IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 9-9-2008 CORAM THE HONOURABLE MR.JUSTICE M.CHOCKALINGAM AND THE HONOURABLE MR.JUSTICE M.VENUGOPAL OSA No.318 of 2006 Dayanand P.Seshan ..Appellant/2ndRespondent/2nd Defendant vs 1.M.Dhanasekaran 2.Park Town Benefit Fund Ltd., Represented by its Chairman No.223, Mint Street, 1st Floor, Chennai 600 003. .. Respondents /Applicant/ Plaintiff and 1st Respondent/ 1st Defendant Original side appeal preferred under Order XXXVI Rule 9 of O.S. Rules read with Clause 15 of the Letter Patent against the order of this Court passed on 14.9.2006 in O.A.No.644 of 2006 in C.S.No.601 of 2006. For Appellant : Mr.PL.Narayanan For Respondents : Mr.AR.L.Sundaresan Senior Counsel for Mr.Sivam Sivandaraj for R1 Mr.T.V.Ramanujun Senior Counsel for M/s.M.Vidya for R2 ORDER (Order of the Court was made by M.CHOCKALINGAM, J.) Challenge is made to an order of the learned Single Judge made in O.A.No.644 of 2006 in C.S.No.601/2006 whereby the said application and another application in O.A.No.643 of 2006 were allowed granting the interim reliefs by a common order. 2.The first respondent/plaintiff filed the said civil suit for a declaration that the sale deed dated 21.7.2004, executed by the second respondent/first defendant in favour of the appellant/second defendant of the Schedule property was null and https://hcservices.ecourts.gov.in/hcservices/ void and not binding on the plaintiff and for consequential permanent injunction not to interfere with the peaceful possession of the plaintiff in the suit property. At the time of the initiation of the suit, the plaintiff filed O.A.No.643/2006 seeking interim injunction not to disturb or interfere with the peaceful possession and enjoyment and also O.A.No.644/2006 to restrain the respondents therein from alienating, encumbering, leasing or dealing with the schedule property in any manner pending disposal of the suit. On appearance, the respondents therein filed their counter. Both the applications were taken up for enquiry and the learned Single Judge by a common order allowed the same. Aggrieved over the order made in O.A.No.644/2006, the second defendant has brought forth this appeal. 3.The case of the plaintiff before the trial Court as could be seen from the averments in the plaint and affidavit in support of the application, is that the plaintiff mortgaged the suit property for a loan of Rs.20 lakhs in favour of the first defendant by executing a mortgage deed on 1.8.1994; that the plaintiff has paid on different dates a sum of Rs.2,22,381.85 to the first defendant; that the plaintiff had entered into a sale agreement on 6.2.2004 with one Venkatesa Perumal for Rs.80 lakhs as sale consideration; that he came to know from the suit notice in C.S.No.919 of 2004 filed by the second defendant, that the first defendant brought the property for public auction on 27.3.2003; that the second defendant has purchased the property for Rs.35 lakhs; that the first defendant also executed a sale deed on 21.7.2004 in favour of the second defendant; that the sale is not valid since the first defendant has not followed the terms and conditions of giving notice to the plaintiff as stated in clauses 7(iii) and 9 of the mortgage deed and also not followed the provisions of Sec.69 of the Transfer of Property Act; that the sale has taken place without the knowledge of the plaintiff; that the suit property has been undervalued which was detrimental to the interest and prejudicial to that of the plaintiff; that the property has been sold only for a sum of Rs.35 lakhs while the property was easily worth more than Rs.1.25 crores; that the second defendant was one of the fixed deposit holders; that in order to adjust the fixed deposit amount of the second defendant, the first defendant sold the property to the second defendant; that the first defendant had played fraud by selling the property deliberately; that it was an outcome of conspiracy and collusion with the second defendant, and under the circumstances, the sale has got to be declared as invalid and consequential injunction not to interfere in the possession he ordered. It was further averred that the plaintiff has been in possession of the property without any interference whatsoever; that pursuant to the sale, the second defendant has also filed a suit for recovery of possession; that they are also attempting to interfere with the possession and under the circumstances, it became necessary for asking the interim reliefs as stated above. 4.The said application was countered by the appellant/second https://hcservices.ecourts.gov.in/hcservices/ defendant inter alia stating that the suit property was mortgaged by the plaintiff with the first defendant even in the year 1994 when the plaintiff availed Rs.20 lakhs; that admittedly, he has defaulted in payment of principal and interest; that the plaintiff has tried to interpret the terms and conditions of the mortgage deed to suit his convenience; that the very reading of the mortgage deed would clearly indicate that he has no case; that he has committed default in payment of interest for several years; that the first defendant faced financial problems pursuant to the default committed by various debtors including the plaintiff; that the plaintiff remained a willful defaulter in respect of lot of moneys lent to him by the Nidhi which were public funds and cared little to repay the dues; that the plaintiff has come with the baseless statements; that the public auction sale was conducted on 27.3.2003 at the suit property; that the second defendant was the successful bidder for a sum of Rs.35 lakhs; that the sale conditions were strictly complied with; that in view of the pendency of certain winding up proceedings before this Court against the first defendant, the second defendant filed C.A.No.1970 of 2003 in C.P.No.179 of 2003 for leave of the Company Court; that the said application was allowed by this Court on 13.7.2004; that after getting leave from the Company Court, the sale deed was executed on 21.7.2004 in favour of the second respondent upon payment of the entire bid amount; that even before the filing of the suit in C.S.No.919 of 2004, there had been despatch of several notices to the plaintiff, who has deliberately evaded them with oblique motive; that the plaintiff was always available in the suit property; that he was fully aware about all the proceedings and thus, the claim of the plaintiff that he came to know about the sale only after service of the notice in C.S.No.919 of 2004 was completely false; that the terms and conditions in both the mortgage deed and also the notice as contemplated under Sec.69 of the Transfer of Property Act have been strictly complied with; that there was proper service of notice; that under such circumstances, the chronic defaulter namely the plaintiff, for a period of 10 years, has come forward with false allegations, and hence the plaintiff had no merits at all in the suit or in the application; that the sale in favour of the second defendant was effected by following the due procedures and also after obtaining the permission from the Company Court; that left with no ground or case, the plaintiff has filed the vexatious suit, and hence the application was to be dismissed. 5.On enquiry, the learned Single Judge has allowed both the applications granting the interim reliefs. Aggrieved, the second defendant has challenged the order in O.A.No.644 of 2006. 6.Advancing arguments on behalf of the appellant, the learned Counsel would submit that the auction sale of the suit property was by professed exercise of power; that the suit itself is not maintainable within the meaning of Sec.69(3) of the Transfer of Property Act; that the plaint itself was liable to be rejected on the ground of improper payment of court fee, and https://hcservices.ecourts.gov.in/hcservices/ hence no interim relief should have been granted in a suit which is not at all maintainable; that the finding of the learned Single Judge that the market value of the suit property which was sold in auction, was higher was erroneous for the reason that the learned Single Judge has placed reliance only on the valuation report of the year 2006 filed by the plaintiff; that the property was purchased without vacant possession with 7 tenants; that the plaintiff was also in occupation of a part of the suit property, and therefore, the market value of the suit property got reduced for want of vacant possession; that the property which was sold in auction was subjected to tax arrears over a period of 10 years amounting to several lakhs of rupees, which would also considerably reduced the market value of the property; that during the material time, the market value of the property in the city was lower than the guideline value; that in fact, writ petitions challenging the Sub-Registrar's action of seeking additional stamp fee while registering the properties, were pending disposal; that the learned Single Judge has misdirected himself in holding that the sale has not been made in professed exercise of power; that the plaintiff's plea of want of due notice would not entitle him to attack the title of the auction purchaser namely the appellant herein, as adumbrated under Sec.69 (3) of the Transfer of Property Act; that the plaintiff has come to Court with soiled hands; that he was not entitled to the discretionary relief of interim injunction; that the auction notice was publicized in vernacular daily directing the reader to contact the auctioneer's office for fuller particulars and in fact, the plaintiff was fully aware of the auction sale proceedings initiated by the first defendant; and that under the circumstances, no relief could be granted to a person who has failed to pay the mortgage debt for about 10 years. 7.Added further the learned Counsel that the learned Single Judge has not taken into consideration the conduct of the plaintiff in continuously evading the service of all notices with the full knowledge of the auction sale and with the intention to avoid payment of the mortgage debt; that the plaintiff who has failed to clear the huge principal and interest dues under the mortgage over 10 years with full knowledge of the auction proceedings initiated by the mortgagee, did not take any steps for the redemption, and the plaintiff's conduct was to avoid discharge of the mortgage debts; that there was no bona fide in the challenge made to the sale; that the statutory provisions under Sec.69(2)(b) of the Transfer of Property Act would clearly provide for sale without notice when there are interest arrears as in the case on hand; that the price of Rs.35 lakhs for a land of 1926 sq. ft. as per the patta with an old building when the real estate market value was very dull even assuming vacant possession was readily available, cannot at all be termed as a low price; that the price of Rs.35 lakhs was exclusive of other liabilities such as property tax arrears, water tax and water charges arrears to the tune of Rs.7 lakhs which the appellant has cleared; that the current valuation report of the property if taken into consideration, the Court could not have come into such https://hcservices.ecourts.gov.in/hcservices/ a decision; that the learned Single Judge has relied on the plaintiff's self serving document namely the valuation report; that the auction sale cannot be challenged by the mortgagor merely because there was subsequent appreciation in the real value of the property; that the conduct of the plaintiff in not asserting his alleged ownership over the suit property for nearly three years since the date of auction, confirmed that the first respondent had accepted the appellant's ownership over the suit property pursuant to his auction purchase, while the appellant has asserted his ownership by taking all steps as a true owner; that the professed exercise of power of sale means the exercise of such a power of sale when the deed of mortgage specifically provides for it; that whether or not the notice has been issued as contemplated under Sec.69(2)(a) of the Act or as provided under the deed of mortgage has nothing to do with the professed exercise of sale, nor will it vitiate the title of the purchaser; that the learned Single Judge has not appreciated the clear statutory provisions under Sec.69(3) of the Transfer of Property Act when it makes clear that want of due notice would not be a ground of attack for impeaching the title of the appellant; that the observation of the learned Single Judge that despite the failure of notice, even assuming that the sale was made in professed exercise of such power, the same ought not to have been held since the price being low was erroneous, and under the circumstances, the order of the learned Single Judge has got to be set aside. 8.The Court heard the learned Senior Counsel for the respondents on the above contentions. 9.The Court paid its anxious consideration on the submissions made and looked into the materials available. 10.As could be seen above, the plaintiff/first respondent aggrieved over the auction sale made by the second respondent Benefit Fund in favour of the appellant on 27.3.2003 for a sum of Rs.35 lakhs and pursuant to the execution of the sale deed on 21.7.2004, has filed the suit to declare that the sale made by the first defendant in favour of the second defendant was null and void. Pending the suit, he has asked for two interim reliefs one not to interfere with his peaceful possession and enjoyment, while the other to restrain the defendants from alienating, encumbering, leasing or dealing with the property in any manner. The learned Single Judge has granted both the interim reliefs pendente lite. Concededly, the first respondent/plaintiff is occupying a part of the property while the other part is leased out to number of tenants. As far as the interim injunction granted in favour of the plaintiff restraining the defendants not to interfere with his possession, the second defendant has not challenged the same. But, he has preferred appeal only in respect of the injunction restraining him from making any alienation, etc. As could be seen from the averments in the plaint, the sale is challenged mainly on the ground that both the notices as contemplated under the mortgage deed and also under https://hcservices.ecourts.gov.in/hcservices/ Sec.69 of the Transfer of Property Act were not issued. The same is replied by the second defendant stating that the notices were sent, but they were returned unclaimed; that the publication was also made in Dhina Thanthi dated 23.3.2003 in respect of the auction sale; that apart from that, it is a case in which notice itself was not mandatory, and the mortgagee in exercise of its powers could sell the property. Before the learned Single Judge, number of rulings of the Apex Court and of this Court were cited. 11.Admittedly, the property was sold in public auction held on 27.3.2003 pursuant to the default committed in payment of the principal of Rs.20 lakhs and the accrued interest thereon. A reading of Clause 7(iii) of the hypothecation deed would indicate that the power of sale without the intervention of the Court was conferred on the mortgagee only upon the mortgagor failing to pay within three months from the date of service of notice. Under Sec.69(3) of the Transfer of Property Act, the title of the purchaser could not be impeached on the grounds; (i) that no case had arisen to authorise the sale; or (ii) that due notice was not given; or (iii) that the power was otherwise improperly and irregularly exercised and if the owner of the property is damnified by such unauthorised improper or irregular exercise of power, he shall have remedy in damages. The agreement entered into between the parties under the hypothecation deed as indicated above, would make it abundantly clear that the power of sale could be exercised by the mortgagee only after the issuance of the notice. In the instant case, in the considered opinion of this Court, there was no proper service of notice as required. The contention raised by the appellant's side that number of notices were issued; but, they were returned unclaimed, and apart from that, there was a notice issued by making a publication in Dhina Thanthi on 23.3.2003 cannot be an answer to the legal requirement of notice. The learned Single Judge has pointed out that as far as the endorsement "unclaimed" was concerned, it was for the earlier auction sale of the year 2001-2002, and hence it could not be taken to have served the purpose. Equally the publication relied on by the appellant cannot also satisfy the requirement for two reasons. Firstly, the advertisement of sale of mortgaged property in the newspaper would not satisfy the imperative requirement under Sc.69(2)(a) of the Transfer of Property Act. Secondly, the sale was scheduled to take place on 27.3.2003, and the publication was made shortly before that i.e., on 23.3.2003. Thus, it cannot be said to be a notice in the eye of law. 12.The decision relied on by the plaintiff and accepted by the learned Single Judge and reported in AIR 1967 SC 1296 (R.S.NADAR V. INDIAN BANK LTD., MADRAS) has got full application to the present situation wherein it has been held thus: "Sub-section (2) of S.69 lays down inter alia that no such power shall be exercised unless and until notice in writing requiring payment of the principal money has been served on the mortgagor, ..... and default has https://hcservices.ecourts.gov.in/hcservices/ been made in payment of the principal money or of part thereof, for three months after such service. The language of this sub-section is clear and unambiguous. The section lays down in no uncertain terms that the requisite notice may be given to the mortgagor ..... It may be hard on a person in the position of a mortgagor to get no notice under this section if he comes to learn that the property has been sold without any notice to him. But if there has been no fraud or collusion in the matter, he has no cause for complaint." 13.Under the stated circumstances, the contentions put forth by the appellant's side do not merit acceptance, and hence till the decision as to the validity of the auction sale is taken by the Court on appreciation of evidence to be adduced by both sides at the time of trial, in the considered opinion of this Court, it is a fit and proper case where interim injunction has got to be granted against the defendants who are the appellant and the second respondent herein. If not done, it would lead to multiplicity of proceedings and unnecessary litigations. In order to avoid the same, in view of the circumstances attendant, interim injunction is necessary. 14.At this juncture, the learned Counsel for the appellant would submit that the appellant undertakes not to encumber or alienate the property, but as far as the dealing with the property is concerned, after the sale was made in his favour on 27.3.2003, he has filed RCOPs against the tenants seeking eviction, and hence he should be permitted to prosecute those RCOPs for eviction. In answer to the above, it is contended by the learned Senior Counsel for the first respondent that the sale of the entire property is challenged in the suit; that a part of the property is continued to be in occupation of the plaintiff while the rest of the property is occupied by tenants; that the plaintiff/first respondent has also filed RCOPs for eviction of the tenants, and hence the appellant/second defendant should not be allowed to prosecute the rent control proceedings since he has no right to deal with the property till adjudication in respect of the sale is made by the Court. 15.It is true that on 27.3.2003 the sale was made in favour of the appellant/second defendant; but, he has not taken delivery of possession. The auction purchaser namely the second defendant also filed a suit for recovery of possession. Needless to say that it could be only in respect of the entire property pursuant to the auction sale. Now, the said auction sale is being challenged in C.S.No.601 of 2006 by the first respondent/plaintiff. In such circumstances, allowing the appellant to proceed with the RCOPs against the tenants who have occupied a part of the property, would be nothing but allowing him to deal with a part of the property which would include the subject matter of the suit filed by him in C.S.No.919 of 2004 for recovery of possession pursuant to the auction sale dated https://hcservices.ecourts.gov.in/hcservices/ 27.3.2003, which is challenged in the instant suit in C.S.No.601 of 2006. Hence this Court is of the considered opinion that till the decision is taken in C.S.No.601 of 2006, the appellant cannot be permitted to deal with the property in any manner. 16.Accordingly, the order of the learned Single Judge is sustained, and this original side appeal is dismissed leaving the parties to bear their costs. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar nsv/ To The Sub Asst. Registrar, Original Side, High Court, Madras-104. +1cc to Mr.PL. Narayanan, Advocate Sr 51653 +1cc to Mr.Sivam Sivanandraj, Advocate Sr 51406 RSM (CO) km/19.9. OSA No.318 of 2006 https://hcservices.ecourts.gov.in/hcservices/