IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL SPECIAL APPEAL NO. 545 of 2019 [ENTITY] Appellant. Vs. The [ENTITY]. Respondents Sri [ENTITY], learned counsel for the appellant. Sri [ENTITY], learned Standing Counsel for the State of Uttarakhand / respondent nos. 1 & 2. Sri [ENTITY], learned counsel for the respondent-Bank. Dated: 10th June, 2019 Coram: Hon'ble [ENTITY], C.J.
Hon'ble [ENTITY], J.
[ENTITY], C.J. (Oral) This appeal is preferred against the order passed by the learned Single Judge in [CASE NUMBER] dated 15.05.2019.
2. The appellant herein M/s [ENTITY] (a company incorporated under the [ACT]) invoked the jurisdiction of this Court, under [SECTION] of the [ACT], seeking a writ of certiorari to quash the order passed by the Debts Recovery Tribunal in [CASE NUMBER] dated 08.02.2019 to the extent interim relief, sought for by the appellant-writ petitioner in its interim relief application, was not granted; and for a writ of mandamus commanding respondent nos. 1 & 2 not to proceed with the order dated 26.11.2018 till the disposal of the interim relief application.
3. Facts, to the limited extent necessary, are that the subject property was mortgaged in favour of the third respondent-Bank on 23.01.2007. It is after the subject property was mortgaged, that the borrower had leased the subject premises in favour of M/s Navitas Green Power (Fuel Management) Private Limited (an affiliate of the appellant-writ petitioner) by way of a registered lease-deed dated 11.03.2013 for a period of four years. While the appellant-writ petitioner claims that M/s Navitas Green Power (Fuel Management) Private Limited had sub-leased the property in their favour by way of an unregistered lease-deed dated 05.08.2014, the fact remains that the borrower entered into a lease agreement with the appellant- writ petitioner on 22.01.2018. The subsequent lease-deed dated 22.01.2018 neither refers to the earlier lease being renewed nor that M/s Navitas Green Power (Fuel Management) Private Limited had sub-leased the subject property in the appellant-writ petitioner's favour earlier.
4. On an application, filed by the third respondent-Bank under [SECTION] of the [ACT] (for short the '[ACT]'), an order was passed by the District Magistrate, Haridwar on 26.11.2018 which the appellant-writ petitioner claims is an order passed behind their back without putting them on notice and without giving them an opportunity of being heard. The appellant-writ petitioner approached the Debts Recovery Tribunal, under [SECTION] of the [ACT], questioning the order passed by the District Magistrate dated 26.11.2018 under [SECTION] of the [ACT]. The relief sought by the appellant-writ petitioner, before the Debts Recovery Tribunal, was to set aside the operation / effect / implementation of the order dated 26.11.2018 passed by the District Magistrate, and all consequential action / proceedings taken pursuant thereto; to declare the proceedings, initiated by the respondent-Bank, to be in violation of the provisions of the [ACT] and the Rules; to prohibit the respondent Bank from evicting the appellant-Company till the lease continued to remain in force i.e. upto 21.07.2021; to quash the entire recovery proceedings initiated by the respondent-Bank in the exercise of the power and jurisdiction vested under [SECTION] of the [ACT]; and to declare the measures taken by the respondent-Bank under [SECTION] of the [ACT], after summoning the possession notice from the respondent-Bank, as invalid. By way of interim relief, the appellant-writ petitioner had sought a direction to the respondent-Bank not to proceed with the order dated 26.11.2018 passed by the District Magistrate, Haridwar and to restrain the respondents from taking possession of the secured assets.
5. In its order in [CASE NUMBER] dated 08.02.2019, all that the Debts Recovery Tribunal, Dehradun did was to grant the respondent-Bank ten days' time to file its reply, and for the applicant to file a rejoinder affidavit within one week from that date. The matter was directed to be re-listed on 27.02.2019. Questioning the said order of the Debts Recovery Tribunal, Dehradun dated 08.02.2019, the appellant-writ petitioner invoked the jurisdiction of this Court seeking a writ of certiorari to quash the said order dated 08.02.2019, and to restrain the official respondents from giving effect to the order of the District Magistrate dated 26.11.2018.
6. While the order of the District Magistrate, Haridwar dated 26.11.2018 was not even subjected to challenge in the writ petition, the appellant-writ petitioner, thereafter, filed an application seeking amendment of the prayer to include a challenge to the order passed by the District Magistrate, Haridwar dated 26.11.2018. The affidavit filed in support of the amendment application is dated 14.05.2018; a copy thereof was served on the Chief Standing Counsel of the Government of Uttarakhand on 15.05.2018, and was also filed in the High Court Registry on 15.05.2015, on the very same day on which the order under appeal came to be passed by the learned Single Judge. The amendment application could not have been, and was not in fact, listed before the learned Single Judge on the day the the order under appeal came to be passed.
7. In the order under appeal, the learned Single Judge placed reliance on the judgment of the Supreme Court, in [PRECEDENT] dated 30.01.2018), and dismissed the writ petition, however, granting liberty to the appellant-writ petitioner to approach the lead Bank, or the consortium of banks with a fresh offer. The lead bank, or consortium of banks, were directed to convey their decision to the appellant-writ petitioner within a period of two weeks from the date of making of such an offer by the appellant-writ petitioner. Aggrieved thereby, the present appeal.
8. Sri [ENTITY], learned counsel for the appellant-writ petitioner, would submit that, unlike borrowers who can possibly invoke the jurisdiction of the Debts Recovery Tribunal under [SECTION] of the [ACT], the appellant, a lessee, is not entitled to avail the remedy available to a borrower under [SECTION] of the [ACT]; its only remedy is to approach this Court under [SECTION] of the [ACT]; in the present case the earlier lease-deed executed in favour of their affiliate M/s Navitas Green Power (Fuel Management) Private Limited was on 11.07.2013 after the subject property had been mortgaged in favour of the third respondent-Bank on 23.01.2007; the said lease deed dated 11.07.2013 was however executed before a notice was issued by the third respondent-Bank under [SECTION] of the [ACT] on 28.08.2014; even prior thereto, an unregistered sub-lease agreement was executed by M/s Navitas Green Power (Fuel Management) Private Limited in the appellant-writ petitioner's favour on 05.08.2014; and since, in effect, it is the lease-deed dated 11.07.2013, which has been renewed by the subsequent lease- agreement dated 22.01.2018, the appellant-writ petitioner is entitled to retain possession of the subject premises till expiry of the lease period on 22.07.2021 (since the subsequent lease deed dated 22.01.2018 has been made applicable retrospectively from 22.07.20[SECTION]); even if the subsequent renewal of the lease is ignored, the fact that the appellant-writ petitioner is in possession of the subject property, pursuant to the sub-lease agreement dated 05.08.2014, would require their lease to be treated as an oral lease on a month to month basis; in such an event also, the appellant-writ petitioner is entitled to be put on notice, and to be given an opportunity of being heard, before an order under [SECTION] of the [ACT] is passed; and failure to put the appellant-writ petitioner on notice is in violation of principles of natural justice, and falls foul of the requirement of [SECTION] of the Act. Learned counsel would rely on the judgments of the Supreme Court in [ENTITY] vs. International Assets Reconstruction Company Limited and others : (2014) 6 SCC 1 and [ENTITY] vs. Bank of India and others : (2016) 3 SCC 762.
9. On the other hand, Sri [ENTITY], learned counsel appearing on behalf of the respondent-Bank, would submit that the original lease-agreement executed by the borrower in favour of M/s Navitas Green Power (Fuel Management) Private Limited expired on 11.07.20[SECTION]; even prior to its expiry, a notice under [SECTION] of the [ACT] was issued on 28.08.2014; the borrower could, therefore, not have executed a fresh lease-deed in favour of the appellant-writ petitioner on 22.01.2018, in view of the bar under [SECTION] of the [ACT]; the appellant-writ petitioner having invoked the jurisdiction of the Debts Recovery Tribunal, and having elected to avail the remedy under [SECTION] of the [ACT], cannot simultaneously invoke the jurisdiction of this Court under [SECTION] of the [ACT]; the appellant-writ petitioner has not even questioned the order passed by the District Magistrate, Haridwar on 26.11.2018, under [SECTION] of the [ACT], in the writ petition filed by it; an intra- court appeal is not maintainable against an order passed by the Debts Recovery Tribunal in view of the bar under [SECTION] of the [ACT]; the borrower has adopted this ruse of granting one lease after another only to avoid the Bank taking possession of the subject property, and in putting it to sale; and since a sum in excess of Rs. 124.50 crores is due and payable by the borrower to the Bank, this Court should refrain from interference. Learned counsel would rely on the judgments of the Supreme Court, in [ENTITY] and others vs. State of Maharashtra and others : (2011) 2 SCC 782 and [PRECEDENT] dated 30.01.2018.
10. As noted hereinabove, the challenge in the writ petition is to the order passed by the Debts Recovery Tribunal (which as noted hereinabove is only an order deferring hearing to enable the parties to complete pleadings). In terms of [SECTION] of the [ACT], an intra-court appeal would not lie against an order passed in a writ petition filed against an order passed by the Tribunal i.e. in the present case the order of the DRT dated 08.02.2019.
11. It is unnecessary for us to dwell on this issue, as Sri [ENTITY], learned counsel for the appellant-writ petitioner, would fairly state that the appellant-writ petitioner does not press for the grant of the relief sought for against the DRT. If that be so, nothing remains to be examined regarding the validity of the order under appeal passed by the learned Single Judge, as the order passed by the District Magistrate, Haridwar, under [SECTION] of the [ACT], has not been put in issue in the writ petition. While it does appear, from the material placed before us, that the appellant-writ petitioner had filed an application seeking amendment of the prayer, to include a challenge to the order passed by the District Magistrate, Haridwar dated 26.11.2018, the said application was filed in the Registry of the High Court only on 15.05.2019 i.e. the very same day on which the writ petition came to be decided by the learned Single Judge. Since the said application was not even listed before him, the learned Single Judge could not have passed any order on the said application. In so far as this intra-court appeal is concerned, there is no specific challenge in the writ petition to the order of the District Magistrate dated 26.11.2018, and it is unnecessary for us therefore to examine the contentions urged before us for the first time in an intra-court appeal. We have, however, examined the contentions urged by Sri [ENTITY], learned counsel for the appellant-writ petitioner, as elaborate submissions were put forth by him on the scope of [SECTION] and [SECTION] of the [ACT].
12. Sri [ENTITY], learned counsel for the appellant-writ petitioner, would submit that, since the appellant-writ petitioner has no remedy under [SECTION] of the [ACT] to question the order passed by the District Magistrate, Haridwar under [SECTION] of the [ACT], it can only approach High Court under [SECTION] of the [ACT].
13. [SECTION] of the [ACT] (for short the '1882 Act') relates to the mortgagor's power to lease, and under sub-section (1) thereof, subject to the provisions of sub-section (2), a mortgagor, while lawfully in possession of the mortgaged property, shall have the power to make leases thereof which shall be binding on the mortgagee. [SECTION] of the 1882 Act stipulates that every such lease shall be such as would be made in the ordinary course of management of the property concerned, and in accordance with any local law, custom or usage. [SECTION] of the 1882 Act stipulates that no such lease shall contain a covenant for renewal. [SECTION] of the 1882 Act stipulates that the provisions of sub-section (1) shall only apply if and as far as a contrary intention is not expressed in the mortgage-deed; and the provisions of sub-section (2) may be varied or extended by the mortgage-deed and, as so varied and extended, shall, as far as may be, operate in a like manner and with all like incidents, effects and consequences, as if such variations or extensions were contained in that sub-section.
14. The borrower (mortgagor) has the power under [SECTION] of the 1882 Act to lease the mortgaged property subject to the provisions of [SECTION]. [SECTION] of the 1882 Act expressly stipulates that no such lease shall contain a covenant for renewal. The fact, however, remains that Clause 6 of the lease-deed dated 11.07.2013 expressly provides that, while the lease was initially for a period of four years commencing from the date of the lease-deed dated 11.07.2013, it may be renewed for a further period as provided in [SECTION]. Clause 16A of the lease-agreement dated 11.07.2013 stipulates that the lessee shall have an option, exercisable at its option, to renew the lease of the demised property for a further period of three years commencing from expiration of the initial lease period ("Renewed Lease Term"); in the event that the lessee wishes to exercise its option of renewal of the lease pursuant to [SECTION], the lessee shall issue a notice in writing to the lessor at least six months prior to the expiry of the initial lease period and, where such notice is issued, the lessor shall be obligated to execute a fresh lease-deed at least sixty days prior to the expiration of the initial lease period, for renewing the lease for the renewed lease term on the same terms and conditions set out in the lease-deed, except that the lease rent payable for the first twelve months of the renewed lease term shall be subject to increase by ten percent over the monthly lease rent payable in the last month of the initial lease period, and the lease rent shall be subject to increase by ten per cent on each anniversary from the commencement of the renewed lease term.
15. A perusal of the lease-deed executed by the borrower in the appellant-writ petitioner's favour on 22.01.2018 makes it amply clear that the original lease deed dated 11.07.2013 was not renewed, but a fresh lease-deed was executed in favour of the appellant-writ petitioner. While it is, no doubt, true that a reference is made therein to the fact that M/s Navitas Green Power (Fuel Management) Private Limited (an affiliate of the lessee) had entered into the lease-deed dated 11.07.2013, all that is stated is that the initial lease period expired on 21.07.20[SECTION], and the lessee (the appellant-writ petitioner) was desirous of taking on lease the demised property along with the right to use the agreed amenities, facilities, etc. from 22.07.20[SECTION] onwards.
16. As noted hereinabove, by the time the lease was executed between the appellant and the borrower on 22.01.2018, a notice under [SECTION] [ACT] had already been issued by the respondent-Bank on 28.08.2014. [SECTION] of the [ACT] stipulates that where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any installment thereof, and his account in respect of such debt is classified by the secured creditor as a non-performing asset, then the secured creditor may require the borrower, by notice in writing, to discharge in full his liabilities to the secured creditor within sixty days from the date of the notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4).
[SECTION]. [SECTION] of the [ACT] stipulates that no borrower shall, after receipt of the notice referred to in sub-section (2), transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice, without prior written consent of the secured creditor. Since the [SECTION] notice was issued on 28.08.2014, [SECTION] of the [ACT] prohibited the borrower from transferring the secured asset by way of a lease after receipt of the notice under [SECTION] of the [ACT]. In the present case, the lease-deed executed in favour of the appellant-writ petitioner on 22.01.2018 is several years after the notice under [SECTION] was served on the borrower. In the light of the express prohibition under [SECTION] of the [ACT], the borrower could not have granted a lease in favour of the appellant- writ petitioner, or to have executed a lease deed on 22.01.2018, without the consent of the respondent-Bank.
18. Emphasis is placed by Sri [ENTITY], learned counsel for the appellant-writ petitioner, on [ENTITY] to contend that the lessee has no right to invoke the jurisdiction of the Debts Recovery Tribunal under [SECTION] of the [ACT], and his application to the Tribunal must, therefore, be treated as non-est to the extent a challenge was made to the order passed by the District Magistrate, Haridwar under [SECTION] of the [ACT] on 26.11.2018. It is useful in this context to refer to the earlier judgment of the Supreme Court, in [ENTITY] and others vs. State of Maharashtra and others : (2011) 2 SCC 782, wherein the Supreme Court has held that an action under [SECTION] of the Act constitutes an action taken after the stage of [SECTION], and therefore the same would fall within the ambit of [SECTION] of the Act, and the Act itself contemplates an efficacious remedy for the borrower or any person affected by an action under [SECTION] of the Act, by providing for an appeal before the DRT. The law declared by the Supreme Court in [ENTITY] and others would, undoubtedly, enable any person affected by an action under [SECTION], other than the borrower, which would undoubtedly include a lessee to avail the remedy under [SECTION] of the [ACT]. The appellant-writ petitioner has, evidently, invoked the jurisdiction of the DRT, under [SECTION] of the [ACT], in compliance with the law declared by the Supreme Court in [ENTITY]. It is only because they were not able to secure the interim relief sought for by them, did they invoke the jurisdiction of this Court, under [SECTION] of the [ACT], questioning the order of the DRT in [CASE NUMBER] dated 08.02.2019.
19. While the earlier judgment in [ENTITY] and others was not noticed by the subsequent two-judge Bench of the Supreme Court in [ENTITY], the Supreme Court has no doubt observed that, since the power of the Debts Recovery Tribunal is only to restore possession of the secured asset to the borrower only, and not to any person such as a lessee, the Debts Recovery Tribunal cannot restore possession of the secured assets to the lessee; and, therefore, no remedy was available under [SECTION] of the [ACT] to the lessee to protect his lawful possession under a valid lease.
20. In the very same judgment in [ENTITY], the Supreme Court, after referring both to [SECTION] of the 1882 Act and [SECTION] of the [ACT], held that the provisions of [SECTION] of the [ACT], and the provisions of the 1882 Act enabling the borrower or the mortgagor to make a lease, were inconsistent with each other; hence, [SECTION] of the [ACT] would override the provisions of [SECTION] of the 1882 Act by virtue of [SECTION] of the [ACT]; and a lease of a secured asset made by the borrower, after he had received the notice under [SECTION] of the [ACT] from the secured creditor intending to enforce that secured asset, would not be a valid lease.
21. It is evident, therefore, that the lease agreement executed by the borrower with the appellant-writ petitioner on 22.01.2018, long after the notice under [SECTION] of the [ACT] was issued on 28.08.2014, would render the lease dated 22.01.2018 invalid, since the borrower was disabled by [SECTION] of the [ACT] to enter into a lease-agreement with the appellant- writ petitioner after receipt of the [SECTION] notice.
22. Reliance placed by Mr. [ENTITY], learned counsel for the appellant, on [ENTITY] Vs. Bank of India and others :
(2016) 3 SCC 762 to contend that even possession, pursuant to an oral lease, is valid, is also of no avail. In [ENTITY] Vs. Bank of India and others : (2016) 3 SCC 762, the question which arose for consideration before the Supreme Court was whether a "protected tenant", under the [ACT], could be treated as a lessee, whether the provisions of the [ACT] would override the provisions of the [ACT], and as to how the right of the 'protected tenant' could be preserved in cases where the debtor-landlord secured a loan by offering the very same property as a security interest either to Banks or Financial Institutions. Unlike in [ENTITY], the appellant-writ petitioner is, admittedly, not a protected tenant under the [ACT].
23. In [ENTITY], the Supreme Court, after referring to its earlier judgments in [PRECEDENT]; [PRECEDENT]; and [PRECEDENT], held that a word or sentence could not be picked up from a judgment to construe that it is the ratio decidendi on the relevant aspect of the case; and a judgment cannot be read as a statute and interpreted and applied to the fact situations. The observations in [ENTITY] cannot be read out of context, and be made applicable even to cases where the lessee is not a protected tenant under the [ACT].
24. Before parting with the case, we must not lose sight of the fact that the learned Single Judge had, in the order under appeal, referred to the judgment of the Supreme Court in [PRECEDENT], wherein the Supreme Court observed that the High Courts ought not to entertain the writ petition in view of the remedy provided under the [ACT]; and an interim order being passed at the very inception, without inviting a response from the Bank, was wholly unjustified. As a sum in excess of Rs. 124.50 crores is due from the borrower to the respondent-bank, we see no reason to interdict the Bank from taking possession of the subject property pursuant to the order of the District Magistrate, Haridwar dated 26.11.2018, and recover a part of its dues after putting the property to sale, more so as the lease deed dated 22.01.2018, executed long after the [SECTION] notice was issued on 28.08.2014, is not valid under [SECTION] read with [SECTION] of the [ACT].
25. The scope of interference, in an intra-court appeal, is extremely limited. It is only in cases where the order under appeal suffers from a patent illegality, would interference in an intra-court appeal be justified. We find no such infirmity in the order under appeal. The appeal fails and is, accordingly, dismissed. No costs.
26. Needles to state that the order now passed by us shall not disable the appellant-writ petitioner from approaching the respondent-Bank in terms of the order passed by the learned Single Judge, and for the respondent-Bank to consider the same in accordance with law.
([ENTITY], J.) ([ENTITY], C.J.) 10.06.2019 10.06.2019 Rathour