Newsletter ARBITRATION AND CONCILIATION ACT, 1996 JUNE, 2023 UNLESS INCIDENTAL TO FUNDAMENTAL CLAIMS, CIVIL COURT CAN NOT GO INTO THE QUESTION OF TITLE IN A PARTITION SUIT The Hon’ble Supreme Court partially upholding the judgement of the Division bench of Telangana High Court in Trinity Infraventures Ltd. v. M.S. Murthy, held that the Civil Court cannot decide the title for suit property in a partition suit if it is not incidental to the fundamental premise of the claim. The matter pertains to a dispute over the “Paigah Estate” where “Paigah” was granted by the Nizam of Hyderabad to Khurshid Jah. Such grants were given to maintain the Paigah troops for the services of the Nizam. Paigah grantees were not absolute owners of the estates and it could not be physically divided among legally entitled family members. To distribute the income of the Paigah, the Paigah Committee was constituted which reported that Khurshid Jah had not left any property which was not acquired or purchased out of the Paigah income, leaving behind properties obtained from the income of Paigah. Paigah system was abolished in 1949. A partition suit claiming that the estate left by Khurshid Jah was Mathruka estate whose 29/2944 share was claimed was filed by his lineal descendant, Dildar-Un-Nissa Begum. There were several applications filed seeking possession of the property. In 2004, a single Judge of the City Civil Court of Hyderabad held that the title of the property was held by the Respondent. The same was challenged in the High Court where it was held that the appellants failed to establish that the estate is a Mathruka property and that the preliminary decree obtained in 1963 was obtained by fraud, which was affirmed by the Division Bench of the High Court. The petitioners were aggrieved and filed a SLP. The Supreme Court held that preliminary decree could not have determined the claim to title made by the legal heirs seeking partition and fraud was not one of the issues framed by the Single judge bench. Therefore, the finding about the title of the property in the preliminary decree is only incidental to the suit hence, cannot be said to determine the title of properties. Read More... POSSESSION OF THE PROPERTY CANNOT BE REFUSED BY THE LANDLORD CLAIMING THAT THE PROPERTY IS DAMAGED In the matter of Mrs. Ameet Bhatia & Anr. v. Devyani International Ltd., the Patiala House Court, New Delhi, held that a landlord cannot refuse to take possession of the property on the ground that the property is damaged. The plaintiffs were owners and had leased out a property to the defendants in 2015. Repeated requests were made by the defendants to lower the rent which the plaintiff agreed to. The defendants stopped paying rent after 31.03.2020. A letter was sent by the plaintiff demanding the rent for April, May, and June 2020. An email was then sent by the defendant in July 2020 terminating the lease and informing about the three-month advance notice. The Plaintiff responded that the three-month notice would also include rent for October 2020 and that the defendant also needed to clear the utility bills. A legal notice was also issued against the defendant, whereafter the defendant offered to return the keys of the vacated suit property but was not accepted by the plaintiff on the ground that it needed repairs. The lease agreement gave the defendant the right to foreclose the lease agreement and also made the defendant duty-bound to keep the suit property in good condition. Reliance was placed on a decision of the High Court of Delhi, titled, H.S. Bedi v. National Highway Authority of India wherein it was held that it is well established that the landlord cannot refuse to take possession of the suit property and if he does, the possession is deemed to be delivered to the landlord. Hence, the Hon’ble Court held that the landlord shall also not be liable to receive rent. Read More... POSSESSORY RIGHT OF THE PURCHASER IS PROTECTED UNDER S. 53A TPA, EVEN IF THE AGREEMENT TO SELL DOESN’T CONFER TITLE The Hon’ble Supreme Court in matter of Ghanshyam v. Yogendra Rathi held that legally an agreement to sell may not be regarded as a transaction of sale or a document transferring the proprietary rights in an immovable property but the prospective purchaser having performed his part of the contract and lawfully in possession acquires possessory title which is liable to be protected in view of Section 53A of the Transfer of Property Act, 1882. The said possessory rights of the prospective purchaser could not be invaded by the transferer or any person claiming under him. In the present case, the parties had entered into an agreement to sell and the defendant-appellant received the entire sale consideration from the plaintiff-respondent, executed a will bequeathing the suit property to the plaintiff-respondent and general power of attorney in favour of the plaintiff-respondent. Thereafter, the plaintiff-respondent took possession of the suit property without executing any sale deed. On request of the defendant-appellant, the plaintiff-respondent allowed him to occupy some space in the property as a licensee for a certain period of time. Dispute arose when the defendant-appellant failed to vacate the suit premises upon expiry of the license period. The plaintiff-respondent filed eviction of defendant-appellant from suit premises with mesne profits which the defendant-appellant contested the suit on the grounds that the documents have been manipulated on blank papers. The trial court decided against the defendant-appellant and held that it could not be proved that the documents were manipulated, which was upheld by the first appellant court and High Court. Therefore, the defendant-appellant filed the present appeal wherein the Hon’ble Apex Court concluded that the plaintiff-respondent was rightly held to be entitled for a decree of eviction with mesne profits and the defendant-appellant ceased to be in possession of the suit property as it was determined by valid notice. Read More... EVIDENCE ACT, 1872 TO INDICATE THE GUILT OF AN ACCUSED, THE CIRCUMSTANTIAL EVIDENCE CHAIN SHOULD BE COMPLETE IN ALL RESPECT An appeal was filed in the matter of Laxman Prasad @ Laxman v. The State of Madhya Pradesh before the Hon’ble Supreme Court against the judgment passed by the High Court of Madhya Pradesh, which confirmed the conviction and life sentence awarded to the appellant by the trial court. The conviction was based on circumstantial evidence by three links: (i) motive, (ii) last seen, and (iii) recovery of weapon of assault. This conviction was challenged before the High Court which affirmed the findings only on motive and last seen but not on the recovery of the weapon of assault and blood-stained clothes. The Hon’ble Supreme Court did not find such conclusion strictly in accordance law. Reliance was placed on judgments passed in Sharad Birdhichand Sarda v. State of Maharashtra and Sailendra Rajdev Pasvan v. State of Gujarat where it is well settled that the chain of circumstantial evidence should be complete in all respects to indicate the guilt of the accused and exclude any other theory of the crime. Therefore, the conviction and life sentence of the appellant were set aside. Read More... CODE OF CRIMINAL PROCEDURE, 1973 BANK GUARANTEES CANNOT BE SET AS A BAIL CONDITION The Hon’ble Supreme Court in Karandeep Singh v. CBI where the legal position was reiterated in light of the judgment passed in Subhash Chouhan v Union of India where a pre-condition of furnishing bank guarantees was held to be unsustainable in law. The High Court set the bail conditions for the appellant, one of which was to furnish INR 2 crores for granting bail. The appellant challenged these orders before the Supreme Court and argued that these orders were onerous. The Hon’ble Apex Court took cognisance of the same and revised the bail condition wherein the appellant would have to furnish a bail bond of INR 5 lakhs each in both orders. Read More... INSOLVENCY AND BANKRUPTCY CODE, 2016 CAN CLAIMS CAN BE KEPT IN ABEYANCE BY THE RESOLUTION PROFESSIONAL? In the matter of Anheuser Busch Inbev India Limited v Mr. Pradeep Kumar Sravanam, the Hon’ble NCLAT held that a Resolution Professional has the power to keep the claims submitted before them, in abeyance. The Appellant entered into a brewing agreement with the Corporate Debtor and advanced a sum of INR. 17.5 crores, which was repayable with interest on termination of said agreement. The Corporate Debtor defaulted in doing the same therefore the Appellant initiated arbitration proceedings for recovery of due amount to which the Corporate Debtor filed a counter claim. Thereafter, the Appellant participated in the CIRP of the Respondent as a Financial Creditor but the Respondent/Resolution Professional did not admit the its financial claim and kept it in abeyance. NCLT affirmed the actions of the Respondent/Resolution Professional in view of the pending arbitration proceedings and counterclaim filed by the Corporate Debtor. The Appellant filed an Appeal before this Hon’ble Adjudicating Authority which observed that the Interim Resolution Professional had once denied the Appellant’s claim due to lack of proof and the Respondent/Resolution Professional kept the financial claim of the Appellant at abeyance only after getting to know about the arbitration. The Respondent/Resolution Professional also filed an arbitration application informing the arbitral tribunal about the initiation of CIRP. Hence, this Hon’ble Adjudicating Authority held that the Respondent/Resolution Professional took all measures to verify the validity of claims submitted in a meticulous manner and since the Respondent/Resolution Professional was not in a position to admit or reject the claim, it was rightfully kept in abeyance. It was also held that since the counter claim of the Corporate Debtor had not been determined, which may set off the sum stated in the claim, the Appellant’s claim could not be admitted. Read More... SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 WHEN CAN A RECOVERY NOTICE BE ISSUED UNDER 13(2) BE CHALLENGED BEFORE DRT AND CIVIL COURT? In matter of Regional Manager, Union Bank of India and Anr. v. M/s Punya Coal Road Lines and Ors., the Hon’ble Bombay High Court held that a demand notice issued under Section 13(2) of the SARFAESI Act cannot be challenged before a Civil Court, but before the Debt Recovery Tribunal. A suit could be tried before the civil court if commission of fraud has been established. In the present matter, the Respondent availed credit facilities from the Applicant Bank and secured it by executing various security documents, loan agreements, mortgaging immovable properties in favour of the Applicant Bank. Upon the default of the Respondent, the loan accounts were declared as NPA and the Applicant Bank issued a demand notice under section 13(2) of SARFAESI, which was not complied by the Respondent. Therefore, the Applicant Bank moved the District Magistrate for taking physical possession of the mortgaged properties and a recovery suit before the DRT for recovery of dues, both of which are still pending. The Respondent filed civil suits for declaration and permanent injunction and damages alleging that the Applicant Bank had committed illegalities in contravening specific RBI guidelines and Fair Lending Practices Code, obtaining signatures on numerous blank documents and classifying the loan account of the Respondent as NPA. The Applicant bank filed an application seeking rejection of the civil suits which the trial court dismissed, therefore, the Applicant Bank filed the present civil revision application. The Hon’ble Court herein observed that the word ‘fraud’ has not been used by the Respondent in its pleadings and held that the jurisdiction of the DRT is to decide all the matters relating to Sections 13 and 17 of the SARFAESI Act is exclusive, to the total exclusion of the Civil Court. Only where civil rights of persons other than the borrower(s) or guarantor (s) are involved, the Civil Court would have jurisdiction, that too, when it is prima facie apparent from the face of record that the relief claimed, is incapable of being decided by the DRT, under Section 17 of the DRT Act, 1993 read with Sections 13 and 17 of the SARFAESI Act. Hence, the finding of the trial court was set aside as it had not considered at all whether there was any pleading of fraud and what was the effect of the notice issued under Section 13(2). Read More... 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