Sree Gokulam Chit & Finance Company Private Limited v Vimala Naik and Sree Munnodi Devaswom Manava Seva Trust

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** ## **THE HONOURABLE MR.JUSTICE P.N.RAVINDRAN** **& THE HONOURABLE MR. JUSTICE DEVAN RAMACHANDRAN** **FRIDAY, THE 10TH DAY OF NOVEMBER 2017/19TH KARTHIKA, 1939** **Ex.FA.No. 13 of 2017 ()** **------------------------** ## **E.A. NO. 357/2016 IN E.P. NO. 21/2013 IN OS 75/2011 OF SUB COURT,ALAPPUZHA** **--------** ## **APPELLANT/CLAIM PETITIONER:** **---------------------------------------------------** **SREE GOKULAM CHIT & FINANCE COMPANY PRIVATE LIMITED NO.49, ARCOT ROAD, KODAMBAKKOM, CHENNAI.24, REPRESENTED BY POWER ATTORNEY HOLDER AND ASSISTANT LEGAL MANAGER, ALAPPUZHA BRANCH, JOBY CHACKO.** **BY ADVS.SRI.K.S.BABU SMT.N.SUDHA SRI.BABU SHANKAR** ## **RESPONDENT(S)/RESPONDENTS:** **-------------------------------------------------** ## **1. VIMALA NAIK** **W/O N. DEVARAJA NAIK, VIMALA NIVAS, A.N. PURAM, ALAPPUZHA, PINCODE. 688011.** **2. SREE MUNNODI DEVASWOM MANAVA SEVA TRUST, REG. NO.A491/2001, KANJIRAMCHIRA, ALAPPUZHA, PINCODE. 688007, REPRESENTED BY ITS PRESIDENT & SECRETARY.** **R1 BY ADVS. SRI.K.V.SADANANDA PRABHU SRI.A.KEVIN THOMAS R2 BY ADVS. SRI. B. PRAMOD(B/O) SRI.B.PRAMOD** **THIS EXECUTION FIRST APPEAL HAVING BEEN FINALLY HEARD ON 10-11-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **sdr/-** ## **Ex.FA.No. 13 of 2017 ()** **------------------------** ## **APPENDIX** **---------------** ## **PETITIONERS ANNEXURES** **------------------------------------------** **ANNEXURE A1 ORIGINAL OF SALE DEED NO. 3218/1/2005 OF THE SUB REGISTRY OFFICE, ALAPPUZHA DEPOSITED WITH THE PETITIONER/APPELLANT BY THE 2ND RESPONDENT/2ND RESPONDENT** **RESPONDENTS ANNEXURES ------------------------------------------** **ANNEXURE R2(A) TRUE COPY OF THE LIST OF DEPOSITORS** **ANNEXURE R2(B) TRUE COPY OF THE CHITS SUBSCRIBED BY THE 2ND RESPONDENT** **ANNEXURE R2(C) TRUE COPY OF THe LIST OF PROPERTY OWNED BY THE 2ND RESPONDENT** **/TRUE COPY** **PA TO JUDGE** **sdr/-** ## **P.N.RAVINDRAN &** ## **DEVAN RAMACHANDRAN, JJ.** ============================ Exe.F.A.No.13 of 2017 ============================ Dated this the 10[th] day of November, 2017 ## **JUDGMENT** ## **Devan Ramachandran, J.** This appeal has been filed by a Private Limited Company by name, Sree Gokulam Chit and Finance Company Private Limited, impugning the order of the Sub Court, Alappuzha in E.A.No.357 of 2016 in E.P.No.21 of 2013 in O.S.No.75 of 2011. 2. The suit referred to above was instituted by the first respondent- Smt.Vimala Naik on the allegation that the second respondent- Sree Munnodi Devaswom Manava Seva Trust (for short, 'the Trust') owed her certain sums of money. The suit was decreed on 10.01.2012 and the first respondent levied execution proceedings, as E.P.No.21 of 2013, seeking that the properties of the second respondent-Trust be brought to sale under the provisions of Order 21 Rule 66 of the Code of Civil Procedure. 3. It appears that on obtaining information of the intended sale, the appellant filed E.A.No.357 of 2016, styling it as a claim petition, under the provisions of Order 21 Rule 58 of the Code of Exe.F.A.No.13 of 2017 2 Civil Procedure, claiming that they have a first charge over the property sought to be sold. The foundation of the assertion of the appellant, that they have a first charge over the property, is that they had earlier obtained two awards in certain arbitration proceedings, initiated by them against the second respondentTrust, conducted at Chennai and that the Arbitrator appointed in such proceedings had issued awards, as early as in the year 2010, finding that the second respondent – Trust had executed an equitable mortgage of the property in question in favour of the appellant, thus declaring that they had a charge over the same. They produced on record along with the application, Exts.A3 and A5 stated to be the awards passed by the said Arbitrator in A.R.C.No.670 of 2010 and A.R.C.No.216 of 2010 respectively. 4. The court below, however, dismissed the application holding that the appellant had not produced any document on record to establish that any such mortgage was created by the second respondent – Trust in their favour. The court, thereafter, went on to conclude that nevertheless this, the passing of the awards, namely, Exts.A3 and A5 by the Arbitrator would not, in Exe.F.A.No.13 of 2017 3 law, amount to creation of a charge over the property and that the appellant would obtain competence to proceed against the property only from the date on which they had obtained attachment, if any, over the same, under the provisions of the CPC, in execution of the said awards. 5. We have heard Smt.N.Sudha, learned counsel appearing for the appellant, Sri.K.V.Sadananda Prabhu, the learned counsel appearing for the first respondent and Sri.B.Pramod, the learned counsel appearing for the second respondent. 6. An examination of the translated copies of the two awards, the originals of which are in Tamil language, would show that they were issued on 24.09.2010 and 27.08.2010 respectively holding that a charge had been created over the property on account of an equitable mortgage allegedly created by the Trust in favour of the appellant. The appellant claims that the effect of two arbitration awards is that they hold a first charge over the property and it is on such assertion that they filed the claim petition. 7. It is further submitted before us by the learned counsel appearing for the appellant that the said arbitration awards Exe.F.A.No.13 of 2017 4 have been transmitted to the District Court, Alappuzha for execution and she says that on account of the sale now proposed by the Sub Court, Alappuzha in O.S.No.75 of 2011, their legitimate rights to bring the property to sale through execution proceedings initiated by them would be prejudiced. 8. We have examined the order of the court below, impugned in this appeal. The court below has referred to the judgment of the Hon'ble Supreme Court in **Booz Allen and Hamiltom Inc. v. SBI Home Finance Ltd. and others** [AIR 2011 SC 2507] and has correctly concluded, drawing strength from the ratio of the said judgment, that a suit for enforcement of a mortgage, being the enforcement of a right in rem, will have to be decided by courts of law and not by Arbitral Tribunals. The declaration of law in **Booz Allen** (supra) is of climacteric significance and its reading is essential, for which reproduce relevant portions from it as under: “An agreement to sell or an agreement to mortgage does not involve any transfer of right in rem but create only a personal obligation. Therefore if specific performance is sought either in regard to an agreement to sell or an agreement to mortgage, the claim for specific performance will be arbitrable. Exe.F.A.No.13 of 2017 5 On the other hand, a mortgage is a transfer of a right in rem. A mortgage suit for sale of the mortgaged property is an action in rem, for enforcement of a right in rem. A suit on mortgage is not a mere suit for money. A suit for enforcement of a mortgage being the enforcement of a right in rem, will have to be decided by Courts of law and not by arbitral tribunals. The provisions of Transfer of Property Act read with Order 34 of the Code, relating to the procedure prescribed for adjudication of the mortgage suits, the rights of mortgagees and mortgagors, the parties to a mortgage suit, and the powers of a Court adjudicating a mortgage suit, make it clear that such suits are intended to be decided by public fora (Courts) and therefore impliedly barred from being referred to or decided by private fora(Arbitral Tribunals).' A decree for sale of a mortgaged property as in the case of a decree for order of winding up, requires the Court to protect the interests of persons-other than the parties to the suit / petition and empowers the Court to entertain and adjudicate upon rights and liabilities of third parties (other than those who are parties to the arbitration agreement). Therefore, a suit for sale, foreclosure or redemption of a mortgaged property, should only be tried by a public forum, and not by an arbitral tribunal.” Exe.F.A.No.13 of 2017 6 9. A reading of the above and the conclusive view of the Hon'ble Supreme Court in **Booz Allen** (supra) leaves no doubt that arbitral awards, akin to ones that are produced in this case, namely, Exts.A3 and A5, would not concede to the holder of such awards a charge much less a first charge, over the property, over which they claim mortgage. We also notice that another learned Single Judge of this Court has in the judgment reported in **India Cements Capital Limited (M/s.) v. William and others** [2015 (4) KHC 728], followed by **Booz Allen** (supra) to conclude that an arbitral award would not concede to its holder competence to apply for sale of mortgaged property. We are, therefore, certain that the proper remedy for the person holding such awards would be to apply for execution and to attach the property, from which date onwards alone they would obtain competence to seek and bring it to sale. 10. In the case at hand, the decree in O.S.No.75 of 2011 was passed by the Sub Court on 10.01.2012 and E.P. was levied in the year 2013. There is nothing on record to show whether the appellant had obtained an attachment over the same property which now proclaimed be sold by the court below in the Exe.F.A.No.13 of 2017 7 execution proceedings relating to the decree in O.S.No.75 of 2011. The best that the appellant can legally seek is rateable distribution of the proceeds of the sale on the strength of the attachment over the property, if they have obtained one at all. Beyond that, they cannot claim that they hold first charge over the property based on the alleged mortgage or based on the arbitral awards, namely, Exts.A3 and A5. 11. In such view of the matter, we see that the court below has not erred in issuing the impugned order. The court below has only said that the appellant cannot claim a higher right or charge over the property on the basis of the arbitral awards, and that they will require to execute the awards in terms of law by proceeding against the property under the provisions of Order XXI of the CPC by attaching it and seeking to sell it but not on the assertion of a first charge. We notice that the court below has also found that the property is attached by other courts and that the appellant at the best can only claim rateable distribution, if they seek to enforce their decrees against the property. In the circumstances and reasons detailed above, we find Exe.F.A.No.13 of 2017 8 no reason to interfere in any manner with the order impugned and the appeal, therefore, fails. In the rather peculiar scenario presented in this case, we deem it appropriate not to make any order as to costs and leave the parties to suffer their respective costs in this appeal. Sd/- **P.N.RAVINDRAN JUDGE** stu Sd/- **DEVAN RAMACHANDRAN JUDGE**