Case Note & Summary
The dispute arose from competing mortgage claims over property known as 'Ghia Compound' located at Santacruz and Bandra village. J.C. Flowers Asset Reconstruction Pvt. Ltd. (original plaintiff) filed a commercial suit seeking declaration that it is the exclusive charge holder/mortgagee of the suit property, cancellation of deeds of simple mortgage dated 30 July 2018 in favour of Omkara Asset Reconstruction Pvt. Ltd. (original defendant No.5), and directions to Piramal Capital and Housing Finance Limited to deposit mortgage deeds and disclose third party rights, along with injunction against acting on those deeds. The property belonged to Sumer Radius Realty Private Limited and Sumer Buildcorp Private Limited, with Radius Estate Projects Pvt. Ltd. (REPPL) as a confirming party. Yes Bank Limited, predecessor of J.C. Flowers, had advanced loans to Sumer Radius and other entities, secured by mortgages over the suit property. In January 2016, Yes Bank sanctioned a loan of Rs.350 crore to Sumer Radius, secured by mortgage over Santacruz property. Additional loans totaling Rs.350 crore were sanctioned in March 2016. A further loan of Rs.205 crore was granted to Raghuleela Builders in March 2017, and supplemental mortgage deeds dated 6 February 2018 created mortgage over the entire suit property in favour of Yes Bank. In July 2018, Piramal Capital issued sanction letters for loans of Rs.1100 crore to REPPL and Rs.900 crore to Sumer Radius, and on 30 July 2018 mortgage deeds were executed in favour of Piramal Capital over the suit property. Yes Bank issued a conditional NOC on 31 July 2018 subject to receipt of outstanding dues by 10 August 2018, but the NOC was later withdrawn because defaults occurred. Yes Bank recalled the loans in July 2019, issued notice under Section 13(2) of SARFAESI Act on 29 July 2019, and withdrew the NOC on 2 August 2019. NCLT admitted REPPL into Corporate Insolvency Resolution Process on 6 September 2021. Yes Bank filed the commercial suit on 7 June 2022. By Assignment Agreements dated 16 December 2022 and 30 June 2023, the loans and security interests were assigned to J.C. Flowers and Omkara Asset respectively. The Bombay High Court substituted J.C. Flowers as plaintiff and added Omkara Asset as defendant on 20 February 2024. NCLT dismissed Yes Bank's application on 7 August 2024, and J.C. Flowers filed an appeal before NCLAT. The learned Single Judge by order dated 12 February 2025 allowed the interim application directing deposit of registered deeds of simple mortgage and restraining reliance on them. Aggrieved, Omkara Asset filed the present appeal. The appellant argued that the relief for cancellation of mortgage deeds was dropped by amendment and that Section 31 of the Specific Relief Act, 1963 requires twin conditions to be satisfied and is discretionary. The appeal was reserved on 25 April 2025 and pronounced on 6 May 2025. The provided judgment text ends mid-argument at Section 34 of the Specific Relief Act, so the final decision of the appeal is not available.
Headnote
A) Specific Relief Act, 1963 - Cancellation of Instruments - Section 31 - Discretionary Relief - The appellant contended that cancellation of a written instrument requires twin conditions to be satisfied and is discretionary, not mandatory; the mortgage deeds dated 30 July 2018 were sought to be cancelled in the suit; Court recorded this submission while considering the appeal against interim relief (Paras 12-13). B) Interim Relief - Deposit of Mortgage Deeds and Injunction - No specific statute cited - The learned Single Judge allowed Interim Application (L) No. 18666 of 2022 directing defendants to deposit registered deeds of simple mortgage dated 30 July 2018 with the Prothonotary and restraining them from acting on or relying upon the deeds without consent; Held that the order is operative only against parties and observations are prima facie (Paras 3-4). C) SARFAESI Act, 2002 - Enforcement of Security Interest - Section 13(2) - Yes Bank issued notice under Section 13(2) of the SARFAESI Act on 29 July 2019 after default and recall of term loans, before assignment of loans to J.C. Flowers; the notice formed part of the chronology leading to the dispute over charge priority (Para 9). D) Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process - NCLT Order - REPPL was admitted into CIRP by NCLT order dated 6 September 2021; Yes Bank's Interim Application No.1367 of 2022 seeking similar relief was dismissed by NCLT on 7 August 2024, and appeal was filed before NCLAT; these proceedings formed background to the commercial suit and the present appeal (Paras 9-11).
Issue of Consideration
Whether the interim order directing deposit of mortgage deeds and injunction against reliance on them, passed by the learned Single Judge, was justified; whether the conditions under Section 31 of Specific Relief Act, 1963 for cancellation of the mortgage deeds were satisfied; and whether the plaintiff established a prima facie case for exclusive charge holder status.
Law Points
- Cancellation of written instrument under Section 31 Specific Relief Act
- 1963 is discretionary and requires twin conditions
- Interim relief directing deposit of mortgage deeds and restraining reliance on them
- SARFAESI Act Section 13(2) notice
- Assignment of debts and security
- Prima facie case for interim injunction
