Bombay High Court
Omkara Asset Reconstruction Pvt Ltd vs J C Flowers Asset Reconstruction Pvt Ltd on 6 May, 2025
Author: M.S.Karnik
Bench: M.S.Karnik
2025:BHC-OS:7579-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL APPEAL (L) NO. 7072 OF 2025
IN
INTERIM APPLICATION (L) NO. 18666 OF 2022
IN
COMMERCIAL SUIT (L) NO. 18229 OF 2022
Omkara Asset Reconstruction Pvt. Ltd.
A company incorporated under the provisions
of the Companies Act, 2013
Having its registered office at:
No.9, M.P. Nagar First Street,
Kongu Nagar Extension,
Tirupur, Tamil Nadu, India - 641607.
And at:
47 Floor, Kohinoor Square, N.C. Kelkar Road,
Ram Ganesh Gadkari Chowk,
Opp. Shiv Sena Bhavan, Dadar West,
Mumbai - 400028 ... Appellant
Versus
1. J.C. Flowers Asset Reconstruction Pvt. Ltd.
A company incorporated under the provisions
of the Companies Act, 2013
Unit No. 203-206, 2nd Floor,
Wing A Inspire BKC, Bandra East,
Maharashtra, India, 400051.
2. Sumer Radius Realty Private Limited
A company incorporated under the provisions
of the Companies Act, 1956,
Having its registered address at
220, Commerce House, 140 N.M.Nagindas Road,
Fort, Mumbai - 400 023.
3. Sumer Buildcorp Private Limited
A Company incorporated under the provisions
Of the Companies Act, 1956,
Having its registered office at
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203, Peninsula Corporate Park, Tower No. 1,
2nd floor, G.K. Marg, Lower Parel,
Mumbai 400 013.
4. Piramal Capital and Housing Finance Limited
A company incorporated under the provisions
of the Companies Act, 1956
Having its registered office at 4th floor,
Piramal Towers, Ganpatrao Kadam Marg,
Lower Parel (West), Lower Parel,
Mumbai 400013. ... Respondents
WITH
INTERIM APPLICATION (L) NO.7074 OF 2025
IN
COMMERCIAL APPEAL (L) NO. 7072 OF 2025
Omkara Asset Reconstruction Pvt. Ltd.
A company incorporated under the provisions
of the Companies Act, 2013
Having its registered office at:
No.9, M.P. Nagar First Street,
Kongu Nagar Extension,
Tirupur, Tamil Nadu, India - 641607.
And at:
47 Floor, Kohinoor Square, N.C. Kelkar Road,
Ram Ganesh Gadkari Chowk,
Opp. Shiv Sena Bhavan, Dadar West,
Mumbai - 400028 ... Applicant
IN THE MATTER BETWEEN :
Omkara Asset Reconstruction Pvt. Ltd.
A company incorporated under the provisions
of the Companies Act, 2013
Having its registered office at:
No.9, M.P. Nagar First Street,
Kongu Nagar Extension,
Tirupur, Tamil Nadu, India - 641607.
And at:
47 Floor, Kohinoor Square, N.C. Kelkar Road,
Ram Ganesh Gadkari Chowk,
PMB 2
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Opp. Shiv Sena Bhavan, Dadar West,
Mumbai - 400028 ... Appellant
Versus
1. J.C. Flowers Asset Reconstruction Pvt. Ltd.
A company incorporated under the provisions
of the Companies Act, 2013
Unit No. 203-206, 2nd Floor,
Wing A Inspire BKC, Bandra East,
Maharashtra, India, 400051.
2. Sumer Radius Realty Private Limited
A company incorporated under the provisions
of the Companies Act, 1956,
Having its registered address at
220, Commerce House, 140 N.M.Nagindas Road,
Fort, Mumbai - 400 023.
3. Sumer Buildcorp Private Limited
A Company incorporated under the provisions
Of the Companies Act, 1956,
Having its registered office at
203, Peninsula Corporate Park, Tower No. 1,
2nd floor, G.K. Marg, Lower Parel,
Mumbai 400 013.
4. Piramal Capital and Housing Finance Limited
A company incorporated under the provisions
of the Companies Act, 1956
Having its registered office at 4th floor,
Piramal Towers, Ganpatrao Kadam Marg,
Lower Parel (West), Lower Parel,
Mumbai 400013. ... Respondents
****
Mr. Venkatesh Dhond, Senior Advocate a/w Mr. Karl Tamboly,
Mr. Ryan D'souza, Mr. Zaid Mansuri i/b. DSK Legal, for the
Applicant/original Appellant.
Mr. Pradeep Sancheti, Senior Advocate a/w Mr. Rohan Savant,
Mr. Vinod Kothari, Ms. Mitali Shahane, Mr. Kshitij Parekh
i/b. M/s. Apex Law Partners, for Respondent No.1.
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Mr. Ankit Lohia a/w Mr. Viraj Bansod i/b. Mr. Tushar Goradia,
for Respondent No.3.
****
CORAM : ALOK ARADHE, CJ &
M.S.KARNIK, J.
RESERVED ON : 25th APRIL, 2025
PRONOUNCED ON : 6th MAY 2025
JUDGMENT (PER M.S.KARNIK, J.) :
1. The Respondent No.1-original Plantiff – J.C. Flowers
Asset Reconstruction Pvt. Ltd. (“J.C. Flowers” for short) filed a
Commercial Suit in this Court for a declaration that J.C.
Flowers is the exclusive charge holder/mortgagee with regard
to the suit property. A further declaration is
sought that the deeds of simple mortgage dated 30 th July
2018 in favour of Appellant – Omkara Asset Reconstruction
Pvt. Ltd. – original defendant No.5 are void and illegal and for
taking all necessary steps to cancel the deeds of simple
mortgage dated 30th July 2018. In the suit J.C. Flowers
prayed for a direction to Respondent No.4 – Piramal Capital
and Housing Finance Limited (“Piramal Capital” for
short) – original defendant No.1 to deposit the mortgage
deeds with the Trial Court. Further, a direction was sought to
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Piramal Capital to disclose on oath, any rights created in
favour of third parties in respect of the suit property. The
directions were also sought from Respondent No.2 – Sumer
Radius Realty Private Limited (“Sumer Radius” for short)-
original defendant No.2 and Respondent No.3 – Sumer
Buildcorp Private Limited (“Sumer Buildcorp” for short) –
original defendant No.3 to disclose on oath third party rights
created in the Suit property. An injunction is sought against
Omkara Asset Reconstruction Pvt. Ltd. (“Omkara Asset” for
short) and Piramal Capital from acting on or relying on the
subject mortgage deeds. Further, directions to Respondent
No.2 – Sumer Radius and Piramal Capital are sought to
disclose on oath amounts received out of receivables from the
Suit property.
2. The property comprises of land parcels at
Santacruz and at Bandra village known as ‘Ghia Compound’
described at Exhibit-A to the Suit.
3. The learned Single Judge by the impugned order
dated 12th February 2025 granted the following interim
reliefs :-
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“(i) The Interim Application (L) No. 18666 of 2022 is
allowed in terms of prayer clauses (a) and (d) which read
thus, viz.
a) Pending the present Suit, this Hon’ble Court be
pleased to order and direct Defendant No. 1 and Defendant
No.5 to deposit Registered Deeds of simple Mortgage dated
30 July 2018 (Exhibits “B” and “C”) in respect of Suit
Properties with Prothonotary and Senior Master of this
Honb’le Court:
d) Pending the present Suit, this Hon’ble Court be
pleased to order and direct injunction on Defendant No. 1
and Defendant No.5 and their respective agents, servants,
officers or any person or persons claiming by, through or
under each or any one of them from in any manner acting
on or relying upon the Deeds of Simple Mortgage dated
30th July 2018 (Exhibit B and C) in respect of Suit
properties without obtaining consent of the Applicant;
(ii) It is made clear that this Order is passed only in
facts of the present case and it shall be operative only
against parties to the present Suit.
(iii) It is made clear that the observations made in this
Order are prima facie and shall not affect the parties while
dealing with the captioned Suit.”
4. Aggrieved by the interim order passed by the
learned Single Judge, this Appeal is filed by Omkara Asset.
Assailing the findings on the basis of which the interim order
was made, Mr. Dhond, learned Senior Advocate placed the
following facts for our consideration which need to be stated
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to appreciate the controversy. It is the case of J.C. Flowers in
the plaint that Sumer Radius approached Yes Bank Limited
(“Yes Bank” for short), the predecessor of J.C. Flowers for a
loan of Rs.350,00,00,000/- sometime in January 2016. By a
sanction letter dated 28th January 2016 Yes Bank sanctioned a
loan of Rs.350,00,00,000/- in favour of Sumer Radius. This
was granted on the condition that a mortgage would be
created in respect of the Suit property to secure the
repayment. Yes Bank and Sumer Radius entered into a loan
agreement for a facility of Rs.350,00,00,000/- [Term Loan
(“TL1” for short)] on 29th January 2016. In order to secure the
TL1, Sumer Radius as borrower, Sumer Buildcorp as
mortgagor and Radius Estate Projects Pvt. Ltd. (“REPPL” for
short) as confirming party executed a deed of mortgage with
respect to their Santacruz property (forming part of the suit
property).
5. Sumer Radius approached Yes Bank in March 2016
for a further loan of Rs.3,50,00,00,000/-. By a sanction letter
dated 31st March 2016, two additional term loan facility of
Rs.111,00,00,000-/ (“TL2”) and Rs.239,00,00,000/- (“TL3)
aggregating to Rs.350,00,00,000/- were granted in favour of
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Sumer Radius. In order to secure TL2 and TL3, Sumer Radius
as a borrower, Sumer Buildcorp as mortgagor and REPPL as
confirming party executed a deed of mortgage with respect to
the Santacruz property in Yes Bank’s favour. Clause 5 of this
mortgage deed is identical to Clause 5 of the earlier mortgage
deed.
6. Yes Bank granted a loan of Rs.205,00,00,000/- on
24th March 2017 to one Raghuleela Builders (Raghuleela was
impleaded as defendant No.4 to the captioned Suit but
subsequently dropped by J.C. Flowers). Sumer Radius, Sumer
Buildcorp and REPPL executed supplemental deeds of
mortgage on 6th February 2018 in favour of the trustee acting
on behalf of Yes Bank and created a mortgage over the ‘Ghia
Compound’ property. Thus, as on 6th February 2018, the
entire Suit property was mortgaged in favour of J.C. Flowers.
7. One of the promoter groups of Sumer Radius viz.
the Radius Group, sent email to Yes Bank on 27 th July 2018
stating that Sumer Radius wished to close the loan facilities
with Yes Bank and requested for a conditional NOC in respect
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of all the loan facilities. Piramal Capital (which was then
known as Dewan Housing Finance Corporation Limited) issued
sanction letters in respect of two loans on 27 th July 2018 viz.
(i) Loan of Rs.1100 Cr. to REPPL, (ii) Loan of Rs.900 Cr. to
Sumer Radius. On 30th July 2018 Piramal Capital entered into
two loan agreements with the borrowers therein i.e. REPPL
and Sumer Radius in respect of the aforesaid sanctioned
loans. To secure the loans advanced by Piramal Capital to
Sumer Radius and REPPL respectively, the following mortgage
deeds were executed :
(i) Mortgage deed by REPPL, Sumer Radius, Sumer
Buildcorp (all as mortgagors) in favour of Piramal Capital
creating a mortgage over the Suit property on 30 th July
2018.
(ii) On 30th July 2018 a second mortgage deed in favour of
Piramal Capital in respect of the loan of Rs. 900 Crs.
creating a mortgage over the Suit property.
8. On 31st July 2018 Yes Bank issued a conditional
NOC to Sumer Radius and Raghuleela for release of charge
over the Suit property subject to receipt of its outstanding
dues on or before 10th August 2018. This NOC was issued on a
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conditional basis subject to receipt of all amounts due to Yes
Bank. The NOC also stated that in the case the conditions in
the NOC are not complied with on or before 10 th August 2018,
the NOC shall stand revoked. Piramal Capital disbursed an
amount of Rs.1100 Cr. to REPPL on 31st July 2018. Piramal
Capital disbursed an amount of Rs.439.25 Cr. to Sumer Radius
between 30th July 2018 to 1st July 2019 over 7 tranches.
9. According to J.C. Flowers, Sumer Radius defaulted
in making payments of the outstanding dues to Yes Bank.
Owing to such non-payment, Yes Bank issued a loan recall
notice in respect of TL1, TL 2 and TL3 on 24 th July 2019. Yes
Bank issued a notice under Section 13(2) of the SARFAESI Act
on 29th July 2019 in respect of the property. Yes bank
withdrew the NOC dated 31st July 2018 on 2nd August 2019.
The National Company Law Tribunal, Mumbai (“NCLT”) passed
an order on 6th September 2021 admitting REPPL into
corporate insolvency resolution process. Yes Bank addressed a
letter to the Ministry of Corporate Affairs on 18 th February
2022 requesting it to cancel Piramal Capital’s charge on the
Suit property. Yes Bank filed an Interlocutory Application
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dated 17th May 2022 being Interim Application No.1367 of
2022 before the NCLT, Mumbai in the CIRP of REPPL seeking
similar relief as in the Interim Application filed by J.C.
Flowers.
10. On 7th June 2022 Yes Bank filed the present Suit.
By an Assignment Agreement dated 16 th December 2022, the
loans advanced by Yes Bank to Sumer Radius were assigned
in favour of J.C. Flowers-the plaintiff. By and under an
Assignment Agreement dated 30th June 2023, the loans
advanced by Piramal Capital to REPPL and Sumer Radius,
along with all corresponding security (including the rights of
Piramal Capital under the deeds of simple mortgage) were
assigned in favour of the Appellant – Omkara Asset. By an
order dated 20th February 2024, this Court permitted Yes Bank
to be substituted by J.C. Flowers. By the same order Omkara
Asset was added as a party to the Suit.
11. The NCLT passed an order dated 7 th August 2024
dismissing Interim Application No.1367 of 2022 filed by Yes
Bank. J.C. Flowers filed Appeal No.1804 of 2024 before the
NCLAT challenging the aforesaid order dated 7th August 2024.
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12. Mr. Dhond, learned Senior Advocate for the
Appellant – Omkara Asset submits that the relief prayed for
cancellation of the mortgage deeds dated 31 st July 2018 was
dropped pursuant to an amendment made in the Plaint.
Learned Senior Advocate relying on Section 31 of the Specific
Relief Act, 1963 submitted that it is only when the twin
conditions of Section 31 is satisfied, that the Court may, in its
discretion order for it to be cancelled. In his submission, the
relief seeking cancellation of a written instrument is a
discretionary relief and not a mandatory one. Learned Senior
Advocate submitted that the aforesaid twin conditions are not
met and neither has J.C. Flowers made out a case for exercise
of the discretion.
13. Learned Senior Advocate then placed reliance on
Section 34 of the Specific Relief Act, 1963 to submit that the
grant of a declaratory relief in the nature as sought in the
captioned Suit is also a discretionary relief. As the twin test
under Section 31 is not met, therefore, it is the submission of
learned Senior Advocate that for an agreement to be
considered as a void agreement, it should qualify as an
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agreement which is not enforceable by law. According to
learned Senior Advocate, the learned Single Judge committed
an error in holding that the mortgage deeds were voidable at
the instance of J.C. Flowers as the said mortgaged deeds are
not agreements and hence cannot be enforceable by law.
14. Learned Senior Advocate submitted that the entire
basis for J.C. Flowers case is in the teeth of Clause 5 of
the two mortgage deeds executed in favour of Yes Bank.
He submits that Clause 5 stipulates that no mortgage deed
can be executed by the mortgagors without the prior written
consent of Yes Bank and that any mortgage entered into “in
violation of this deed, shall be subject to the present
mortgage/charge created in favour of the mortgagee under
this deed, and the mortgage/charge created in terms of this
deed shall in all circumstances rank superior.” Learned Senior
Advocate submitted that from Clause 5 it is clear that the two
mortgage deeds in Yes Bank’s favour provides for the
consequence of a subsequent mortgage created without
obtaining Yes Bank’s NOC, namely such mortgage will rank
inferior to that of the Respondent No.1. This per force means
that the subsequent mortgage is in existence and in force for
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it to rank inferior to J.C. Flowers mortgage. The emphasis of
learned Senior Advocate’s contention is that if the mortgage
deed is to be treated as void/legally unenforceable then the
language of the last part of Clause 5 quoted above would be
rendered superfluous. The submission is that an interpretation
which renders some words/a phrase of the contract otiose is
legally impermissible. According to learned Senior Advocate,
the learned Single Judge erred in holding that the mortgage
deeds were voidable at the instance of Respondent No.1, as
such a finding would be completed contrary to the terms of
Clause 5 of the Yes Bank’s mortgage deeds and would
therefore amount to rewriting the contract which is wholly
impermissible. In fact a proper reading of Clause 5 makes it
clear that the mortgage deeds dated 30 th July 2018 in favour
of Piramal Capital are enforceable. Learned Senior Advocate
then placed reliance on Section 48 of the Transfer of Property
Act, 1882 which provides for priority of rights created by
transfer. According to him the provisions of Section 48 makes
it clear that not only the mortgage is enforceable under law,
but there is a specific recognition of such subsequent rights
and a manner provided for the way such rights are to be
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exercised. It is therefore submitted that the first condition of
Section 31 of the Specific Relief Act, 1963 itself is not satisfied
and hence Section 31 is not attracted.
15. Learned Senior Advocate relied upon the decision
in Deccan Paper Mills Company Limited vs. Regency
Mahavir Properties and others1 in paragraph 19 which sets
out the test to be applied for cancellation of the document.
It is further submitted that the decision relied upon by J.C.
Flowers in Bikram Chatterji and others vs. Union of India
and others2 is distinguishable on facts. Learned Senior
Advocate placed reliance on the decision of the Allahabad High
Court in Mata Din Kasodhan vs. Kazim Husain and
another3, wherein a Full Bench held that the transfer by a
mortgagor in breach of a condition against alienation is valid,
except in so far as it does not encroach upon the right of the
mortgagee to realise the security. Mr. Dhond therefore
submits that J.C. Flowers cannot be aggrieved by the fact that
the mortgage in favour Omkara Asset will be treated
subservient to that of J.C. Flowers. It is further submitted
that J.C. Flowers has not dealt with the jurisdictional
1 (2021) 4 SCC 786
2 (2019) 19 SCC 161
3 ILR (1891) 13 ALL 432 (FB)
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arguments on exclusive jurisdiction to decide the question of
priorities vesting solely with the NCLT. J.C. Flowers entire
case proceeds on the basis that the injury caused to them will
ensue after Sumer Radius and Sumer Buildcorp are admitted
into CIRP and according to learned Senior Advocate this is all
the more reason why the jurisdictional interdiction under
Section 60(5)(c) of the Insolvency and Bankruptcy Code will
wholly apply. Learned Senior Advocate submitted that in fact,
J.C. Flowers has taken this very position in its own Appeal
filed before the NCLT and therefore also the learned Single
Judge ought not to have granted interim reliefs in favour of
J.C. Flowers. Mr. Dhond also relied upon the decision of Kanti
Ram and others vs. Kutubuddin Mahomed and others4.
16. Mr. Sancheti, learned Senior Advocate for J.C.
Flowers, on the other hand invited our attention to the
findings of learned Single Judge, in support of his
submissions. Our attention is invited to the relevant
pleadings in the Plaint, relevant documents and the findings in
the impugned order to submit that the discretion exercised by
the learned Single Judge in granting the interim reliefs is not
4 (1895) ILR 22 CAL 33
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arbitrary, capricious or perverse to warrant an intervention in
the appellate jurisdiction of this Court.
17. We have heard learned Senior Advocate for the
parties at length. Let us first notice the relevant observations
of the learned Single Judge. According to the learned Single
Judge, the deeds of simple mortgage were executed prior to
the conditional NOC issued by Yes Bank and for a subsequent
mortgage to have come into existence, NOC from Yes Bank
was a mandatory requirement. Section 48 of the Transfer of
Property Act, 1882 did not apply as it pre-supposes that a
mortgage created subsequently is a validly created mortgage.
The deeds of simple mortgage were created in violation of Yes
Bank’s mortgage deed and therefore voidable at the instance
of J.C. Flowers.
18. The subsequent mortgage created in favour of
Omkara Asset is not subservient to that of J.C. Flowers but
voidable at the instance of J.C. Flowers as that would be
directly contrary to Clause 13(d) and 10(B) of the Schedule-I
of J.C. Flowers mortgage deed. The deeds of simple mortgage
itself state that the mortgage properties were free from any
prior charge.
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19. The learned Single Judge rejected the contention of
Omkara Asset that by virtue of Clause 5 of J.C. Flowers
mortgage, any subsequent mortgage without J.C. Flowers
NOC would not be void but merely be subservient to J.C.
Flowers mortgage.
20. The learned Single Judge observed that J.C.
Flowers mortgage unequivocally sets out that it is the first and
exclusive charge holder in respect of the Suit properties. The
learned Single Judge held that J.C. Flowers has demonstrated
how its rights as exclusive charge holder under the provisions
of SARFAESI Act and IBC would be entirely lost/defeated if
Piramal Capital and/or Omkara Asset were to be considered as
second charge holders. The learned Single Judge was of the
opinion that the impugned mortgages had been created
contrary to J.C. Flowers mortgage and are thus invalid in the
eyes of law. The learned Single Judge was of the opinion that
permitting Piramal Capital or Omkara Asset to assert any right
under the impugned mortgages which would in any manner
impinge upon J.C. Flowers exclusive first charge would
amount to putting a premium on dishonesty.
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21. The learned Single Judge has held the contention
of Omkara Asset that “the plaintiff have conceded/accepted
that it would be the NCLT which would have jurisdiction to
decide the issue of priority and validity of the impugned
mortgages in view of Section 60(5) of the IBC, since J.C.
Flowers has filed an Appeal from Order dated 7 th August 2024
passed in Interim Application No.1367 of 2022 in Company
Petition No.380 of 2021 in which J.C. Flowers has inter alia
stated that NCLT has jurisdiction under Section 60(5) of IBC
to adjudicate upon the issue of validity and legality of the
charge” is misconceived. The reasoning of the learned Single
Judge is that as on the date of the passing of the order there
was no IBC proceedings admitted against the defendant No.2
– Sumer Radius and defendant No.3 – Sumer Buildcorp.
Learned Single Judge then held that the issue in the present
Suit is to the very legality of the impugned mortgages and
also a declaration that the same are void and illegal. Learned
Single Judge further observed that any application under
Section 60(5) of the IBC would deal with the priority of charge
and not the very legality of the impugned mortgage itself. It is
in these circumstances the learned Single Judge held that
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these reliefs would squarely fall within the purview of the
jurisdiction of this Court.
22. Before proceeding to test the order of the learned
Single Judge, we must bear in mind the well settled principles
laid down regarding the scope of an Appeal under Section 13
of the Commercial Courts Act against an order granting
injunction. The scope of an appeal from an order has already
been delineated by the Supreme Court in Wander Limited
vs. Antox India Pvt. Ltd.5, Shyam Sel and Power Limited
and another vs. Shyam Steel Industries Limited 6 and
Ramakant Ambalal Choksi vs. Harish Ambalal Choksi
and others7. We may also refer to a Full Bench decision in
UTO Nederland B. V. & Anr. vs. Tilaknagar Industries Ltd. of
this Court dated 28th April 2025 in Appeal No.66 of 2012.
In view of the enunciation of law by Supreme Court, the
Appellate Court will not interfere with exercise of discretion of
Court of first instance and substitute its own discretion except
where the discretion has been shown to have been exercised
arbitrarily or capriciously or perversely or where the Court had
5 1990 (supp) SCC 727
6 (2023) 1 SCC 634
7 2024 SCC OnLine SC 3538
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ignored the settled principles of law regulating grant or refusal
of interlocutory injunctions.
23. It is thus seen that J.C. Flowers issued conditional
NOC on 31st July 2018 to release the mortgage properties
subject to the repayment of outstanding loans. The NOC was
valid upto 10th August 2018 and it was further provided that
it would stand revoked if the conditions mentioned therein
were not complied with. Without waiting for the NOC and
without repaying the outstanding loans due to J.C. Flowers, a
day prior to the conditional NOC, on 30 th July 2018 deeds of
mortgage were executed by Sumer Radius and Sumer
Buildcorp in favour of Piramal Capital (predecessors of
Omkara Asset). The mortgage deed contains clauses to the
effect that the mortgagee was the sole and exclusive charge
holder of the subject properties. This mortgage document was
not disclosed to J.C. Flowers by Sumer Radius and Sumer
Buildcorp. As Sumer Radius and Sumer Buildcorp committed
defaults, J.C. Flowers issued a recall notice dated 24 th July
2019 and also issued notices under Section 13(2) of the
SARFAESI Act. Sometime in August 2019, upon taking search
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of ROC records, J.C. Flowers came across the impugned deeds
of simple mortgage dated 30th July 2018 for financial facilities
of Rs.2000 Crores approximately. The impugned mortgage
deeds of the Suit property are in violation of the terms of the
prior mortgage in favour of J.C. Flowers. It is the submission
of learned Senior Advocate Mr. Dhond that Clause 5 of the
mortgage deed be interpreted in a manner whereby Omkara
Asset should be treated as second charge holder having
regard to the last sentence of Clause 5. Clause 5 of the
mortgage deed reads thus :-
“5. DEALINGS WITH RESPECT TO THE MORTGAGED
PROPERTIES :
The Mortgaged Properties shall be specifically
appropriated in the charge and mortgage and lien
created under this Deed and the Mortgagor shall not
sell, transfer, lease out, assign, dispose of or otherwise
part with the Mortgaged Properties or any part thereof,
or deal with the same or create or suffer any mortgage,
charge, lien or other encumbrance on the Mortgaged
Properties, without the prior written consent of the
Mortgagee. Any mortgage/ charge created hereafter by
the Mortgagor on the Mortgaged Properties, in violation
of this Deed, shall be subject to the present
mortgage/charge created in favour of the Mortgagee
under this Deed, and the mortgage/ charge created in
terms of this Deed shall in all circumstances rank
superior.”
(emphasis supplied)
24. It is well settled that the mortgage document must
be read as a whole and must be construed in a manner so as
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not to render any part thereof nugatory or otiose. The
decision in Life Insurance Corporation of India and
another vs. Dharam Vir Anand8 and Radha Sundar Dutta
vs. Mohd. Jahadur Rahim and others 9 is in support of the
proposition. We agree with learned Senior Advocate
Mr. Sancheti appearing for J.C. Flowers that the earlier part of
Clause 5 ought to be given effect to, as a disposition once
made cannot be taken away by a later clause/part. In the
present case the mortgage deed needs to be interpreted
against Sumer Radius and Sumer Buildcorp and in favour of
J.C. Flowers. It is pertinent to note that the sanction letter
and loan agreement mandated that Sumer Radius and Sumer
Buildcorp were not to create any mortgage or charge without
consent of J.C. Flowers. Clause 13(d) of the deed of mortgage
stipulates “not to create any mortgage or encumbrance over
the mortgage property in favour of any person except as
permitted under the financing documents.”
25. We find force in the submission of learned Senior
Advocate Mr. Sancheti that the mortgage in favour of Omkara
8 (1998) 7 SCC 348
9 AIR 1959 SC 24
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Asset violates Section 6(h) of the Transfer of Property Act
read with Section 23 of the Indian Contract Act. J.C. Flowers
has filed a Suit invoking the provisions of Section 31 of the
Specific Relief Act on the ground that the subsequent
mortgage is void/voidable and that it has reasonable
apprehension that such instrument may cause it serious
injury. The apprehension of injury to J.C. Flowers is clearly
demonstrated by the fact that under the IB proceedings all
the financial creditors who claim to be secured financial
creditors are treated at par, i.e. no priority is accorded on the
basis of first and second charge in terms of entitlement under
Resolution Plan approved by CoC/NCLT. Moreover, NCLT in IB
proceedings may not be in a position to adjudge the invalidity
of the subsequent mortgage and hence we find force in the
submission of Mr. Sancheti that in such circumstances the
position of J.C. Flowers as sole and exclusive charge holder
would clearly be compromised.
26. The impugned mortgage in favour of Omkara Asset
is clearly contrary to the terms of the prior mortgage
inasmuch as it purports to grant exclusive first charge in
favour of Omkara Asset as mentioned in Clause 2 and Clause
PMB 24
comapl.7072-2025.odt
3 of the impugned deed of mortgage. In the facts of the
present case J.C. Flowers has prima facie made out a case
that the essential condition about the instrument being void or
voidable against J.C. Flowers and that J.C. Flowers reasonably
apprehends serious injury by the instrument being left
outstanding are met.
27. Let us briefly refer to the relevant clauses from the
financing documents. The sanction letter dated 28th January
2016 provides that so long as the facilities or any sum
thereunder are outstanding, Sumer Radius and Sumer
Buildcorp shall not create or allow to exist any encumbrance
or security over assets specifically charged to J.C. Flowers
without its prior written consent. The loan agreement dated
29th January 2016 stipulates the following representations and
warranties :-
“3. REPRESENTATIONS AND WARRANTIES
(a) Special Terms and Conditions: The Borrower
agrees that the Facilities hereby granted shall also be
subject to the Borrower providing the special
representations and warranties and agreeing/complying
with the conditions as specified in the Facility Letter and
other Transaction Documents.
(i) Good Title:
(i) The Borrower possesses or shall possess valid,
right and marketable title and interest over the Assets
PMB 25
comapl.7072-2025.odtand revenues of the Borrower on which it grants or
purports to grant security interests) pursuant to the
Security Documents, in each case free and clear of any
security interest (other than those permitted by the
Bank) and further confirms that the security interest(s)
created or expressed to be created by the Security
Documents is and shall be valid and enforceable.
Further, the Borrower shall not, hereafter, encumber
any of its Assets or part thereof (including uncalled
share capital or any part thereof) without the prior
written consent of the Bank nor do or allow anything to
be done that may prejudice the Security created in
favour of the Bank/Person acting on behalf of the
Bank.”
28. The Recital B in the deed of mortgage dated
9th February 2018 reads thus :-
“(B) One of the conditions of the Term Loan
Agreement is that the Facilities together with all
interest, Additional Interest, Default Interest,
commission, costs, charges, expenses and all other
monies including any increase as a result of
revaluation/devaluation/fluctuation or otherwise in the
rates of exchange of foreign currencies. if any, involved,
whatsoever stipulated in or due and payable by the
Mortgagor under the Term Loan Agreement and/or the
other Financing documents shall be secured, inter alia,
by a charge on the Mortgaged Properties …. in terms of
the provisions act out in Schedule I hereto.”
29. Then the clause regarding the dealings with
respect to the mortgaged properties provides that “The
Mortgaged Properties shall be specifically appropriated in the
charge and Mortgage and lien created under this Deed and
the Mortgagor shall not sell, transfer, lease out, assign,
dispose of or otherwise part with the Mortgaged Properties or
any part thereof, or deal with the same or create or suffer any
PMB 26
comapl.7072-2025.odt
mortgage, charge, lien or other encumbrance on the
Mortgaged Properties, without the prior written consent of the
Mortgagee. Any mortgage/ charge created hereafter by the
Mortgagor on the Mortgaged Properties, in violation of this
Deed, shall be subject to the present mortgage/charge
created in favour of the Mortgagee under this Deed, and the
mortgage/ charge created in terms of this Deed shall in all
circumstances rank superior.”
30. It is also material to refer to the provisions relating
to floating charge which reads thus :-
“10(B). PROVISIONS RELATING TO FLOATING CHARGE
(iii) ….. FURTHER THAT, the Mortgagor shall not create
or suffer any lien on the Mortgaged Properties set out in
paragraph 10(A)(iv) of this Schedule I or any part
thereof except with the specific written approval of the
Mortgagee. Any subsequent fixed or floating charge
created by the Mortgagor, in violation of this Deed, shall
under no circumstances rank superior to the charge
created by the Mortgagor in favour of the Mortgagee
under this Deed. Further, upon creation of any charge
in violation of this Deed, the charge created under this
Deed shall crystallize and shall have priority over any
and all other charges created in violation of this Deed.
31. It is also relevant to note that the mortgagor had
undertaken as under :-
“13. UNDERTAKINGS
(d) not create any mortgages, charges and
encumbrances over the Mortgaged Properties in favour
of any person except which are expressly permitted toPMB 27
comapl.7072-2025.odtbe created under the Financing Documents and as are
disclosed to the Secured Parties in writing.”
32. It would also be significant to notice the relevant
clause in the sanction letter dated 27 th July 2018 issued by
DLFH i.e. the predecessor of the Omkara Asset. The following
clauses relevant which read as under :-
“2. The borrower has to arrange-for the conditional
NOC for creation of exclusive charge in favour of DHFL
w.r.t the facilities availed against the security of Avenue
54 from the respective lenders;
4. The borrower w.r.t the existing facilities proposed
to be taken over by DHFL has to comply with the
following conditions-
a) Procure and submit Original No Dues
Certificate from the respective Lenders within 2
working days from date of closure of the
respective facilities;
b) Release of charge of the existing lenders
within 2 working days from the date of closure
of the loan availed;
c) deposit the Original Title deeds with DHFL
within 7 working days from the date of closure
of respective loan accounts.
5. The Borrower within 7 working days from the
date of closure of all the facilities availed from YES
Bank Ltd against the Avenue 54, has to execute the
conveyance deed for plot #1 with SBPL for acquisition
of 100% land and rights on the project Avenue 54.”
33. Now let us briefly refer to the decision relied upon
by the learned counsel. In Bikram Chatterji and others (supra)
Their Lordships observed in paragraph 85 that “In order to
create a mortgage, it was necessary to obtain clear NOC in
PMB 28
comapl.7072-2025.odt
order to create effective mortgage deed. As that has not been
done so far, no mortgage in the eye of the law has been
created in favour of the bank. It was not open to the bankers
to mortgage the land in view of the conditional permission to
create mortgage, the mortgage created in violation of
condition cannot be said to be effective in accordance with law
as the land was owned by the authorities concerned and the
lessees had right to mortgage only subject to fulfilment of
conditions imposed by the lessor/authorities.” In Radha
Sundar Dutta (supra) the Supreme Court held that if two
constructions of a document are admissible, one which would
give effect to all the clauses therein would be adopted as
opposed to the construction which would render one or more
of the clauses nugatory. In Sahebzada Mohammad
Kamgarh Shah vs. Jagdish Chandra Deo Dhabal Deb and
others10 it was held that in the event, two clauses or two
parts of the same clause are irreconcilable, the earlier clause
will prevail, i.e. the earlier clause will not be allowed to be cut
down by a later clause. In the case of ambiguity, the
document has to be interpreted strictly against the grantor
and in favour of the grantee. Deccan Paper Mills Company
10 AIR 1960 SC 953
PMB 29
comapl.7072-2025.odt
Limited (supra) is relied upon for the proposition as to the
declaration that a document is void or voidable and its
cancellation can be sought if the document can be a source of
potential mischief. The jurisdiction under section 31 is a
protective or a preventive one and the principle of the relief is
the same as in quia timet actions. In Zarina Siddiqui vs. A.
Ramalingam11 the Supreme Court held that the Court would
exercise discretion judiciously and in accordance with sound
and reasonable judicial principles and not in an arbitrary
manner. The conduct of the respondent is a relevant factor.
34. The arguments of Mr. Dhond that having regard to
the last sentence in Clause 5, Omkara Asset is entitled to a
second charge, undoubtedly is attractive. However, we
cannot overlook the facts of the present case and the conduct
of Sumer as well the conduct on the part of Omkara Asset in
seeking the deeds of mortgage executed even prior to the
issuance of conditional NOC of Yes Bank. The huge loans of
Yes Bank were not repaid. The loan account was not closed.
The NOC of Yes Bank was a conditional one. It appears that
mortgage deeds were executed by Omkara Asset hurriedly.
11 (2015) 1 SCC 705
PMB 30
comapl.7072-2025.odt
In the light of the various clauses referred to hereinbefore, it
is obvious that the impugned mortgage deeds without a clear
NOC from Yes Bank cannot be a mortgage in the eye of law.
It was not open for Sumer to create a mortgage in favour of
Omkara Asset. The conduct of Sumer is dishonest. The claim
of J. C. Flowers cannot be defeated in such a manner.
The provisions of law cannot be read in the given facts which
would virtually amount to putting a premium on a dishonest
transaction by holding that Omkara Asset still is entitled to a
second charge.
35. We are, therefore, satisfied with the manner in
which the discretion is exercised by the learned Single Judge
in the facts of the present case which cannot be said to
arbitrary, capricious or perverse to warrant interference in the
Appeal.
36. We therefore do not find any merit in this Appeal.
The Appeal is dismissed. Interim Application (L) No.7074 of
2025 is disposed of.
(M.S.KARNIK, J.) (CHIEF JUSTICE)
Signed by: Pradnya Bhogale
Designation: PA To Honourable Judge
Date: 06/05/2025 15:21:01 PMB 31
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