M/S. THREE LINE PROPERTIES v. United Bank of India and Others

W.P.(C).No.38229/15 1 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT** **THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN TUESDAY, THE 8[TH] DAY OF AUGUST 2023 / 17TH SRAVANA, 1945 WP(C) NO. 38229 OF 2015** **AGAINST THE ORDER/JUDGMENT IN CMP 2155/2013 OF CHIEF JUDICIAL MAGISTRATE ,KOZHIKODE** ## **PETITIONER:** M/S. THREE LINE PROPERTIES AGED 51 YEARS DOOR NO. OP 7/813, OMASSERY PANCHAYATH, KOZHIKODE - 673 572, REPRESENTED BY ITS MANAGING PARTNER SRI. ABDUL LATHEEF KACHERI VEETIL. BY ADVS. SRI.S.EASWARAN SRI.M.A.AUGUSTINE SRI.P.MURALEEDHARAN IRIMPANAM SMT.SOUMYA JAMES SRI.P.SREEKUMAR THOTTAKKATTUKARA ## **RESPONDENTS:** 1 _*_ _**THE UNITED BANK OF INDIA**_ KOZHIKODE BRANCH, C/940, SAIKEN CHAMBERS, KANNUR ROAD, KOZHIKODE - 673 001 (REPRESENTED BY ITS AUTHORISED OFFICER AND CHIEF MANAGER (RECOVERY) UNITED BANK OF INDIA, SOUTHE REGIONAL OFFICE, MADAVELIM, CHENNAI, TAMIL NADU - 600 028. [SUBSTITUTED AS **P** _**UNJAB NATIONAL BANK**_ PER ORDER DATED 14.06.2022 IN IA.NO.2/22] W.P.(C).No.38229/15 2 2 YOUNG MENS CHRISTIAN ASSOCIATION YMCA CROSS ROAD, KOZHIKODE, KALATHINKUNNU AMSOM, DESOM, KOZHIKODE - 673 001, REPRESENTED BY ITS SECRETARY. 3 V.K. SREERAM MADHAVAN 6/875 J, YMCA INTERNATIONAL CULTURAL COMPLEX, YMCA CROSS ROAD, KOZHIKODE - 673 001. 4 V.K. MANORAM MADHAVAN 6/875 J, YMCA INTERNATIONAL CULTURAL COMPLEX, YMCA CROSS ROAD, KOZHIKODE - 673 001. BY ADVS. SRI.E.NARAYANAN SRI.JOSE JONES JOSEPH SRI.M.PRAVEESH SRI.E.NARAYANAN SRI.A.SUDHI VASUDEVAN SR. THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 07.06.2023, THE COURT ON 08.08.2023 DELIVERED THE FOLLOWING:- W.P.(C).No.38229/15 3 ## **ANU SIVARAMAN, J.** **= = = = = = = = = = = = = = = W.P.(C).No.38229 of 2015** **= = = = = = = = = = = = = = = = Dated this the 8th day of August, 2023** ## **JUDGMENT** 1.The question of law sought to be raised in this writ petition is whether a lease entered into in respect of a mortgaged property is valid and enforceable as against the mortgagee or his successors-in-interest. The respondents claim that the lease in question is a pre-mortgage lease. This Court, therefore, has also to consider whether the question with regard to chronological order of the lease and the mortgage are questions which this Court can consider in these proceedings or is it a question of fact which can be decided only after adducing evidence? W.P.(C).No.38229/15 4 2. The facts in brief are as follows:- The 2[nd] respondent availed of a loan from the Vijaya Bank, Calicut in the year 2002. 93.44 cents of property was mortgaged as security for repayment of the loan. It is contended by the writ petitioner that the loan was taken over by the United Bank of India, Kozhikode branch and fresh agreement was executed for the loan on 27-12-2004. The repayment having fallen in arrears, the Bank initiated SARFAESI proceedings in 2007. Though S.A.No195/2008 was filed by the 2[nd] respondent before the DRT, Chennai, the condition for stay was not complied with and the proceedings went on and the bank took possession of the secured asset on 28.08.2008. The tenants of the building filed W.P.(C).No.29303/2008 seeking to pay off the liabilities of the 2[nd] respondent. Though a direction was initially issued stalling the proceedings on condition that the petitioners pay an amount of Rs. 1 crore to the Bank, the condition could not be complied with and resultantly, the writ petition was dismissed. The proceedings W.P.(C).No.38229/15 5 went on. W.P.(C).No.35800/2008 & W.P.(C).No.21200/2009 was filed by the 2[nd] respondent. In W.P.(C).No.21200/2009, an interim order was passed on 17.09.2009 directing the 1[st] respondent to explore the possibility of conducting a private sale. Accordingly, a private sale was conducted and the petitioner herein purchased one of the buildings and 37 cents of land for Rs.9 Crore. Sale was confirmed and sale certificate was issued to the writ petitioner on orders of this Court. The tenants, including the party respondents herein were permitted to file appeal against the sale before the DRT. S.A.No.18/2010 was filed by some of the tenants, which was ultimately dismissed. The resultant further steps taken under Section 14 of the Act were again subjected to challenge before this Court in W.P.(C).No.19221/2015. By Ext.P9 judgment, the order of the Chief Judicial Magistrate was set aside and all the questions with regard to creation of tenancy rights and mortgage and whether the lease satisfies the requirement of Section 65A(2) of the Transfer of Property Act were directed to be considered after hearing all parties. Ext.P10 order has been passed by the C.J.M finding that all the tenancies, except W.P.(C).No.38229/15 6 those of the party respondents herein were created after the mortgage of the property and that in their case alone, the petitioner will have to take steps to terminate the tenancies by legal means. This finding is under challenge. 3. A detailed counter affidavit has been placed on record by respondents 3 & 4 contending that, the C.J.M has considered all the records produced and found that the lease of the property to respondents 3 & 4 was prior to the mortgage and that there was no material to show that the earlier loan had been taken over by the United Bank of India. It is submitted that a mortgage by deposit of title deeds was created on 3112-2004 pursuant to Ext.R3(a) loan agreement dated 27-122004. It is submitted that Ext.P15 document produced by the petitioner would not show any taking over of the loan, as contended by the petitioner. Ext.P10 order is, therefore, perfectly legal and valid. Several factual details are also pleaded in the counter affidavit. It is contended that the lease was entered into prior to the mortgage and the fact was well within the knowledge of the bank. It is, therefore, contended W.P.(C).No.38229/15 7 that even in cases where Section 65A were to be applicable, the conditions of sub-section 2 stood explicitly waived by the Bank and that the respondents are entitled to the protection under the Kerala Buildings (Lease and Rent Control) Act due to the acceptance of the tenancy by the purchaser, since the writ petitioner had purchased the property fully knowing the fact of their pre-existing tenancy. 4. The learned counsel for the petitioner places reliance on the decision of this Court in **Nanu Vydiar v. Lakshmikutty Amma** [1961 KHC 263] to contend that only a tenant admitted by a person having authority to do so can claim protection under tenancy laws. The decision in **Mathew v. Ayyappankutty** [1962 KHC 12] is also relied on to contend that a lease created after the property has been mortgaged would be void and not voidable. Reliance is placed on the decision in **Harshad Govardhan Sondagar and others v.** **International Assets Reconstruction Company Ltd. and** **others** [2014 (6) SCC 1] to contend that the prior property rights are binding over property rights created subsequently. W.P.(C).No.38229/15 8 It is, therefore, contended that since the original mortgage was prior in point of time to the lease deeds entered into on 16.6.2004 and 22.5.2004, the subsequent lease would be void in law. The decision of the Apex Court in **Bajarang Shyamsunder Agarwal v. Central Bank of India and Another** [ (2019) 9 SCC 94] is also relied on. 5. The learned counsel for the respondents, on the other hand, contends that the present mortgage of the property was on 27.12.2004 and the lease deeds, which are produced as Exhibits P12 and P13 by the petitioner, are clearly created on 16.6.2004 and 22.5.2004 respectively. It is, therefore, contended that the lease deed being prior in point of time to the mortgage, the mortgage could have been created only subject to the rights of the lessees and that the petitioner, who is only the successor-in-interest of the mortgager, could have purchased the property only subject to the subsisting leases which were created before the mortgage deed was executed. It is further contended that the remedy available to the petitioner in case of an alleged mistake in the order of the W.P.(C).No.38229/15 9 Chief Judicial Magistrate is under Section 17(1) of the SARFAESI Act and not by filing a writ petition. It is further contended that the petitioner is only the purchaser of a property under a private sale and he cannot approach this Court challenging the proceedings under Section 14. 6. The learned counsel for the petitioner would thereupon contend that a reading of Exhibit P1 judgment would clearly show that the sale in question has been recognised as a sale under the Act and the petitioner is not a purchaser of the property in a private sale. It is further contended that Section 17(1) provides remedy only against measures taken by the secured creditor and a reading of Section 17(3)(a),(b) and (c) would show that the petitioner, who is the purchaser of the property, cannot approach the DRT under Section 17 of the Act. - 7.Having considered the contentions advanced, I notice that the question that requires to be decided is whether the tenancy in question was created earlier in point in time to the creation of W.P.(C).No.38229/15 10 the mortgage. The said specific question has been considered by the Chief Judicial Magistrate, who came to a conclusion that the leases were prior to the mortgage. It was held that from the documents produced, it is impossible to come to a conclusion that the present mortgage was a continuation of the earlier mortgage or that there was a valid “takeover” of the loan from M/s.Vijaya Bank. This finding is clearly a finding of fact based on the materials on record. I fail to see how this Court can upset those findings, especially on the basis of Ext.P14 and Ext.P15 documents which are not conclusive or proved. This Court would not be justified in entering into findings on disputed questions of fact in these proceedings on the strength of such material. In the above view of the matter, this writ petition is dismissed. However, it will be open to the petitioner to work out his remedies in accordance with law and all contentions are left open to be decided in appropriate proceedings. **==> picture [24 x 12] intentionally omitted <==** ## **Anu Sivaraman, Judge** sj W.P.(C).No.38229/15 11 ## **APPENDIX OF WP(C) 38229/2015** |PETITIONER EXHIBITS|| |---|---| |Exhibit P1|P1-TRUE COPY OF THE COMMON JUDGMENT| ||DATED 23/12/2009 IN W.P(C) 21200 AND| ||34358 OF 2009| |Exhibit P2|COPY OF JUDGEMENT DATED 09.08.2012 IN OP| ||(DRT) NO. 2356 OF 2012| |Exhibit P3|P3-TRUE COPY OF THE JUDGMENT DATED| ||10/06/2013 IN O.P(DRT) 1982/2013.| |Exhibit P4|COPY OF ORDER DATED 21-08-2014 IN| ||R.P.NO.957 OF 2013 IN OP(DRT)NO.1982 OF| ||2013.| |Exhibit P5|P5-TRUE COPY OF THE ORDER DATED| ||04/10/2013 IN C.M.P. NO. 2087/2013 OF| ||THE CJM COURT, KOZHIKODE.| |Exhibit P6|P6-TRUE COPY OF THE ORDER DATED| ||02/06/2015 IN C.M.P. 2155/2013 OF THE| ||CJM COURT, KOZHIKODE.| |Exhibit P7|P7-TRUE COPY OF THE ORDER DATED| ||02/06/2015 IN C.M.P. 2155/2013 IN C.M.P| ||2087/2013.| |Exhibit P8|P8-TRUE COPY OF THE COUNTER AFFIDAVIT| ||DATED 29/06/2015 IN W.P(C) 19221/2015| ||FILED ON BEHALF OF THE PETITIONER| |Exhibit P9|P9-TRUE COPY OF THE JUDGMENT DATED| ||29/06/2015 IN W.P(C) 19221/2015.| |Exhibit P10|P10-TRUE COPY OF THE COMMON ORDER DATED| ||18/08/2015 IN C.M.P 2087/2013 AND C.M.P.| ||1460/2015| W.P.(C).No.38229/15 12 - Exhibit P11 P11-TRUE COPY OF THE ORDER DATED 18/08/2015 IN C.M.P 2087/2013 ISSUED BY THE CJM, KOZHIKODE. - Exhibit P12 P12-TRUE COPY OF THE LEASE AGREEMENT DATED 16/06/2004 ENTERED INTO BETWEEN RESPONDENTS 3 AND 2. - Exhibit P13 P13-TRUE COPY OF THE LEASE AGREEMENT DATED 11/05/2004 ENTERED INTO BETWEEN RESPONDENTS 4 AND 2 - Exhibit P14 P14-TRUE COPY OF THE SANCTION LETTER DATED 16/12/2004 ISSUED BY THE IST RESPONDENT. - Exhibit P 17 Copy of the letter dated 30-4-2002 issued by Vijaya Bank to the 2nd respondent - Exhibit P 18 Copy of the letter dated 27.11.2004 issued by Vijaya Bank to the erstwhile United Bank of India - Exhibit P 19 Copy of the letter dated 27-12-2004 issued by erstwhile United Bank of India to Vijaya Bank - Exhibit P 20 Copy of the Judgment dated 19-1-2016 in WP 30016 of 2015 on the files of this Honourable Court - Exhibit P 21 Copy of the Judgment dated 11.2.2016 in WA 135 of 2016 on the files of the Honourable High Court Exhibit P 22 Copy of the order dated 3-10-2019 in SLP 4665 of 2016 passed by the Supreme Court of India W.P.(C).No.38229/15 13 - Exhibit P 23 Copy of the Judgment dated 30-6-2020 in RP No 31 of 2020 in WA 158 of 2016 on the files of this Honourable court - Exhibit P 24 Copy of the order dated 11-2-2022 in SLP 11665 of 2020 passed by Supreme Court of India RESPONDENTS' EXHIBITS - Exhibit R3(A) A TRUE COPY OF THE LOAN AGREEMENT DATED 27-12-2004 EXECUTED BETWEEN THE 1ST RESPONDENT AND 2ND RESPONDENT BANK. - Exhibit R3(b) A TRUE COPY OF SALE NOTICE DATED - 02.07.2009 ISSUED BY THE 1ST RESPONDENT. EXHIBIT R3 (c) - A TRUE COPY OF IA 12256/2009 FILED SRI AHAMMED KOYA SEEKING HIS IMPLEADMENT IN WPC 21200/2009 ON THE FILE OF THIS HON'BLE COURT - Exhibit R3(d) A TRUE COPY OF THE LETTER DATED 06-112009 ISSUED BY SRI.AHAMMED KOYA TO THE 2ND RESPONDENT HEREIN. Exhibit R3(e) A TRUE COPY OF THE PRIVATE TREATY DATED 06-11-2009 ENTERED INTO BETWEEN SRI.AHAMMED KOYA AND THE 2ND RESPONDENT HEREIN, BEREFIT OF THE LIST. - EXHIBIT R3 (f) A TRUE COPY OF THE LETTER DATD 17.11.2009 ISSUED BYTHE IST RESPONDENT HEREIN TO SRI.AHAMMED KOYA EXHIBIT R3 (g) A TRUE COPY OF THE PARTNERSHIP DEED DATED 26.11.2009 EXECUTED BETWWN SRI.AHAMMED KOYA AND SRI RAFEEQUE W.P.(C).No.38229/15 14 EXHIBIT R3(h) A TRUE COPY OF THE EXTRACT OF THE REGISTER OF FIRMS MAINTAINED UNDER SECTION 59 OF INDIAN PARTNERSHIP ACT IN RELATION TO THE FIRM "THREE PROPERTIES" ACCOMPANIED BYTHE COVERING LETTER DATED 04.09.2020 ISSUED BYTHE REGISTER OF FIRMS EXHIBIT R3(i) A TRUE COPY OF THE SALE CONFIRMATION LETTER DATED 02.1202009 ISSUED BYTHE IST RESPONDENT HEREIN TO SRI.AHAMMED KOYA EXHIBIT R3(j) A TRUE COPY OF FINAL ORDER DATED 29.10.2012 IN SA 18/2010 PASSED BY THE DEBTS RECOVERY TRIBUNAL, ERNAKULAM EXHIBIT R3(k) A TRUE COPY OF THE WRITTEN STATMENT DATED 17.03.2010 FILED BY THE IST RESPONDNET HERIN IN SA 18/2010 BEFORE DEBTS RECOVERY TRIBUNAL,,ERNAKULAM Exhibit R3(l) A TRUE COPY OF THE JUDGMENT DATED 10-062013 PASSED BY THIS HON'BLE COURT IN OP (DRT) NO.1982/2013. EXHIBIT R3 (m) A TRUE COPY OF THE SALE CERTIFICATE DATED 10/09.2013 ISSUED BYTHE IST RESPONDENT HERIN IN THE FAVOUR OF EXT R3(g) FIRM REPRESENTED BYT ITS PARTNERS SREI. AHAMMED KOYA AND SRI.RAFEEQ EXHIBIT R3(n) A TRUE COPY OF THE COUNTER AFFIDAVIT DATED 16.08.2016 FILED BY SRI.AHAMMED KOYA IN IA NO NO.3089/2016 IN OS NO. 410/2016 THE ADDITIONAL MINSIFF COURT, KOZHIKODE EXHIBIT R3(o) A TRUE COPY OF AFFIDAVIT DATED 19.10.2016 FILED BY SRI AHAMMED KOYA IN OS 410/2016 BEFORE ADDITIONAL NMUNSIFF COURT, KOZHIKODE W.P.(C).No.38229/15 15 - EXHIBIT R3(p) A TRUE COPY OF AFFIDAVIT DATED 01.10.2016 FILED BY IST DEFENDANT THEREIN IN OS 410 2016 BEFORE ADDITIONAL MUNSIFF COURT,M KOZHIKODE - EXHIBIT R3(q) A TRUE COPY OF THE WRITTEN STATEMENT DATE D04.01.2017 FILED BY PETITIONERS HEREIN IN OS 410/2016 BEFORE ADDITIONAL MUNISIFF COURT,KOZHIKODE - EXHIBIT R3(r) A TRUE COPY OF THE ORDER DATED 24.10.2019 OF THE HON'BLE SUPREME COURT IN SLP (CIVIL) NO.4665/2016 WITH SLP(C) 5109/2016 AND SLIP(C)5141/2016 - EXHIBIT R3(s) A TRUE COPY OF THE ORDER DATED O3.10.2019 OF THE HON'BLE SUPREME COURT IN SLP (CIVIL) NO.4665/2016 WITH SLP(c) 5109/2016 AND SP(C) 5141/2016 EXHIBIT R3(t) A TRUE COPY OF THE COMMON ORDER DATED 22.06.2020 PASSED BY THIS HON'BLE COURT INRP NO.31/2020, RP N.51/2020 AND RP NO85/2020 Exhibit R3(u) A TRUE COPY OF THE PETITION DATED 11.09.2013 BEARING CMP NO. 2087/2013 FILED BY THE 1ST RESPONDENT HEREIN U/S. 14(1) AND (2) OF THE SECURITIZATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT 2002 BEFORE THE CHIEF JUDICIAL MAGISTRATE COURT KOZHIKODE` ## TRUE COPY PS TO JUDGE