# 7 S.C.R: 569 M/S. L.K. TRUST v. EDC LTD. & ORS

- **Citation:** [2011] 7 S.C.R. 569
- **Court:** Supreme Court of India
- **Decided:** 2011-05-10
- **Case number:** Civil Appeal Nos. 4214-4215 of 2011
- **Bench:** J.M. Panchal, Cyriac Joseph
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/7-s-c-r-569-m-s-l-k-trust-v-edc-ltd-ors-27843
- **Pages:** 42

## Headnote

Transfer of Property Act, .1882 - ss. 60 and 54 - Right
A
B
of redemption - Nature and scope of -
When can be
exercised and when extinguished - Held: Right of redemption
C
is a statutory right - A mortgage being a security for the debt,
the right of redemption continues although the mortgagor fails
to pay the debt on the due date - Any provision inserted to
prevent, evade or hamper redempti<y1 is void - Right of
redemption is an incident of a subsisting mortgage and o
subsists so long as the mortgage itself subsists - It stands
extinguished on execution of conveyance and the registration
of transfer of the mortgagor's interest by registered instrument
or by decree of a court - Dismissal of an earlier suit for
redemption whether as abated or as withdrawn or in default
E
would not debar the mortgagor from filing a second suit for
redemption so long as the mortgage subsists - On facts, no
sale/transfer worth the name of the mortgaged property had
taken place in favour of the contender of the mortgaged
property - There was no concluded contract between. the
F
contender and the mortgagee - Thus, it cannot be said that
that the mortgagor had lost its right to redeem the mortgaged
property or that by the acts of the contender for the mortgaged
property and mortgagee, the right of the mortgagor to redeem
the property was extinguished - Acceptance of proposal of the
G
mortgagor by the mortgagee to permit it to redeem the
property cannot be said to be illegal in any manner - The
statutory right of redemption available to the mortgagor was
never Jost - Mortgage.
569
H
570
SUPREME COURT REPORTS
[2011] 7 S.C.R.
A
Constitution of India, 1950 - Article 136 - Special Leave
Petition filed against the order passed in the application filed
in writ petition by which the status-quo order granted earlier
was modified as well as SLP filed against the order passed
in another writ petition permitting withdrawal of the writ petition
B - Maintainability of - Held: Petitions filed under Article 136
should not be rejected on the ground of availability of
alternative remedy nor it should be rejected on the ground that
SLP is filed against order permitting withdrawal of writ petition.
Respondent No. 3 company took loan of Rs. 7.00
C crores from the respondent No. 1 company against
mortgage of the property. It also took loan from
respondent No. 2-State Bank of India. Respondent no. 3
was unable to repay the loan amount and respondent No.
1 attached the property of respondent No. 3. Thereafter,
D respondent No. 1 made several attempts to auction the
property. By private negotiation respondent No. 1
accepted the proposal of appellant-trust to sell the said
property for a sum of Rs.12.99 crores and informed
respondent No. 3 as also gave them three days time to
E bring in matching offers. Res'pondent No. 3 made an offer
through third party 'C' for Rs. 14 crores but respondent
No. 1 did not consider the same. Aggrieved, respondent
No. 3 filed Writ Petition No. 19 of 2006. The appellant was
impleaded in the petition. During the pendency of the writ
F petition, the appellant trus~ issued cheques to respondent
No. 1, purporting to be in full payment. The High Court
dismissed the writ petition holding that there was a
concluded contract between respondent No. 1 and the
appellant. Thereafter, the unit holders in the hotel project
G of respondent No. 3 filed Writ Petition No. 124 of 2006
challenging the action of respondent No. 1 in selling the
property to the appellant-trust. They offered to pay higher
amount than offered by the appellant-trust and the same
was conveyed to the respondent No. 1.
H
L.K. TRUST v. EDC LTD. & ORS.
571
Aggrieved, against the dismissal of the Writ Petition
A
No. 19 of 2006, respondent No. 3 filed Special Leave
Petition. This Court rejected the highest offer made by
responde.nt No. 3 through third party and dismissed the
SLP on August 24, 2006. The Board of Directors of
respondent No. 1 were not informed that the appellantB
trust had default

## Text

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[2011) 7 S.C.R: 569
M/S. L.K. TRUST
v.
EDC LTD. & ORS.
(Civil Appeal Nos. 4214-4215 of 2011)
MAY 10, 2011
[J.M. PANCHAL AND CYRIAC JOSEPH, JJ.]
Transfer of Property Act, .1882 - ss. 60 and 54 - Right
A
B
of redemption - Nature and scope of -
When can be
exercised and when extinguished - Held: Right of redemption
C
is a statutory right - A mortgage being a security for the debt,
the right of redemption continues although the mortgagor fails
to pay the debt on the due date - Any provision inserted to
prevent, evade or hamper redempti<y1 is void - Right of
redemption is an incident of a subsisting mortgage and o
subsists so long as the mortgage itself subsists - It stands
extinguished on execution of conveyance and the registration
of transfer of the mortgagor's interest by registered instrument
or by decree of a court - Dismissal of an earlier suit for
redemption whether as abated or as withdrawn or in default
E
would not debar the mortgagor from filing a second suit for
redemption so long as the mortgage subsists - On facts, no
sale/transfer worth the name of the mortgaged property had
taken place in favour of the contender of the mortgaged
property - There was no concluded contract between. the
F
contender and the mortgagee - Thus, it cannot be said that
that the mortgagor had lost its right to redeem the mortgaged
property or that by the acts of the contender for the mortgaged
property and mortgagee, the right of the mortgagor to redeem
the property was extinguished - Acceptance of proposal of the
G
mortgagor by the mortgagee to permit it to redeem the
property cannot be said to be illegal in any manner - The
statutory right of redemption available to the mortgagor was
never Jost - Mortgage.
569
H
570
SUPREME COURT REPORTS
[2011] 7 S.C.R.
A
Constitution of India, 1950 - Article 136 - Special Leave
Petition filed against the order passed in the application filed
in writ petition by which the status-quo order granted earlier
was modified as well as SLP filed against the order passed
in another writ petition permitting withdrawal of the writ petition
B - Maintainability of - Held: Petitions filed under Article 136
should not be rejected on the ground of availability of
alternative remedy nor it should be rejected on the ground that
SLP is filed against order permitting withdrawal of writ petition.
Respondent No. 3 company took loan of Rs. 7.00
C crores from the respondent No. 1 company against
mortgage of the property. It also took loan from
respondent No. 2-State Bank of India. Respondent no. 3
was unable to repay the loan amount and respondent No.
1 attached the property of respondent No. 3. Thereafter,
D respondent No. 1 made several attempts to auction the
property. By private negotiation respondent No. 1
accepted the proposal of appellant-trust to sell the said
property for a sum of Rs.12.99 crores and informed
respondent No. 3 as also gave them three days time to
E bring in matching offers. Res'pondent No. 3 made an offer
through third party 'C' for Rs. 14 crores but respondent
No. 1 did not consider the same. Aggrieved, respondent
No. 3 filed Writ Petition No. 19 of 2006. The appellant was
impleaded in the petition. During the pendency of the writ
F petition, the appellant trus~ issued cheques to respondent
No. 1, purporting to be in full payment. The High Court
dismissed the writ petition holding that there was a
concluded contract between respondent No. 1 and the
appellant. Thereafter, the unit holders in the hotel project
G of respondent No. 3 filed Writ Petition No. 124 of 2006
challenging the action of respondent No. 1 in selling the
property to the appellant-trust. They offered to pay higher
amount than offered by the appellant-trust and the same
was conveyed to the respondent No. 1.
H
L.K. TRUST v. EDC LTD. & ORS.
571
Aggrieved, against the dismissal of the Writ Petition
A
No. 19 of 2006, respondent No. 3 filed Special Leave
Petition. This Court rejected the highest offer made by
responde.nt No. 3 through third party and dismissed the
SLP on August 24, 2006. The Board of Directors of
respondent No. 1 were not informed that the appellantB
trust had defaulted in making the balance payment and
as such they rejected the offer made by respondent No.
3 through 'C'. Thereafter, the Board of Directors noted
that the cheques issued by the appellant-trust were
dishonoured and resolved to accept the higher bid of c
offered by 'C' but this decision of Board of Directors of
the respondent No. 1 was not brought to the notice of
this Court during the course of hearing of the aforesaid
Special Leave Petition.
After the dismissal of SLP; respondent No. 3
D
addressed a letter to respondent No. 1 and exercised its
right of redemption. Respondent No. 3 made certain
payments. Thereafter, respondent No. 1 company
acknowledged the right of redemption of mortgage of
respondent No. 3 and stated that it was in the process
E
of implementing the Supreme Court orderdated August
24, 2006, thus, respondent No. 3 could not be given
further concession for extension of time to exercise the
right of redemption. Respondent no. 3 showed its
bonafide and offered to deposit Rs.18.15 crores in the
F
State Bank of India which was permitted by the High
Court in Writ Petition No. 124 of 2006.
Meanwhile, the Advocate General opined that there
was a concluded contract between respondent No. 1 and
the appellant-trust and the right of respondent No. 3 of G
redemption stood extinguished by its conduct as
envisaged under Section 60 of the Transfer of Property
Act, .1882. Acting thereupon, the Board of Directors of
respondent No.1 passed a resolution that the respondent
H
572
SUPREME COURT REPORTS
[2011) 7 S.C.R.
A No. 1 would conclude the sale transaction with the
appellant-trust and go ahead with the conveyance and
delivery of possession in favour of the appellant-trust.
Aggreived, respondent No. 3 filed W.P. No. 601 of 2006
before the High Court praying for writ of mandamus
B against the respondent Nos. 1 and 2 inter alia directing
them to permit respondent No. 3 to exercise the rights of
redemption of mortgaged property. The High Court
tagged W P (C) No. 601 of 2006 with W P (C) No. 124 of
2006 and directed the parties to maintain status quo.
c Thereafter, respondent No. 1 in its Board Meeting passed
a resolution dated February 20, 2008 to the effect that the
offer of the respondent No. 3 to redeem the mortgage
was favourably accepted provisionally, subject to the
approval of the High Court in writ petitions pending
0 before the High Court. Respondent no. 1 then filed Misc.
Civil Application No. 165 of 2008 in W P No. 601 of 2006
inter alia praying for appropriate orders directing
approval of the Board resolution dated February 20, 2008.
The High Court by order dated April 7, 2008 held that the
E order of status quo passed by the High Court shall not
come in the way of respondent Nos. 1 and 2 in
considering the proposal of respondent No. 3. Thereafter,
the respondent No. 1 passed a 1'esolution on April 8, 2008,
accepting the offer of the respondent No. 3 to redeem the
mortgage. On April 9, 2008, the High Court permitted
F respondent No. 3 to withdraw the writ petition. The High
Court by an order dated April 9, 2008, also dismissed the
Writ Petition No. 124 of 2006 filed by unit holders of the
hotel project as infructuous. Therefore, the instant
appeals are filed against the orders dated April 7, 2008
G passed in Misc. Civil Application No. 165 of 2008 in Writ
Petition No. 601 of 2006 and order dated April 9, 2008 in
Writ Petition No. 601 of 2006.
Dismissing the appeals and the contempt petition,
H the Court
L.K. TRUST v. EDC LTD. & ORS.
573
HELD: 1.1 The petitions filed under Article 136 of the
A
Constitution should not be rejected on the ground of
availability· of alternative remedy nor it should be rejected
on the ground that the special leave petition is filed
against order permitting withdrawal of writ petition. Right
from the beginning, the case of the appellant is that there
B
was a concluded contract between the appellant and the
respondent No. 1 and, therefore, the respondent No. 1
could not have accepted proposal of the respondent No.
3 to redeem the mortgage executed by the respondent
No. 3. This issue was raised by the appellant in Writ c
Petition No. 601 of 2006 .. Without adjudicating the said
claim the High Court permitted the respondent no. 3 to ·
withdraw the petition filed by them. Also it is the case of
the appellant that in view of decision of this Court dated
August 24, 2006 rendered in Special Leave Petition (Civil)
0
No.4957 · of 2006, the rights of the parties were
crystallized and, therefore, permission to withdraw the
. petition unconditionally should not have been granted to .
respondent No, 3. In Writ Petition No. 601 of 2006 filed by
the respondent No. 3 and another against respondent No.
E
1 ·and others, the prayer was to issue a Writ of Mandamus
directing respondent No.1 to permit the respondent Nos.
3 and 4 to exercise the right of redemption of mortgaged
property and to direct the respondent Nos. 1 and 2 to
execute the re-conveyance and release the documents
of title deposited with the respondent No.1.. The interim
F
relief claimed by the respondent No. 3 in the writ petitio11
was to restrain the respondent No.1 from proceeding to
finalize the sale of the mortgaged property in favour of
the appellant. The record shows that by an order dated
December 18, 2006 the High Court had directed the G
parties to maintain status quo. By the impugned order
dated April 7, 2008 passed in M.C.A. No. 165 of 2008 filed
in WP No. 601 of 2006, the.High Court has modified the .
same. This modification of interim relief would have
certainly adversely affected the claim of the appellant that H
574
SUPREME COURT REPORTS
[2011] 7 S.C.R.
A in view of concluded contract between the appellant and
the respondent No. 1, the respondent No. 1 could not
have been permitted to consider the claim of the
respondent No. 3 for redemption of the mortgaged
property and, therefore, Special Leave Petition under
B Article 136 of the Constitution would certainly be
maintainable against that order. [Para 14] [594-A-H; 595A-C]
1.2 A fair and reasonable reading of the judgment
C dated August 24, 2006 in SLP (Civil) No. 4957 of 2006
makes it evident that in fact this Court did not record any
finding that a concluded contract __ had come into
existence between the appellant and the respondent No.
1. It was noticed that on December 12, 2005 the offer
made by the appellant was accepted by the respondent
D No.1 and the same was communicated to the appellant
incorporating the relevant conditions for the sale. It is
nobody's case that those. conditions, which were
stipulated, were complied with by the appellant nor any
such finding was recorded by this Court. It is relevant to
E notice is that in the operative part of the judgment, this
Court observed that if the respondent No.3 makes the
payment as promised within such time as might be
granted by respondent No.1 and fulfills the conditions of
sale, that might be the end of the matter which means that
F at the time when the judgment was delivered, this Court
proceeded on the footing that there was no concluded
contract between the appellant and respondent No. 1.
Further it was stipulated by this Court that if the appellant
failed to do so it was always open to respondent No.1 to
G take necessary steps to safeguard the interests which
included inter a/ia the consideration of other offers made
by the other parties. Such weighty observations would
not have been made by this Court if this Court had come
to the conclusion that there was a concluded contract of
H sale between the appellant and the respondent No. 1.
L.K. TRUST v. EDC LTD. & ORS.
575
This Court had never recorded any finding to the effect
A
that sale of the property mortgaged by respondent No.3
was concluded between the appellant and the respondent
No.1 and the Court was essentially concerned with
exercise of discretion under Article 136 of the
Constitution. Further the question whether the
B
respondent No.3 had subsisting right to redeem the
property was never gone into by the Court in the said
special leave petition because it was never raised either
before the High Court or before this Court in the said
matter. [Paras 16, 17] [598-E-H; 599-A-E]
c
2.1 In India it is only on execution of conveyance and
the registration of transfer of the mortgagor's interest by
registered instrument that the mortgagor's right of
redemption stands extinguished. Further it is not the case
of the appellant that a registered Sale Deed had been
D
executed between the appellant-trust and the respondent
No. 1 . pursuant to the Resolution passed by the
respondent No. 1 and, therefore, in terms of Section 54
of the Transfer of Property Act 1882 no title relating to the
disputed property had passed to the appellant at all. [Para
E
21] [602-C-D]
Narandas Karsandas vs. S.A. Kamtam (1977) 3 SCC
247: 1977 ( 2 ) SCR 341; Gajraj Jain vs. State of Bihar and
Ors. (2004) 7 SCC 151: 2004 (2) Suppl. SCR 677 - referred
to.
F
2.2 No transfer of mortgaged property had taken
place in favour of the appellant and, therefore, the
statutory right of redemption available to the respondent
No. 3 'was never lost. The record of the case indicates that G
the matter had rested at the level of passing some
resolution by the respondent No. 1 Company in favour
of the appellant and nothing more than tliat. If the
appellant was keen to complete its title over the suit
properties, nothing . prevented it from instituting
H
576
SUPREME COURT REPORTS
[2011] 7 S.C.R.
A appropriate proceedings to compel .the respondent No.
1 ·to execute a sale deed in its favour and getting it
registered, but admittedly no such step was taken by the
appellant. By letters dated October 9, 2006 and September
27, 2006, the respondent No. 1 had already accepted and
B acknowledged the right of the respondent No. 3 to
redeem the mortgaged property on the payment of
amount due. Further by filing affidavit, the respondent No.
2, State Bank of India, had declared that it had accepted
the proposal of the respondent No. 3 for redemption of
c mortgage on payment of Rs.12.87 crores to the
respondent No. 1 and Rs.9.18 crores to the State Bank
of India. However, after receipt of the opinion of the
· Advocate General, the respondent No. 1 had drastically
changed its stand without considering the subsisting
0 right of the respondent No. 3 to redeem the mortgaged
property and was inclined to proceed with completion of
sale transaction in favour of the appellant. It was at that
stage that the respondent No. 3 had to file Writ Petition
No. 601 of 2006 asserting its right to redeem the
E mortgaged property in which in fact no relief is granted
to the respondent No. 3. The issues in the earlier
proceedings were quite different from those raised in Writ
Petition No. 601 of 2006. [Para 22) [603-H; 604-A-H]
Mohan/al Goenka vs. Benoy Krishna Mukherjee and Ors.
F (1953) SCR 377 - Distinguished.
2.3 The mortgagor under Indian law is the owner
who had parted with some rights of ownership and the
right of redemption is the right which he exercises by
virtue of his residuary ownership to resume what he has
G parted with. In India this right of redemption, however, is
statutory one. A right of redemption is an incident of a
subsisting mortgage and subsists so long as. the
mortgage itself subsists. The dismissal of an earlier suit
for redemption whether as abated or as withdrawn or in
H default would not debar the rnortgagor from filing a
L.K. TRUST v. EDC LTD. & ORS.
577
second suit for redemption so long as the mortgage A
subsists. This right cannot be extinguished except by the
act of parties or by decree of a court. The right of
redemption under a mortgage deed can come to an end
only in a manner known to law. Such extinguishment of
the right can take place by contract between the parties,
B
by a merger or by statutory provision which debars the
mortgager from redeeming the mortgage. The
mortgagor's right of redemption is exercised by the
payment or tender to the mortgagee at the proper time
and at the proper place of the mortgage money. When it c
is extinguished by the act of parties, the act must take the
shape and observe the forrnalities which the law
prescribes. A mortgage being a security for the debt, the
right of redemption continues although the mortgagor
fails to pay the debt at the due date. Any provision 0
inserted to prevent, evade or hamper redemption is void.
· Having regard to the facts of the instant case, it is difficult
to hold that the respondent No. 3 had lost lts right to
redeem the mortgaged pr.operty or that by the acts of the
appellant and the respondent No. 1, the right of the
respondent No. 3 to redeem the property was
E
extinguished. No sale worth the name of the mortgaged
property had taken place in favour of the appellant
because there is no agreement of sale on the record of
the case nor the facts indicate that 'the same was
registered. The right to redeem the mortgage property
F
which was available to the respondent No.3 had never
extinguished at all and, therefore, the acceptance of
proposal of the respondent No. 3 by the respondent No,
1 to permit it to redeem the property dated April 8, 2008
cannot be said to be illegaf in any manner. [Paras 23 and
G
24] (605-A-H; 606-A-B]
.
Jaya Singh D. Mhoprekar and another vs. Krishna Balaji
Patil and Anr. (1985) 4 SCC 162: 1985 ( 2 ) Suppl. SCR
308 - relied on.
H
578
SUPREME COURT REPORTS
[2011) 7 S.C.R.
A
2.4 The submission that reliance placed on Clause
16 of the General Terms and Conditions by the
respondent No.1 is misconceived and untenable in view
of decision of this Court in earlier round of litigation, has
no substance. This Court while delivering judgment dated
B August 24, 2006 in Special Leave Petition (Civil) No. 4957
of 2006 was not called upon and in fact did not consider
the effect of Clause 16 of the General Terms and
Conditions. The record shows that Clause 16 of the
General Terms and Conditions was expressly accepted
c by the appellant The Resolution dated December 5, 2005
read with the Agenda Note records that the appellant had
agreed to follow the General Terms of Auction. [Para 25)
[606-C-E]
2.5 The record of the case shows that the actions of
D the Corporation-respondent No.1 have been entirely in
accordance and consistent with the provisions of Clause
16 of the General Terms and Conditions that the
Corporation would execute transfer documents only after
entire accepted offer amount is received. When the
E appellant-trust wrote a letter dated August 24, 2006 to the
respondent No.1 and asked for possession of the
property and to complete other legal formalities, the
respondent No. 1 had informed the appellant by its letter
dated September 27, 2006 making it clear that the
F respondent No. 1 was in the process of proceeding
further with the sale transaction. On September 28, 2006
the respondent No.1 had informed the appellant that the
borrower company had approached it for redemption of
the mortgage. On October 9, 2006 the respondent No.1
G had informed the respondent No. 3 that they were in the
process of implementing the judgment of this Court in
Special Leave Petition (Civil) No.4957 of 2006 dated
August 24, 2006 and, therefore, all legal formalities were
required to be completed with respect to the transfer of
H the property in its name in accordance with the law. The
L.K. TRUST v. EDC LTD. & ORS.
579
resolution dated November 24, 2006 on which the A
appellant had placed reliance makes it clear that the,
transactions would have to be concluded by execution
of the conveyance ·and delivery of possession in favour
of the appellant, which never happened. The record does
not indicate that the appellant had filed any procee(:tings
B
. either to obtain specific performance of the agreement to
sell entered into between it and the respondent No. 1. nor
the appellant had initiated any proceedings ·for obtaining
possession of the property in. question. If in ·fact the
contract had been concluded between the parties as is c
claimed by the appellant, the appellant would not have
failed to obtain possession of the propel'.ty after
execution of registered deed in its favour. These fa.cts,
thus, indicate that there was· no concluded contract
between the appellant and the respondent No.1. [Para 26]
0
[606-H; 607-A·H]
·2.6 It cannot be ignored the fact that on September
27, 2006, the respondent No. 3 had deposited cheques
of Rs:9.25 crores·in favour of.the first respondent and
Rs.5.90 crores in favour of the respondent No: 2. The
E
bonafide of the first respondent can be seen from the fact
that these cheques were not immediately encashed, and ·
as on January 2007, the total amount lying with the first
respondent and the respondent No. 2 pa-id by· the
respondent No.3 was Rs.24.15 crores as against the
F
redemption amount of Rs.18.40 crores. As· the
respondent No.3 had made payment to redeem the
property which was accepted by respondent No.1 and as
respondent No.1 had. agreed to permit the respondent
No.3 to redeem the property a prayer was made to permit G
respondent No.3 to withdraw Writ Petition No. 601 of
2006 which can neither be regarded as arbitrary nor as
illegal nor contrary to the decision of this Court dated
August 24, 2006 rendered in Special Leave Petition (Civil)
4957 of 2006. Similarly, as the grievance .of the H
580
SUPREME COURT REPORTS
[2011] 7 S.C.R.
A respondent No.3 did not survive, the modification of the
order of status quo granted earlier at the instance of the
respondent No. 3 who was petitioner in the writ petition,
also cannot be held. to be bad in law because if the
statusquo order had not been modified the respondent
s No.1 would not have been in a position to accept the offer
of respondent No.3 to permit it to redeem the property
which would have been in derogation of right of the
respondent No. 3 to redeem the property as recognized
by Section 60 of the Transfer of Property Act. Thus, there
c is no substance in the challenge to the two orders dated
April 7, 2008 modifying the order of status quo and order
dated April 9, 2008 permitting the respondent No~3 to
withdraw W P No. 601 of ~006 warranting inference of this
Court in appeals arising by grant of special leave filed
0
under Article 136 of the Constitution. Therefore, the two
appeals which are directed against the said orders
respectively have no substance. [Paras 27 and 28] [608A-H]
2.7 The appellant-trust has filed a ·Contempt Petition
E against the respondents for willfully disobeying and
acting against the order passed by this Court. on August
24, 2006 in Special Leave Petition (Civil) No.4957 of 2006.
The exercise of right of redemption in accordance with
Section 60 of the Transfer of Property Act was neither a
F subject matter of Writ Petition No. 19 of 2006 nor it was ,
subject matter of Special Leave Petition (Civil) No.4957 of
2006 which is clear from the enumeration of the main
points by the High Court in Writ Petition No. 19 of 2006,
which was whether there was a concluded ·contract. This
G Court had never prohibited the respondent Nos. 3 and 4
from exercising right of redemption nor restrained the
respondent No.1 from considering the proposal of the
Respondent No.3 to permit it to redeem the disputed
property and had in fact expressed strongly that the
H res'pondent No. 1 should take that action which is in its
L.K. TRUST v. EDC LTD. & ORS.
581
best interest. Under the circumstances the passing of A
resolutions by the respondent No.1 company can hardly
be regarded as breach of direction given by this Court .
. No case is made out by the petitioner either to exercise
powers under Section 12 of the Contempt of Courts Act
1971 nor any case is made out to set aside the B
resolutions passed by the Board of Directors of the
respondent No.1 company. Therefore, the prayers made
in the Contempt Petition cannot be granted. [Paras 29, 30,
31] [609-A-H; 610-A-E]
Executive Officer, Arthanareswarar Temple vs. R.
C
Sathyamoorthy (1999) 3 SCC 115: 1999 (1) SCR 485; R.
Rathinavel Chettiar vs. V. Sivaraman (1999) 4 SCC 89: 1999
(2) SCR 313 - referred to.
Case Law Reference:
1999 (1) SCR 485
1999 (2) SCR 313
1977 (2) SCR 341
Referred to.
Para 13
Referred to
Para 13
Referred to.
Para 22
2004 (2) ·Suppl. SCR677
Referred to.
Para 22
· (1953) SCR 377
Distinguished. Para 22
1985 (2) Suppl. SCR 308
Relied on.
Para 23
D
E
CIVIL AP PELLA TE JURISDICTION : Civil Appeal Nos.
F
4214-4215 of 2011.
From the Judgment & Order dated 7.4.2008 of the High
Court of Bombay in MCA No. 165 of 2008 and WP No. 601 of
2006.
WITH
Contempt Petition (C) No. 165 of 2008.
Dushyant R. Dave, Jaideep Gupta, Dhruv Mehta, S.
G
Sukumaran, Ananad Sukumar, Meera Mathur, Shobhit H
582
SUPREME COURT REPORTS
. [2011) 7 S.C.R.
A
Chandra, Yashraj Singh, Sriram Krishna, Sarv Mitter, A.V.
B
Rangam, Buddya A. Rangandhan, Sukumar Pattjoshi, Somesh
Kr. Dubey, Rajiv Kumar, Sudarsh Menon, A.V. Rangam and K.L.
Mehta and Co. for the Respondents.
The Judgment of the Court was delivered by
J.M. PANCHAL, J.1. Leave is granted in each Special
Leave Petition.
2. The appeal arising from Special Leave Petition (C) No.
C 10334 of 2008 is directed against order dated April 07, 2008
passed by the High Court of Bombay at Goa in Misc. Civil
Application No. 165 of 2008 which was filed in Writ Petition
No. 601 of 2006 by which it is clarified that the order of status
quo passed by the High Court vide order dated December 18,
2006 shall not come in the way of EDC Ltd., i.e., the respondent
D no. 1 Company herein and the State Bank of India, i.e., the
respondent No. 2 herein in considering the proposal of the
respondent no. 3 Company who is mortgagor and the petitioner
in Writ Petition No. 601 of 2006. The appeal arising from SLP
(C) No. 10335 of 2008 is directed against order dated April 9,
E 2008 passed by the Division Bench of the High Court of
Bombay at Goa in Writ Petition No. 601 of 2006 by which the
resolution passed by the respondent no. 1 EDC Ltd. on April
8, 2008 had resolved to accept the proposal of respondent no.
3 the Falcon Retreat Pvt. Ltd. for redemption of mortgage and
F
affidavit tendered by the State Bank of India, i.e., the
respondent No. 2, stating that the State Bank of India has
accepted the proposal of M/s. Falcon Retreat Pvt. Ltd. for
redemption of mortgage on payment of Rs.12.87 crores to
EDC Ltd. and Rs.9.18 Crores to the State Bank of India, are
G noticed and in view of the said resolution as well as the affidavit
of the State Bank of India, the respondent no. 3, who was the
original petitioner, is granted leave to withdraw the petition.
H
3. This Court proposes to refer to certain relevant facts,
which are as under:
L.K. TRUST v. EDC LTD. & ORS. [J.M. PANCHAL, J.] 583
The respondent no. 1, i.e., EDC Ltd. is a Company
A
registered under the Indian Companies Act, 1956. Earlier it
was known as the Economic Development Corporation of Goa.
B
It is ·an investment company in which the State of Goa holds
majority shares. The main objects of the respondent no. 1
Company, as per its Memorandum of Association, amongst
others, are providing financial assistance to the industrial
enterprises and enterprises carrying on other economic
activities whether for starting, running, expanding, modernizing
etc. and to aid, assist, initiate, promote, expedite and
accelerate the economic development of the State in various c
spheres. The respondent no. 3 is a Private Limited Company.
It is also incorporated under the provisions of the Companies
. Act, 1956. The respondent No. 3 company is engaged inter alia
in the business of development/operation of hotel and tourism.
During the years 1994 to 1999, the respondent no. 3 proposed
to develop and to start hotel project in the property admeasuring
approximately 28000 sq. mtrs. of Survey Nos. 142/1 and 142/
1 of Revenue Village Arpora, in Taluka Bardez. For the purpose
of implementing the said hotel project, the respondent no. 1.
company i.e. EDC Ltd. granted term loan ofRs.7.00 crores to
respondent No. 3 against mortgage of aforesaid hotel property
vide agreement dated February 8, 1999. Respondent No. 2 has
also granted a loan of Rs~ 5 crores to the respondent No. 3
· against pari pasu charge of the hotel property.
D
E
4. The record indicates that about 80 per cent of the project
F
was completed by the middle of the year 2001 but subsequently
because of global recession in the tourism and real estate
business, the development of the project was severely affected
and project implementation was halted. In view of this. hurdle,
the repayment of the loan amount became difficult resulting in . G
arrears of installments of loan with mounting interest fiability.
5. When the respondent no. 3 was not able to repay the
loan amount, the respondent no. 1 company initiated coercive
action for the recovery of loan amount and attached the property
H
584
SUPREME COURT REPORTS
[2011] 7 S.C.R.
A of respondent no. 3 company on July 15, 2003 under Section
29 of State Finance Corporation Act, 1951. On the request of
the respondent No. 3 that it would be able to sustain the adverse
market conditions and convert the project into profitable venture
provided some time was granted, the property attached was
B released and, therefore, the respondent no. 1 handed over the
possession of the property to the respondent no. 3 on certain
conditions stipulated in agreement dated August 19, 2003, but
subsequently in the month of October, 2003 the respondent No.
1 again attached the property. The respondent no. 3 challenged
c the action of the respondent no. 1 in attaching the property by
way of filing Writ Petition No. 608 of 2003 before the High Court.
The said petition was, however, withdrawn subsequently.
6. The offer made by the respondent No. 3 for financial
restructuring and/or one time settlement by payment of Rs.12.00
D crores was rejected by the respondent No. 1 and the
respondent No.· 2. Pursuant thereto, the respondent no. 1 made
several attempts between 2004 to 2005 to sell the attached
property, which was mortgaged by way of public auction, but
in none of the public auctions, it received offers equivalent to
E market value of the property. Thereafter, by private negotiation
the respondent No. 1 had accepted th.e proposal of appellant
trust to sell the property in question for a sum of Rs.12.~9 crores.
7. The respondent no. 3 thereafter received a letter dated
F December 5, 2005 on December 13, 2005 from the
respondent no. 1 whereby the respondent no. 1 notified that it
had received an offer of Rs.12.99 crores from the appellant and
was inclined to accept the said offer and in case the respondent
no. 3 had any party with better offer, the same should be sent
G to respondent no. 1 within 3 days from the date of the letter,
failing which the respondent no. 1. would proceed further in the
matter without prejudice to the rights of the respondent no. 1
company to recover the balance outstanding dues fro!T) the
respondent no. 3. On the same date i.e. on December 5, 2005
H EDC Board while accepting the offer of the present appellant
L.K. TRUST v. EDC LTD. & ORS. [J.M. PANCHAL, J.] 585
.. trust, the respondent No. 1 had also passed a resolution that
A
· only 3 days notice be given in future to borrowers to bring in
matching offers in case of private auctions. The offer received
by the respondent no. 1 from the appellant was subject matter
of Writ Petition No. 19 of 2006 filed by the respondent no. 3
before the High Court. The ground raised in the petition was
B
that the offer made by the respondent no. 3 through third party
i.e. Condor Polymeric for Rs. 14 crores made on January 18,
2006 was not being considered by the respondent no. 1
despite the said offer being the higher offer than made by the
appellant trust. The respondent no. 3 had prayed for a writ of c
mandamus directing the respondent no. 1 to consider and •
accept the proposal of the respondent no. 3 communicated
vide a letter dated 18.01..2006 and restrain the respondent no.
1 from proceeding to sell the property attached to the appellant.
8. While the said petition was pending before the High
D
Court, the appellaDt had filed an application for intervention and
impleadment in the petition on the ground that the property in
issue was already agreed to be sold to the appellant trust by
the respondent no. 1 and part payment towards it was already
made. Upon hearing the parties the High Court had directed
E
the impleadment of appellant, i.e., L.K. Trust as the respondent
no. 3 in the Writ Petition pending before it.
At the hearing of the said petition, the High Court
questioned respondent no. 1 as to whether there was an
agreement to sell the property to the appellant. The stand taken
F
by the respondent n(). 1 was that there was a concluded
contract with the appellant. In support of the said stand, the
respondent no. 1 had relied upon the resolution dated
December 5, 2005 of the Board of Directors inaicating that
G
the Board of Directors had accepted the offer of the appellant
and acceptance was communicated to the appellant on
December 12, 2005. However, the respondent no. 1 did not
bring to the notice of the Court the fact that 3 days time was
granted to the respondent n.o. 3 to bring better offer and before
H
586
SUPREME COURT REPORTS
[2011] 7 S.C.R.
A
expiry of the said period resolution was passed by the Board
of Directors of respondent no. 1 company. The respondent no.
1 company also concealed the fact that on January 18, 2006
Condor Polymeric has made offer of Rs. 14 crores to the Board
of Directors of respondent no. 1 company. The High Court,
B
therefore, relying upon the stand taken by the respondent No.
1, held that there was a concluded contract between the
respondent no. 1 and the appellant and in view of the said
conclusion dismissed the petition filed by the respondent no.
3 vide judgment and order dated February 22, 2006. Feeling
c aggrieved, the -respondent no. 3 approached this Court by filing
Special Leave Petition on March 27, 2006 which was ultimately
dismissed on August 24, 2006. Thus the higher offer made by
the respondent no. 3 through third party which was subject
matter of Writ Petition !':Jo. 19 of 2006 was not accepted when
0
petition for special leave to appeal was dismissed on August
24, 2006. During the pendency of Writ Petition No. 19 of 2006,
filed by the respondent No. 3 herein, the appellant trust, on
February 13, 2006 issued cheques to the respondent No. 1,
purporting to be in full payment of Rs.12,99,00,000/- as per the
E
terms and conditions of sale. After the High Court dismissed
Writ Petition No. 19 of 2006 on February 22, 2006, RC.
Mirchandani and others, who are unit holders in the hotel
project of the respondent No. 3, filed Writ Petition No. 124 of
2006 challenging the action of the respondent No. 1 in selling
the property to the appellant-trust. Those petitioners
F
(Mirchandani and others) offered to pay higher amount than
offered by the appellant-trust in Writ Petition No. 19 of 2006,
i.e., Rs .. 15 crores, which was conveyed to the respondent No.
1 by letter dated January 3, 2006. The respondent Nos. 3 and
4 herein were impleaded as the respondent Nos. 4 and 5 in
G Writ Petition No. 124 of 2006.
9. The Board of Directors of the respondent No. 1 was
informed that offer of Rs. 14 crores was made by Condor
Polymeric to sabotage the offer made by the appellant-trust.
H The record indicates that the Board of Directors was not
L.K. TRUST v. EDC LTD. & ORS. [J.M. PANCHAL, J.] 587
informed that the appellant-trust had defaulted in making the
A
balance payment as per the terms of acceptance dated
December 12, 2005 by January 12, 2006. Because of this
concealment and wrong representation regarding Condor
Polymeric, the Board of Directors of the respondent No. 1 in
its meeting held on January 18, 2006 rejected the offer of Rs.
B
14 crores made by the respondent No. 3 through Condor
Polymeric. In the meeting held on April 10, 2006, the Board of
Directors of the respondent No. 1 was informed that the
cheques issued 'by the appellant-trust, which were delivered
during the pendency of the Writ Petition No. 19 of 2006, were
C
subsequently deposited by the respondent No. 1 for realization
but the same were dishonoured. The Board of Directors noted
this default and resolved to accept the higher bid of Rs. 14
crores offered by Condor Polymeric, brought by the respondent
No, 3. This decision of Board of Directors of the respondent
D
No. 1 was not brought to the notice of this Court during the
course of hearing of Speci~I Leave Petition on April 12, 2006,
but an affidavit was filed stating as to why the offer of the
respondent No. 3 was not acceptable.
The respondent no. 3 was of the view that its right of E
redemption of the, mortgaged property under Section 60 of the
Transfer of Property Act ('T.P. Act' for short) was not defeated
by mere agreement to sell the property between the respondent
no. 1 and the appellant nor by the Judgment of the High Court
which was confirmed by the Supreme Court because the said
F
question. was never raised before the Court and was, therefore,
not considered. According to the respondent no. 3 such a right
in law was recognized in Clause 16 of terms and conditions of
tender document entered into between the appellant and the
respondent no. 1. Thereafter, by addressing a letter dated
G
August 25, 2006 to the respondent No. 1, the respondent no.
3 exercised its right of redemption and requested the
respondent no. 1 to confirm the exact amount due from the
respondent no. 3 payable to the respondent Nos. 1 and 2.
Meanwhile, the respondent No. 3 enclosed banker's cheque of H
588
SUPREME COURT REPORTS
[2011) 7 S.C.R.
A
Rs. 25 lakhs stating that the balance amount which was due
on the date of attachment of the mortgaged assets would be
paid in full on settlement of the amount. The respondent no. 3
addressed another letter dated September 27, 2006
requesting the respondent no. 1 to issue the letter of
B acceptance as it had received information that the Board of
Directors of the respondent no. 1 company had acknowledged
the equity of redemption. The respondent no. 3, by subsequent
letter dated September 29, 2006, made a fair estimate of
outstandings, on the basis of outstanding amount quoted by
C respondent no. 1 before the Supreme Court on April 12, 2006
in Special Leave Petition No. 4957 of 2006 read with
resolution passed by the Board of Directors in its meeting held
on August 27, 2004 wherein it was recorded that the interest
would not be levied on the dues if the proP,erty was attached
or taken possession of, from the date of taking such
D possession read with Loan Settlement Scheme approved by
Government of Goa as proposed by the respondent no. 1
company in line with RBI Guidelines, and sent to the respondent
no. 1 an amount of Rs.9,25,00,000/- by cheque; in addition to
earlier payment of Rs.25,00,000/- which was made on August
· E 25, 2006. The respondent no. 3 also sent an amount of
Rs.5,90,00,000/- to the respondent no. 2 by a cheque. The
respondent no. 1 vide its letter dated September 27, 2006
purportedly, in response to the letter dated August 25, 2006 of
the respondent no. 3, informed the respondent no. 3 that, for
F the purpose of redemption of the mortgaged property, the
outstanding dues were Rs.19,22,922.12. It was mentioned in
letter dated September 27, 2006 by the· respondent No. 1 that
it was in the process of proceeding further with the transaction
entered into with the appellant-trust as the appellant-trust had
G forwarded balance consideration to the respondent no. 1
subject to the decision of the Supreme Court dated August 24,
2006. By subsequent letter dated 09.10.2006 the respondent
no. 1 company had acknowledged the right of the respondent
no.