9 Rohit Nath vs. KEB Hana Bank Ltd. AIR 2021 Madras 241 Date of order: 28th July, 2021 Bench: Sanjib Banerjee CJ
Guarantor’s liability – Insolvency proceedings can be initiated before appropriate Debts Recovery Tribunal [Insolvency and Bankruptcy Code, 2016 (Code), S. 95, S. 79, S. 60; Companies Act, 2013, S. 408; Recovery of Debts and Bankruptcy Act, 1993, S. 3; Contract Act, 1872, S. 128]
FACTS
An individual (petitioner) had stood as a guarantor to a credit facility taken by a corporate entity. On non-payment of the credit facility the bank (respondent) proceeded against the petitioner by serving a notice as per Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019. Pursuant thereto, the bank initiated proceedings before the Debts Recovery Tribunal. It is the case of the petitioner that insolvency proceedings cannot be initiated against an individual u/s 95 of the Insolvency and Bankruptcy Code, 2016 (the Code).
HELD
Section 95(1) of the Code read with section 79(1) thereof permits a creditor to apply to any Debts Recovery Tribunal for initiating an insolvency resolution process under such provision.
Section 95(1) of the Code, in its ordinary form, allows a creditor to initiate an insolvency resolution process. It does not specify as to who the debtor may be. Further, the enactment is a complete code in itself and the three classes of persons indicated to be governed by the Code are corporate persons, partnership firms and individuals. The Debt Recovery Tribunal having jurisdiction over such firms and individuals is the adjudicating authority in matters related to insolvency.
Further, in view of section 128 of the Contract Act, 1872, the liability of a guarantor is co-extensive with that of the principal-debtor, unless it is otherwise provided by the contract. Therefore, the petitioner can be held liable as a guarantor to the credit facility taken by the company. The petition was dismissed with Rs. 50,000 costs.
10 R. Selvam vs. R. Mani C.M.P. No. 8020 of 2016 (Mad)(HC) Date of order: 22nd July, 2021 Bench: G.K. Ilanthiraiyan J
Gift Deed – Unilateral cancellation by the donor – Invalid [Transfer of Property Act, 1882, S. 123, S. 126]
FACTS
The suit is filed for declaration and permanent injunction in respect of the suit property. The case of the plaintiff is that the suit property belonged to the first defendant as per the preliminary decree passed in O.S. No. 18 of 2010 dated 8th December, 2011 on the file of the Fast-Track Court No. 2, Salem. The first defendant filed a suit against her brothers and the suit property was allotted in her favour. Thereafter, the first defendant had executed a registered gift settlement deed in favour of the plaintiff on 8th March, 2012. From the date of the gift settlement deed, the plaintiff had taken possession of the suit property and he is in possession and enjoyment of the same.
According to the plaintiff, in the meanwhile, under the influence of defendants 2 to 4, the first defendant unilaterally executed a registered cancellation deed dated 3rd July, 2012.On the same day, the first defendant executed another gift settlement deed in favour of the plaintiff and defendants 2 to 4. The said cancellation deed and the subsequent gift settlement deed executed by the first defendant are void ab initio. The plaintiff’s case is that once the first defendant had lost her title to the suit property, after execution of the registered settlement deed in favour of the plaintiff, she has no title over the property. On the strength of the settlement deed executed in favour of defendants 2 to 4, they created encumbrance by execution of an agreement for sale with defendant 5 and hence, the suit for declaration and permanent injunction.
According to the second defendant, the registered gift settlement deed in favour of the plaintiff was obtained by the plaintiff by misrepresentation or undue influence and he played fraud without knowledge of the first defendant. This was not acted upon and the first defendant rightly cancelled the gift deed by cancellation.
HELD
The Court noted that the entire issue was revolving around the first defendant. Even then, the other defendants failed to examine the first defendant to support their case whether the gift settlement deed in favour of the plaintiff was obtained on compulsion, misrepresentation or by fraud or undue influence.
The Court held that there is a specific recital that the first defendant has no power to revoke the gift deed and even if she cancelled the deed, the said cancellation would not be valid. When no right has been reserved by the first defendant to cancel the settlement deed, the Court below rightly declared the title in respect of the suit property in favour of the plaintiff. It is settled law that in settlement, once the ‘settlee’ accepts the transfer, it is presumed that the said document has been acted upon irrespective of the fact whether the ‘settlee’ has obtained possession immediately or not. Referring to the judgment of the Supreme Court of India in the case of Jamil Begum vs. Shami Mohd. [(2019) 2 SCC 727], the Court held that there is a presumption that a registered document is validly executed. The appeal suit was dismissed.
11 Davesh Nagalya (D) vs. Pradeep Kumar (D) AIR 2021 Supreme Court 2717 Date of order: 10th August, 2021 Bench: Hemant Gupta J, A.S. Bopanna J
Tenant – Partners – Business in suit premises – Death of partners – Results in dissolution of partnership – Property will be vacant [Urban Buildings Act, 1972, S. 12, S. 25, S. 41; Indian Partnership Act, 1932, S. 42]
FACTS
An application was filed by one Pradeep Kumar in July, 1982 before the Court of the Rent Control and Eviction Officer in terms of the Urban Buildings Act (Act) stating that after the death of the tenant partner, he inducted the legal heir of the deceased, one Subhash Chand, and continued the business in the same premises. The application was, however, opposed by the landlord. The District Magistrate permitted Subhash Chand to be inducted as a partner on 15th November, 1982. The landlord challenged the order passed by the District Magistrate before the District Judge. The revision petition was dismissed on 12th December, 1983. A further challenge before the High Court through a writ petition also remained unsuccessful vide order dated 10th October, 2007. The appellant challenged the said order by way of a Special Leave Petition before this Court but the same was dismissed on 10th January, 2008.
The appellant filed an application for review before the High Court inter alia on the ground that pursuant to the death of the tenant, Pradeep Kumar, i.e., one of the partners of the firm, the partnership does not survive in view of section 42(c) of the Partnership Act.
The review was dismissed vide order impugned in the present appeal on the ground that the petitioners have entirely set up a new case and the grounds urged are different from those of the writ petition. As on record, both the partners, i.e., Pradeep Kumar and Subhash Chand, had died on 21st May, 2004 and 25th June, 2014, respectively. Hence, now the argument is that in terms of section 42(c) the partnership stands dissolved by law. There is no clause in the partnership deed which permits the legal heirs of the deceased partners to continue with the partnership firm. Therefore, by operation of law, the partnership has come to an end.
HELD
The order of permitting Subhash Chand as partner with Pradeep Kumar has come to an end by efflux of time and operation of law. In terms of section 42(c) of the Partnership Act, the partnership stands dissolved by death of a partner. One of the partners, i.e., Pradeep Kumar, died on 21st May, 2004. The High Court has not taken note of such fact in the review petition and failed to take into consideration the subsequent events which were germane to the controversy. Subhash Chand, the other partner, also died during the pendency of the appeal on 25th June, 2014. It was represented to the District Magistrate by Pradeep Kumar that Subhash Chand is a divorcee and has no children but such assertion was not found to be correct as he had two children, a son and a daughter, who were impleaded as his legal heirs.
Therefore, with the death of both the partners and not having any clause permitting continuation of the partnership by the legal heirs, the non-residential tenanted premises is deemed to be vacant in law as the tenant is deemed to have ceased to occupy the building. In view thereof, the order passed by the High Court in the Review Application dated 23rd April, 2008 is set aside. Therefore, the tenant is deemed to cease to occupy the premises in question. Consequently, the tenanted property has fallen vacant as well. The appellants may take recourse to remedy as may be available to them and may proceed in accordance with law and the provisions of the Act.
12 Hemraj Ratnakar Salian vs. HDFC Bank Ltd. and Ors. AIR 2021 Supreme Court 507 Date of order: 17th August, 2021 Bench: S. Abdul Nazeer J, Krishna Murari J
Registration – Tenancy – Claim of tenancy not supported by a registered document – Claim of tenant as ‘tenant in sufferance’ – No protection under the Rent Act [Maharashtra Rent Control Act, 2000, S. 3(2)]
FACTS
HDFC Bank had granted financial facility to the respondent Nos. 2 and 3 (the borrowers). They had mortgaged a property in favour of the bank with an intention to secure the said credit facility.
The accounts of the borrowers were declared as non-performing assets (NPA) on 31st October, 2013. On 25th January, 2014, the bank issued a notice u/s 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) to the borrowers. It is the case of the appellant that he is a tenant of the secured asset on a monthly rent since 12th June, 2012. And he has been paying rent regularly to his landlord since the inception of his tenancy.
The appellant filed an application before the Magistrate seeking protection of his possession of the secured asset as the Magistrate was seized with the petition u/s 14 of SARFAESI filed by the respondent No. 1 Bank. The intervention application of the appellant was dismissed by the Magistrate holding that there was no registered tenancy agreement placed on record by the appellant.
HELD
There is a serious doubt as to the bona fides of the tenant, as there is no good or sufficient evidence to establish his tenancy. According to the appellant, he is a tenant of the secured asset from 12th June, 2012. However, the documents produced in support of his claim are photocopies of the rent receipts and the first copy of the rent receipt is of 12th May, 2013 which is after the date of creation of the mortgage. The borrowers have not claimed that any tenant is staying at the secured asset. The appellant has pleaded tenancy from 12th June, 2012 to 17th December, 2018. This is not supported by any registered instrument. Further, even according to the appellant, he is a ‘tenant in sufferance’, therefore, he is not entitled to any protection of the Rent Act. Secondly, even if the tenancy has been claimed to be renewed in terms of section 13(13) of SARFAESI, the borrower would be required to seek consent of the secured creditor for transfer of the secured asset by way of sale, lease or otherwise, after issuance of the notice u/s 13(2) of SARFAESI and, admittedly, no such consent has been sought by the borrower in the present case. The appeal was dismissed.
