M/S.L.K.Trust vs Edc Ltd. & Ors

2. The appeal arising from Special Leave Petition (C) No. 10334 of 2008 is directed against order dated 2 April 07, 2008 passed by the High Court of Bombay at Goa in Misc. Civil Application No. 165 of 2008 which was filed in Writ Petition No. 601 of 2006 by which it is clarified that the order of status quo passed by the High Court vide order dated December 18, 2006 shall not come in the way of EDC Ltd., i.e., the respondent no. 1 Company herein and the State Bank of India, i.e., the respondent No. 2 herein in considering the proposal of the respondent no. 3 Company who is mortgagor and the petitioner in Writ Petition No. 601 of 2006.

3. This Court proposes to refer to certain relevant facts, which are as under:

The said petition was, however, withdrawn subsequently.

6. The offer made by the respondent No. 3 for financial restructuring and/or one time settlement by payment of Rs.12.00 crores was rejected by the respondent No. 1 and the respondent No. 2. Pursuant thereto, the respondent no. 1 made several attempts between 2004 to 2005 to sell the attached property, which was mortgaged by way of public auction, but in none of the public auctions, it received offers equivalent to market value of the property.

However, the respondent no. 1 did not bring to the notice of the Court the fact that 3 days time was granted to the respondent no. 3 to bring better offer and before expiry of the said period resolution was passed by the Board of Directors of respondent no. 1 company. The respondent no. 1 company also concealed the fact that on January 18, 2006 Condor Polymeric has made offer of Rs. 14 crores to the Board of Directors of respondent no. 1 company. The High Court, therefore, relying upon the stand taken by the respondent No. 1, held that there was 1 a concluded contract between the respondent no. 1 and the appellant and in view of the said conclusion dismissed the petition filed by the respondent no. 3 vide judgment and order dated February 22, 2006. Feeling aggrieved, the respondent no. 3 approached this Court by filing Special Leave Petition on March 27, 2006 which was ultimately dismissed on August 24, 2006. Thus the higher offer made by the respondent no. 3 through third party which was subject matter of Writ Petition No. 19 of 2006 was not accepted when petition for special leave to appeal was dismissed on August 24, 2006. During the pendency of Writ Petition No. 19 of 2006, filed by the respondent No. 3 herein, the appellant trust, on February 13, 2006 issued cheques to the respondent No. 1, purporting to be in full payment of Rs.12,99,00,000/- as per the terms and conditions of sale. After the High Court dismissed Writ Petition No. 19 of 2006 on February 22, 2006, R.C. Mirchandani and others, who are unit holders in the hotel project of the respondent No. 3, filed Writ Petition No. 124 of 2006 challenging the action of 1 the respondent No. 1 in selling the property to the appellant-trust. Those petitioners (Mirchandani and others) offered to pay higher amount than offered by the appellant-trust in Writ Petition No. 19 of 2006, i.e., Rs..

15 crores, which was conveyed to the respondent No. 1 by letter dated January 3, 2006. The respondent Nos. 3 and 4 herein were impleaded as the respondent Nos. 4 and 5 in Writ Petition No. 124 of 2006.

9. The Board of Directors of the respondent No. 1 was informed that offer of Rs. 14 crores was made by Condor Polymeric to sabotage the offer made by the appellant-

trust. The record indicates that the Board of Directors was not informed that the appellant-trust had defaulted in making the balance payment as per the terms of acceptance dated December 12, 2005 by January 12, 2006. Because of this concealment and wrong representation regarding Condor Polymeric, the Board of Directors of the respondent No. 1 in its meeting held on January 18, 2006 rejected the offer of Rs. 14 crores made 1 by the respondent No. 3 through Condor Polymeric. In the meeting held on April 10, 2006, the Board of Directors of the respondent No. 1 was informed that the cheques issued by the appellant-trust, which were delivered during the pendency of the Writ Petition No. 19 of 2006, were subsequently deposited by the respondent No. 1 for realization but the same were dishonoured. The Board of Directors noted this default and resolved to accept the higher bid of Rs. 14 crores offered by Condor Polymeric, brought by the respondent No. 3. This decision of Board of Directors of the respondent No. 1 was not brought to the notice of this Court during the course of hearing of Special Leave Petition on April 12, 2006, but an affidavit was filed stating as to why the offer of the respondent No. 3 was not acceptable.

which was made on August 25, 2006. The respondent no. 3 also sent an amount of Rs.5,90,00,000/- to the respondent no. 2 by a cheque. The respondent no. 1 vide its letter dated September 27, 2006 purportedly, in 1 response to the letter dated August 25, 2006 of the respondent no. 3, informed the respondent no. 3 that, for the purpose of redemption of the mortgaged property, the outstanding dues were Rs.19,22,922.12. It was mentioned in letter dated September 27, 2006 by the respondent No. 1 that it was in the process of proceeding further with the transaction entered into with the appellant-trust as the appellant-trust had forwarded balance consideration to the respondent no. 1 subject to the decision of the Supreme Court dated August 24, 2006. By subsequent letter dated 09.10.2006 the respondent no. 1 company had acknowledged the right of the respondent no. 3 of redemption of mortgage but had stated that it was in the process of implementing the Supreme Court order and therefore no further concession for extension of time to exercise the right of redemption could be considered in the case of the respondent no. 3.

As mentioned above, the respondent no. 3 had sent an amount of Rs.9,72,00,690/- to the respondent no. 1 on August 24, 2006 and vide letters dated September 27, 1 2006 and October 9, 2006 the respondent No. 1 had clearly accepted and acknowledged the right of the respondent no. 3 to redeem the mortgaged property on the payment of liabilities due. Meanwhile, the appellant trust received a letter from the President of Goa Chamber of Commerce, who was also Vice Chairman of respondent no. 1 company stating that the respondent no. 1 at its Board Meeting held on October 19, 2006 had acknowledged legal and inherent right of respondent no.

18.40 crores to the respondent nos. 1 and 2 and also agreed to pay Rs. 11.50 crores towards the liabilities of 1 unit holders and Court creditors etc. Meanwhile, SBI filed an affidavit on November 21, 2006 in Writ Petition No. 124 of 2006 that they were willing to accept offer of Rs.18.40 crores offered to EDC Ltd. and State Bank of India by the respondent no. 3. By its letter dated November 23, 2006, the respondent no. 3 again asserted its right of redemption and informed that its financial supporters i.e. M/s. R N R Hotels Pvt. Ltd. had already deposited Rs.25 lakhs with the respondent no.1. The respondent no. 3 to show its bonafide, offered to deposit Rs.18.15 crores on or before December 8, 2006 in the Commercial Branch of the State Bank of India which was permitted by the High Court on November 28, 2006 in Writ Petition No. 124 of 2006.

Ltd. (the respondent No. 3) for redemption of mortgage on payment of Rs.12.87 crores to EDC Ltd. and Rs.9.18 crores to the State Bank of India, on the record of the Writ Petition No. 601 of 2006 and permitted the respondent No. 3 to withdraw the Writ Petition. The High Court by an order dated April 9, 2008, also dismissed the Writ Petition No. 124 of 2006 preferred by Mirchandani as infructuous. The above two orders dated April 7, 2008 passed in Misc. Civil Application No. 165 of 2008 in Writ Petition No. 601 of 2006 and April 9, 2008 in Writ Petition No. 601 of 2006 have given rise to the instant appeals.

14. After taking into consideration the facts of the case and the points raised at the Bar by the learned counsel for the parties, this Court is of the opinion that the petitions filed under Article 136 of the Constitution should not be rejected on the ground of availability of alternative remedy nor it should be rejected on the ground that the special leave petition is filed against order permitting withdrawal of writ petition. Right from the beginning, the case of the appellant is that there was a concluded contract between the appellant and the respondent No. 1 and, therefore, the respondent No. 1 could not have accepted proposal of the respondent No. 3 to redeem the mortgage executed by the respondent No.

3. This was the issue which was raised by the appellant in Writ Petition No. 601 of 2006. Without adjudicating the said claim the High Court has permitted the respondent no. 3 to withdraw the petition filed by the respondent No. 3. Further it is also the case of the appellant that in view of decision of this Court dated August 24, 2006 rendered in Special Leave Petition (Civil) 2 No.4957 of 2006, the rights of the parties were crystallized and, therefore, permission to withdraw the petition unconditionally should not have been granted to respondent No. 3. In Writ Petition No. 601 of 2006 filed by the respondent No. 3 and another against EDC Limited, i.e., respondent No. 1 herein and others, the prayer was to issue a Writ of Mandamus directing respondent No.1 to permit the respondent Nos. 3 and 4 herein to exercise the right of redemption of mortgaged property by accepting the offer of Rs. 18.40 crores towards the full and final settlement of the liability of the respondent No.3 towards the respondent Nos. 1 and 2 and to direct the respondent Nos. 1 and 2 to execute the reconveyance and release the documents of title deposited with the respondent No.1. The interim relief which was claimed by the said respondent No. 3 in the writ petition was to restrain the respondent No.1 herein from proceeding to finalize the sale of the mortgaged property in favour of the present appellant. The record shows that by an order dated December 18, 2006 the 2 High Court had directed the parties to maintain status-

Though it was pointed out on behalf of the respondent No.3 to the Court that the cheques which had been issued by the appellant to the respondent No.1 had not been honoured by the Bank, but this Court had expressed the view that even if that be so, it was for respondent No.1 to consider what action it should take in such an event, and ultimately if the respondent No.1 finds that the appellant is not in a position to fulfill its commitment and pay the price offered within the time granted by the respondent No.1, it was open to the respondent No. 1 to proceed to consider other options. In 3 the said matter, this Court expressed an opinion that it was expected of the respondent No.1 to act fairly and in accordance with law but as long as it acts within the parameters of law and its actions were not found to be arbitrary or unreasonable, it was entitled to take a decision which was in its interest. While disposing of the Special Leave Petition, it was observed in the judgment that if the appellant made the payment as promised within such time as might be granted by respondent No.1 and fulfilled the conditions of sale, that might be the end of the matter, but if it failed to do so it was always open to the respondent No.1 to take necessary steps to safeguard its interests, which included inter alia the consideration of other offers made by the other parties.

27. This Court cannot ignore the fact that on September 27, 2006 the respondent No. 3 had deposited cheques of Rs.9.25 crores in favour of the first respondent and Rs.5.90 crores in favour of the respondent No. 2. The bonafide of the first respondent can be seen from the fact 5 that these cheques were not immediately encashed, and as on January 2007, the total amount lying with the first respondent and the respondent No. 2 paid by the respondent No.3 was Rs.24.15 crores as against the redemption amount of Rs.18.40 crores. As the respondent No.3 had made payment to redeem the property which was accepted by respondent No.1 and as respondent No.1 had agreed to permit the respondent No.3 to redeem the property in question, a prayer was made to permit respondent No.3 to withdraw Writ Petition No. 601 of 2006 which can neither be regarded as arbitrary nor as illegal nor contrary to the decision of this Court dated August 24, 2006 rendered in Special Leave Petition (Civil) 4957 of 2006. Similarly, as the grievance of the respondent No.3 did not survive, the modification of the order of status quo granted earlier at the instance of the respondent No. 3 who was petitioner in the writ petition, also cannot be held to be bad in law because if the status quo order had not been modified the respondent No.1 would not have been in a position to 5 accept the offer of respondent No.3 to permit it to redeem the property which would have been in derogation of right of the respondent No. 3 to redeem the property as recognized by Section 60 of the Transfer Property Act.

quo. By the impugned order dated April 7, 2008 passed in M.C.A. No. 165 of 2008 filed in Writ Petition No. 601 of 2006, the High Court has modified the same. There is no manner of doubt that this modification of interim relief would have certainly adversely affected the claim of the appellant that in view of concluded contract between the appellant and the respondent No. 1, the respondent No. 1 could not have been permitted to consider the claim of the respondent No. 3 for redemption of the mortgaged property and, therefore, Special Leave Petition under Article 136 of the Constitution would certainly be maintainable against that order. Having regard to the facts and circumstances of the case this Court is of the opinion that it would not serve purpose of any party to dismiss the petitions on the basis preliminary objections raised on behalf of the respondent Nos. 3 and 4 and, therefore, this Court has decided to entertain the Special Leave Petitions and to adjudicate the claims raised therein on merits.

On January 23, 2006, the respondent No.3 herein had filed Civil Writ Petition No. 19 of 2006 before the High Court claiming the relief which is referred to earlier. The High Court had dismissed the Writ Petition holding that the respondent No.1 had already entered into an agreement with the appellant for the sale of the assets for 3 a sum of Rs. 12.99 crores and, therefore, there was no question of the same being cancelled or set aside since it represented a concluded contract between the parties.

28. On over all view of the matter, this Court finds that there is no substance in the challenge to the two orders dated April 7, 2008 modifying the order of status quo and order dated April 9, 2008 permitting the Respondent No.3 to withdraw Writ Petition No. 601 of 2006 warranting inference of this Court in appeals arising by grant of special leave filed under Article 136 of the Constitution.

Therefore, the two appeals which are directed against orders dated April 7, 2008 and April 9, 2008 respectively have no substance and are liable to be dismissed.

31. Under the circumstances the passing of resolutions by the respondent No.1 company can hardly be regarded as breach of direction given by this Court. No case is made out by the petitioner either to exercise powers under Section 12 of the Contempt of Courts Act 1971 nor any case is made out to set aside the resolutions passed 6 by the Board of Directors of the respondent No.1 company. The prayers made in the Contempt Petition therefore, cannot be granted.

32. For the foregoing reasons the appeals as well as the Contempt Petition fail and are dismissed. Having regard to the peculiar facts of the case the parties are ordered to bear their own costs.