9911796707
TMI Blog2016 (4) TMI 676X X X X Extracts X X X X X X X X Extracts X X X X ..... and Himanshu was given packing credit facilities for the sum of Rs. 29,05,485/-. This agreement contained an arbitration clause. The arrangement entailed co-ordination between MMTC and manufacturing units such as Himanshu; it involved MMTC securing credit from its banker and then passing it on to the unit, which was then to export jewellery in terms of the prevailing import-export policy. The amounts availed of by the units were to be repaid with agreed interest. Claiming that Himanshu had defaulted inasmuch as the full payment of the amounts with interest at agreed rates had not been made, MMTC invoked the arbitration clause on 19.06.1996. A three member Arbitral Tribunal was constituted before which MMTC claimed about Rs. 29 lacs with interest and costs. 3. Himanshu contested the proceedings before the Arbitral Tribunal and denied its liability to MMTC. After considering the terms of the agreement, the invoices in question and the payments made by Himanshu, the Arbitral Tribunal by a plurality of opinions dated 21.12.2002 upheld MMTC's claim to the tune of Rs. 14,73,973/-. Each arbitrator (Mr. Justice S. Ranganathan (Retd.), Mr. Justice P.N. Khanna (Retd) and Mr. K.T.S. Tulsi, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, Shri. Jagdish Kumar, the third respondent. 6. On 25.11.2009, the Recovery Officer held that PSB had an overriding right to proceed against the disputed property. The order, inter alia, stated that: "Ld. counsel for the MMTC, the noticee, however submits that the award dated 21.12.2002 is a decree and the MMTC has the first charge over the said property and the CH Bank has no right over the property at 277/2779, Gali No. 20, First Floor, Beadonpura Karol Bagh, New Delhi. This forum observes that the award dated 22-12-2002 in the nature of money decree and this award has nothing to do with the mortgage of the property. Further, mortgage of the property by CD-2 with MMTC has not been substantiated. It is further observed that since there exists a financial dispute between CD-2 & MMTC, the alleged rights of noticee, MMTC are only that of recovery under the alleged award. The Section 34 of RDDBFI Act 1993 provides for over riding effect of this Act and section 25 of RDDBFI Act 1993 provides-the powers to the Recovery officer without making distinction between the properties "charged or otherwise". As such the application of MMTC regarding claiming the first right & precedence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n favour of MMTC was never proved. Mr. Pallav Saxena, learned counsel for PSB, urged that the Memorandum of deposit of title deeds was undated; besides it did not pertain to Himanshu. In the absence of the method known to law, i.e. a mortgage suit, in terms of Order XXXIV, Rule 14, Code of Civil Procedure, MMTC could not have rested its claim only on the basis of the arbitral tribunal's award - which resulted in a decree. It was urged here that an arbitration proceeding is neither appropriate nor competent in respect of mortgage transactions, which are to be proceeded with in terms of the only manner known to law i.e. a suit for foreclosure and sale. It is argued in this context that the award at best was a money decree and could under no circumstances be interpreted as to mean a successful mortgage claim. 10. Mr. Saxena relied on the judgment of the Supreme Court reported as Booz Allen & Hamilton Inc. v SBI Home Finance Ltd 2011 (5) SCC 532, particularly the observations that mortgage suits- unlike arbitration proceedings which are private actions and can be decided by an agreed forum with consent of parties- are actions in rem which can also implicate rights of third parties and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and justified. Analysis and Conclusions 13. Chronologically speaking, the following events occurred: In 1993, MMTC advanced a loan to the second Respondent, supposedly backed by a mortgage of title deeds. In 1994, PSB advanced a loan to the second Respondent. PSB obtained in its favour an order against the second Respondent in 1998 from the Debt Recovery Tribunal. MMTC obtained an arbitral award in its favour against the second Respondent in 2002. 14. The present dispute pertains to immovable property belonging to Jagdish Kumar (the third Respondent), the original debtor in both the cases, being a proprietor of the second Respondent. The original debtor is now out of the picture, and the two lenders are fighting to claim priority over the asset. 15. MMTC initiated execution proceedings of the award before a civil court. The Arbitration and Conciliation Act, 1996 confers the status of a decree to an arbitral award, which can be enforced according to the provisions of the Code of Civil Procedure. PSB commenced recovery proceedings before the DRT. The proceedings before the Recovery Officer are governed by the Recovery Act. The Recovery Officer under the Recovery Act is cloaked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty and not on account of any other person, or was in the possession of some other person in trust for him, or in the occupancy of a tenant or other person paying rent to him, the Tax Recovery Officer shall disallow the claim. (6) Where a claim or an objection is preferred, the party against whom an order is made may institute a suit in a civil court to establish the right which he claims to the property in dispute; but, subject to the result of such suit (if any), the order of the Tax Recovery Officer shall be conclusive." 17. Section 48 of the Transfer of Property Act reads as follows: "48. Priority of rights created by transfer.-Where a person purports to create by transfer at different times rights in or over the same immoveable property, and such rights cannot all exist or be exercised to their full extent together, each later created right shall, in the absence of a special contract or reservation binding the earlier transferees, be subject to the rights previously created. 18. Order 34 Rule 14, CPC is also relevant; it states that: "14. (1) Where a mortgagee has obtained a decree for the payment of money in satisfaction of a claim arising under the mortgage, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the non-obstante provision in Section 34, overrides a prior charge is unacceptable. The non obstante clause would operate only where there is a conflict, and the Court holds that the applicable rules themselves envision a situation where the Recovery Officer is confronted with a property that is already charged. Rule 11 of the Second Schedule as applied to the Debt Recovery Officer, sets out how the Recovery Officer should investigate such a claim. 24. The fact that the mortgage debt must be enforced by sale through a separate civil suit does not obviate the mortgage itself. So far as the Debt Recovery Officer is concerned, Rule 11 merely requires him to investigate if evidence of a prior charge on the property exists, and then proceed accordingly. His task is not to finally give effect to the mortgage debt, nor is it to deny its existence in law. Indeed, his determination is not final and is subject to a civil suit that may be filed in that regard (See Rule 11(6) which states, inter alia that "the party against whom an order is made may institute a suit in a civil court to establish the right which he claims to the property in dispute; but, subject to the result of such suit (if ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
