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TMI Blog2007 (8) TMI 449X X X X Extracts X X X X X X X X Extracts X X X X ..... operty irrespective of the nature thereof by several modes, e.g., a lease of land which does not require registration; (ii) by partition of a joint family property by way of family settlement, which does not require registration. In a case of this nature where valuable right is created which may or may not confer an assignable right, the question requires clear determination having regard to the equitable principle in mind, and would have far reaching consequences, as a large number of banks and financial institution advance a huge amount only on the basis of allotment letters. If such allotment letters are to be totally ignored, the same may deter the banks in making advances which would in effect and substance create a state of instability. - CIVIL APPEAL NOS. 7824-7828 AND 7833-37 OF 2004 - - - Dated:- 30-8-2007 - S.B. SINHA AND MARKANDEY KATJU, JJ. Adarsh B. Dial, Ms. Sumati Anand and Rajiv Nanda for the Appellant. Vahanavati, A.K. Ganguli, K. Ramamurthy, H.S. Gururaja, Devdath Kamath, Ms. T. Anamika, Guntur Prabhakar, S. Madhusudhan Basu, Mukesh K. Giri, Manoj Saxena, Rajnish Kumar Singh, Rahul Shukla, T.V. George, Jayant Muthuraj, Mrs. Manik Karanjawala a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o re-enter the premises or any part thereof in the name of the whole, without prejudice to the rights of the Government to seek any available remedy against the company for recovery of the loss. ****** 21.All payments due to the Government under this agreement shall carry interest at 8 per cent. All payments made/instalments paid after the due dates carry penal interest at 12 per cent per annum." 2. In terms of clause 2 of the said agreement, the Company indisputably had made initial payment of 50 per cent of the total cost of the allotted land. 3. On the said date, the Government of Andhra Pradesh also issued a letter to the Company; permitting it to mortgage the said 51 acres of land to any Scheduled Bank to obtain financial assistance to the project, which the Company sought to establish, stating : "In the circumstances stated in your letter second cited, you are hereby permitted to mortgage the 51 acres of land allotted in the Ncharam Industrial Development area to any Scheduled Bank to obtain financial assistance to your project. The agreement executed by you is returned herewith duly signed." 4. Relying on or on the basis of the said purported sanction, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of public auction is unwarranted, arbitrary, and opposed to the principles of natural justice." 9. During pendency of the said writ petition, APIIC resumed possession of 25 acres of land and decided to hold auction in respect thereof only, which was questioned by the appellant-Bank by filing a writ petition before the Andhra Pradesh High Court, which was marked as W.P. No. 24060 of 1998. By an order dated 12-8-1998, the claim petition filed by APIIC before the Debt Recovery Tribunal was dismissed. APIIC being aggrieved by and dissatisfied therewith filed a writ petition before the Andhra Pradesh High Court on or about 1-9-1998. 10. A sale proclamation for the entire 51 acres of land proposing to sell the said land by public auction was issued by the Recovery Officer on or about 10-12-1998. Yet again a writ petition was filed by APIIC and the operation of the said for holding auction was stayed. 11. On or about 24-8-1998, one Nacharam Industries Association also filed a writ petition questioning the auction in respect of 25 acres of land. The Company also filed a writ petition, which was marked as Writ Petition No. 25056 of 1998 questioning the auction- cum -sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gently in the matter and in advancing huge financial assistance to the Company on the strength of a letter of no objection purported to have been issued by the Director of Industries. What was surprising was that Syndicate Bank equated that letter to that of a title deed and accordingly advanced monies without taking proper care and caution. ( vi )APIIC by its proceedings dated 17-8-1993 cancelled the allotment of land to an extent of 25 acres of land. The said order remained unquestioned. ( vii )The Estate Officer under the Public Premises Act could not have filed an affidavit for and on behalf of APIIC stating that the sale of 26 acres of land could be permitted. ( viii )A reading of all the covenants clearly reveals that the Government merely granted permission by putting the Company in possession of the land. The ownership always remained with the Government until the recovery. No sale deed was executed by the Government in favour of the Company. ( ix )Admittedly, no such sale deed was executed by the Government in favour of the Company. 17. In regard to the interpretation of clause 8 of the agreement, the High Court while opining that there was absolutely no disput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allotment of remaining extent of land also. The first order dated 17-8-1993 cancelling the allotment of Ac.25-00 of land remained unchallenged. This order dated 14-7-1999 cancelling the allotment of remaining extent of Ac.26-00 of land, in our considered opinion, is not vitiated for any reason whatsoever. There is a clear and categorical finding in the said order that the Company failed to utilize the land for the purpose for which it was allotted. The APIIC was well within its limits to cancel the remaining extent of fund. . . ." 18. In regard to the question as to whether the recovery certificate dated 30-12-1996 issued by the Debt Recovery Tribunal to recover the amount by sale of mortgaged property, it was held that despite the fact that in the recovery certificate the schedule of the properties attached and sold was shown to be nil , stating : "Be it as it may, the finding, recorded by the DRT as against the APIIC, in no manner, effects the title since the lands in question remained under the ownership of the APIIC as there is no transfer of title as such in favour of the company. Admittedly, no sale deed has been executed by the APIIC in favour of the company." It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in interest of the Government, is not bound by the advances so made by the Syndicate Bank. Therefore, the Syndicate Bank cannot have the first charge over the property in question; ( c )that there is no specific agreement as such by the Syndicate Bank agreeing to pay the Government on behalf of the company so much of the amount advanced as loan to the company will remain due on the promissory note executed by the Company. In the absence of any specific agreement, the APIIC is not bound to accept the demand draft for a sum of Rs. 3,366.35 paise purporting to be due from the company towards the land cost and the same has been rightly rejected by the APIIC; ( d )that the order of cancellation of allotment of land dated 17-8-1993, which remained unchallenged, has not only become final, but also does not suffer from any legal infirmities requiring any interference; ( e )that the order dated 14-7-1999 cancelling the allotment of remaining extent of Ac.26-00 of land which is challenged by the Syndicate Bank in W.P. No. 17443 of 1999, is not vitiated for any reason whatsoever. It is a composite order passed by the APIIC cancelling the allotment of land both on the ground of failur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent letter dated 3-8-1972, which is in conformity with clause 8( b ) of the agreement dated 3-8-1972 was misconstrued by the High Court, inasmuch as by reason thereof, the State agreed that the allottee may raise loan mortgaging the lands agreed to be sold as well as the buildings constructed thereupon. ( vi )Clause 8( b ) supersedes other clauses to the contrary in the agreement, which provides for prior agreement of Government before creating charge/mortgage only if more than 60 per cent of the value of the land was to be advanced and a consent letter of the Government was to be issued therefor. ( vii )Clause 8( b ) having provided that the charge of the financial institution would be the first charge and that the Government having provided that the second charge, the obligation of the financial institution was required to be liquidated at the first instance. ( viii )It is borne out from the records that the entire cost of the land being Rs. 4,93,680 stood paid. In any event the value of the entire land having been adjusted for 25 acres of land which had been cancelled, the APIIC did not make it clear as to on what basis further cost of the land towards 26 acres was being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter or the agreement dated 3-8-1972, thus, did not create any charge in favour of the bank. The letter dated 3-8-1972 issued by the Director of Industries being not a document of title, the judgment of the High Court cannot be assailed. ( iv )Appellant-Bank having not questioned the orders of cancellation of allotment dated 17-8-1993 and 14-7-1993 respectively, it must be held to have waived its right, if any, to question the same. The sale proceeds in terms of the judgment and order dated 22-2-1977, therefore, should be directed to be paid to APIIC. 22. The principal question which arises for consideration is as to whether in absence of any execution and registration of deed of sale by the Government of Andhra Pradesh or by APIIC in favour of the Company, any interest in the land has been and could be created. Our attention has been drawn by the learned counsel for appellant to a large number of decisions of different High Courts to show that for the purpose of creating mortgage by depositing title deeds in terms of section 58 of the Transfer of Property Act, it is not necessary that the mortgagor would have forfeit complete title over the property. Even if the mortgagor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty on condition that on default of payment of the mortgage-money on a certain date the sale shall become absolute, or on condition that on such payment being made the sale shall become void, or on condition that on such payment being made the buyer shall transfer the property to the seller, the transaction is called a mortgage by conditional sale and the mortgagee a mortgagee by conditional sale : Provided that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale. ( d ) Usufructuary mortgage - Where the mortgagor delivers possession or expressly or by implication binds himself to deliver possession of the mortgaged property to the mortgagee, and authorizes him to retain such possession until payment of the mortgage-money, and to receive the rents and profits accruing from the property or any part of such rents and profits and to appropriate the same in lieu of interest, or in payment of the mortgage-money, or partly in lieu of interest or partly in payment of the mortgage-money, the transaction is called an usufructuary mortgage and the mortgagee an usufructuary mortgag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been fulfilled or not would essentially be a question of fact in each case. In this case, a right appears to have been conferred on the allottee by issuance of a valid letter of allotment coupled with possession as also licence to make construction and run a factory thereon, together with a right to take advances from banks and financial institutions; subject, of course, to its fulfilment of condition may confer a title upon it in terms of section 58( f ) of the Transfer of Property Act, but the question would be whether such a right is assignable. 28. In Mulla s Transfer of Property Act, a large number of cases have been noticed where even a patta of land has been considered to be a document of title depending of course on the circumstances under which it had been given. 29. Moreover, if insistence on the original document of title is laid, it may give rise to the conclusion that once the document of title is lost, no mortgage of deposit of title deed can be created at all. 30. It is, however, one thing to say that a person cannot convey any title, which he himself does not possess; but it is another thing to say that no mortgage can be created unless he obtains a tit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a facie such patta would not be mere bill of rent but something more and that if it is not so it would not create any rights in the pattadar in derogation of the rights of a person who would be entitled to the land subject to the proper and regular payment of rent. The question directly arose before a Bench of this Court in Official Assignee v. Basudevadoss AIR 1925 Mad. 723, as to whether a deposit of patta is enough to constitute an equitable mortgage. The Bench answered the question in the affirmative. Srinivasa Aiyangar, J. who delivered the leading judgment in that case, has pointed out that the answer to the question as to whether the pattas in respect of a land is a document which would be sufficient, by being deposited, to evidence the intention required for an equitable mortgage would vary according to the conditions of the country and the consciousness on the part of the members of the community and that though a patta is not a document of title still a deposit of the same with intent to create an equitable mortgage would create an equitable mortgage." (p. 20) 32. In M.M.T.C. Ltd. v. S. Mohamed Gani AIR 2002 Mad. 378, a learned Single Judge opined : "18. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on since the mere possession of the deeds is not enough without evidence as to the manner in which the possession originated, so that an agreement may be inferred. Even the mere possession of the deeds by the creditor coupled with the existence of a debt need not necessarily lead to the presumption of a mortgage. The mere fact that the documents were coming from the custody of the plaintiff is not by itself sufficient to prove an intent to create a security. But in a given case unless and until the defendants satisfactorily explain how the documents came to the plaintiffs custody, the said fact would be significant and have a great bearing." (p. 393) 33. In Amulya Gopal Majumdar v. United Industrial Bank Ltd. AIR 1981 Cal. 404, a Division Bench of the Calcutta High Court held that possessory title itself can be a subject-matter of mortgage, opining : "...Therefore, at the time when the disputed transaction was entered into the mortgagor Eagle Plywood Industries Private Limited had entered into lawful possession of the Behala property on the basis of an agreement for sale dated 18-7-1950. Such possessory title could very well in law be furnished as security for the mortgag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Evidence Act or in the Transfer of Property Act. But a Court may presume under section 114 of the Evidence Act that under certain circumstances a loan and a deposit of title deeds constitute a mortgage. But that is really an inference as to the existence of one fact from the existence of some other fact or facts. Nor the fact that at the time the title deeds were deposited there was an intention to execute a mortgage deed in itself negatives, or is inconsistent with, the intention to create a mortgage by deposit of title deeds to be in force till the mortgage deed was executed. The decisions of English courts making a distinction between the debt preceding the deposit and that following it can at best be only a guide; but the said distinction itself cannot be considered to be a rule of law for application under all circumstances. Physical delivery of documents by the debtor to the creditor is not the only mode of deposit. There may be a constructive deposit. A Court will have to ascertain in each case whether in substance there is a delivery of title deeds by the debtor to the creditor. If the creditor was already in possession of the title deeds, it would be hypertechnical to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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