//
archives

Indian Bank

This tag is associated with 4 posts

DRT – Recovery of Debts due to Banks and Financial Institutions Act, 1993 -whether a suit containing a “counter-claim” or claiming a “set-off” filed by a debtor can be heard and tried before the Debt Recovery Tribunal (hereinafter referred to as ‘DRT’) under the RDB Act or must be tried by a Civil Court alone. – Apex court held that there is a difference opinion between several Benches of this court – directed the registry to place the case before CJ = CIVIL APPEAL Nos.8973-8973 OF 2014 (Arising out of Special Leave Petition (C) Nos. 975-976 of 2012) Bank of Rajasthan Ltd. …. Appellant Versus VCK Shares & Stock Broking Services Ltd. …. Respondent = 2014 – Sept.Month – http://judis.nic.in/supremecourt/filename=41930

DRT – Recovery of  Debts  due  to  Banks  and  Financial  Institutions  Act,  1993 -whether a suit containing a  “counter-claim” or claiming a “set-off” filed by a debtor can be heard and tried before  the Debt Recovery Tribunal (hereinafter referred to as ‘DRT’) under the RDB  Act or must be tried by a Civil Court alone. – Apex court held that … Continue reading

SARFAESI Act, verses Official liquidator under companies Act = any sale conducted defraud other secured creditor within one year after the commencement of company petition is void = There cannot be any doubt of the fact from the dates given earlier that the transfer was within a period of six months from the date of presentation of the liquidation proceedings and consequently it is statutorily invalid and the law does not recognize it. In fact, an attempt was sought to be made that there is no reference to sale in either of the Sections and it only refers to transfer and consequently these provisions can have no application. It has to be held that the transfer of interest in immovable property is in consequence of a sale and therefore the word transfer takes in its fold the very act of sale. Therefore, by applying Section 531 it is quite clear that the transfer shall be deemed to be invalid. 12. Even under Section 531-A it is quite clear if the sale was within a period of one year from the date of presentation of the liquidation proceedings as against the Official Receiver who represents the body of the creditors on his appointment after the winding up proceedings, the sale is void. Therefore, by applying Section 531 or 531-A it is quite clear from any angle the sale in this case is hit by the above provisions and when the sale is statutorily invalid or void there is no need for a relief to be asked by the Official Receiver to set aside the sale or approach the Debt Recovery Tribunal, since these two provisions are to be exclusively dealt by the Company Court alone, which is rightly contended by the Official Liquidator. I hold that this Court alone can decide the binding nature of the transactions under Section 531 or 531(A) of the Companies Act. It is to be noted that the powers conferred under the SARFAESI Act for the Bank or the Authorized Officer is only in order to avoid the delay of legal proceedings and it does not give any right or advantage to misuse the power of quasi judicial nature in order to convert a Non Performing Asset and realize the money by adopting improper mode. Therefore, for all the above reasons, I hold that the sale as held by the Authorized Officer on behalf of the Creditor Bank is void and the right of the Official Receiver in the liquidation proceedings cannot be defeated and as the sale is void, it goes to the root of the obligations between the auction purchaser and the Authorized Officer and when once the sale is set aside as void, it is needless to say that the Creditor Bank cannot take advantage of the void sale and the auction purchaser shall be restored to the same position prior to the sale and any amount realized by the Creditor Bank cannot be retained by it. Accordingly, W.P.No.19297 of 2012 is allowed granting the reliefs claimed thereunder. W.P.No.33655 of 2011 and Company Application No.1972 of 2011 are dismissed. Consequent on the orders holding that the sale as void as it comes within the purview of this Court, Company Application No.421 of 2013 is also allowed as a consequence of the sale being held as void under Section 531 and 531 (A) of the Companies Act. No costs.

HON’BLE SRI JUSTICE N.R.L. NAGESWARA RAO WRIT PETITION Nos.19297 of 2012 & 33655 of 2011 & COMP.A.Nos.1972 of 2011 & 421 of 2013 in C.P.No.215 of 2010 22.04.2013. M/s. United Steel Allied Industries Private Limited ….Petitioner M/s. Indian Bank, Corporate Office, and others …Respondents Counsel for the Petitioner: Counsel for the Respondents: <Gist : >Head … Continue reading

Specific Relief Act, 1963: s.16(c) – Suit for specific performance of contract – “Readiness and willingness” – Connotation of – HELD: Clause (c) of s.16 mandates that the person seeking specific performance must prove that he has performed or has been ready and willing to perform the essential terms of the contract which are to be performed by him – It is a condition precedent for obtaining the relief – The onus is on the plaintiff – In the instant case, the plaintiff has proved his readiness and willingness to perform his part of obligation under the contract. Contract Act, 1872: ss. 31 and 32 – Contingent contract – Suit land mortgaged to Bank – Owners entering into agreement for sale with plaintiff and undertaking to discharge their loans and to execute sale deed in favour of plaintiff after discharge of mortgage – HELD: Clauses in the agreement to discharge the loan of the Bank and handover the original title deeds to the plaintiff cannot be construed as impossible event so as to affect the terms of the contract to become void – Nor can it be said that the contract was a contingent contract – Doctrine of impossibility cannot be permitted to become a device for destroying the sanctity of a contract – Doctrines – Doctrine of impossibility. Transfer of Property Act, 1882: ss.56 and 81 – Plea of marshalling – Suit for specific performance of agreement for sale of suit property which was mortgaged to Bank – Decree of specific performance granted – Appeal before High Court – Plea of marshalling raised as the suit property was brought to auction by orders of DRT, along with other properties of vendors – HELD: Plea of marshalling being pure question of law based upon the decree obtained cannot simply be thrown out merely because the same was not specifically pleaded – In the instant case, High Court has rightly granted the relief to the plaintiff – Merely because proceedings are pending before DRT, it is not a bar for approaching civil court for relief u/s 56 of TP Act – Recovery of Debts Due to Bank and Financial Institutions Act, 1963. Constitution of India, 1950: Article 226 – Writ petition involving same property as in pending appeal before High Court – HELD: There is no bar for the Division Bench of the High Court which has jurisdiction to hear the appeal, to hear writ petition when the same is connected with the main issue – Besides, in the instant case, no such objection was raised before the High Court. Article 136 – Jurisdiction of Supreme Court – HELD: Even if leave is granted, irrespective of the nature of the subject matter, the appellant must show the exceptional and special circumstances and, if there is no interference by the Court, substantial and great injustice would result. Code of Civil Procedure, 1908: s. 35 – Costs – HELD: In asmuch as the plaintiff after valuing the suit and paying substantial court fee, secured a decree for specific performance, though he could not secure a relief in its entirety, the plaintiff is entitled to his costs. Jurisdiction: Appeal and writ petition before High Court arising out of decree of specific performance, and directions of DRT in respect of same property – Direction by High Court to Bank vis- =Dismissing the appeals, the Court HELD: 1.1. “Readiness and willingness” is enshrined in clause (c) of s. 16(c) of the Specific Relief Act, 1963. This clause provides that the person seeking specific performance must prove that he has performed or has been ready and willing to perform the essential terms of the contract which are to be performed by him. The words “ready” and “willing” imply that the person was prepared to carry out the terms of the contact. The distinction between “readiness” and “willingness” is that the former refers to financial capacity and the latter to the conduct of the plaintiff wanting performance. Generally, readiness is backed by willingness. [para 8-9] [561-G-H; 562-A-B] 1.2. Section 16(c) of the Specific Relief Act, 1963 mandates “readiness and willingness” on the part of the plaintiff and it is a condition precedent for obtaining relief of grant of specific performance. It is also clear that in a suit for specific performance, the plaintiff must allege and prove a continuous “readiness and willingness” to perform the contract on his part from the date of the contract. The onus is on the plaintiff. It is settled law that even in the absence of specific plea by the opposite party, it is the mandate of the statute that plaintiff has to comply with Section 16(c) of the Specific Relief Act and when there is non-compliance with this statutory mandate, the Court is not bound to grant specific performance and is left with no other alternative but to dismiss the suit. It is also clear that readiness to perform must be established throughout the relevant points of time. “Readiness and willingness” to perform the part of the contract has to be determined/ascertained from the conduct of the parties. [para 12] [563-E-H; 562-A] N.P. Thirugnanam vs. Dr. R. Jagan Mohan Rao & Ors., 1995 (2) Suppl. SCR 53= (1995) 5 SCC 115; P.D’Souza vs. Shondrilo Naidu, 2004 (3) Suppl. SCR 186= (2004) 6 SCC 649 – relied on. R.C. Chandiok & Anr. vs. Chuni Lal Sabharwal & Ors., 1971 SCR 573= (1970) 3 SCC 140 – referred to. 1.3. Insofar as readiness and willingness on the part of the plaintiff in the instant case is concerned, apart from the specific plea in the plaint and his assertion in the witness box at the time of trial, about the payment and advance of substantial amount, he also placed the relevant materials in the form of letters to show that he was corresponding with the Bank for early settlement of the dues. The plaintiff has demonstrated by placing oral and documentary evidence that on the date of execution of Ex. A-3, he has paid further advance of Rs. 24 lakhs and Rs. 50 lakhs on 18.04.2006. In order to prove that he had sufficient means of finance, the plaintiff has produced documents under Exts. A-12 and A-13. In his evidence as PW-1, he has asserted that he had ready cash and also produced Fixed Deposit Receipt (Ex.A-11), proof of Savings Bank Accounts (Exts. A-12 and A-13). Exts. A-11 to A-13 coupled with assertion made in the oral evidence of PW-1, would amply show that plaintiff had sufficient cash and financial capacity to complete the transaction. Under Ext. A-4, he had intimated that he is prepared to get the sale executed. The Courts below are, therefore, right in arriving at a conclusion that the plaintiff has proved and complied with the mandates provided u/s 16 (c) of the Specific Relief Act. [para 17-18] [566-A-B; 567-A-E-G; 566-B-C] 1.4. Further, the plaintiff is required to pay the balance amount of consideration only on the event of a demand made for payment of further amount by the defendants on the basis of the confirmation letter to be obtained from the bank as per the agreement for sale under Ext. A-3. Absolutely, there is no evidence as to any demand made by defendant Nos. 1 and 2 from the plaintiff for further payment of sale price. Defendant Nos. 1 and 2 did not lead any oral evidence in support of their claim. They also avoided the witness box. As rightly pointed out by the High Court, mere withdrawal of Rs. 10,01,000/- deposited in “No-lien account” by the plaintiff has no significance since subsequent to the same both parties have entered into agreement for sale (Ext.A-3) on 03.02.2006 on which date the plaintiff has also paid a further advance of Rs. 25 lakhs, and further obtained advance of Rs. 50 lakhs from the plaintiff on 18.04.2006 and made endorsement in the agreement for sale (Ext.A-3). These facts have been clearly explained by PW-1 in his evidence and he also asserted that the same fact was orally informed to defendant Nos. 1 and 2. There is no reason to disbelieve the assertion of PW-1. [para 18] [567-F-G; 568-A-B-G- H; 569-A-C] 1.5. With the materials placed, specific assertion in the plaint, oral and documentary evidence as to execution of agreement, part-payment of sale consideration, having sufficient cash and financial capacity to execute the sale deed, bank statements as to the moneys in fixed deposits and saving accounts, the plaintiff has proved his “readiness” and “willingness” to perform his part of obligation under the contract. The concurrent findings of the trial court as well the High Court as to readiness and willingness to perform plaintiff’s part of the obligations under the contract, in the absence of any acceptable contra evidence, is confirmed. [para 19] [569-D- F] 2.1. Contingent contract has been defined in s.31 and method of enforcement is stated in s.32 of the Contract Act, 1872. It is clear that if the condition prescribed or even described in the contract is impossible, undoubtedly, such contracts become void and not enforceable in terms of s. 32. In the instant case, among various clauses, Clauses 4, 6, 7 in the MoU (Ext. A-2) were highlighted by the appellants to contend uncertain events and impossible conditions at the hands of the Bank. But the agreement for sale dated 03.02.2006 is a fresh agreement and, therefore, Clauses 4, 6 and 7 of the MoU (Ext. A-2) would not govern the parties. It is relevant to note that in the plaint, this aspect has been specifically pleaded wherein it was highlighted that the plaintiff sought for performance of contract strictly in accordance with the original Memorandum of Understanding (MoU) dated 15.08.2005 as merged with the agreement for sale dated 03.02.2006 entered into between the plaintiff and the defendant Nos. 1 and 2 for sale and purchase of the suit property. As per Clause 3, 4 and 6 in Ex. A-3, the vendor and defendant Nos. 1 and 2 have undertaken to discharge their loans and hand over title deeds. In view of Ext. A-3, the conditions incorporated in Ext. A-2 need not be complied with and it cannot be said that the contract was a contingent contract and unless and until a letter of confirmation issued by the Indian Bank, the same is not enforceable. The vendors have agreed to sell the property but agreed to execute the sale deed after discharge of the mortgage in favour of the defendants. It was only the execution of the sale deed which was postponed to a future date. The clauses referred in Ext. A-3 do not insist the sale deed is to be executed only after the acceptance of OTS proposal by the Bank. [para 21-22] [570-C-D-F-H; 571-A-G; 572-C-E] 2.2. Clause 4 of Ext. A-3, makes it clear that to discharge the loans of the Bank, the vendors are free to make a request to the purchaser, namely, the plaintiff, to make further advance and after getting the amount from the plaintiff, defendant Nos. 1 and 2 have to secure documents from the Bank. The trial Court as well as the High Court held that there is no material to show that defendant Nos. 1 and 2 made any attempt to comply with Clause 4 in Ex. A-3 by requiring the plaintiff to make further advance. The conduct of the plaintiff in keeping the required money, no doubt, in his SB account for the purpose of meeting the demand of defendant Nos. 1 and 2 cannot be ignored. [para 22] [572-F-H; 573-A] 2.3. Even otherwise, the agreement to discharge the loans of the Bank and handover the original title deeds to the plaintiff cannot be construed as impossible event so as to affect the terms of contract to become void. The contract in question did not come to an end on this ground and such contract is not a contingent contract and undoubtedly, the Court has jurisdiction to grant relief in terms of the contract. Obtaining No Objection Certificate (NOC) from the authority concerned, clearance of NOC from Income Tax Department or any other State/Central authority, securing title deeds after clearing certain loans are incidental and implied covenant on the part of the vendors to do the needful to give effect to the agreement. [para 22-23] [573-B-E] 2.4. It is also relevant to note that though defendant Nos. 1 and 2, at the first instance offered OTS for Rs. 148 lakhs, the Bank, after taking into consideration various aspects claimed Rs. 629.60 lakhs as their proposal. It was not an impossible performance considering the amount borrowed by the sister agency of defendant no.1 and various properties possessed by defendant Nos. 1 and 2 in prime localities of the city and in and around the sub-urban areas. The contract in question is capable of performance and the plea of the appellants that it is a contingent contract and incapable of performance cannot be accepted. Besides, this was not an issue before the trial Court and such plea was not raised in the written statement. Further, defendant Nos. 1 and 2 did not bother to explain all salient features by entering the witness box in support of their claim. The plaintiff has established that he has partially performed his part of obligations by paying the advance amount of Rs. 25 lakhs and another Rs. 50 lakhs in addition to the initial deposit of Rs. 1 Lakh. The plaintiff has proved his readiness and willingness and financial ability to complete the sale transaction. [para 24-25] [573-F-H; 574-A-C] 2.5. The court will not apply the doctrine of impossibility to assist a party which does not want to fulfil its obligations under them contract. The said doctrine cannot be permitted to become a device for destructing the sanctity of contract. [para 34] [579-E] 3.1. The doctrine of marshalling rests upon the principle that a creditor who has the means of satisfying his debt out of several funds shall not, by the exercise of his right, prejudice another creditor whose security comprises only one of the funds. Section 56 of the Transfer of Property Act, 1882 deals with the right of subsequent purchaser to claim marshalling. The High Court after noting that the plaintiff had paid substantial amount as advance and secured decree for specific performance came to the conclusion that the right of marshalling is available to the plaintiff. The concept as in s.56 applies to sales in a manner similar to s. 81 which applies to mortgages alone. [para 27-28] [575-A-B-E] 3.2. In the instant case, in view of the sale agreement which results into decree for specific performance, the plaintiff is entitled to insist upon defendant Nos. 1 to 3 to have the mortgage debt satisfied out of the properties not sold to the plaintiff and in any case if the sale proceeds are not sufficient, then only to proceed against the said suit properties. It is not in dispute that the plea of marshalling and applicability of s.56 of the T.P. Act was not raised before the trial Court. However, if the entire plaint is considered, the plaintiff has claimed a larger relief. Even otherwise, the plea of marshalling being pure question of law based upon the decree obtained for specific performance, cannot simply be thrown out merely because the same was not specifically pleaded. [para 29-30] [575-F-G; 577-D-E] Anathula Sudhakar vs P. Buchi Reddy (Dead) By Lrs. And Ors. 2008 (5) SCR 331 = (2008) 4 SCC 594; Bachhaj Nahar vs. Nilima Mandal and Anr. 2008 (14) SCR621 = (2008) 17 SCC 491 – held inapplicable. 3.3. It is significant to note that the relief has been prayed in the plaint by paying substantial court fee of Rs. 41,66,326.50. In such circumstances, when a party is able to secure substantial relief, namely, decree for specific performance with clearance of mortgage amount, it is the duty of the court to mould the relief so as to render substantial justice between the parties. In this regard, the High Court has adopted the right course in granting relief to the plaintiff. [para 32] [578-G] 3.4. Merely because for recovery of the loan secured by banks, a special Act, namely, Recovery of Debts due to Banks and Financial Institutions Act, 1993 has been enacted, it is not a bar for approaching the civil court to apply for other relief such as s.56 of the T.P. Act. By issuing the direction on the application of s. 56 of the T.P. Act, the Division Bench has not modified or eroded the order passed by the DRT. On the other hand, it is an admitted fact that the Bank has accepted the impugned verdict of the High Court and did not challenge the same before this Court by filing an appeal. Further, by granting such a relief, the Bank is not prejudiced in any way by bringing other properties for sale first, to satisfy the mortgage debt payable by defendant Nos. 1 and 2. In fact, the High Court was conscious and safeguarding the interests of the Bank observed that if sale proceeds of other items of properties are not sufficient to satisfy the debt payable to the Bank by defendant Nos. 1 and 2, in that event, Bank can proceed against the suit properties. [para 33] [578-H; 579-A-D] 4. As regards the High Court hearing the writ petition along with the appeals, the writ petition was filed by the very same plaintiff impleading defendant Nos. 1 and 2, M/s `A A’, which is a sister concern of defendant No. 1, and defendant no.3-Bank, apart from Union of India, praying for issuance of a writ of mandamus forbearing the respondents from bringing to auction the suit property, forming the subject matter of the decree in his favour in O.S. No 336 of 2006 on the file of the Principal District Judge. It is not in dispute that the parties in the appeals as well as in the writ petition are one and the same except Union of India against whom the writ petitioner has not sought any relief. It is also not in dispute that the subject matter of the lis and properties are one and the same in both the appeals and the writ petition. There is no bar for the Division Bench which has jurisdiction to hear appeal, to hear writ petition when the same is connected with the main issue. In fact, no serious objection was raised before the High Court for hearing the writ petition along with the appeal. On the other hand, on the earlier occasion, when the parties filed special leave petitions against certain interim orders, this Court requested the High Court to dispose of all the matters together. It is relevant to point out that no clarification or direction was sought in respect of the said order passed by the Supreme Court. [para 35] [579-F-H; 580-A-D] Brahm Parkash vs. Manbir Singh & Ors., [1964] 2 SCR 324; Sain Ditta Mal vs. Bulagi Mal & Sons and others AIR (34) Lahore 230; and Karam Singh Sobti vs. Smt Shukla Bedi, AIR 1962 Punjab High Court at Delhi 477 – referred to. 5. Section 35 CPC speaks about costs. Though, in the grounds raised in the appeal, no serious argument was advanced about the award of costs, the appellants have agitated the award of cost by the High Court in favour of the plaintiff. Inasmuch as the plaintiff after valuing the suit paid a substantial court fee of Rs. 41,66,326.50 and, ultimately, secured a decree for specific performance though he could not secure a relief in its entirety, the plaintiff is entitled for his costs. It is not in dispute that the court has granted the major relief, namely, decree for specific performance subject to clearance of the mortgage debt. In the circumstances, the High Court rightly ordered costs payable by the contesting defendant Nos. 1 and 2 to the plaintiff. [para 40] [583-E-H] 6. As regards directions to the Recovery Officer/Tribunal, the High Court took into consideration various connected issues in respect of the same properties and several orders passed by the Civil Court and the DRT and the fact that defendant Nos. 1 and 2 have sufficient other properties in prime locations in the city and other nearby places and also of the fact that the Bank was also party to both these proceedings. The Bank also accepted the impugned order of the High Court and did not file any appeal before this Court. The directions/clarifications issued by the High Court do not run counter to the orders of DRT/Recovery Officers, on the other hand, it safeguards the interest of all parties. Only because of the delay on the part of defendant Nos. 1 and 2 in not settling the dues of the Bank at the appropriate time, in the recent times, property value has risen to some extent. On this ground, the direction of the High Court about the sale of the said properties cannot be interfered with. [para 41] [684-A-F] Allahabad Bank vs. Canara Bank & Anr., 2000 (2) SCR1102= (2000) 4 SCC 406, State Bank of India vs. Allied Chemical Laboratories & Anr., (2006) 9 SCC 252, India Household and Healthcare Ltd. vs. LG Houshold and Healthcare Ltd. 2007 (3) SCR726 = (2007) 5 SCC 510 – referred to. 7. So far as interference under Article 136 of the Constitution of India is concerned, even after issuance of notice in the special leave petition and after grant of leave, irrespective of the nature of the subject matter, the appellants must show that exceptional and special circumstances exists and, if there is no interference by this Court, substantial and grave injustice will result and that the case has features of sufficient gravity to warrant a decision from this Court on merits. [para 46] [589-D-E] Balvantrai Chimanlal Trivedi, Manager Raipur Manfg. Co. Ltd., Ahmedabad vs. M.N. Nagrashna and Others AIR 1960 SC 407; Balvantrai Chimanlal Trivedi vs. M.N. Nagrashna and Others, AIR 1960 SC 1292; Taherakhatoon (D) By Lrs. vs. Salambin Mohammad, 1999 (1) SCR 901= (1999) 2 SCC 635; Chandra Singh and Ors. vs. State of Rajasthan and Anr. 2003 (1) Suppl. SCR674= (2003) 6 SCC 545 – relied on. Case Law Reference: 1995 (2) Suppl. SCR53 relied on para 9 2004 (3) Suppl. SCR186 relied on para 11 1971 SCR573 referred to para 12 2008 (5) SCR331 held inapplicable para 31 2008 (14) SCR621 held inapplicable para 31 AIR (34) Lahore 230 referred to para 37 AIR 1962 Punjab High Court at Delhi 477 referred to para 37 [1964] 2 SCR 324 referred to para 38 2000 (2) SCR1102 referred to para 41 (2006) 9 SCC 252 referred to para 41 2007 (3 ) SCR726 referred to para 41 AIR 1960 SC 407 relied on para 43 AIR 1960 SC 1292 relied on para 44 1999 (1) SCR 901 relied on para 45 2003 (1) Suppl. SCR674 relied on para 46 CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 9821-9822 of 2010. From the Judgment & Order dated 23.2.2010 of the High Court of Judicature at Madras in A.S. No. 708 of 2008 and Judgment order dated 29.4.2010 in Review Application No. 37 of 2010 in A.S. No. 708 of 2008. WITH C.A. Nos. 9824-9825 & 9826 of 2010. L. Nageshwar Rao, Nalini Chidambaram, R.F. Nariman, K.V. Viswanathan, Bhargava V. Desai, Rahul Gupta, Nikhil Sharma, Pallavi Mohan, K.K. Mani, R. Thiagarajan, Vasudha Thiagarajan, Abhishek Krishna, Himanshu Munshi for the appearing parties.

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOs. 9821-9822 OF 2010 (Arising out of S.L.P. (C) Nos. 14985-14986 of 2010) M/s J.P. Builders & Anr. …. Appellant(s) Versus A. Ramadas Rao & Anr. …. Respondent(s) WITH CIVIL APPEAL NOs. 9824-9825 OF 2010 (Arising out of S.L.P.(C) Nos. 15008-15009 of 2010) … Continue reading

Specific Relief Act, 1963: s.16(c) – Suit for specific performance of contract – “Readiness and willingness” – Connotation of – HELD: Clause (c) of s.16 mandates that the person seeking specific performance must prove that he has performed or has been ready and willing to perform the essential terms of the contract which are to be performed by him – It is a condition precedent for obtaining the relief – The onus is on the plaintiff – In the instant case, the plaintiff has proved his readiness and willingness to perform his part of obligation under the contract. Contract Act, 1872: ss. 31 and 32 – Contingent contract – Suit land mortgaged to Bank – Owners entering into agreement for sale with plaintiff and undertaking to discharge their loans and to execute sale deed in favour of plaintiff after discharge of mortgage – HELD: Clauses in the agreement to discharge the loan of the Bank and handover the original title deeds to the plaintiff cannot be construed as impossible event so as to affect the terms of the contract to become void – Nor can it be said that the contract was a contingent contract – Doctrine of impossibility cannot be permitted to become a device for destroying the sanctity of a contract – Doctrines – Doctrine of impossibility. Transfer of Property Act, 1882: ss.56 and 81 – Plea of marshalling – Suit for specific performance of agreement for sale of suit property which was mortgaged to Bank – Decree of specific performance granted – Appeal before High Court – Plea of marshalling raised as the suit property was brought to auction by orders of DRT, along with other properties of vendors – HELD: Plea of marshalling being pure question of law based upon the decree obtained cannot simply be thrown out merely because the same was not specifically pleaded – In the instant case, High Court has rightly granted the relief to the plaintiff – Merely because proceedings are pending before DRT, it is not a bar for approaching civil court for relief u/s 56 of TP Act – Recovery of Debts Due to Bank and Financial Institutions Act, 1963. Constitution of India, 1950: Article 226 – Writ petition involving same property as in pending appeal before High Court – HELD: There is no bar for the Division Bench of the High Court which has jurisdiction to hear the appeal, to hear writ petition when the same is connected with the main issue – Besides, in the instant case, no such objection was raised before the High Court. Article 136 – Jurisdiction of Supreme Court – HELD: Even if leave is granted, irrespective of the nature of the subject matter, the appellant must show the exceptional and special circumstances and, if there is no interference by the Court, substantial and great injustice would result. Code of Civil Procedure, 1908: s. 35 – Costs – HELD: In asmuch as the plaintiff after valuing the suit and paying substantial court fee, secured a decree for specific performance, though he could not secure a relief in its entirety, the plaintiff is entitled to his costs. Jurisdiction: Appeal and writ petition before High Court arising out of decree of specific performance, and directions of DRT in respect of same property – Direction by High Court to Bank vis- = Dismissing the appeals, the Court HELD: 1.1. “Readiness and willingness” is enshrined in clause (c) of s. 16(c) of the Specific Relief Act, 1963. This clause provides that the person seeking specific performance must prove that he has performed or has been ready and willing to perform the essential terms of the contract which are to be performed by him. The words “ready” and “willing” imply that the person was prepared to carry out the terms of the contact. The distinction between “readiness” and “willingness” is that the former refers to financial capacity and the latter to the conduct of the plaintiff wanting performance. Generally, readiness is backed by willingness. [para 8-9] [561-G-H; 562-A-B] 1.2. Section 16(c) of the Specific Relief Act, 1963 mandates “readiness and willingness” on the part of the plaintiff and it is a condition precedent for obtaining relief of grant of specific performance. It is also clear that in a suit for specific performance, the plaintiff must allege and prove a continuous “readiness and willingness” to perform the contract on his part from the date of the contract. The onus is on the plaintiff. It is settled law that even in the absence of specific plea by the opposite party, it is the mandate of the statute that plaintiff has to comply with Section 16(c) of the Specific Relief Act and when there is non-compliance with this statutory mandate, the Court is not bound to grant specific performance and is left with no other alternative but to dismiss the suit. It is also clear that readiness to perform must be established throughout the relevant points of time. “Readiness and willingness” to perform the part of the contract has to be determined/ascertained from the conduct of the parties. [para 12] [563-E-H; 562-A] N.P. Thirugnanam vs. Dr. R. Jagan Mohan Rao & Ors., 1995 (2) Suppl. SCR 53= (1995) 5 SCC 115; P.D’Souza vs. Shondrilo Naidu, 2004 (3) Suppl. SCR 186= (2004) 6 SCC 649 – relied on. R.C. Chandiok & Anr. vs. Chuni Lal Sabharwal & Ors., 1971 SCR 573= (1970) 3 SCC 140 – referred to. 1.3. Insofar as readiness and willingness on the part of the plaintiff in the instant case is concerned, apart from the specific plea in the plaint and his assertion in the witness box at the time of trial, about the payment and advance of substantial amount, he also placed the relevant materials in the form of letters to show that he was corresponding with the Bank for early settlement of the dues. The plaintiff has demonstrated by placing oral and documentary evidence that on the date of execution of Ex. A-3, he has paid further advance of Rs. 24 lakhs and Rs. 50 lakhs on 18.04.2006. In order to prove that he had sufficient means of finance, the plaintiff has produced documents under Exts. A-12 and A-13. In his evidence as PW-1, he has asserted that he had ready cash and also produced Fixed Deposit Receipt (Ex.A-11), proof of Savings Bank Accounts (Exts. A-12 and A-13). Exts. A-11 to A-13 coupled with assertion made in the oral evidence of PW-1, would amply show that plaintiff had sufficient cash and financial capacity to complete the transaction. Under Ext. A-4, he had intimated that he is prepared to get the sale executed. The Courts below are, therefore, right in arriving at a conclusion that the plaintiff has proved and complied with the mandates provided u/s 16 (c) of the Specific Relief Act. [para 17-18] [566-A-B; 567-A-E-G; 566-B-C] 1.4. Further, the plaintiff is required to pay the balance amount of consideration only on the event of a demand made for payment of further amount by the defendants on the basis of the confirmation letter to be obtained from the bank as per the agreement for sale under Ext. A-3. Absolutely, there is no evidence as to any demand made by defendant Nos. 1 and 2 from the plaintiff for further payment of sale price. Defendant Nos. 1 and 2 did not lead any oral evidence in support of their claim. They also avoided the witness box. As rightly pointed out by the High Court, mere withdrawal of Rs. 10,01,000/- deposited in “No-lien account” by the plaintiff has no significance since subsequent to the same both parties have entered into agreement for sale (Ext.A-3) on 03.02.2006 on which date the plaintiff has also paid a further advance of Rs. 25 lakhs, and further obtained advance of Rs. 50 lakhs from the plaintiff on 18.04.2006 and made endorsement in the agreement for sale (Ext.A-3). These facts have been clearly explained by PW-1 in his evidence and he also asserted that the same fact was orally informed to defendant Nos. 1 and 2. There is no reason to disbelieve the assertion of PW-1. [para 18] [567-F-G; 568-A-B-G- H; 569-A-C] 1.5. With the materials placed, specific assertion in the plaint, oral and documentary evidence as to execution of agreement, part-payment of sale consideration, having sufficient cash and financial capacity to execute the sale deed, bank statements as to the moneys in fixed deposits and saving accounts, the plaintiff has proved his “readiness” and “willingness” to perform his part of obligation under the contract. The concurrent findings of the trial court as well the High Court as to readiness and willingness to perform plaintiff’s part of the obligations under the contract, in the absence of any acceptable contra evidence, is confirmed. [para 19] [569-D- F] 2.1. Contingent contract has been defined in s.31 and method of enforcement is stated in s.32 of the Contract Act, 1872. It is clear that if the condition prescribed or even described in the contract is impossible, undoubtedly, such contracts become void and not enforceable in terms of s. 32. In the instant case, among various clauses, Clauses 4, 6, 7 in the MoU (Ext. A-2) were highlighted by the appellants to contend uncertain events and impossible conditions at the hands of the Bank. But the agreement for sale dated 03.02.2006 is a fresh agreement and, therefore, Clauses 4, 6 and 7 of the MoU (Ext. A-2) would not govern the parties. It is relevant to note that in the plaint, this aspect has been specifically pleaded wherein it was highlighted that the plaintiff sought for performance of contract strictly in accordance with the original Memorandum of Understanding (MoU) dated 15.08.2005 as merged with the agreement for sale dated 03.02.2006 entered into between the plaintiff and the defendant Nos. 1 and 2 for sale and purchase of the suit property. As per Clause 3, 4 and 6 in Ex. A-3, the vendor and defendant Nos. 1 and 2 have undertaken to discharge their loans and hand over title deeds. In view of Ext. A-3, the conditions incorporated in Ext. A-2 need not be complied with and it cannot be said that the contract was a contingent contract and unless and until a letter of confirmation issued by the Indian Bank, the same is not enforceable. The vendors have agreed to sell the property but agreed to execute the sale deed after discharge of the mortgage in favour of the defendants. It was only the execution of the sale deed which was postponed to a future date. The clauses referred in Ext. A-3 do not insist the sale deed is to be executed only after the acceptance of OTS proposal by the Bank. [para 21-22] [570-C-D-F-H; 571-A-G; 572-C-E] 2.2. Clause 4 of Ext. A-3, makes it clear that to discharge the loans of the Bank, the vendors are free to make a request to the purchaser, namely, the plaintiff, to make further advance and after getting the amount from the plaintiff, defendant Nos. 1 and 2 have to secure documents from the Bank. The trial Court as well as the High Court held that there is no material to show that defendant Nos. 1 and 2 made any attempt to comply with Clause 4 in Ex. A-3 by requiring the plaintiff to make further advance. The conduct of the plaintiff in keeping the required money, no doubt, in his SB account for the purpose of meeting the demand of defendant Nos. 1 and 2 cannot be ignored. [para 22] [572-F-H; 573-A] 2.3. Even otherwise, the agreement to discharge the loans of the Bank and handover the original title deeds to the plaintiff cannot be construed as impossible event so as to affect the terms of contract to become void. The contract in question did not come to an end on this ground and such contract is not a contingent contract and undoubtedly, the Court has jurisdiction to grant relief in terms of the contract. Obtaining No Objection Certificate (NOC) from the authority concerned, clearance of NOC from Income Tax Department or any other State/Central authority, securing title deeds after clearing certain loans are incidental and implied covenant on the part of the vendors to do the needful to give effect to the agreement. [para 22-23] [573-B-E] 2.4. It is also relevant to note that though defendant Nos. 1 and 2, at the first instance offered OTS for Rs. 148 lakhs, the Bank, after taking into consideration various aspects claimed Rs. 629.60 lakhs as their proposal. It was not an impossible performance considering the amount borrowed by the sister agency of defendant no.1 and various properties possessed by defendant Nos. 1 and 2 in prime localities of the city and in and around the sub-urban areas. The contract in question is capable of performance and the plea of the appellants that it is a contingent contract and incapable of performance cannot be accepted. Besides, this was not an issue before the trial Court and such plea was not raised in the written statement. Further, defendant Nos. 1 and 2 did not bother to explain all salient features by entering the witness box in support of their claim. The plaintiff has established that he has partially performed his part of obligations by paying the advance amount of Rs. 25 lakhs and another Rs. 50 lakhs in addition to the initial deposit of Rs. 1 Lakh. The plaintiff has proved his readiness and willingness and financial ability to complete the sale transaction. [para 24-25] [573-F-H; 574-A-C] 2.5. The court will not apply the doctrine of impossibility to assist a party which does not want to fulfil its obligations under them contract. The said doctrine cannot be permitted to become a device for destructing the sanctity of contract. [para 34] [579-E] 3.1. The doctrine of marshalling rests upon the principle that a creditor who has the means of satisfying his debt out of several funds shall not, by the exercise of his right, prejudice another creditor whose security comprises only one of the funds. Section 56 of the Transfer of Property Act, 1882 deals with the right of subsequent purchaser to claim marshalling. The High Court after noting that the plaintiff had paid substantial amount as advance and secured decree for specific performance came to the conclusion that the right of marshalling is available to the plaintiff. The concept as in s.56 applies to sales in a manner similar to s. 81 which applies to mortgages alone. [para 27-28] [575-A-B-E] 3.2. In the instant case, in view of the sale agreement which results into decree for specific performance, the plaintiff is entitled to insist upon defendant Nos. 1 to 3 to have the mortgage debt satisfied out of the properties not sold to the plaintiff and in any case if the sale proceeds are not sufficient, then only to proceed against the said suit properties. It is not in dispute that the plea of marshalling and applicability of s.56 of the T.P. Act was not raised before the trial Court. However, if the entire plaint is considered, the plaintiff has claimed a larger relief. Even otherwise, the plea of marshalling being pure question of law based upon the decree obtained for specific performance, cannot simply be thrown out merely because the same was not specifically pleaded. [para 29-30] [575-F-G; 577-D-E] Anathula Sudhakar vs P. Buchi Reddy (Dead) By Lrs. And Ors. 2008 (5) SCR 331 = (2008) 4 SCC 594; Bachhaj Nahar vs. Nilima Mandal and Anr. 2008 (14) SCR621 = (2008) 17 SCC 491 – held inapplicable. 3.3. It is significant to note that the relief has been prayed in the plaint by paying substantial court fee of Rs. 41,66,326.50. In such circumstances, when a party is able to secure substantial relief, namely, decree for specific performance with clearance of mortgage amount, it is the duty of the court to mould the relief so as to render substantial justice between the parties. In this regard, the High Court has adopted the right course in granting relief to the plaintiff. [para 32] [578-G] 3.4. Merely because for recovery of the loan secured by banks, a special Act, namely, Recovery of Debts due to Banks and Financial Institutions Act, 1993 has been enacted, it is not a bar for approaching the civil court to apply for other relief such as s.56 of the T.P. Act. By issuing the direction on the application of s. 56 of the T.P. Act, the Division Bench has not modified or eroded the order passed by the DRT. On the other hand, it is an admitted fact that the Bank has accepted the impugned verdict of the High Court and did not challenge the same before this Court by filing an appeal. Further, by granting such a relief, the Bank is not prejudiced in any way by bringing other properties for sale first, to satisfy the mortgage debt payable by defendant Nos. 1 and 2. In fact, the High Court was conscious and safeguarding the interests of the Bank observed that if sale proceeds of other items of properties are not sufficient to satisfy the debt payable to the Bank by defendant Nos. 1 and 2, in that event, Bank can proceed against the suit properties. [para 33] [578-H; 579-A-D] 4. As regards the High Court hearing the writ petition along with the appeals, the writ petition was filed by the very same plaintiff impleading defendant Nos. 1 and 2, M/s `A A’, which is a sister concern of defendant No. 1, and defendant no.3-Bank, apart from Union of India, praying for issuance of a writ of mandamus forbearing the respondents from bringing to auction the suit property, forming the subject matter of the decree in his favour in O.S. No 336 of 2006 on the file of the Principal District Judge. It is not in dispute that the parties in the appeals as well as in the writ petition are one and the same except Union of India against whom the writ petitioner has not sought any relief. It is also not in dispute that the subject matter of the lis and properties are one and the same in both the appeals and the writ petition. There is no bar for the Division Bench which has jurisdiction to hear appeal, to hear writ petition when the same is connected with the main issue. In fact, no serious objection was raised before the High Court for hearing the writ petition along with the appeal. On the other hand, on the earlier occasion, when the parties filed special leave petitions against certain interim orders, this Court requested the High Court to dispose of all the matters together. It is relevant to point out that no clarification or direction was sought in respect of the said order passed by the Supreme Court. [para 35] [579-F-H; 580-A-D] Brahm Parkash vs. Manbir Singh & Ors., [1964] 2 SCR 324; Sain Ditta Mal vs. Bulagi Mal & Sons and others AIR (34) Lahore 230; and Karam Singh Sobti vs. Smt Shukla Bedi, AIR 1962 Punjab High Court at Delhi 477 – referred to. 5. Section 35 CPC speaks about costs. Though, in the grounds raised in the appeal, no serious argument was advanced about the award of costs, the appellants have agitated the award of cost by the High Court in favour of the plaintiff. Inasmuch as the plaintiff after valuing the suit paid a substantial court fee of Rs. 41,66,326.50 and, ultimately, secured a decree for specific performance though he could not secure a relief in its entirety, the plaintiff is entitled for his costs. It is not in dispute that the court has granted the major relief, namely, decree for specific performance subject to clearance of the mortgage debt. In the circumstances, the High Court rightly ordered costs payable by the contesting defendant Nos. 1 and 2 to the plaintiff. [para 40] [583-E-H] 6. As regards directions to the Recovery Officer/Tribunal, the High Court took into consideration various connected issues in respect of the same properties and several orders passed by the Civil Court and the DRT and the fact that defendant Nos. 1 and 2 have sufficient other properties in prime locations in the city and other nearby places and also of the fact that the Bank was also party to both these proceedings. The Bank also accepted the impugned order of the High Court and did not file any appeal before this Court. The directions/clarifications issued by the High Court do not run counter to the orders of DRT/Recovery Officers, on the other hand, it safeguards the interest of all parties. Only because of the delay on the part of defendant Nos. 1 and 2 in not settling the dues of the Bank at the appropriate time, in the recent times, property value has risen to some extent. On this ground, the direction of the High Court about the sale of the said properties cannot be interfered with. [para 41] [684-A-F] Allahabad Bank vs. Canara Bank & Anr., 2000 (2) SCR1102= (2000) 4 SCC 406, State Bank of India vs. Allied Chemical Laboratories & Anr., (2006) 9 SCC 252, India Household and Healthcare Ltd. vs. LG Houshold and Healthcare Ltd. 2007 (3) SCR726 = (2007) 5 SCC 510 – referred to. 7. So far as interference under Article 136 of the Constitution of India is concerned, even after issuance of notice in the special leave petition and after grant of leave, irrespective of the nature of the subject matter, the appellants must show that exceptional and special circumstances exists and, if there is no interference by this Court, substantial and grave injustice will result and that the case has features of sufficient gravity to warrant a decision from this Court on merits. [para 46] [589-D-E] Balvantrai Chimanlal Trivedi, Manager Raipur Manfg. Co. Ltd., Ahmedabad vs. M.N. Nagrashna and Others AIR 1960 SC 407; Balvantrai Chimanlal Trivedi vs. M.N. Nagrashna and Others, AIR 1960 SC 1292; Taherakhatoon (D) By Lrs. vs. Salambin Mohammad, 1999 (1) SCR 901= (1999) 2 SCC 635; Chandra Singh and Ors. vs. State of Rajasthan and Anr. 2003 (1) Suppl. SCR674= (2003) 6 SCC 545 – relied on. Case Law Reference: 1995 (2) Suppl. SCR53 relied on para 9 2004 (3) Suppl. SCR186 relied on para 11 1971 SCR573 referred to para 12 2008 (5) SCR331 held inapplicable para 31 2008 (14) SCR621 held inapplicable para 31 AIR (34) Lahore 230 referred to para 37 AIR 1962 Punjab High Court at Delhi 477 referred to para 37 [1964] 2 SCR 324 referred to para 38 2000 (2) SCR1102 referred to para 41 (2006) 9 SCC 252 referred to para 41 2007 (3 ) SCR726 referred to para 41 AIR 1960 SC 407 relied on para 43 AIR 1960 SC 1292 relied on para 44 1999 (1) SCR 901 relied on para 45 2003 (1) Suppl. SCR674 relied on para 46 CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 9821-9822 of 2010. From the Judgment & Order dated 23.2.2010 of the High Court of Judicature at Madras in A.S. No. 708 of 2008 and Judgment order dated 29.4.2010 in Review Application No. 37 of 2010 in A.S. No. 708 of 2008. WITH C.A. Nos. 9824-9825 & 9826 of 2010. L. Nageshwar Rao, Nalini Chidambaram, R.F. Nariman, K.V. Viswanathan, Bhargava V. Desai, Rahul Gupta, Nikhil Sharma, Pallavi Mohan, K.K. Mani, R. Thiagarajan, Vasudha Thiagarajan, Abhishek Krishna, Himanshu Munshi for the appearing parties.

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOs. 9821-9822 OF 2010 (Arising out of S.L.P. (C) Nos. 14985-14986 of 2010) M/s J.P. Builders & Anr. …. Appellant(s) Versus A. Ramadas Rao & Anr. …. Respondent(s) WITH CIVIL APPEAL NOs. 9824-9825 OF 2010 (Arising out of S.L.P.(C) Nos. 15008-15009 of 2010) … Continue reading

Blog Stats

  • 2,859,667 hits

ADVOCATE MMMOHAN

archieves

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 1,903 other followers

Follow advocatemmmohan on WordPress.com