ORDER
Pratibha Upasani, J. (Chairperson)
1. This Misc. appeal is filed by the appellants/original objectors Belley Realtors Pvt. Ltd. and Another being aggrieved by the order dated 18.9.2003 passed by the learned Presiding Officer of the Debts Recovery Tribunal-II, Mumbai in Appeal No. 34/2002. The said appeal was filed against order of the Recovery Officer dated 5.12.2002 in Recovery Proceeding No. 39/2002. By the said order, the Recovery Officer rejected the application of the appellants dated 4.9.2002 (Exhibit 34) in which they had prayed that the attachment ordered by the Recovery Officer with respect to the property namely 4th floor of Wembley Building, Nehru Road, Vile Parle (West), Mumbai be lifted and that warrant of attachment be quashed. When the appeal was filed against that order passed by the Recovery Officer to the learned Presiding Officer under Section 30 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the learned Presiding Officer partly allowed the said appeal and substituted the order of the Recovery Officer by giving declaration that mortgage of the 4th floor of Wembley Building, Nehru Road, Vile Parle (West), Mumbai standing on plot No. 300 in favour of the respondent No. 1 Bank shall be subject to the result as per final Order of the High Court of Judicature at Bombay in (i) Company Petition No. 294/1997 filed by the appellant No. 2 namely Pioneer Sales Agencies Pvt. Ltd. and Suit No. 922/1997 filed by the appellant No. 2 Pioneer Sales Agencies Pvt. Ltd. and against the respondent Nos. 2 to 4 namely M/s. Olympus Superstructures Pvt. Ltd., Mr. Dinky Macarena’s and Smt. Bela Mascarenhas (original defendants). Being aggrieved, the present appeal is filed in this Appellate Tribunal.
2. Few facts, which are required to be stated to understand the controversy in this appeal are as follows:
The respondent No. 1 Bank had filed a suit against the respondent Nos. 2 to 4 namely M/s. Olympus Superstructures Pvt. Ltd., Mr. Dinky Mascarenhas and Smt. Bela Mascarenhas for recovery of Rs. 76,20,688.85 with interest thereon at the rate of 17.5% per annum with quarterly rests and for enforcement of the security. The Bank had granted certain facilities to the defendants/respondent Nos. 2 to 4 herein. The defendant No. 1 company availed of the facilities and operated the account, but not satisfactorily. Hence, the outstandings were recalled. The defendants appeared but did not file their written statement and the original application was accordingly allowed in favour of the Bank after going through the evidence on record. The learned Presiding Officer while allowing the claim of the Bank in toto also gave certain consequential declarations. He declared that outstanding was secured by mortgaged property of defendant No. 2 being flats on 4th floor of Wembley Building, Nehru Road, Vile Parle (West), Mumbai, admeasuring 1634 sq. ft., standing on Plot No. 300 and that mortgagers would be at liberty to redeem the mortgage within three months of issuance of recovery certificate.
3. As recovery proceedings commenced, since there was a declaration given by the learned Presiding Officer that the outstandings were secured by equitable mortgage of the property, the Recovery Officer levied the attachment. However, the appellants Belley Realtors Pvt. Ltd. along with appellant No. 2 Pioneer Sales Agencies Pvt. Ltd. intervened and objected to the said attachment. The main contention of the appellants was that the defendant Nos. 1 and 2 in’ Original Application No. 3637/2000 might have deposited the title deeds with reaped to the’ said flats in Order to create equitable mortgage but that could not have been done owing to the injunction Order passed by the High Court (Coram : Justice Variava, as he then was) on 13.6.1997 in Company Application No. 237/1997 in Company Petition No. 294/1997 taken out by the appellant No. 2 Pioneer Sales Agencies Pvt. Ltd. who had assigned its right in favour of the appellant No. 1 Belley Realtors Pvt. Ltd. This company petition was taken out, according to the contention of the appellants herein, because amount was due from the respondent No. 2 Olympus Superstructures Pvt. Ltd. and in that respect the appellant No. 1 Pioneer Sales Agencies Pvt. Ltd. had also filed suit being Suit No. 922/ 1997 in the High Court. It was further contended by the appellants that by consent terms dated 31.8.1998, the said suit came to be disposed of and the company petition also came to be disposed of by the Division Bench of the High Court (Coram : Mr. M.B. Shah C.J. and Mr. Jahagirdar J.) on 14.9.1998 in view of the consent terms.
Under the consent terms, the respondent No. 2 Olympus Superstructures Pvt. Ltd. was required to make certain payments to Pioneer Sales Agencies Pvt. Ltd. within 180 days and till such payments were made, injunction in respect of various properties including the one in question was to be operated. In the event of non payment, legal rights regarding the property in question were to vest in the appellant No. 2 Pioneer Sales Agencies Pvt. Ltd. The original defendants/respondent Nos. 2 to 4 herein made attempt to challenge these consent terms, but the learned Single Judge of the High Court in Notice of Motion No. 209/1999 in Suit No. 922/1997 rejected the said Notice of Motion taken out by the defendants Olympus Superstructures Pvt. Ltd. That Order was upheld by the Division Bench of the Bombay High Court by its Order dated 21.3.2000 in Appeal No. 44/2000.
It is therefore stated by the appellants that the mortgagers had no right to create mortgage and even if the same was created on or before 5.10.1997, it was not good and valid in the eye of law. In any case, it is further stated that the possession of the respondent Nos. .2 to 4 over the said property as on the date of attachment i.e. 16.5.2002 was not on behalf of the appellant No. 2 Pioneer Sales Agencies Pvt. Ltd. It is contended that the learned Recovery Officer did consider these facts but still refused to lift the attachment. The learned Recovery Officer also ordered that before resorting to the property in question, other’ properties would be sold.
The Bank filed reply to this application assailing averments made by the appellants, It was submitted that the Bank had no knowledge about dealings/transaction, so also about the Court matters between the respondents Nos. 2 to 4 on the one hand and the appellant No. 2 on the other. The Bank had pleaded ignorance about injunction Order passed by Justice Variava. The Bank’s contention was that proper mortgage was created by the respondents Nos. 2 to 4 in favour of the bank with respect to the property situated on 4th floor of Wembley Building, Nehru Road, Vile Parle (West), Mumbai. It was further contended that whether any mortgage was valid or not, had to be decided by the Court, who granted injunction and, thus, remedy of the appellants was to approach the Civil Court and not the Tribunal. It was prayed that the application be dismissed. The Recovery Officer, so also the learned Presiding Officer, refused to lift the attachment as already stated above. Therefore, this appeal to this appellate Tribunal.
4. I have heard Mr. K.I. Shah for the appellants and Mr. Pandit for the respondent Bank. I have gone through the voluminous proceedings including the proceedings of Suit No. 922 of 1997, Company Petition No. 291 of 1997 and various orders passed therein. I have also gone through the proceedings of O.A. No. 3637 of 2000, so also recovery proceedings bearing R.P. No. 39 of 2002, and in my opinion, the Recovery Officer as well as the learned Presiding Officer, both committed error in passing the impugned orders.
5. Since the objection raised by the appellants has to be considered as per provisions of Section 11(4)(5) of the Second Schedule of the Income Tax Act, which is applicable to the procedure before the Recovery Officer, it will be desirable to reproduce the said Section for ready reference :
“11. Investigations by Tax Recovery Officer–
(1) …………….
(2) …………….
(3) …………….
(4) Where, upon the said investigation, the Tax Recovery Officer is satisfied that, for the reason stated in the claim or objection, such property was not, at the said date, in the possession of the defaulter or of some person in trust for him or in the occupancy of a tenant or other person paying rent to him, or that, being in the possession of the defaulter at the said date, it was so in his possession, not on his own account or as his own property, but on account of or in trust for some other person, or partly on his own account and partly on account of some other person, the Tax Recovery Officer shall make an Order releasing the property, wholly or to such extent as he thinks fit, from attachment or sale.
(5) Where the Tax Recovery Officer is satisfied that the property was, at the said date, in the possession of the defaulter, as his own property and not on account of any other person, or was in the possession of some other person in trust for him, or in the occupancy of a tenant or other person paying rent to him, the Tax Recovery Officer shall disallow the claim.”
6. Thus, what the Recovery Officer is required to see is whether the certificate debtor is in possession of the property under attachment (either himself or through somebody else) in his own right on the date of attachment and with reference to that date, all this investigation has to be done by the Recovery Officer and if it is found that the certificate debtor is not in possession of the attached property on that date or that such possession is not for himself then the attachment is to be lifted.
In the present case at hand, date of attachment is 16.5.2002. Claim of the appellants is that they are the lawful owners of the said property in question (4th floor of Wembley Building, Nehru Road, Vile Parle (West), Mumbai) on that day. My attention is drawn to the consent terms dated 31.8.1998 and Order passed thereon by Justice Deshpande on 18th September, 1998 in suit No. 922 of 1997 and the Order of the Division Bench dated 14.9.1998 in appeal No. 794 of 1998 in Company Petition No. 294 of 1997, which categorically states that in view of the consent terms dated 31st August, 1998 to be filed in the Suit No. 922 of 1997, Order dated 16.4.1988 passed in the Company Petition No. 294 of 1997 is set aside by consent and the company petition is allowed to be withdrawn, Para 5 of the said Order states that appeal and the Company Petition No. 294 of 1997 are disposed of accordingly in terms of the consent terms. These consent terms were between Pioneer Sales Agencies Pvt. Ltd. (plaintiffs) and Olympus Superstructures Pvt. Ltd. (defendants). It was inter alia agreed between the parlies that there will be decree in favour of the plaintiffs and against the defendants for a sum of Rs. 1,25,00,000/- along with interest thereon at the rate of 24% per annum with effect from expiry of 180 days from the date of execution of these consent terms till payment. Along with many other terms and conditions, it was also agreed between the parties that the defendants will transfer, convey and assign to the appellants or its nominees on expiry of 180 days from the date of these consent terms, the flats including the flats in question, which are the subject matter of the present appeal before me and that the defendants were at liberty to repay the said aggregate amount of Rs. 1,50,00,000/- to the plaintiffs on or before the expiry of 180 days from the date of execution of these consent terms. It was also agreed that if the defendants so paid the amount, the plaintiffs’ right, title and interest in the said flats should automatically stand relinquished in favour of the defendants.
Main purpose and object of entering into the consent terms as mentioned in Clause 21 of the said consent terms, was to secure and safeguard the interest of the plaintiffs M/s. Pioneer Sales Agencies Pvt. Ltd. to the extent of Rs. 1,50,00,000/- by the defendants M/s. Olympus Superstructures Pvt. Ltd. within the period of 180 days from the dale of execution of these consent terms. It was also agreed that in the event of failure on the part of the defendants the plaintiffs and/or their nominees should continue to be in physical possession of the said property as absolute owners of the entire fourth and fifth floors and their respective parking spaces in the said building “Wembley” and the said flats should be automatically deemed to be conveyed to the plaintiffs as agreed in Clause 6 of the consent terms, of which mention is already made above.
7. In the present appeal, we are concerned only with lawful or otherwise of the attachment with respect to flats on fourth floor of Wembley Building.
It appears that the defendants-Olympus Superstructures Pvt. Ltd. did not pay the amount to the plaintiffs-Pioneer Sales Agencies Pvt. Ltd. within 180 days and, therefore, effect has to be given to the consent terms. It appears that the consent terms were challenged by the defendants, but ultimalely their challenge failed and, therefore, the consent terms have to be given effect to. It also appears that there were two separate deeds of assignment executed on 7.10.1999 and 19.6.2002 respectively between the appellant No. 2 Pioneer Sales Agencies Pvt. Ltd. and appellant No. 1 Belley Realtors Pvt. Ltd. and after referring to the consent terms and consent decree, the appellant No. 2 had agreed to nominate, assign as their nominees and transfer the flat Nos. 401 and 402 on the fourth floor of Wembley Building to the appellant No. 1. It also appears that the appellant No. 2 received consideration from the appellant No. 1. In any case, as argued by Mr. Shah the said property did not belong to the certificate debtors, who are respondents Nos. 2 to 4 in the present appeal. According to Mr. Shah, the said property belongs to the appellants in their own right and does not belong to the certificate debtors and therefore, the Bank has no right to attach the same and that since the attachment is illegal, it has to be lifted.
8. Having heard both the Advocates and having gone through the entire chronology of events and dates, I find substance in the submissions of Mr. Shah. It does appear that the said flats Nos. 401 and 402 in Wembley Building, Nehru Road, Vile Parle (W), Mumbai are not owned by the certificate debtors, Olympus Superstructures Pvt. Ltd. As per the consent terms between Pioneer Sales Agencies and Olympus Superstructures Pvt. Ltd., the property passed on to the appellant No, 2 Pioneer Sales Agencies Pvt. Ltd., which by virtue of registered deeds of assignment between Pioneer Sales Agencies Pvt. Ltd. and Belley Realtors Pvt. Ltd. was. passed on to the appellant No. 1 Belley Realtors Pvt. Ltd. Thus, the Recovery Officer should not have attached the said property. The learned Presiding Officer has taken cognizance of all these orders, but probably due to inadvertence, in the operative portion of the order, ordered that the said property should not be sold at all and gave a declaration that mortgage of the flats on 4th floor of Wembley Building, admeasuring 1634 sq. ft., Nehru Road, Vile Parle (West), Mumbai standing on plot No. 300, with the Bank, shall be subject to the final orders of the High Court, Bombay in Company Petition No. 294 of 1997 filed by the appellant No. 2 and Suit No. 922 of 1997 filed by the appellants against the respondent Nos. 2 to 4, when as proceedings reveal, that both the company petition as well as the suit had come to an end by an Order dated 14.9.1998 passed by the First Court in Appeal No. 794 of 1998 in Company Petition No. 294 of 1997.
9. From the proceedings, especially from the elaborate Order dated 13.7.1999 passed by Justice Nijjar in Notice of Motion No. 209 of 1999 in Suit No. 922 of 1997, it appears that while dealing with the challenge to the consent terms by the defendant-Olympus Superstructures Pvt. Ltd. several strictures were passed by Justice Nijjar against the said Olympus Superstructures Pvt. Ltd., but he also observed that the plaintiff i.e. Pioneer Sales Agencies Pvt. Ltd. also were not that honest. Thus, it appears that both the players were of equal caliber. It is also revealed that the defendant-Olympus Superstructures Pvt. Ltd. while injunction Order was in force, mortgaged the said property namely flat Nos. 401 and 402 on 4th floor of Wembley Building, Nehru Road, Vile Parle (West), Mumbai with the Bank on 5.10.1997 by depositing title deeds. As per the submission of the Bank, the Bank was not aware of the said injunction order. The defendants’ conduct is all along reproachable and condemnable. It is revealed that right up to the Supreme Court the said Olympus Superstructures Pvt. Ltd. have given several undertakings only to commit breach of them. It is also revealed that with respect to flat Nos. 501 and 502 on 5th floor of Wembley Building, the receiver came to be appointed, but he was discharged by the High Court by its Order dated 31st October, 2002. These events arc recorded only to make the narration complete.
In view of the above discussion, the appeal of the appellants has to be allowed and the Order of attachment passed by the Recovery Officer with respect to attachment of flat Nos. 401 and 402 on the 4th floor of Wembley Building, Nehru Road, Vile Parle (West), Mumbai and the impugned Order passed by the learned Presiding Officer both have to be set aside and the attachment of the said flats has to be lifted Hence, following’ order is passed:
ORDER
Misc. Appeal No. 355 of 2003 is hereby allowed and the Order of attachment warrant dated 16.5.2002 and terms of sale proclamation with respect of flat Nos. 401 and 402 on fourth floor of Wembley Building, Nehru Road, Vile Parle (W) Mumbai passed by the Recovery Officer in R.P. No. 39 of 2002 and the impugned Order passed by the learned Presiding Officer, both arc set aside and quashed.
Misc. Appeal is disposed of in the above stated terms.