1 vks IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO. 4343 of 2006 IN SUIT NO.3411 of 2006 Lilam Arvind Vora & anr .. Plaintiffs -versus M/s M.B. Associates & Ors .. Defendants Mr. Vinit Naik with Bharati Bhende, for the plaintiffs Dr.Birendra Saraf, i/b Yogesh Adhia, for the defendant, l, 2, 4 to 7 Mr.Cyrus Ardeshir, i/b Vigil Juris, for defendant No.8 CORAM: R. G. KETKAR, J. Judgment Reserved on 21stAugust, 2009. Judgment Pronounced on: 9th October,2009 JUDGMENT 1. The plaintiffs have taken out this Notice of Motion inter alia praying for appointment of Court Receiver, High Court, Bombay, or some other fit and proper person, of the property admeasuring 3810 Sq. 2 meters, known as “Haveli”, at Bhiwandi, Kotargate, as more particularly described in Exhibit ‘A” to the plaint (for short “suit property”); to sell the same by and under the directions of this Court and pay net sale proceeds thereof to the plaintiffs for appropriating towards the Plaintiffs’ claim in the suit; for injunction restraining the defendant No.8 by itself, its servants, agents from in any manner developing the suit property or carrying out any proposed construction; or creating any third party interests in the proposed construction of the suit property; for injunction restraining the defendant by themselves, their servants and agents from in any manner dealing with or disposing off or transferring or alienating, encumbering or parting with possession of the suit property or any part thereof. 2. The plaintiffs the instituted the suit No.3411 of 2006 against defendants for recovery of Rs.3,63,46,595 with further interest on the principal sum of Rs. 3,08,79,631/- @ l8% per annum from the date of institution of the suit till the decree and thereafter at the 3 same rate till the payment and/or realization, among the other prayers. 3. The defendant No.1 is a partnership firm registered under the Indian Partnership Act, l932 and the defendant Nos 2 to 7 (since then defendant No.3 has expired), are the partners of defendant No.l. The defendant No.8 is a partnership firm duly registered under the provisions of Indian Partnership Act, l932. 4. The plaintiffs instituted the suit on March 29, 2006, contending that the defendant No.1 in the course of its business approached to the plaintiffs in or about September, l992 for a business loan for purchasing the suit property. Earlier suit property was owned by one Umar Moosa Memon and ors. Under several agreements in writing coupled with Power of Attorneys and possession letters, the defendant Nos l to 7 purchased and acquired from said Umar Memon and ors, the suit property. However, for purchasing suit property the defendant Nos l to 7 needed financial assistance. Upon request of the defendant Nos l to 7, the plaintiffs granted business loan 4 to them on the terms and conditions mutually agreed upon. 5. It is the case of the plaintiffs that after availing of loan by the defendant Nos l to 7 in consideration thereof and for repayment of the said loan, the defendant Nos l to 7 addressed letters dated September 24, l992. (Exhibit B-1), December 1, 1992 (Exhibit B-2), and March 1, l993 (Exhibit B-3), to the plaintiffs’ advocates and deposited original agreements/documents/title deeds as more particularly described in these letters. It is the case of the plaintiffs that the defendant Nos l to 7 created equitable mortgage in favour of the plaintiffs. 6. The defendant Nos l to 7 were repeatedly called upon to repay the loan together with interest. However, they failed to pay the same and after lot of persuasion and at the request of plaintiffs, the defendant Nos l to 7 finalised the loan account by letter dated February 7, l994 (Exhibit-C), and confirmed that the defendant No.1 settled account of loan granted by the plaintiffs to the defendant Nos l to 7 in respect of the suit property. By 5 the said confirmation letter, defendant No.1 assured that sum of Rs.50,00,000/- will be paid to the plaintiffs by the end of March, l994. 7. The plaintiffs further asserted that to their shock and surprise on behalf of defendant No.l letter dated September 29, l995 (Exhibit D-1,) addressed to the plaintiffs’ advocates wherein it was set out that the original documents were delivered to them for investigating the title of the suit property and request was made to return these original documents. The defendant No.l thereafter issued reminder on October, 13, 1995 (Exhibit D-2), to the plaintiffs’ advocates requesting them to return the original documents mentioned in the letter dated September 29, 1995. These letters were responded to by the plaintiffs’ advocate on October 20, 1995 (Exhibit E) wherein, it was set out that on behalf of defendant No.l, its partner Shri. Manhar P. Shah approached them and carried out negotiations for raising loan with several financiers and that for securing repayment of such loan they had deposited original 6 documents with the plaintiffs’ advocates for and on behalf of the plaintiffs. By the said letter the plaintiffs’ advocates informed the defendant No.1 that loan availed by the defendant No.l was still outstanding and defendant No.l did not settle the claims of the plaintiffs. The plaintiffs’ advocates asserted that the defendant No.l’s contention that documents were deposited with them only for the purpose of investigation of title was not correct. The defendant No.l was further requested to obtain the suitable N.O.C/advice from the plaintiffs so as to return the original documents to the defendant No.l. C.C of that letter was marked to plaintiff No.2 herein. 8. On November 11, l995 (Exhibit H), defendant No.1 addressed a letter to the plaintiffs’ advocates in response to letter dated October 20, 1995 denying all the allegations made in the letter dated October 20, l995. The defendant No.l called upon the plaintiffs’ advocates to furnish the names and addresses of the persons from whom the defendant No.l have raised several loans as alleged by the plaintiffs’ advocates. The defendant No.l 7 further called upon the plaintiffs’ advocates to inform them whether the plaintiffs’ advocates were the witnesses to such transactions between the defendant No.1 and persons from whom they have purportedly raised several loans. The defendant No.1 further called upon the plaintiffs’ advocates to return all the original documents delivered to them vide letters dated September 24, 1992, December 1, 1992 and March 1, l993, within 7 days from the receipt of letter failing which they will take appropriate action against plaintiffs’ advocates, in the Bar Council, High Court, Bombay and Incorporated Law Society. 9. The plaintiffs’ advocates replied on December 12, 1995 (Exhibit-I) and instead of dealing with any of the points raised therein set out that their clients had deposited with them the defendant No.1’s acknowledgment of debt against the suit property. The defendant No.1 was called upon to take inspection of the acknowledgment of debt in the company of its advocates and with prior appointment. 8 10. From the material on record it appears that nothing transpired between the parties for a long time and plaintiffs’ advocates addressed letter dated July 29, 2005 (Exhibit -J), setting out therein that the plaintiffs’ account under the mortgage has yet not been paid and/or cleared. Under the instructions from their clients, plaintiffs’ advocates once again called upon the defendant no.1 to pay the same at the earliest, failing which their clients will be constrained to proceed further for the recovery of the same at the entire risk as to costs and consequences of the defendant No.1. This was followed by notice dated September 30, 2005 (Exhibit -K). Notice was addressed by the plaintiffs to Shri.Umar Moosa Memon and 11 other, co-owners of the suit property. In the notice it was set out about availing of loan by defendant Nos l to 7 from the plaintiffs. In order to secure the repayment of loan amount together with interest and costs, the defendant Nos l to 5 created equitable mortgage in favour of the plaintiffs by depositing original title deeds. On account of failure of 9 defendant Nos l to 7 to repay the loan, Shri. Umar Moosa & 11 others were called upon to sign, execute appropriate conveyance in terms of the respective agreements executed by them in favour of plaintiffs. It was further set out that they understood that under the respective agreements executed by Shri Umar Moosa Memon, and 11 others, they had not yet conveyed the proportionate shares to the defendant No.l and as mortgagees of the defendant No.l and to secure outstanding at the foot of the said mortgage; the plaintiffs were interested in spending further amount towards payment of Shri.Memon and 11 others respective balance consideration, if any, stamp duty and registration charges and complete conveyance. In the circumstances and under the instructions of plaintiffs- mortgagees of the suit property, Shri.Umar Moosa Memon and 11 others were called upon to make, sign and execute appropriate conveyance in terms of the respective agreements in favour of the plaintiffs at the earliest. The copy of the said letter was marked to the defendant No.l and others. 10 11. The plaintiffs took out above Notice of Motion praying for appointment of Court Receiver among other reliefs. In support of Notice of Motion, the plaintiffs filed affidavit of Nimesh Vora, Constituted Attorney of the plaintiffs substantially reiterating the assertions made in the plaint. On behalf of Defendant Nos l, 2, 4 to 7, affidavit in opposition was made by Shri.Manhar Bagadia, defendant No.2 a Partner of defendant No.l on March 9, 2009. After denying assertions made in the plaint as also in affidavit in support of Notice of Motion, it was submitted that the suit is not maintainable and barred by the provisions of Bombay Money Lenders Act, l947 (for short ‘Act’). It was further asserted that the Plaintiffs’ contention that the original agreements/documents/title deeds were deposited with S. Ashwinikumar & Co. Advocates, as and by way of equitable mortgage is completely false. Letters at Exh B-1, to B-3 establish beyond doubt that the documents were not deposited with the said advocates with an intention of creating mortgage in favour of any party leave alone the plaintiffs. 11 There was no intention to create mortgage as disclosed in the said three letters. On the other hand, these letters clearly establish that there was no intention whatsoever of creating mortgage. At any rate, these letters do not in any manner indicate or suggest that mortgage was intended to be created in favour of the plaintiffs as alleged or at all. It was submitted that the documents in relation to the suit property were forwarded to the said Advocates for the purpose of investigating title of the suit property. This is apparent from the perusal of communication dated December 1, l992 (Exhibit B-2) which specifically says that the original documents were enclosed in connection with purchase of the suit property. In continuation of the said communication, subsequent communication was addressed on March 1, 1993 (Exhibit B-3). Reliance was placed on communication dated September 29, 1995 at Exh D-1 wherein it was set out that the original documents were delivered to the said advocates for investigating title of the suit property. In this connection, the said advocates had raised a bill by 12 letter dated November 2, l992 on the first defendant for Rs.l0,000/- for advance towards professional fees and out of pocket expenses in relation to the suit property. Accordingly defendant No.1 paid the said bill amount by cheque No.540299 dated December 2, 1992 to the said advocates. 12. The defendants further contended that by communication dated October 20, 1995, said advocates alleged that they had negotiated finance for these defendants from several financiers and the documents in relation to the suit property were deposited with them for and on behalf of mortgagee. However, no details whatsoever were furnished of the alleged several financiers and/or mortgagees. By communication dated November 11, 1995, addressed on behalf of defendants to the said advocates request was made to furnish the name and addresses of the persons from whom they have raised several loans as alleged by them. The said advocates were called upon to inform the defendants whether they were witnesses to any such transactions 13 between defendants and the persons from whom the said defendants purportedly have raised loan. There was no response to this letter. The defendants further submitted that the plaintiffs rely upon document dated February 7, 1994 at Exhibit -C, to allege that same was a confirmation to the plaintiffs whereby defendant No.1 allegedly settled the account of the plaintiffs. Apart from denying these assertions, it is specifically contended by the defendants that the document at Exhibit C is not addressed or directed to the plaintiffs and there is no commitment or promise to pay to the plaintiffs. It was denied that the said document was ever issued by these defendants to the plaintiffs or was handed over to the plaintiffs. The said document does not relate to the plaintiffs. The defendants also relied upon order dated January 21, 2000, passed by this Court (D. K. Deshmukh, J) in Notice of Motion No.183 of 2000 for the purpose of substantiating that the plaintiffs are in the habit of filing false and frivolous proceedings. On these and among other grounds the defendants, prayed for dismissal of the 14 Notice of Motion. 13. On behalf of defendant No.8, its partner Shri. Abdulla Khalil Mulla, made an affidavit dated March 8, 2007, resisting the Notice of Motion. 14. For consideration of ad interim relief, Notice of Motion was heard by this Court (A.M. Khanwilkar, J) and by a detailed order dated March 23, 2007, learned Judge prima facie found substance in the stand taken by the defendants and came to the conclusion that this is not fit case to grant ad interim relief and consequently prayer for ad interim relief was rejected. Considering documents on record, learned Judge, prima facie recorded finding that the original documents in respect of the suit property were handed over to M/s S. Ashwinikumar & Company, Advocates for investigating the title of the suit property and not with intent to create an equitable mortgage. The learned Judge taking overall view of the matter prima facie found substance in the stand taken by the defendants that said advocates have misused their office in the entire episode and if established at the appropriate 15 stage, will be a serious matter which will have to be taken into its logical end against said advocates. In paragraph 4, the learned Judge clarified that the observations made in earlier part of the order against advocates will have to be examined in detail after rejoinder affidavit is filed by the defendants or any affidavit filed on behalf of the advocates, if so advised. Notice of Motion was ordered to be placed for hearing as per its turn under appropriate caption. 15. Defendant Nos l, 2, 4 to 7 filed further affidavit dated December 31, 2008 substantially reiterating the stand in the earlier affidavit as also dealing with the assertions made in the plaint. The plaintiffs have filed affidavit of Shri. Nimesh Vora, Constituted Attorney of plaintiffs in rejoinder in February, 2009. The Plaintiffs have annexed copy of the memorandum of September, l992, authorizing Manhar Bagadia, to sign, execute document for the purpose of raising loan for developing suit property. Relying on this memorandum, it was contended that the assertions made on behalf of 16 defendant that Manhar Bagadia was not authorized by defendant No.1 firm was wholly untenable. The plaintiffs also annexed letter dated September l7, l992, addressed to one Shri. Anant Girdharilal Shah, confirming that the defendants had deposited with M/s Ashwinikumar & Co. Advocates, the title deeds relating to the suit property with an intention to create equitable mortgage. Relying on these documents, the plaintiffs submit that their contentions based on the earlier communication attached to the plaint clearly go to establish that the original documents were deposited with said advocates with an intention to create an equitable mortgage and consequently the plaintiffs are entitled to the reliefs sought in the Notice of Motion. 16. I have heard Shri.Vinit Naik, learned counsel for the plaintiffs in support of this Motion and Dr. Birendra Saraf, learned counsel on behalf of defendant Nos l, 2 and 4 to 7 and Mr. Cyrus Ardeshir, learned counsel on behalf of defendant No.8 at great length. Mr. Naik invited my attention to the communication dated September 24, 17 l992, December 1, l992, March, 1, l993, acknowledgment dated February 7, 1994 to submit that the defendant Nos l to 7 availed loan of Rs.50,00,000/- by depositing original title deeds with M/s S. Ashwinikumar and Company, advocates of the plaintiffs with an intention to create an equitable mortgage. He submitted that it is not open to the defendant Nos l to 7 to contend that these documents were not deposited with the said advocates with intention to create mortgage, but were deposited for the purpose of investigating the title. The assertions made on behalf of these defendants is falsified from communication dated September l7, l992 annexed at Exhibit II to the rejoinder of the February 9, 2009 of the plaintiffs. He submitted that Shri.Bagadia was duly authorized by defendant No.1 to execute the documents. He submitted that having regard to section 2(9)(f2) of the Act, the suit is maintainable. He submits that from the perusal of the communication dated September 17, l992, the intention of the defendants to create an equitable mortgage is explicit. The documents were not submitted for the 18 purpose of investigating the title. He also criticized that though the defendants by communications dated September 29, 1995, October 13, 1995, November 3, 1995 and November 11, 1995 requested to return the original documents, the defendants kept quiet and did nothing for getting back original documents. 17. On the other hand, Dr. Birendra Saraf, learned counsel for the defendant Nos 1, 2 and 4 to 7 submitted that the suit is barred by the provisions of the Act. He submitted that the defendant No.2 had no authority on behalf of defendant No.1, to hand over the original documents to S. Ashwinikumar & Company, Advocates. He also submitted that the purpose of handing over the original documents was for investigating title of the suit property and not for the purpose of creating an equitable mortgage. He invited my attention to the provisions of the Act, and in particular sections 2(2), 2(9) (f2), 2(10), 10 in support of his contention that the suit is liable to be dismissed. It was further submitted that under Article 62 of Part V of the Schedule under the Limitation Act, l963, 19 to enforce payment of money secured by a mortgage or otherwise charged upon immovable property, period of limitation prescribed is 12 years from when money sued for becomes due. In the instant case, on the plaintiffs’ own showing the money became due and payable by March 31, 1994 and the suit is instituted as late as on March 29, 2006, the plaintiffs are not entitled to any relief. He invited my attention to the order dated March 23, 2007 passed by this Court (A. M. Khanwilkar, J), declining to grant ad interim relief. He also submitted that mere possession of the original documents does not necessarily lead to a presumption of an equitable mortgage by deposit of title deeds. He submitted that the entire suit is based upon purported acknowledgment dated February 7, 1994 at Exhibit C which is not addressed to anybody much less to the present plaintiffs. If that be so, the entire foundation of the suit collapses. 18. Dr. Birendra Saraf, learned counsel for the defendant No. 1, 2 and 4 to 7, further submitted that the plaintiffs have not pleaded in the entire suit as to what 20 business they are carrying on. It is the case of the plaintiffs that they have advanced loan to these defendants. The plaintiffs can not maintain the suit by relying upon section 2(9 (f2) of the Act, as the plaintiffs have to establish that they are carrying on a particular business which does not have its primary object of lending of money and the said advance was made in regular course of their business. In order to avail benefit of exception, the plaintiffs have to assert these basic facts. The entire plaint is silent on these aspects. If that be so, the suit is liable to be dismissed as per section 10 of the Act. 19. Dr. Saraf further submitted that plaintiffs did not give inspection of the memorandum at Exhibit -1 and letter dated September 17, 1992 at Exhibit 2, annexed to the affidavit in rejoinder made by the Plaintiffs in February, 2009. He also submitted that Shri. Anant G Shah did not take any steps. At any rate no reference was made to this document in the plaint and the correspondence on which reliance is placed in the plaint 21 starts from September 24, 1992. Lastly he submitted that the communication dated September 17, 1992 is not addressed to the plaintiffs. 20. During the course of hearing I invited Mr.Naik’s attention to the order dated March 23, 2007 passed by this Court ( A. M. Khanwilkar, J) and in particular paragraph 3 thereof, wherein it was observed that the advocates have misused office in the entire episode and if the said fact is established at the proper stage, it will be a serious matter which will have to be taken to its logical end against concerned advocates. In paragraph 4 the Court also expected the said advocates to file affidavit. No affidavit was filed by the said advocates. In view of the this, I suggested Mr. Naik to consider the position of the said advocates. I must record that Mr. Naik, took the requisite steps and the said advocates withdrew their appearance. 21. With the assistance of the learned counsel, I have gone through the material on record. In my prima facie opinion, the entire suit instituted by the plaintiff is 22 misconceived. In the first place, the suit is based upon the purported acknowledgment dated February 7,1994 which is not at all addressed to the plaintiffs. Secondly, in the entire plaint, the plaintiffs have not pleaded as to the nature of business they carry on. In order to avail benefit of exception under section 2(9) (f2) of the Act, it was absolutely necessary for the plaintiffs to plead and prove the ingredients set out in section 2(9) (f2) of the Act. The ingredients of the said provisions are not even pleaded in the entire suit. Thirdly, the communications dated September 24, 1992 ((Exhibit B-1), December 1, 1992 (Exhibit B-2), March 1, l993 (Exhibit B-3) do not even remotely suggest that the original documents were deposited with the said advocates with an intention of creating equitable mortgage. On the contrary, these communications prima facie establish that these documents were deposited with the said advocates for the purpose of investigating the title of the suit property. This becomes further clear from the communication dated November 2, 1992 addressed by the said 23 Advocates to the defendant No.1 raising a bill of Rs. 10,000/- towards professional fees and out of pocket expenses. Fourthly, the plaintiffs alleged that they have advanced an amount of Rs.50,00,000/- to the defendant No.1 and for that purpose relied upon the acknowledgment dated February 7, 1994 at Exhibit C. However, the entire plaint is silent as to mode of payment namely whether loan was paid by cash or cheque. Fifthly, though on the basis of acknowledgment, dated February 7, 1994 at Exhibit C, money was due and payable by the end of March, l994 and the present suit was instituted as late as March 29, 2006 ie just within a period of limitation and no effective steps were taken by the plaintiffs for recovery of the said amount from 1994 till 2006. In my opinion, cumulative effect of these