COMMISSIONER OF INCOME TAX-III vs. M/S PRASADHINI ENTERPRISES PVT LTD

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23RD DAY OF OCTOBER, 2019 BEFORE THE HON' BLE MR. JUSTICE B. VEERAPPA REGULAR SECOND APPEAL No.390/2012 (RES)

BETWEEN:

PUNJAB NATIONAL BANK A BODY CORPORATE CONSTITUTED UNDER THE BANKING COMPANIES (ACQUISTION & TRANSFER OF UNDERTAKINGS ACT, 1970) HAVING ITS HEAD OFFICE AT NO.7, BHIKAIJI CAMA PLACE, NEW DELHI-110066. WITH ITS REGIONAL OFFICE AT MAKERS TOWERS, 7TH FLOOR, CUFFE PARADE, COLABA, MUMBAI-400005. NOW ASSET RECOVERY MANAGEMENT BRANCH, DALAMAL HOUSE, J.B. MARG, NARIMAN POINT, MUMBAI-400021. REPTD. BY ITS SENIOR MANAGER. ... APPELLANT

(SRI S.P. SHANKAR, SENIOR COUNSEL A/W SRI VARADARAJ R. HAVALADAR, ADVOCATE)

AND:

2 REPTD. BY ITS MANAGING PARTNER MR. C.R. GOPAL KRISHNA,

(BY SRI ANANTHA MANDAGI, SENIOR COUNSEL FOR SRI G. VIKRAM, ADVOCATE FOR R1; SRI JEEVAN J. NEELARAGI, ADVOCATE FOR R3; VIDE ORDER DATED 26.7.2012 SERVICE OF NOTICE ON R2 IS HELD SUFFICIENT) .... THIS REGUAL SECOND APPEAL IS FILED UNDER SECTION 100, READ WITH RULE 1 OF CPC., AGAINST THE JUDGMENT AND DECREE DATED:02.01.2012 PASSED IN R.A.NO.168/2011 ON THE FILE OF THE PRESIDING OFFICER, FAST TRACK COURT AT DEVANAHALLI, AND CIVIL JUDGE (SR. DN.) & JMFC, DEVANAHALLI, DISMISSING THE APPEAL AND CONFIRMING THE JUDGMENT AND DECREE DATED: 24.03.2011 PASSED IN O.S.NO.1440/2006 ON THE FILE OF THE SENIOR CIVIL JUDGE & JMFC, DEVANAHALLI.

THIS REGUAL SECOND APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ARE COMING ON FOR PRONOUNCEMENT OF JUDGMENT THIS DAY, THE COURT DELIVERED THE FOLLOWING:

3 JUDGMENT

This appeal is filed by the 3rd defendant against the judgment and decree dated 2.1.2012 made in R.A.No.168/2011 on the file of the fast track court at Devanahalli dismissing the appeal and confirming the judgment and decree dated 24.3.2011 made in O.S.No.1440/2006 by the Civil Judge (Sr.Dn.) and JMFC., Devanahalli decreeing the suit filed by the plaintiff (respondent No.1 herein) with costs declaring that the plaintiff is entitled to the vacant possession of the suit schedule second property from the defendants (appellant, respondent Nos.2 and 3 herein) within a period of three months from the date of the judgment and directing the 2nd respondent to pay a sum of Rs.25,000/- per month as damages from 30.6.2003 till the date of delivery of possession of the suit schedule property to the plaintiff-respondent No.1 herein.

4 I Facts of the Case

5 the club and to provide recreation facility to the prospective purchasers of the sites formed in the suit schedule first property. At that time, defendant No.1- respondent No.2 herein being a company registered under the Companies Act, approached the plaintiff- respondent No.1 herein in the year 1997 and offered to run the club in the suit schedule second property representing that it had vast experience of more than 18 years in constructing the hotels, clubs, resorts and running the club by providing facilities and maintaining them on long term basis.

6 well as to perform the formalities. Accordingly, respondent No.1 and respondent No.2 entered into a Lease Deed dated 26.3.1997 with terms and conditions mentioned therein. Earlier to that an Agreement dated 12.2.1997 was in existence and there was a Clause in the subsequent Lease Deed dated 26.3.1997 stating that the Lease and Development Agreement dated 12.2.1997 has to be read conjointly with the Lease Deed dated 26.3.1997 along with the terms and conditions mentioned therein. Respondent No.2 had taken the suit schedule second property on lease for a period of 99 years on the rent of Rs.100/- per month which excludes electricity and water charges. Accordingly, respondent No.2 paid an amount of Rs.9,900/- towards the rent for the entire lease period by way of cheque drawn on Bank of India, Malleshwaram Branch, Bangalore in favour of respondent No.1-plaintiff.

8 defendants, respondent Nos.2 and 3 have neglected and violated the said terms and conditions. In view of the above, because of non-providing service to the plot owners as agreed, they started complaining the respondent No.1-plaintiff regarding lack of service and improper management of the club by respondent No.2- defendant No.1. Even defendant No.1-respondent No.2 had not paid any income tax and other levy payable by it and thus had violated Clause 20 of the said Lease Deed. Even defendant No.1-respondent No.2 had failed to perform the obligations cast on it under the Lease Deed and hence it had no right to continue as a lessee of the schedule premises. The Income Tax Authority- respondent No.3 had declared defendant No.1- respondent No.2 as the defaulter for not paying the income tax and proceedings were also initiated against it since there was due for a sum of Rs.59.06 Crores.

9 5. It is the further case of the plaintiff that Defendant No.2-respondent No.3 attached the suit schedule property on 6.1.2003. This callous and negligent attitude of respondent No.2-defendant No.1 has embarrassed respondent No.1-plaintiff and lot of inconvenience. As per Clause 21 of the Lease Deed and violation of the terms and conditions of the Lease Deed, the right of defendant No.1-respondent No.2 to continue as a lessee ceased. The plaintiff-respondent No.1 issued a letter dated 8.8.2003 to the Recovery Officer of defendant No.2-respondent No.3 with a request to deliver back the possession of the suit schedule property by clarifying the terms and conditions entered into between itself and respondent No.2-defendant No.1 and also about the notices exchanged between the plaintiff-respondent No.1 and defendant No.1- respondent No.2.

10 6. It is the further case of the plaintiff- respondent No.1 that defendant No.1-respondent No.2 forged the signature of its Managing Partner – C.R. Gopal Krishna on an indemnity bond and an undertaking alleged to have executed by I.D.B.I. and the said undertaking is to the effect that as long as the loans borrowed by the defendant No.1-respondent No.2 from the I.D.B.I are repaid, the plaintiff-respondent No.1 will not terminate the lease in favour of defendant No.1- respondent No.2. Though no such indemnity bond was executed by the plaintiff’s Managing Partner, defendant No.1-respondent No.2 forged the signatures and committed a grave offence of forgery.

11 them and has kept the premises under the lock and key, which has caused much embarrassment to the reputation of the plaintiff-respondent No.1 and the site owners are agitating for the lack of facilities. The Association of the site owners wrote a letter to the plaintiff-respondent No.1 complaining about the lack of facilities, who had suffered much humiliation due to the acts of defendant No.1-respondent No.2 and also due to the breach of the terms and conditions of the Lease Deed dated 26.3.1997 and the Agreement dated 12.2.1997. Therefore, the plaintiff-respondent No.1 was constrained to issue a legal notice dated 10.6.2003 under Section 106 of the Transfer of the Property Act terminating the lease of the schedule premises with effect from 30.6.2003. The property leased to defendant No.1-respondent No.2 includes club and open space measuring about 2,23,000 sq.ft. in various survey numbers mentioned supra and defendant No.1- respondent No.2 is a tress-passer from the date of

12 termination of the Lease i.e., 30.6.2003 and is bound to compensate the plaintiff-respondent No.1 at the rate of Rs.25,000/- per month for the alleged use and occupation of the schedule premises.

13 attach the plaintiff’s-respondent No.1 property to its detriment. The residents and other members of the layout are deprived of the recreational facilities since defendant No.1-respondent No.2 had closed the club and for this reason, the plaintiff-respondent No.1 has been put to lot of embarrassment. It is the further case of the plaintiff that defendant Nos.2 and 3 i.e., respondent No.3 and appellant herein are made as parties to the suit since they have attached the suit schedule second property without notice and to the detriment of its interest. Therefore, the suit came to be filed for the relief as sought for.

II The appellant-3rd defendant filed written statement

14 statement and denied the plaint averments contending that the suit of the plaintiff for the relief sought for, is not maintainable and is liable to be dismissed. Defendant No.3-appellant herein further has contended that it had granted credit facility to defendant No.1- respondent No.2 herein i.e., M/s. Suman Motels Limited by way of term loan to an extent of 300 lakhs on the terms and conditions prescribed in the loan documents by it including repayment of the said facility with interest and costs and security for such facility , inter- alia, by way of mortgage of the lease hold property. It is further contended that in terms of the sanction, defendant No.1-respondent No.2 herein has created security of mortgage in favour of defendant No.3- appellant herein – Bank in respect of the properties described in the second schedule of the Lease Deed by delivering and depositing the title deeds with M/s. IDBI on 21.5.1988 along with other properties. M/s. HBI has given consent to defendant No.3 having paripassu

15 charge over the said properties for the term of Rs.300 Lakhs plus interest etc. The creation of mortgage over the leased property is valid and permissible under the Lease Deed and therefore, defendant No.3 is a mortgagee of the suit schedule property. It is also pertinent to note that defendant No.1 extended the mortgage security by way of deposit of title deeds over the Mussori of defendant No.1 as per the memorandum of deposit of title deeds dated 24.9.1998 whereunder defendant No.1-respondent No.2 herein has confirmed the earlier equitable mortgage dated 21.5.1998 for securing the due repayment, discharge and deduction by defendant No.1 of the term loan of Rs.300 lakhs, etc. The creation of mortgage over the leased property is valid and permissible under the lease deed and therefore, the 3rd defendant is the mortgagee of the landed properties described in the schedule to the plaint, who is the holder of security interest Defendant No.1 has extended the mortgage security by way of

16 deposit of title deeds over the Mussori property of defendant No.1 as per the memorandum of deposit of title deeds whereunder the 1st defendant has confirmed the earlier equitable mortgage dated 21.5.1998 for securing the due repayment. Further, with a view to recovery its dues and to protect its security interest since defendant No.1 committed breach, the 3rd defendant exercised the statutory power under the Securitization Act by giving statutory notice to defendant No.1 and its Directors vide notice dated 22.4.2003.

17 As such, the action on the part of the 3rd defendant was in concurrence of the IIBI and also as follow up action of the 3rd defendant is taking possession interalia of the lease properties as the same is evidenced by the documents like, statutory notice, possession notice, panchanama, inventory, etc. It is further contended by the 3rd defendant that it has taken possession of the schedule properties at Bangalore on 1.8.2003 in exercise of statutory rights under the Securitization Act. It is further contended that, the 3rd defendant along with HBI as secured creditors, has filed recovery application against defendant No.1 before the Debts Recovery Tribunal-II at Mumbai under the provisions of Recovery of Dues to the Banks and Financial Institutions Act, 1993 in O.A.No.939/2011 and the recovery application is still pending adjudication and therefore, the suit filed by the plaintiff is not maintainable and the Court has no jurisdiction to entertain the suit.

19 no judgment and decree can be granted in favour of the plaintiff by directing the 3rd defendant or any other defendants to hand over the possession of the suit schedule property to the plaintiff, etc., and sought for dismissal of the suit.

III Issues framed by the Trial Court 12. Based on the aforesaid pleadings, the Trial Court framed the following issues: 1. Whether the plaintiff is entitled for possession of the suit schedule second property from the defendants?

IV Parties Examined 13. In order to prove its case, plaintiff examined one witness as P.W.1 and got marked the documents Exs.P.1 to P.14 and Ex.C1. The defendants examined D.W.1 and D.W.2 and marked the documents Exs.D.1 to D.20.

21 14. The Trial Court, considering both oral and documentary evidence, by the judgment and decree dated 09.11.2007 dismissed the suit as not maintainable, against which, the plaintiff preferred R.A.No.26/2008 on the file of the Prl. District and Sessions Judge, Bengaluru Rural District, Bengaluru, which was also dismissed on 09.09.2008. Aggrieved by the same, the plaintiff preferred RSA No.2344/2008 before this Court which came to be allowed on 30.07.2010 by setting aside the judgment and decree passed in R.A.No.26/2008 dated 09.09.2008 and O.S.No.1440/2006 dated 09.11.2007 and remanded the matter to the Trial Court to record findings on issue Nos.1,2 and 6 after hearing the parties on the said issues and thereafter to dispose off the suit in accordance with law. Since the matter was remanded only for limited purpose of recording findings on issue Nos.1, 2 and 6, the Trial Court was impressed upon to dispose of the suit itself within three months from the

22 date of receipt of a copy of the judgment and decree, subject to cooperation by both the parties.

V Suit Decreed 15. Being aggrieved by the said Judgment and decree, the present appellant-3rd defendant filed SLP (Civil) No.30106/2010 before the Hon’ble Supreme Court. The Hon’ble Supreme Court, by the Order dated 16.11.2010, dismissed the SLP. In pursuance of the remand order made by this court and confirmed by the Hon’ble Supreme Court, the Trial Court, considering both oral and documentary evidence on record, decreed the suit and recorded a finding that, the plaintiff is entitled to possession of the suit schedule second property from the defendants and the plaintiff has proved that the 1st defendant has to pay an amount of `25,000/- per month as damages from 30.06.2003 till the date of delivery of possession of the suit schedule property to the plaintiff firm.

23 VI Appeal by 3rd defendant Dismissed

24 that in no case the property constructed by the lessees on the demised property should go back to lessor?”

VIII Arguments Advanced by the Learned Senior Counsel for Appellant

26 set out in Ex.P.9. He further contended that both the Courts below misunderstood the scope of mortgage security of the defendant No.3/appellant bank, which is a lease-hold interest, but the Courts below have found and held that the defendant No.1 mortgaged the lessor’s (plaintiff) right in the suit schedule second property. He further contended that the Courts below failed to appreciate that although the appellant bank in paragraph 13 of the written statement pleaded that the property had been proceeded with and enforced in O.A.No.939/2001 filed before the Debts Recovery Tribunal, Mumbai, the plaintiff did not take any action in the matter by intervening in such debt recovery case. The said case has been decreed with right to the appellant to enforce the security of suit schedule property in execution of the same. Consequently, the appellant cannot be prejudiced by passing a decree for possession in favour of the plaintiff.

27 22. The learned Senior Counsel further contended that the lower appellate Court erred in dismissing the application for additional evidence filed by the appellant under Order 41 Rule 27 of Code of Civil Procedure in R.A.No.168/2011 in as much as the judgment of the Debts Recovery Tribunal, Mumbai in the said O.A.No.939/2001 has rendered only during the pendency of the First Appeal and therefore the first appellate Court ought to have admitted such additional evidence. The rejection of such application is contrary to law and liable to be set-aside. He further contended that the lease is for a period of 99 years. There is profit sharing between the lessor and lessee under Ex.P.1 r/w Ex.P.13. Right of re-entry prematurely is not reserved under Ex.P.1. Further, Ex.P.1 r/w Ex.P.13 makes the lease permanent and incapable of termination. Therefore, the impugned judgment and decree passed by the Courts below has to be set-aside.

29 to be read with clause 30 of Ex.P.13. Clause 29 of Ex.P.13 makes lessor and lessee as partners in business. Clauses 18 and 19 of Ex.P.13 would make the lessee owner of the super structure and the same would never revert to the lessor. The said aspect of the conditions were not considered by the Courts below, thereby passed erroneous judgment and decree which is impermissible.

30 the lessee to mortgage the suit schedule property pursuant to the powers reserved in clause 23 of Ex.P.1 read with Ex.P.13. The said lease holder interest is the property of the lessee and such a right can be mortgaged. He further contended that the judgment made in RSA No.2344/2008 dated 30.07.2010 is sub- silentio in regard to statutory provisions of Sections 13(2), 13(4), 17 and 34 of Securitization Act. Thereby, the impugned judgment and decree is rendered in ignorance of statutory law. Therefore, he sought to allow the Regular Second Appeal.

(i) Siva Yogeshwara Cotton Press, Davanagere and others vs. M. Panchaksharappa and another reported in AIR 1962 SC 412.

31 (ii) Ram Sarup Gulla (Dead) by LRs vs. Bishen Barain Inter College and others reported in AIR 1987 SC 1242.

(iii) Mardia Chemicals Ltd., and others vs. Union of India and others reported in (2004) 4 SCC 311.

(iv) United Bank of India vs. Satyawati tondan and others reported in (2010)8 SCC 110

(v) Rajkumar Shivare vs. Assistant Director, Directorate of Enforcement and another reported in (2010)4 SCC 772,

(vi) Agarwal Tracom Pvt. Ltd., vs. Punjab National Bank and others reported in AIR 2017 SC 5562.

IX Arguments advanced by the learned Senior Counsel for Respondent No.1- Plaintiff

32 justify the impugned judgment and decree passed by the Courts below. He contended that, the Lease Deed Ex.P.1 dated 26.3.1997 and Lease and Development Agreement dated 12.02.1997 executed between the owner and the tenant does not transfer any right or ownership, but it is only a temporary lease as contemplated under clause 21 of the Lease Deed which states that the lessees covenant with the lessors that they will promptly perform all the terms of the agreement dated 12.02.1997 and/or his lease and in case of breach of any of the terms of the agreement dated 12.02.1997 and/or this Lease Deed or if the lessees at any time hereafter are adjudged insolvent under the insolvency law, the lessors have the authority to terminate the lease and this lease shall cease. The same was admitted by D.W.1 in his cross-examination that it is true that the agreement shown to him was the agreement dated 12.02.1997 which was scrutinized by him at the time of sanctioning loan to the 1st defendant.

33 The said document is marked as Ex.P.13. It is true that the property was given to the 1st defendant as he had agreed to perform various obligations as mentioned in paragraph-16 of the document. It is true that as per Ex.P.1, one of the obligation of the 1st defendant is not only construction of club house, but also to maintain the club house as per the terms and conditions mentioned therein. He also admitted in his cross examination that, it is true that at the time of sanctioning and releasing of loan in favour of the 1st defendant, he was aware of clause 21 on Ex.P.1. It is true that as per clause 21 of Ex.P.1, plaintiff/lessor is not liable to answer any liabilities of 1st defendant to either banks or any financial institutions. He also admitted that, it is true that there is no privity of contract between the plaintiff and 3rd defendant to discharge the loan in question. It is true that as per clause 31 of Ex.P.1 the notice of termination of the lease has to be issued by the plaintiff/lessor only to the

34 lessee/defendant No.1 and none else. He also admitted that it is true that as per clause 32 of Ex.P.1 the lessee/defendant No.1 without obtaining written consent from the lessor/plaintiff, the defendant No.1 cannot give lease hold right in favour of anybody.

35 originally not mortgaged with the 3rd defendant and the 3rd defendant is not in custody of original title deeds of the suit schedule property and the original Sale Deed. It is true that Ex.P.13 is the only document executed by the 1st defendant in favour of the 3rd defendant by accepting paripasu charge in respect of the loan in question. As per Ex.P.13, the second schedule at page No.8-part ‘A’ does not contain the mortgage of original Lease Deed dated 26.03.1997. He would further contend that both the Courts below held that termination is valid. Therefore, possession must follow. In view of the above, there is no substantial question of law involved in the present appeal and this Court cannot interfere with the concurrent findings of fact, exercising powers under Section 100 of the Code of Civil Procedure.

36 calendar month and shall commence from 1st day of every English calendar month and shall end on the last day of the same month. That on the expiry of the lease period or an earlier termination of the lease, the lessee shall vacate and deliver back vacant possession of the second schedule property in the condition in which it is let out. It is also stated that the lessee shall be at liberty to assign the leasehold rights in second schedule property comprised in the lease only after obtaining prior sanction in writing of the lessors to respectable and responsible persons which sanction shall not be unreasonably withheld, provided that the lessees shall always remain liable for carrying out all the terms and conditions, responsibilities and obligations cast upon them by virtue of this agreement. Admittedly, in the present case, before obtaining the loan from the 3rd defendant bank, the 1st defendant has not obtained any prior permission from the lessor/plaintiff.

37 29. He would further contend that Ex.P.1 read with Ex.P.13 produced by the plaintiff are Xerox copies of documents and not originals. The same is admitted by D.W.1 in the cross-examination as already stated supra. He would further contend that the transaction between the lessee and the bank is fake as the owner is not a party in Ex.D.13. It is only a make believe and not real.

(j) the lessee may transfer absolutely or by way of mortgage or sub- lease the whole or any part of his interest in the property, and any transferee of such interest or part may again transfer it. The lessee shall not, by reason only of such transfer, cease to be subject to any of the liabilities attaching to the lease;

38 Nothing in this clause shall be deemed to authorize a tenant having an untransferable right of occupancy, the farmer of an estate in respect of which default has been made in paying revenue, or the lessee of an estate under the management of a Court of Wards, to assign his interest as such tenant, farmer or lessee;

39 the negative holding that the trial Court and the First Appellate Court were not justified in constructing Clause 34 of Ex.P.1 – a Lease Deed, as an arbitration clause; that the 1st respondent-defendant No.3 having not filed an application accompanied by the Agreement providing for arbitration, the suit not could have been dismissed on the ground that the agreement between the parties provides for arbitration; further that in the absence of a privity of contract between the plaintiff and defendant No.3, the suit could not have been dismissed on the ground that defendant No.3 has invoked the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and merely because defendant No.3 has invoked the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the jurisdiction of the Civil Court will not be taken away.

41 this Court has held that the definition of ‘Lease’ under Section 105 of the said Act does not refer to transfer of any estate but it refers to transfer of right to enjoy the property and there is no privity of estate between the mortgagee and the rightful lessor.

42 privity of contract between the plaintiff and the 3rd defendant-Bank.

i) R. Janakiraman –vs- State reported in (2006) 1 SCC 697 with regard to ‘make- believe’ and not real. (para-26 and 27)

ii) State of Andhra Pradesh –vs- Star Bone Mill & Fertiliser Co., reported in (2013) 9 SCC 319 with regard to paramount title;

iii) Hope Plantations Ltd –vs- Taluk Land Board, Peermade reported in (1999) 5 SCC 590 (para-26)

iv) Jamnadas –vs- J.J. Fareet reported in AIR 1980 sc 1605 (PARA-18)

v) B. Arvind Kumar –vs Government of India reported in (2007)5 SCC 745 (para-11)

Therefore, he sought to dismiss the Regular Second Appeal. X Consideration

45 parties and perused the entire material on record carefully.

46 appeal and remanded the matter only with regard to issue Nos.1, 2 and 6. After remand, the trial Court considering the entire material on record decreed the suit and the appeal filed by the 3rd defendant before the Appellate Court came to be dismissed.

47 defendant has to run the club and maintain the suit schedule property in a good and tenantable condition and has to attend all the periodical repairs of the buildings from time to time. Defendant No.1 has also agreed that if there is any deviation or failure to perform the terms of the lease, it would enable the plaintiff- respondent No.1 to terminate the lease as mentioned in Clause-21 of the Lease Deed. The plaintiff-respondent No.1 has also undertook a stand that Clauses 26 and 29 of the Lease Deed reserve right to re-enter the suit schedule property for the non-performance of any of the terms of the Lease Deed and the Agreement.

48 appellant herein has seized the suit schedule property on 1.8.2003 without notice to the plaintiff-respondent No.1, which has caused embarrassment and humiliation to the plaintiff.

49 obtaining prior sanction in writing of the lessors to respectable and responsible person.

50 Deed and the Agreement entered into between the plaintiff-firm and defendant No.1. He has also admitted that defendant No.1 had agreed to perform various obligations under the Lease Deed and Agreement. He has also further admitted in the cross-examination that if there is any violation of the terms and conditions of the Lease Deed and the Lease and Development Agreement, the plaintiff is authorized to terminate the lease; there is no privity of contract between the plaintiff firm and defendant No.3-Bank; when the possession of the suit schedule property was taken on 1.8.2003 under the Securitization Act, defendant No.3 was not running the club since then; that because of non-performance of the obligation under the Lease and Development Agreement and the Lease Deed by Defendant No.1, plaintiff has issued the termination notice on 10.6.2003 as per Ex.P.9.

52 Government and Municipal Taxes, Assessments, etc., will be levied in respect of the suit schedule property and the buildings therein shall be borne by the lessees and on failure to pay the same, the lessor is entitled to terminate the lease. Defendant No.1 having failed to pay the necessary income tax to the Government, defendant No.2 had initiated recovery proceedings, which is a clear cut violation of Clause 20 of Ex.P.1. Therefore, the termination of the lease by the plaintiff- firm is proper. Infact, D.W.1 in his cross-examination has admitted that defendant No.1 is not performing its obligation under the Lease Deed.

53 defendant No.1. As per the provisions of Section 105 of the Transfer of Property Act, a lease is a transfer of right to enjoy such property which is the subject matter of the lease. Admittedly, in the present case, there is no privity of contract between the plaintiff and defendant No.3 as held by this Court in RSA No.2344/2008 and while remanding the matter, this Court in the said appeal has held that a mere transfer of possession by a mortgager to the mortgagee cannot create privity of estate between the mortgagee and the original owner. The rights claimed by defendant No.3-Bank i.e., the present appellant is whatever that was being enjoyed by defendant No.1 as a lessee and subject to whatever obligations, defendant No.1 had as a lessee. Admittedly, defendant No.1 was not a owner and could not have given property as a security.

54 the terms and conditions of the Agreement and Lease Deed. Merely because the suit schedule property has been mortgaged by defendant No.1 in favour of defendant No.3, defendant No.3 cannot resist the suit for ejectment against the lessee –defendant No.1. A mortgagee would not be regarded as assignee of lessee’s entire interest and the remedy of the mortgagee is to enforce his mortgage and not to resist the suit for ejectment against defendant No.1. Admittedly in the present case, defendant No.1 has violated the terms and conditions of the Lease Deed and the Agreement. It is admitted by the defendant No.3 that it has not verified the original documents which have been given to the IDBI Bank by defendant No.1 which has been admitted by D.W.1 in his cross-examination that the original Deeds of the property of which the loan has been granted are not available with the 3rd respondent-Bank. Admittedly the lease between the plaintiff firm and defendant No.1 firm is for 99 years at the rate of

55 Rs.100/- per annum and the plaintiff firm has legally terminated the lease as per the provisions of the Transfer of Property Act. Since the suit is for ejectment of the tenant, notice of termination has to be issued as per Section 106 of the Transfer of Property Act and the material documents on record clearly depict that the plaintiff has complied with all the statutory requirements by issuing notice for termination of tenancy. Therefore, the contention of the learned Counsel for the appellant –defendant No.3 that the termination of notice dated 10.6.2003 issued under Section 107 of the Transfer of Property Act is bad in law, since the manufacturing process was going on in the lease hold property, cannot be accepted.

56 the Code of Civil Procedure against defendant No.2 would not arise at all, as held by the Hon’ble Supreme Court in the case of State Of A.P. & Ors vs M/S. Pioneer Builders, A.P reported in AIR 2007 SC 113 wherein it has been held that if no objection is taken, the requirement of statutory notice is deemed to be waived and the same has been discussed and answered by this Court in RSA No.2344/2008 and this Court in the said RSA has held that the suit against defendant No.2 is maintainable, and the said finding has reached finality.

57 the date of delivery of possession for illegal use and occupation of the suit schedule property. It was further held that the plaintiff is entitled for a decree as prayed for. Accordingly, the trial Court by the judgment and decree dated 24th March, 2011 decreed the suit with costs.

58 executed between the plaintiff and defendant No.1, defendant No.1 – Company can obtain loan only on the security of the lease hold rights in respect of the suit schedule second property and no right has been conferred under the agreements Ex.P.1 and Ex.P.13, on the security of the suit schedule ‘B’ land belonging to the plaintiff-Company. It is further held that though the 3rd defendant Company obtained possession of the suit ‘B’ schedule property under the provisions of the Securitization Act for recovery of loan, the 3rd defendant Company at the time of sanction of the loan to the 1st defendant Company, has not particularly obtained any consent agreement from the plaintiff Company with regard to the ‘B’ schedule property is concerned.

59 suit schedule property belonging to the plaintiff’s company for recovery of loan. The right to recover the loan of Rs.300 lakhs from the 1st defendant granted by the 3rd defendant Bank on the security of the building proposed to be constructed on the suit schedule second property and other immovable properties for providing other services is always accrued, but in the present case, the 1st defendant having constructed the building on the land belonging to the plaintiff-Company on the basis of the lease agreement for a period of 99 years, the 3rd defendant Bank granted loan to defendant No.1 only on the basis of the lease agreement as per Exs.P.1 and 13, do not confer right to defendant No.1 to mortgage the loan along with ‘B’ schedule land is concerned and thereby the 1st defendant has violated the terms and conditions of the Lease and Development Agreement and Lease Deed. Therefore it was held that it is not possible under law for the 3rd defendant – bank to refrain the plaintiff-company from exercising its right for

60 recovery of possession of the suit schedule ‘B’ property being the owner of the same.

61 document at the time of examination of the witness and that he had no other legal hurdles to such non submission/presentation of the documents and admittedly, the said additional documents have been obtained only after completion of trial which clearly indicates that it is only after thought, the application is filed before the Appellate Court. Therefore, the application came to be rejected.

62 for payment of tax due, clearly indicates that there is violation of terms by defendant No.1 as agreed at Exs.P.1 and 13 and therefore, there is violation of the Lease and Development Agreement at Ex.P.13 between the plaintiff and defendant No.1. Therefore, the Appellate Court was of the considered opinion that the trial Court considering both oral and documentary evidence has rightly decreed the suit. Accordingly, the Appellate Court by the impugned judgment and decree dated 2nd January, 2012 while rejecting the application filed under Section 41 Rule 27 of the Code of Civil Procedure, has dismissed the appeal by confirming the judgment and decree of the trial Court.

63 equitable mortgage at paragraphs-26 and 27 has held as under: “26 (iii) The creation of an equitable mortgage by depositing documents other than title deeds is not valid or permissible. We extract below the contents of Ext. P-69: “On this day, 24-5-1986, I have deposited with you on 23-5-1986, the undermentioned title deeds belonging to my property namely (1) one plot with terraced house site bearing (S. No. 8/3) Plot No. 10, in Swarnapuri Extension, Salem-636 004, with intent by it in respect of the amount due to you under the pronote executed by me for Rs 2,50,000 with interest at 24% per annum thereon. Equitable mortgage in favour of M/s Satramdas Mahesh Kumar and M/s Pahlaprai Sons, 43-D, First Agaharam, Salem. (R. Janakiraman) Signature

64 Details of title deeds handed over for the purpose of equitable mortgage abovesaid: Copy of the sale deed in my favour dated…. Copy of the loan sanction from the Railway Board. Copy of the sale deed given because original is with the Railways. Dated: 24-5-1986 at Salem (R. Janakiraman) Signature sd/: Narayanaswamy” 27. Equitable mortgage is created by depositing the original title deeds. But in this case, the original title deeds are not deposited. Not even the two documents referred in Ext. P-69 are deposited. What are deposited (Exts. P-82 and P-83) were not title deeds but only a certificate issued by the Swarnapuri Cooperative House

65 Building Society Ltd., dated 1-2-1984 certifying that the appellant is owner of Plot No. 10, Swarnapuri Extension (Ext. P-82) and two receipts issued by Tamil Nadu Electricity Board showing that the appellant had paid some electricity charges (Ext. P-83). PW 11 and PW 15 being experienced moneylenders, if really were lending Rs 2,50,000, would have certainly insisted upon the original title deeds or at least the documents mentioned in Ext. P-69 being deposited. This shows that the equitable mortgage was also a “make- believe” and not real. Admittedly, Ex.D.13 Lease and Development Agreement does not creat any right on defendant No.1 to mortgage the suit schedule property to obtain loans about 300 Crores which clearly indicates that there is collusion between defendant No.1 and defendant No.3-Bank and on that ground alone, the appeal filed by the appellant is liable to be dismissed.

67 said lease deed to be treated as having been executed on 21-5-1943, under Section 90 of the Evidence Act and, thus, for believing that the land belonging to the Forest Department, which had in turn, given it to M/s A. Allauddin & Sons on lease.

68 of suit or appeal. Thus, the said section deals with the admissibility of ancient documents, dispensing with proof as would be required, in the usual course of events in a usual manner.

69 parties are bound by the judgment and are estopped from questioning it. They cannot litigate again on the same cause of action nor can they litigate any issue which was necessary for decision in the earlier litigation. These two aspects are “cause of action estoppel” and “issue estoppel”. These two terms are of common law origin. Again, once an issue has been finally determined, parties cannot subsequently in the same suit advance arguments or adduce further evidence directed to showing that the issue was wrongly determined. Their only remedy is to approach the higher forum if available. The determination of the issue between the parties gives rise to, as noted above, an issue estoppel. It operates in any subsequent proceedings in the same suit in which the issue had been determined. It also operates in subsequent suits between the same parties in which the same issue arises. Section 11 of the Code of Civil Procedure

70 contains provisions of res judicata but these are not exhaustive of the general doctrine of res judicata. Legal principles of estoppel and res judicata are equally applicable in proceedings before administrative authorities as they are based on public policy and justice.

“18. The decisions referred to above will show that that the plaintiff/ landlord of the land is entitled to claim the relief for possession of his land and in effect the decree for possession of the land would mean that the land should be delivered to him without the structures. Apart from the relief under the lease deed, the plaintiff is entitled to succeed as he has established that

71 there was default of payment under the provisions of the Bombay Rent Act. The jurisdiction of the Small Cause Court to grant an effective decree for possession of the land cannot be denied. Equally untenable is the contention of the respondent that as the plaintiff has sought two reliefs one under the Bombay Rent Act and another under the Contract, the entire plaint must be rejected. As we have already observed so far as the relief of possession of the premises i.e. the land, is concerned, it is exclusively within the jurisdiction of the Small Cause Court. In asking for the relief for possession of the land, the plaintiff is entitled to incidental and consequential reliefs such as for taking possession of the plot without the structures. The prayer in the plaint asking for possession of the land including the structures would not take the suit out of the competence of the Small Cause Court. In this view it is not necessary for us to go into the question

72 as to whether the terms in the contract regarding the forfeiture can be enforced by the Small Cause Court. It is sufficient for the purpose of this suit to hold that the plaintiff is entitled to seek for possession of the land which is the premises in the suit, and in getting possession of the land, he is entitled to ask for possession of the land without any superstructures. In this connection reference may be made to the nature of the relief which the plaintiff is entitled to. In Ramchandra Raghunath Shirgaonkar v. Vishnu Balaji Hindalekar [AIR 1920 Bom 87 : 22 Bom LR 948 : 58 IC 323] it was held that the ordinary rule of law is that the tenant must give up vacant possession of the land demised at the end of the term and that if he builds on the land of the tenancy he builds at his own risk. At the end of the term he can take away his building but if he leaves it there, it becomes the landlord's property. The court further held that the tenant who

73 had been in possession of land for a large number of years and built a costly and substantial house on the land of the tenancy with the knowledge of the landlord, is entitled to some compensation.

“11. To decide the duration of the lease, the deed has to be read as a whole. The deed dated 30-9-1921 does not specify any duration, but permits the lessee to hold the land forever subject to the right of the lessor to resume the land by giving one month's notice. There is no grant in perpetuity. The right of the lessor to resume the land by giving a month's notice, is unconditional at the absolute will and discretion of the

74 lessor, whenever he desires. These terms indicate that though the instrument was termed as a lease, it only granted permissive occupation terminable at the will of the owner, and therefore, at best a tenancy at will. The absolute discretion to resume the land at any time without assigning any reason, and absence of any express grant in perpetuity and absence of any consideration, militates against the instrument being construed as a lease in perpetuity. The learned counsel for the appellant submitted that courts have taken the view that existence of a mere provision for forfeiture for non- payment of rent or other specified breach, in a deed granting permanent lease, will not make the lease non- permanent. Such line of decisions, may not assist the appellant as a provision for determination of the lease for a specified breach, is in no way comparable to reservation of an absolute right to resume at will without

75 assigning any reason, in a lease without consideration. We, therefore, affirm the finding that Ext. P-1 is not a lease in perpetuity. We, however, desist from examining the further question whether the lease itself was invalid for want of consideration, as such a contention was not raised in the written statement nor urged before the trial court or the High Court.

76 conditions of the agreement, the plaintiff - firm has legally terminated the lease as per the provisions of the Transfer of Property Act and mortgaged the property belonging to the plaintiff without his consent and when he has no right in respect of suit ‘B’ schedule property to mortgage in favour of the 3rd defendant-Bank, the plaintiff can very well maintain the suit for recovery of possession of the suit schedule property. The judgments relied upon by the learned Counsel for the appellant has no application to the facts and circumstances of the present case.

77 creditor on the secured assets and when the secured creditor proposes to proceed against the secured assets, sub-section (4) of Section 13 envisages various measures to secure the borrower’s debt. One of the measures provided by the statute is to take possession of secured assets of the borrowers, including the right to transfer by way of lease, assignment or realizing the secured assets. But in the present case, the plaintiff executed the Lease Deed and the Agreement for a period of 99 years in favour of the 1st defendant and the 1st defendant cannot take the loan from the 3rd defendant- Bank on mortgaging the suit schedule ‘B’ property for obtaining the loan. The 3rd defendant-Bank without ascertaining whether the 1st defendant, who is a lessee under the plaintiff has accrued the right to pledge the property, has granted the loan. Therefore, the judgment relied upon by the learned Counsel has no application to the facts and circumstances of the present case.

79 substance, essential, real, of sound worth, important or considerable – such question need not, however, be one ‘of general importance’. Admittedly, in the present case, both the Courts have concurrently held that the 1st defendant being the lessee under the plaintiff has no right to execute the mortgage deed based on Exs.P.1 and 13 Agreement and Lease Agreement and no right is confirmed on the 1st defendant to mortgage the suit schedule ‘B’ property in favour of the 3rd defendant- Bank. Therefore, the judgment relied upon by the learned Counsel has no application to the facts and circumstances of the present case.

80 executing sale to get back property sold in execution – purchaser on the same day executing agreement to sell the property to close relative of vendor after 10 years – both documents executed immediately one after other and were also registered simultaneously one after other – shows that the intention was to reconvey property to vendor – transaction was mortgage by conditional sale. The said judgment has no application to the facts and circumstances of the present case. Admittedly in the present case, there is no sale or mortgage by the plaintiff in favour of defendant No.1. What was executed was only Exs.P.1 and 13 Agreement and Lease Agreement for a period of 99 years to run the club and to maintain the schedule property in good and tenable conditions and what was permitted was only the mortgage of the lease hold rights and the said Exs.P.1 and 13 will not confer any title or do not authorize the 1st defendant to execute the mortgage in favour of the 3rd defendant. Therefore, the said judgment has no

81 application to the facts and circumstances of the present case.

82 Lease and Development Agreement between the plaintiff and 1st defendant. The 1st defendant has misused the Lease Deed and approached the 3rd defendant - Bank for loan. The 3rd defendant – Bank, without ascertaining the title of the 1st defendant in respect of the property in question, only on the basis of the Lease Deed and Lease and Development Agreement as per Exs.P.1 and P.13, proceeded to sanction loan based on lease hold rights which is impermissible, in view of the provisions of Section 108(g) of the Transfer of Property Act. Therefore, the said judgment has no application to the facts and circumstances of the present case.

83 No.2344/2008 filed by the plaintiff came to be allowed by the judgment and decree dated 30.07.2010 and the matter was remanded to the Trial Court only to record its findings on Issue Nos.1,2 & 6. Against the said judgment and decree, the 3rd defendant-appellant - Bank filed SLP (Civil) No.30106/2010 before the Hon’ble Supreme Court, which came to be dismissed on 16.11.2010. In the said judgment, the question of law (ground) No.1 with regard to maintainability of the suit and ground No.3 with regard to law declared by the Hon’ble Supreme Court in the case of Mardia Chemicals Limited and others vs. Union of India and others reported in (2004)4 SCC 311 and ground No.8 where the suit for possession by the 1st defendant against the 1st respondent-lessor, respondent No.2-lessee as well as Income Tax Department and the petitioner-Bank is infact a suit in collusion between respondent Nos.1 and 2, lessor and lessee have been considered. The appellant cannot reopen the findings of fact confirmed

84 by this Court in RSA No.2344/2008 as well as by the Hon’ble Supreme Court in SLP (Civil) No.30106/2010 and admittedly, lessee is not before the Court, throughout.

85 findings of fact recorded by the Courts below, in exercise of power under Section 100 of the Code of Civil Procedure.

Accordingly, the Regular Second Appeal is dismissed as devoid of merits.

Sd/-

Judge

Nsu-Pages 1-18, 39-80 kcm-Pages 19-38, 81 to end.