2012 (11) TMI 916 - HC - Companies Law

SARFAESI Act - bank or a financial institution has enormous powers to sell the assets of a defaulting borrower and realise their debt without recourse to a court of law - first defendant allegedly entered into an agreement with the plaintiff for sale of those properties in their favour - According to this agreement this defendant was required to issue a sale certificate in favour of the plaintiff - plaintiff thought that it had performed its obligations under the agreement, that the first defendant was obliged to issue the sale certificate and that they were wilfully not doing the same - defendant sold the above properties to the fourth defendant - application was filed by the plaintiff to restrain the fourth defendant from selling, transferring, encumbering or otherwise dealing with the said properties Held that - Plaintiff has been able to show that the fourth defendant had notice and knowledge of the agreement between the plaintiff and the first defendant, notice to the fourth defendant or absence thereof or the fourth defendant being a bona fide purchaser for value or not being so, will be fully established at the trial - order of injunction has to be passed restraining the fourth defendant from transferring, encumbering or otherwise dealing with the property till disposal of the suit if the plaintiff succeeds in the suit the property has to be transferred to them, by any transferee - suit has to be expedited and the above order of injunction should be restricted in its operation to six months from date

Issues Involved:
1. Concluded Contract
2. Bona Fide Purchaser
3. Applicability of Section 52 of the Transfer of Property Act, 1882
4. Notice and Knowledge of the Agreement
5. Stamp Duty and Evidentiary Value

Detailed Analysis:

Concluded Contract:
The primary issue was whether there was a concluded contract between the plaintiff and the first defendant. The plaintiff argued that the agreement dated 13th February 2007 was a binding contract, and they had performed their obligations under it. The first defendant contended that the document was merely a "term sheet" and not a concluded contract, citing Black's Law Dictionary and the case of Alpenstow Ltd vs. Regalian Properties plc. However, the court found that the first defendant's conduct, such as not protesting the plaintiff's letter dated 16th February 2007 and relying on the forum selection clause in their jurisdictional challenge, suggested that they treated the agreement as binding. Thus, the court concluded that there was a prima facie case of a concluded contract.

Bona Fide Purchaser:
The fourth defendant claimed to be a bona fide purchaser for value without notice of the prior agreement between the plaintiff and the first defendant. The plaintiff argued that the fourth defendant had notice of the earlier transaction, as indicated by their failure to explicitly state the absence of notice in their affidavit. The court noted that the omission to state they purchased the property without notice, while claiming to be a bona fide purchaser, prima facie indicated that they had notice of the transaction.

Applicability of Section 52 of the Transfer of Property Act, 1882:
The court examined the applicability of Section 52 of the Transfer of Property Act, 1882, as amended by the Bombay Amendment Act of 1939, which requires the registration of a notice of pendency of a suit under Section 18 of the Indian Registration Act, 1908, for the restraint on transfer to be operative. Since the suit was not registered, the court concluded that there would be no Section 52 protection for the plaintiff. However, the court noted that valuable rights created before the institution of the suit, such as the agreement for sale, could still be protected under Section 19(b) of the Specific Relief Act, 1963, and Section 91 of the Indian Trusts Act, 1882.

Notice and Knowledge of the Agreement:
The court considered whether the fourth defendant had notice of the agreement between the plaintiff and the first defendant. The plaintiff did not explicitly plead the knowledge of the fourth defendant in their application, but the court found that the fourth defendant's affidavit, which only stated they were a bona fide purchaser, prima facie indicated notice of the prior transaction. The court held that the existence and purport of the agreement, as well as the fourth defendant's notice and bona fide status, would be fully established at trial.

Stamp Duty and Evidentiary Value:
The first defendant argued that the alleged agreement was unstamped and had no evidentiary value. The court acknowledged that an unstamped agreement could be impounded, stamped, and tendered in evidence. The court held that the plaintiff had prima facie established the existence of the agreement for sale, but the full examination of its evidentiary value would occur at trial.

Conclusion:
The court concluded that the plaintiff had made out a prima facie case for an injunction to restrain the fourth defendant from transferring, encumbering, or otherwise dealing with the property until the disposal of the suit. The court noted the considerable lapse on the part of the plaintiff in not seeking an injunction earlier but balanced this with the need to prevent the creation of further third-party interests. The injunction was limited to six months, and the suit was expedited with specific timelines for filing written statements and discovery.

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