{"id":94927,"date":"2007-08-30T00:00:00","date_gmt":"2007-08-29T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/syndicate-bank-vs-estate-officer-manager-on-30-august-2007"},"modified":"2017-05-04T10:57:29","modified_gmt":"2017-05-04T05:27:29","slug":"syndicate-bank-vs-estate-officer-manager-on-30-august-2007","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/syndicate-bank-vs-estate-officer-manager-on-30-august-2007","title":{"rendered":"Syndicate Bank vs Estate Officer & Manager, … on 30 August, 2007"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Syndicate Bank vs Estate Officer & Manager, … on 30 August, 2007<\/div>\n
Bench: S.B. Sinha, Markandey Katju<\/div>\n
           CASE NO.:\nAppeal (civil)  7824-7828 of 2004\n\nPETITIONER:\nSyndicate Bank\n\nRESPONDENT:\nEstate Officer & Manager, A.P.I.I.C. Ltd. & Ors\n\nDATE OF JUDGMENT: 30\/08\/2007\n\nBENCH:\nS.B. Sinha & Markandey Katju\n\nJUDGMENT:\n<\/pre>\n
JUDGMENT
\nO R D E R<\/p>\n
WITH
\nCIVIL APPEAL NOS. 7833-37 OF 2004<\/p>\n
\tOn or about 19.03.1969,  United Auto Tractor Ltd. (for short, ‘the
\nCompany’) filed an application before the State Government for allotment of
\n100 acres of land in the industrial area for setting up an industrial unit for the
\npurpose of manufacture of agricultural tractors and implements. The
\nGovernment of Andhra Pradesh pursuant to or in furtherance thereof made
\nallotment of 51 acres of land in the Industrial Development Area, Nacharam,
\nAndhra Pradesh to the Company for the aforementioned purpose in terms of
\nan order dated 18.07.1972.  On 03.08.1972, an agreement was entered into
\nby and between the Government of Andhra Pradesh and the Company in
\nrelation thereto;  some of the terms and conditions whereof are as under :\n<\/p>\n
“6.\tOnly on the completion  and full payment of the
\n\tentire consideration amount, the sale deed shall be
\n\texecuted and registered in the name of the
\n\tcompany.\n<\/p>\n
\t\txxx\t\t\txxx\t\t\txxx<\/p>\n
8(a)\tWithout prejudice to the rights of the State Bank of
\n\tIndia or any other financing agency approved by
\n\tthe Government as first mortgagees, Government
\n\thave a second charge on the land, buildings, plant
\n\tand machinery which shall be converted into a first
\n\tcharge when the obligation of the financing
\n\tagencies are liquidated.\n<\/p>\n
8(b)\tIf the Financing Institutions were to advance more
\n\tthan 60% of the value of the land, building,
\n\tmachinery and structure, prior agreement of the
\n\tGovernment will be required.\n<\/p>\n
\t\txxx\t\t\txxx\t\t\txxx<\/p>\n
13.\tThe company shall bear, pay and discharge all
\n\texisting and further amounts, duties, imposing and
\n\tout-going of whatsoever rates, taxes imposed or
\n\tcharged upon the premises or upon the occupier in
\n\trespect thereof from the date of taking possession.\n<\/p>\n
\t***\t\t\t***\t\t\t\t***<\/p>\n
(s)\tTill such time as the ownership of the property is
\n\ttransferred to the Company in the manner
\n\tmentioned above the property shall continue to
\n\tremain the property of the Government.\n<\/p>\n
16.\tThe Government shall  have right to resume the
\n\tland, if the Company do not use the land for the
\n\tpurpose for which it was allotted within the period
\n\tspecified above, the period to be reckoned from
\n\tthe date of which the company was placed in
\n\tpossession of the land.\n<\/p>\n
17.\tIn case the Company shall become bankrupt or
\n\tproceedings of insolvency or for winding up are
\n\tfiled by or against the Company the sale shall
\n\tforthwith stand determined and the Government
\n\tshall be entitled to re-enter the premises or any
\n\tpart thereof in the name of the whole, without
\n\tprejudice to the rights of the Government to seek
\n\tany available remedy against the company for
\n\trecovery of the loss.\n<\/p>\n
\t\txxx\t\t\txxx\t\t\txxx<\/p>\n
21.\tAll payments due to the Government under this
\n\tagreement shall carry interest at 8 =%.  All
\n\tpayments made\/instalments paid after the due
\n\tdates carry penal interest at 12% per annum.”\n<\/p>\n
\tIn terms of clause 2 of the said agreement the Company indisputably
\nhad made initial payment of 50% of the total cost of the allotted land.\n<\/p>\n
\tOn  the said date, the Government of Andhra Pradesh also issued a
\nletter to the Company, permitting it to mortgage the said 51 acres of land to
\nany scheduled bank to obtain financial assistance to the project,  which the
\nCompany sought to establish,  stating :\n<\/p>\n
\t“In the circumstances stated in your letter second
\ncited, you are hereby permitted to mortgage the 51 acres
\nof land allotted in the Ncharam Industrial Development
\narea to any Scheduled Bank to obtain financial assistance
\nto your project.\n<\/p>\n
\tThe agreement executed by you is returned
\nherewith duly signed.”\n<\/p>\n
\t  Relying on or on the basis of the said purported sanction,  the
\nCompany mortgaged the said land in favour of Appellant Bank, pursuant
\nwhereto and in furtherance whereof  moneys were advanced to it on the said
\nsecurity from time to time.  Indisputably, the Government of Andhra
\nPradesh transferred all the industrial estates and development areas to M\/s
\nAndhra Pradesh Industrial Infrastructure Ltd. (for short, ‘A.P.I.I.C’) with
\neffect from 01.01.1974.  Accounts Officer of A.P.I.I.C. informed the
\nDirector of Industries that amount of incentive to the extent of Rs.78,860\/-
\nsanctioned to the borrower had been adjusted against a sum of Rs.91,840\/-
\nagainst the balance cost of the land sold to borrower on outright sale basis.\n<\/p>\n
\tThe allotted land allegedly was being utilised by the borrower for the
\npurpose for which the same was allotted.  It is stated that the borrower paid
\nthe entire cost of the land to the Government on or about 31.07.1980 being a
\nsum of Rs. 2,03,304\/-, which was acknowledged by A.P.I.I.C.  After, a long
\ntime,  however, A.P.I.I.C. purported to have cancelled the allotment of 25
\nacres out of 51 acres of land allotted to the Company.  The balance 26 acres
\nof land was designated as Plot No.A-27\/1, which is the disputed property in
\nthis case.\n<\/p>\n
\tAppellant-Bank filed O.A. No. 425 of 1995 against the Company and
\nthe guarantor for recovery of a sum of Rs.2,57,10,393\/- before the Debt
\nRecovery Tribunal, Bangalore.  In the said application, the Bank intended to
\nenforce its charge on the property which had been created.\n<\/p>\n
\tThe said  application was allowed by an order dated 18.10.1996,
\nwhereafter a recovery certificate was issued on 01.07.1997.\n<\/p>\n
\tA notice for sale of the entire 51 acres of land by public auction was
\nproposed to be held by the Recovery Officer on 08.03.1998.  An objection
\nthereto was made by A.P.I.I.C. on or about 21.03.1998, stating that it had no
\nobjection for sale of 26 acres of land.  A writ petition was thereafter filed
\nbefore the High Court questioning the validity of the said proposed auction
\nbefore the Andhra Pradesh High Court by A.P.I.I.C., inter alia, praying for
\nthe following reliefs :\n<\/p>\n
\t“(g)\tSale of 26-00 acres of land which is allowed
\nto be retained by the  3rd Respondent company would
\nsecure more than the decreetal amount passed in O.A.
\nNo. 425 of 1996 and therefore, inclusion of 25-00 acres
\nof land i.e., plot no. A-27\/2 belonging to the IInd
\nPetitioner Corporation in the proposed sale by the 1st
\nRespondent herein by way of public auction is
\nunwarranted, arbitrary, and opposed to the principles of
\nNatural Justice.”\n<\/p>\n
\tDuring pendency of the said writ petition, A.P.I.I.C. resumed
\npossession of 25 acres of land and decided to hold auction in respect thereof
\nonly, which was questioned by the appellant-Bank by filing a writ petition
\nbefore the Andhra Pradesh High Court, which was marked as W.P. No.
\n24060 of 1998.  By an order dated 12.08.1998, the claim petition filed by
\nA.P.I.I.C. before the Debt Recovery Tribunal was dismissed.  A.P.I.I.C.
\nbeing aggrieved by and dissatisfied therewith filed a writ petition before the
\nAndhra Pradesh High Court on or about 01.09.1998.\n<\/p>\n
\tA sale proclamation for the entire 51 acres of land proposing to sell
\nthe said land by public auction was issued by the Recovery Officer on or
\nabout 10.12.1998.  Yet again a writ petition was filed by A.P.I.I.C. and the
\noperation of the said for holding auction was stayed.\n<\/p>\n
\tOn or about 24.08.1998, one Nacharam Industries Association also
\nfiled a writ petition questioning the auction in respect of 25 acres of land.
\nThe Company also filed a writ petition, which was marked as Writ Petition
\nNo. 25056 of 1998 questioning the auction-cum-sale notice dated
\n06.08.1998 held by APIIC.  No stay, however, was granted therein.  During
\npendency of the aforementioned writ petition, APIIC issued a show cause
\nnotice dated 18.12.1998 upon the Company directing it to show cause as to
\nwhy the allotment of balance 26 acres of land should not be cancelled on the
\nfollowing grounds that : (a) it had failed to set up an industry much less the
\nproposed industry for which the land was allotted, except constructing some
\nstructures on Plot No.A.27\/1; and (b) the Company had failed to pay the
\nbalance cost of the land, property tax and maintenance charges etc.
\namounting to a sum of  Rs.27,19,366\/-.\n<\/p>\n
\tNo cause, however, was shown by the Company.  It  had merely been
\nasking for time for submitting the explanation.  On or about 14.07.1999,
\nallotment in favour of the Company in respect of the balance 26 acres of
\nland was also cancelled, the agreement dated 03.08.1972 was determined
\nand the amount already paid by the Company was forfeited. The Company
\nwas directed to surrender the vacant possession of the land.\n<\/p>\n
\tAs noticed hereinbefore, the grounds of cancellation of allotment inter
\nalia were : (i) the outstanding amount as payable in accordance with the
\nterms and conditions of the agreement had not been paid; and (ii) the land
\nwas not utilised for the purposes for which it was allotted.\n<\/p>\n
 \tAppellant filed a writ petition questioning the said order dated
\n14.07.1999 before the Andhra Pradesh High Court, which was marked as
\nWrit Petition No. 17443 if 1999.\n<\/p>\n
\tA Division Bench of the High Court took up for considerations all the
\nwrit petitions as well as contempt proceeding initiated for the alleged
\nviolation and disobedience of the order dated 22.05.1998 passed in W.P. No.
\n14174 of 1998 being C.C. No. 2065 of 1998.\n<\/p>\n
\tThe High Court by reason of the impugned judgment, inter alia, held :\n<\/p>\n
i)\tThe Company having obtained the allotment of land failed to utilise
\nthe same for industrial purposes.\n<\/p>\n
ii)\tThe Company had taken APIIC as well as the Syndicate Bank for a
\nride.\n<\/p>\n
iii)\tThe Syndicate Bank did not initiate any coercive steps against the
\nManaging Director and Directors for realisation of the amounts.\n<\/p>\n
iv)\tThe most singular and remarkable feature was the non performance of
\nthe Company and its abstentious silence.\n<\/p>\n
v)\tThis, however, was not to certify that the Syndicate Bank acted
\ndiligently in the matter and in advancing huge financial assistance to the
\nCompany on the strength of a letter of no objection purported to have been
\nissued by the Director of Industries.  What was surprising was that Syndicate
\nBank equated that letter to that of a title deed and accordingly advanced
\nmonies without taking proper care and caution.\n<\/p>\n
vi)\tAPIIC by its proceedings dated 17.08.1993 cancelled the allotment of
\nland to an extent of 25 acres of land.  The said order remained unquestioned.\n<\/p>\n
vii)\tThe Estate Officer under the Public Premises Act could not have filed
\nan affidavit for and on behalf of APIIC stating that the sale of 26 acres of
\nland could be permitted.\n<\/p>\n
viii)\tA reading of all the covenants clearly reveals that the Government
\nmerely granted permission by putting the Company in possession of the
\nland.  The ownership always remained with the Government until the
\nrecovery.  No sale deed was executed by the Government in favour of the
\nCompany.\n<\/p>\n
ix)\tAdmittedly, no such sale deed was executed by the Government in
\nfavour of the Company.\n<\/p>\n
\tIn regard to the interpretation of clause 8 of the agreement, the High
\nCourt while opining  that there was absolutely no dispute whatsoever that
\nthe Appellant-Bank advanced more than 60% of the value of the land,
\nbuilding, machinery and structures in favour of the Company posed a
\nquestion which, according to it, fell for its consideration, namely, as to
\nwhether the Company as well the Syndicate Bank obtained prior consent of
\nthe government in the matter as was required under clause 8(b) of the
\nagreement.  The High Court having opined that no prior consent of the
\nGovernment was taken by the Appellant-Bank before advancing more than
\n60% of the value of the land came to the conclusion that the letter dated
\n03.08.1972 of the Director of Industries could not be treated as a document
\nof title enabling the Company to create a charge against the properties
\nbelonging to APIIC.  It was held that there was nothing on record to show
\nthat the said letter had been issued by the Director of Industries with the
\nprior approval of the government.  It was observed :\n<\/p>\n
“There is nothing on record suggesting that the so-
\ncalled no objection of the Director of Industries binds the
\nGovernment.  There is nothing on record to show that the
\nsaid letter has been issued by the Director of Industries
\nwith the prior approval of the Government.  The
\nagreement requires prior consent of the Government
\nexpressing no objection if the financing agencies were to
\nadvance more than 60% of the value of the land.  The
\nsaid letter by no stretch of imagination could be
\ncharacterized and treated as a prior agreement of the
\nGovernment enabling the Syndicate Bank to advance
\nmore than 60% of the value of the land.  The actual
\nmortgage deed executed by way of deposit of title deeds
\nis not made available for the perusal of the Court by the
\nSyndicate Bank.”\n<\/p>\n
\tIn the aforementioned premise the High Court held that the order of
\ncancellation of allotment of 25 acres of land dated 17.08.1993,  having not
\nbeen challenged, the same became final.  It was also held that as a clear and
\ncategorical finding had been arrived at by APIIC in its order dated
\n14.07.1999 that the Company had failed to utilise the land for the purpose
\nfor  which  the same had been allotted, the order of cancellation of allotment
\nwas also valid in law, stating :\n<\/p>\n
“The Company failed to submit any explanation to the
\nshow cause notice and after providing innumerable
\nopportunities, the APIIC passed final order dated
\n14.7.1999 canceling the allotment of remaining extent of
\nland also.  The first order dated 17.8.1993 canceling the
\nallotment of Ac.25-00 of land remained unchallenged.
\nThis order dated 14.7.1999 canceling the allotment of
\nremaining extent of Ac.26-00 of land, in our considered
\nopinion, is not vitiated for any reason whatsoever.  There
\nis a clear and categorical finding in the said order that the
\nCompany failed to utilize the land for the purpose for
\nwhich it was allotted.  The APIIC was well within its
\nlimits to cancel the remaining extent of fund”\n<\/p>\n
\tIn regard to the question as to whether the recovery certificate dated
\n30.12.1996 issued by the Debt Recovery Tribunal to recover the amount by
\nsale of mortgaged property, it was held that despite the fact that in the
\nrecovery certificate the schedule of the properties  attached and sold was
\nshown to be nil, stating :\n<\/p>\n
\t“Be it as it may, the finding, recorded by the DRT
\nas against the APIIC, in no manner, effects the title since
\nthe lands in question remained under the ownership of
\nthe APIIC as there is no transfer of title as such in favour
\nof the company.  Admittedly, no sale deed has been
\nexecuted by the APIIC in favour of the company.”\n<\/p>\n
\tIt was further held :\n<\/p>\n
\t“In the circumstances, we hold that the
\nproclamation of sale notice dated 21.1.1998 issued by the
\nRecovery Officer proposing to auction the lands
\nbelonging to the APIIC is ultra vires.  Such a
\nproclamation has been issued without putting the APIIC
\non any proper notice.”\n<\/p>\n
\tIn regard to the purported concession made by APIIC in regard to 26
\nacres of land, it was opined that the same had been made inadvertently by
\nthe APIIC as it did not have a copy of the recovery certificate.  It was
\nobserved that in any view of the matter, the consent on the part of the parties
\ndid not confer any jurisdiction on the authorities concerned, stating  :\n<\/p>\n
\t“It is well settled that the consent of the parties does
\nnot by itself confer any jurisdiction upon the authorities.
\nNor such consent can take away the jurisdiction if
\notherwise conferred under the provisions of the Act.  It is
\nnot open to the parties to confer, by their agreement,
\njurisdiction on a court, which it does not possess”\n<\/p>\n
\tIt was further held that the letter of the Director dated 03.08.1972
\ncannot be said to be in terms of clause 8(b) of the agreement and, thus, the
\nappellant cannot be allowed to say that the land had been completely utilised
\nfor industrial purposes, in  absence of any such assertion and proof furnished
\nby the Company itself.  It was also opined :\n<\/p>\n
“(a)\tThat the letter dated 3.8.1972 purported to have
\nbeen issued by the Director of Industries, by no
\nstretch of imagination, could be characterized as a
\ndocument of title so as to enable the Company to
\nmortgage these same by way of deposit of title
\ndeeds in order to secure financial assistance from
\nthe Syndicate Bank.  The Director of Industries
\ncannot be equated to that of the Government and it
\nis the only government, which could have agreed
\nto the company raising money on the property.
\nSuch letters voluntarily issued by an individual
\nofficer of the Government, in no manner, bind the
\nGovernment unless it is clearly pleaded and
\nestablished that the Director of Industries has been
\nauthorised and delegated with the power to accord
\npermission to the company raising money on the
\nproperty;\n<\/p>\n
(b)\tthat the Syndicate Bank admittedly advanced more
\nthan 60% of the value of the land but without prior
\nagreement of the Government as is required in
\nterms of clause 8(b) of the agreement.  Therefore,
\nthe APIIC, being the successor in interest of the
\nGovernment, is not bound by the advances so
\nmade by the Syndicate Bank.  Therefore, the
\nSyndicate Bank cannot have the first charge over
\nthe property in question;\n<\/p>\n
(c)\tthat there is no specific agreement as such by the
\nSyndicate Bank agreeing to pay the government on
\nbehalf of the company so much of the amount
\nadvanced as loan to the company will remain due
\non the promissory note executed by the Company.
\nIn the absence of any specific agreement, the
\nAPIIC is not bound to accept the demand draft for
\na sum of Rs.3,366.35 paise purporting to be due
\nfrom the company towards the land cost and the
\nsame has been rightly rejected by the APIIC;\n<\/p>\n
(d)\tthat the order of cancellation of allotment of land
\ndated 17.8.1993, which remained unchallenged,
\nhas not only become final, but also does not suffer
\nfrom any legal infirmities requiring any
\ninterference;\n<\/p>\n
(e)\tthat the order dated 14.7.1999 cancelling the
\nallotment of remaining extent of Ac.26-00 of land
\nwhich is challenged by the Syndicate Bank in W.P.
\nNo.17443 of 1999, is not vitiated for any reason
\nwhatsoever.  It is a composite order passed by the
\nAPIIC canceling the allotment of land both on the
\nground of failure to pay the balance sale
\nconsideration by the Company and also on the
\nground that the Company failed to utilize the land
\nfor the purpose for which it has been allotted to it.
\nThe orders of cancellation of allotment of land
\nhave duly taken into account the admissions made
\nby the Company that it has failed to utilize the land
\nfor the purpose for which it has been allotted to it.
\nThe company has admitted that it was in red and
\ncould not establish any industrial unit for the
\npurpose of manufacture of agricultural tractors for
\nwhich purpose the land has been allotted to it;\n<\/p>\n
(f)\tthat the order dated 12.8.1998 passed by the
\nRecovery Officer rejecting the claim petition of the
\nAPIIC is vitiated.  The Recovery Officer could not
\nhave proceeded with the sale of the land belonging
\nto the APIIC in the absence of any specific
\nauthorization and permission by the Presiding
\nOfficer of DRT.  In the schedule of the recovery
\ncertificate, there is no mention of the details of the
\nlands in question enabling the Recovery Officer to
\nproceed against the same for recovery and
\nrealization of the decreetal amount; and\n<\/p>\n
(g)\tthat the sale notifications issued by the APIIC do
\nnot suffer from any legal infirmities.”\n<\/p>\n
\tMr. Rajiv Nanda, learned counsel appearing on behalf of the
\nAppellant-Bank, would submit :\n<\/p>\n
i)\tThe High Court committed a factual error insofar as it proceeded on
\nthe basis that the mortgage was created merely by deposit of consent letter,
\nwhereas in fact the same  was created by deposit of allotment letter, original
\ncounter part of the agreement dated 03.08.1972 and letter dated 03.08.1972.\n<\/p>\n
ii)\tThe High Court erred in so far as it failed to notice that the order of
\nthe Debt Recovery Tribunal dated 18.10.1996 became final as the same had
\nnot been challenged by any party to the lis.\n<\/p>\n
iii)\tAPIIC having categorically made a statement before the Recovery
\nOfficer that 26 acres of land should be allowed to be retained by United
\nAuto, which was more than sufficient to recover the bank dues and, thus, it
\nwas estopped and precluded from cancelling the letter of allotment in
\nrelation to the said land.\n<\/p>\n
iv)\tAllotment letter dated 18.07.1972, agreement dated 03.08.1972 as
\nalso the consent letter dated 03.08.1972  being documents of title within the
\nmeaning of Section 58(f) of the Transfer of Property Act, the High Court
\ncommitted a mistake in opining otherwise.\n<\/p>\n
v)\tConsent letter dated 03.08.1972, which is in conformity with clause
\n8(b)of the agreement dated 03.08.1972 was  misconstrued by the High
\nCourt, inasmuch as by reason thereof, the State agreed that the allottee may
\nraise loan mortgaging the lands agreed to be sold as well as the buildings
\nconstructed thereupon.\n<\/p>\n
vi)\tClause 8(b) supersedes other clauses to the contrary in the agreement,
\nwhich provides for prior agreement of government before creating
\ncharge\/mortgage only if more than 60% of the value of the land was to be
\nadvanced and a consent letter of the government was to be issued therefor.\n<\/p>\n
vii)\tClause 8(b) having provided that the charge of the financial institution
\nwould be the first charge and that the government having provided that the
\nsecond charge, the obligation of the financial institution was required to be
\nliquidated at the first instance.\n<\/p>\n
viii)\tIt is borne out from the records that the entire cost of the land being
\nRs.4,93,680\/- stood paid.  In any event the value of the entire land  having
\nbeen adjusted  for 25 acres of land which  had been cancelled, the APIIC did
\nnot make it clear as to on what basis further cost of the land towards 26 acres
\nwas being made.  APIIC was not only estopped and precluded from raising
\nthe aforementioned contentions  and its order would be wholly inequitable if
\nthe bank is left with no remedy when it had acted on the basis of its consent.\n<\/p>\n
ix)\tThe schedule of the recovery certificate having been shown nil, the
\nRecovery Officer could not have determined as to which properties were to
\nbe attached or sold;  the finding of the High Court is clearly contrary to the
\nprovisions of Section 19(20), 19(22) and Section 25 of the Recovery of
\nDebts due to the Banks and Financial Institutions Act, 1993 and in that view
\nof the matter the High Court committed an error in holding that the auction
\nof land  by the Recovery Officer was ultra vires as the mortgaged property
\nwas not specified in the recovery certificate.\n<\/p>\n
x)\tIf the consent made by the Manager (Law) did not bind APIIC, it is
\ndifficult to conceive as to how the writ petitions which were filed by the said
\nparties could be  entertained.\n<\/p>\n
xi)\tThe finding of the High Court that the letter dated 03.08.1972 issued
\nby the Director of Industries was not binding on the government and APIIC
\nwas wholly without any basis as all the orders of the government had been
\ncommunicated only through the letters issued by the Director of Industries.\n<\/p>\n
xii)\tThe purported finding of the High Court that the Company had failed
\nto utilise the land for the purpose of allotment is clearly erroneous as  there
\nis nothing to show that the conditions precedent therefor existed and in any
\nevent, clause 8(b) of the agreement dated 03.08.1972 would override clauses
\n13, 15 and 16 thereof, in terms whereof interest of the bank would prevail
\nover that of APIIC.\n<\/p>\n
xiii)\tThe High Court should not have entertained the writ petition filed by
\nthe APIIC as  it did not prefer any appeal  against the order of the Debt
\nRecovery Tribunal.\n<\/p>\n
\tThe learned Solicitor General and Mr. A.K. Ganguli, learned Senior
\nCounsel, appearing on behalf of the State and APIIC, on the other hand,
\nwould submit :\n<\/p>\n
i) \tThe agreement dated 03.08.1972 being not registered, no title was
\nconferred on the Company, pursuant whereto or in furtherance whereof the
\nCompany had  not derived any assignable title.\n<\/p>\n
ii)\tIt is not a case where a mortgage could be created by reason of deposit
\nof title deed as contemplated under Section 58 of the Transfer of Property
\nAct.\n<\/p>\n
iii)\tMere deposit of allotment letter or the agreement dated 03.08.1972,
\nthus, did not create any charge in favour of the Bank.  The letter dated
\n03.08.1972 issued by the Director of Industries being not a document of title,
\nthe judgment of the High Court cannot be assailed.\n<\/p>\n
iv)\tAppellant-Bank having not questioned the orders of cancellation of
\nallotment dated 17.08.1993 and 14.07.1993 respectively, it must be held to
\nhave waived its right, if any, to question the same.  The sale proceeds in
\nterms of the judgment and order dated  22.02.1977, therefore, should be
\ndirected to be paid to APIIC.\n<\/p>\n
\tThe principal question which arises for consideration is as to whether
\nin absence of any execution and registration of deed of sale by the
\nGovernment of Andhra Pradesh or by A.P.I.I.C. in favour of the Company,
\nany interest in the land has been and could be created.  Our attention has
\nbeen drawn by the learned counsel for Appellant to a large number of
\ndecisions of different High Courts to show that for the purpose of creating
\nmortgage by depositing title deeds in terms of Section 58 of the Transfer of
\nProperty Act, it is not necessary that the mortgagor would have forfeit
\ncomplete title over the property.   Even if the mortgagor derives some
\ninterest which can be subject-matter of mortgage, a mortgage by deposit of
\ntitle deeds can be created.  It is not in dispute that whereas a deposit of title
\ndeeds by itself does not require a document in writing, but in the in event a
\nmortgage is created thereby, it will require registration.  It is furthermore not
\nin dispute that  complete title over a property can be acquired by a vendee
\nonly when a deed of sale is executed and registered by the vendor in terms of
\nSection 54 of the Transfer of Property Act.  In this case, it has not been
\ndisputed that apart from the letter of allotment, an agreement coupled with
\nthe letter dated 03.08.1972, no deed of sale was executed or registered by the
\nGovernment of Andhra Pradesh or by A.P.I.I.C.  in favour of the Company.\n<\/p>\n
\tAs would appear from the following, we are of the opinion that the
\nissues raised herein are of some importance and as any decision thereupon
\nwould have serious impact  on similar transaction in future, it should be
\nheard by a larger bench.\n<\/p>\n
\tWe may, however, make some general  observations.\n<\/p>\n
\tSection 58 of the Transfer of Property reads as under :\n<\/p>\n
“Section 58  “Mortgage”, “mortgagor”, “mortgagee”,
\n“mortgage-money” and “mortgage-deed” defined\n<\/p>\n
 (a) A mortgage is the transfer of an interest in specific
\nimmoveable property for the purpose of securing the
\npayment of money advanced or to be advanced by way of
\nloan, an existing or future debt, or the performance of an
\nengagement which may give rise to a pecuniary liability.
\nThe transferor is called a mortgagor, the transferee a
\nmortgagee; the principal money and interest of which
\npayment is secured for the time being are called the
\nmortgage-money, and the instrument (if any) by which
\nthe transfer is effected is called a mortgage-deed.\n<\/p>\n
(b) Simple mortgage.-Where, without delivering
\npossession of the mortgaged property, the mortgagor
\nbinds himself personally to pay the mortgage-money, and
\nagrees, expressly or impliedly, that, in the event of his
\nfailing to pay according to his contract, the mortgagee
\nshall have a right to cause the mortgaged property to be
\nsold and the proceeds of sale to be applied, so far as may
\nbe necessary, in payment of the mortgage-money, the
\ntransaction is called a simple mortgage and the
\nmortgagee a simple mortgagee.\n<\/p>\n
(c) Mortgage by conditional sale.-Where, the mortgagor
\nostensibly sells the mortgaged property-\n<\/p>\n
on condition that on default of payment of the mortgage-
\nmoney on a certain date the sale shall become absolute,
\nor
\non condition that on such payment being made the sale
\nshall become void, or
\non condition that on such payment being made the buyer
\nshall transfer the property to the seller,
\nthe transaction is called a mortgage by conditional sale
\nand the mortgagee a mortgagee by conditional sale:
\nProvided that no such transaction shall be deemed to be a
\nmortgage, unless the condition is embodied in the
\ndocument which effects or purports to effect the sale.\n<\/p>\n
(d) Usufructuary mortgage.-Where the mortgagor
\ndelivers possession or expressly or by implication binds
\nhimself to deliver possession of the mortgaged property
\nto the mortgagee, and authorizes him to retain such
\npossession until payment of the mortgage-money, and to
\nreceive the rents and profits accruing from the property
\nor any part of such rents and profits and to appropriate
\nthe same in lieu of interest, or in payment of the
\nmortgage-money, or partly in lieu of interest or partly in
\npayment of the mortgage-money, the transaction is called
\nan usufructuary mortgage and the mortgagee an
\nusufructuary mortgagee.\n<\/p>\n
(e) English mortgage.-Where the mortgagor binds
\nhimself to repay the mortgage-money on a certain date,
\nand transfers the mortgaged property absolutely to the
\nmortgagee, but subject to a proviso that he will re-
\ntransfer it to the mortgagor upon payment of the
\nmortgage-money as agreed, the transaction is called an
\nEnglish mortgage.\n<\/p>\n
(f) Mortgage by deposit of title-deeds.-Where a person in
\nany of the following towns, namely, the towns of
\nCalcutta, Madras, and Bombay, and in any other town
\nwhich the State Government concerned may, by
\nnotification in the Official Gazette, specify in this behalf,
\ndelivers to a creditor or his agent documents of title to
\nimmoveable property, with intent to create a security
\nthereon, the transaction is called a mortgage by deposit of
\ntitle-deeds.\n<\/p>\n
(g) Anomalous mortgage.-A mortgage which is not a
\nsimple mortgage, a mortgage by conditional sale, an
\nusufructuary mortgage, an English mortgage or a
\nmortgage by deposit of title-deeds within the meaning of
\nthis section is called an anomalous mortgage.”\n<\/p>\n
\tThe requisites of  an  equitable mortgage are : (i) a debt; (ii) a deposit
\nof title deeds; and (iii) an intention that the deeds shall be security for the
\ndebt.   The existence of the first and third ingredients of the said requisites is
\nnot in dispute.  The territorial restrictions contained in the said provision
\nalso does not stand as a bar in creating such a mortgage.  The principal
\nquestion, which, therefore, requires consideration is as to whether for
\nsatisfying the requirements of Section 58(f) of the Transfer of Property Act,
\nit was necessary to deposit documents showing complete title or good title
\nand whether all the documents of title to the property were required to be
\ndeposited.  A’ fortiori the question which would arise for consideration is as
\nto whether in all such cases, the property should have been acquired by
\nreason of a registered document.\n<\/p>\n
\tEach case will have to be considered on its own facts.  A
\njurisprudential title to a property may not be a title of an owner.  A title
\nwhich is subordinate to an owner and which need not be created by reason of
\na registered deed of conveyance may at times create title.  The title  which is
\ncreated in a person may be a limited one, although conferment of full title
\nmay be governed upon fulfilment of certain conditions.  Whether all such
\nconditions have been fulfilled or not  would essentially be a question of fact
\nin each case.  In this case a right appears to have been conferred on the
\nallottee by  issuance of a valid letter of allotment coupled with possession as
\nalso licence to make construction and run a factory thereon, together with a
\nright to take advances from banks and financial institutions; subject, of
\ncourse,   to its fulfilment of condition may confer a title upon  it in terms of
\nSection 58(f) of the Transfer of Property Act,  but the question would be
\nwhether such a right is assignable.\n<\/p>\n
\tIn Mulla’s Transfer of Property Act, a large number of cases have
\nbeen noticed where even a patta of land has been considered to be a
\ndocument of title depending of course on the circumstances under which it
\nhad been  given.\n<\/p>\n
\tMoreover, if insistence on the original document of title is laid,  it
\nmay give rise to the conclusion that once the document of title is lost, no
\nmortgage of deposit of title deed can be created at all.\n<\/p>\n
\tIt is, however, one thing to say that a person cannot convey any title,
\nwhich he himself does not possess; but it is another thing to say that no
\nmortgage can be created unless he obtains a title by reason of a registered
\nconveyance.\n<\/p>\n
\tIn Angu Pillai and Others v. M.S.M. Kasiviswanathan Chettiar and
\nOthers [AIR 1974 Madras 16], a Division Bench of the High Court reversed
\nthe decision of the Trial Judge, holding that the said document did not
\nconstitute a valid mortgage by deposit of title, stating :\n<\/p>\n
\t“13. The only question, in these circumstances, is
\nwhether, by depositing Exs. A.23 to A.26 a valid
\nequitable mortgage was created in favour of the plaintiff.
\nSection 58 of the Transfer of Property Act inter alia
\nprovides that where a person in any of the towns
\nmentioned therein delivers to a creditor or his agent
\ndocuments of title to immovable property with intent to
\ncreate a security thereon, the transaction is called a
\nmortgage by deposit of title deeds. It would be seen from
\nthis provision that three essentials are required for an
\nequitable mortgage, namely, (1) a debt, (2) deposit of
\ntitle deeds and (3) the intention that the delivery should
\nbe security for the debt. In the instant case, the first and
\nthird essentials are satisfied. The only question is whether
\nExs. A.23 to A. 26 are documents of title within the
\nmeaning of S. 58. The trial Court, relying upon the
\ndecisions of the Rangoon High Court in V.E.R.M.A.R.
\nChettiar firm v. Ma Joo Teen, AIR 1933 Rang 299 held
\nthat the said documents were not documents of title and
\nthat, therefore, no valid equitable mortgage was created.
\nWe are clearly of the opinion that this conclusion cannot
\nbe sustained. The expression ‘documents of title’
\noccurring in Section 58 has been the subject of
\nconsideration in some decisions. The law in regard to
\nequitable mortgage is precisely the same in England as it
\nis in India”\n<\/p>\n
\tIt was further noticed :\n<\/p>\n
\t“15. In Indian law, deposit of patta has been held
\nto constitute a valid equitable mortgage, though patta is
\nnot in itself a deed of title, but is only an evidence of title.
\nThis Court has consistently taken the view that the main
\nobject of tender of patta is merely to give information of
\nthe land revenue payable and the details of the property
\nand that the exact weight to be given to the patta would
\ndepend upon the circumstances of the case. In Dohganna
\nv. Jammanna, AIR 1931 Mad 613 it is pointed out that in
\ncase of pattas in respect of a land in Zamindari, if the
\nland be at the disposal of the landlord at the time of
\ngranting the patta, prima facie such patta would not be
\nmere bill of rent but something more and that if it is not
\nso it would not create any rights in the pattadar in
\nderogation of the rights of a person who would be
\nentitled to the land subject to the proper and regular
\npayment of rent. The question directly arose before a
\nBench of this Court in Official Assignee v.\n<\/p>\n
Basudevadoss, AIR 1925 Mad 723, as to whether a
\ndeposit of patta is enough to constitute an equitable
\nmortgage. The Bench answered the question in the
\naffirmative. Srinivasa Aiyangar, J. who delivered the
\nleading judgment in that case, has pointed out that the
\nanswer to the question as to whether the pattas in respect
\nof a land is a document which would be sufficient, by
\nbeing deposited, to evidence the intention required for an
\nequitable mortgage would vary according to the
\nconditions of the country and the consciousness on the
\npart of the members of the community and that though a
\npatta is not a document of title still a deposit of the same
\nwith intent to create an equitable mortgage would create
\nan equitable mortgage.”\n<\/p>\n
\tIn M.M.T.C. Limited v. S. Mohamed Gani and Another [AIR 2002
\nMadras 378], a learned Single Judge opined :\n<\/p>\n
“The plaintiff has sought for a mortgage decree
\nspecifically alleging that the first defendant in respect of
\nthe advances made by the plaintiff to his business has
\noffered the immovable property of his wife viz., the
\nsecond defendant herein as security and has created an
\nequitable mortgage.  Both the counsel have made
\nelaborate submissions in that regard.  Hence, a question
\nwould arise whether an equitable mortgage by deposit of
\ntitle deeds was created.  What is mortgage by deposit of
\ntitle deed is defined under Section 58(f) of the Transfer
\nof Property Act, as follows :\n<\/p>\n
‘Where a person in many of the following towns,
\nnamely, the towns of Calcutta, Madras and
\nBombay, and in any other town which the State
\nGovernment concerned may by notification in the
\nOfficial Gazette, specify in this behalf, delivers to
\na creditor or his agent, documents of title to
\nimmoveable property, with intent to create a
\nsecurity thereon, the transaction is called a
\nmortgage by deposit of title deeds.’
\nIt is called in English law an equitable mortgage.  Lord
\nCairns defined the same as ‘It is well established rule of
\nequity that a deposit of a document of title without more,
\nwithout writing, without word of mouth, will create
\nEquity a charge upon the property referred to.’  In order
\nto prove the existence of an equitable mortgage, the
\nfollowing requisites are necessary :–(1) a debt; (2) a
\ndeposit of title deeds, and (3) an intention that the deeds
\nshall be security for the debt.  The debt may be an
\nexisting debt or a future debt.  Insofar as the deposit of
\ntitle deeds is concerned, physical delivery of document is
\nnot the only mode of deposit and even the constructive
\ndelivery has been held sufficient.  It is sufficient if the
\ndeeds deposited bona fide relate to the property or are
\nany material evidence of title and are shown to have been
\ndeposited with an intention to create a security thereon.
\nThe essence of the whole transaction of euitable
\nmortgage by deposit of title deeds is the intention that the
\ntitle deeds shall be the security for the debt.  Whether the
\nsaid requisite intention is available in a given case is a
\nquestion of fact and has to be ascertained after
\nconsidering the oral, documentary and circumstantial
\nevidence.  It is true the mere fact of deposit does not raise
\nthe presumption that such an intention existed.  Such an
\nintention cannot be presumed from the possession since
\nthe mere possession of the deeds is not enough without
\nevidence as to the manner in which the possession
\noriginated so that an agreement may be inferred.  Even
\nthe mere possession of the deeds by the creditor coupled
\nwith the existence of a debt need not necessarily lead to
\nthe presumption of a mortgage.  The mere fact that the
\ndocuments were coming from the custody of the plaintiff
\nis not by itself sufficient to prove an ntent to create a
\nsecurity.  But in a given case unless and until the
\ndefendants satisfactorily explain how the documents
\ncame to the plaintff’s custody, the said fact would be
\nsignificant and have a great bearing.”\n<\/p>\n
\tIn Amulya Gopal Majumdar v. United Industrial Bank Ltd. and
\nOthers [AIR 1981 Calcutta 404], a Division Bench of the Calcutta High
\nCourt held that possessory  title itself can be a subject-matter of mortgage,
\nopining :\n<\/p>\n
“Therefore, at the time when the disputed transaction
\nwas entered into the mortgagor Eagle Plywood Industries
\nPrivate Limited had entered into lawful possession of the
\nBehala property on the basis of an agreement for sale
\ndated July 18, 1950. Such possessory title could very
\nwell in law be furnished as security for the mortgage. On
\nthis point we are in respectful agreement with the view
\ntaken by M.M. Dutt and R.K. Sharma, JJ. in the case of
\nUsha Rice Mills Company Limited v. United Bank of
\nIndia (1978) 82 Cal WN 92, since the view taken by their
\nLordships is based on high authorities.”\n<\/p>\n
\tWe may notice that that a Division Bench of this Court in Bank of
\nIndia  v. Abhay D. Narottam and Others  [(2005) 11 SCC 520], did not think
\nit fit to consider the correctness thereof having regard to the provisions
\ncontained in Section 125 of the Companies Act, 1956.\n<\/p>\n
\tSome decisions of this Court in this connection may also be noticed.\n<\/p>\n
\tIn Alapati Venkataramiah v. Commissioner of Income Tax Hyderabad<\/a>
\n[1965 (3) SCR 567], while considering the provisions of Section 12B of the
\nIndian Income Tax Act, 1922, this Court repelled a contention that a
\npossessary title in terms of Section 53-A of the Transfer of Property Act
\nwould not subserve the requirements of an effective conveyance of the
\ncapital assets, as delivery of possession of immovable property cannot by
\nitself be treated as equivalent to conveyance of the immovable property.\n<\/p>\n
\tHowever, in terms of Section 12B of the Income Tax Act, title must
\npass by any of the modes mentioned therein, namely, sale, exchange or
\ntransfer.  It did not contemplate any other mode of transfer.\n<\/p>\n
\tIn K.J. Nathan v. S.V. Maruty Reddy and Others<\/a> [1964 (6) SCR 727],
\nthis Court held :\n<\/p>\n
“10. The foregoing discussion may  be summarized thus:
\nUnder the Transfer of Property Act a mortgage by
\ndeposit of title deeds is one of the forms of mortgages
\nwhereunder there is a transfer of interest in specific
\nimmovable property for the purpose of securing payment
\nof money advanced or to be advanced by way of loan.
\nTherefore, such a mortgage of property takes effect
\nagainst a mortgage deed subsequently executed and
\nregistered in respect of the same property. The three
\nrequisites for such a mortgage are, ( i ) debt, ( ii ) deposit
\nof title deed; and ( iii ) an intention that the deeds shall be
\nsecurity for the debt. Whether there is an intention that
\nthe deeds shall be security for the debt is a question of
\nfact in each case. The said fact will have to be decided
\njust like any other fact on presumptions and on oral,
\ndocumentary or circumstantial evidence. There is no
\npresumption of law that the mere deposit of title deed s
\nconstitutes a mortgage, for no such presumption has been
\nlaid down either in the Evidence Act or in the Transfer of
\nProperty Act. But a court may presume under Section
\n114 of the Evidence Act that under certain circumstances
\na loan and a deposit of title deeds constitute a mortgage.
\nBut that is really an inference as to the existence of one
\nfact from the existence of some other fact or facts. Nor
\nthe fact that at the time the title deeds were deposited
\nthere was an intention to execute a mortgage deed in
\nitself negatives, or is inconsistent with, the intention to
\ncreate a mortgage by deposit of title deeds to be in force
\ntill the mortgage deed was executed. The decisions of
\nEnglish courts making a distinction between the debt
\npreceding the deposit and that following it can at best be
\nonly a guide; but the said distinction itself cannot be
\nconsidered to be a rule of law for application under all
\ncircumstances. Physical delivery of documents by the
\ndebtor to the creditor is not the only mode of deposit.
\nThere may be a constructive deposit. A court will have to
\nascertain in each case whether in substance there is a
\ndelivery of title deeds by the debtor to the creditor. If the
\ncreditor was already in possession of the titledeeds, it
\nwould be hypertechnical to insist upon the formality of
\nthe creditor delivering the title deeds to the debtor and
\nthe debtor redelivering them to the creditor. What would
\nbe necessary in those circumstances is whether the
\nparties agreed to treat the documents in the possession of
\nthe creditor or his agent as delivery to him for the
\npurpose of the transaction.”\n<\/p>\n
\tThe question which arose therein was that what would be the extent of
\nsubject-matter of mortgage; the entire property forming the subject-matter
\nof mortgage or a part thereof.\n<\/p>\n
\tThere cannot be any doubt whatsoever that in absence of a registered
\ndeed of sale, the title to the land does not pass, but then what would not be
\nconveyed is the title of the estate and not the allotment and possession
\nitself.\n<\/p>\n
\tIt would, therefore, appear that there is no clear authority on the
\nquestion as to whether in absence of any title deed in terms whereof the
\nmortgagee obtained title by reason of a registered deed can be a subject-
\nmatter of mortgage.  Section 58 of the Transfer of Property Act does not
\nspeak of mortgage of an owner’s interest.  If any interest in property can be
\ncreated by reason of a transaction or otherwise which does not require
\nregistration, in our opinion, it may not be necessary to have a full title
\nbefore such a mortgage is created by deposit of title deeds.  A person may
\nacquire title to a property irrespective of the nature thereof by several
\nmodes e.g. a lease of land which does not require registration; (ii) by
\npartition of a joint family property by way of family settlement, which
\ndoes not require registration.\n<\/p>\n
\tIn a case of this nature where valuable right is created which may or
\nmay not confer an assignable right, the question requires clear
\ndetermination having regard to the equitable principle in mind,  and  would
\nhave far reaching consequences, as a large number of banks and financial
\ninstitution advance a huge amount only on the basis of allotment letters.  If
\nsuch allotment letters are to be totally ignored, the same may deter the
\nbanks in making advances which would in effect and substance create  a
\nstate of instability.\n<\/p>\n
\tApart from the said question, the effect of an admission by an
\nauthorized representative of the State having regard to the rules of
\nexecutive business or otherwise vis-`-vis the Appellant-Bank also requires
\nconsideration.\n<\/p>\n
\tWe, therefore, are of the opinion that keeping in view the importance
\nof the questions raised at the Bar, as noticed hereinbefore, and in the
\ncontext of the factual matrix involved in the matter, the questions require
\nconsideration by a larger bench so that an authoritative pronouncement can
\nbe made thereupon.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Syndicate Bank vs Estate Officer & Manager, … on 30 August, 2007 Bench: S.B. Sinha, Markandey Katju CASE NO.: Appeal (civil) 7824-7828 of 2004 PETITIONER: Syndicate Bank RESPONDENT: Estate Officer & Manager, A.P.I.I.C. Ltd. & Ors DATE OF JUDGMENT: 30\/08\/2007 BENCH: S.B. Sinha & Markandey Katju JUDGMENT: JUDGMENT O R D […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-94927","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nSyndicate Bank vs Estate Officer & Manager, ... on 30 August, 2007 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/syndicate-bank-vs-estate-officer-manager-on-30-august-2007\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Syndicate Bank vs Estate Officer & Manager, ... on 30 August, 2007 - 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