Creation Of Mortgage Not Void If Consequence Of Breach Of Any Covenant Of Lease Deed Is Provided: Bombay High Court
The Bombay High Court dismissed Writ Petitions of the Maharashtra Industrial Development Corporation against the Judgment of the Debts Recovery Appellate Tribunal.
Justice A.S. Chandurkar, Justice M.M. Sathaye, Bombay High Court
The Bombay High Court held that the creation of the mortgage is not void if the consequence of a breach of any covenant of the lease deed has been provided.
The Court held thus in a batch of Writ Petitions preferred by the Maharashtra Industrial Development Corporation (MIDC) challenging the Judgment of the Chairperson, Debts Recovery Appellate Tribunal (DRAT), Mumbai.
A Division Bench comprising Justice A.S. Chandurkar and Justice M.M. Sathaye observed, “It thus becomes clear that the action of BI of creating a mortgage of the leased plot in favour of UBI was without the prior consent of the Chief Executive Officer of the MIDC and thus in violation of Clause 2(t) of the lease deed. Though MIDC sought to invoke its right under Clause 4 of the lease deed by issuing a show cause notice on 16/10/2007, it did not take any further steps in that regard. Since the consequence of a breach of any covenant of the lease deed has been provided, the creation of the mortgage in breach thereof cannot be treated to be void.”
The Bench was of the view that the DRAT has rightly found that the creation of the mortgage by M/s. Benelon Industries (BI) was without the prior permission of the MIDC and it was open for the MIDC to exercise its right of re-entry due to breach of a covenant which it failed to enforce.
Senior Advocate Prashant Chawan appeared for the Petitioner while Additional Government Pleader (AGP) A.I. Patel and Senior Advocate Pankaj Sawant appeared for the Respondents.
Brief Facts
A plot located in Marol Maharashtra Industrial Development Corporation Area was under control of the Petitioner-MIDC. The MIDC allotted the said plot to the BI (second Respondent). In the lease deed executed between the parties with a duration of 95 years, various terms and conditions were incorporated including a restriction on the assignment or letting or parting with possession of the leasehold plot without prior consent of the MIDC. There was also a provision for determination of the lease deed with a further right of re-entry in case of breach of any covenant by the lessee. BI had obtained financial assistance from the Maharashtra State Financial Corporation (MSFC), which issued a No Dues Certificate to BI on receiving its dues. Since BI sought further financial assistance from the Union Bank of India (UBI) i.e., Respondent, it approached the MIDC for grant of No Objection for creation of mortgage of the said plot in its favour. BI was however informed by the UBI that unless all requisite documents were furnished to the MIDC, it would not be able to consider such request. UBI granted financial assistance to BI and since there was a default by BI in making repayment of the loan amount, UBI filed a suit against BI for recovery of the outstanding dues.
An ex-parte decree was passed by the High Court against BI and after the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993 came into force, the execution proceedings stood transferred to DRT. A recovery certificate was then issued in favour of UBI. According to MIDC, during inspection of the plot, its Officers noticed unauthorised use of the same by third parties without its permission. Hence, MIDC issued a show-cause notice (SCN) to BI and in the meanwhile, the DRT issued an Order of proclamation for the sale of the plot. After some proceedings, the DRAT passed an Interim Order staying the recovery proceedings initiated by UBI. Being aggrieved, Kalindi Properties Private Limited (KPPL) i.e., fifth Respondent filed a Writ Petition and MIDC filed the same. The plot was handed over to KPPL. The MIDC approached the Supreme Court and its Special Leave Petition (SLP) was dismissed. The Writ Petitions of KPPL and MIDC were heard together and KPPL was directed to deposit an amount. After various round of litigation, ultimately, the DRAT partly allowed the MIDC’s Appeal and issued certain directions to the parties with a view to put an end to the dispute amongst them. This was challenged before the High Court.
Reasoning
The High Court in view of the above facts, noted, “The said finding recorded by the DRAT is in accordance with the terms of the lease deed dated 23/03/1979. The said finding therefore cannot be said to be perverse for being interfered with in exercise of writ jurisdiction.”
The Court said that though it was urged on behalf of the MIDC that the decree passed in the suit filed by UBI against BI was vitiated by fraud as all relevant material aspects were not placed on record by UBI, this ground of challenge was not raised by the MIDC either before the DRT or the DRAT.
“The adjudication of the aspect as to whether a judgment of a competent court is vitiated by fraud on account of alleged non disclosure of material facts is a mixed question of fact and law. In absence of any such grievance being raised by the MIDC earlier either before the DRT or DRAT, we are not inclined to go into this disputed question in exercise of jurisdiction under Article 226 of the Constitution of India”, it added.
The Court, therefore, upheld the directions issued by the DRAT on the ground that the same were issued to enable the claims of the litigating parties to be duly satisfied.
“In our view, since the order passed by the DRAT has been upheld, the parties would be at liberty to have their other rights adjudicated in accordance with law in the proceedings pending before the Civil Court. We clarify that the said proceedings be decided on their own merits and in accordance with law”, it concluded.
Accordingly, the High Court dismissed the Writ Petitions and upheld the DRAT’s Judgment.
Cause Title- Maharashtra Industrial Development Corporation v. Union Bank of India & Ors. (Neutral Citation: 2025:BHC-AS:22204-DB)
Appearance:
Petitioner: Senior Advocate Prashant Chawan, Advocates Rajmani Varam, and Meet Vora.
Respondents: AGP A.I. Patel, Senior Advocate Pankaj Sawant, Assistant GP S.P. Kamble, Advocates Ziyad Madon, Amit Mehta, Nipa Gupte, and Hitesh Mishra.
