1 FA 1294/2006 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION FIRST APPEAL NO.1294 OF 2006 Shri. Balkrishna Devan Prabhunaik, Age about 70 years, Occupation: Retired, Residing at Shiv Darshan Premises Pvt.Ltd. Flat No.10, 2nd Floor, S.K.M.Road, Plot No.9, Sector 11, New Panvel, Dist:Raigad- 410 206 .. Appellant (Org.Plaintiff) V/s 1. Bank of Baroda Shivaji Park Branch, Lady Jamshedji Road, Mahim, Mumbai- 400 216 2. M/s.Navyug Steel Corporation 260/1, Joshi Building, Wadala, Scheme Road, Road No.19, Wadala, Mumbai -400 031. 3. Mr.Nayan Gangaram Joshi Adult, Occupation: Business, 4. Mr.Pankaj Gangaram Joshi, Adult, Occupation: Business, 5. Smt.Harshal Gangaram Joshi, Adult, Occupation: Business, 6. Smt.Madhuri Gangaram Joshi, Adult, Occupation : Business, Nos.3 to 6, all residing at 116, Giriraj, Sant Tukaram Road, Mandvi, Mumbai 400 009. .. Respondents (org.Defendants) Mr.P.K.Hushing i/by Mr.Kiran J.Kandpile for the Appellant. Mr.D.S.Paranjape for the Respondents. 2 FA 1294/2006 CORAM: R.G.KETKAR, J. DATE: 23rd September, 2010. JUDGMENT: 1. This appeal is preferred by original plaintiff challenging the judgment and decree dated 21st March,2006 passed by learned Civil Judge Senior Division, Panvel in Special Civil Suit No.141 of 2003. By that judgment, the learned trial Judge dismissed the suit in instituted by Appellant-original plaintiff. The parties shall hereinafter be referred as per their status in the trial Court. The facts giving rise to filing of this appeal, briefly stated, are as under. 2. Plaintiff instituted Special Civil Suit No.141 of 2003 on 31st December, 2003 contending interalia that Plot No.9, Road No.S.K.M., Sector 11 at New Panvel, Navi Mumbai, admeasuring about 600 sq. meters was leased out by CIDCO to one Mr.Vijay Kaushik for 60 years. Said Kaushik was unable to develop the said plot. In view of this, said Kaushik entrusted the work of development of the said plot to M/s.Navbharat Construction Company. He also executed the requisite power of attorney in favour of Mr.Darshan Kumar Bhalla of M/s.Navbharat Construction Company. On behalf of said Kaushik, M/s.Navbharat Constrcution Company submitted building plans to CIDCO. On 2nd June, 1988 CIDCO approved plans and issued commencement certificate. M/s.Navbharat Construction Company completed the construction and formed Shivdarshin Co-op.Housing Society Limited. On 20th September, 1990 Defendant No.3 herein purchased flat bearing No.10 admeasuring 650 sq.ft. situate on 2nd Floor, Shivdarshan building (for short suit flat). It is the case of the plaintiff that by agreement of sale dated 1st January, 2000, Defendant No.3 agreed to sell suit flat to the plaintiff for consideration of Rs.3,50,000/-. 3 FA 1294/2006 He was also put in possession of the suit flat on 1st January, 2000. Under the said agreement, plaintiff paid part consideration and could not pay the entire consideration to Defendant No.3. Consequently, said agreement was not registered. Subsequently, plaintiff paid entire consideration to Defendant No.3. On 1st June, 2001 the Developer M/s.Shivdarshan Premises Private Limited, who had sold flat to Defendant No.3 issued No Objection Certificate. Defendant No.3 executed agreement for sale dated 19th June, 2001 in favour of the plaintiff and the same was registered at serial No.4054 in the office of the Sub-Registrar, Panvel on 19th June, 2001. On 12th June, 2002 plaintiff issued public notice in daily “Shivtej” inviting objections’ from the public at large having any interest in the suit flat. However, no objections were received pursuant to the said notice, which clearly substantiates that the suit flat was free from encumbrances and Defendant No.3 had clear and marketable title for disposing of the suit flat. Plaintiff therefore claims that he is a bonafide purchaser for valuable consideration without notice. 3. Plaintiff further asserted that after making necessary enquiries he agreed to purchase the suit flat from Defendant No.3. Plaintiff further came out with the case that on 12th August, 2002 notice in the Recovery Proceedings No.216 of 2001 issued by the Debt Recovery Tribunal, Mumbai was pasted on the suit flat, and for the first time, plaintiff came to know that Defendant No.1 had advanced loan against the security of suit flat. However, when plaintiff entered into the transaction, he was not given any information about the said loan transaction. Defendant No.3 never informed plaintiff about the advancing of loan against the suit flat by Defendant No.1. He asserted that Defendant No. 1 had initiated Original Application No.3394 of 2000 against the Defendant Nos.2 to 6 in the Debt Recovery Tribunal, Mumbai. Plaintiff 4 FA 1294/2006 was not made party in the said proceedings. It was therefore prayed that the decree passed in the said proceedings was not binding on him. Plaintiff made an application at Exh.71 in Recovery Proceedings No.216 of 2001 and objected to the attachment and sale of the suit flat for recovery of loan. Application made by the plaintiff was rejected by Recovery Officer on 30th June, 2003. Against that decision, plaintiff filed Appeal No.27 of 2003 before the Debt Recovery Tribunal. Appeal preferred by plaintiff was dismissed reserving liberty to him to approach the Competent Civil Court. It is on that basis plaintiff has instituted present suit for declaration that he is a bonafide purchaser for valuable consideration without notice of the suit flat. Plaintiff further sought declaration that the decision of the Debt Recovery Tribunal, Mumbai in Original Application No.3394 of 2000 is not binding on him as he is not party to the said proceedings and for further declaration that Defendant No.1 has no right to attach and sale the suit flat. Plaintiff also sought perpetual injunction restraining Defendant No.1 from attaching and selling the suit flat pursuant to the decision of the Debt Recovery Tribunal, Mumbai in Original Application No.3394 of 2000. Plaintiff instituted said suit on 31st December, 2003. 4. Defendant No.1 filed its written statement at Exh.17 contending interalia that the suit instituted by plaintiff is with an ulterior motive and with a view to scuttling the recovery proceedings initiated by Defendant No.1. Plaintiff is fully responsible for his own acts and cannot deprive Defendant No.1 from proceeding with the execution proceedings. It was contended that the suit flat was validly mortgaged by Defendant No.3 in favour of Defendant No.1. Though plaintiff claims to have purchased the suit flat from Defendant No.3 by executing registered agreement of sale dated 19th June, 2001 he issued public notice on 12th June, 2002 inviting objections. It was submitted that plaintiff was not a bonafide 5 FA 1294/2006 purchaser for valuable consideration without notice of mortgage. It was further asserted that in pursuance of the Recovery Certificate issued to Defendant No.1, the Recovery Officer of D.R.T.-II, Mumbai took notional/symbolic possession of the suit flat on 23rd December, 2003. In fact, it is the specific case of plaintiff that Defendant No.3 cheated him. On these among other grounds, Defendant No.1 resisted the suit. 5. Though the summons were served to Defendant Nos.2 to 6, they remained absent and suit proceeded exparte against them as per the order dated 9th June, 2004. On the basis of rival pleadings of the parties, learned trial Judge framed necessary issues. Plaintiff examined himself and filed affidavit at Exh.41. On behalf of Defendant No.1 Mr.Arun Kumar Ramgupta was examined at Exh.54. Both the parties filed documents on record. After considering the material on record, learned trial Judge held that plaintiff failed to establish that he is a bonafide purchaser for valuable consideration from Defendant No.3 without notice of mortgage to Defendant No.1. He held that plaintiff failed to establish that the decree of Debt Recovery Tribunal Mumbai in Special Civil Suit No.3394 of 2000 is not liable to be executed by attachment and sale of the suit flat. He also held that plaintiff failed to establish that he is entitled to the reliefs sought in the suit. 6. I have heard Mr.P.K.Hushing, learned counsel for the appellant-original plaintiff and Mr.D.S.Paranjape, learned counsel for Respondent No.1- original Defendant No.1 at length. Learned counsel for the parties filed compilation of all the relevant documents. By order dated 9th June, 2010 the matter was placed for directions and the parties were put to notice that on the next date of hearing, the Court may endeavor to decide the appeal finally. With the assistance of learned counsel for the parties, I have gone through the record of the case as also compilation of all the relevant documents filed by the plaintiff. 6 FA 1294/2006 7. In support of his case, plaintiff examined himself at Exh.41 and was cross-examined by Defendant No.1. Similarly, on behalf of Defendant No.1, Arunkumar R.Gupta, Senior Manager working at Shivaji Marg Branch was examined at Exch.54 and was cross-examined by plaintiff. Mr.Hushing submitted that plaintiff is a bonafide purchaser for valuable consideration without notice. He submitted that the mortgage executed between Defendant No.1 on one hand and Defendant Nos.2 to 6 on the other hand, is not a registered document and consequently, is inadmissible in evidence. Relying upon the judgment of the Apex Court and various High Courts, to which attention will be drawn at appropriate place, he submitted that basically the alleged mortgage was neither registered, nor charge was created. Neither mortgage nor charge was recorded with the Society. He further submitted that pursuant to the observations made by the Presiding Officer while dismissing Appeal No. 27 of 2003 on 24th November, 2003, plaintiff had instituted the present suit and it cannot be said to be not maintainable. 8. On the other hand, Mr.Paranjape submitted that the plaintiff is a stranger to transaction between Defendant No.1, and Defendant Nos.2 to 6. He cannot challenge validity of the mortgage. He submitted that Defendant Nos.2 to 6 deposited title deeds, which is equitable mortgage as contemplated u/s.58(f) of the Transfer of Property Act, 1882 (for short the Act), and which does not require registration as per Section 59 thereof. He submitted that at any rate, the validity of the mortgage was concluded in the earlier round of litigation and even the attempts made by plaintiff herein in lifting the attachment failed. He also invited my attention to the fact that earlier agreement of sale was executed by Defendant No.3 in favour of the Plaintiff on 1st January, 2000. Subsequently Defendant No.3 executed registered agreement of sale in favour of Plaintiff on 19th June, 2001. Perusal of the admissions given 7 FA 1294/2006 by the plaintiff in cross-examination, will falsify his claim that he is a bonafide purchaser for valuable consideration without notice. He also submitted that the suit instituted by the plaintiff is not maintainable and he should have challenged the order of the Presiding Officer of the Debt Recovery Tribunal dated 24th November, 2003 before the appropriate forum instead of filing the suit. 9. In the light of the submissions made by learned counsel appearing for the parties, following points arise of my consideration:- (i) Does plaintiff prove that he is a bonafide purchaser for valuable consideration without notice of mortgage? Answer – Nagative. (ii) Does plaintiff prove that the decree of Debt Recovery Tribunal-II, Mumbai in OA No.3394 of 2000 dated 25th October, 2001 is not binding on him? Answer – Negative. (iii) Whether plaintiff proves that he is entitled to a declaration and injunction as claimed against Defendant No.1? Answer – Negative. 10.Since all these points are interlinked, I propose to consider them together. Before considering the rival contentions raised by the parties, it would be necessary to consider the background of the case. It is the case of Defendant No.1 that on 8th August, 1992 equitable mortgage by deposit of title deeds was created by Defendant No.3 (Exh.56). Defendant No.1 instituted Suit No.344 of 1994 on the Original Side of this Court for recovery of its dues against Defendant Nos.2 to 6. Said suit was transferred to Debt Recovery Tribunal and was re-numbered as OA No.3394 of 2000. Said suit was decreed on 25th October, 2001 and it was held that Defendant No.1 is entitled to recover the amount 8 FA 1294/2006 claimed in the suit. It was further declared that the mortgage created by Defendant No.1 was valid and subsisting. Pursuant to the decree dated 25th October, 2001 Defendant No.1 initiated recovery proceeding No. 216 of 2001. It has come on record that on 7th May, 2002 the suit flat was attached in R.P.No.216 of 2001. 11. On 8th July, 2002, learned Recovery Officer of DRT-II, Mumbai issued attachment warrant in respect of the suit flat. On 12th August, 2002 notice in R.P.No.216 of 2001 issued by D.R.T.-II, Mumbai was pasted on the suit flat. It is the case of plaintiff that for the first time he realised that Defendant No.1 advanced loan against the security of suit flat. However plaintiff was not informed the said fact by any one including Defendant No.3. Plaintiff took out application on 11th September, 2002 for lifting of attachment, contending that he is a bonafide purchaser for value without notice. By order dated 30th June, 2003 the Recovery Officer rejected the application. This order was challenged by plaintiff by filing Misc.Application No.27 of 2003. The said appeal was dismissed on 24th November, 2003. Pursuant to the observations made by learned Presiding Officer of DRT while dismissing the appeal, plaintiff instituted the present suit on 31st December, 2003. Pending the suit, plaintiff took out application for temporary injunction which was rejected on 7th July, 2004. Thus pending suit, there was no interim order in favour of plaintiff. Ultimately, by the impugned judgment and decree dated 21st March, 2006, learned trial Judge dismissed the suit. On 8th June, 2006 plaintiff preferred present first appeal in this Court. Initially, by order dated 16th June, 2006 this Court granted ad-interim relief in terms of prayer clause (a) of the Civil Application No.2644 of 2006 for a period of six weeks, i.e.till 28th July, 2006. By prayer clause (a), plaintiff claimed injunction restraining the Respondents, their agents and servants from attaching and selling the suit flat pursuant to the order 9 FA 1294/2006 passed by DRT in Suit No.3394 of 2000 as also from obstructing plaintiff’s user and enjoyment of the suit flat. On or about 16th November, 2009 plaintiff moved application at Exh.145 in R.P.No.216 of 2001 before the DRT-II Mumbai praying for cancellation / postponing the sale as also the proceedings of R.P.No.216 of 2001. By order dated 24th November, 2009 learned Recovery Officer DRT-II Mumbai dismissed the said application and declared that public auction of the suit flat scheduled on 24th November, 2009 has to be conducted as per the earlier declared programme on 24th November, 2009. Learned Recovery Officer noted that earlier this Court had granted ad-interim order till 28th July, 2006. However, said order was not continued subsequently. It is also not in dispute that the plaintiff did not challenge the order dated 24th November, 2009 before the appropriate forum. 12.Mr.Paranjape submitted that the suit instituted by the plaintiff is not maintainable. Plaintiff ought to have challenged the decision dated 24th November, 2009 passed by the DRT in Appeal No.27 of 2003. Instead of challenging the said order, plaintiff instituted present suit which was wholly misconceived and not maintainable. On the other hand Mr.Hushing submitted that the plaintiff had instituted suit in the light of observations made by learned Presiding Officer of DRT, Mumbai while dismissing the Appeal No.27 of 2003. Even otherwise, relying upon the judgment of the Apex Court in the case of Mardia Chemicals V/s.Union of India, 2004 (4) Bom.C.R.530, as also the judgment of this Court in the case of Yuth Development Co-op.Bank V/s.Balasaheb, 2008 (5) Mh.L.J. 326, he submitted that the civil suit is maintainable. In the first place, Defendant had not raised this issue specifically in the trial Court. Secondly, plaintiff is claiming declaration that he is a bonafide purchaser for value without notice of mortgage. He further sought declaration that the decision dated 25th October, 2001 passed by DRT-II, Mumbai in 10 FA 1294/2006 Original Application 3394 of 2000 is not binding on him. Having regard to the reliefs claimed by the plaintiff in the present suit, in my opinion, the contention raised by Mr.Paranjape is devoid of substance. The suit instituted by plaintiffs for the aforesaid reliefs is maintainable. Mr.Paranjape could not show any judgment taking a contrary view. 13. Mr.Hushing submitted that plaintiff is a bonafide purchaser for valuable consideration without notice of mortgage. He submitted that the document dated 8th August, 1992 at Exh.56 though styled as memorandum of deposit of title deeds, in fact amounts to mortgage and consequently requires registration u/s.59 of the Act. Since admittedly Exh.56 is not a registered instrument, it is not admissible in evidence. The claim of plaintiff is based upon agreement of sale executed by Defendant No.3 in his favour. Plaintiff claims that initially agreement of sale was executed by Defendant No.3 in his favour on 1st January, 2000 (Exh.61). Said agreement is executed on non-judicial stamp paper of Rs. 100/-. Clause 4 thereof recited that the purchaser (plaintiff herein) has paid to the vendor (Defendant No.3 herein) a sum of Rs.3,50,000/- as and by way of full and final consideration amount of the suit flat, receipt whereof the vendor-Defendant No.3 admitted and acknowledged at the foot thereof in full and final settlement. Clause 6 recited that the vendor, in pursuance of the said agreement and in consideration of amount of Rs.3,50,000/- paid by the purchaser to the vendor, has delivered all the documents, papers, writings, receipts pertaining to the suit flat to the purchaser. Clause 7 thereof recited that on receiving full consideration, the vendor shall immediately put the purchaser in possession of the suit flat and shall surrender the right, title and interest in respect of the suit flat and the shares in favour of purchaser, which the purchaser has seen, inspected and found to be in prefect condition. Clause 10 of the said agreement records declarations made by the vendor to the following 11 FA 1294/2006 effect:- (a) He/she has not transferred /assigned his/her right, title or interest in the said Flat in favour of any other person nor he/she entered into any Agreement with any other person/s. (b) The said Flat is free from all other encumbrances, charges and lien and the Vendor has not mortgaged/ alienated the same with any other person/s. (c) Except the Vendor no other person/s have any right, title or interest in the said flat. (d) That no suit, proceedings, litigations are pending against the said Flat and that the said Flat is not a subject matter in any Court of Law in India. (e) That Vendor had not raised any sort of Loan/ Construction Loan against the said Flat from any person/s and/or Institution/s. 14. Clause 11 thereof recited that the vendor has not taken any loan/s from any financial institution/s or person/s against the suit flat and that he has not kept the suit flat/shares as a security or additional security in respect of any sort of loan/finance. At the end of this agreement, there is receipt duly signed by the vendor-Defendant No.3 acknowledging the receipt of Rs.3,50,000/- as and by way of full and final cost price/consideration amount towards the sale of the suit flat as per the terms and conditions of the said agreement in full and final settlement. Said receipt also indicates that the cheque bearing No.029055 dated 3rd January, 2000 drawn on Central Bank of India for Rs.3,50,000/- was received by Defendant No.3-vendor. It is the case of the plaintiff that pursuant to this agreement of sale, he was put in possession of the suit flat. 15. As noted earlier plaintiff came out with the specific case that the agreement of sale dated 1st January, 2000 was not registered as he had not paid the entire consideration. However, the agreement of sale 12 FA 1294/2006 recorded the facts which are otherwise, viz.the payment of entire consideration of Rs.3,50,000/- by the plaintiff to Defendant No.3 by cheque dated 3rd January, 2000. It is the case of the plaintiff that after he paid the entire consideration, agreement of sale dated 19th June, 2001 (Exh.62) was executed by Defendant No.3 in his favour. Said agreement is registered with the office of Sub-Registrar, Panvel at Serial No.2054 on 19th June, 2001. Perusal of this agreement indicates that in the preamble of the said agreement the details about the shares bearing Nos...... to ....., both inclusive under Share Certificate No..... were kept blank. In other words, shares number as also the Share Certificate number were not mentioned in this agreement. Clause 6 of the said agreement recited that the purchaser (plaintiff herein) had paid consideration of Rs.3,50,000/- to the vendor-Defendant No.3, and the vendor has delivered all the documents, papers, writings, receipts pertaining to the suit flat to the purchaser. Clause 7 thereof recited that on receiving full consideration, the vendor shall immediately put the purchaser in possession of the suit flat and shall surrender the right, title and interest in respect of the suit flat and the said shares in favour of purchaser, which the purchaser has seen, inspected and found to be in prefect condition. This agreement also has clauses 10 & 11 where the vendor had made declarations to the same effect as in the earlier agreement dated 1st January, 2000. Clause 20 thereof provided that the vendor shall obtain from Shivdarshan Co-operative Housing Society Limited the No Objection Certificate (Noc). As against this, plaintiff relied upon the NOC dated 1st June, 2001 purportedly issued by the Director of Shivdarshan Co-operative Housing Society Limited. 16. Section 55 of the Act lays down the rights and liabilities of buyer and seller. Section 55(1) (a) casts obligation on the seller to disclose to the buyer any material defect in the property or in the seller’s title thereto 13 FA 1294/2006 of which the seller is and the buyer is not aware and which the buyer could not with ordinary care discover. Section 55 (1) (b) casts obligation on the seller to produce to the buyer, on his request, for examination, all documents of title relating to the property which are in the seller’s possession or power. Section 55 (1) (c) casts obligation on the seller to answer all best of his information all the relevant questions put to him by the buyer in respect of the property or title thereto. Section 55 (3) lays down that where the whole of the purchase money has been paid to the seller, seller is bound to deliver to the buyer all documents of title relating to the property which are in the seller’s possession or power. Any omission to make disclosures as mentioned in paragraph 1 of Section 55 is fraudulent. 17.In the light of section 55 of the Act, the oral evidence of plaintiff will have to be considered. In the cross-examination the plaintiff admitted that he had studied upto 3rd standard. He worked as a driver for 34 years in Tata Institute of Fundamental Research. His knowledge of English language is average. He cannot read English. He was not aware whether the transaction between Vijay Kaushik and his vendor-Defendant No.3 was registered or not. He admitted that it was true that his Advocate did not explain to him, as also he did not ask his Advocate in that regard. He met Defendant No.3 through the Estate Agent on 31st December, 1999. Before that he did not consult any lawyer. Agreement of sale was prepared by the Estate Agent and his son. His son is not a lawyer. He has not passed LL.B. Examination. He had not consulted any lawyer and the persons to whom he consulted are not conversant with legal aspects. Despite this, he entered into transaction in respect of the suit flat. He further admitted that the NOC dated 1st June, 2001 is on two letter heads and both these letter heads are different. Even the signatures on these two NOCs are different. The said NOC dated 1st June, 2001 14 FA 1294/2006 was given by Defendant No.3 and Defendant No.3 did not receive the NOC from the Society He was confronted with the blanks on Page No.2 of the Agreement of sale dated 19th June,