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TMI Blog2025 (3) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... dant Nos. 2 and 3. 2. Before adverting to the rival contentions, it is necessary for context, to set out the following facts, viz. i. The Original Plaintiff i.e. Yes Bank Limited ("Yes Bank") had sanctioned certain financial faculties/loans under three Term Loan Facility Agreements to Defendant No.2 to the extent of Rs.700 crores. ii. Defendant No. 2 and one Real Estate Projects Private Limited ("REPPL") as 50% owners of the Santacruz Property mortgaged the said property in favour of Yes Bank under Deeds of Mortgage dated 9th February 2016 and 12th May 2016 respectively as and by of security for due repayment of the said facilitates granted by Yes Bank to Defendant No.2. Defendant No.3 then, by way of a Supplemental Deed of Mortgage dated 6th February 2018 as owner, mortgaged the Ghia Compound plot in favour of Yes Bank. The three Mortgage Deeds executed in favour of the Plaintiff are for convenience referred to as "the Plaintiff's Mortgage". iii. It is not in dispute that all the clauses contained in all the aforesaid Deeds of Mortgage were virtually identical. For convenience, reference to the relevant clauses from the Plaintiff's Mortgage i.e. clauses 5, 13(d) and 10(B) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inter alia stated that Yes Bank had no objection to release the mortgage over the said Suit properties subject to due repayment of the said amounts which had been advanced by Yes Bank. The NOC specified that the same was valid upto 10th August 2018 and provided that it would stand revoked if the conditions mentioned therein were not complied with. vi. Since it is the Plaintiff's case that the said amounts were not repaid and Defendant Nos. 2, 3 and REPPL committed defaults, the Yes Bank issued a loan recall notice dated 24th July 2019 as also a notice under Section 13(2) of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Act, 2002 ("SARFAESI Act"). vii. It is the Plaintiff's case, that in or around August 2019, upon taking search in the office of the Registrar of Companies ("ROC") the Plaintiff inter alia came across the two Deeds of Mortgages dated 30th July 2018 ("the Impugned Mortgages") , executed by Defendant No. 2, 3 and REPPL whereby the said Defendants had mortgaged the suit properties in favour of Defendant No.1 for aggregate financial facilities of Two Thousand Crores stated to have been lent and advance by Defendant No.1 to Defe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions as may be decided by the Authority at the time of granting the permission. This permission is being granted subject to the condition that in the mortgage deed, following clauses will be included: (i) That the financial institution in whose favour mortgage permission is required should be recognised by the Reserve Bank of India/National Housing Bank/HUDCO, New Delhi. Noida shall have the first charge towards the pending payment in respect of plot/flat allotted/lease rent/taxes or any other charges as informed or levied by the Authority on the plot and the banks/financial institutions/HUDCO, New Delhi, shall have the second charge on the dwelling units thus being financed. (ii) The mortgage permission shall be effective on making full payment of premium and up-to-date annual lease rent of group housing plot and after execution of sub-lease deed in favour of allottee of the dwelling unit and the allottee/sub-lessee shall be governed by the terms and conditions of allotment/lease deed of the plot to be executed and sub-lease deed to be executed in favour of the allottee sub-lessee. In the event of sale/transfer of flat, transfer charges at the rate prevailing at the time o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following, viz. i. Clause 6 (vii)3 of the Sanction letters dated 28th January 2016 and 31st March 2016 issued by Yes Bank to Defendant Nos. 2 and 3 specifically provided that Yes Bank did not permit Defendant Nos. 2 and 3 to create any encumbrance or security over assets specifically charged to Yes Bank i.e. the Suit Properties. ii. That terms of the sanction letters were also adopted in Facility Term Loan Agreements entered into thereafter. iii. That clauses 5, 13(d) and 10(B) of Schedule I of the Plaintiff's Mortgage clearly barred Defendant Nos. 2 and 3 from selling, transferring, leasing out, assigning, disposing of or otherwise parting with the Suit Properties or any part thereof, as also from dealing with the same or creating or suffering any mortgage, charge, lien or other encumbrance on the Suit Properties, without the prior written consent of Yes Bank. 5. Mr. Sancheti then submitted that the promoter of the Radius Group had infact specifically sought an NOC from Yes Bank vide an email dated 27th July 2018 and that the Plaintiff had thus on 31st July 2018 granted a provisional NOC which was valid only till 10th August 2018. He then took pains to point out that the Im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary to clause 6(vii) of the sanction letter read with the Loan Agreement. 8. He then submitted that the later part of clause 5 of the Plaintiff's Mortgage i.e. "Any mortgage/charge created hereafter by the Mortgagor on the Mortgaged Properties, in violation of this Deed, shall be subject to the present mortgage/charge created in favour of the Mortgagee under this Deed and the mortgage/charge created in terms of this Deed shall in all circumstances rank superior" only provides an additional consequence for any breach of clause 5. He submitted that on the occurrence of such breach it was the option of the Plaintiff to treat such subsequent mortgage/transaction as being void and the same was not an option given to a party, who has either occasioned the breach or who seeks to make capital of the breach to assert any alleged right claimed by virtue of the breach. Mr. Sancheti, then submitted that it was well settled that when interpretating a contract, an interpretation which does not make one part of the contract otiose or nugatory was always preferred. In support of his contention, he placed reliance upon the judgements of the Hon'ble Supreme Court in the case of Life Insurance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.5 was permitted to assert that it had a valid mortgage or a second charge in respect of the Suit Properties. 11. Mr. Sancheti placed reliance upon Section 3110 of the Specific Relief Act,1963 ("SRA") and judgment of Hon'ble Supreme Court, in Deccan Paper Mills Company Limited vs Regency Mahavir Properties ((2021) 4 SCC 786 to submit that in cases where a Plaintiff is able to establish that a written instrument is void or voidable and that a party had a reasonable apprehension that if such written instrument is left outstanding, the same would cause serious injury and the Court may on an application by the party who apprehends any such injury adjudge the written instrument to be void or voidable and order it to be cancelled. He thus submitted that since the Plaintiff had established that (i) the Impugned Mortgages were entered contrary to the terms of the Plaintiff's Mortgage and (ii) the likely prejudice that would be caused to the Plaintiff if the same were not declared void and illegal, the Plaintiff was entitled to interim relief as prayed for. 12. Mr. Sancheti then submitted that the Plaintiff had approached National Company Law Tribunal, Mumbai (NCLT) and had filed an Inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submit that the declaratory reliefs which were sought in the captioned Suit were also discretionary reliefs and that the Plaintiff, in the facts of the present case had also failed to make out any case to grant any of such reliefs. 16. He then without prejudice to the fact that the prayer seeking cancelation of the Impugned Mortgages had been deleted, submitted that the Plaintiff had failed to make out a case as to how the Impugned Mortgages were void in any manner. Mr. Tamboly then invited my attention to Section 2(g)13 of Indian Contract Act, 1872 ("Contract Act") and pointed out that a void agreement was defined as one which is not enforceable in law. He pointed out that as per clause 5 of the Plaintiff's Mortgage, it could not be said that a subsequent mortgage was not enforceable in law since, firstly the said clause specifically contemplated a second mortgage and secondly Defendant Nos. 1 and 5 accepted that the Plaintiff had the first and exclusive right under the Plaintiff's Mortgage. It was thus he submitted that the Impugned Mortgages could not be said to be void, since the same merely relegated Defendant No. 1 and/or Defendant No.5 to the status of a second charge hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atus of an unsecured creditor. Mr. Tamboly submitted that such an approach could not be permitted, as the legal consequences flowing from a statute enacted by Parliament cannot serve as ground for invalidating a contract between two private parties. Furthermore, he argued that the Plaintiff's alleged serious injury could not be used as justification for rendering the Impugned Mortgages as being void. 20. Mr. Tamboly then submitted that the Plaintiff had sought virtually the identical reliefs in the present Interim Application, as had been sought for by the Plaintiff before the NCLT, Mumbai in Interim Application No. 1367 of 2022. He pointed out that the said Interim Application was dismissed vide Order dated 7th August 2024 in which the NCLT held as follows: "38. The Applicant is mainly seeking to declare that the mortgage created in favour of Respondent No.2 is illegal. It is pertinent to notice that there is neither any prohibition nor any requirement under law to obtain permission of the mortgagee to create further mortgage. The restriction arises purely out of a covenant in the Mortgage Deed or contract between the mortgagor and mortgagee. It is also pertinent to observe tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the NCLT under Section 60(5) of the IBC, stating as follows: "c BECAUSE Ld. Adjudicating Authority has the jurisdiction under Section 60(5) of the Code to adjudicate upon the issue of validity and legality of the charge and claim of Respondent No.2." "o. BECAUSE the Ld. Adjudicating Authority failed to appreciate that whether a person has a valid charge over an asset of the Corporate Debtor, or is actually a creditor of the Corporate Debtor, can be decided only by the Ld. Adjudicating Authority under Section 60 (5) of the Code and is the only efficacious remedy available to the Appellant... It is submitted that refusing to exercise jurisdiction to decide such questions of fact and laws amounts miscarriage of justice." 22. Mr. Tamboly then invited my attention to Section 60(5)16 of IBC and submitted that any questions of priority or in relation to the insolvency and liquidation proceedings of a corporate debtor were to be exclusively decided by the NCLT. Basis this Mr. Tamboly submitted that, since the question of priority of the competing claims of the Plaintiff and Defendant No.1 and/or Defendant No.5 could be decided by NCLT only after the admission of insolvency pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... REPPL was undergoing CIRP and was not a party to the present suit and that the amended prayer clause (b) and prayer clause (d) were limited only to Defendant Nos. 2 and 3, so as to ensure that the relief sought for did not affect documents executed by REPPL. 26. Mr. Sancheti then submitted that interpretation of clause 5 of the Plaintiffs Mortgage by Defendant No. 1 and 5 was totally misconceived because (i) the NOC requirement was not complied with (ii)the Impugned Mortgages were executed on 30th July 2018, even before the conditional NOC was granted (iii) the first part of Clause 5 explicitly barred the creation of a subsequent mortgage, as evidenced by the phrase 'in violation of' at the beginning of the clause and (d) accepting Defendant Nos.1 and 5's interpretation would render Clauses 13(d) and 10(B) of Schedule I of the Plaintiff's Mortgage meaningless. He submitted that accepting Defendant Nos. 1 and 5's reading of Clause 5, would effectively mean permitting the mortgagor to create a further mortgage, despite it being expressly barred under the Plaintiff's Mortgage. He pointed out that such an interpretation, would amount to rewriting Clause 5, which could not be permitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above submissions he submitted that present application may be allowed. 30. I have heard learned counsel for the parties, as also considered the case law upon which reliance has been placed and have no hesitation in holding that the Plaintiff has made out a case for the grant of interim reliefs. I say so for the following reasons, viz. A. Firstly, it is not in dispute that the Plaintiff's Mortgage is prior in point of time to the Impugned Mortgages. Also, a plain reading of clause 13(d) of the Plaintiff's Mortgage and clause 10(B) of Schedule I of the Plaintiff's Mortgage make it abundantly clear that the Mortgagor i.e. Defendant Nos. 2 & 3 would not be entitled to not create any mortgages, charges and encumbrances over the Mortgaged Properties i.e. the Suit Properties or any part thereof except with specific written approval/permission (NOC) from Mortgagee i.e. the Plaintiff. Thus for any subsequent valid mortgage to have come into existence, the grant of an NOC by the Plaintiff was a mandatory prerequisite. However, it is an admitted position that the Impugned Mortgages were created on 30th July 2018 whereas the Plaintiff's Conditional NOC was issued only on 31st July 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or charge, is entirely justified in apprehending that Defendant No.1 and/or Defendant No.5 would misuse and/or make use of the Impugned Mortgages to defeat the exclusive rights of the Plaintiff in any proceedings adopted under the IBC or under the of SARFAESI Act. Hence in my view the Plaintiff has made out a case under Section 31 of the Specific Relief Act demonstrating the serious injury that is likely to be caused to the Plaintiff if interim reliefs are not granted. I find that in the facts of the present case, the judgement of the Hon'ble Supreme Court in the case of Deccan Paper Mills Company Limited would squarely apply. C. Third, what is crucial to note and what Defendant Nos. 1 and 5 have in my view glossed over is the fact that, the Plaintiff's Mortgage unequivocally sets out that the Plaintiff is the first and exclusive charge holder in respect of the Suit Properties. The Plaintiff has also demonstrated how the Plaintiff's rights as exclusive charge holder under the provisions of the SARFAESI Act and the IBC would be entirely lost/defeated if Defendant No. 1 and/or Defendant No.5 were to be considered as second charge holders. To this there was no denial by Defendant No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 30th July 2018 (Exhibit 'B' and 'C') in respect of Suit Properties without obtaining consent of the Applicant; ii. It is made clear that this Order is passed only in facts of the present case and it shall be operative only against parties to the present Suit. iii. It is made clear that the observations made in this Order are prima facie and shall not affect the parties while dealing with the captioned Suit. (ARIF S. DOCTOR, J.) AFTER PRONOUNCEMENT 32. At this stage, Mr. Tamboly requested that effect of this Order may be stayed for the period of two weeks from today and assured that the Petition filed under Section 7 of IBC against Defendant Nos. 2 and 3 would not be moved before the next date, so the purpose of the present Order is not defeated. This statement is accepted. The operation of this Order is thus stayed by two weeks from the date on which this order is uploaded. FOOTNOTES 1(i) a property admeasuring 21,774.10 sq. mtrs. situated at C.S. Nos. H401, H402, H415 to H438 of Bandra Village, Samtacruz (W), Mumbai with structures standing thereon (Santacruz Property) and (ii) a plot of land known as Ghia Compound admeasuring 4,325.30 sq. mtrs. bearing C.S. No. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by more than one secured creditors or joint financing of a financial asset by secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to sub-section (4) unless exercise of such right is agreed upon by the secured creditors representing not less than sixty per cent in value of the amount outstanding as on a record date and such action shall b e binding on all the secured creditors: 1031. When cancellation may be ordered.-(1) Any person against whom a written instrument is void or voidable, and who has reasonable apprehension that such instrument, if left outstanding may cause him serious injury, may sue to have it adjudged void or voidable; and the court may, in its discretion, so adjudge it and order it to be delivered up and cancelled. 1234. Discretion of court as to declaration of status or right.-Any person entitled to any legal character, or to any right as to any property, may institute a suit against any person denying, or interested to deny, his title to such character or right, and the court may in its discretion make therein a declaration that he is so entitled, and the plaintiff need not in such su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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