in an action for restraining a sale by mortgagee must clearly disclose a fraud or irregularity on the basis of which relief is sought: 'Adams v. Scott, (1859) 7 WR 213, 249. I need not point out that this restraint on the exercise of the power of sale will be exercised by Courts only under the limited circumstances mentioned above because otherwise to grant such an injunction would be to cancel one of the clauses of the deed to which both the parties had agreed and annul one of the chief securities on which persons advancing moneys on mortgages rely. (See Ghose, Rashbehary, Law of Mortgages, Vol.II, Fourth Edn., page 784)."

54. In Mardia (supra) Supreme Court has also held that the

proceedings under Section 17 of the Securitisation Act in fact are not

appellate proceedings and it seemed to be a misnomer. It was observed

that it is the initial action which is brought before a forum as prescribed

under the Securitisation Act, raising from the grievance against the

action or measures taken by one of the parties to the contract. It is held

that this is the stage of initial proceedings, like filing a suit in civil court

and as a matter of fact the proceedings under Section 17 of the

Securitisation Act are in lieu of a civil suit, which remedy is ordinarily

available, but for the bar under Section 34 of the Securitisation Act.

55. In M/s.Transcore Vs. Union of India & Anr.51 the Supreme

Court again had an occasion to examine the provisions of Securitisation

Act as also referring to the decision in Mardia Chemicals Ltd.(supra).

The Supreme Court held that Securitisation Act was enacted to enforce

the interest in the "financial assets" which belong to banks or financial 51 (2008) 1 SCC 125

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:00 ::: Pvr 66 comapl 360-17 Axis-22-10-18.odt

institutions by virtue of contract between the parties or by operation of

common law principles. It was held that the Securitisation Act enables

the banks and financial institutions to realise long term assets, manage

problems of liquidity, asset liability mis- match and to improve recovery

of debts by exercising powers to take possession of securities, sell them

and thereby reduce non-performing assets by adopting measures for

recovery and reconstruction. One of the object of the Act was recovery

by non-adjudicatory process by enforcement of security interest, on

default of the borrower to repay the debt or failure to maintain the

appropriate margin. It was observed that it was for this reason Section

13(1) and 13(2) of the Securitisation Act are imperative to enable banks

and financial institutions to enforce expeditiously without the

intervention of the court/tribunal, the security interest on the default of

the borrower in repayment and the account of the borrower becoming a

non performing assets. It was observed that powers conferred under

Section 13(4) of the Securitisation Act comprehend the power to take

actual and physical possession of immovable property. The Court in

paragraph 41 and 43 has held as under:-

"41. The heart of the matter is that NPA Act proceeds on the basis that an interest in the asset pledged or mortgaged with the bank or FI is created in favour of the bank/ FI; that the borrower has become a Debtor, his liability has crystallized and that his account with the bank/ FI (which is an asset with the bank/FI) has become sub-standard.

... ... ...

43. Keeping in mind the above circumstances, the NPA Act is enacted for quick enforcement of the security. The said Act deals with enforcement of the rights vested in the bank/ FI. The

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:00 ::: Pvr 67 comapl 360-17 Axis-22-10-18.odt

NPA Act proceeds on the basis that security interest vests in the bank/FI. The NPA Act proceeds on the basis that security interest vests in the bank/FI. Sections 5 and 9 of NPA Act is also important for preservation of the value of the assets of the banks/ FIs. Quick recovery of debt is important. It is the object of DRT Act as well as NPA Act. But under NPA Act, authority is given to the banks/ FIs, which is not there in the DRT Act, to assign the secured interest to securitisation company/ asset reconstruction company. In cases where the borrower has bought an asset with the finance of the bank/ FI, the latter is treated as a lender and on assignment the securitisation company/ asset reconstruction company steps into the shoes of the lender bank/ FI and it can recover the lent amounts from the borrower."

56. Adverting to the above position in law and the provisions of

the Securitisation Act, we now discuss whether the suits in question can

be said to be maintainable against the bank ? It is not in dispute that

the substantial amounts were advanced by the bank to Orbit. It is stated

that the liability of the Orbit towards Axis Bank is more than Rs.150

crores (i.e. term loan of Rs.85 crores, OD facilities of 130 crores and OD

facilities of Rs.35 crores). These amounts as advanced are secured in

favour of the Axis bank by a registered indenture of mortgage dated 28

February 2013 and subsequently by indenture of mortgage dated 17

September 2013 and the indenture of mortgage dated 17 June 2015.

Thus, a 'security interest' as clearly falling within the meaning and

purview of Section 2(zf) of the Securitisation Act, is created in favour of

the bank in regard to these advances made in favour of Orbit. It is also

not in dispute that the entire project in question (land and building) are

the subject matter of the said mortgage. Once there is a valid and legal

mortgage in operation and there is default on the part of Orbit in

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:00 ::: Pvr 68 comapl 360-17 Axis-22-10-18.odt

repayment of the said advances and the account of Orbit becoming non-

performing assets (NPA), there can be no fault or any impediment in

law and/or any illegality on the part of the bank to take recourse to the

provisions of the Securitisation Act namely by issuing notice under

Section 13(2) and taking measures under Section 13(4) to enforce the

security interest and realise the amounts due and payable to the bank by

Orbit, from the mortgaged assets. The bank has resorted to these

remedies and measures under the Securitisation act by issuance of

notice under Section 13(2) dated 19 August 2016 issued to Orbit and

thereafter by taking recourse to Section 13(4) and taking symbolic

possession of the suit properties on 7 November 2016.

57. The averments as made in the plaint clearly indicate that the

plaintiffs decided to purchase their respective flats on or about 2009-

2010 and substantial payments were made to Orbit as stated to be part

consideration of the purchase price. It is however astounding that

despite parting with such huge amounts stated to be the consideration

for purchase of the flats, the plaintiffs remained satisfied on a mere

piece of paper namely allotment letters issued by Orbit and/or a merely

MOU. The Plaintiffs are not the category of persons who can be said to

be unaware of law or would have no means to seek legal advice. The

plaintiffs never felt that Orbit should follow the process of law as

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:00 ::: Pvr 69 comapl 360-17 Axis-22-10-18.odt

prescribed under the MOFA and enter into a registered agreement with

them. It is also quite clear that in some of the cases even timely receipts

in regard to payments were not accepted and the receipts were passed

on subsequently. Not even in one case there is a registered agreement

for purchase of flat as would usually and normally happen in a case of a

bonafide purchase transaction of a flat and more so, when the flat in

question is so valuable the price of which runs into several crores of

rupees, ranging between Rs.18 crores to Rs.38 crores.

58. When it comes to purchase of flats and protection being

conferred on the flat purchasers in the State, the provisions of MOFA are

attracted which is an enactment to regulate promotion of construction,

sale, management and transfer of flats on ownership basis. It is

worthwhile to note the preamble of the Act so as to ascertain the

intention of the legislature to have such an enactment. The preamble of

the MOFA reads thus:-

"WHEREAS, It has been brought to the notice of the State Government that, consequent on the acute shortage of housing in the several areas of the State of Maharashtra, sundry abuses, malpractices and difficulties relating to the promotion of the construction of, and the sale and management and transfer of flats taken on ownership basis exist, and are increasing;

AND WHEREAS, the Government in order to, advise itself as respects the manner of dealing with these matters appointed a committee by Government Resolution in the Urban Development and Public Health Department No. S. 248-79599-F, dated the 20th May 1960, to inquire into and report to the State Government on the several matters referred to aforesaid with the purpose of considering measures for their amelioration;

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 ::: Pvr 70 comapl 360-17 Axis-22-10-18.odt

AND WHEREAS, the aforesaid Committee has submitted its report to Government in June 1961, which report has been published for general information;

AND WHEREAS, it is now expedient after considering the recommendations and suggestions made therein, to make provision during the period of such shortage of housing, for the regulation of the promotion of the construction, sale and management and transfer, of fiats taken on a ownership basis in the State of Maharashtra; It is hereby enacted in the Fourteenth Year of the Republic of India as follows:.. ... ."

The notes on the clauses of the provisions of MOFA reads thus:-

"Clause 4- This contains the provision for compulsory registration of the agreement for sale of the flat.

.... ..... ...

Clause 8- This clause provides for the refund of the amount paid, with interest at the rate of 9 per cent per annum, if the flat is not handed over by the date agreed upon or within further time allowed to him for reasons beyond the control of the promoter or his agents.

Clause 9 - This clause provides that the promoter shall not, without the previous consent of the flat purchasers, mortgage or create a charge on the flat or the land after he has entered into an agreement to sell a flat. If he nevertheless does create mortgage or a charge without such consent after the agreement is registered it will not affect the rights and interests of such flat takers.

59. In the context of the present dispute, the relevant

provisions of the MOFA are as under:-

2 Definitions:

(c) ["promoter" means a person and includes a partnership firm or a body or association of persons whether registered or not] who constructs or causes to be constructed a block or building of flats [or apartments] for the purpose of selling some or all of them to other persons, or to a company, co-

operative society or other association of persons, and includes his assignees; and where the person who builds and the person who sells are different persons, the term includes both; ... ... ...

4. Promoter before accepting advance payment or deposit to enter into agreement and agreement to be registered,- (1) [Notwithstanding anything contained in any other law, a promoter who intends to construct or constructs a block or building of flats all or some of which are to be taken or are taken

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 ::: Pvr 71 comapl 360-17 Axis-22-10-18.odt

on ownership basis, shall, before he accepts any sum of money as advance payment or deposit, which shall not be more than 20 per cent, of the sale price enter into a written agreement for sale with each of such persons who are to take or have taken such flats, and the agreement shall not be registered under 2[the Registration Act, 1908 (hereinafter in this section referred to as "the Registration Act")] 3[and such agreement shall be in the prescribed form.] 4[(1A) The agreement to be prescribed under sub-section (1) shall contain inter alias the particulars as specified in clause (a); and to such agreement there shall be attached the copies of the documents specified in clause (b) -

(a) particulars -

(i) if the building is to be constructed, the liability of the promoter to construct it according to the plans and specifications approved by the local authority where such approval is required under any law for the time being in force ;

(ii) the date by which the possession of the flat is to be handed over to the purchaser;

(iii) the extent of the carpet area of the flat including the area of the balconies which should be shown separately;

(iv) the price of the flat including the proportionate price of the common areas and facilities which should be shown separately, to be paid by the purchaser of flat; and the intervals at which installments thereof may be paid;

(v) the precise nature of the organisation to be constituted of the persons who have taken or are to take the flats;

(vi) the nature, extent and description of the common areas and facilities;

(vii) the nature, extent and description of limited common areas and facilities, if any;

(viii) percentage. of undivided interest in the common areas and facilities appertaining to the flat agreed to be sold;

(ix) statement of the use for which the flat is intended and restriction on its use, if any;

(x) percentage of undivided interests in the limited common areas and facilities, if any, appertaining to the flat agreed to be sold;

(b) copies of documents, -

(i) the certificate by an Attorney-at-law or Advocate under clause

(a) of sub-section (2) of section (3);

(ii) Property Card or extract of Village Forms VI or VII and XII or any other relevant revenue record showing the nature of the title of the promoter to the land on which the flats are constructed or are to be constructed;

(iii) the plans and specifications of the flat as approved by the concerned local authority.]

1[(2) Any agreement for sale entered into under sub-section (1) shall be presented, by the promoter or by any other person

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 ::: Pvr 72 comapl 360-17 Axis-22-10-18.odt

competent to do so under section 32 of the Registration Act, at the proper registration office for registration, within the time allowed under sections 23 to 26 (both inclusive) of the said Act and execution thereof shall be admitted before the registering officer by the person executing the document or his representative, assign or agent as laid down in sections 34 and 35 of the said Act also within the time aforesaid:

Provided that, where any agreement for sale is entered into, or is purported to be entered into, under sub- section (1), at any time before the commencement of the Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) (Amendment and Validating Provisions) Act, 1983, and such agreement was not presented for registration, or was presented for registration but its execution was not presented before the registration officer by the person concerned, before the commencement of the said Act, then such document may be presented at the proper registration office for registration. and its execution may be admitted, by any of the persons concerned referred to above in this sub-section, on or before the 31st December 1984, and the registering officer shall accept such document for registration, and register it under the Registration Act, as if it were presented and its execution was admitted, within the time laid down in the Registration Act:

Provided further that, on presenting a document for registration as aforesaid if the person executing such document or his representative, assign or agent does not appear before the registering officer and admit the execution of the document, the registering officer shall cause a summons to be issued under section 36 of the Registration Act requiring the executants to appear at the registration office, either in person or by duly authorised agent, at a time fixed in the summons if the executant fails to appear in compliance with the summons, the execution of the document shall be deemed to be admitted by him and the registering officer may proceed to register the document accordingly. If the executant appears before the registering officer as required by the summons but denies execution of the document, the registering officer shall, after giving him a reasonable opportunity of being heard, if satisfied that the document has been executed by him, proceed to register the document accordingly.]

SECTION 4A: EFFECT OF NON-REGISTRATION OF AGREEMENT REQUIRED TO BE REGISTERED UNDER SECTION 4 - Where an agreement for sale entered into under sub-section 4, whether entered into before or after the commencement of the Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) (Amendment and Validating Provisions) Act, 1983, remains unregistered for any reason, then notwithstanding anything contained in any law for the time being in force, or any judgment, decree or order of any

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 ::: Pvr 73 comapl 360-17 Axis-22-10-18.odt

Court, it may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1963, or as evidence of part performance of a contract for the purposes of section 53A of the Transfer of Property Act, 1882, or as evidence of any collateral transaction not required to be effected by registered instrument.]

SECTION 8: REFUND OF AMOUNT PAID WITH INTEREST FOR FAILURE TO GIVE POSSESSION WITHIN SPECIFIED TIME OR FURTHER TIME ALLOWED. If -

(a) the promoter fails to give possession in accordance with the terms of his agreement of a flat duly completed by the date specified, or any further date or dates agreed to by the parties, or

(b) the promoter for reason beyond his control and of his agents, is unable to give possession of (he flat by the date specified, or a further agreed date and a period of three months thereafter, or a further period of three months if those reasons still exist, then, in any such case, the promoter shall be liable on demand (but without prejudice to any other remedies to which he may be liable) to refund the amounts already received by him in respect of the flat (with simple interest at nine percent per annum from the date he received the sums till the date the amounts and interest thereon is refunded), and the amounts and the interest shall be a charge on the land and the construction if any thereon in which the flat is or was to be constructed, to the extent of the amount due, but subject to any prior encumbrances.

SECTION 9: NO MORTGAGE ETC., TO BE CREATED WITHOUT CONSENT OF PARTIES AFTER EXECUTION OF AGREEMENT FOR SALE - No promoter shall, after he execute an agreement to sell any fiat, mortgage or create a charge on the flat or the land, without the previous consent of the persons who take or agree to take the flats, and if any such mortgage or charge is made or created without such previous consent after the agreement referred to in section 4 is registered, it shall not affect the right and interest of such persons."

60. It view of the above object and intention of the legislation, the

above provisions of the MOFA as referred during the course of

arguments are required to be considered in their application to the given

facts, inasmuch as the plaintiffs contend that the legislation provides for

valuable rights referring to Section 4, 4A, Section 5 and 9 of the MOFA.

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 :::

Pvr 74 comapl 360-17 Axis-22-10-18.odt

61. We find it difficult to accept the said contention as urged on

behalf of the plaintiffs that these provisions of the MOFA would in any

manner assist the plaintiffs. The plaintiffs who have parted with

substantial amounts, are not ordinary flat purchasers. For the reasons

best known to them, the plaintiffs never felt to have a benefit of a

registered agreement of sale of their respective flats which would

require payment of proper stamp duty nor they called upon Orbit to do

so. This possibly in view of the nature of the relations the plaintiffs

stood with Orbit, the plaintiff thought it wiser to remain in that position.

In the context of the MOFA Act the non-registration of an agreement to

purchase/sale of a flat in fact goes to the root of the matter. Thus when

we consider the argument of the applicability of the provisions of MOFA

and a protection as claimed by the plaintiffs under the provisions of the

said Act the basic compliance of the provisions MOFA would not only be

germane but a requirement and a mandate of law.

62. We are unable to agree with the reasoning of the learned

Single Judge on the applicability of the MOFA. Admittedly there is no

compliance of the provisions of Section 4 of the Act which provides that

a promoter who intends to construct a building or flats which are to be

taken or already taken on ownership basis, shall before, he accepts any

some of money as advance payment or deposit, which shall not be more

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 ::: Pvr 75 comapl 360-17 Axis-22-10-18.odt

than 20% of the sale price, enter into a written agreement for sale with

each of such persons, who are to take or have taken, such flats, and the

agreement shall be registered under the Registration Act,1908. Sub-

section 1A of Section 4 provides that the prescribed agreement shall

contain all particulars as specified in clause (a) and such agreement

shall be attached with the copies of the documents specified in clause

(b) of the said provision. In the present case admittedly there is no

agreement entered between the parties as prescribed under Section 4(1)

and Section 4(1A) of the Act. In case of one plaintiff there is merely

on MOU which is also not registered as per the provisions of the

Registration Act.

63. Section 4A provides for effect of non registration of an

agreement, this provision is also not available to the plaintiff, as Section

4A speaks of 'an agreement for sale entered under sub-section (1) of

Section 4' before or after the commencement of the Maharashtra

Ownership Flats (Regulation of promotion of construction, sale,

management and transfer) (Amendment and Validating Provisions)

Act,1983 and which remains unregistered for any reason. It is only in

such a situation notwithstanding anything contained in any law for the

time being in force, or in any judgment, decree or order of any Court, it

may be received as evidence of a contract in a suit for specific

performance under Chapter II of the Specific Relief Act,1963 or as

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 ::: Pvr 76 comapl 360-17 Axis-22-10-18.odt

evidence of part performance of a contract for the purposes of Section

53A of the Transfer of Property Act,1882, or as evidence of any

collateral transaction not required to be effected by registered

instrument. We are afraid as to how the provisions of Section 4 and

4A , ex-facie, are of any avail to the plaintiffs.

64. Further Section 9 of the MOFA which provides that no

mortgage etc. be created without consent of parties, after execution of

agreement for sale, also can have no application in the facts of the

present case. This for the reason that primarily there is no agreement

for sale executed by Orbit in favour of the plaintiffs to sell any of these

flats and when no such agreement to sale is executed, there was no

embargo on Orbit not to mortgage the project to the bank and to receive

the term loans and the other borrowings. Conversely in such a situation

there was also no embargo on the bank to advance a loan and receive

the project assets as a mortgage/security for repayment of loan from

Orbit. As there was no registered agreement as prescribed under

Section 4 of the MOFA, there was no question of the rights of the

plaintiffs/purported flat purchasers being protected so as to legally

override the charge created by the bank on the project assets. In the

absence of the basic compliance under MOFA by Orbit and plaintiffs it

cannot be presumed that the money which was received by Orbit from

plaintiffs was towards purchase of flats for the applicability of the

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 ::: Pvr 77 comapl 360-17 Axis-22-10-18.odt

MOFA. In Hansa V. Gandhi (supra), the Court examining the provisions

of Section 4 of the MOFA held that the agreement executed between the

plaintiff and the developer ought to have been registered with the Sub-

Registrar and in the absence of such registered document, the plaintiff

would not get any right in the flat which he intended to purchase. In

paragraphs 19 and 20 the Court observed thus:-

"19. It is a fact that the plaintiffs had not entered into any formal agreement with regard to the purchase of the flats with the Developer. The mere letter of intent, which was subject to several conditions, would not give any right to the plaintiffs for purchase of the flats in question till all the conditions incorporated in the letter of intent were fulfilled by the plaintiffs i.e. the proposed purchasers. It is also a fact that all the conditions, which were to be fulfilled, had not been fulfilled by the plaintiffs.

20. According to the provisions of Section 4 (1) of the Act, the agreement, if any, executed between the plaintiffs on one hand and the developer on the another, ought to have been registered with the sub-Registrar. In absence of such a registered document, the plaintiffs would not get any right in respect of the flats, which they intended to purchase. Moreover, in absence of the registration, the Subsequent Buyers could not have got an opportunity to inspect the agreement and there could not be any presumption that the Subsequent Buyers knew about the agreement. (emphasis supplied)

65. Thus, on the above conspectus it would not be correct to

accept the case of the plaintiffs of any protection was available to them,

under the provisions of MOFA and on that ground assert for

impleadment of Axis bank as a defendant to the suit.

66. Further, even if the plaintiffs intend to rely on the provisions

of Section 5 and 8 of the MOFA, these provisions are of no avail against

the bank. The plaintiffs contention that in view of the specific provisions

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 ::: Pvr 78 comapl 360-17 Axis-22-10-18.odt

under Section 4 and 9 of the MOFA , the plaintiffs would have a prior

charge on the project as mortgaged to the bank and thus the bank

becomes a necessary party to the suit, is required to be stated only to be

rejected. As noted above it is quite clear that the plaintiffs transaction

to purchase the flat, if any, had become quite old inasmuch as the

amounts were paid by the plaintiffs to Orbit in or about 2009 or

sometime thereafter. However, the fact remains that only after the

plaintiffs became aware of the bank enforcing its security interest by

taking measures under Section 13 of the Securitisation Act in the year

2017, the plaintiffs woke up and instituted these suits. It is surprising

that despite such large amount being advanced, no steps whatsoever

were taken by the plaintiffs, to resort to any legal remedy against Orbit,

prior to institution of this suit, which a bonafide flat purchaser in the

normal course would do. We see no correspondence entered between

the plaintiffs and Orbit or any other material which would show that the

plaintiffs had any grievance in Orbit not undertaking completion of the

project or not registering an agreement with the plaintiffs for sale of the

flats.

67. From the MOU entered by one of the plaintiffs (Madhav

Prasad Aggarwal- plaintiff in Suit No.62 of 2017) it is clear that this

plaintiff was made aware about the mortgage of the said project in

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 ::: Pvr 79 comapl 360-17 Axis-22-10-18.odt

favour of the bank and this was accepted in totality by the said plaintiff.

Thus there was a clear intention of the said plaintiff not to get the

agreement registered and/or to take any steps to safeguard any of the

legal rights which if at all had accrued to the plaintiff. It is also

astonishing as to why before the bank adopted measures under the

Securitisation Act, any of the plaintiff's for the long-long time available

at their disposal, did not feel the need to seek specific performance of

the so called agreements, entered by the plaintiffs with Orbit. This is

surely very abnormal. This conduct of the plaintiffs casts a serious doubt

of the real intention of the plaintiffs when we consider the plea of the

bank for rejection of the plaint under Order VII Rule 11(d) of the CPC.

68. It is thus clear that the real cause of action to implead Axis

bank as a party was to prevent the bank from enforcing its security

interest as created by Orbit on the said project. This position is fortified

by the fact, that in each and every plaint, there are clear averments in

regard to the plaintiffs' grievance being echoed in regard to the

measures taken by Axis bank under the Securitisation Act.

69. In support of the plaintiffs' contention that the bank would be

required to be joined in the conveyance in case the plaintiff succeed in

their prayer for a specific performance of the agreement against Orbit

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 ::: Pvr 80 comapl 360-17 Axis-22-10-18.odt

and thus, bank is a necessary party to the suit, reliance is placed on the

decision of the Supreme Court in Dwarkaprasad Singh & Ors. (supra).

In our opinion, in the facts of the present case, the said decision is

certainly not applicable. This is not the case where the bank is a

purchaser of the property. We have already held that considering the

prayers as made in these suits, the relief revolving around or in any

manner touching the issue qua the legality of the bank exercising rights

under the Securitisation Act as a mortgagee of the project, the civil court

would have no jurisdiction. Thus when the adjudication of the rights of

the bank to create the mortgage is not within the scope and cannot be

subject matter of the suit, the bank cannot become a necessary party to

the suit merely on the relief of specific performance being sought by the

plaintiff against Orbit. We are of the clear opinion that if the plaintiffs

wish to assert their rights against the bank which has a security interest

in the project as recognized by the Securitisation Act, then the only

remedy for the plaintiffs was to take recourse under Section 17 of the

Securitisation Act.

70. We thus see much substance in the contention as urged on

behalf of the bank, that the averments as made in the plaint are

sufficient to reach to a conclusion that the plaint as against the bank is

barred by the provisions of Section 34 of the Securitisation Act.

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 :::

Pvr 81 comapl 360-17 Axis-22-10-18.odt

71. We now consider whether the plaint(s) in any of these suits

fall within the exceptions as carved out in paragraph 51 of the decision

of the Supreme Court in Mardia Chemicals Ltd (supra), namely whether

the case of the plaintiffs as made out in the plaint is such that the action

of the bank ( secured creditor) can be said to be fraudulent or the bank's

claim is so absurd and untenable that it may not require any probe

whatsoever, so as to hold that the plaints in these suits are maintainable

against the bank, by overcoming the bar of Section 34 of the

Securitisation Act.

72. In the foregoing paragraphs we have categorically noted the

averments in each of the plaints as made against the bank, which the

plaintiffs interalia say, are allegations of fraud as played by the bank in

granting loan to Orbit and accepting the mortgage of the project assets.

It is well settled that the parties pleading fraud must set forth full

particulars, general allegations are insufficient even to amount to an

averment of fraud, however strong the language in which such

averments are couched (see Bishnudeo Narain Versus Seogeni Rai &

Ors. AIR 1951 SC 280). The provisions of Order VI Rule 4 postulate that

when plaintiff alleges fraud the same is required to be pleaded with

specificity, particularity and precision.( See Afsar Saikh Versus

Soleman BiBi (1976 (2) SCC 142).

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 :::

Pvr 82 comapl 360-17 Axis-22-10-18.odt

73. The bank would be justified in relying on the decision of the

Single Judge of Madras High Court in Punjab National Bank,

represented by its Manager Vs. J. Samsath Beevi & Ors.(supra)

wherein the Court emphasized that it is the duty of the Court to see that

the allegations of fraud are not thrown, just for the purpose of

maintaining a Suit and ousting the jurisdiction of the Tribunal and to

keep the Banks and Financial Institutions at bay. Referring to the

decision of the Supreme Court in T.Arivandandam v. T.V. Satyapal the

celebrated judgment of Krishna Iyer, J. (supra) in I.T.C. Ltd. v. Debts

Recovery Appellate Tribunal52, the Supreme Court held that clever

drafting, creating illusions of cause of action are not permitted in law.

The ritual of repeating a word or creation of an illusion in the plaint can

certainly be unraveled and exposed by the Court while dealing with an

Application under Order 7, Rule 11. It is the obligation on the Court to

examine if the allegations of fraud and collusion made in the Plaint, are

themselves a product of "fraud and collusion", so as to prevent any

action being taken by the bank on secured assets and whether the facts

are such overwhelming so that the mandate, object and intention of

Section 34 read with Section 17 of the Securitisation Act are required to

be kept aside. The principles that particulars of fraud are required to be

pleaded as per the requirements of Order VI Rule 4 of the CPC, the

principles are succinctly elaborated in the decision of the Supreme Court

52.1998 (2) SCC 70

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 ::: Pvr 83 comapl 360-17 Axis-22-10-18.odt

in Ranganayakamma & Anr. (supra). The Court held that when a

fraud is alleged, the particulars thereof are required to be pleaded. The

plea of fraud cannot be general in nature. It also cannot be vague.

74. Adverting to the above principles we do not find any

substance in the contention of the plaintiffs that there is any case of

fraud practised by the bank so that the plaints in these suits against the

bank be sustained, on the exception as carved out in Mardia (supra). Ex

facie allegations of collusion/fraud which have been made in each of

these plaints and as noted above, to say the least are so vague, weak and

ambiguous, to hold that these averments can at all be considered to be

averments of fraud as played by the bank against the plaintiffs. We

thus see much substance in the contention as urged on behalf of the

bank that by clever drafting and by making unsubstantiated allegations

of fraud, the bank has been impleaded as a party defendant to the suit. The bank would thus be correct in its contention that in the absence of

an unsubstantiated plea of fraud against the bank, the plaint against the

bank is liable to be rejected following the principles as laid down in

paragraph 51 in Maradia Chemicals Ltd (supra). The nature of the

prayer clauses as noted above in all these plaints also makes it clear

that the principal relief is of specific performance of the agreement

against Orbit. There is no case in the alternative of any damages or any

mandatory claim being made against the bank. Thus, the statements

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 ::: Pvr 84 comapl 360-17 Axis-22-10-18.odt

which are made in the plaint against the bank cannot be said to be in

aid of any relief prayed against the bank.

75. The case as urged on behalf of the plaintiff that the bank

ought to have undertaken due diligence, is also of no avail as there are

no registered agreements between the plaintiffs and Orbit. In this

situation, even if due diligence was to be undertaken nothing could have

been revealed to the bank qua the alleged rights of the plaintiffs. The

plaintiffs argument of 'due diligence' is very casual, as they are unable to

explain as to what would be the outcome of due diligence, when there

are no registered agreements. Such plea of the plaintiffs is thus

absolutely hollow as it leads plaintiffs nowhere.

76. In the above context, the reliance on behalf of the plaintiff on

the decision of the Single Judge of this Court in Ramniklal Tulsidas

Kotak vs. Varsha Builders (supra) which considered an issue

pertaining to the validity of a "certificate of title" issued by the

advocates appended to the printed agreement of sale, is of no avail.

Paragraph 28 of the decision records the requirements which should be

borne in mind in attributing credence to such certificate. The Court

emphasized the need of issuance of a public notice by the advocates

before issuing a certificate of title. In the present case, there is no

certificate of title as issued by the advocates. Further as observed by us,

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 ::: Pvr 85 comapl 360-17 Axis-22-10-18.odt

even if the respondent was to undertake any due diligence, nothing

would have surfaced as there were no registered agreements by Orbit

entered with the plaintiffs and other flat purchasers, which can be said

to be neglected/overlooked by the bank, in accepting mortgage of the

project in advancing loans to Orbit.

77. The learned Senior Counsel for the bank in these appeals,

would be correct in their contention referring to Section 5(b) and 5(c)

and Section 6 of the Banking Regulation Act 1949, that the business of

the bank is primarily accepting for the purpose of lending or investment,

deposits of money from the public, interalia repayable on demand or

otherwise and withdrawal of cheque, draft, order etc. The banking

company as defined is a company which would transact business of

banking, and thus, the plaintiffs cannot expect the bank to undertake

the work of a 'promoter', in view of the specific definition of

a"promoter", as contained under Section 2(c) of the MOFA namely who

constructs a building or flats and for the purpose of selling them to

persons or co-operative society or association of persons, and thus the

reliefs which the plaintiffs can seek against the promoters/Orbit cannot

be availed against the bank in the civil suit in question.

78. As regards the plaintiffs contention that in view of Section 9 of

the MOFA the plaintiffs would have prior rights to that of the bank qua

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 ::: Pvr 86 comapl 360-17 Axis-22-10-18.odt

the project as mortgaged to the Axis bank, also cannot be accepted as

noted above. In fact by this plea the plaintiffs indirectly question the

security interest of the bank and the entitlement of the bank to resort to

the measures under Section 13 of Securitisation Act. The plaintiffs

therefore necessarily should have availed of a remedy under Section 17

of the Securitisation Act which permits "any person" who is aggrieved by

any of the measures referred to in sub-section 4 of Section 13 taken by

the secured creditor or his authorised officer, by making an application

to the Debts Recovery Tribunal against such measures. As held by the

Supreme Court in Mardia Chemicals Ltd.(supra), the proceedings in an

appeal under Section 17 is that of a suit in the court of first instance

under the Code of Civil Procedure, as observed in paragraph 59 and 62

of the said decision.

79. In supporting the contention that the bank would be required

to be joined in the conveyance in case the plaintiffs succeeds in

obtaining a decree of specific performance against Orbit, and thus, bank

is a necessary party to the suit, the plaintiffs rely on the decision of

Supreme Court in Dwarkaprasad Singh & Ors. (supra). In our

opinion, the reliance on this decision in the facts of the present case is

not well founded. This is not the case where the bank is a purchaser of

the property. We have already held that considering the prayers as

made in the suits in question, a relief that the mortgage created in

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 ::: Pvr 87 comapl 360-17 Axis-22-10-18.odt

favour of the bank be declared as illegal, cannot be granted by the civil

court. Once the adjudication of the rights of the bank qua the mortgage

are outside the jurisdiction of the civil court, the bank does not become

a necessary party, merely on the relief of specific performance being

sought by the plaintiff against Orbit. In fact the plaintiffs are assuming a

situation that the bank has no mortgage rights on the the project and

thus they can seek a relief against the bank. Such a presumption is

wholly baseless in the absence of the plaintiffs making any plea to

challenge the rights of the bank to enforce its security interest by

adopting proceedings before the DRT.

80. We may thus observe that considering the expediency,

prudence and wisdom of the banking business and when in the facts of

the case the dealings between the bank and Orbit purely pertain to a

banking business, the consequence of the bank being dragged into this

litigation is definitely not warranted. In fact this would adversely affect

the banks commercial interest to recover the debts due and payable to it

by adhering to the procedure as prescribed by law, namely under the

Securitisation Act. In the facts of the present case it would definitely

meet the ends of justice that the plaint against the bank although it is

one of the defendant needs to rejected. It is permissible for the Court to

reject the entire plaint so far as the bank is concerned which is one of

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 ::: Pvr 88 comapl 360-17 Axis-22-10-18.odt

the defendants. In Mst.Phool Sundari Vs. Gurbans Singh & Ors.53 the

Division Bench of Rajasthan High Court comprising 'Wanchoo C.J. &

Dave J.' had an occasion to consider the issue whether it is possible to

reject the entire plaint in so far as one of the defendants is concerned

and in such a situation, what would be a proper order under Order 7

Rule 11(a) or (d) of the Code of Civil Procedure. Chief Justice

Wanchoo speaking for the Bench, taking review of law on the issue, in

paragraph 9 and 14 observed thus:-

"9. We have given our earnest consideration to this matter and we do not see why where a plaint discloses no cause of action against some of the defendants it cannot be rejected against those defendants. We can understand that a plaint has to be rejected in toto in the sense that a Court cannot reject one part of the plaint against all the defendants and carry on with the rest of the plaint against them, but we cannot understand why the Court cannot reject the entire plaint against a particular defendant and carry on with the entire plaint against others.

In such a case, there is a total rejection of the plaint so far as a particular defendant is concerned. There being such a total rejection of the plaint so far as the particular defendant is concerned, we are of the opinion that such an order would be open to appeal as a decree.

.....

14. We are, therefore, of opinion that in the first place, we do not see anything in O.7 R.11(a) or (d) which forbids a Court from rejecting the plaint as a whole against some of them. We are of the opinion that it is possible for the Court to reject the entire plaint so far as some of the defendants are concerned and that would be a proper order under O.7 R.11(a) or (d) and an appeal would lie in view of the definition of "decree" in S.2(2).

In any case, we are further of opinion that even if this is not possible, an order by which the suit practically fails against some of the defendants amounts to a decree in favour of those defendants against the plaintiffs within the meaning of that word in S.2(2), Civil P.C. and an appeal lies.

In any view of the matter, therefore, the order passed in this case was appealable. The plaintiff has not filed an appeal Against it. We are not prepared to grant him the benefit of S.5 of the Limitation Act and dismiss the revision. In view of the circumstances

53 AIR 1957 Raj 97

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:01 ::: Pvr 89 comapl 360-17 Axis-22-10-18.odt

of this case, we order the parties to bear their own costs of this Court.

(emphasis supplied).

81. A similar view has been taken by the Supreme Court in

Church of Christ Charitable Trust and Educational Charitable

Society Vs. Ponnoamman Educational Trust (supra), the specific point

for consideration before the Supreme Court was whether the learned

Single Judge of the High Court was justified in ordering rejection of the

plaint in so far as the first defendant/appellant therein was concerned.

The Court examining the provisions of Order 7 Rule 11 of CPC, held

that the plaint was rightly rejected against the first defendant. The

Court in paragraph 9, 29 & 30 held thus:-

"9. The points for consideration in this appeal are:

(a) Whether the learned Single Judge of the High Court was justified in ordering rejection of the plaint insofar as the first defendant (the appellant herein) is concerned ? And

(b) Whether the Division Bench of the High Court was right in reversing the said decision ?

29. Finally, the learned Senior Counsel for the respondent submitted that in view of a decision of this Court in Roop Lal Sathi V. Nachhatiar Singh Gill [(1982)3 SCC 487], rejection of the plaint in respect of one of the defendants is not sustainable. We have gone through the facts in that decision and the materials placed for rejection of plaint in the case on hand. We are satisfied that the principles of the said decision do not apply to the facts of the present case where the appellant-first defendant is not seeking rejection of the plaint in part. On the other hand, the first defendant has prayed for rejection of the plaint as a whole for the reason that it does not disclose a cause of action and not fulfilling the statutory provisions. In addition to the same, it is brought to our notice that this contention was not raised before the High Court and particularly in view of the factual details, the said decision is not applicable to the case in hand.

30. In the light of the above discussion, in view of the shortfall in the plaint averments and statutory provisions, namely, Order 7 Rule 11, Rule 14(1) and Rule 14(2), Forms 47 and 48 in Appendix A of the Code which are statutory in nature, we hold that the learned Single Judge of the High Court has correctly concluded that in the absence of any cause of action shown as against the first

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:02 ::: Pvr 90 comapl 360-17 Axis-22-10-18.odt

defendant, the suit cannot be proceeded either for specific performance or for the recovery of money advanced which according to the plaintiff was given to the second defendant in the suit and rightly rejected the plaint as against the first defendant. Unfortunately, the Division Bench failed to consider all those relevant aspects and erroneously reversed the decision of the learned Single Judge. We are unable to agree with the reasoning of the Division Bench of the High Court.

82. Similar view was taken by the Division Bench of this Court in

K.S.Dhondy Vs. Her Majesty The Queen of Netherlands & Anr

(Supra). Dr.Justice D.Y.Chandrachud (as His Lordship then was)

speaking for the bench held that the dismissal of the suit against the first

defendant was in order.

83. In Sejal Glass Ltd. (supra) the Court was concerned with

defendant's application under Order VII Rule 11(a) that there was no

cause of action against defendant no.2 to 4 in the suit in question in the

said decision. The Supreme Court held that it cannot be a rule of law

that once a part of a plaint cannot proceed, the other part also cannot

proceed, and the plaint as a whole must be rejected under Order VII

Rule 11. The Court recognized that in cases where the plaint survives

against certain defendants, against them Order VII Rule 11 will have no

application.

84. To support the contention that the jurisdiction of the Civil

Court is not completely ousted, on behalf of the plaintiffs, reliance is

placed on the decision of the Supreme Court in Nahar Industrial

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:02 ::: Pvr 91 comapl 360-17 Axis-22-10-18.odt

Enterprises Ltd. Vs. Hong Kong & Shanghai Banking Corporation

(supra). In this case the Supreme Court was considering an issue arising

out of an order passed by the High Court allowing the application of the

bank, transferring the civil suit filed by the appellant therein from the

Court of Civil Judge, Ludhiana to Debt Recovery Tribunal at Mumbai.

The question which fell for consideration of the Supreme Court was

'whether the High Court or Supreme Court has the power to transfer a

civil suit to Debt Recovery Tribunal; whether transfer of a civil suit from

the civil Court to Debt Recovery Tribunal could be tried as counterclaim.

It is in this context the Court examined the provisions of Section 9 of

CPC and the Recovery of Debts due to Banks and Financial Institutions

Act,1993. The Court held that the civil court indisputedly would have

jurisdiction to try a suit and if the suit is vexatious or otherwise not

maintainable action can be taken in terms of the Code. The Court also

considered the decision in Mardia Chemicals Ltd. & Ors. (supra) and

the observations as made in the said decision that the jurisdiction of the

civil court can be invoked in case of fraud and misrepresentation. The

Court held that the High Court could not have transferred the suit from

the civil court Ludhiana to the DRT, Mumbai. We are afraid as to how

this decision would assist the plaintiffs, when the question in the present

proceedings is completely distinct, namely whether the jurisdiction of

the civil court is barred in view of Section 34 of the Securitisation Act, as

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:02 ::: Pvr 92 comapl 360-17 Axis-22-10-18.odt

a closer scrutiny of the plaints as framed against the bank indicates that

the issue as set up in the plaint against the bank are the measures

adopted by the bank under Section 13(4) of Securitisation Act.

85. The reliance on behalf of the plaintiffs on the decision in

Indian Bank Vs. ABS Maritime Products Pvt. Ltd. (supra) is also not

well founded. In the said case the issue before the Supreme Court was

'whether a civil suit filed against the bank in Calcutta High Court for

recovery of certain amount as damages for non-disbursal of loan with

interest, could be transferred to the Debt Recovery Tribunal in view of

Section 19 of the the Debts Due to Banks and Financial Institutions Act.

The plea of the bank was rejected by the High Court. The contention of

the bank was that the recovery proceedings initiated by the bank against

the respondent and the respondent's suit for damages, were inextricably

connected and although the suit of the respondent was prior to the

application of the bank filed before the Tribunal, it was required to be

considered as a counterclaim and should be transferred to the tribunal.

The Supreme Court, however, did not accept the plea of the bank and

dismissed the appeals. It is in this context the Supreme Court examined

the powers of the civil court under Section 9 of CPC and Sections 17 and

18 of the the Debts Due to Banks and Financial Institutions Act, in

holding that the civil court's jurisdiction is barred only in regard to the

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:02 ::: Pvr 93 comapl 360-17 Axis-22-10-18.odt

application by bank or financial institutions for recovery of its debt and

that the jurisdiction of civil court is not barred in regard to any suit filed

by the borrower or any other person against a bank for any other relief

and it was held that the Calcutta High Court had jurisdiction to

entertain and try a civil suit filed by the borrower. It was held that there

is no provision in the Act for transfer of suits and proceedings, except

section 31 which relates to suit/proceeding by a Bank or financial

institution for recovery of a debt. Thus this decision would not assist the

plaintiffs, as in the present case there are no proceedings which are filed

by the bank before the Debt Recovery Tribunal and the issue is of

jurisdiction of the civil court to entertain a suit after the bank has

resorted to the measures under Section 13(4) of the Securitisation Act.

86. The plaintiffs' reliance on the decision of the Division Bench of

this Court in "Gopal Srinivasan vs National Spot Exchange" (supra) is

also not well founded, as in the facts of the said case, the Division Bench

has come to a conclusion that it was a case of mass illegalities, siphoning

of moneys, fraud etc and such being the allegations in the plaint, it was

held that the plaint could not be rejected against the appellant/

defendant. However, such is not the case in these appeals before us.

87. The Division Bench of this Court in State Bank of India Vs.

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:02 ::: Pvr 94 comapl 360-17 Axis-22-10-18.odt

Jigishaben B.Sanghavi & Ors. (supra) was considering an appeal

against the dismissal of an application seeking rejection of the plaint

under Order 7 Rule 11(d) of the CPC filed by the State Bank of India.

The applicant-State Bank of India had contended that Section 34 of

Securitisation Act created bar to the maintainability of the suit against

the State Bank of India. The plaintiffs in the said case had raised a

similar contention that there are no legal and valid mortgage in favour

of the bank, nor any security created in favour of the bank as against

rights of HUF of which plaintiffs were members. The Division Bench

examining the provisions of Securitisation Act and the principles of law

as laid down in Mardia Chemicals Ltd. (supra), held that Securitisation

Act provides a comprehensive scheme. It was held that the provisions of

Securitisation Act explicitly were applicable to challenge the measures

taken under Section 13(4) of the Securitisation Act and the challenge

thus fell necessarily before the tribunal by an appeal under Section 17

after the measures are taken. It was held that once the measures were

adopted under Section 13(4), the statutory remedy is available not only

to the borrowers but to "any person", aggrieved by the measures. Referring to the Decision of the Supreme Court in Authorised Officer,

Indian Overseas Bank Vs. Ashok Saw Mills (supra), the Court

observed that wide powers were conferred upon the banks and financial

institutions and any person who is aggrieved by the measures taken

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:02 ::: Pvr 95 comapl 360-17 Axis-22-10-18.odt

under Section 13(4) can approach the DRT. The Court observed that the

intention of the legislation in making the said provision was that the

banks and financial institutions be vested with stringent power for

recovery of dues and safeguards have also been provided for rectifying

any error or wrongful use of such powers by vesting with the DRT

powers of adjudication into such issues and to declare any such action

taken as invalid and also to restore possession even though possession

may have been made over to the transferee. The Legislature by

including sub-section (3) in Section 17 has vested the DRT with

authority to even set aside a transaction including sale and to restore

possession to the borrower in appropriate cases. It was observed that the

action taken by a secured creditor in terms of Section 13(4) of the

Securitisation Act is open to scrutiny and cannot only be set aside, but

even the status quo ante can be restored by the DRT. The Division

Bench accordingly, set aside the order passed by the learned Single

Judge and rejected the plaint against the bank. The observations of the

Court in paragraph 20 and 21A are required to be noted which read

thus:-

20. Where as in the present case, the grievance by a third VBC 23 app244.10-8.12 person is that : (i) There was no mortgage; (ii) There was no mortgage by the HUF; (iii) The mortgage, if any, is illegal in relation to the share alleged to be that of the HUF; and

(iv) No action had been instituted against the HUF before the Tribunal; hese are all grounds of challenge which, in substance, can be asserted before the Debts Recovery Tribunal. These are matters which the Debts Recovery Tribunal is empowered by or under the Act to determine. None of the grounds which are sought to be urged in the plaint fall outside the province and

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:02 ::: Pvr 96 comapl 360-17 Axis-22-10-18.odt

jurisdiction of the Debts Recovery Tribunal. Once we come to that conclusion, the necessary corollary is that recourse to proceedings in the form of a civil suit is barred by Section 34.

... ...

21A These observations of the Supreme Court emphasize that the exception which is carved out is a limited exception. Like all exceptions, this exception must be strictly construed. A borrower or a third party cannot be permitted to defeat or to render nugatory the provisions of the Act merely by a stray reference to an allegation of fraud or, as in the present case, by an averment in paragraph 15 of the plaint of "a systematic fraud". The entirety of the plaint has to be construed. Essentially, in the present case, the averments in the plaint are that: (i) The HUF was a co-owner/tenant in common of the residential flat; (ii) The Bank has taken recourse to proceedings for recovery to which the HUF was not a party; (iii) The Plaintiffs had, in the course of the recovery proceedings, raised an objection before the Recovery Officer to the tenability of the action taken by the Bank; (iv) The Bank had taken recourse to its remedy under the Securitization Act without awaiting the result of the objection raised by the Plaintiffs; (v) The action under Section 13(2) was initiated in disregard to the provisions of the Securitization Act; (vi) The mortgage executed by the Second, Third and Fourth Defendants was defective because the original Share Certificates were not with the Bank; (vii) The VBC 26 app244.10-8.12 First Defendant had no security interest and no secured assets and, therefore, was not entitled to invoke the provisions of Sub-section (4) of Section 13 against the right claimed by the HUF; (viii) A 'systematic fraud' was played by the First Defendant to pressurise the Plaintiffs; and

(ix) There was an absence of legal necessity which would vitiate the mortgage alleged to have been created by the Second Defendant as Karta of the HUF. The reliefs which are sought in the suit have already been adverted to earlier. These averments, when construed in their entirety, would reveal that the grievance which the Plaintiffs have in the suit is in respect of the validity of the mortgage which is alleged to have been executed by the Second Defendant as Karta of the HUF and of the tenability of the action adopted by the Bank under the Securitization Act, so as to meet the interest of the HUF claimed in the residential flat. The Plaintiffs as third parties have sufficient recourse to challenge the lawfulness of the action of the Bank by invoking their remedies under Section 17. Thus, clearly within the meaning of Section 34, a suit in respect of any matter which the Tribunal is empowered by or under the provisions of Section 17 to determine is barred. The suit, therefore, in our view, was clearly barred by Section 34. The VBC 27 app244.10-8.12 stray reference to an allegation of fraud in paragraph 15 of the Plaint is not sufficient to bring the case within the scope of the exception carved out by the Supreme Court in Mardia Chemicals."

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:02 :::

Pvr 97 comapl 360-17 Axis-22-10-18.odt

88. In "Jagdish Singh vs Heeralal & Ors." (supra), the Supreme Court

was examining the issue arising out of an order passed by the High Court in a

first appeal whereby the Division Bench set aside the order passed by the trial

court holding that a civil suit which was filed by respondent nos.1 to 5

(therein) before the Court of District Judge, Barwani, was not maintainable

against the bank in view of the provisions of Section 13 read with Section 34

of Securitisation Act. The Supreme Court examining the ambit of the

provisions of Sections 17 and 34 of the Securitisation Act set aside the orders

passed by the High Court holding that the measures taken under Section 13 of

Securitisation Act dealt with the enforcement of the security interest without

intervention of the Court and any person aggrieved by any such measures

referred in sub-section (4) of Section 13 has statutory right to appeal to the

Debt Recovery Tribunal under Section 17. It was held that Section 34 clearly

bars jurisdiction of civil court to entertain any suit or proceedings in respect of

"any matter" which the DRT or the appellate tribunal was empowered by or

under Securitisation act to determine, and the expression "in respect of any

matter" referred to in Section 34 would take within its ambit the " measures"

provided under sub-section (4) of Section 13 of the Securitisation Act. It was

held that any grievance against any measures taken by the borrower under

sub-section (4) of Section 13 of the Securitisation Act a remedy is open to the

aggrieved party to approach the DRT or the appellate tribunal and not the civil

court, as the civil court had no jurisdiction to entertain any suit or proceedings

in respect of the matter which fall under Section 13(4) of the Securitisation

Act and more particularly when Section 35 provides for overriding effect over

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:02 ::: Pvr 98 comapl 360-17 Axis-22-10-18.odt

the other laws, if they are inconsistent with the provisions of the Securitisation

Act, which takes within its purview Section 9 of the Code of Civil Procedure as

well. It was held that the bank had proceeded only against the secured assets

of the borrowers on which no rights of respondents therein have been

crystallized, before creating security interest in respect of the secured assets.

89. In a recent decision of the Supreme Court in the case

"Authorised Officer, State Bank of India vs. Allwyn Alloys Pvt.Ltd. &

Ors."54, the Supreme Court was considering the provisions of Section 13

and 34 of the Securitisation Act and the powers of DRT to adjudicate on

the issues arising out of security interest created in respect of the bank.

The Court held that mandate of Sections 13 and 34 clearly bars filing of

civil suit and no civil court can exercise jurisdiction to entertain any suit

or proceeding in respect of any matter which the DRT or DRAT is

empowered by or under the Securitisation Act. The Supreme Court set

aside the decision of the High Court which permitted respondent nos.5

and 6 therein to approach the competent forum for adjudication of their

right, title and interest in the premises in question. It would be

profitable to note the observations of the Court in paragraphs 8 and 9 of

the report. Mr.Justice A.M.Khanwilkar speaking for the Bench observed

as under:-

"8. After having considered the rival submissions of the parities, we have no hesitation in acceding to the argument urged on

54 (2018)8 SCC 120

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:02 ::: Pvr 99 comapl 360-17 Axis-22-10-18.odt

behalf of the Bank that the mandate of Section 13 and, in particular, Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act,2002 (for short 'the 2002 Act'), clearly bars filing of a civil suit. For, no civil court can exercise jurisdiction to entertain any suit or proceeding in respect of any matter which a DRT or DRAT is empowered by or under this Act to determine and no injunction can be granted by any court or authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the Act.

9. The fact that the stated flat is the subject-matter of a registered sale deed executed by Respondents 5 and 6 (writ petitioners) in favour of Respondents 2 to 4 and which sale deed has been deposited with the Bank along with the share certificate and other documents for creating an equitable mortgage and the Bank has initiated action in that behalf under the 2002 Act, is indisputable. If so, the question of permitting Respondents 5 and 6 (writ petitioners) to approach any other forum for adjudication of issues raised by them concerning the right, title and interest in relation to the said property, cannot be countenanced. ... ... ...."

90. In the light of the above discussion, we are of the clear

opinion that the learned Single Judge was in an error in holding that the

plaints against the bank were not barred under Section 34 of the

Securitisation Act and consequently in rejecting the notices of motion

and holding that the suits were not barred against the bank.

91. We accordingly set aside the impugned order and allow the

notices of motion as filed by the plaintiffs. Ordered accordingly. No

costs.

92. Our observations are limited in the context of the issues

arising before us under the provisions of Order VII Rule 11 of C.P.C.

[G.S. KULKARNI, J.] [ACTING CHIEF JUSTICE]

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:02 ::: Pvr 100 comapl 360-17 Axis-22-10-18.odt

93. The learned Counsel Mr.Vaishnawa for the respondents seeks

stay of the order. The request is opposed by the other side. It is

submitted that the next date of suit is after four weeks. The request for

stay is rejected.

[G.S. KULKARNI, J.] [ACTING CHIEF JUSTICE]

::: Uploaded on - 26/10/2018 ::: Downloaded on - 27/10/2018 03:35:02 :::