The Saraswat Co-Op. Bank Ltd. v. M/S Mine Stone And ORS.
Atul
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION CHAMBER SUMMONS NO. 765 OF 2013 IN EXECUTION APPLICATION NO. 1471 OF 2012 The Saraswat Coop Bank Ltd ...Claimant
Versus
Mine Stone & Ors
...Respondents
And Hina Paresh Mehta ...Applicant Mr Gauraj Shah, with Shlok Parikh, i/b M/s. Gajria & Co., for the Applicant.
Mr Bhupesh Narkar, i/b Vishal Narkar, for the Claimant. Mr Yogesh Dabholkar, Chief Manager, Saraswat Bank Ltd., is present.
CORAM: G.S. PATEL, J DATED:
PC:- 1.
The Chamber Summons is by one Hina Paresh Mehta, a third party, who claims that her residential Flat No. 5 at Krishna Kunj, second floor, behind Wilson College, Mumbai has recently been attached by the Claimant, the Saraswat Cooperative Bank Ltd, in execution of an Arbitral Award dated 1st December 2011. That Award was made under the Multi State Cooperative Societies Act
2002. Hina was not a Respondent to that Arbitration Claim. She is not a Judgment Debtor. Her husband Paresh is arrayed at various places as partner of various firms the Bank sued. 2.
Hina says she is the sole and absolute owner of Flat No. 5 in Krishna Kunj. She says in paragraph 5 of her Affidavit in Support that she was not party to the arbitral claim and is not an Award Debtor. That is correct. In paragraph 8 she says that before 12th August 2005, her husband Paresh and his brother Nilesh jointly owned this flat. Under a registered Gift Deed dated 12th August 2005 Paresh gifted his 50% right, title and interest in that flat to Hina. By a separate Gift Deed dated 19th September 2009, Nilesh, Hina's brother-in-law, gifted his remaining 50% share, right, title and interest in the flat to Hina. Both Gift Deeds are registered. It appears that there was a family arrangement or arrangements and these Gift Deeds were in pursuance of that Family Arrangement. 3.
Both Gift Deeds pre-date the arbitration claim which is of 2010. Second, the flat is not in the name of any of the Award Debtors at all as on the date of the reference to arbitration claim let alone as on the date of the arbitral Award in 2011. 4.
In its Affidavit in Reply the Bank says these Gift Deeds constitute fraudulent transfers and that they are voidable. The basis for this assertion is that Paresh and Nilesh were either themselves debtors or guarantors for various amounts due to the Saraswat Bank. But executing a Deed of Guarantee does not automatically result in an injunction of any kind.
5.
As to the question of these being "voidable", admittedly the Bank has taken no steps whatsoever to having those documents invalidated or delivered up for cancellation, and it must be borne in mind that both Gift Deeds are duly registered. Filing an Affidavit in Reply to a Chamber Summons will not achieve the purpose. Merely saying that a transaction is "voidable" is never enough where the transfer is effected by a registered instrument. The Bank has filed no substantive proceedings to impeach the transactions or to have the registered document delivered up for cancellation. It has made no application for an order in these terms.
6.
Mr Narkar submits that the Bank need take no separate proceeding to impeach the transaction or have the document cancelled. It is enough, he says, if the Bank says so in reply to an application for raising the attachment. That is incomprehensible, for it means that the Bank can seek an order for a relief it has never sought and for which it has never made any sort of application or filed any proceeding at all.
7.
In support of this proposition, Mr Narkar relies on the decision of the Supreme Court in C Abdul Shukoor Saheb v Arji Papa Rao.
1 There the Supreme Court was dealing with a defence taken in the written statement and mounted under Section 53 of the Transfer of Property Act. In paragraphs 29 and 31, on which Mr Narkar relies, the Supreme Court referenced Order 21 Rule 63 of the Code of Civil Procedure, 1908. Mr Narkar fails to point out that this Rule, along with Rules 60 to 62, was deleted by the 1976 amendment, with
effect from 1st February 1977.
2 That amendment did away with the need to file a separate suit. It has to be read with the significant amendment to Rule 58, including Rule 58(2), which tells us that all questions, including as to any right, title or interest in any property attached must be determined by the court dealing with the claim or the objection and not by a separate suit. But this does not mean that the Bank does not need to file a proceeding in execution for a declaration that transaction is a fraudulent transfer, and for a direction that, following such a finding being returned, the document effecting that transfer be delivered up for cancellation. This is plainly necessary, for an order can only be passed by a civil court in terms of a relief actually sought. Nothing in Abdul Shukoor Saheb militates against this, even de hors the 1976 amendment.
Indeed, paragraph 31 is against Mr Narkar, for it specifically contemplated a suit being filed under Rule 63, but clarified that it would need to be brought in a representative capacity. There is nothing in these observations of the Supreme Court that say that a registered document of transfer or title can be deemed to have been declared void on the basis of an assertion made in an Affidavit in Reply without the person who made that assertion filing a proceeding seeking that relief. It is always possible for an attaching Creditor to argue in opposition to an application for raising attachment that a particular transaction is fraudulent. But when it is shown that there is an registered document of title effecting the 1 AIR 1963 SC 1150.
2 Before its deletion, Rule said: "63. Saving of suits to establish right to attached property.-Where a claim or an objection is preferred, the party against whom an order is made may institute a suit to establish the right which he claims to the property in dispute, but, subject to the result of such suit, if any, the order shall be conclusive.
"
transfer, merely saying it is fraudulent is not enough. There is an effect to registration under Section 17 of the Registration Act and this cannot be nullified on an argument in opposition. The person who seeks to invalidate the transfer must seek that relief, but he is required to do so in execution, not, any longer, by a separate suit. That is the only effect of the deletion of Rule 63 and the amendment of Rule 58. Mr Narkar cannot explain how that declaration of a fraudulent transfer and that direction for delivery of the document for cancellation can be granted to the Bank without there being a prayer for it anywhere in any application or proceeding. 8.
In any case, it is not shown how such a transfer is invalid, let alone fraudulent. The only argument seems to be that the transferors and transferee of the flat entered into this arrangement only after the loan granted by the Saraswat Bank to the principal debtor 'went bad'. But it is not shown that this transfer was in violation of any order of injunction, restraint or any order of Receivership. A loan remaining unpaid or overdue does not selfgenerate any injunction or restraint. The property in question was not charged to the Bank or given as security. The Bank has, simply put, done nothing at all ever to impeach the transaction. 9.
What Mr Narkar's argument amounts to is this: if a loan 'goes bad', then there is automatically a charge created over any and every property of a borrower, and of the borrower's partners, including fractional interests, even if the loan in question is secured by other properties and assets, and even if the lender has not even initiated any recovery proceedings, let alone obtained any injunctive order.
10. The long and short of this is that the Bank seeks in execution to attach a property that does not belong to any of the principal debtors nor to any of the guarantors. It is not the property of any of the Award Debtors at all. The entire action of the Bank in attempting to attach this flat is wholly without basis.
11. The Chamber Summons is made absolute in terms of prayer clauses (a) and (b).
12. The request for a stay of this order is rejected. The Bank is unable to demonstrate even prima facie how that transfer is bad, and how it could have attached the entire flat in execution. The attachment is raised and released forthwith and all will act immediately on production of an authenticated copy of this order.
13. No costs.
(G. S. PATEL, J)