TMI Blog2017 (3) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... f SGS Constructions for amendment of its objections shall stand allowed as prayed for. (iv) So far as the proceedings initiated by HUDCO under the provisions of SARFAESI Act are concerned, the DRT shall decide all the Applications under Section 17(1) pending on its file including the claim of SGS Constructions that Property No.6 being an agricultural land is beyond the purview of the SARFAESI Act and pass an appropriate order in accordance with law within three months from today. (v) Till appropriate orders are passed by the Recovery Officer and DRT in terms of the above directions, status quo obtaining as on today with regard to Property Nos. 1 to 6 shall be maintained in all respects. - LPA 221/2016 & CM Nos.12231, 12232/2016, LPA 223/2016 & CM Nos.12347, 12348, 12351, 12352, 12353/2016, LPA 225/2016 & CM Nos.12401, 12403/2016, LPA 248/2016 & CM Nos.13926-28/2016, LPA 249/2016 & CM Nos.13931-32, 15107-08/2016, W.P.(C) 2604/2013 - - - Dated:- 1-2-2017 - Ms.G.ROHINI, AND MR. P.S. TEJI, JJ. W.P.(C) 4412/2013 CM Nos.10213/2013, 12143/2013 13323/2013, W.P.(C) 7261/2015 CM Nos.29428/2015, 31482/2015, 6095/2016, W.P.(C) 3047/2016 CM Nos.12862, 12864/2016 For T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt together with interest. 6. During the pendency of the said proceedings, the Trust had entered into an Exchange Deed dated 04.05.2007 with U.P. Housing Development Board/Avas Evam Vikas Parishad (for short 'AEVP') whereby the Trust received the land belonging to AEVP situated in villages Shahbad, Mithapur and Akbarpur in exchange of 21 acres of its land out of 63.45 acres of vacant land comprised in property No.6. The Trust claims that pursuant to the said Exchange Deed, property No.6 has become a contiguous piece of vacant land. 7. O.A. No.160/2002 was allowed by the Debt Recovery Tribunal-II (DRT) in favour of HUDCO by order dated 03.06.2008 and in terms thereof, Recovery Certificate No.039/2011 was issued to the Recovery Officer attached to DRT-II, Delhi for recovery of ₹ 148.08 crores due from the Trust. Against the order of the DRT dated 03.06.2008, the Trust preferred an appeal being Appeal No.120/2008 before the Debt Recovery Appellate Tribunal (DRAT), Delhi which was dismissed by order dated 06.10.2010. 8. During the pendency of the appeal before the DRAT, the Trust had entered into an agreement of sale dated 26.08.2010 with M/s SGS Construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Allahabad by order dated 25.09.2013 allowed the writ petition and directed demarcation of the mortgaged land and un-encumbered land out of 63.45 acres of property No.6 with the help of the Revenue Authorities concerned. There was also a direction that the parties shall maintain status quo qua 21 acres of land out of property No.6 and that the same shall not be alienated or transferred in any manner till the exercise of demarcation is carried out in accordance with law. 12. Aggrieved by the said order of the High Court of Allahabad dated 25.09.2013, the Trust filed Civil Appeal No.4494/2015; U.P. Avas Evam Vikas Parishad (AEVP) filed Civil Appeal No.4495/2015 and HUDCO filed Civil Appeal No.4496/2015. All the said appeals were allowed by the Supreme Court by common judgment dated 15.05.2015 thereby setting aside the order of the High Court of Allahabad dated 25.09.2013. Apart from holding that no part of cause of action had arisen at Lucknow and that the writ petition was not maintainable at Lucknow Bench, on merits it was held that in case of dispute inter se between SGS Constructions and the Trust based upon the Agreement of Sale of the year 2010, no right was available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the SARFAESI Act. 15. Alleging that HUDCO failed to respond to its offer dated 15.03.2013, M/s K.M. Realcon Pvt. Ltd. filed W.P.(C) No.2604/2013 in this Court seeking a direction to HUDCO to exercise its statutory power and sell property No.6 to it for a total sale consideration of ₹ 395 crores. HUDCO contested the writ petition contending inter alia that the auction can be held only under the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. 16. SGS Constructions had also filed supplementary objections dated 15.07.2013 before the Recovery Officer contending that the exchanged land of 21 acres out of property No.6 vide Exchange Deed dated 04.05.2007 has not been mortgaged with HUDCO as per its own pleading in the Special Leave Petition filed before the Supreme Court; that the arbitration proceedings between the Trust and SGS Constructions are still pending before the Sole Arbitrator; that the other mortgaged property i.e. properties 1 to 5 of Recovery Certificate are sufficient to liquidate the entire dues as per the valuation done by HUDCO itself; that in compliance with the order of the Assistant Commissioner, Stamps, Ghazi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his objections. It was further held that since there is no requirement to file the evidence as per the provisions of the Second Schedule to Income Tax Act, 1961, there is no need to recall the order dated 21.05.2015. The appeal preferred by SGS Constructions against the said order of the Recovery Officer dated 01.07.2015 was dismissed by DRT by order dated 10.07.2015 and the further appeal to DRAT was also dismissed by order dated 20.07.2015 holding that the applications are nothing but an attempt to reopen the issues that were already decided by the Supreme Court and thus to stall the recovery proceedings. Aggrieved by the abovesaid order passed by the Recovery Officer dated 01.07.2015 as confirmed by DRT and DRAT by orders dated 10.07.2015 and 20.07.2015 respectively, SGS Constructions filed W.P.(C) No.3047/2016 praying for quashing all the said orders. 18. In the meanwhile, SGS Constructions also filed W.P.(C) No.7261/2015 seeking a direction to HUDCO to consider its proposal for purchase of all the properties so as to put a quietus to the whole dispute. 19. It may also be mentioned that after initiating the proceedings under the SARFAESI Act, the Trust approached thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 10.07.2015 passed by DRT-II, Delhi as well as the order of the Recovery Officer dated 01.07.2015 in RC No.39/2011. 21. Before proceeding further, we may also refer to the interim orders passed by the learned Single Judge out of which the five LPAs arose. Letters Patent Appeals: 22. In W.P.(C) No.2604/2013 filed by M/s K.M. Realcon Pvt. Ltd., the learned Single Judge by order dated 20.05.2015 while recording the contention on behalf of HUDCO/respondent No.1 that auction can only be held under RDDBFI Act, 1993, directed to list the writ petition for hearing on 17.09.2015. The respondent No.3/SGS Constructions filed CM No.11785/2015 on 04.07.2015 to advance the hearing contending that the writ petition, being not maintainable is liable to be dismissed in limine . The said application for advancing the hearing was heard and adjourned to 30.07.2015 by the learned Single Judge by order dated 13.07.2015 with a direction to the parties to complete the pleadings. By the said order, the learned Single Judge had also directed that the Recovery Officer shall dispose of the objections raised by SGS Constructions as directed by this Court in LPA No.385 of 2015 and the obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst has attained finality and even the Supreme Court held that where the sale of one property is sufficient to clear the debts then that property must be sold, it is not open to SGS Constructions to contend that property Nos.1 to 5 should be first sold for liquidating the liability of the Trust. 28. While submitting that property No.6 is governed by Section 54 of the Transfer of Property Act as amended by the State of U.P. which mandates that any agreement of sale for an immovable property in the State of U.P. has to be compulsorily registered and Section 17 of the Registration Act which also mandates the registration of an agreement of sale, it is contended that SGS Constructions cannot claim any right or title based on the unregistered agreement of sale dated 26.08.2010. In support of the said contention, the learned Senior Counsel relied upon Raheja Universal Ltd. v. NRC Ltd. Ors., (2012) 4 SCC 148 . It is also sought to be contended that in view of Section 49 of the Registration Act as amended by the State of U.P. which makes clear that any agreement of sale qua an immovable property in the State of U.P. if not registered cannot be used for specific performance, no rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trust is arbitrary and illegal. It is also contended that there is no legal impediment for the sale of property No.6 accepting the offer made by M/s K.M. Realcon Pvt. Ltd. in the light of the specific provisions under Rule 8(5)(a) and (d) of the Security Interest (Enforcement) Rules, 2002. The further contention is that the objections raised by SGS Constructions on the basis of an unregistered and insufficiently stamped agreement of sale being untenable, HUDCO shall be directed to accept the offer made by M/s K.M. Realcon Pvt. Ltd. qua property No.6 and finalize the sale in its favour. 34. Rebutting the abovesaid contentions, it is submitted by Shri Sudhir Nandrajog, the learned Senior Counsel appearing for SGS Constructions that the objections preferred by SGS Constructions with regard to 21 acres of land covered by the Exchange Deed have to be adjudicated upon by the Recovery Officer in terms of the directions of the Supreme Court. According to the learned Senior Counsel, there is no basis for the contention of the Trust that 21 acres of land covered by the Exchange Deed dated 04.05.2007 is also under mortgage with HUDCO and forms part of the proceedings before the Recovery O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same is not binding on it. The learned Senior Counsel sought to distinguish the decision in Transcore v. Union of India (supra) contending that the issue whether proceedings under SARFAESI Act, 2002 can be taken recourse to during the pendency of recovery proceedings under RDDBFI Act was not in issue before the Supreme Court. It is further contended that on a conjoint reading of the provisions of the SARFAESI Act and Sections 2(1)(g) and 19 of RDDBFI Act, 1993, it is clear that during pendency of recovery proceedings under RDDBFI Act, recourse to SARFAESI proceedings is impermissible. 39. Regarding the nature of property No.6, it is submitted by the learned Senior Counsel that as is evident from the recitals in the Agreement of Sale, it is an agricultural land and the stand taken by HUDCO and the Trust that it is a residential land is without any basis. Consideration 40. We have given our thoughtful consideration to the rival submissions made on behalf of all the parties. 41. The debt amount recoverable from the Trust has been quantified by the order of DRT dated 03.06.2008 as confirmed by DRAT by order dated 06.10.2010. The same has attained finality and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mance. (b) Though SGS Constructions got the said agreement of sale duly stamped subsequently and also got a declaration to that effect under Section 42 of the Stamp Act vide order of the Chief Controlling Revenue Authority, Allahabad dated 01.07.2013, the Trust challenged the said declaration by filing W.P. No.39596/2013 which is still pending on the file of the High Court of Allahabad and an interim order staying the operation of the order dated 01.07.2013 has been in operation. (c) SGS Constructions being a mere agreement holder without possession has no locus standi to oppose the proceedings either under RDDBFI Act or under SARFAESI Act. SGS Constructions cannot also maintain a writ petition seeking a direction to a private party to sell its land in terms of the agreement of sale. 43. On the other hand, the specific case of SGS Constructions is that - (i) By virtue of the Exchange Deed dated 04.05.2007 executed between the Trust and AEVP, the Trust received 21 acres of land belonging to AEVP situated in Villages Shahbad, Mithapur and Akbarpur in exchange of 21 acres of its land out of 63.45 acres of vacant land comprised in property No.6 and thus the 21 acres of la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he SARFAESI Act and the Rules made thereunder. If DRT after examining the facts and circumstances of the case and evidence produced by the parties comes to the conclusion that the measures taken by the secured creditor are not in consonance with sub-section (4) of Section 13, then it can direct the secured creditor to restore possession of the secured assets to the borrower. 45. As is evident from the material available on record, SGS Constructions made a claim in the year 2011 itself before DRT-II, Delhi by making an application under Section 17 of SARFAESI Act. A specific claim was made that it acquired right and title in respect of property No.6 by virtue of the agreement of sale dated 26.08.2010 and more particularly that property No.6 being an agricultural land, falls beyond the purview of SARFAESI Act by virtue of Section 31(i). The offer by K.M. Realcon Pvt. Ltd. to purchase property No.6 by way of private treaty appears to have been made in March, 2013 which was taken note of by DRT by order dated 05.04.2013 during the enquiry in the Securitization Application filed by SGS Constructions. 46. It is relevant to note that sub-section (5) of Section 17 mandates that any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement holder qua property No.6; that out of property No.6 admeasuring 63.45 acres mortgaged to HUDCO, 21 acres had been exchanged by the Trust with AEVP; that the recovery proceedings are pending before the Recovery Officer in which SGS Constructions had filed objections in respect of Property No.6 and that steps initiated by HUDCO for sale of mortgaged property under the SARFAESI Act are also pending. 49. While setting aside the order of the High Court of Allahabad dated 25.09.2013 in W.P.(C) No.11669/2011, the Supreme Court held that the writ petition filed for a direction to AEVP to demarcate the 42.45 acres of encumbered land was not maintainable since the rights between private parties cannot be made subject matter of writ jurisdiction. It was also observed by the Supreme Court: 11. Though, there is serious dispute between the parties to the lis whether the said land is unencumbered, finding has been given by the High Court that 21 acres of land is unencumbered. The High Court could not have treated 21 acres of land as unencumbered one out of 63.45 acres. It was not open to the High Court to enter into the aforesaid arena, which of the property is encumbered and to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seeking amendment of its objections by incorporating that Property No.6 includes 21 acres of unencumbered land. It is no doubt true that this Court in exercise of writ jurisdiction cannot take up such issues and cannot declare the properties as unencumbered, however, certainly it is an issue which needs consideration by the Recovery Officer as has been observed by the Supreme Court in Maharaji Educational Trust v. SGS Construction Development Pvt. Ltd. Ors. (supra). 51. It is also relevant to note that against an interim order dated 20.05.2015 passed by the learned Single Judge in W.P.(C) No.2604/2013, SGS Constructions had earlier filed LPA No.385/2015 contending that by virtue of the Agreement of Sale dated 26.08.2010, it is entitled to purchase the property No.6 and that the said land being an agricultural land the provisions of SARFAESI Act are not applicable. The said appeal was disposed of by the Division Bench by order dated 01.07.2015 leaving it open to the Recovery Officer to decide all the objections raised by the parties in accordance with law uninfluenced by the observations made by the learned Single Judge. It was a consent order and all the parties to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same shall not come in the way of adjudication of the objections by the Recovery Officer or by DRT under SARFAESI Act. 55. Accordingly, we direct that: (i) The Recovery Officer attached to DRT-II, Delhi shall consider and decide the objections raised by SGS Constructions as well as other objectors, if any, with regard to Property No.6 specified in the Recovery Certificate dated 30.06.2008 and pass an appropriate order in accordance with law within 3 months from today. (ii) The consideration of the objections by the Recovery Officer shall be in accordance with the procedure prescribed under the Second and Third Schedules to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962. (iii) The order of the Recovery Officer dated 01.07.2015 as confirmed by DRT by order dated 10.07.2015 and by DRAT by order dated 20.07.2015 is hereby set aside and the application of SGS Constructions for amendment of its objections shall stand allowed as prayed for. (iv) So far as the proceedings initiated by HUDCO under the provisions of SARFAESI Act are concerned, the DRT shall decide all the Applications under Section 17(1) pending on its file including the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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