Dismissed

Ms Nel Holdings South Limited v. PNB Housing Finance Limited

DRT17 Apr 2025SA/487/2022

Case brief

AI extract

What is this about?

In an application under the SARFEASI Act challenging a Section 14 order for possession, the tribunal dismissed the claims of an applicant who alleged rights over the property via unregistered Joint Development Agreements. The court held that the applicant failed to produce the primary agreement, that unregistered documents lack legal standing regarding title, and the applicant could not challenge

What did the court decide?

The Special Application SA No. 487/2022 was dismissed.

Ms Nel Holdings South Limited versus PNB Housing Finance… — Company and Corporate | DRT (2025)

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IN THE DEBTS RECOVERY TRIBUNAL II, KARNATAKA AT BENGALURU

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Dated this the 17^st Day of April, 2025

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Present: Sri. T. Rajesh Hon’ble Presiding Officer

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SA.No.487/2022

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BETWEEN:

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M/s. NEL Holdings South Ltd. (Now Known as Satchmo Holdings Ltd.) Having registered office at No. 110, Wing A, Level 1, Andrews Building, M.G. Road, Bengaluru, Karnataka 560001, Represented by its Authorised Signatory, Mr. Sathish Kumar. …APPLICANT

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AND

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Kotak Mahindra Bank Limited, 278 KC, C-27, G-Block Bandra Kurla Complex, Bandra (E), Mumbai- 400051, Interlia Having its office at No 22, M G Road 560001, Represented by its officer, Mr. Murali M R.

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M/s. Sri Balaji Realtors Pvt. Ltd, A Company represented by its Managing Director) Represented by Mr. Y. Shivarama Krishna, No. 002, Farah Plaza, Infantry Road Cross, Bangalore- 560 001.

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Mr. A.S. Jayasimha, S/o. A.S. Prahlada Rao, Aged about 69 years, Residing at No. 352, 41^st Cross, SrirangaVittalaNilaya, 8^th Block, Jayanagar, Bangalore- 560 082.

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Mr. Nirmal Kumar Tejraj Bantia,

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SA 487/2022

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Residing at No. 50, Nirmal Deep, Yamu Nabai Road, Madhava Nagar, Bangalore, Karnataka- 560038.

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M/s. HDFC Ltd, Registered under Companies Act 1956, Regd Head Office at, Ramon House, H T Praksh, 169, Backbay Reclamation, Mumbai Maharashtra- 400 020.

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Also at, M/s. HDFC Ltd, HDFC House, No 51, Kartraba Road, Bangalore- 560 001.

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…RESPONDENTS

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Counsels on record/	appeared for:
Applicant	: Sri. Vignesh Shetty
Respondent No. 1	: M/s. Fx & Co.,
Respondent No. 2	: Closed
Respondent No. 3	: Exparte
Respondent No. 4	: Sri. R. Ashok Kumar
Respondent No. 5	: Sri. B.S. Mahendra

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: ORDER ON SA.No. 487/2022:

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The measures taken by the 1^st respondent as per

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the provision of the Securitization And Reconstruction of Financial Asset and Enforcement of Security Interest Act,2002, herein after referred to as “SARFEASI Act” or “The ACT” leading to the procurement of S.14 order from the Ld. Magistrate is under challenge in this application filed under sub section [1] of S.17 of the Act.

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SA 487/2022

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The applicant who is neither the borrower nor the guarantor is seeking to assail the measures contending that by virtue of a Joint Development Agreement entered into between the applicant and then owner of the property they have right and interest over a portion of the property.

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It is the case of the applicant that the applicant carried on business of development of properties in and around Bangalore and the Schedule property had been set apart for the purpose of “Club House” in a residential layout agreed to be developed by the applicant.

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It is the case of the applicant that the residential converted land in Sy. No. 19/2, measuring 5 Acres 12 guntas, Sy. No. 20/4 measuring 23 guntas, Sy. No. 20/2 measuring 5 acres 21 guntas and Sy. No. 20/1 measuring 2 acres belonging to respondent Nos. 2 & 3. The 2^nd and 3^rd respondent then entered into a Joint Development Agreement dated 08.01.2015 with the applicant for the development of the aforesaid converted lands into residential layout with all amenities and facilities in revenue sharing model fixed at the ratio of 72:28.

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SA 487/2022

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The Joint Development agreement dated 08.01.2015 was also executed where by the it was mutually agreed that the residential layout would be sold by the applicant and the revenue received from the sale is to be shared in a 50:50 ratio. It is also stated that the developed portion of residential layout is to be shared between the landowners and the applicant in the ratio of 72:28 respectively. It is also stated that by virtue of Joint Development Agreement the land owners were entrusted with the responsibility of developing the Club-House for which the developer has surrendered 8 plots to the land owners. It is also stated that a Sharing agreement was also executed on 05.12.2016 between the land owners and the applicant. Hence according to the applicant the plot No. 44 was ear marked for building the Club-House for which the requisite permissions from the authorities were also obtained.

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It is further case of the applicant that the applicant had availed financial facility from HDFC Limited by executing a master facility agreement on 24.03.2016. It is also the case of the applicant that the respondent No.2 had illegally assigned the plot No. 44 in favour of the respondent No.4 by virtue of sale deed dated 06.04.2016 registered vide

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SA 487/2022

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document No. 77/2016-2017 of Book I, Stored in CD No. 97 in the office of the Sub-Registrar, Jayanagar, who in turn deposited the said document with the 1^st applicant for the purpose of creation of security interest.

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In respect of the said assignment the applicant contends that the sale consideration for the assignment is too low and the said sale in not a sale in the eye of law as the same is executed by fraud and coercion. Hence, according to the applicant the rights and interest over plot No. 44 was created in favour of all the customers of the remaining plot by virtue of Joint Development Agreement and as such there is no right for the vendor to execute the sale deed in favour of the 4^th respondent. The applicant also places reliance on supplementary Joint Development Agreement dated 15.12.2016 wherein also a reference was made to the Club House and the land owners had agreed to invest Rs. 2 Crores. 8. The applicant is also producing another supplementary joint development agreement dated 15.11.2017 wherein also a reference as to the development of Club House is mentioned. The applicant has also claimed to have lodged a police complaint.

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SA 487/2022

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In the grounds to the SA the applicant apart from reiterating the contentions taken in the statement of facts has contended that the respondents have misused and abused their authority and power. The applicant has also reiterates that the schedule property should not have been sold or mortgaged by the erstwhile landowners or by any persons claiming through or under them, as the applicant and all purchasers of the layout have indefeasible right, title and interest over the schedule property as per the Joint Development Agreement and the Supplementary Joint Development Agreements.

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On the above stated reasons the applicant seeks to set aside the measures in particular the Impugned Order passed by the Ld. Magistrate on 26.09.2022. Along with the SA the applicant has produced the following documents:

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1. ANNEXURE A: Copy of the sanctioned layout plan.

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1. ANNEXURE B: Copy of the Master Facility Agreement dated 24.03.2016

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1. ANNEXURE C: Copy of Sale deed dated 06.04.2016

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1. ANNEXURE D: Copy of the supplementary joint development agreement dated 15.12.2016

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1. ANNEXURE E: Copy of the said supplementary joint development agreement dated 15.11.2017

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1. ANNEXURE F: Certified copy of the said illegal order dated 26.09.2022

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SA 487/2022

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1. ANNEXURE G: Certified copy of the petition in Cl.Misc No. 5265/2022.

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The applicant had also produced the Copy of the

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summons issued by the City Civil Court in OS 1481/2022 and sanction letter dated 23.03.2016 and the application filed for the change of name before the commercial court.

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Even though the SA is filed against Punjab Housing Finance Limited as the first respondent, in view of the fact the debt is assigned in favour of Kodak Mahindra Bank the same got substituted in the place of the first respondent.

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The first respondent has filed their objections refuting the allegations of the applicant and contending interalia that the 4^th respondent have approached the 1^st respondent for loan the purchase of the schedule property and a credit facility of Rs. 7,50,00,000/- was sanctioned and disbursed as the borrower had entered into an agreement for sale with the 2^nd respondent.

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In pursuant to the sanctioning and disbursal of the credit facility the property was purchased by the 4^th respondent by virtue of sale deed dated 07.04.2016. In lieu of the security towards the credit facility an equitable mortgage by deposit of title deeds was created by the 4^th

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SA 487/2022

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respondent and the said security interest created is duly registered with the Central Registry. It is also stated that since the borrowers were irregular in making the payments the account was classified as NPA on 15.03.2019. On classification of the account as NPA a demand notice dated 18.03.2019 was issued calling upon the borrowers to pay entire balance outstanding. Apart from the issuance of the demand notice, the same was duly published in two newspapers as the Authorised officer apprehends that the borrower may evade the notice.

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The borrower did not come forward to discharge the liability or to make an representation, resulting in issuance of the possession notice dated 26.06.2022. According to the 1^st respondent the possession notice was also duly published and affixed as required under the Statute. After due compliance of mandate of Rule 3 and Rule 8(1) & (2), in order to take physical possession of the property a S.14 application was moved before the Chief Metropolitan Magistrate and the magistrate had passed the order which is under challenge in the S.A.

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SA 487/2022

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The first respondent had pointed out the fact that the applicant though placing heavy reliance on a Joint development agreement which according to the applicant is dated 08.01.2015, the said agreement was neither produced before this Tribunal along with the S.A nor any reason is given for the non production of the said vital document

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The first respondent also disputes the sharing agreement claimed to have been executed by the applicant on 05.12.2016 and 15.11.2017. According to the 1^st respondent the applicant is a stranger to the proceedings and had nothing to do with the schedule properties. It is also contended that the sale deed deposited for the purpose of mortgage is dated 06.04.2016 and the supplemental Joint Development Agreement sought to be relied upon by the applicant are all subsequent documents.

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According to the 1^st respondent the 4^th respondent is in the absolute ownership of the property and is competent to create a valid equitable mortgage in favour of the 1^st respondent. The 1^st respondent had further denied the parawise averments as made in the S.A. Along with the

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SA 487/2022

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objections the 1^st respondent had produced the following documents:-

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a) ANNEXURE R-1:- Copy of the Authorization letter.

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b) ANNEXURE R2 to R4:- Copy of the loan application, sanction letter and loan agreement.

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c) ANNEXURE R-5:- Copy of the Registered sale deed dated 06.04.2016.

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d) ANNEXURE R-6:- Copies of demand notice dated 18.03.2019, Delivery status and paper publications.

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e) ANNEXURE R-7:- Copies of possession notice dated 26.02.2022, Postal receipts, and Photographs having affixed possession notice, paper publications.

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The respondent No.1 bank has produced the following citations in support of their case:-

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a) MANU/SC/1258/2017: Commissioner of Income Tax Vs Balbir Singh Maini.

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b) MANU/SC/1488/2018 Jamil Begum (D) thr. LRS Vs Shami Mohd (D) thr LRS and others.

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c) MANU/SC/0528/1995 Ramti Devi Vs Union of India.

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d) Yellpu Uma Maheshwari and another Vs Buddha Jagadheeswara Rao and others.

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Even though the 4^th respondent had filed an objection after being closing the chance, I.A No. 2186/2024 filed to receive the objection stands dismissed by the order

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SA 487/2022

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dated 03.02.2025. Though an I.A 312/2025 was filed seeking restoration of I.A 2186/2024 the same was not allowed.

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The 5^th respondent who has impleaded subsequently had filed their objections contending that the applicant has availed four credit facilities from the 5^th respondent and the said accounts were also declared as NPA. It is also pointed out that schedule properties were not mortgaged with the 5^th respondent and 5^th respondent is not a necessary party. Along with the objections the 5^th respondent have produced the following documents:-

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a) Document No. 1: Copy of the memorandum of Entry.

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b) Document No.2: Copy of the sharing agreement.

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c) Document No. 3: Copy of the Supplementary Agreement.

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Heard the counsels for respective parties and considered the case put up by applicant in the light of pleadings in the SA and the statement of objection filed by the 1^st respondent and also the contentions of other

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respondents as to the matter in issue.

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The following issues arises for consideration in this

matter:-

SA 487/2022

1. Whether the applicant is entitled to challenge the measures contending that the applicant is having right over the property.

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1. Whether the 4^th respondent is having any right to create security interest over the schedule properties.

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1. What orders are to be passed?

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Since all these issues are inter related all are gone into and decided together.

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The applicant set up their case on the basis of a Joint Development Agreement claimed to have been executed by

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then owners of the property on 08.01.2015 and the supplementary Joint Development agreement executed on 15.11.2017 and also the sharing agreement dated 05.12.2016.

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The applicant contends that by virtue of the Joint development agreement the revenue from the sale proceeds needs to be shared and by the virtue of the supplementary Joint Development Agreement and the approved plan the schedule property was set apart for the commercial purpose

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for setting up the “Club-House” which is required for the proper development of the residential layout. Even though

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SA 487/2022

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the applicant is claiming right over the schedule property by virtue of the Joint Development Agreement dated 08.01.2015, the said document is not forthcoming. Apart from reiterating the so claimed terms of the agreement, not even a copy of the agreement is produced along with the S.A.

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Even the supplementary Joint Development Agreements dated 15.12.2016 and 15.11.2017 produced along with the SA are not registered documents. In the absence of production of Joint Development Agreement claimed to have been executed by then owners of the property in favour of the applicant this Tribunal is not inclined to accept the contention of the applicant that prior to the execution of the sale deed the vendors had lost their title, disentitling them to execute the sale deed dated 06.04.2016.

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The issue whether the applicant have got any right or title over the property is to be viewed in light of the fact that the claim raised by the applicant are all based on agreements that too unregistered agreements. In this regard it is worth to mention S. 17(b) of the Registration Act.

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S.17(b):-

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Documents of which registration is compulsory- (1)XXXXXXXXX

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SA 487/2022

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(a) Xxxxxxxx

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(b) Other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of the on hundred rupees and upwards, to or in immovable property:

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(d) Xxxxxxxxx

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(e) Xxxxxxxxx

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Hence, by virtue of S.17(b) of the Registration Act any document creating any right over the immovable property if the same is having value over 100 rupees is compulsory registerable and the applicant’s so called agreements; joint development agreement and supplementary agreements does not satisfy the mandate of the S.17(b) of the registration Act and as such have no standing in the eye of law.

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Apart from the above, the documents deposited with the first respondent for the purpose of creation of security interest/ mortgage is dated 06.04.2016 and the supplementary Joint Development Agreements as produced

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by the applicant are all subsequent to the execution of the sale deed in favour of the 4^th respondent. The said documents

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SA 487/2022

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have no legal validity since as on date of execution of said supplementary Joint Development Agreements, the 2^nd respondent had already assigned his right in favour of the 4^th respondent.

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Another reason which entice this Tribunal to take a view against the applicant claim is that as on date of consideration of this S.A there is no valid challenge as to the legality of the sale deed which is executed as early as 06.04.2016. It is trite law that unless a document is annulled, cancelled or declared illegal by a competent authority/ court the documents remains valid. Till date the applicant who is claiming right over the property had not taken any steps to challenge the validity of the document executed by the 2^nd respondent. In the absence of any valid challenge as to the legality of the title document there is nothing available to record to hold that the 4^th respondent is anywhere is incapacitated from creating a valid security by depositing the said documents.

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Apart from raising a contention as to the existence of their so called right over the schedule property, the applicant is not having challenge as to the availment of the

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SA 487/2022

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credit facility, defaults occurred in the account or as to legality of any of the steps taken by the 1^st respondent leading to the procurement of S.14 orders. Even otherwise, the applicant who is trying to set up a ease as to their right over the property, cannot be held to contend that there is flaw in measures initiated against 4^th respondent.

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On consideration of the above facts and discussion held therein this Tribunal is of considered opinion that there is no merit in the SA and the SA is liable to be dismissed and accordingly the S.A No. 487/2022 stands dismissed. Interim order, if any granted and subsisting till this day stands vacated. Pending I.A’s if any are all disposed of in terms of this Order. No order as to cost.

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Copy of this order be communicated to the parties concerned.

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(Dictated to the Stenographer (AJ), after its transcription and necessary corrections, signed and Order is passed on this day 17^th Day of April, of 2025)

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Sd/-

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(T.RAJESH) PRESIDING OFFICER

Ms Nel Holdings South Limited v. PNB Housing Finance Limited

Case brief

What is this about?

What did the court decide?

Ms Nel Holdings South Limited v. PNB Housing Finance Limited

Case brief

What is this about?

What did the court decide?

What the court decided

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